In chapter 4 of my Guide to Florida Real Estate Transactions (the series started in April, in case you missed it) I will explain where the friendly real estate agent you are talking to on the phone, by Skype, Zoom or Signal might stand – or, to say it clearer: who he (or she) represents. Hopefully your interests.
Let's dive right in:
In residential transactions (different rules apply to commercial and business transactions) agents can act only as a
• transaction broker for the seller or the buyer or
• seller's broker, representing the interests of the seller,
• buyer's broker, representing the interests of the buyer,
• non-representative, very similar to the broker model in many European countries.
Agents often represent one party exclusively, typically the seller, though an agent may show a variety of other broker’s property listings to a buyer.
If you are a buyer, you should insist that the agent you work with represents you and your interests. Working as a buyer's agent he is obligated to represent your interests and to find you the property best suited to your needs at the best possible price. A residential commission will typically be paid by the seller; this does not constitute a conflict of interest but is part of most listing contracts.
89% of US buyers claim a very good or even excellent experience in using a buyer's broker, and are very satisfied with the services and the results. Negotiating skills, experience and knowledge of the local market are the reasons most quoted for using an agent. (Survey of Recent Home Buyers ©2020 FAR).
Buyer’s advantage: without additional cost he has a professional at his side representing his interests – which is not the case if a buyer contacts the selling broker or even the seller directly, for instance by calling a telephone-number on a “For Sale”-sign.
If you are happy with your buyer’s broker, please remain loyal. Because the moment a seller or his real estate agent learn your name in any other way then through your agent, your agent will be excluded from the transaction.
This means: he can’t represent you, can’t look out for your interests, can’t negotiate for you and will not receive any commission for all the services rendered to you. The result: deep frustration, the end of your business relationship, and for you having to start all over, this time without your agent’s support.
It is a common misconception that the seller or a listing agent (the agent who markets the property) will pass on any commission savings when being contacted directly by a buyer who has the idea of cutting out one of the middle-men. Believe me: it does not happen.
In addition, foregoing or worse, circumventing a buyer's agent, does not help the buyer in any way. In contrast, the buyer most likely pays more than he has to, since the seller's agent's obligation is not to save the buyer money, but to get the best deal and highest price for the seller.
Tip: For your legal questions, please consult with a recommended Florida real estate attorney. Real estate brokers are neither qualified nor allowed to give you legal advice, and unauthorized practice of law is not taken lightly.
©2021 Tobias Kaiser
Above is an excerpt of my Guide to Florida Real Estate Transactions, which you can request for free. It is updated annually and available in English and in German. – Do you have any questions, corrections or comments? I would love to hear from you!
Update: In 2008, Julio Robaina, then Republican state legislator in Florida, sponsored a law requiring condo associations to hire engineers or architects to submit reports every five years about how much it would cost to keep up with repairs.
The law lasted only two years before it was repealed in 2010, after Robaina left office. The legislator who sponsored the repeal, former state Rep. Gary Aubuchon, a Republican real estate broker and homebuilder. Robaina blamed the repeal on pushback from real estate lawyers and property managers, who he said claimed that the law was too burdensome for condo owners.
The law might have very well prevented the Surfside tragedy. Robaina recently commented to NBC “If the [Surfside] owners would have had a reserve study, if the board was proactive and had funded its reserves, this never would have happened”.
Q&A: After Surfside, What Should I Know About Condos?
by Lois K. Solomon, 2 July 2021
Shaken by the recent disaster in Surfside, many condo owners wonder what they don’t know but should. A Q&A with specialists and attorneys provides some answers.
FORT LAUDERDALE, Fla. – Many of us live in high-rise buildings in South Florida. And even if we don’t, we have to wonder about the condition of our apartments, condos and homes after the Surfside catastrophe.
We asked construction specialists and attorneys about the questions we should all be asking about the condition of our living spaces and what kinds of updates they need as they deteriorate from heat, humidity, hurricanes and climate change.
Question: What kinds of questions should condo owners, likely with little knowledge of building construction, be asking now?
Answer: Ask about the age of your building, when the last inspection was and what kinds of repair work are planned in the near future, said Boca Raton attorney Peter Sachs, who is certified in condominium and planned development law. You will also want to know how much money is in the building’s reserve fund, and if and when an extra financial assessment is coming, he said.
You have the right to inspect your building’s records, which would include finances and repair work. Florida law requires that condos maintain their official records for seven years.
Question: Who’s at fault when there’s a serious structural problem in a building? Is it the architects, the builders, the engineers, the inspectors or city officials? Or all of the above?
Answer: The architect, builder and engineer are all potentially culpable, as is the condo board if they do not act to fix the problem, Sachs said.
He said the architect would be responsible if there is a serious design flaw, and the engineer if the calculations, supervision or drawings are deficient. The builder would be to blame if corners were cut on materials or if construction failed to comply with the building code. The builder may also be liable for the failings of the architect or engineer.
The board, too, has obligations to residents, he said.
“The board has a fiduciary duty to act in the best interests of the unit owners. If the board is negligent and fails to act, or unduly delays, it may be held liable,” Sachs said.
But city officials are off the hook, according to Sachs.
“The city officials are protected by the doctrine of sovereign immunity,” he said. “Barring criminal conduct (the building official accepted a bribe to look away from a potential problem), it is highly unlikely that a city or its employees would be held legally responsible.”
Question: How often should structural engineers inspect high-rise buildings?
Answer: Miami-Dade and Broward require inspections when a building turns 40, but there’s no similar mandate in the rest of the state, said Peter Sachs, a Boca Raton attorney certified in condominium and planned development law.
The boards that supervise the buildings should take the initiative and conduct a thorough inspection at least every 10 years, and more often is better, said Yaniv Levi, president of Coast to Coast General Contractors in Hollywood.
“It would behoove the association to do it yearly or bi-yearly,” he said. And he recommends the building get a new coat of paint, which also serves to weatherproof it, every seven to 10 years.
Question: How quickly should buildings fix leaks and other water intrusions?
Answer: Immediately, said Yaniv Levi, president of Coast to Coast General Contractors in Hollywood. “As soon as the leak is identified, they should find the source of the intrusion,” he said. “If you catch it early, it won’t develop into something major.”
Question: How can I find out if my building was constructed under the highest safety codes?
Answer: If it was built in 2002 or later, you should have the best building codes or close to it. If your building was constructed before 2002, it likely does not meet the highest standards unless it was damaged by a storm and had to be upgraded.
After Hurricane Andrew in 1992 mowed down entire blocks of cheaply built houses, Florida adopted a statewide building code that has become a national model. So when Hurricane Wilma struck Fort Lauderdale 13 years later, new downtown buildings, such as the 42-story Las Olas River House, held up well. Older buildings constructed before the building code sustained severe damage.
Question: What should owners do if they believe their board is ignoring a safety issue?
Answer: You should ask to have the issue brought up at the next board meeting, said Hallandale Beach attorney Larry Tolchinsky.
“Get it on the record that the board is ignoring the issue,” he said. “Thereafter, file a lawsuit against the board.”
Boca Raton attorney Guy M. Shir agreed that you may need to take matters into your own hands. Call the local building or code enforcement department to report your concern, and put it in writing, Shir said. And if you can afford it, you may want to hire your own engineer.
“In the end,” Shir said, “it’s (your) property, investment and life/safety issues.”
Question: Should condos have rainy-day accounts to pay for property improvements?
Answer: There’s often resistance from condo owners when a board of directors wants to add to the monthly maintenance fees, said West Palm Beach attorney Michael Gelfand, who is certified in condominium, planned development and real estate law.
“The board is caught between irreconcilable goals: perfect safety, which is impossible, and the owners not wanting their assessments to go up,” he said.
Condo associations are required by law to budget for reserve accounts for repairs of significant components, such as painting/waterproofing, roofs and paving, but frequently owners vote down these budgets as well as expensive structural work, Gelfand said.
These repairs are often expensive. In emails released by the town of Surfside, an engineer said Champlain Towers South, the collapsed building, needed to spend about $9 million to repair cracked columns and crumbling concrete. The board took out a $12 million loan to do the work.
The loan meant owners at Champlain Towers South were facing payments of anywhere from $80,000 for a one-bedroom unit to about $330,000 for a penthouse.
Beyond the legally required reserve accounts, boards of directors take an assortment of approaches. Some have no reserves at all, while others have accounts dedicated to repairs needed every five to 10 years, said Mike Ryan, a Fort Lauderdale attorney and mayor of Sunrise.
“Some condos cater to people with fixed incomes. It’s difficult for them to suddenly get hit with an assessment,” Ryan said. “It’s up to the board how they want to handle this. It’s wise for them to put aside money. If you defer too long, it becomes too costly.”
The best strategy for the condo board is often to take the monthly maintenance fees and set aside some of that money for a rainy day fund, he said. This will lessen the financial impact on individual owners when a sudden major repair is needed and the board must ask each homeowner for money.
Question: What if an owner can’t afford the assessment?
Answer: “It’s like a lifeboat,” said West Palm Beach attorney Michael Gelfand, who is certified in condominium, real estate and planned development law. “If you can’t pull your weight, you’re off.” The association may foreclose on your unit. Otherwise, their accounts will run a deficit and they won’t be able to pay the bills.
Sometimes the association will borrow money from a bank to pay for these large expenditures, Hallandale Beach attorney Larry Tolchinsky said. “For those unit owners that can’t afford to pay, the association will likely spread the payments over time,” he said. “Up to 10 years in some cases.”
Question: Will prices of semi-attached condos or low-rise units increase significantly?
“We moved from Massachusetts to the Lotus development in West Boca in June 2020. Since we made our deposit in March 2019, the market value of our home is up 86%, due to constant price increases.
I’m wondering if enough owners will now start selling their high-rise condo units [so] that the values of these units will drop significantly. At the same time, will the prices of semi-attached condos, or low-rise units increase significantly? I can see a number of owners moving to what they will now perceive as ‘safer’ housing. I can also see a number of snowbirds deciding to sell before prices drop, then renting for the season or buying a winter home in low-rise or garden-style units.” – Arthur Missan
Answer: Ken Johnson, a real estate economist at Florida Atlantic University, said he does not anticipate significant effects on prices because of the Surfside collapse. He said buyers likely will perceive the collapse as a freak accident that’s unlikely to be repeated.
“I expect to see an increase in the demand for satisfactory property inspections contingent upon closing,” he said. “However, I do not see any price impact due to this horrible tragedy. Most know that this sort of thing is unlikely to ever happen again. As for a moving strategy, I don’t really see one with the average cost of a move, all things considered, being between 10% and 20% of selling price.”
Question: In terms of safety, is it better to live on a high floor or a low floor?
Answer: “In my personal opinion, there are risks in both cases,” Hallandale Beach attorney Larry Tolchinsky said. “Living on the ground floor can have flooding issues. Perhaps issues with crime. Higher floors take longer to escape from the building and they have wind issues.”
Question: Is it going to be harder to find concrete repair firms now that everyone is thinking about these questions?
Answer: “Perhaps, but my belief is the collapse was more complicated than just issues related to concrete repair,” Hallandale Beach attorney Larry Tolchinsky said. “Certainly, the cost of having a firm perform these repairs is going to skyrocket. This is based on the level of data and certifications that will likely be needed to be provided to boards and governmental agencies to perform this work. Also, the high demand for building materials and the lack of skilled workers given the tight labor market will make it harder to find concrete repair firms.”
©2021 South Florida Sun-Sentinel.com via FloridaRealtors.org.
Please contact me if you have any questions or would like further information. I will be happy to assist in any way I can.
Tobias Kaiser is an independent real estate consultant and licensed Realtor in Florida since 1990. He specializes in modern architecture and net leased investments.