Florida Home Buying and the Law
Let us be clear up front – we are not lawyers and cannot provide legal advice or guidance in the State of Florida (or any other state). We have simply put together some basic information from our experience and are providing some details that should be helpful when using a home buyer’s agent or home buyer’s representative to pursue a real estate purchase in Florida.
The real estate laws that guide real estate agents decisions are different for each state. Many states will mimic other states and write similar real estate laws. However, Florida and Georgia, even while bordering one another, have differing views on how the real estate market should be regulated. As a result, the home buying process can vary when buying a home in Florida and a home buyer who is looking at Florida homes should have a working knowledge of Florida’s approach to home buying or home buyer’s representation. If in doubt, ask pointed questions of your licensed Florida real estate agent or talk to a Florida attorney.
What is a Florida Buyer Agent?
Here is a scenario that has played-out countless times across the Florida real estate market: You are driving through a Florida neighborhood or surfing the web when you see a beautiful Florida home for sale. Eager to look inside, you call the Florida licensed real estate agent on the sign or listed on the web so you can arrange to see the home. There is no harm in that…right? Or Wrong?
The Florida licensed real estate agent that has the home listed for sale is working for the seller. Whenever real estate agents list a property, they pledge – legally – confidentiality, loyalty, and a fiduciary responsibility to the seller. Although they are ethically bound to deal honestly and fairly with you, it is their fiduciary responsibility to act in the seller's best interests... not yours.
Even if they don't advertise their allegiance to the seller, most Florida real estate agents work for sellers and as a result represent the seller's interest, not yours. If you are dealing with the seller’s real estate agent in Florida, that real estate agent is negotiating to create a real estate sale and terms most advantageous for the home sellers. If you want to buy real estate in Florida you should ensure your real estate agent is acting with your best interests in mind.
So how do you protect yourself and your interests? If you are buying a Florida home that is listed for sale through a real estate agent, consider interviewing and hiring your own real estate agent, often referred to as a buyer’s real estate agent or buyer’s real estate representative.
What do they cost? Well that depends, but it is fairly easy to ensure they do not cost you anything out of pocket. Interview a few agents and as part of the process ask the real estate agent about specific buyer representation laws in Florida. Also, ask the Florida real estate agent to only show you homes that offer a commission to a real estate agent who brings a buyer…trust me, they know which homes do and which homes do not and they are more than happy to show you only homes that offer a buyer’s real estate agent a commission for bringing a buyer to the table.
Here is how it typically works in Florida: A home seller is “listing” their Florida home for sale through a real estate agent. They agree to pay the “listing real estate agent” a commission (let’s say 6%). Then, the listing agent puts the home on a database for all Florida buyer’s agents to see. Most people know the database as the Multiple Listing Service, or MLS. When the Florida home’s details are put on the MLS the listing agent tells buyer’s agents how much of that commission they will pay the buyer’s agent for bringing a buyer. For example, the 6% is split 50/50 between the listing agent and the buyers agent.
On a $200,000 home, using my example commission and split ratio, the listing agent will get $6000 and the buyers agent will get $6000. The buyer’s real estate agent will receive the $6000 from the listing agent through the commission split agreement, AND the buyer’s real estate agent can receive this while having a fiduciary responsibility to the buyer – not the seller. This is genuinely one of those situations where it sounds too good to be true but it is ACTUALLY TRUE! This is because Florida has written real estate laws to protect buyers from believing the listing agent is looking out for them as buyers.
CRITICAL POINT – Make sure you ask your Florida real estate agent about buyer representation and how it works in Florida. While I cannot guarantee it I suspect that Florida requires a buyer’s real estate agent to put it in writing and requires both the real estate agent and the buyer(s) to sign the contract. Sadly, many buyers are hesitant about getting locked-into a contract with a buyer’s agent only to find they are dealing with the Florida licensed sellers real estate agent who – works for the seller! As a result the buyer gets the short end of the deal.
Buying a Florida Home For Sale by Owner (FSBO)
Some Florida home sellers who are selling their home by owner will allow you to bring a buyers agent and still be willing to pay buy the buyer’s agent. They do this to encourage agents to bring buyers (called For Sale By Owner with Broker Protected) while not having to pay to have a listing agent who markets the home. This usually results in the seller being at a disadvantage because they are paying for the buyer to have real estate representation while opting to not have real estate representation for their selves. This is like getting sued and paying for the other party’s lawyer but not getting a lawyer for their selves. Here is an important point – if you find yourself in this situation, let the seller pay for your agent’s services and not have representation of their own. This failure to protect their selves is NOT your problem, but it is to your advantage!
You should also realize that some Florida home sellers are selling their home with the For Sale by Owner strategy but they will not pay for your real estate agent to bring you to the table. This is called For Sale by Owner with Broker Not Protected. In this situation it is entirely up to you to decide how you want to proceed. You can buy the Florida home without the assistance of a licensed Florida real estate agent on either side of the transaction, or you can opt to pay out of your own funds to have a Florida real estate agent represent you on the buyer’s side of the home purchase. If you have signed a buyer’s representation agreement with the real estate agent then you will probably be legally required to pay them when you buy a house so make sure you understand this aspect completely before signing any Florida home purchase contract with a home seller.
Buying a Florida Home from an Investor
Florida homes for sale by an investor are, for the most part, just like any other For Sale By Owner situation. The owner simply happens to be a real estate investor. Each investor will differ or vary in how they approach the sale of their Florida based real estate investments. Starting from the frame of mind that the seller is an experienced For Sale by Owner circumstance is probably the best starting position. Whether you bring a licensed Florida real estate agent with you into the transaction or opt to go it alone is entirely up to you and the impact on your pocket for the real estate agents services. In other words, who is paying for the real estate agent’s services?
Some advantages of dealing with Florida real estate investors are in the financing. Many real estate investors have the experience, ability, and willingness to do owner financing on real estate purchases. Some of the deals are straight owner financing while other deals may be structured as rent to own real estate transactions. On the surface the two look largely the same but they probably differ in which party holds the real estate title through the payment process. Whether you purchase using a standard qualifying mortgage, or use creative financing like the rent to own strategy or owner financing, purchasing a home from a Florida investor may be less painful because you are dealing with an experienced seller who does not get emotionally tied to the deal or the home. I have personally bought and sold millions of dollars of real estate as an investor, with home buyers and sellers direct, or through other real estate investors, and I have found the experience mostly a positive experience.
Here is a rough list of the Florida communities that we invest in and deal with:
Nassau County Florida
Duval County Florida
St. Johns County Florida
Good luck in your Florida home buying pursuit!