What is the Florida Real Estate Contract Form?
The Florida real estate contract form is a legally binding document that is utilized in the purchase and sale of real estate properties in Florida. The contract serves to outline the essential terms of an agreement between a seller and buyer, including stipulations such as the sale price, payment terms, and contingencies.
It is commonly used for real estate transactions across the state of Florida in both commercial and residential real estate. In deed , the Florida cyclical real estate contracts were uniquely crafted to account for the specific realities of Florida’s oftentimes very fast-paced and high stakes real estate environment.
The Florida real estate contract is designed to protect all of the parties involved in the transaction, by spelling out all of the rights and responsibilities to both the buyer and the seller. Unlike contracts that only benefit the buyer, the Florida robust real estate contract helps protect the interests of both sides.
Essentials of a Real Estate Contract
One of the fundamental aspects of a valid real estate contract is the creation of a meeting of the minds, meaning that the parties agree on the principal terms and conditions. In Florida, the state-approved real estate contract form contains all the necessary contract provisions for a residential real estate sale.
Another important piece of any contract is the offer and acceptance with respect to the purchase price, the closing date, any contingencies such as financing, home inspections, or property disclosures, and the like. The Florida real estate contract form includes these topics that must be understood by the parties, their real estate agents, and attorneys to understand what they may mean in the context of a real estate transaction.
Typical Provisions in Florida Real Estate Contracts
The Florida real estate contract form typically contains several common clauses that address different aspects of the transaction. The financing contingency clause, for example, sets forth the terms and conditions under which financing must be secured. If the buyer is unable to secure financing within the specified time frame, they have the right to cancel the contract, and their deposit should be returned. Inspection rights are another common provision in the Florida contract form, which typically grant the buyer the right to perform inspections of the property within a specified period of time. If the inspection reveals significant issues with the property, the buyer has the option to terminate the contract. Clauses regarding title and closing obligations also are common in the Florida contract form, addressing who will be responsible for certain fees, such as repairs and owner contributions, and setting forth any deposit conditions or other closing obligations. A clause addressing default penalties is also usually included, which usually provides for specific performance or liquidated damages, and notes the governing law to be applied.
Functions of Real Estate Agents Regarding Contract Forms
The role of real estate agents remains the same for Purchasers and Sellers of real estate in Florida. Agents are supposed to be a source of information and guidance in a realm of transactions usually unknown to their client. That is why most states have created specific rules for licensed real estate professionals. Florida is no exception. The Florida Real Estate License Act specifically sets out the duties that arise between real estate professionals and their clients including: loyalty, confidentiality, full disclosure, accounting, skill, care and diligence, and the duty of a principal to act in good faith and deal fairly.
In the course of a real estate transaction, two of those duties are particularly significant. Only "qualified individuals" can prepare legal documents for others. For those interested in purchasing real estate, this often leads to the pragmatic conclusion of hiring an attorney to complete the transaction from the offer to closing or settlement. However, it is also important to know that salespersons and brokers are allowed to fill in blank forms which are authorized and approved by the state’s Department of Business and Professional Regulation to help prospective buyers submit an offer to purchase real estate. The pre-approved form is of limited assistance in that it does not inform the purchaser of potential pitfalls or issues that could be avoided and may ultimately be to the detriment of the buyer.
Generally, professional real estate brokers and salespeople should use these "form" contracts in a manner similar to an attorney drafting a form contract. They should explain to their clients the contents of a boilerplate document prior to completion rather than rely solely on the form to cover all the contingencies which may exist in certain sales. The more complicated the transaction, the more likely it is that a licensed real estate professional will need the help of an attorney to assist in obtaining a favorable contract.
Legal Aspects and Conflict Resolution
Parties to Florida real estate contracts, or their counsel, should be aware of the legal considerations surrounding the Florida real estate contract form. The basic rule is that Florida real estate contracts are preferred to be concluded as a separate sales or purchase agreement rather than the use of a short, premises style contract. Cases such as Starling v. Hennel, 97 So.2d 257 (Fla. 3d D.C.A. 1957) and Octon v. Florida Nat. Bank, Miami, 376 So.2d 1144 (Fla. 3d D.C.A. 1979), and other older authority hold that concluding a short, premises style contract containing a commencement date of the offer, a commencement date of acceptance and a closing date is sufficient as a meeting of the minds. However, many courts have limited the applicability of these cases. We have summarized some of the recent cases here, here and here.
Once you have a binding contract, disputes can arise due to either party’s failure to comply with the terms of the contract or at times due to fraud or misrepresentations. This will be the topic of another blog post, but suffice it to say that unless damages to "a party’s person, property or reputation" is involved, the parties are usually required to go through some type of mediation, arbitration or other alternative dispute resolution process before a court will agree to hear the matter.
Most of the time parties are required to proceed through mediation. Mediation is a non-binding process that requires the litigants to meet with a neutral mediator (who is usually a retired judge) to see if the matter can be resolved before proceeding on to arbitration or litigation. If mediation fails to resolve the dispute, the dispute can then go to litigation through either arbitration or litigation. The difference is procedural:
Arbitration is a formal procedure wherein a case is referred to a neutral arbitrator to decide all matters in dispute. Parties have very limited rights of appeal from an Arbitrator’s award. The Florida Real Estate Sales Contract Form has different types of clauses with which the parties can agree to proceed. For example, parties can have a provision for: (1) Mandatory Binding Arbitration or (2) Non Binding Mediation / Binding Arbitration. When there is a Mandatory Binding Arbitration clause, the Arbitrator usually drafts an order staying all further judicial proceedings in the case and the parties must submit to the Arbitrator’s jurisdiction . Binding arbitration is very similar to litigation in some respects. Each party is allowed to present their side of the story and the neutral arbitrator decides who is right and who is wrong. However, the appeal rights from an Arbitrator’s award are very limited, but the parties can agree in advance to extend the appeals process by way of an agreement at the time of the submission for arbitration.
The other option for parties is to have the matter tried in court via litigation. There may be certain advantages to proceeding to litigate the claim first, including the possibility of obtaining attorneys’ fees and costs from the opposing party. In addition, litigation and arbitration are not free and can consume significant amounts of time and money.
Furthermore, before you litigate or arbitrate, there are two other factors that you must consider when pursuing a contract action against the other party to the contract. First, the parties may be able to recover from the other party some or all of their attorneys’ fees and costs if certain requirements are met. The third amended version of the contract form provides, "If Buyer or Seller customarily obtains a title insurance policy in connection with this transaction, Escrow Agent shall hold the initial deposit of Five Hundred Dollars ($500.00) until provided with a copy of the title insurance policy and shall then return the initial deposit to the buyer." The reasoning has to do with the parties’ position regarding the closing that would have occurred under the contract and the order in which costs of settlement and commissions subject to dispute would be paid. If no title company is used for the transaction, then this part of the form may not apply.
Second, the parties may be able to recover a percentage of their attorneys’ fees and costs if they are the prevailing party in a litigation or arbitration. In some circumstances the parties may be able to recover their attorneys’ fees and costs from the non-prevailing party even if they are not successful in their litigation or arbitration because they complied with the requirements of Florida Statute section 718.303(1), which requires a party to notify the adverse party of the nature of the alleged default, and that such default must be ignored for a period of 30 days before the non-defaulting party can initiate litigation in the matter.
How to Complete a Real Estate Contract
Once the real estate contract has been selected, it is time to complete the contract. This will take place in seven general steps.
- A buyer and seller should execute page 6 of the Residential Contract for Sale and Purchase (Residential Contract). Page 6 has a space for the initials or facsimile signatures of the contracting parties, and this is the best place to do that (don’t try to initial or sign the exhibit copies).
- The buyer’s broker should type or write in the information regarding the listing on page 1 of the Residential Contract, so that it will be clear the contract relates to the property that is subject to the commission agreement with the listing broker.
- The seller’s broker should type or write in the information regarding the date and time for the closing and closing location on page 1 of the Residential Contract. Brokers should remember that the date and time for closing should always be at least 14 days after the title examination date and preferably longer.
- The residential property is often unit number 101; it is always a good idea, however, to check to make sure it is not unit 116A B, C or D, since those units may not be eligible to be homesteaded (and a lot of other similar associations with letters).
- The parties should obtain the Florida Department of Revenue Transfer Tax Forms needed to close the transaction from the Title Agent or Attorney for the seller.
- The parties then need to send these forms to the Florida Department of Revenue on the date of closing, along with the seller’s check.
- Completed and signed documents, including needed signatures, can be emailed to the Title Agent or Attorney for the seller or can be sent in PDF format. This can save hours of time since the documents are not required to be originally signed, although this would be advisable. However, there is still time, and perhaps it would be better to fax the documents that need original signatures, such as closing documents or the deed, to the fax number for the Title Agent or Attorney for the seller and have them send the original documents back via overnight delivery. This will save a lot of money on overnight delivery.
Common Questions About Real Estate Contracts
Common Questions about the Florida Real Estate Contract Form
The following is a brief discussion of general questions many buyers and sellers of real estate may ask when they first review the Florida real estate contract form.
What does it mean to have clear title?
Clear title means that the subject property will be transferred without any claims of another party. In other words, there cannot be an ownership, lien , claim or debt owed against the property.
How long is the standard contract period?
The default period for most steps in the contract is thirty (30) days. Usually both the buyer’s inspection period and the buyer’s right to cancel the contract are thirty (30) days from the date of signing.
Is special financing available for first-time homebuyers?
Yes. There are both government programs and alternative sources of financing for low-income borrowers and first-time homebuyers.
What does it mean to be "as is"?
Real estate "as is" means that the buyer acknowledges the condition of the property and accepts it in its current condition without any changes by the seller.
