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Florida: Closing a Property Purchase

Overview

The final act of a property purchase is the closing or settlement, the date of which is stated in the contract. The closing involves the signing of the deed of sale, transferring legal ownership of a property, and the payment of the balance of the purchase price plus any other payments due, e.g. closing costs, taxes and insurance. The balance of the price after the deposit and any mortgages are subtracted must be paid by the buyer in cash or with a certified or cashier’s cheque. The parties are given a closing statement, e.g. the HUD-1 form approved by the US Department of Housing and Urban Development, which sets out all the costs and fees for which they are responsible.

Before the deed of sale is signed, the closing agent checks that all the conditions contained in the preliminary contract have been fulfilled. The agent collects any fees or taxes due, witnesses the signing of the deed and arranges for its registration (in the name of the new owner) at the local property register. He doesn’t, however, verify or guarantee the accuracy of statements made in a contract or protect you against fraud. The closing agent may issue other documents including an IRS form 1099 to the sellers (to declare their sale) – or a Sale or Exchange of Principal Residence (form 2119). The buyers and sellers are required to sign a state tax return (DR-219) confirming that the documentary stamps have been paid on the sale. If applicable, the seller will need to sign a certificate stating that he isn’t a non-resident alien for the purpose of US income tax, otherwise 10 per cent of the sale price must be withheld by the closing agent against a possible capital gains tax liability under the Foreign Investment in Real Property Tax Act (FIRPTA).

Final Check

Property is sold subject to the condition that it’s accepted in the state it’s in at the time of closing, therefore you should be aware of anything that occurs between signing the contract and closing. Before signing the deed of sale, it’s important to check that the property hasn’t fallen down or been damaged in any way, e.g. by a storm or the previous owners. If you have employed a broker he should accompany you on this visit (failing that, take your lawyer). You should also do a final inventory immediately prior to closing (the previous owner should have already vacated the property) to ensure that the seller hasn’t absconded with anything that was included in the price.

You should have an inventory of the fixtures and fittings and anything that was included in the contract or paid for separately, e.g. carpets, light fittings, curtains or kitchen appliances, and check that they are present and in good working order. This is particularly important if furniture and furnishings (and major appliances) were included in the price. You should also ensure that expensive items (such as kitchen apparatus) haven’t been substituted by inferior (possibly second-hand) items.

If you find anything is missing, damaged or isn’t in working order you should make a note and insist on immediate restitution or an appropriate reduction in the amount to be paid. In such cases it’s normal for the closing agent to withhold an appropriate amount in escrow from the seller’s proceeds to pay for repairs (etc.) or replacements. You should refuse to go through with the closing if you aren’t completely satisfied, as it will be difficult or impossible to obtain satisfaction later. If it isn’t possible to complete the closing, you should contact a real estate lawyer about your rights and the return of a deposit and any other funds already paid.

Overseas Buyers

It’s usual for both parties to be present when the deed of sale is read, signed and witnessed, although it’s possible to give a US representative power of attorney (proxy). This is quite common for foreign buyers and can be arranged by your broker, builder or lawyer. It’s usually necessary for an overseas buyer to sign certain documents in the presence of a notary who will witness his signature. There are US authorised notaries in most countries (contact your nearest US consulate or embassy for information). There are also US lawyers in many countries, although (if possible) you should choose one who’s licensed to practise in Florida and has experience of Florida property law. If you need to send documents to Florida from overseas, you should use a courier company such as Federal Express or DHL. On the other hand, if you have any questions you should fax or e-mail them to Florida rather than waste money on expensive telephone calls.

Registration

After the deed of sale has been signed by the closing agent he will give you a certified copy. A notarised copy is lodged at the county property registry office and the new owner’s name is entered on the registry deed. Note that only when the deed is registered do you become the legal owner of the property. Following registration, the original deeds are retained by the lender until a mortgage is paid off or are returned to the owner.

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