A recent trend has been for real estate brokers
to add fees for themselves in addition to their commission
to the contract. These are often described as "processing"
or "handling fees" and are assessed by the listing
broker against the seller, and even against the buyer! Because
many brokers print up their own contracts with these fees
included in the "boiler plate," the parties may
not be aware of them. But when they sign the purchase and
sale contract they are also contracting to pay these fees.
The parties should carefully review the contract, and if you
do not agree to pay these additional amounts, delete them
from the contract.
Closing Costs: are your title insurance related expenses of
closing. They are :
Title Search: theoretically, the cost of generating
the search of the county records.
Title Examination: theoretically, the cost of labor to review
the title search.
Tile Insurance: the premium for insuring the property and
the mortgage lender against title defects. The State of Florida
has established the minimum rate for title insurance, which
is called the "promulgated rate." This is $5.75
per $1,000.00 of insured value up to $100,000.00, $5.00 per
thousand up to a million, $2.50 per thousand up to five million,
and $2.25 per thousand up to ten million.
The contract often allocates these costs by
stating for example seller shall furnish buyer a title abstract,
which means the buyer pays for the other two, title exam and
title insurance, and that the buyer's title company will bill
the seller for the cost of the search. If the contract states
that the seller shall provide a title insurance commitment,
then the seller hires the title company and pays the search,
exam, and owner's policy, and the buyer pays for the lender's
title insurance and post closing title update.
In general it makes more sense for the buyer to assume the
responsibility for the title insurance, as the title insurer
has to work with the buyer's mortgage company. Consider factoring
the additional share of the closing costs into the purchase
price. The advantage of choosing the title agent yourself
is to keep control of the closing, rather than risk the other
party retaining an incompetent title company and jeopardize
the transaction. Secondly, the party being billed by the other
party's title company rarely gets a competitive price. I.e.
if you are a seller responsible for the costs of a search,
get a quote in advance.
Breach of Contract: as noted above, if the buyer
breaches the seller may claim the deposit. If the seller breaches
the buyer may sue for specific performance to force the seller
to sell the property or get his deposit back. Note the comments
on the effect of a Lis Pendens in the next paragraph if you
are a seller contemplating breaching your sales contract.
In a breach of contract, the broker may also
claim his commission. Review the contract to see if it provides
for a portion of or all or the deposit to be used for the
broker's commission. Florida law provides that brokers may
not file a law suit against the subject property to collect
their commission. You may, however, waive this right. Do not
be surprised if the broker has saved you the trouble of having
to waive it manually, it may already have been inserted into
your "form" contract. Sellers should be aware that
if a suit is filed against their property (known by the recording
of a Lis Pendens, Latin for pending suit) they will not be
able to sell it until the law suit is over. That will be many
months at best. If you had a mortgage about to balloon, you
may never get to sell your house. The broker's Lis Pendens
will not stop a foreclosure.
In a breach of contract law suit, the contract
usually provides that the loser pays the winner's legal fees.
This is thought to act as a deterrent to filing frivolous
law suits. [..cont..]
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