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BUYER’S GUIDE TO REAL ESTATE CLOSINGS, KEY POLICIES, AND INSTRUCTIONS

Jul 12, 2022

BUYER’S GUIDE TO REAL ESTATE CLOSINGS, KEY POLICIES, AND INSTRUCTIONS

Haga click aquí para leer la guía de compradores en español.

We are very excited to serve you as the Closing Agent on the purchase of your property! We have assembled some very important information below that will ensure you can experience an on-time and stress-free closing. We invite you to discuss any of the following key instructions with us at any time by reaching out to the team assigned to your file or welcome@foliotitle.com.

Introduction

Purchasing a property can be a stressful experience if you, your real estate agent, your lender, and your title company are not on the same page. Each transaction is different, so we need to adjust our process accordingly. Below are some key policies and instructions you will need to follow depending on your transaction’s unique characteristics. Note: NOT every situation below will apply to all transactions. As you navigate the contents below, you can focus only on situations that may apply to your transaction.

Contents

Title Vesting

When we refer to “Title Vesting,” we usually refer to how someone will “take title” on a property that they are purchasing or that is being transferred to them. When a title deed is written for real property, ownership is described using the name of the owner(s), and often a phrase which describes the legal relationship between multiple owners or married persons. This only applies to individuals, and not legal entities. For more information and options on title vesting, please click here. 

Escrow Deposits

Escrow deposits and the Escrow Agent are detailed on the first page of the Purchase and Sale Contract. Escrow deposits are usually held by the Closing Agent /Title Company or the Buyer’s Broker. Please ensure you monitor key dates for when escrow deposits are due, and note that some contracts require more than one escrow deposit.

When the Escrow Deposit is not held by FOLIO Title, we ask that you please provide us with the Escrow Letter for the above referenced transaction at your earliest convenience. Escrow deposits held by a third party should be disbursed to FOLIO Title at least 3 business days prior to Closing.

When the Escrow Deposit is held by FOLIO Title, we will provide an escrow letter within 24 business hours of receiving the deposit. If you would like to send a copy of your wire transfer confirmation, please send it to docs@foliotitle.com. If you need a copy of our wire instructions, please contact us to 786-888-6640.

Homestead Properties being purchased with mortgage loans

For Buyers who are purchasing a property for their primary residence using a mortgage loan, it is important to realize that there are usually specific legal and lending underwriting requirements associated with these purchases. For example:

  1. Spousal Joinder on Mortgages – It is required that both spouses sign the Mortgage when buyer(s) who are married and purchasing a property to use as their homestead. Spousal joinder is required even when only one of the two spouses will “take out the loan”, that is, only one of the two spouses will be on the Note. For more information, please contact our team. 
  2. Post-Closing Occupancy – For purchases where the Seller would need to stay in the property after closing, or if the property currently has a valid lease with a tenant, most lenders require the Buyer to take possession of the Property within 60 days of Closing. This requirement is usually detailed in the “Occupancy Affidavit” once the lender provides the Loan Package on the day of Closing. Please speak to your lender about lender requirements regarding Occupancy and Possession.

Properties that are Governed by An Association

Following the instructions below can help us avoid any unnecessary delays or last-minute surprises when properties are governed by an association:

  1. When applying for the Association, most applications reveal important information about the requirements for acceptance of a Buyer by the Condo Association. These may include items such as restrictions on rentals, parking restrictions, and Buyer capital contribution requirements.  Please review these requirements carefully and let us know if you have any questions.
  2. The Condo Approval letter *MUST* be in the name of the title holder purchasing the property and reflected on the deed at Closing.

     If the property will be purchased under the name of a legal entity, for example, then the legal entity must be reflected on the Condo Approval. This is a frequent source of delay at Closing because many Condo Applications only request the individual names of those applying. However, it is the responsibility of the persons applying to the Condo to inform the Condo Association if the title will be held under an entity and, if so, that the Condo Approval is needed in the name of the entity purchasing the unit.
  3. It is imperative that Buyer’s and Buyer’s agents re-confirm directly with the Condo Association if the property being purchased is subject to more than one association. Many associations are governed by additional associations (such as Master Associations) which each require Estoppel Letters per the title requirements on the title commitment. This is a frequent source of closing delays. The Seller and Listing Agent must disclose any and all associations and their information. However, though fulfilling title conditions on the title commitment is a Seller responsibility, it should be part of the Buyer’s due diligence with the Condo to confirm such information to try and avoid delay.
  4. Special Assessments and Pending Litigation should be disclosed on the Condominium Rider or HOA Rider to the Purchase and Sale Contract. However, they are frequently omitted. The Closing Agent will not receive confirmation of Association Special Assessments, Pending Litigation, or the existence of multiple associations until an Estoppel Letter(s) is provided to us. This is usually received within a few days before the Closing Date.  Therefore, we recommend that the Buyer and Buyer’s agent take actions to conduct a thorough due diligence on the Association to gather as much information as possible, including, but not limited to: (1) speaking to the listing agent; (2) speaking (or visiting) directly with the Association; (3) Reviewing other MLS listings in the same Association to gather insights from those listings; (4) speaking to other real estate agents who may have previously closed on units in the Association. 
  5. If you are purchasing a condo unit with a loan, please ensure you speak to your lender about their loan requirements on condo units. Different lenders have slightly different processes which may impact the timelines in the Contract. Some lenders require documents such as Condo Questionnaires and Master Insurance Policies for the Condo during underwriting process. Most of these documents are handled directly between the lender and the association, and many times, lender’s request the assistance of the real estate agents, especially when the lender does not receive timely communications from the condo. Some lenders provide Conditional Loan Approvals yet underwrite the Condo after the Loan Approval Period. We urge you to speak to your lender to ensure their condo underwriting requirements are in line with the timeframes in the Contract signed between the Buyer and Seller.
  6. For more information to ensure smooth closings in Properties subject to Condo / Home-owners Associations, please click here.

Properties that are Single-family homes or townhomes

Properties that are single-family homes or townhomes where a mortgage loan will be used to finance a property will require a boundary survey for closing. A boundary survey is a process carried out to determine property lines and define true property corners of a parcel of land described in a deed. It also indicates the extent of any easements or encroachments and may show the limitations imposed on the property by state or local regulations. (Please note that there are other kinds of surveys, such as construction surveys, which Buyer’s may want to evaluate instead of a Boundary survey.)

While cash closings do not require surveys, we highly recommend Buyers obtain a survey as it is a crucial part of the legal history of the property. Surveys are paid for by Buyers. For more information, please contact us.

FINCEN Requirements

The Federal Government requires Closing Agents and Title Companies to submit a report on the final beneficiaries on a real estate transaction in Miami-Dade, Broward, and Palm Beach counties that meet the following criteria: 

FINCEN Reporting Transaction Criteria

(1) Property is purchased by a legal entity (not an individual)

(2) Property is more than $300,000 in value

(3) Property is purchased in cash or private loan (not commercial bank loans)

FINCEN Reporting Requirements must be submitted before Closing and include information of managers and beneficial owners. Please provide the following information for all beneficial owners as soon as possible:

(1) Full name and contact information for each beneficial owner who owns more than 25% of the shares of the legal entity purchasing the property

(2) % of shares/ownership of *each* beneficial owner;

(2) Photo ID – Passport clearly showing date of birth; 

(3) Mailing Address;

(4) Occupation;

(5) Taxpayer ID Number (If Applies)

For more information on FINCEN and the reporting requirements, please click here.

Broker Credits

FOLIO Title requires a broker letter, on broker letterhead, to properly reflect any Broker credits and/or changes to commissions from what is reflected on the MLS. The broker letter must confirm the final amount of the credit and the final commission amount due to the Broker. To avoid unnecessary delays, please provide any broker commission letter at least 3 days before Closing, if possible. For more information, please contact our office.

Broker Commission Disbursements

To correctly disburse broker commission funds as quickly as possible after closing, we ask Real Estate Agent’s submit the Broker Commission Disbursement Information form at least two (2) business days before Closing. If you have not received it, you may download a blank copy here, or please call us to 786-888-6640 and we will send you a copy. 

Moreover, if an agent would like their commission to be disbursed directly to their name, we require a Disbursement Authorization (DA) form at least 2 business days prior to Closing/Funding with the following conditions: 

(1) It must be signed by the broker; and 

(2) The DA must include an affirmative statement that the broker will issue a 1099 for the transaction to the realtor.

When Does the “Closing” officially occur? When should the Seller provide possession of the Property to the Buyer?

The Closing officially occurs when:

  1. The Closing Agent has all the Buyer’s and Buyer’s lenders funds required per the Settlement Statement in the Closing Agent’s escrow account;
  2. The Lender has provided a “Funding Authorization”;
  3. The Seller’s original documents in the Closing Agent’s possession; 
  4. All closing, title, and lender requirements have been satisfied

When the Closing Agent “in a position to fund and close”, the Seller’s proceeds are immediately available at the Closing Agent’s office via check, and possession of the property should be delivered to the Buyer (meaning, the keys and access cards should be officially provided to the Buyer or Buyer’s representative.) Closing, therefore, is NOT defined as when the Seller receives their seller proceeds, but when the Closing Agent is  “in a position to fund and close”.

Sellers who request a wire transfer may also request proof that the wire transfer was sent. However, Sellers who prefer a wire transfer should NOT withhold possession of the Property while they wait for a wire transfer to be credited to their account. This is because all banks have a different policy for when they credit the funds to the receiving account; some banks and credit unions make take more than 24 business hours to credit the money to the receiving account. 

International wire transfers are not recommended; therefore, Seller’s who request an international wire transfer MUST sign a Hold Harmless Agreement for the Closing Agent. Sellers who wish to receive international wire transfers and sign the Hold Harmless Agreement should be prepared to provide possession of the property to the Buyers once the Closing Agent has confirmed that the Closing Agent is in a position to fund and close.

Seller Requirements for Closing

To close and fund a transaction, Sellers must comply with the terms and conditions of the Contract, including the provision of conveyance documents, the clearing of requirements on the title commitment, and compliance of local, state, and federal laws.  Some of these issues require time to work through, and taking action on these as early as possible in the transaction (or even before a formal Contract is signed) can help avoid unnecessary and costly delays, especially when Buyers are purchasing using a mortgage loan.

Some key title requirements for closing that Buyer’s and Seller’s must be aware of include:

    • Conveyance documents (also known as “Seller Documents”) – these are documents that allow for the proper transfer of title and rights from the Seller to the Buyer. These documents must comply with the Purchase and Sale Contract requirements, including the requirements stated on the title commitment provided by the Closing Agent to the Sellers or Seller’s legal representative.  (For more information on Seller Documents, please click here.)

      Important additional considerations:

      1. Mail-Away Closings: Extra planning and time is required when Sellers will not be present at closing, especially if they are outside of the United States. For a complete guide to understanding how to execute Seller Documents from out-of-state or abroad , please click here.
      2. Legal Entities: When Sellers are legal entities, especially if the owner of the legal entity is an off-shore company, there are important additional corporate documents required for Closing. For more information on additional corporate documentation required for closing, click here.
      3. Seller’s Homestead: When the property being sold is the Seller’s homestead property, both spouses must sign the conveyance documentation, even if the current title only reflects one of the spouses. 
      4. Seller’s Are Divorced: In the case when Seller’s are divorced, a Marital Settlement Agreement (MSA) may be required. Closing Agents can only disburse funds to the title holders of the property subject to any provisions to the contrary in an MSA.
      5. Seller is Deceased: In the case where a Seller is deceased, probate documentation will be required (in most cases), in addition to evidence that no Estate Taxes are due. If the decedent is not a U.S. Taxpayer, we highly recommend the heirs or administrators of the estate seek the advice of a Certified Public Accountant (CPA) or tax attorney.
        If the title holder is deceased and probate is necessary, a court-confirmed Personal Representative (PR) of the estate must be appointed; the PR and will be the person who will represent the estate in the sale. Depending on the stage of the probate case, the time required for PRs to legally transfer title may vary widely.
      6. Title Holders Desire a Distribution of Seller Proceeds Different than the Distribution Currently on Title: Closing Agents can only disburse funds to the current title holders. A Closing Agent cannot distribute seller proceeds to an individual who is not on title. If the current title holder is a legal entity, the Closing Agent will not distribute seller proceeds individually to shareholders or members.
        When seller proceeds are being used to purchase another property, we may disburse funds to the Closing Agent of the new purchase if certain conditions are met. Please check with our office for a list of these conditions.
      7. Seller Proceeds – Forms of Payment – By default, seller proceeds are offered via check to current title holders when the Closing occurs. Most Closing Agents offer Sellers, as a courtesy, a wire transfer at Closing. Sellers who request a wire transfer may also request proof that the wire transfer was sent.


Sellers who prefer a wire transfer shall NOT withhold possession of the Property while they wait for a wire transfer to be credited to their account. Please click here for more information. 

  • Estoppel letters – when Properties are governed by a condominium, the Purchase and Sale Contract requires the Seller to obtain an estoppel letter from the Condominium. Estoppel letters in practice are usually ordered by the Seller’s legal representative..
  • Re-occupancy Certificates – many cities in Florida require that the Seller apply for a Re-occupancy Certification. To obtain this certification, the city or municipality requires a physical inspection of the property. We suggest Listing Agents and their sellers inquire with their city as early in the transaction as possible to avoid unnecessary delays. For a list of cities that require Re-Occupancy Certifications for closing, please click here.

Foreign Sellers and FIRPTA Withholding Requirements

When the owner’s / title holders of a property are foreigners, a federal tax law known as FIRPTA requires the Buyer to withhold funds from the Seller’s proceeds. FIRPTA requirements are usually detailed as part of the Purchase and Sale Contract. (For example, see paragraph 10, subparapgrah (i) FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT (“FIRPTA”) and paragraph 18, subparagraph V. FIRPTA TAX WITHHOLDING in the Florida FR/BAR AS IS Contract Version 5). 

The FIRPTA withholding process is usually executed by the Closing Agent in conjunction with the seller’s Certified Public Accountant (CPA) and/or a tax attorney . FIRPTA laws are strict and complex and it is important that a Closing Agent with experience handle these closings. 

There are exceptions to FIRPTA that can be handled on a case by case basis. Some of these exceptions may result in reduced withholding amounts for the Seller, but may also require commitments from the Buyer that may include the requirement for the Buyer to sign a residency affidavit.

The FIRPTA process requires information from the Buyer and actions that the Buyer must take, usually in coordination with the Closing Agent and the Seller’s Accountant. Buyer’s will need to provide  federal tax ID numbers (such as a Social Security number or ITIN number) and if the Buyer does not have a federal tax ID number, they will need to apply for one to comply with the FIRPTA requirements. For more information regarding FIRPTA requirements for Buyers, please contact our office. 

Properties that are Subject to Lease or Post-Closing Occupancy by the Seller

The Purchase and Sale Contract should reflect when the property will be occupied by a tenant with a valid lease beyond the Closing Date or by the Seller after Closing.

When a valid lease is in place at the time the Purchase and Sale Contract is executed, the Seller (usually through their real estate listing agent) must provide a copy of the Lease for the Buyer to review. The Buyer will usually have at least 3 days to review the Lease and determine if it is satisfactory to the Buyer. Moreover, the Contract will require a Tenant Estoppel or Seller Affidavit where the tenant and seller confirm the information in the Lease documentation provided, such as the rental rate being paid, the payment dates, the amount of prepaid rents, and deposits held by the Seller. 

The lease must be provided to the Closing Agent. This will allow the Closing Agent to reflect the transfer of any prorated prepaid rents and deposits at Closing from the Seller to the Buyer in the Settlement Statement. 

When Buyers are purchasing properties with mortgage loans for primary or secondary residencies, those loans usually require the Buyers to take occupancy and possession within 60 days of the Closing Date. Therefore, Buyers should consult with their lenders and obtain the loan requirements for any properties that have tenants with valid leases beyond the Closing Date to ensure the lender will be able to underwrite the loan with the lease in place and allow for the proper accounting of tenant rents and deposits on the Closing Statement.

A Post-Closing Occupancy (PCO) is when the Seller will be occupying the property after Closing. In these cases,  the Buyer and Seller must enter into a Post-Closing Occupancy Agreement (PCOA) that details the terms and conditions of the tenancy. It is similar to a short-term lease agreement between the current owner and the prospective buyer. Usually, during the negotiation of the Purchase and Sale Contract, the Buyer and Seller will agree on any possible rental rate charged to the Seller during the PCO Period, any deposits collected from the Seller at Closing, and the duration of the PCO.  It is a best practice to reflect these terms as part of the Purchase and Sale Contract in the Additional Terms Section, and, if using the Florida FR/BAR AS IS Contract, by selecting Paragraph 6(b) of the Contract and selecting Addendum “U. Post Closing Occupancy” in Paragraph 19.

Mail-Away Closings for Buyers or Buyers who will be traveling during the Closing Process

It is absolutely essential that Buyers inform our office as soon as possible if they will travel during the Closing Process or if they will not be present at Closing. Additional logistical and compliance requirements take time to coordinate. Without proper measures taken, the Closing may be delayed, and potentially, put the Transaction at risk. It is highly recommended that if the Buyer knows during the Purchase and Sale negotiation process, that they may not be present at Closing, that they consider inserting additional language into the Contract to protect the Buyer and Seller in case the travel plans complicate an on-time Closing.

Cash Transaction Mail-Away Closings 

Buyers who are purchasing properties in cash without a mortgage loan can usually sign Closing Documents via electronic signature, and therefore, usually do not need to be present at the Closing. Please contact our office to ensure no further documentation will be required from the Buyers that may require original wet signature and/or notarizations.

Mortgage-Loan Transaction Mail-Away Closings

When purchasing using a mortgage loan, Buyer’s must understand that there is extensive coordination between the Lender and the Closing Agent in the 24 – 72 hours before Closing, including balancing the final Settlement Statement (which is required to provide the Buyer with the final “cash to close”) and receiving the final loan documentation. Many times, final loan documents are delivered by the lender to the Closing Agent on the day of Closing. This means that while the Closing Agent makes every effort to provide final cash to close and a specific time for Closing, it is not always possible to do so with as much anticipation as the client would like. Our promise is to always strive to provide all information to the Buyer to ensure an on-time and stress-free closing.

This logistical coordination can get even more complicated when Buyers who are purchasing using a mortgage loan cannot be present at Closing. Therefore, to try and make the closing as smooth as possible, we ask that Buyers who will not be present at closing contact the Closing Agent and the lender as early in the process as possible to allow ample time for coordination and compliance with lender and title requirements. Mail-away closings may not always be logistically possible.

Execution of closing and loan documents in the United States, can usually be done with mobile notary services, and can be coordinated by the Closing Agent. These services usually will cost the Buyer an additional $200-300. 

Execution of closing and loan documents outside the United States can be more complex, and, sometimes, the lender requirements will not make it possible. Executing documents outside the United States may require Buyers to sign the documents in front of a US Notary at a US Embassy or Consulate. The possibility of Remote Online Notarization (RON) also exists, however, has additional compliance requirements.

Buyers who are in the process of separation or divorce

Florida law recognizes two types of marital statuses: Single and Married. 

Single includes people who have been divorced and not remarried, as well as widows and widowers. Persons who are separated but not legally divorced are considered “married” until the divorce is legally finalized.

When married individual Buyers purchase a homestead property, both spouses are required to sign the mortgage. This includes the case when the married individuals are separated, and only one of the two spouses will be using the property for homestead, and only one of the spouses applies for the loan. It also applies when only one of the spouses would like to appear on title alone, perhaps pending a divorce. 

If the spouses are planning to formalize a divorce in the future, but one of the spouses must purchase a property before the divorce is formalized, it is recommended that the Buyers speak to a family law attorney to make provisions for this specific scenario, such as a post-nuptial agreement.  Otherwise, the Buyers may need to consider postponing the purchase of the property until the divorce is finalized.