BUYING PROPERTY IN FLORIDA
Chapter 1: Introduction
Chapter 2: Choosing a Home
Chapter 3: Inspection Visit
Chapter 4: Contract
Chapter 5: Mortgages
Chapter 6: Closing
Hello and welcome to the Central Florida Real Estate ‘Home Buyers Guide’.
Orlando is the number one tourist destination in the world with guaranteed sunshine, Walt Disney World, Universal Studios, superb golf, excellent shopping and only a short drive to the beautiful Gulf or Atlantic beaches. This provides a constant attraction for people wishing to own property either for investment or as a holiday home.
In truth, due to exceptionally low interest rates together with high value for money, it has never been easier to own a luxury pool home than right now.
With this in mind we will now take you through each step of the way from finding the home of your choice, buying it and should you so wish to managing and renting it.
The object of this guide is to explain in clear and concise terms the process of acquiring property in Central Florida and to explain in detail to potential buyers the after sales commitments of a registered management company together with the rental investment return. Our aim is to try and cover the most frequently asked questions concerning the various points involved while reaching that very important decision to purchase, also to provoke questions that you will need to answer to yourselves about the type of property that would best suit your requirements. The buying of another home is a big purchase so the more information that you have available right at the start will enable a better communication between us during the journey to find your dream vacation home.
There have been many articles written on the subject and many conflicting reports of what is the best way to go about securing your private pool home.
We have drawn on the resources of over 15 yrs experience in the tourism, sales, property management area of Central Florida and spoken with many involved parties to produce this guide.
My name is Jim Baillie, a licensed realtor working for American First Realty in association with the Elite Group of companies. I first started in the tourism industry back in 1986 working with the Walt Disney Company, moving on from there to work with the British Tour Operators, Airtours and First Choice.
In 1996 we formed Elite Vacations Inc. a specialist booking company for the rental of private pool homes to the tourist industry. Elite Vacations Inc. currently organizes and arranges bookings into over 200 homes on a regular basis.
In order to sustain our own inventory of homes and to be able to ensure a constantly high standard in maintaining those homes we formed Excel Management and Rentals Inc. for the sole purpose of managing properties we sell together with those entrusted to us from other sources at a level that our owners and renters expect.
Once as a potential buyer you have decided to purchase a home through our company we handle everything from helping to locate a suitable property to working with you through the mortgage process and ensuring the closing is smooth and efficient.
The information for this guide has been drawn from the following sources:
Mortgage Services of Orlando Inc
British Mortgage Abroad
Elite Vacations Inc.
Maesbury Homes
Excel Management and Rentals
American First Realty
SunTrust Banks
Once you have read through the guide and had a chance to digest its contents the next step is to contact us.
We can be contacted on the following:
We have 2 offices both located in Kissimmee.
Elite Vacations Inc - The management and rental office.
2929 Vineland Rd,
Kissimmee, Florida 34746
UK Free phone – 0800 0688286
US Free phone – 1 866 873 5483
Office – 407 518 7144
Fax – 407 518 7147
E-mail – jim@elitevacationsinc.com
The real estate office
American First Realty
3050 Michigan Avenue
Kissimmee, Florida 34744
Tel 407 518 7433
Fax 407 944 3532
The best way to reach me directly is by e-mail or on my cell phone 407 709 5565
Our normal office hours are 9-5 Monday to Friday. The first contact will be to set up a time where we can have a conversation without interruptions and go through the many questions you will have.
When you start the process of buying a house it is highly recommend that you work with a Real Estate Professional. We are licensed by the State of Florida to sell real property within the state and are regulated to ensure compliance with a continuing education to stay abreast of new laws and legislation that affect the real estate industry. We are state regulated to work to high standards and as a licensed realtor it is my duty to act fairly, honestly with skill care and diligence, to respect confidentiality and to fully disclose any item material relative to the purchase of a property.
What is the reason you are buying a private pool home?
This may seem like an easily answered question. The reasons people buy homes vary and will have a direct effect on the type of home you buy and the financing that you obtain or utilize for that home.
Q. Are you buying the home solely for investment purposes where the home will be self-financing and you will receive an income from the property?
Q. Are you buying the home as a family vacation home without regard to income support form rentals?
Q. Are you buying the home as a family vacation home with the running costs being supplemented or partially covered by the rental income?
Q. Are you buying the home as a family vacation home with the running costs being covered by the rental income?
Once you have established what type of buyer you are then you are ready to move on to the fun part of choosing your rental home. The following are the factors you will need to consider when deciding on what type of home will best suit your requirements.
If you have visited the area before then you may well have a good idea as to where you would like to purchase. Please see the map of Disney Area Villas. This shows the majority of the short-term rental communities around the Disney Area. When buying to rent, your property must be located in a short-term residential community. All the major short-term sub-divisions (Estates) are to be found on the locator map at the end of this section.
They can be broken down into three areas:
Each area has its benefits.
This is the most central and built up area. Close proximity to a many of the superstores, restaurants and the commerce of Kissimmee. Traffic can be heavy on the 192 but you are not too far from the major highway of Interstate 4.
The East side is very close to Orlando International Airport and is easily accessible from the 417 beltway from Sanford Orlando International airport. It has the best accessibility for the major highways. The Florida Turnpike and the 417 Beltway are close by. For Disney the Osceola Parkway runs from Disney straight to the Eastside of town. In Florida most distances are measured in time. Time wise the Eastside area is closest to all the major theme parks.
This is the area undergoing the most development at the moment. It is the area that is closest to Walt Disney World.
From a renting point of view there are no significant benefits from one sub-division to another. Each has is own appeal. Elite Vacations Inc regularly rent accommodation in all the sub-divisions shown on the locator map.
It really depends on the size of your family. The size most rented is a 3 bedroom
2 bathroom home, which accounts for around 65% of all bookings. The next most popular is the 4 bedroom 2 bathroom home which has about 25% of the bookings with the balance going into 5 and 6 bedroom homes. You do get more rental income from a larger house and you can always rent a 4 bedroom as a 3 or a 5 bedroom as a 4 or 3.
There is every configuration of homes available for sale.
Popular at the moment is the 4 bedroom 3 bathroom home that has two en suite bathrooms. It can accommodate easily two families or generations of the same family while allowing the parents each to have their own en suite facility.
From 7 bedrooms 5 bath down to any configuration that will fit you families needs. They are all available.
You should remember that when re-selling your house onto the permanent residential market 4 bedroom homes are more popular than 3 bedroom homes
The size of the houses in Florida that are used for holiday homes range from 1200 square foot up to 2500 square foot. A good size is around the 1600 square foot area, which would be ample for a 3 or 4 bed house. Obviously the bigger the house the more money it costs to cool it down and will increase the electric bill. The other factor, which increases the electric bill, is whether the house is one story or two stories. Two story houses always have a higher electricity bill than one story
Some families prefer a larger living area with perhaps a separate lounge or dining area.
There are many extras or personal tastes that each homebuyer has. Please find some of the features that we have been asked for over the years.
Overlooking a conservation area or lake
Large pool with extended pool deck
2 story house with master bedroom upstairs / downstairs
Shaded area or covered patio on the pool deck
2 lounges
Separate dining
South or West facing pool
Spa on the pool
4 bedrooms and 3 full bathrooms
In a golfing community
Large master bedroom and bathroom
There may be other features that are important too. The thing to remember is the more particular about what you want in your house the higher the price gets.
It is far easier to make additions and alterations to new homes than it is to find what you are looking for in the pre-owned market. This will have a bearing on whether you are going to buy a new house of go for a pre-owned.
One of the most important questions is how much do you want to spend on your house. Will the amount you are going to spend get the house that you want? Once you have established what exactly you are looking for in your house then we can start searching to find the house that has everything that you want and compare some prices. Once you have read the guide completely and then look at the figures, decide what level of mortgage payments work for you or if you are paying cash how much you will need to spend.
Re-sales start from around $225,000 for a standard 3-bed pool home. Once you get more specific for your requirements the prices increase.
New homes after you have closed on the house and put a furniture package start around $230,000 plus.
New House or a pre-owned
The biggest difference is the price; new houses are more expensive than
pre-owned which makes it all the more important to establish what you want from your home.
Included with this package are selections of new estates being built and the location and examples of the types of houses available.
The major benefits of having a house built are that you choose the lot you want and the type of home that you want to put on it. If you have specific requirements then the builders can always change the model to accommodate design changes. For instance you may want a larger bathroom and a smaller bedroom, bigger pool deck etc. You can tailor the fixtures to your desire choosing your own cabinets, counter top etc.
New homes come with warranties on the plumbing, electrical and structural elements of your home. In addition all the appliances are new and also come with a warranty.
With a new home you have the enjoyment of choosing your own colours and furniture package and having an overall closer involvement with the home.
There are also often builder incentives on the mortgages and closing costs where they will contribute cash towards the purchase if you use their recommended mortgage company.
While there are many builders in Central Florida erecting new homes for the short-term rental and investment market and we sell all products, we do not focus on any particular builder but rather the best deal. The reasons for this are that and all builders in Central Florida meet the state standards of excellence quality and the service they provide is superb. The locations of all of the builders and their developments are prime areas for property appreciation. All developments are close to all the areas of commerce and ideal for local residents as well as vacations home owners
Please Note
Should you be interested in a new home it is important to first contact us prior to visiting with a builder or we may be unable to become involved in assisting you with your home buying. As part of our service we monitor the building through each phase to ensure that the builder fulfills all his contractual obligations. We conduct inspection throughout and make sure before you sign off on a closing package that the house is completely ready with all faults attended to.
With an inspection visit whether you are buying a new or a pre-owned home we can provide arranged accommodation. We will try to accommodate you in a villa close to the area in which you are interested. The rental costs will be discounted and should you decide to buy a new property with our assistance it will be refunded in full at the time of purchase, also in many cases where a new home is purchased the developer will provide the cost of two economy return flights from your country as an incentive
A week should be long enough to go though the buying process, but if you come on a two-week charter which we can arrange should you wish, so much the better. We will meet you at the airport and transfer you to your villa.
On the inspection visit you will need a couple of days to acclimatize and get over the time change. Then it’s off to look at houses. For new homes it’s a fairly easy process. We take you to the developments that are currently under construction and check out the prices, models, lots and any buying incentives. If you know in advance either from looking at internet sites or through choosing a community from the material that’s included in this package then we can send you in advance the floor plans from the available models, a lot map of available lots and the prices relating to the models and lots.
If it is a pre-owned that you are looking for then prior to your arrival once we have your criteria, we will search the area for houses that fulfill your needs and arrange for access to the homes for your viewing.
Purchasing real estate in Florida is a fairly straightforward process. Almost all parties buying or selling houses are working through licensed real estate professionals. If you are selling a house you have a listing agent or a builder’s agent and if you are buying a house you work with the buying agent. Once you have found the property that you wish to purchase an offer is made. The offer must be in the form of a signed written contract. It is given to the listing agent or builder’s agent who presents the contract to the Seller. When the contract is counter signed by the Seller we have a binding contract.
The main parts to the contract are:
A description of the property being sold and the names of the principals involved
The purchase price and method of payment – how much is the down payment and how much is to be mortgaged.
The time for acceptance of offers and counter offers. This is usually a couple of days. If the seller does not accept the offer within the stated terms the buyer is released from any duty.
The type of financing. Whether it is a cash purchase or if the contract is contingent on the buyer obtaining loan approval. If the house is being financed the length of time available before loan approval is stated. The contract is written detailing the price you are offering and the length of time you need to organize financing.
Title evidence, ensuring that the title is allowed to pass from seller to buyer by researching to ensure that there are no other parties with liens on the title.
The closing date is stated on the contract detailing the date when the closing documents will be delivered.
Maximum repair costs. The amounts the seller is responsible for treatment, repair and replacement – pre-owned only.
Any addenda or special clauses. It is usual with a pre-owned house to put in an addendum that the contract is contingent to a successful certified home inspection. The home inspection checks for any faults throughout the house – structural, electrical and general.
Basically it’s the offer and the terms and conditions that you are willing to agree to.
The contract is presented to the seller for review and he will accept, refuse or come back with a counter offer. Once a price has been agreed by both parties and signed. The buyer lodges a good faith money deposit usually 1% of the sales price into an escrow account. The escrow account is held by the closing company who are responsible for the transfer of title from the seller to the buyer. They work with all the concerned parties – buyer, seller, Mortgage Company, insurance companies - to pull the closing package together ensuring that there will be no problems when the closing date arrives. Closing dates are anywhere from 6 – 10 weeks from the date the offer is accepted. The mortgage market is very active at the moment due to low interest rates consequently there is a lot of re-financing going on which slows down the loan approval process.
Once the contract has been signed and loan approval applied for we arrange for a certified home inspection. Once the home inspection is complete and items that need to be repaired, replaced or removed are noted. It is the seller’s responsibility to take care of the items revealed by the home inspection. We monitor the repair to ensure that all the work is done. Generally the houses are in very good condition and the $500 limits for repairs cover all that is necessary. Obviously with a pre-owned home there will be wear and tear. If there was a major problem for instance if the roof needed replacing costing $5000 that would negate the contract. We would withdraw or renegotiate the offer. The good faith money would be returned to the buyer.
New Homes
With a new home the builder takes a $2000 lot hold to keep the lot while the rest of the paperwork is processed and the buyer secures the appropriate financing. To start building a new house 10% of the sales price must be given to the builder usually within 30 days of receiving the lot hold. The balance of any down payments is taken at closing.
In the interests of translation I have included a glossary of terms that are used in the US regarding mortgages and their equivalent UK meaning. Please look to the glossary to familiarize yourself with the verbiage that is used in the US.
You can have a mortgage from either a US financial institution or a UK financial institution. There are different qualifications for each type of mortgage and personal decisions as to whether you go with a US mortgage or a UK mortgage.
To buy any property in Florida you need to have a US bank account. This can be set up while you are over here or by filling in an International Open-By-Mail Application with Suntrust Banks. Suntrust offer free internet banking which allows you to monitor your account from anywhere with Internet access
US Lending
There are many different programs from US lending institutions for foreign buyers. Below are examples of the type’s documentation required for qualification.
25% or more down payment
Income and assets are stated on loan application. Include all account numbers. Financial institutions for both US and UK bank accounts, name, address and phone numbers or each employer or similar information if you are self employed.
US bank account, no verification, source of funds required
Only available with a 20 year term mortgage (longer terms available with more down payment)
Photographic copies of passports for each borrower
There are always several options if the decision is to use a US mortgage company. We ask several different companies to come back with Good Faith Estimates of what the mortgage rates and charges will be and pick the best one. Most US mortgage companies are fine lending to foreign investors when the loan to value ratio is 80% or lower. The mortgage is secured only by the house in Florida. Though you can put less down it does become more difficult to qualify.
Most US Mortgages are quoted on a 30-year term. You can have whatever term you want. At the time of asking for the Good Faith Estimates we can check the rates on 15 year 20 year and 30 year mortgages.
The two types of mortgages used for foreign investors are the Fixed Rate Mortgage and the Adjustable Rate Mortgage. The adjustable rate almost always returns with a lower monthly payment. The adjustable mortgage rates change (adjusts) after 3yrs or 5 yrs depending on what plan is chosen. At the moment the 3-year adjustable rate is coming in around 4.75%. The fixed is around 6%
Recently there has been a good deal of interest from UK financial institutions in providing British Mortgages for foreign properties. You borrow in Sterling. You have the choices of the traditional Flexible Tracker Mortgage or Fixed Mortgage. They have become popular mainly due the comfort zone some buyers find when dealing with a British Company and paying their mortgage in Sterling. We have included a Mortgages at a Glance page in the pack, which outlines what the qualifications are to get a British mortgage and the types or rates and mortgages available.
The downside of a British Mortgage is that you can’t take any tax deductions against your property in Florida. You would only show the income at your property and the expenses associated with the house excluding the mortgage payments. In addition though the mortgage is secured by the house in Florida should the house go into foreclosure and is sold for a price which does not cover the outstanding mortgage. As a British Company they can come after your UK assets to cover any shortfall.
This is not the case with a US mortgage company who have no rights on any of your UK assets.
In the following section there may be terms that you will be unfamiliar with be it legalese or just American phraseology. They are all necessary parts of a real estate transaction and we will be happy to explain further any specific aspect of the closing process. We always use a professional agency whether it be a title company or real estate attorney to close any property transactions.
The day has arrived and the title to the house will be passed to you from the previous owner or builder. In Florida you can choose to use a Real Estate Attorney or a Title Company to handle the property transaction. Residential transactions are almost exclusively handled by Title Companies this has arisen out of the need for title insurance.
Title insurance covers a property owner or lender against losses caused by any defects in the title to the real property, which are discovered after the closing. An owner’s title insurance policy offers coverage to the buyer for the purchase price of the property while a lenders title policy protects the lender for the amount of the mortgage or loan.
By doing a title search the title company determines whether the seller can convey clear title to the property and disclose any matters on record that could adversely affect the buyer or lender.
With the need for title insurance title companies now handle the complete transaction putting together the closing package.
There are 2 ways to close on you house either in person or by express mail.
Most sales at the moment are concluded by expressing the closing package to the buyer overseas. The buyer signs and notarizes all the relevant documents.
When buying a new house the scheduled completion date is hard to estimate. New build times range from 4 – 6 months from initial contract. Re-sales close much quicker between 6 – 10 weeks. It is possible to fly back over and sign in person though it is not necessary.
In Florida, like elsewhere, most of your closing costs are incurred in connection with obtaining a mortgage. However, even if you are not obtaining a mortgage, you can expect the following closing costs:
Home Inspection Fees: Pre-owned only. You will want a licensed inspection company to check out the roof structure and appliances as well as check for termites.
Survey: You will want to make sure exactly what the boundaries are to your property and make sure that there are no unusual easements running through your property.
Title Insurance: Title insurance provides you with a "deep pocket" and peace of mind if for some reason your title is no good or clouded.
Casualty and Flood Insurance: Obviously, you want to protect your real estate investment from fire or storm.
New Construction: Most developers/builders charge a closing fee of between 1.5% and 1.75% to cover the cost of Florida Documentary Stamp Taxes and Title Insurance.
Closing Fees: Charged by the closing agent for closing on the property.
Real Property Taxes and Home Owners Association Dues: These items need to be pro-rated at closing depending on the time of year.
Title Examination: Charged by the closing agent for examining the status of title on the property.
Decertification Fee: Charged by Title Company for reviewing recorded deed and issuing title policy.
Most lenders will charge for many of these items. Be sure to request a Truth and Lending Disclosure form before committing to a loan. This disclosure form will tell you about all of your closing costs such as:
Application Fee: Charged by lender; usually paid before closing - can range from $50 - $550.
Underwriting fees: Charged by Lender; the fee for approving the loan.
Flood Certification Fee: Charged by Lender to determine if property is in flood zone.
Tax Service Fee: Charged by Lender to monitor payment of real property taxes.
Loan Origination Fee: Charged by Lender for giving you the loan.
Loan discount Fee: Charged by lender for reducing the interest rate on the loan.
Document Preparation Fee: Charged by Lender for preparing loan documents.
Escrows: Some lenders require you to escrow money in advance for real estate taxes and insurance.
Prepaid Interest: If you close on any day other than the last day of the month, you will need to prepay interest for the rest of the month. However your next mortgage payment won't be due until 30 days after the 1st day of the following month.
Settlement Fee: Charged by the closing agent for closing your loan.
Title Examination: Charged by the closing agent for examining the status of title on the property.
Title Insurance: Required by Lender to close. Big savings are available if closing on loan is coordinated with the purchase of the property.
Intangible Taxes: .0020 % of loan amount charged by State of Florida at closing.
Documenting Stamp Taxes: .0035% of loan amount charged by Florida at closing.
Recertification Fee: Charged by Title Company for reviewing recorded deed and issuing title policy.
The actual charges will vary depending on how much the mortgage amount is and whether you are buying a new or pre-owned property.
Once the closing package is signed and the funds dispersed, the title is transferred to your name and its time to start planning for your next holiday.