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Real estate has a language all of its own, and there are a few terms and abbreviations you see quite often. Although many real estate terms are universal, every state and locality has it’s own lingo that relates to the real estate process.
Here is your Rosetta Stone guide when buying or selling in the Sunshine State:
Agency/type of representation: Florida has various forms of real estate representation as defined below and explained on state disclosures. In the state of Florida, representation is deemed to be transaction brokerage unless otherwise disclosed.
Binder deposit or escrow money: The earnest money that buyers put down with an offer as a sign of their commitment and seriousness in the transaction. The binder deposit, as it is commonly referred to, is typically placed at either a real estate company that has an escrow account or with an attorney’s office or title company handling the closing.
Broker: This refers to a licensee who holds a broker’s license and is functioning as a broker of record or possibly as a manager for a real estate company. Not all of those in a management capacity in a real estate firm hold a broker’s license in Florida.
Broker associate: This refers to an agent who has obtained his or her Florida broker’s license but functions in the role of a sales associate and not in a management capacity. The license number starts with the letters “BK” before proceeding with several numbers.
CDOM: Continuous days on market refers to the total time a property has been on the market, including prior listings.
Chapter 475: This is the Florida state statute that pertains to real estate license law.
Closing costs: These are fees associated with closing on a real estate transaction. A buyer and seller both have fees that they are responsible for paying. What a buyer and seller pays in Florida depends on which part of the state the property and/or the locality where the closing takes place as well as if a buyer has a mortgage loan or is paying cash. Florida does not have any state income tax, but it certainly makes up for it with three different state-specific closing costs that you will have to deal with when transacting real estate as outlined below:
- Deed stamps: This is a Florida state tax on the sales price of the property. It is 70 cents per $1,000 of the purchase price. Who pays this fee depends on what part of Florida you are located in. On new construction, the buyer usually pays, but on a resale, the local custom of the area will dictate this, however, all closing costs as far as what party pays what can be negotiated.
- Intangible tax: Because mortgages are considered personal property in Florida, the state imposes a tax on this as well. It is assessed at 0.002 times the loan amount. So, if you are a buyer obtaining a mortgage loan, you will need to pay this. The one exception is if you are obtaining a loan through a credit union as those are exempt from intangible tax because they are considered a nonprofit organization.
- Note stamps: This is a Florida state tax on mortgages. If a buyer is obtaining a mortgage loan to purchase a property, this is a tax that the buyer will be paying at closing based on his or her loan amount. It is taxed at a rate of 35 cents per $1,000 of the mortgage loan.
Closing/closing date: In Florida, the term closing means the designated day and date that closing documents are signed by both the buyer and seller, the transaction funds and possession is provided to the buyer.
Coastal construction control line (CCCL): This refers to property that may be partially or totally seaward of this line, which is usually oceanfront. A disclosure is required to be made if a property is subject to these circumstances as the property may be prone to coastal erosion and federal, state or local regulations that govern coastal property. In other words, if you are considering property that is oceanfront, you need to be aware of where it is situated in reference to the CCCL.
Condominium governance form: This is a disclosure by the state of Florida, Department of Business and Professional Regulation that explains condominium governance to the consumer. It should be provided to a buyer before making an offer on a condominium property. Florida is famous for having a variety of master planned communities that are often mini resorts among themselves with an array of pools, parks and other recreational amenities. Common terms you will often see referenced with these communities are CDD, HOA and PUD. Here’s what they mean:
- Community district development (CDD): This is a local, special purpose governmental unit established pursuant to and regulated by Florida statue. A CDD generally finances, owns and manages infrastructure and amenities within the boundaries of the CDD. The CDD issues bonds, and the proceeds from these bonds are used to finance the development of infrastructure for that particular community. Examples of infrastructure funded by these bonds are road, water, storm water and sewer facilities. The funds are also used to develop recreational facilities such as tennis courts, fitness centers, pools, walking and running trails, etc. The residents of that community then pay the debt on those bonds through their property taxes. The repayment of the bond department is part of the CDD annual assessment on property taxes each year.
- Homeowner’s association (HOA): A homeowner’s association enforces covenants and restrictions regarding the neighborhood as well as provides guidelines for architectural control and maintenance regarding common areas of the neighborhood such as the entrance, signage and parks or other amenities in the neighborhood. Not all neighborhoods have an HOA or a CDD fee, but typically if there are some sort of amenities, there is usually a homeowner’s association at a minimum. Membership in a homeowner’s association is usually mandatory, which means required fees. However, some homeowner’s associations are voluntary.
- Planned unit development (PUD): A “PUD” is a common term used when talking about a master planned community that consists of varied land uses. It may not only be residential but also commercial properties such as a shopping center that may have a grocery store and other retail services located in close proximity for the convenience of residents as well as recreational or industrial structures.
Continued marketing addendum: This is an addendum that allows a seller to accept an offer from a buyer that has a contingency associated with it, such as the sale and/or closing of their home and continue to market their home for sale and entertain offers. Should the seller receive another offer, this form gives the buyer an agreed upon time period such as 24, 48 or 72 hours to lift the contingency or step aside so the seller can work with the other offer. This is sometimes referred to as a “right of first refusal” (ROFR).
DAC: This refers to days after closing, such as a seller turning over possession of the home to a buyer within so many days after closing instead of on the actual closing date.
DOM: This acronym refers to the days on market for a property that has been listed on the multiple listing service.
DBPR: The Department of Business and Professional Regulation oversees all professions that require licensure in the state of Florida including real estate agents, appraisers and home inspectors.
FAR: Florida Association of Realtors
FAR/BAR: Florida Association of Realtors/Florida Bar Association. Both FAR and “FAR/BAR” are often used to refer to the type of form sales agreement that may be used. There is a FAR contract as well as a FAR/BAR contract that has been approved for use by both the Florida Association of Realtors and the Florida Bar Association.
FAR BAR as-is: This is a statewide “as-is” contract. It is often used with foreclosure listings where inspections are permitted but no repairs will be made or anytime a seller wishes to sell without doing any repairs. It is important to note that just because Florida has statewide forms, it does not mean that every real estate board within the state is universally using the same forms. In Florida, it is quite common for each board of Realtors to have its own forms specific to its area that it uses to facilitate real estate transactions. Local custom often dictates how things are done with regard to what closing costs a buyer versus seller pays.
Flood insurance notice: This is a disclosure commonly given for buyers’ signatures when making an offer informing the buyers to be aware that their lender could require them to purchase flood insurance or that they may want to purchase it even if it is not required. It also advises the buyer to learn more about flood insurance, its availability and costs and provides relevant links to pertinent websites to learn more information.
FREC: The Florida Real Estate Commission oversees the regulation of real estate licensees in the state of Florida. The Commission consists of seven members appointed by the governor, subject to confirmation by the Senate. FREC is charged with hearing matters of concern over potential violations of real estate license law by Florida real estate licensees.
Hotel tax: With an abundance of property used for short-term rentals in Florida, homes and condominiums that are rentals for less then seven months are subject to a hotel tax per rental, which ranges generally speaking from 7 percent to 13 percent depending on which county the property is located in, and there could be some deviation from the stated rate for particular areas within the county.
Multiple listing service (MLS): Agents refer to the MLS or “multiple listing service” as the database where they can search for properties or input new listings.
MLS portal: Real estate agents can set a customer up with a portal on the multiple listing service that allows them to search and receive notification of new property listings as well as those that have had a price change, come back on market as well closed, been withdrawn or expired.
No brokerage relationship notice: A seller may be given this form when a real estate agent is representing a buyer who is making an offer on his or her home and the sellers are selling it on their own without representation. This advises the party with no representation that the licensee will deal honestly and fairly, account for all funds and disclose all known facts that will materially affect the value of the property that are not readily observable to the buyer.
Sales associate: This refers to an agent who has obtained a real estate salesperson’s license in the state of Florida. Each license number will start with the letters “SL” before proceeding with several numbers.
Single agency: Single agency is a broader form of representation that allows a licensee to provide full loyalty, confidentiality, obedience and full disclosure. This requires a higher level of fiduciary duty than a transaction brokerage. An agent cannot represent both a buyer and seller acting as a single agent.
Timeshare: Florida put this word on the map. A timeshare refers to an arrangement whereby several owners have the right to use a property as a vacation home under a timeshare agreement. Timeshares are governed by Florida State Statutes Chapter 721.
Transaction brokerage: This form of representation allows a real estate agent in the state of Florida to represent both a buyer and a seller in a transaction. It allows the agent to provide a limited form of representation whereby the agent must deal honestly and fairly, account for all funds, use skill care and diligence, disclose all known facts that could materially affect the value of residential real property and are not readily observable to the buyer; presenting all offers and counter offers in a timely manner and limited confidentiality that will prevent disclosure of what price a buyer may be willing to pay or the price a seller would be willing to sell for, the motivation of any party buying or selling property and any other information requested deemed confidential. Transaction brokerage means that a buyer or seller is not responsible for the acts of the licensee and is also giving up their rights for undivided loyalty of the licensee.
Wood destroying organisms (WDO) inspection/report: It is very common in Florida to have a WDO inspection to check for the presence of termites or other organisms that can cause wood rot such as powder post beetles. This inspection also looks for any signs of wood rot or decay, whether that is caused by insects, moisture or water. A WDO inspection is required for buyers using FHA and VA financing, however, most buyers opt to have this inspection done no matter how they intend to pay for the home. The inspector must hold a specific state license to allow him or her to perform this inspection.
In sum, although there are numerous real estate terms to decipher, as you embark on your real estate journey in Florida, this primer will help you understand some of the more common ones that you are likely to encounter. When in doubt, ask a trusted Floridian real estate professional!