Florida Real Estate Contract Issues Should Be No Surprise
Florida real estate contract law is clear in terms of what the buyer’s and seller’s obligations are. But whether buying or selling property, protect yourself by hiring a Winter Park, Florida, attorney with experience in real estate to review every contract.
What happens frequently to investors trying to take advantage of foreclosed properties or short sales is that real estate deals are done without consulting an attorney. Reliance on a realtor who is capable, yet not an attorney, is a mistake for buyers and sellers. Standard, template or form contracts are used. Contingencies, addenda and key elements are not included which can ensure that expensive mistakes will be made. Forgoing process, legal, inspection, title and other elements of a short sale or a property in the initial stages of foreclosure are skipped.
Then, there are issues not covered to protect both buyer and seller for properties that have been sitting empty, sometimes for years, with no maintenance, improper and illegal repairs, non-licensed rebuilds, add-ons, roofs and buildings.
Then, a buyer agrees to the use of a contract created by the seller’s attorney and foregoes hiring an attorney to review the contract. There’s no assurance that everything is in order. The rush-through contract is used and the buyer agrees because the seller just wants out from under a mortgage they couldn’t afford. There couldn’t possibly be anything wrong with this, right?
Wrong. If you buy a property, there will be a point of realization when the seller lied about a property’s pre-existing condition usually when the leaky roof is dripping on your head. Now, you now bear the responsibility of tracking down who’s to blame and why you ended up with the bad deal. It’s your own fault.
It is certainly common for parties to close on a residential real estate purchase without any involvement of an attorney. Realtors can draft contracts from forms, and title insurance companies are allowed to examine title and issue title insurance. But a real estate contract, a purchase agreement for a home may be the largest purchase of a person’s lifetime. More often than not in Florida, real estate is handled without a real estate attorney. The attorney is consulted for the lawsuit. Rather than investing in the beautification of a property, thousands are sunk into pursuing legal action.
Contingencies in Real Estate Contracts
Perhaps the most common contract condition that makes the transaction contingent on the buyer obtaining either a mortgage or a written commitment, is the amount of money required to complete the purchase within a certain time frame.
The timing aspect can be the most troublesome to buyers, sellers and all real estate professionals involved. The sooner the buyer can complete this financial condition, the better. If the deadline passes without a loan approval, the seller has the right to cancel the contract.
Beware real estate and property owners: The mere filing of a lawsuit for specific performance regardless of its ultimate success or the merits can potentially tie up your property for several years, with or without the existence of a lis pendens.
A real estate contract frequently has contingencies agreed upon by the parties. Buyers often make an offer to buy another property before having sold their house. And then they must sell their current home in order to have the down payment to make the purchase.
Obviously this sort of contingency where the buyer has to sell first to buy your home, is a double-edged sword: Your home can’t be sold until another home is sold. But with a buyer who is offering the right price, sellers many times will hold up the sale inevitably for a monetary guarantee.
The offer to purchase is conditional on the sale of the other home. That is a contingency. But there are financial penalties that can be assessed for delays or incremental funds due to the seller should the contract be broken completely.
This is where a real estate attorney should be consulted to determine what should be included to protect you as a buyer or as a seller.
The contract is the legal agreement you a seller have made with the buyer who agreed to arrange for financing to purchase. Most contracts have specific contingencies where a cancellation is acceptable or is not acceptable. To cancel for reasons other than those, there are often consequences and such decisions cannot be taken lightly.
A simple reason for cancellation is never simple and there may be ulterior motives to try to keep a property off the market, or to get the price to drop.
Should you decide to sue a buyer for breach of contract your property is tied up in legalities. Should you decide to file a lawsuit for any reason while your home is for sale, you may shoot yourself in the foot. It is virtually impossible to obtain title insurance necessary to convey title while an action for specific performance is pending. In effect, this can be a form of legal blackmail.
This is why before you enter into a real estate contract of any kind whether you’re buying or selling, that you meet with an experienced real estate attorney. A real estate attorney who knows litigation so that should you have to go to court, you have an experienced litigator to defend you.
Buyer Issues or Seller Issues Can Hold Up a Sale
The buyer and the seller have different concerns and issues in a real estate contract. For example, a contract to buy real estate will tie up the property while the buyer pursues required government approvals and financing of the property.
The contract to sell real estate will avoid having the property off the market for too long unless the buyer is demonstrating an ability and commitment to close.
Mistakes in contract preparation can be extremely detrimental to both you and the parties to the transaction. Mistakes not only can affect the formation of an enforceable contract, but also can lead to closings falling through and to costly litigation.
Here are several common contract preparation challenges and attempts to provide guidance on avoiding these potential problems are too complex for the average buyer or seller. The best decision you can make is to consult with Eric Lanigan or Roddy Lanigan in their Winter Park, Florida, or the Orlando, Florida, Lanigan and Lanigan offices.
As Is Contracts
As Is contracts or addenda typically delete the seller’s obligation to make repairs for items not in working condition and for damage caused by wood-destroying organisms. In return, the terms and conditions usually require the buyer to perform any inspections or pursue whatever due diligence they deem necessary to fully understand the condition of the property and to commit to purchasing the property. The seller is not obligated to fix anything but he or she may be willing to make certain concessions in order to see the contract to closing.
This too becomes a point of contention without the direction of a real estate attorney.
If defects in the home are found, the buyer can cancel the contract, or the buyer and seller may renegotiate the contract in order to find an appropriate solution.
In addition, once the seller is aware of any material defects, they will have to be disclosed to future potential buyers. The buyer has a very possible out and loses only the cost of the inspections. This is what seller’s disclosure is supposed to cover. But should there be a legitimate mistake where the seller didn’t know of the defect and it’s discovered via inspection, the buyer can pursue legal action. It’s at this point that a real estate attorney should be consulted.
A leading case of Johnson v. Davis decided by the Supreme Court of Florida imposes an affirmative duty on sellers to disclose “… facts materially affecting the value of the property which are not readily observable and are not known to the buyer.” In Florida, As Is contracts or addenda DO NOT remove any legal obligations of the seller to disclose.
Both sellers and buyers should closely scrutinize any addenda, riders or additional terms added to their contract with the expertise of a real estate attorney.
The Comprehensive Rider to the FloridaRealtors/FloridaBar Contract addresses most additional circumstances such as contingencies for the buyers to sell their home or contract review by an attorney, or specialized financing options obtained through the Veterans Administration (VA) of the Federal Housing Administration (FHA) to name a few.
However, an experienced real estate attorney, or realtor, must fully examine the chain of title before a real estate transaction closes to ensure that there are no outstanding claims to ownership. Clouded title, unresolved title issues can expose a property owner to costly and time-consuming litigation.