Legal terms you may come across when purchasing your investment property abroad.

Closing Costs, refers to the amount of money required to settle legal fees, stamp duties, and bank charges when the property is "closed" or conveyed to you. This varies with the mortgage amount and stamp duty, but is approx. $1,500 to $2,500.

Deed Restrictions or "Deed Restricted Community" refers to a set of covenants placed on your deeds which contain limitations on the use of the property. They are written to protect the community and the most common refer to size of home, design, price band and setback lines of improvement. Alternatively there may be a restriction on the overnight parking of commercial vehicles in a driveway or landscaping design. You will be advised on these at the time of purchase.

Short Term Rental Restrictions. Certain Counties and Developments have a restriction on the usage of private homes for short term rental. We do not sell homes in these Counties or Communities, however if a Development decided to change its rules (or Deed Restrictions) they would not affect an existing owner, your rights would be Grandfathered In" .The original rights of an owner cannot be changed, only upon re-sale can Deed Restrictions be altered.

Title to your Home - Lien Theory. Florida is a "lien theory" State, which means that a home owner receives the title documents to his house immediately, even though he may have a mortgage on the property. The Bank or Mortgagee receives a lien on the property, but this does include the right of possession.

Do I need an Attorney. In normal circumstances the answer is no. The Closing or Conveyance is handled by a Title Company, licensed by the State of Florida to transact property transfers. In addition if you are obtaining a mortgage the Bank will also oversee the closing to safeguard its own interests. This is one of the advantages of taking out a U.S. loan.

Title Insurance refers to an insurance policy taken out by the Title Company on the purchasers behalf which guarantees against any defects or encumbrances in the title to real estate. This is normally paid for by the seller.

Construction Interest. During the construction phase of a new home the builder may require stage payments, the bank will begin paying these from the residue of your deposit after purchasing the land. Once your deposit funds have been exhausted the bank will use its own money on which it will charge interest until the home is finished. Upon completion the construction loan will "roll over" into a permanent loan and normal monthly payments will begin.

Borrowers Escrow Account. Most Florida banks have a facility which allows the borrower to make extra monthly payments towards insurance and property taxes which are paid annually. This is basically a good idea and saves owners from having to find a lump sum at the end of each year.

Property Taxes are calculated on the Counties valuation of the property and payable in arrears each November. The principal is very similar to the old English rating system. If a house is purchased after the November payment date the purchaser will receive a pro-rated amount from the seller towards the following Novembers payment.

Points, Mortgage Loan Commitment or Loan Origination Fee, are generic terms used to denote one percent of the loan amount and are charged by the banks for setting up your mortgage. We have included an amount for this in the total closing costs already mentioned and typically these should not exceed 1% to 1.5% unless a mortgage broker is involved.

Documentary Stamps are paid by the purchaser at a rate of $0.32 per hundred dollars of the mortgage amount and included in the closing costs already mentioned.

Construction Inspections are carried out by the lending institution before a stage payment is made to the builder. The total cost of these is around $250.00 and included in the closing statement. The larger builders do not require stage payments.

Construction Lien Law does not normally concern purchasers buying through a bank as the lending institution, in the process of protecting itself, automatically protects the borrower. It is mentioned because in order to comply with Florida Lien Law some suppliers of building materials or labour will issue a statutory notice stating that if they are not paid by the builder the owner could be personally liable. Obviously a bank will not make final payment to a builder until it is satisfied all construction invoices have been paid, otherwise it will leave itself open to a potential lawsuit and a diminished equity in the property. However these "Lien Notices" can look quite threatening when received and the purchaser should be forewarned.

Impact Fees are normally paid by the developer or builder to the County upon completion of the home and are used to provide funds for the continuing infrastructure of the County, such as roads and schools. Payment must be made before the CO (Certificate of Occupation) is issued. Without this certificate the power company will not make a final connection.

Notice of Commencement. A statutory notice posted on the construction site by the lending institution stating the names of contractors, purchaser and lender. The notice will also be filed on the public record before construction can commence.

Good Faith Estimate. Is a statutory document prepared by the lending institution which shows the estimated closing costs for your home and includes points, insurance and outstanding property taxes, etc.

© Universal Vacations Realty,Inc.Florida 2006