Florida Real Estate Contract Changes [What Does This Mean For You?]

 I wanted to take a quick minute to record a new video to let everyone know about all the new changes that are going on in the contract that everyone uses down here in South Florida to buy and sell property. So if you're not familiar with the contract changes, the contract that everyone uses is called the "As Is With Right To Inspect Contract" and it just changed on November 1st, 2021. There are some minor changes in there as far as what conveys with the property - what stays, what doesn't - but the big change is in regards to financing. And this is a really, really big deal, so I want to make sure everyone is aware of it.

So one of the most important timeframes in the contract is called the Buyer's Loan Approval Period. So if you are a buyer who is getting a mortgage, the way the contract works, you have X number of days, whatever's written into the contract, to be able to be approved or denied for the mortgage. Now typically, when you get approved, it's what's called a conditional approval. So it's gonna say you are approved for the mortgage, but here are the conditions that you have to satisfy, and typically they are: you have to have clean title, you have to have a survey, if you're a borrower, maybe you have to show updated pay stubs, you have to get insurance, things like that. Conditions to which if you can meet those conditions, you will get the loan.

One of those conditions might have been a satisfactory appraisal. So you might also have to get an appraisal on the property, but in the old version of the contract, the contract specifically said that even if you have a loan approval, so the mortgage company said you were approved for the mortgage and the condition is you have to get an appraisal, you could, as the buyer, get that appraisal result back in literally the day before closing, and then hypothetically, if you were agreeing to pay $500,000 for a property, and that appraisal came back in at $475,000, the deal could blow up, and even though you were approved, and it's the day before closing, you, as the buyer, are out of the contract. It was a get out of jail free card and it blew the deal up, so it was causing a lot of problems.

This new version of the contract changes everything. So the new version of the contract says that the appraisal has to be completed and back to the lender within your loan approval period. So what a lot of people were doing was they were doing really short loan approval periods, you know, and they meet all the conditions real quick, and then they'd get the appraisal, you know, a couple weeks down the road, and let's see what it comes in at and it was causing problems. Now you have to have that appraisal done within that loan approval period, not just done, but the value has to be back and certified by the underwriter. Everyone needs to know the value of that house during your loan approval period.

So this is good for sellers because it means you're not waiting until the last minute to find out what the property appraises for, and then God forbid, there's an issue, you gotta renegotiate or the deal dies at the 11th hour.

For buyers, what does this mean? If you've bought a property before, this changes everything. What this really means, the bottom line, is that the lender who you are using, if you're a buyer and you're getting a mortgage, the lender who you are using really, really matters. There are a lot of very bad lenders out there and you could lose your deposit if you use a bad lender and they don't get the appraisal back in time and it blows the deal and you're past your loan approval period, this could be really bad for you. So the lender that you work with really, really matters.

We recommend a couple different mortgage companies around town, the one we really highly recommend, what they're doing is they're fully underwriting all of our clients upfront, and that way, they can do a 10 to 12-day loan approval period, even now with this new rule, they're getting the appraisal done literally on day one, they're ordering it, so you'll know within day 10 of your loan approval period that the appraisal is in, we've met all of our conditions, our loan is fully approved. It's kind of rushing that process, but that gives you as the buyer certainty that you know everything that's going on, your deal is done very quickly, and it gives the seller a lot of certainty that they're not gonna have to wait 30 days to find out is the buyer approved or did the property appraise. This lender who we use can get all of this stuff done within a week to 10 days depending on, you know, how underwritten you are as a buyer, how much of the documents that the mortgage company is gonna need anyway, have they already verified upfront.

We see a lot of buyers coming down here from New York, so this is just something that I want to talk about. In New York, the way real estate is done is just so different from how it's done here in South Florida. In New York, from our understanding at least, we're not licensed in New York, but from our understanding and seeing it so often, a lot of the contracts up there just, you know, everyone gets an automatic extension, and, you know, there's no real hard dates for everything. The contract down here specifically says time is of the essence. Every date in this contract has a real meaning, a real hard deadline, and you have to do certain things within your time periods here. So if you're coming from New York and moving down here to South Florida, it's a big difference in how it's done up there. The lender who you work with matters.

We have some buyers who are using New York lenders, lenders based in New York, and, you know, even though they know what the contract says because we tell them, they're just not used to operating like that. They don't move as quickly as they need to move to do loans down here in South Florida and it puts a lot of buyers potentially at jeopardy of losing their deposits. It's just not the best way to do things because to make your offer stronger, we want to shorten that loan approval period to, you know, give that seller some certainty that we're not gonna have to take this home off the market for 30 days to find out if this deal is good or not. So that's why we recommend local direct lenders down here, not mortgage brokers who are gonna shop your loan out to five or six other lenders.

The problem with that is once that loan officer sends your loan to whoever the end bank is, yeah, maybe you are getting quoted a very, very good interest rate and you're saving, you know, 30 or 40 bucks a month on your mortgage payment with a smaller interest rate, but you really don't have control over the backend processes because you don't know what bank its going to. You don't know how quickly they can get an appraisal done, they can get their underwriter to approve your file. So it's really, really important to work with a good, reputable local lender down here now more than ever. We always say the agent you work with matters. The lender you work with matters.

So if you're thinking about buying a home in South Florida and you need a good recommendation for a great lender or if you just have any questions on any of these contract changes, give us a call, shoot us a text or send us an email. This is really, really important. We'd be more than happy to explain it to you and tell you why we recommend working with the people that we do. Thanks for tuning in. If you have any other questions, give us a call, shoot us a text or send us an email. We got your back when moving in South Florida,