Real Estate Law, Definitions and Broker’s Assessment of Risk


Escrow: In Florida, escrow can be held by a Licensed Broker in an account so designated and funds segregated in an approved financial institution. Title companies can and often do hold escrow for buyers and sellers as well. Attorneys function as escrow, title and representation. Escrow is controlled by the terms of the contract and not by the seller or buyer. If a deal is terminated, both buyer and seller must sign a release and cancellation to allow this escrow to pass to either buyer or seller. If there is a dispute, there are remedies such as an escrow disbursement order (FREC) if escrow is held by a broker, Submit to arbitration (must be mutually agreed), interpleader (civil court which typically costs $1200 and is often used by title companies to remedy escrow disputes) or mediation.

Closing cures all: Once parties close, all contract defects are cured except fraud, misrepresentation and other violations of trust.


Who stands behind the language in contracts that Florida real estate agents use? There are a few Realtor Associations in Florida that have developed their own contracts and forms with the assistance of their attorneys and board members. The Florida Bar, The Florida Association of Realtors and their attorneys, some local Realtor boards and their attorneys as well as the National Association of Realtors have a hand in developing approved forms and contracts. Florida Realtors have access to attorneys for questions regarding the FAR contracts via the “Florida Legal Hotline,” provided by FAR. These attorneys support just the FAR/BAR “As-is” and the “CRISP 13” contracts while local boards such as Northeast Florida Association of Realtors (NEFAR) and Naples Area Board of Realtors (NABOR) have their own contracts supported by their staff attorneys.

FAR/BAR “as-is”: Popular because the buyer can escape the contract for any reason within the inspection period. Favored by sellers and some buyer’s agents to make the buyer’s offer more attractive to a seller.

FAR “CRISP 13”: Popular by major real estate companies when working with buyers because it contains standard inspection repair limits of 1.5%. Sellers can always counter the 1.5% and replace with small dollar amount. Often, buyer’s agents attach a “Right To Inspect /Right To Cancel” addendum to this contract which allows the buyer more flexibility and takes away any possible control by the seller attempting to hold a buyer in a transaction when the repair issues fall under the 1.5%.

When does a contract end? If parties should close a deal after a closing deadline without an extension, the fact the buyer and seller signed the HUD and closed is evidence of a transaction. Lenders may not close without a valid contract or extension.

Counter time deadlines or drop-dead dates: Once an offer is made, the seller may or may not find it to their advantage to counter an offer by the time deadline imposed by a buyer. Does this mean the offer is null and void after a particular time so stated in the offer has passed? Yes, because in both the FAR/BAR “As-Is” and the “FAR CRISP 13” contracts, there are offer deadline dates that once passed create a “withdrawn or terminated” offer situation. The language clearly states in both contracts that buyer has withdrawn the offer. Additionally, should that exact offer or a counter offer be signed by seller, with or without changes but beyond the buyer’s drop-dead date, then the new seller counter actually becomes a new offer and not a continuation of the prior offer. The buyer may accept or reject the sellers attempt to continue negotiations. The correct way to re-start negotiations beyond the offer drop-dead date is to rewrite the offer (from either buyer or seller) and start again. The risk with passing a counter-offer deadline and proceeding with the original contract is the buyer’s signature and date. The date of the original buyer offer and their associated “counteroffer deadline” will be different from the date when the seller signed the deal. The buyer could attempt to escape the transaction before closing, claiming the seller manipulated the dates and their offer terminated/withdrawn on x/x/x and therefore we have no contract!

Leases: Licensed agents in Florida can write a lease but not for a term of more than 1 year.

Licensed agents in Florida can create a lease-purchase transaction by writing a purchase and sale agreement with a “lease” as an attachment as long as that lease is for a term less than 1 year.

Is a “financing contingency” the same as an “appraisal contingency?” The fact that a contract is contingent on buyer’s ability to procure a loan doesn’t protect a buyer from an appraisal shortfall. Language or an addendum must be added to a contract so a buyer can terminate a contract should the appraisal value not meet or exceed the sales price. Use either: i) Appraisal contingency addendum; or ii) add language in the other terms section of the purchase and sale agreement “Should appraisal not meet or exceed the contract price, Buyer may, at Buyer’s sole discretion, cancel contract whereby Seller agrees to release escrow to buyer.”

The closing: Closings are handled by title companies and real estate attorneys. Sellers and buyers need not attend a closing, nor be closing at the same time, as closing can occur in person or “mail-a-way” with a notary if necessary. The purpose of the closer is to prepare all documents necessary to transfer deed to the new buyer and execute all needed documents for the lender. Title insurance and prorations of costs between buyer and seller are contained in the HUD closing settlement statement.

Closing costs: Sellers in Florida all pay documentary stamps on deed transfers at .70/$100 paid to the state of Florida. Title insurance is paid by both sellers and buyers depending on which county the property is located within. In Collier, Miami-Dade, Sarasota and Broward, the buyer customarily pays for title insurance while all other Florida counties have the seller paying this cost. Buyers pay for their cost of borrowing (loan fees) or if cash, buyers pay just a title fee of less than $500. Real estate taxes, HOA and other costs are prorated with the day of closing belonging to the buyer.

Procuring cause: A continuous uninterrupted chain of events that leads to a contract.

FHA financing is available up to 96.50% of the appraised value of the purchase price. Often, buyers have the 3.5% down payment but lack the funds necessary to close a real estate transaction. One possible solution is to ask the seller to pay these costs.

The benefit to the seller is they close their transaction. But, there are three risks a seller assumes when closing a transaction when the buyer requests closing cost assistance from a seller. First, the amount of buyer assistance that is received from the seller is a direct loss to the seller assuming the seller, if a bit more patient, could have found a buyer willing to pay the appraised value without such assistance. The second risk is the appraisal itself. If the appraisal falls short of the contract price, the buyer will likely not have the additional funds pay the difference (banks only lend to the appraised value) which means the seller drops the price to meet the appraised value or walks the buyer. Another risk associated with the appraisal is the practice of buyer’s agents inflating the sales price to compensate the seller for paying the buyer’s closing costs. This increases the risk of having the appraisal meet the contract sales price.