Frequently Asked Questions

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Without any doubt, it is always a good idea to have a licensed REALTOR®. I will accompany you on your first visit to the new construction. The Builder (who is the Seller) will be responsible for paying all commissions for any real estate agents. So, the builder needs to know from the very beginning that you will have a licensed Florida REALTOR® representing you.

Bringing your agent to the first visit will clarify that the builder will be responsible for paying any and all commissions. Remember that some builders might even refuse to pay your REALTOR® a commission if you don’t register the agent the first time you visit the home on a new construction site.

My job as your REALTOR® is to help you get the most value for your money with the least hassle and frustration. There are two important areas where my experience and resources can be extremely helpful:

1. Negotiation: Not only can I help you negotiate your purchase price with the builder, but I can also address the inclusion of value-added and often unadvertised upgrades that might be available.
2. Selection of Financing: A builder typically will have a “preferred” lender that they will try to steer you to, but I can help make sure that you are getting the mortgage that works best for your situation. Shopping around for your financing is always a good idea, and you do not want the builder’s agent pressuring you into using their suggested finance professional unless it is absolutely right for you.

Keep in mind that besides selling you a new home, builders want your REALTOR® to bring them more qualified buyers for future sales. As a result, builders will likely work harder to keep you happy and keep your REALTOR® happy in hopes of future business and positive referrals from you. Rely on me to take advantage of this leverage when dealing with your Builder.

Unless you are paying cash, you will need considerably more than the final negotiated purchase price to buy your new home.  While you typically do not need a 20% down payment to buy a home, you will probably need at least 3%. On top of that, you will likely need as much as an additional 5% of the purchase price to secure a mortgage, conduct due diligence and transfer the property. These mortgage-related expenses are referred to as your “closing costs” (for more details see FAQ links regarding Closing Costs and Florida Documentary Stamp Taxes). On a $400,000 home, your closing costs could total as much as $20,000.

Understand that all that money will leave your savings account before you get the keys to your new home. So it is recommended that you have a comfortable cash cushion for irregular and unpredictable expenses that might occur once you move in. In fact, your lender might require you to have 2 to 6 months of reserves, especially if you are buying a second home or if your credit score is low or if your DTI (debt-to-income) ratio is high.

Mortgage lending guidelines define one month’s reserves as one month’s housing expenses. This calculation includes real estate taxes, homeowners association (HOA) dues, property insurance, mortgage insurance, and flood insurance (if required) along with principal and interest. So consider setting aside 2 to 6 months of all your expenses, not just housing expenses, to give yourself a bit more peace of mind.

The down payment is the cash a home buyer pays upfront in a real estate transaction and is a percentage of the home’s purchase price. Mortgage lenders no longer require a 20% down payment, and you can get a mortgage for as little as 3% down. However, although a 20% down payment may not be required, there are advantages if you can afford it. Making a larger down payment may mean securing a lower interest rate on your mortgage and avoiding the expense of private mortgage insurance (PMI). The minimum down payment requirement is primarily based on the type of home loan the borrower applies for, though factors like the property type, your credit score, and current mortgage rates can play a role as well. 

 The earnest money deposit (EMD), often referred to as a “good faith deposit,” is the deposit a Buyer pays immediately (within 3 days) after an offer is accepted to show the Seller they are serious about following through with buying their home. It usually equals 1% to 2% of the home’s purchase price. A more substantial EMD can set you apart from other Buyers, particularly in a competitive market. The EMD is applied to the down payment at closing. In Florida, earnest money usually goes into an escrow account, ensuring that neither the Buyer nor the Seller has direct access to the funds until the sale closes or the agreement falls apart.

The EMD comes with certain conditions and time periods that define when the Buyer can terminate the contract and reclaim the full deposit. However, if the Buyer terminates the contract for any other reason not specified in these conditions, the Seller is typically entitled to keep the EMD as a concession for when the home was taken off the market to enter into the contract with the Buyer.

Although it is certainly a possibility, with few exceptions, it is really very difficult for a Buyer to lose their EMD. If the Buyer works within the terms and conditions of the purchasing contract, there are several opportunities to break the contract and walk away from the deal along with their earnest money.

Here are the most common scenarios in which Buyers can recover their earnest money:

• Inspection Period: During the Inspection Period specified in the purchasing contract, the Buyer can terminate the contract for basically any reason that has to do with the condition or status of the property.
• Low Property Appraisal: If the property appraises at a lower value than the contracted purchase price, the seller has the option to lower the purchase price to the appraised value or to get the Buyer to compromise on a new purchase price. If the Seller chooses not to lower the purchase price, the Buyer can back out of the transaction and keep with their earnest money.
• Buyer Financing Problems: If the Buyer fails to get mortgage approval within the specified financing period deadline, the Buyer can terminate the contract and remain entitled to their earnest money deposit, basically holding the lending institution responsible for the failed process.
• Home Sale Contingency: The home sale contingency typically stipulates that the Buyer’s current home must be sold in time for the closing on the new home being purchased. This ensures that the Buyer will not be responsible for two mortgages at the same time. If the Buyer’s home does not sell within the contractual timeline specified between the Buyer and Seller, then the Buyer is entitled to their EMD if and when they back out of the deal.
• Title Search Issue: One of the most important reasons a reputable title company is engaged in a real estate transaction is the title search which is performed to ensure that no other parties have ownership claims to the property. If the Buyer finds an issue with the title, such as a lien or inconsistencies in ownership, the Buyer can void the contract and recover the EMD.
• Final Walkthrough: A final walkthrough is not required but is certainly recommended prior to closing. If any contractually agreed-upon repairs are not completed by this time, or if anything is removed from the property in violation of the sales agreement, the Buyer has a right to void the contract and recover their EMD.
• Termination by the Seller: The Seller may terminate the contract early for various reasons. However, if the Seller breaches the contract illegally, the Buyer may be entitled to much more than a refund of the EMD, including the ability to force the sale. In some cases, the Buyer could bring a lawsuit against the Seller.

Real estate contracts in Florida generally favor the Buyer.  While it is undoubtedly easier for a Buyer to terminate a purchasing contract and retain the earnest money, it is indeed possible that the Buyer can forfeit it as well.

Here are the most common scenarios in which the Buyer could forfeit the EMD:

• Missing the Closing Date: If the Buyer fails to close the deal by the specified date in the purchasing agreement, the EMD could be forfeited. It is important to manage the contractual timelines and responsibilities and ensure that all paperwork and requirements are satisfactorily completed well before the closing date to avoid this scenario.
• Buyer does not abide by the terms and conditions in the purchasing contract: The purchasing agreement spells out the terms and conditions of the sale. If any of these terms are violated, the EMD could be forfeited. For example, if the agreement requires the Buyer to apply for financing within a certain number of days and that deadline is missed, the Seller might have the right to keep your deposit.
• The Buyer “Getting Cold Feet:” Simply put, if the Buyer does not honor the terms, conditions, and deadlines of the purchasing contract or makes assumptions that are not specified in the purchasing contract, the Buyer can lose the EMD. The Seller’s receipt of the earnest money in such cases helps lessen the blow of the time lost during which the property was removed from the market.

To repeat, the earnest money deposit is a gesture of good faith, not a guarantee of a sale. In some failed transactions, both the Buyer and Seller feel entitled to the EMD. However, with the support of a well-written contract, this determination is usually straightforward. This is another example in which your representation by a licensed Florida REALTOR® can be invaluable. 

The Florida Documentary Stamp Tax is a closing cost which usually must be addressed by both Buyers and Sellers in the State of Florida. The Florida Documentary Stamp Tax that is levied on deeds is customarily paid by the Seller while the Florida Documentary Stamp Tax that is levied on mortgages is typically paid by the Buyer.

It is important to note that this customary division of responsibility between Buyer and Seller can be overridden if mutually agreed upon in the purchasing contract. This is often seen when buying a newly built home from a Builder who will usually assign ALL Documentary Stamp responsibility to the Buyer as part of the boilerplate verbiage of their standard purchasing contract.

For the Seller, the Florida Documentary Stamp Tax rate is 0.7% of the total consideration in all Florida counties with the exception of Miami-Dade. In Miami-Dade County, the tax rate is 0.6% on single-family home sales and 1.05% on anything else.

For the Buyer, the Florida Documentary Stamp Tax rate is 0.35% of the transaction’s mortgage loan amount (the amount the Buyer is borrowing). For any new mortgage, Florida also imposes an Intangible Tax of 0.2% of the amount of the new mortgage.

As an example, let’s say the Buyer is purchasing a home (resale, not newly built) for a price of $400,000 with a $20,000 down payment and a new mortgage of $380,000. The Florida tax obligations can be broken down for the Buyer and Seller as follows:

Buyer:  ($380,000  x  0.0035)  +  ($380,000  x  .002)  =  $1,330  +  $760  =  $2,090

Seller:  $400,000  x  .007  =  $2,800

Note that in a purely cash transaction, the Buyer will customarily have NO Florida Documentary Stamp Tax responsibility since there would be no mortgage. Combining this with the fact that the Seller is customarily responsible for ALL real estate commissions in the transaction, it is easy to understand why closing costs for the Buyer in an all-cash purchase are usually incredibly small. 

"Closing costs” refers to various fees you will pay for on the day of your actual home purchase. Closing costs typically range from around 3% to 5% of the purchase price of the home. In a “buyer’s market,” you can sometimes ask the seller to pay for part or all of your closing costs, but sellers are less likely to do so in a more competitive real estate market.

Here are a few of the closing costs you should be prepared to pay:

• Home appraisal fee: After signing a purchase agreement, your lender will order an appraisal of the property from an appraisal management company for which you can expect to pay a home appraisal fee typically costing between $300 and $600.
• Title fees: The title company will charge title fees, which cover the cost of a record search run by the company to ensure there are no other claims or judgments against the property you are purchasing. There are several fees included in this, from title search fees to title insurance. These fees will make up a large part of your closing costs.
• Mortgage origination fee: The mortgage origination fee covers the cost of processing and underwriting your home loan. This fee typically costs between 0.5% and 1% of the total loan amount. This can also be referred to as processing or underwriting.
• Application fee: Some lenders charge a fee for processing your initial loan application. This fee can cost up to $500, though it can vary by situation.

Prepaid Costs

When buying a home, you sometimes must prepay certain expenses such as property taxes, homeowners insurance or mortgage interest. Your mortgage lender will likely have you make an initial escrow deposit that they’ll put into an account for you. Your lender will then use the escrow account to pay any property taxes, interest or insurance premiums when they come due.

Mortgage Payments

Your monthly mortgage payments will consist of two main components: payment towards your principal balance (the total amount borrowed for the home loan) and towards interest. A portion of your payment will also go to taxes and insurance.

Depending on the type of home loan and the size of your down payment, you may be required to pay for private mortgage insurance which protects your lender in the event that you default on the loan. The cost of mortgage insurance depends on your loan type, down payment amount, credit score and many other factors, but it can add $100 or more to your monthly mortgage payment.

Additional Home Ownership Expenses

Here are a few of the more common and significant homeownership expenses to plan for:

• HOA fees: If the home you’re buying is located in a community with a homeowners association (HOA), you might have to pay monthly HOA dues. These charges usually cover certain services and amenities like trash removal, security or access to common areas.
• Home maintenance and repairs: It is recommended that you set aside upfront money for possible home renovations and ongoing maintenance.
• Home warranties: A home warranty is an entirely optional purchase, but it could help you save money down the road. A home warranty is like an insurance policy that protects your home’s major systems and appliances. Not all home warranties are the same, so you’ll want to shop around for the best and most affordable coverage. In general, you can expect to spend $300-600 per year for a basic home warranty plan.

Property taxes in Florida are not assessed by the County in question until November of the year in which they are due. So, anyone involved in a real estate transaction in which the closing is concluded between January 1 and the first week of November will not know the current year’s required amount of property taxes. Property taxes in Florida are based on the tax required for the previous year to prevent taxpayers from failing to pay the owed amount. For example, if you are involved in a real estate transaction in which the closing was concluded in April 2024, you will pay a tax amount according to the amount applied in 2023.

At the closing of a real estate transaction in Florida, property taxes are divided between the Buyer and the Seller using a “property tax proration,” which divides property taxes fairly based on the number of days during that tax year that they own the property. Since property taxes in Florida are paid in arrears, tax proration ensures that the Buyer is fairly compensated at closing for the Seller’s tax responsibility based on the number of days the Seller still owned the property. Note that in November, the County will send the Buyer the entire property tax bill for that tax year. Since the Buyer would already have been compensated for the Seller’s share at closing, the Buyer would be responsible for paying the entire year-end property tax bill.

Refinancing a mortgage simply means paying off an existing loan and replacing it with a new one. Refinancing via a new mortgage, like an original mortgage, can cost the borrower from 3 to 6% of a loan's principal and also requires an appraisal, title search, and application fees. So it is important for a homeowner to determine if the benefits of refinancing are worth these additional expenses. Among the various incentives for refinancing, the most prominent are:

• Lowering the interest rate: This is perhaps the best reason to consider refinancing. A commonly used rule of thumb suggests that refinancing makes sense if the new rate is lower than your current rate by at least one full percentage point. Consider whether the monthly savings gained from refinancing will be enough or whether the overall savings during the life of the loan will be of sufficient benefit. The advice and assistance of a licensed mortgage professional can be invaluable in helping you compare your calculations and lead to the decision that is best for you.
• Shortening the term (time duration): A shorter-term mortgage will reduce the total amount of interest paid during the lifespan of the loan and help you build equity more rapidly. For example, the total interest paid during the lifetime of a 30-year mortgage compared to a 15-year mortgage, with the same principal and interest rate, will be less by about 30%.
• Converting from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, or vice versa: While ARMs often start out offering a lower rate than a fixed-rate mortgage, periodic adjustments can result in rate increases that are higher than the rate available through a fixed-rate mortgage. When this occurs, converting to a fixed-rate mortgage results in a lower interest rate and eliminates concern over future interest rate hikes. On the other hand, converting from a fixed-rate loan to an ARM which often has a lower monthly payment than a fixed-term mortgage, can be a sound financial strategy if interest rates are falling, especially for homeowners who do not plan to stay in their homes for more than a few years. These homeowners can reduce their loan's interest rate and monthly payment, but they will not have to worry about how higher rates go 30 years in the future since they will have sold the home well before that happens. The devil clearly provides details regarding any decision to convert. To repeat, if rates continue to fall, the periodic rate adjustments on an ARM result in decreasing rates and smaller monthly mortgage payments eliminating the need to refinance every time rates drop. However, when mortgage interest rates rise, precisely the opposite would be the case.
• Accessing home equity: This can help to raise funds to deal with a financial emergency, pay for a child’s college tuition, finance home remodeling, or just consolidate debt. At face value, replacing high-interest debt with a low-interest mortgage is a good idea, but regrettably, refinancing to access your home’s equity can sometimes worsen your debt situation if not done prudently and with self-discipline. Keep in mind that the temptation looms large for a person who once generated high-interest debt on credit cards, cars, and other purchases to simply do it again after the mortgage refinancing provides the available credit to do so. All too often, one sees such dynamics result in an endless cycle of debt and even bankruptcy. So approach this with caution.

In summary, refinancing can be a great decision for you if it reduces your mortgage payment, shortens the term of your loan, or helps you build equity more quickly. When used prudently and cautiously, it can also provide a means for better managing your debt. Perhaps the two key questions to ask yourself are:

·  How long do I plan to continue living in your current home?

·  How much money will I save by refinancing?

Remember that refinancing costs 3% to 6% of the loan's principal, so it could take several years to recapture that cost with the savings generated by a lower interest rate or a shorter term. Clearly, if you are not planning to stay in your home for more than a few years, the cost of refinancing may negate any of the potential savings. Also, keep in mind that tapping into the cash from your home’s equity does not reduce debt, does not build equity, does not save you money, and does not eliminate your mortgage payment. Again, approach this cautiously, prudently, and with lots of self-discipline.