How to protect yourself when selling a house in Central Florida

Real Estate Agent with Sand Dollar Realty Group, Inc. BK627826

You have bought a junker, fixed it up as cute as dollhouse, put it on the market and found someone that loves it and wants to buy.  What an incredible feeling.  In just a few short weeks you have a big payday coming.  But before you start finalizing paperwork and breaking out the champagne bottles, there are several things you want to do to protect yourself so that this deal does not come back and bite you in the behind.

First and foremost you want to make sure that your buyer is actually for real and can actually make it to a closing.  Do not ever sign a contract to sell your property unless (1) you have a reasonable deposit being paid by your buyer, and (2) your buyer has provided you with either a mortgage pre-approval letter or proof of funds to close.  What constitutes a reasonable deposit is a matter of opinion.  To me reasonable means at least 2% of the purchase price but no less than $1,000.  Anything less than that makes me question the sincerity of the buyer.  As for the mortgage pre-approval letter, I learned long ago that the only valuable information on that letter is the name and the phone number of the person who prepared it. Everything else on the letter means absolutely nothing as far as I am concerned.  So before you sign a contract, always call up the lender and talk to them.  You want to verify with the lender that they have pulled this buyer's credit and that they have verified their financial situation.  You also want to discuss title seasoning (meaning that you have only owned this house for a few weeks) in order to deal with any problems that may arise as a result.  Lastly you want to find out how quickly they can get the appraisal ordered and the loan approved. Once you have verified all that information, only then should you sign a contract to sell the property.

I use a little additional language in my paperwork whenever I sell a home.  It is not anything very exciting but it does protect you greatly if things do not progress as expected.  The most important thing is to set clear deadlines for a buyer to meet certain contingencies.  Set deadlines for getting inspections completed, deadlines for getting the appraisal completed, and deadlines for getting written loan approval.  On a typical single-family house a buyer should not need more than 10 days to finish all of their inspections.  For getting an appraisal ordered and completed, they should need no more than 21 days.  For getting written loan approval, it can vary greatly depending on the loan type (conventional, FHA, VA, USDA, etc.) and if they are getting any sort of down payment assistance or bond money.  So talk to the lender and nail them down on a drop dead loan approval date.  If the buyer or the lender makes a fuss about these deadlines, try to work things out but do not let them jerk you around.  Time really is money when you have a hard money lender that you have to pay every month.

Another concern is repairs found during the inspection.  If you use the standard FAR/BAR real estate contract, make sure to put reasonable caps on how much repairs you will make to the property as a result of an inspection. The standard repair amounts listed on that form are 1.5% of the purchase price for building defects and 1.5% of the price for termite/wood destroying organism issues.  On a $150,000 house those could cost you $4,500 to repair.  And the inspector ALWAYS finds a few things for you to repair.  So do not put a number in those blanks that is higher than you would be willing to pay, because more often than not you will end up paying the maximum dollar amount to fix items found on that inspection.

You also need to protect yourself after the sale.  I always add language to my contract that once the buyer closes, that they are buying the property as-is.  I will make reasonable repairs prior to closing but when a buyer calls me 2 weeks after we close and wants me to fix the air-conditioner or the septic tank, I am none too thrilled.  My recommendation is to strongly consider offering a home warranty to the buyer - that is assuming that they pay your asking price.  If you buy a basic home warranty with a higher deductible, it will often cost just a little over $300 for a full 12-month warranty.  Then if something breaks down after the deal closes, they call the home warranty company and not you.  And on top of that, they are thrilled that the repair got made at minimal cost to them.   

Always sell with a "special warranty deed."  These are the same deeds that banks use when they sell their REO foreclosures.  A special warranty deed warrants that you did nothing to affect the title to the property during the time that you owned it.  That means that any problems with the title prior to when you owned it will not be your responsibility to fix.  After all that is why the buyer is getting an owner's title insurance policy anyway.  If you have only owned the property for a few months or a few years, why should you be liable for the quality of the property title back to the year 1821 when the United States acquired Florida from Spain?

Well what about filling out a seller's disclosure form?  Realtors will almost always ask you to fill out a long 5+ page form detailing everything you do or don't know about the condition and history of the property.  Florida law does require a seller to disclose to a buyer any known material facts that could affect the value of the property that are not readily observable. This includes property condition issues, repairs done without permits, as well as offsite problems like the drug dealer that lives next door.  There is a lot of gray area here.  My personal opinion is that the long 5+ page form only protects the buyers and the Realtors.  But the law does require you to make the necessary disclosures. So when in doubt disclose or better yet do what you can to simply fix the problem before you put the house on the market.

The final protection is to own title to the property in an entity of some sort whether it be a corporation, an LLC, a limited partnership, a land trust, or some sort of combination of these entities.  These entities do offer you an extra layer of protection in the remote case of a lawsuit involving the property.  But that is a seminar all to itself.  So until next time ... happy investing.  Deals are everywhere. Get out there and make some offers.

Comments (2)

Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Very informative post Rob. Many agenst don't understand that the 5 page property disclosure is NOT law and it is not required. Personally I don't like the form. It seems like sellers just go through it quickly and rarely cover the items that need to be dislcosed. I'd much rather just have them write out their own disclosure.

Also, great idea to use the special warranty deed. I had not thought of that.


Jun 18, 2010 12:37 PM
Phil Hanner
Keller Williams - Daytona Beach, FL
Phil at

Great post Rob.  Rehabbers should always use proper materials and methods when fixing up properties for quick resale and disclose, disclose, disclose.  I have had many people decide to work with me because I disclose everything I know to be wrong upfront. People appreciate honesty and will refer you.


Jun 19, 2010 05:02 AM