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  Written by Ryan Shaw

White sand beaches, year-round sunshine, more than 1200 golf courses, and a low cost of living attract thousands of homebuyers to Florida each year. According to AARP, the state is the most popular location for relocating retirees, in Bloomberg’s top ten for vacation homes, and one of Motley Fools’ top two states for real estate residential investment. 

Whether you are a first-time homebuyer or a veteran real estate investor, the most efficient process to purchase a home remains the same:

Understand Your Goals and Limits for a Home in Florida

Before you get starting buying your home in Florida, ask yourself these questions:

• What are your plans and needs for a home? 
• Do you have a family that will live in or use the house? 
• Will you be a permanent resident or visit your property from time to time? 
• How important are amenities on the property or nearby? 

For example, a young family will likely consider the quality of schools while a retired couple is more interested in nearby recreational and health facilities. Knowing what you want before beginning a search will avoid frustration and disappointment later in the process.

Knowing what you can afford is just as important as knowing what you want. 

No one wants to own a property that they cannot maintain or, in the case of a vacation home, cannot visit. Conservative lenders typically use the 28%/36% rule in determining how much they will lend to a home buyer:

Front-end Ratio – Housing Cost/Take-Home Income

A home buyer should spend no more than 28% of their take-home income on housing costs – mortgage, interest, taxes, and insurance.

Back-end Ratio – Total Debt Payments/Take-Home Income

All debt payments – mortgage, credit cards, car loans, student loans, and other personal loans should be less than 36% of take-home income each month.

Credit History

Your credit history is another factor that affects whether you can qualify for a loan and how much you can get. Before beginning the home buying process, check your credit score so you can take remedial actions if necessary.

Find a Great Real Estate Agent

The adage, “never bring a knife to a gunfight,” also applies to negotiate real estate transactions. Always presume that the agent representing the seller of your dream home has a background of successful transactions for their client’s benefit. Since the seller will pay the real estate commissions for the buyer’s agent as well as his agent, common sense dictates that you hire the most competent real estate agent available to represent you in any negotiations.

Contracting with a top-rated, local Clever Partner Agent with experience in Florida real estate markets will save you time, money, and unnecessary grief. For example, using resources like Zillow Florida, an agent can keep you apprised of market trends, whether prices are moving up or down or the popularity of different neighborhoods in your targeted area.

The agent invariably knows more about the market than you do, the source of potential savings, the nuances of ownership transfers. In Florida, a real estate agent can legally rebate a portion of the commission to his client. A Clever Partner Agent may return as much as ⅓ of the commission paid to him to the buyer, cash that is available to pay other closing costs.

Arrange Pre-Approved Financing

Many a house purchase has cratered when the buyer learns the needed financing is not available. Sellers (or the agents representing the sellers) understand that buyers without pre-approved financing may not be able to close and favor other buyers who have locked down their loan amount.

Many buyers assume that “pre-qualification” is the same as “pre-approved.” It is not. A pre-qualified person has a promise from the lender that the loan will be approved if the personal information provided by the borrower can be verified. In other words, there will be no loan guaranteed unless and until the mortgage company has independently verified the borrower’s data.

A pre-approval letter commits a lender to lend the borrower a specific amount and the conditions of the loan (interest rate, payment schedule, and term). It enables the borrower to show the seller that he or she is a “serious” buyer able to close the transaction without delay. Pre-approval letters usually have one condition for funding: the financial status of the borrower must be substantially the same on the day of the commitment and the loan funding. Some mortgage companies might charge a small fee for a pre-approval letter. Even so, pre-approval is a powerful tool in negotiations when competing with other potential buyers for the property.

Find Your Dream Home

As one of the most popular states for relocations and second homes, there are thousands of homes for sale in Florida. To save time and money, you can begin your search online through sites like Zillow Florida and Beycome. 

Off-market properties – houses not listed on MLS – can be another source of high-value properties known by a real estate agent.

By excluding properties that do not meet your requirements online, your onsite visits will be more efficient.

Home buying experts caution potential buyers to focus on elements that will be expensive or difficult to change, like foundation repair, roof replacement, or adding space. Appliances, wall colors, and even bathroom fixtures can be replaced. Make your choice based on things you cannot change, not on things that you can.

Make an Offer

Your offer is where the rubber meets the road. An offer price is based on an analysis of market values, competitive bids from other buyers, and the seller’s desire to sell. Your real estate agent, aware of these details, including the negotiating strengths and weaknesses of the seller’s agent, is indispensable in purchase negotiations, saving or costing you thousands of dollars on the purchase price. 

Your offer will either be accepted without change, rejected, or met with a counteroffer. For example, suppose you make an offer of $350,000 on a home with a $375,000 asking price. The seller might counter with a price of $370,000, a discount of $5,000. After a discussion with your agent, you counter back with an offer of $360,000 and an early closing date. This process goes back and forth until the parties agree or realize there is no acceptable compromise for the two parties. 

In most cases, the buyer’s offers will have a contingency: the right to inspect the property to be sure it is in the condition represented by the buyer.  

Get an Independent Property Inspection

Home inspections before closing is typically a lender requirement to ensure that their loan is properly secured. Independent professional appraisers with no connection with buyer or seller do inspections. They walk through the property to inspect the infrastructure (roof, support walls, and foundations), electrical and plumbing connections, condition of major appliances, and compliance with environmental and building codes. In Florida, sinkholes have become more frequent, so confirming the stability of the underlying soil is especially important.

The appraiser completes a report for the mortgage lender, the seller, and the buyer. In some cases, conditions are discovered that affect the previously agreed price and reopen negotiations to determine who pays for the necessary repairs. Your Clever Partner Agent can use the inspection report to the buyer’s benefit by a lower price or credit for any needed repairs.

Buy Your Florida Home

The “closing” refers to the time when your offer is accepted and the transfer of the property. The seller receives cash, and the buyer receives legal title to the home. However. Both parties are liable for additional transaction costs, the seller costs deducted from proceeds and the buyer’s costs added to the cash needed to acquire the property. 

A home buyer in Florida would typically pay for such things as loan origination fees, title searches, surveys, inspection fees, and property tax transfer fees. In total, they typically represent 2.5%-3.0% of the purchase price. For example, a buyer of a home for $300.000 will have closing costs of $7,500-$9,000 ($300,000 X 0.03 = $9,000).

A real estate closing can be confusing and frustrating for those not familiar with the process. Markets can vary wildly between zip codes, while title companies often follow their unique methods to complete a transaction. The presence and participation of your real estate agent can facilitate the process and calm troubled waters.

Final Thoughts

Buying a home in Florida or anywhere else can be a rewarding, enjoyable process with the right help. There is no better feeling than walking into a home you’ve purchased for the first time, anticipating the exciting times ahead with family and friends on your estate (whatever its size).

Scarlett O’Hara, in the last scene of Gone With the Wind, spoke for most homeowners when she asked, “What is there that matters? Tara! Home. I’ll go home.”