Real estate is one of the most valuable investments you can make, which is why it is required that contracts concerning real estate be put in writing. However, the terms used in these contracts can be confusing. Additionally, certain terms are required to be included in Florida real estate contracts.
Here is a list of the key terms in Florida real estate contracts and what they mean for you:
Identity of the Parties
This may seem straightforward, but it can get complicated. The parties’ legal identities must be detailed in the contract. If they are a natural person, their legal name should be on the contract. If the property is owned by a company, this information must be specified, including the state of formation. If a property is owned by a trust, the trustee’s name must be included.
Legal Description of the Property
It’s not enough to include the address of the property. Instead, the contract must include a legal description of the property. This is the precise location and measurement of the real property. This description is more accurate and is a unique identifier. It clearly states where your property line begins and ends. It is included on your real estate deed and must be included in the purchase agreement.
Price
The contract must include the price offered to purchase the property. This is one of the most essential terms of the contract. If it is excluded, the contract may not be enforceable.
Earnest Money
Earnest money is an upfront payment a buyer makes to show they are serious about purchasing a property. The seller accepts the earnest money deposit in exchange for taking the property off the market. If the deal falls through because of buyer’s inability to perform, the seller may be able to keep the earnest money deposit. The amount of the earnest money deposit must be included in the real estate contract.
The earnest money is typically held in escrow by the escrow agent (such as the title company or real estate attorney handling the closing). The amount is negotiable, but it is typically around 1% to 3% of the purchase price.
Manner and Date of Payment
The way the buyer intends to pay for the property and when they will pay must be described in the real estate contract, such as if the purchase is a cash purchase. The closing date should also be provided for in the contract.
Financing Provision
Many real estate purchases involve financing from a lender. A buyer can make the purchase contingent on their ability to get sufficient financing from a mortgage provider. Financing terms are included in the purchase contract.
Deferred Payment Details
If there are any deferred payments, this information must be included in the contract, including when the payments will become due and how interest is calculated for these payments.
Encumbrances
An encumbrance is a legal claim that someone other than the owner has on the property. For example, the seller may have an existing mortgage on the property, or there may be liens on it. The real estate contract must state whether the buyer is taking the property subject to any liens or other encumbrances, or if the seller will resolve them before the property is transferred.
Contingent Acts
The buyer or seller may require that the other party complete some act before the transaction can be completed. For example, the buyer may state that they will not purchase the property until they have successfully sold their own.
Other Important Terms
While all of the above terms are considered material terms of a Florida real estate contract, there are many other important terms to understand when you are buying or selling real property in Florida, including:
As-Is
Some properties are sold “As-Is.” This important term indicates that the seller is selling the property in its current condition. They are not going to make any repairs or changes to the property, unless those are negotiated with the buyer and put in writing.
Inspection Contingency
A contingency is a condition that must be met and if it is not, it gives the other party an opportunity to legally back out of the contract. An important contingency that is often included in Florida real estate contracts is a real estate inspection contingency. This contingency allows the buyer to have the property professionally inspected to determine if there are any defects or damages. The buyer can typically back out of the deal if these problems are not remedied according to the terms of the contract. The common inspection time period for Florida residential properties is fifteen days.
Marketable Title
In most real estate transactions, the buyer wants to secure a marketable title, which is title clear of any liens or defects. The requirement for seller to provide clear and marketable title at closing should be stated in the contract.
How Farshchian Law Can Help
The experienced real estate team at Farshchian law can help you with drafting, reviewing, and negotiating Florida real estate contracts. We can also explain the key terms in the purchase contract to you so that you know what your rights and responsibilities are under the contract.
For a free consultation, call us at (800) 604-1871 or email us via our secure online contact form. We provide real estate, title/closing services, and deed transfer services throughout the State of Florida.