Each state has unique laws and customs surrounding real estate transactions. Legal representation, title and survey requirements, and closing costs are three areas that differ. While Florida does not require the use of an attorney, in Illinois, it is common to use an attorney to review documents and handle the closing. Buyers from California aren’t generally accustomed to needing an attorney. Additionally, states vary in the way property can be titled. For example, should you take title as Joint Tenants with Right of Survivorship or as Tenants in Common? Survey methods, costs, and requirements vary. Fees associated with closing, such as our documentary stamp tax, can vary widely as well. Buyers need to be aware that differences exist. Our Florida Realtors should caution out of state and international buyers that there are state and federal laws and tax implications of purchasing any kind of real estate in Florida. Prior to any purchase, buyers should explore these laws and tax implications with an attorney.
As both an attorney and CPA, my practice is to review both the legal and tax ramifications of holding title to property. While a CPA might say, “A separate LLC is not necessary for your rental property”, an attorney may say, “You need to be in an LLC for the liability protection it provides for your assets.” Each situation is different, and as an attorney and tax counselor, I advise based upon individual client needs while considering the business structure, tax implications, and liability concerns.
While title companies have a place in the Florida real estate transaction landscape, it is important to note that they do not have a fiduciary or legal responsibility to either the buyer or seller; they are not allowed to offer legal advice. If any issues arise in a transaction, a real estate attorney has the knowledge and skill to correct a situation before greater problems occur or the transaction falls apart. Buyers have reduced exposure when they utilize an attorney to review documents and advise on the best practice. Generally, the cost is about the same as using a title company because title insurance rates are set by the State of Florida. However, sometimes problems arise. For example, if a setback violation is identified, a variance may be required to cure the defect. If the closing is being handled by a law firm, the attorney can prepare the variance whereas a title company cannot. If the closing was being handled by a title company, the seller would be required to hire an attorney to obtain the variance which would end up taking more time and costing more money.
Unless you are buying a condominium, yes, you need a survey! Knowing the exact boundaries of your property is not only important, but can uncover costly issues that should be corrected before closing. You may rely on an existing survey if your seller has a survey that accurately reflects the property and if the seller is willing to sign an affidavit that no changes have been made to the footprint of the property since the date the survey was drawn. A good, clear survey is an important document to support ownership. Additionally, in the case of a re-finance, a new survey may not be necessary.
Buyers should be aware of both the creditor protection and tax savings provided in Florida’s Homestead Law. In Florida, our home is a castle that is impenetrable by creditors without a consensual lien. Florida’s Constitution exempts homestead property from levy and execution by judgment creditors. This means that a creditor cannot force the sale of your homestead to satisfy a judgment. Florida courts have liberally expanded definitions of homestead property to include more than just a single family house. Condominiums, manufactured homes, and mobile homes are also afforded homestead protection. The Constitution defines homestead as one’s principal place of residence up to one-half acre within a municipality and up to 160 contiguous acres in any county in Florida. Contiguous property may include lots with separate legal descriptions and separate tax numbers. Buyers need to be sure that title to the property is issued correctly to take advantage of the protection offered by the Homestead Law.
From a taxation point of view, “Every person who owns and resides on real property in Florida on January 1 and makes the property his or her permanent residence is eligible to receive a homestead exemption up to $50,000. The first $25,000 applies to all property taxes, including school district taxes. The additional exemption up to $25,000, applies to the assessed value between $50,000 and $75,000 and only to non-school taxes.” Realtors should be aware that in addition to the resident homestead exemption, there are additional exemptions for veterans, the blind, disabled, and widowed. The State of Florida Department of Revenue website is an excellent source of information.