Commonly Used Real Estate Terminology |
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Closing Costs: refers to the
amount of money required to settle legal fees, stamp duties,
and bank charges when the property is "closed" or
conveyed to you. This varies with the mortgage amount and
stamp duty but you will have a good faith estimate of what
this charge will be well in advance of the closing date.
Deed Restrictions or "Deed Restricted
Community" refers to a set of covenants placed on your
deeds which contain limitations on the use of the property.
They are written to protect the community and the most common
refer to size of home, design, price band and setback lines
of improvement. Alternatively there may be a restriction on
the overnight parking of commercial vehicles in a driveway
or landscaping design. You will be advised on these at the
time of purchase.
Short-Term Rental Restrictions. Certain counties
and developments have a restriction on the usage of private
homes for short-term rental. We do not ordinarily sell homes
in these counties or communities. Any restrictions must be
clearly disclosed prior to purchase. If a development decided
to change its rules (or Deed Restrictions) they would not
affect an existing owner; your rights would be “grandfathered
in". This means that the original rights of an owner
cannot be changed, only upon re-sale do the altered Deed Restrictions
become applicable to the new owner.
Title to your Home - Lien Theory. Florida
is a "lien theory" State, which means that a homeowner
receives the title documents to his house immediately, even
though he may have a mortgage on the property. The Bank or
Mortgagee receives a lien on the property, but this does include
the right of possession.
Do I need an Attorney? In normal circumstances
the answer is no. The “Closing” or conveyance
is handled by a Title Company, licensed by the State of Florida
to transact property transfers. In addition, if you are obtaining
a mortgage, the Bank will also oversee the closing to safeguard
its own interests. This is one of the advantages of taking
out a U.S. loan.
Title Insurance refers to an insurance policy
taken out by the Title Company on the purchaser’s behalf
which guarantees against any defects or encumbrances in the
title to real estate. This is normally paid for by the seller.
Construction Interest. During the construction
phase of a new home, the builder may require stage payments.
The bank will begin paying these from the residue of your
deposit after purchasing the land. Once your deposit funds
have been exhausted the bank will use its own money on which
it will charge interest until the home is finished. Upon completion
the construction loan will "roll over" into a permanent
loan and normal monthly payments will begin.
Borrowers Escrow Account. Most Florida banks
have a facility which allows the borrower to make extra monthly
payments towards insurance and property taxes which are paid
annually. This is basically a good idea and saves owners from
having to find a lump sum at the end of each year to settle
their property taxes – it is in effect a managed savings
account.
Property Taxes are calculated on the county’s
valuation of the property and are payable in arrears each
November. The principal is very similar to the old English
rating system. If a house is purchased after the November
payment date the purchaser will receive a pro-rated amount
from the seller towards the following November’s payment.
Points, Mortgage Loan Commitment or Loan Origination
Fee, are generic terms used to denote one percent
of the loan amount and are charged by the banks for setting
up your mortgage.
Documentary Stamps are paid by the purchaser
at a rate of $0.32 per hundred dollars of the mortgage amount
and included in the closing costs already mentioned.
Construction Inspections are carried out
by the lending institution before a stage payment is made
to the builder. The cost of these is included in the fees
paid on the closing statement. The larger builders do not
require stage payments.
Construction Lien Law does not normally concern
purchasers buying through a bank since the lending institution,
in the process of protecting itself, automatically protects
the borrower. It is mentioned because in order to comply with
Florida Lien Law, some suppliers of building materials or
labour will issue a statutory notice stating that if they
are not paid by the builder, the owner could be personally
liable. Obviously a bank will not make final payment to a
builder until it is satisfied all construction invoices have
been paid, otherwise it will leave itself open to a potential
lawsuit and a diminished equity in the property. However these
"Lien Notices" can look quite threatening when received
and the purchaser should be forewarned.
Impact Fees are normally paid by the developer
or builder to the County upon completion of the home and are
used to provide funds for the continuing infrastructure of
the County, such as roads and schools. Payment must be made
before the CO (Certificate of Occupation) is issued. Without
this certificate, the power company will not make a final
connection.
Notice of Commencement. A statutory notice
posted on the construction site by the lending institution
stating the names of contractors, purchaser and lender. The
notice will also be filed in the public record before construction
can commence.
Good Faith Estimate. Is a statutory document
prepared by the lending institution which shows the estimated
closing costs for your home and includes points, insurance
and outstanding property taxes, etc. |
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