15 FAQs about buying a home in Florida: answered

15 FAQs about buying a home in Florida: answered

It has recently been predicted that one in ten new homes being built in the US in 2014 will be in Florida.

The new-build sector there has certainly roared back into life but there is also a lively market for resale properties, and overall February was a boom month for Florida with house prices going up by an average of $8,000 in a month.

So, with house prices rising faster and faster, now is the time to act if you seek to buy a home in Florida.

To give you a head start in the property-hunting process, Carol Chant of Dream Homes Orlando (a member of the AIPP) here shares the most frequently asked questions from UK buyers...

1. Are there any restrictions when using an agent in Florida?

Unlike the UK, the first agent you visit a development with will register you as their client; he/she is the one who receives the commission on a sale if you later buy there. It does not matter if you subsequently visit with a different agent that you prefer to deal with, the first agent will still be paid.

Similarly, if you view a resale home with an agent, you will then have to use that agent to buy that home, if you decide to purchase it. It is therefore important that you choose a selling agent you can feel comfortable with first time.

2. Who should I use to help me buy?

Use a Member of the [British based] Association of International Property Professionals (AIPP) as they have been vetted and approved. They must act professionally and have signed up to obey a strict code of conduct. The AIPP Member will introduce you to a qualified Real Estate Professional who will help you when buying a property in Florida. Their services are free of charge and can help you avoid making an expensive mistake. The agent is paid by commission from the property sold.

3. Do selling agents differ?

Selling agents (Realtors) can be divided into three categories:
Those who act solely for you, the buyer.
Those who act for both the seller and the buyer.
Those who act for the seller.

4. What extras are there when I buy a new property?

The price of a new property will often exclude a lot premium (an additional cost for a particular plot of land that is deemed desirable and that it is to be built on). The location of a plot within a development is important, as well as the location of the development itself.

5. Do I need to purchase upgrades and extras on a new home?

Not all properties come with the necessary extras to make them a viable rental home, you will need advice on what to purchase without increasing your costs unnecessarily.

6. What deposit will I have to pay?

The minimum deposit in the US for foreign nationals is 20 per cent, although at this time it is more usually a 30 per cent + minimum deposit, due to the recent recession.

Buying a property in Florida guide

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7. How will the level of deposit I pay affect my mortgage application?

The deposit you pay for your home will have an impact on how self-financing it will be when rented out. For lower deposits you may have to produce a range of references and need to receive a great deal more in rental income to cover the costs.

8. What mortgage should I have?

There are a variety of US dollar mortgages. You will need advice on the differences and one most suitable for your needs.

If you borrow from a UK High Street Bank against your UK home, then you will be unable to set the interest against your annual US tax assessment.

9. What legal costs are payable?

Closing costs, the final payment to make your home your own, are often not mentioned by sellers until you have put down a deposit and are committed to purchase. This can be as much as 5.5 per cent of the house value, depending on the property purchased, type of mortgage obtained (if any) and certain other factors. Closing costs are reduced to around 2 per cent for a cash purchase.

10. Is there anything I should be careful of in the management agreement?

Check small print carefully in the management agreement with any prospective management company; some will require you to pay a percentage of your rental receipts to them, even if you sourced your own rental. You may also find that you have to give twelve months notice to leave them.

11. What is real estate tax?

This is a tax on your property value. It is calculated each year by the local county based on the value they deem your property to have. The value of your property is then multiplied by the County Millage Rate for the county you own in to arrive at the figure payable.

A discount is made for early payment. The County Tax Bill is payable by the end of March each year, but if paid in November of the previous year you get a discount of 4 per cent, December 3 per cent, January 2 per cent and February 1 per cent. Full payment is due by 31 March.

You are assessed annually and the tax bill is sent to either you or your mortgage company. Most US mortgages include an amount that builds up over the year to pay this bill, it is called escrow.

12. What are Sales & Use Tax and Tourist Development Tax?

Sales & Use Tax is paid to the state of Florida and is currently 7 per cent.

Tourist Development Tax is paid to the county and depends on the county that your home is situated in; it is currently 5 per cent in Polk County and 6 per cent in Osceola. In total this is 12-13 per cent tax paid on all of your short-term rental monies. The payment is made at the end of each month on the rental payments taken during that month.

If you rent out long term, i.e. more than six months and one day at a time, you will not have to pay these taxes.

13. What is US income tax?

This is a tax on the profit from renting out your home. Usually you are able to offset your mortgage, if any, and other costs so will probably never pay it.

14. What type of insurance should I have?

Your new home will need to have insurance on both the property and the contents. If you have a mortgage, your mortgage company may add the cost of the insurance premiums to your monthly repayments. You will want to be covered against liability and you will need at least $300,000 cover on your main policy. If you are letting your home, we recommend that you also take out liability top up insurance for $1 Million.

15. How do I open a bank account?

The real estate agent will be able to help you open a US bank account.

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