Below you will find an abbreviated version of Tobias Kaiser’s Guide to Buying and Selling Florida Real Estate, based on 20 years experience as a Florida Realtor®. This short introduction is meant to give you a perspective of the buying and selling process. It is not meant to replace professional advice or legal counsel. If you are interested in receiving the unabbreviated version of the Guide as a PDF, Tobias will be happy to send it to you. Just drop him a line by e-mail or phone him at +1.954.561.0066 please.
HOW-TO GUIDE: BUYING AND SELLING FLORIDA REAL ESTATE
Wild stories of innocent clients and vicious brokers acting like pirates are still surfacing from time to time. Conveniently, the storytellers forget that most of those clients insisted on acting on their own without professional advice. Please don't try that.
SUMMARY
If you don't feel like reading the (still longish) text below, please follow these rules:
• If you expect results, be loyal. Work with only one broker at a time and don't shop around. • Put your cards on the table: say what you want and what you expect. • Never contact a seller or his broker on your own if you work with a Buyer's Broker. • Utilize professional advisors such as attorneys or tax advisors for all major questions. • For local buyers and sellers, it is not relevant how "it's done back home": when in Rome, please do as the Romans do.
TYPES OF PROPERTY
When considering a real estate purchase, the first question will or should be: what type of property fits my goals? One generally differentiates between:
• Residential Real Estate (Single Family Homes, townhomes etc) • Commercial Real Estate (Warehouses, NNN, Hotels etc.) and • Business Opportunities (Restaurants, Bakeries etc.)
A good broker will assist you in defining your real estate investment goals and advise you in selecting a matching property.
AGENTS, BROKERS AND REALTORS®
In order to broker Real Estate in the U.S., one has to be properly licensed, either as a real estate broker or a real estate agent. Both must renew their license every two years; the former always work under a broker's supervision, while a broker may work for another broker or self-employed. All Real Estate professions in Florida are supervised by two state authorities. When you consider buying or selling property, hopefully you are using a Real Estate Broker, unless you are a very experienced investor. Your real estate agent should fulfill the following criteria:
• Valid Real Estate license for the state (s)he operates in • Member of the local Board of Realtors (for residential transactions) • Experienced in the property you consider and in international transactions (if applicable)
An agent (following for agent or broker) may call himself a Realtor® only if he (following for he or she) belongs to the regional Board of Realtors®, a voluntary professional association with strict business and ethical guidelines which often exceed state law.
This membership is also the only way to full access and listing privileges in a proprietary computer database called MLS, which contains all properties in the region offered on the market by MLS participants. As a result, buyers can concentrate on working with one agent who is able to offer and sell any property listed in the MLS, not only the ones listed by his firm.
It is important that your agent is experienced in like transactions and knows what you are expecting from him. He should explain the terminology to you in plain language and guide you through the deal. Especially if there are international components involved, you will most likely be served best by an agent who is certified as a CIPS (Certified International Property Specialist).
FORMS OF REPRESENTATION
In residential transactions (slightly different rules apply to commercial and business transactions) agents can act only as
• seller's broker, representing the interests of the seller, • buyer's broker, representing the interests of the buyer, • transaction broker for the seller or the buyer or • nonrepresentative, very similar to the broker model in many European countries.
Often agents represent one party exclusively, typically the seller, though an agent may show a variety of other broker’s properties to a buyer.
As a buyer, you should always insist that the agent you work with represents you and your interests only. In a capacity as a buyer's agent, he is obligated to find you the property best suited to your needs at the best possible price. The commission will typically be paid by the seller; this does not constitute a conflict of interest but is part of most listing contracts.
Advice: If you are happy with your buyer’s broker, it‘s best to remain loyal. As soon as a seller or his real estate agent learns your name in any other way than through your broker, he as your representative will be excluded from the transaction. This means that he will not receive any renumeration for all the services rendered to you. The result: frustration, the end of your business relationship, and for you having to start all over, this time without your broker‘s support.
For all legal questions, please consult with a real estate attorney; real estate agents and brokers are not qualified to practice law or give legal advice.
OFFER AND CONTRACT
Based on your search profile, your agent will assemble a list of suitable properties to look at. If you find one to your liking, you will make a written offer through your agent, which is accompanied by a small deposit. The amount of the opening offer will be based on a market analysis prepared by your agent. The seller can accept, reject or counter your offer within a timeframe you have specified. An offer becomes a contract only when both parties agree and sign.
Your first deposit as well as all following ones will be paid into an escrow account. At closing, all deposits be handed over to the seller together with the remaining balance of the purchase price. If the property doesn’t close, all deposits will be returned to the buyer if he didn’t default. However, if the buyer defaults or changes his mind midway, he will loose his deposits. In a resale, the buyer has the same rights against the seller in case of a seller’s default. In new construction, the purchase agreements very often eliminate these buyer’s rights, and thus demand special attention before signing.
FORECLOSURES AND SHORT SALES
Foreclosures and Short Sales follow a slightly different path. Both transactions are time-consuming, complicated and not for the faint of heart.
A Short Sale is a real estate sale before a property goes into foreclosure, fetching a price under the current mortgage value. A short sale is anything but short: a timeframe fom three to six months from submitting an offer to closing is typical. Short sale asking prices are always teaser prices except when pre-approved; selling prices normally are substantially higher. Cash offers with no contingencies are preferred; if the buyer doesn’t have bullet-proof financing lined up and/or asks for inspection contingencies, he is wasting time.
Foreclosure- and Short Sale-properties are usually in some state of disrepair and may be uninhabitable (vandalism, mold, roof damage, missing toilets etc.) A buyer can not expect any price concessions due to repairs, which can not be financed. Finally, liens, second mortgages, unpaid taxes, utility bills, homeowners or condominium dues and open judgements may have to be added to the purchase price.
At the end of the day, a foreclosure or short sale may not be significantly cheaper than buying a undistressed property, which does not come with excessive headaches, but whose price has been driven down considerably by the large foreclosure and short sale inventory.
FINANCING
In the current credit climate, only few U.S. banks and lenders will accept mortgages from foreigners. Even if you are a US citizen with a good credit rating, you may not qualify for a mortgage. Some US banks request that the mortgagee opens an account with the bank as an additional security. Loan-to-value ratios of 70% to 90% for US-citizens and 50% to 65% for non-US- applicants are typical, depending on credit history, documentation and income. A typical loan approval currently takes at least four to six, more likely eight weeks.
INSPECTIONS
Between the signing of the contract and the closing, several activities run parallel in time: property inspection, title inspection, possibly a loan application, and in case of a commercial or business transaction the so-called due diligence, which also includes inspection of all books and records. At this point in time, you should consult a CPA or tax advisor to structure property ownership under tax perspectives as favorably as possible. Your agent coordinates all these activities for you and should be able to recommend experienced professionals in all fields involved.
VISITORS RIGHTS AND IMMIGRATION Non-US-citizens can enjoy and visit their US-properties – residential or commercial – without too many restrictions or difficulty. Individual visits will be limited to several months, and from a taxation perspective, certain time-limits are important to observe.
Contrary to what some attorneys and real estate brokers promise, there are no guarantees for the decisions of the immigration office USCIS, especially after 9/11. Please note that the purchase of an individual residential property does notqualify for a long-term visa or permanent residency. However, when specific criteria in the purchase of investment real estate are fulfilled, a long-term visa or permanent residency can reasonably be expected.
Especially interesting are the EB-5 Investor Visa and the E-2 Investor Treaty Visa. An EB-5 visa, path to a Green Card or permanent residency, can be obtained in Monroe and Miami-Dade with an investment of $500,000 and the creation of at least 10 fulltime positions. The investor can, but does not have to be actively involved in the business. An E-2 visa is valid for up to five years, requires a “substantial investment” ($90,000 - $100,000 equity have qualified several investors in the past) in an “active ongoing business”, which must be “at risk” (no raw land, for example), and the investor has to be actively involved in the day-to-day operation. An E-2 may be renewed as long as the underlying original investment continues to exist and operate.
If you are a non-US resident considering buying US property, please speak with your broker about your plans. US real estate brokers are not allowed or qualified to give legal advice or to practise law, so it is vital to consult with a recommended immigration specialist prior to any purchase.
TAXES It is prudent to consult a recommended and experienced tax advisor before buying or selling property in the US, for citizens and non-residents alike. Among other subjects, this consultation will clarify under which name (e.g.: company, land trust, your heirs) you will take title to the property. Additional issues that may be discussed in a consultation are inheritance taxes, taxable income from investment properties, FIRPTA, what duration of stay per year may trigger US taxation, and tax treaties with such countries as Austria, Germany, Luxembourg or Switzerland to avoid double taxation.
CLOSING This is the change of ownership against monies, funds nearly always being in form of a cashier's check drawn on a local bank. Before closing buyer and seller will receive a closing- or settlement-statement, detailing all amounts to be paid out at closing. Prorated Real Estate taxes are also shown here. Funds transfers and especially international wire transfers should be ordered in time to make sure that the funds arrive punctually, otherwise the closing will have to be postponed, probably much to the irritation of everyone involved.
The buyer or seller does not have to be present at closing. His lawyer or agent can hold a proper power of attorney, or documents can be couriered to the buyer or seller with specific signing instructions, which have to be observed to ensure the validity of the signed documents.
WITH OR WITHOUT BROKER?
Do you ask yourself now “Do I really need a real estate broker?” Unless you also like to operate on yourself, or represent yourself in court, the answer is “yes”.
In any real estate transaction, a real estate broker fulfills several key functions:
• he facilitates the property search through his network of contacts and the databases you don‘t have access to • he is familiar with the region • he knows the market’s current supply- and demand-status • he is experienced in evaluating property prices through a competitive market analysis • the agent writes and presents the offer • an experienced agents‘ knowledge pays off in contract negotiations • he has access to reliable local sources and experienced professionals in all related fields • he coordinates all services involved in the transaction and • he supports the client after the closing whenever necessary.
Your broker is privy to information, property access and knowledge that is not available to you. His experience and knowledge will not only ease a real transaction considerably, but can be the difference between failure or success.
