Anatomy of a House Sale

     Due to a combination of low interest rates, Covid-19, the desire for more space and the ability for many workers to work remotely in new locations has led to a very active and robust residential real estate market. Selling a residence is a multi-step process that involves a team of professionals including Realtors, attorneys, title agents, lenders, and government officials, all of which are necessary to conduct and complete a typical house sale.

    The beginning of the process is the decision on how to market and sell the property. Traditionally most people interview and hire a local real estate agent to handle this portion of the transaction. While most Realtors utilize a standard form for a listing agreement, promulgated by their local Board of Realtors, this form is negotiable and does not have to be signed as presented. Some issues to consider include the length of the listing, whether the listing automatically renews, the terms and conditions of the sale such as allowing VA or FHA financing, or the offering of both leasing and sale.

     The biggest issue is the Realtors commission. The person listing the house is known as the listing agent and the person who brings the buyer to the transaction is known as the selling agent (because the seller indirectly pays that agent). Traditionally both agents were paid a 3% commission. This is negotiable especially if the listing agent has both sides of the transaction or if the homeowner locates a buyer on their own. For example, a common reduced commission is known as the 5-2-1. listing.  In this type of listing, the listing agent gets 5% if they have both sides of the transaction; 2% if they are the listing agent with 3% going to the selling agent; and only 1% if the seller finds the buyer on their own.

    Once a house is listed for sale it will be subject to viewing both online as well as possibly in person especially once the Covid-19 pandemic ends. This includes the placement of a lockbox on your home which allows Realtors access for showings when you are not home. As a precaution, any valuables or medicine should be securely locked to prevent any question of loss during such visitations. While those risks are small, they do occasionally happen.

   When a Buyer decides to make an offer, they will submit a contract to your agent for review and approval. The most common contract used is called the FAR/BAR Contract. Most attorneys, Realtors and title companies are familiar with this contract and its riders.  The contract can either be an “as-is contract” wherein the Buyer gets a set number of days to complete an inspection and determine whether to cancel the contract for any reason or proceed to close regardless of the property’s issues, or a limited repair contract which requires the Seller to make certain repairs up to a fixed percentage (usually a maximum of 3%) and if the Seller makes the repairs the Buyer cannot cancel the contract. In practice, 90% of the contracts I deal with are the as-is contract, with a fixed inspection period and free right to cancel.

   Once the contract is fully executed a closing agent must be selected. Please note it is the Seller’s or Buyer’s choice not the Realtor’s choice as to whom to utilize and I highly recommend that a real estate attorney be chosen instead of just a non-attorney title company. An attorney can provide greater protection and address more issues should they arise, and answer more questions regarding the purchase and sale.

   In Palm Beach County, the closing agent is customarily selected by the Seller. In Broward and Miami-Dade Counties, the closing agent is customarily selected by the Buyer.  Usually the person selecting the closing agent also pays the cost of the title premium. The other large cost customarily paid by the Seller is the Florida Documentary Stamp Tax due on the transaction, which is based on a rate of $7 per thousand in real property value. For example, a home that sells for $300,000 will have doc stamps in the amount of $2,100 due and payable from the Seller at closing.

   Once the inspection period passes, and any financing contingency has been met (the buyer has obtained loan approval) the deposit becomes nonrefundable and the parties move towards closing. The closing does not have to be formal and in most cases today closing is done through an escrow transfer with the Sellers signing separately from the Buyers and the sale documents exchanged for the net proceeds to the Seller and access to the property for the Buyer. This includes frequent remote notarization of the Buyers or Sellers signatures on closing documents though many lenders still require a wet signature on mortgages and notes.

    After closing, the title agent will issue a final Title Insurance Policy, insuring the Buyer and the Buyer’s lender have insurable and marketable title to the property. If the Buyer intends to reside at the property, the Buyer should then make an application for homestead with the property appraiser in order to obtain the tax benefit provided by Florida law.

   Because selling or purchasing a home is complicated and is also generally the most expensive transaction a party will participate in, having an experienced real estate attorney assist you in the transaction is, in my opinion, a wise investment. This choice can save you money (for example by requiring a seller to provide a survey affidavit in lieu of a new survey) and protect you should issues arise such as improper disclosures, title defects, unknown liens and encumbrances and other issues that may be missed by the title agent or Realtor.

Michael J Posner, Esq., is a partner in Ward, Damon, Posner, Pheterson & Bleau, P.L. a mid-sized real estate and business-oriented law firm serving all of South Florida, with three offices in Palm Beach County.  They specialize in real estate law and can assist sellers and purchaser with closing and financing of residential and commercial real estate including remote closings.  They can be reached at 561.594.1452 or at mjposner@warddamon.com