Real Estate in Miami.
“We arrived in Miami 10 days ago. It was not our first time, and every time we say that it is time to buy a small apartment for the holidays, for the future, for the children».
That’s what told me the ‘Khan’ family when they came to my office.
A most traditional French family – husband and wife and two children- living in the Paris suburbs, both working, and looking for a future investment in Miami.
Now, how to find, visit and buy some real estate safely? The task seems difficult at first, but it is not necessarily true…
Nowadays, it is so easy to go on the internet to look for homes for sale. All you need to do is google “real estate in Miami” or go to several specialized sites such as Realtor.com, Zillow.com, and Trullia.com etc.
Also, one could go any real estate company website such as www.absolutrealty.com and find hundreds of houses, apartments, estates, businesses to buy, to rent or simply dream about it.
The most important thing in this whole process is to find a real estate agent. I would say that it is even essential. Searching, browsing and getting information on the internet may be a rewarding experience but it can also give a false idea of local economic conditions. A lot of television shows and reports in France make you believe that you can buy houses on the water for a very low price…
This real estate specialist will sort between truth and fiction. He typically has a thorough knowledge of the market, prices per square feet in the commercial and residential markets, new projects under construction. He can inform you about the latest sales, building by building to get accurate comparable. He has access to a myriad of statistical data that does mean much to the buyer. He knows also specifically every neighborhood, speaks in general your language and above all is here to help you, to reassure you in your purchase and to make it a rewarding experience. Icing on the cake: the agent is paid by the seller, it is all profit for you.
Service in America is king, and through you, this agent will win new customers only if his work and professionalism have attracted you.
The best way to meet this very special agent is by recommendation.
So how do we go about buying real estate?
As I have done for the ‘Khan’ family, I will try to explain in a simple way the buying process, step by step, in order to take away the anxiety associated with this totally mysterious transaction, in a foreign country with different laws.
The first thing that will do any real estate agent is trying to identify your needs and pre- qualify you financially.
Indeed it is very important to know where you want to buy, oceanfront or in the city? Why in this location and what are the advantages and disadvantages of this choice? What is the monthly maintenance fee for the condo, real estate taxes? What is the purpose of the purchase, enjoy it, rent it annually or for the season? In what price range are you?
After all of these preliminary steps and several visits of apartments, the time has come to make an offer.
Making an offer is quite simple. The real estate agent uses a traditional contract, in which he will fill in the blank spaces.
In this contract, there will be the name of the seller, the buyer, the address of the property, the folio number – which is its own identity-. In the contract presented by the agent to the seller (or its agent), a price is offered – cash or obtaining a bank loan — and a closing date.
This contract in most cases is an “As Is Contract”, meaning the property is bought “As Is” with a right to inspect.
Legally, it is not necessary to deposit money to present an offer, but it is recommended to give a check, $1000 for example, to show his good faith.
The answer is fast and will be obtained within 2 to 3 days.
Let’s take a simple example. The asking price for the apartment is $320,000. An offer was made at $290,000 and after negotiation, was accepted at $300,000 with a closing date for February 1, 2014.
The buyer and seller have signed the contract, put the last initial, and from now on, nothing can no longer be changed – unless it is mutually agreed – we have an official date of contract called the Effective Date. The factor “time” is very important in Florida. All days are carefully accounted for and not making the first or second deposit in time may cause the cancellation of the contract. The inspection report needs to be addressed in time or it would become obsolete.
From now on, the buyer must make a deposit of 5% of the selling price -$15,000- and a week later, another 5% for a total of 10% -$30,000 in our example (or $29,000 if an initial deposit has been made with the offer)-.
This money is deposited in an escrow account either at the real estate office, at the title company or at the buyer’s lawyer.
Buyer has 3 days to check the rules and regulations of the condominium such as: Can we rent this property? Can we rent it several times per year? Are pets allowed? Are motorcycles allowed? And many other rules that can seem absurd. It is very important to know the rules because for instance, if the association does not allow the rental for the first 2 years of ownership, the buyer will have to be able to pay the maintenance and taxes during this time without any income.
During this rescission period (15 days if it is a new development or not at all if it is a detached house)the buyer can cancel the contract without any justification.
The seller provides the buyer with a “Seller’s Disclosure” which describes the physical and legal condition of the property. Seller will be required to disclose information about the condition of the plumbing, electricity, the roof, paint with or without lead, title, if the association has voted a special assessment or else.
He has 15 days to make an inspection of the property. A specialized company will take care of it, and will provide the buyer, seller and agents a detailed report on the physical condition of the property – roof, mold, appliances, doors and windows, air conditioning, etc. – This inspection can cost between $200 and $1000 depending on the size of the apartment and the scope of the inspections (termites and roof for a house).
The buyer takes possession of the report, studied it and then decides to continue the transaction or cancel it. It depends on the number of repairs and the cost associated with it. In the majority of cases, the seller will make no make any repairs and will not give any credit towards these repairs.
If this is an all cash transaction, the buyer will prepare the transfer of money and get ready for the closing. On the other hand, if the transaction is subject to a loan, he needs to take the necessary steps with his bank, waste no time in providing all necessary documents to obtain the loan. Today, for foreigners, the down payment is between 30% and 40% and the interest rate will be 1% more than U.S. residents.
Finally, if the purchase is in a condominium, it is necessary to complete a comprehensive application which at times can seem intrusive (at a cost of $100 to $200 to the buyer). Questions are asked on your employment, bank account, criminal record, etc… The transaction will not be able to finalize without the approval letter from the board of the condominium association, which will officially authorize you to live in this building. This process does not exist if one purchases a single family home or in a new development program.
The day of the closing approaches and the real estate agent will make sure that everything is in place. Inspections have been made, the money is in escrow, and the title company has verified that there are no liens or encumbrances on the property. We need to make sure that the monthly maintenance fees are up-to-date with the condominium and that local taxes have been paid, etc…
For good measure, just before closing, there is a walk-thru, to verify that the property is in the same condition as at the moment the contract was signed.
Closing costs are estimated between 1% and 2% of the purchase price if it is a cash transaction and about 5% if there is a loan – costs from the bank, state taxes, etc. – it is customary in the USA that the seller pays the commission for Realtors, which amounted to 6%. So costs to the seller will be much higher.
The closing takes place at the title company or at the buyer lawyer’s office. There is no need for the buyer and the seller to be physically present at the closing. On the other hand, real estate agents will be there, this is the day they get paid…
The “Khan” family had already returned to France. All necessary documents have been sent to their address and they have signed in the presence of a public notary from the US Embassy. After that, everything is returned to the title company.
The different parties exchange money (in fact the title company takes care of collecting the money and redistributing it to the right entity), keys (apartment, mailbox, pool…), documents and remarks on the whole experience,
This is how the purchase of real estate happens. Sometimes unexpected events happens that need to be dealt with, missed deadlines, hence the need to have an effective and competent real estate agent.
It is clear that we have chosen a simple example for the purposes of this writing. You will have ample opportunity to ask your agent about ‘Short Sales’, ‘REO’ and ‘Foreclosures’. Your real estate agent is at your service. It is at least what we believe in our agency where the service and the client are kings.
Finally, I hope that this topic will serve you for your next purchase. If you have a real estate agent, trust him, otherwise do not hesitate to call us. Good luck…
AbsolutRealty International, Inc.