Overview
The purchase process is most often very straight forward and this is a summary of the key elements. The timeframe from the day of the offer to the day of closing is 21-45 days but can be quicker or longer depending on your and the sellers’ circumstances.
Many of our customers buy property remotely. All aspects of the purchase at any stage can be handled long distance via email and electronic signing apps.
Purchase Contract
We use standard contracts that are approved by the Florida Association of Realtors and the Florida BAR. Key terms of the contract are:
- Offer price
- Earnest money you are putting down (escrow)
- Amount (if any) that will be financed
- Inspection Period
- Date of closing
We work with you to structure the offer terms so they are the best advantage to you, and also that is likely to gain acceptance from the seller.
The seller has 24 – 48 hours (usually 24) to respond to the offer and either accepts the offer, presents a counter offer, or rejects the offer. The offer-acceptance process can take 2-4 days and can occur long distance.
Once the seller has accepted the offer, the seller cannot back out of the contract or offer the property for sale to someone else. The property will be marked Pending in the MLS (also known as “under contract”).
Escrow (Earnest money) Deposit
Once the offer is accepted by the seller, you will need to provide the earnest money deposit. Earnest money is typically 3% of the purchase price (the higher the amount, the more it communicates to the seller that you are a serious buyer). Escrow is due 24-72 hours after offer acceptance.
Escrow deposits are held by the title company or attorney in a third party trust account. The payment can be made by check or by wire fund transfer from your bank to the trust account.
Proof of Funds or Financing Pre-Approval
When we submit the offer, the seller requires evidence that you are qualified to buy the property. This is true of all purchases and is not personal in any way. This evidence gives the seller confidence in taking the property off the market once under contract with you.
If the purchase is all cash (no financing contingency), we will need a Proof of Funds (POF) letter from your bank or a financial statement (with account numbers crossed off). A POF letter is usually short and sweet and states “To whom it may concern, John Doe has $_________ in available funds to purchase real estate.”
If part of your purchase will be financed, you will need pre-approval from a mortgage broker or financial institution. We can introduce you to some excellent local mortgage lending resources to learn about financing options available to you. Many sellers prefer a pre-approval from a local lender (since some big box lenders are algorithms versus a personal relationship).
Professional Property Inspection
A key element of the process is to have a professional inspection of the property (roof, appliances, electrical, plumbing, and so on). Upon acceptance of your offer, we help you schedule the property inspection within 1-3 days of the acceptance (it is not necessary for you to be here for the inspection, but certainly it is welcome). You receive a detailed report from the inspector.
If the inspection shows significant issues or repairs needed, we work on your behalf to have them resolved satisfactorily to both you and the seller. It is also possible to cancel the contract based on the inspection results and be refunded your earnest money deposit (applicable when offer was presented AS-IS).
Closing Costs
Costs to close on a property purchase are the same for US and non-US residents. When the purchase is all cash, the closing costs are nominal: $1000 -$1500. The seller pays the sales commission and there is no “sales tax” on a property purchase. If part of the purchase will be financed, there will be additional charges from the lender.
Property Taxes and Insurance
For annual property taxes, you can get a quick estimate of future taxes on any Lee County property using this formula:
90% of the purchase price * 1.7% = annual property tax
Example: $100,000*.90 = $90,000*1.7% = $1530
Property insurance (wind/fire and flood) varies greatly given the size of the home, its age, construction type, location and so on. Here is one example for illustration:
If you are purchasing a condo/townhome, most often the exterior insurance is included in the association fees. You will only need unit owners (contents) insurance.
Closing-Possession of the Property
The closing is handled by a closing agent (also called title agent). They are the neutral third party that holds escrow funds, researches the property abstract history, checks for liens against the property, issues the title policy (an insurance policy for your deed to the property), and produces the settlement report for both buyer and seller.
If you will not be here for the closing the title agent sends the required documents to you for signature and notarization (called a “mail-away closing”).
At your discretion, you may hire a real estate attorney to work on your behalf and at your expense. Most buyers are comfortable with the title agency.
A few days prior to closing the title agent provides the settlement report which shows all accounting details – the purchase price, tax and similar pro-rations, your earnest money… all of which net to the balance needed to close. The final balance wire fund transfer to the trust account.
Once both buyer and seller have signed all documents, the seller is paid for the property and you receive the deed and keys, etc. and take possession of the property.
Questions?
This is a quick overview and certainly there are many more details that we need to discuss. Let us know what additional questions we can address for you.