If you want to understand Florida real estate transactions inside and out, you need to have a clear picture of what closing costs are. They should be an important part of the budgeting process in preparation for a property purchase, so you can’t work on vague numbers or outdated information.

While this is not the case in every transaction, Florida typically lands somewhere around 2% to 5% of the purchase price for buyers, and sellers often pay more once commissions are included.

Now, when it comes to the question “Who pays for title insurance?”, there’s no straightforward answer. For one, each county has set its own set of rules, while negotiations look different in each transaction, with sellers and buyers separating the costs according to their particular interests and limitations.

 What Are Closing Costs?

In a real estate transaction, closing costs are the fees and expenses that buyers and sellers are expected to pay upon settlement. These costs can be divided in different ways during the negotiations, but each state often has its own standards that clients are expected to follow.

Closing costs generally include:

* Government taxes and recording fees: The costs that are destined for local government authorities. This includes property taxes and the recording of the title transfer on the county’s public records.

* Title and settlement fees: All the costs attached to fulfilling a successful closing. This includes services like title searches, property appraisals, insurance, etc.

*Lender fees: The amount buyers are expected to pay before the lender grants the mortgage loan. It varies depending on the lender company and the buyer’s mortgage plan.

Understanding Florida Government Taxes

Florida assesses a documentary stamp tax on certain documents that are transferring an interest in a real estate transaction. As outlined by the Florida Department of Revenue, the tax rate for documents that transfer in real property is $0.70 per $100 of the total to be paid. This applies for most Florida counties apart from Miami-Dade, where the rate is $0.60 per $100 for single-family homes and $0.60 plus a $0.45 surtax per $100 for other property types like condos and commercial buildings.

For example, when selling a $600,000 single-family home in Miami-Dade, you’d have to divide the purchase price by 100, times $0.60. The resulting cost is $3,600 in deed doc stamps.

Meanwhile, the documentary stamp tax on a mortgage note is $0.35 per $100 of the loan amount. 

When it comes to the distribution of these costs, the seller is usually tasked with paying the deed doc stamps that are placed on certain deeds while the buyer pays for the note stamps and the intangible taxes placed on new mortgages. This is the standard even when the distribution of costs can still be negotiated to work differently. In Florida, the latter amount represents 0.2% (2 mills or $2 for every $1,000) of the loan amount.

Title Insurance and Settlement Fees

As you probably know, title insurance complements title searches when it comes to protecting the buyer’s investment. It protects your ownership rights after claims, issues, or disputes, preventing any financial loss along the way.

There are two major types of insurance that take the spotlight during a Florida real estate transaction:

Owner’s title insurance: Protects your rights as the property’s legal owner. It’s optional but highly recommended.

Lender’s insurance: Protects the lender’s investment in the event of an ownership dispute, and it’s generally mandatory.

Both policies serve the same purpose: to prevent any losses if there are any issues in the property title that could put your ownership rights into question. The main distinction rests on whom each policy is meant to protect. When both policies are purchased together, however, they might result in a reduced rate in what is known as the “simultaneous issue” discount.

Typically deemed special items in South Florida transactions, title insurance premiums are set by the state by administrative rule, so the premium itself is the same no matter which title company you choose. With that said, different portions of the amount can be charged at different rates, with varying additional fees.

For reference, buyers in Miami-Dade and Broward are usually in charge of paying for owner’s title insurance and choosing the title company which, in turn, gives them more freedom to find the perfect policy in terms of coverage and additional fees. In most other Florida counties, the seller customarily pays for title insurance.

Keep in mind that we’re only outlining the customary process according to different parts of the state. Buyers and sellers always have the freedom to negotiate the terms of the Florida standard contracts (FR/BAR Standard and As Is Residential Contract).

So, How Are Closing Costs Allocated?

With that important disclaimer in mind, let’s look at how closing costs are usually distributed between buyers and sellers when completing a Florida closing:

Buyer Closing Costs

– Lender fees: The fees required for a lender company to approve and fund a mortgage. They include the costs of appraisal, the processing of the loan, the client’s credit report, and underwriting costs.

– Prepaids and escrows: Refers to future ownership expenses that are covered by the buyer in advance. Homeowners insurance is usually at the top of that list, followed by property taxes and prepaid mortgage interests.

– Note stamps and intangible taxes: As with lender fees, this applies solely to financed buyers (making the purchase through credit or a loan).

– Title searches and other title-related costs

-Survey and home inspections: These include inspector fees and any subsequent inspections in the event of repairs. As described by Rocket Mortgage, home inspection costs are calculated by square footage, with an average cost of $300 in the Miami area.

Seller Closing Costs

-Deed doc stamps: The tax imposed on certain deeds transferring an interest in a real estate transaction.

– Brokerage commissions: Referring to the brokers’ fees when they facilitate the completion of the closing. They can do this by providing counsel, resources, etc. For more information about brokers’ commissions, you can read our blog about the National Association of Realtors (NAR) settlement.

– Payoff of existing mortgage, prorated property taxes, and any outstanding liens.

– Owner’s title policy: Customary in most Florida counties with the exception of Miami-Dade and Broward.

– Estoppel letter fees for condo/HOA properties: Corresponding to the document disclosing the property’s financial and legal status.

It’s worth nothing that many of these costs correspond solely to financed buyers. Cash buyers, for instance, skip lender fees, note stamps, and intangible tax, so they wind up paying less on closing costs.

Investors buying through an LLC should budget for entity documentation. The title company will require the company’s operating agreement, get in touch with its authorized signer, and verify its certificate of status.

Lastly, international buyers follow a distinct process when wiring funds from abroad under a different payment timeline. They need to get a head start on document authentication while noting how currency timing during the transfer will affect the total closing costs. If you’re planning to buy Florida real estate from abroad, our blog on the Foreign Investment in Real Property Tax Act (FIRPTA) is a great way to get acquainted with the process.  

Frequently Asked Questions About Florida Closing Costs

– How much are closing costs in Florida?

For buyers, closing costs usually represent around 2%-5% of the purchase price. For sellers, they amount to approximately 7%-10% of the purchase price. The exact amount depends on the location, additional fees, and the contract negotiations.

– Who pays for title insurance in Miami?

Buyers generally pay for title insurance in Miami, creating an exception in relation to the rest of Florida.

– Does the seller pay for doc stamps in Florida?

Yes, the seller typically pays for documentary stamp taxes in Florida.

– Are closing costs tax-deductible?

Some closing costs are tax deductible while others aren’t. It’s best to go over each fee with a certified accountant so you can identify which costs are deductible and for how long.

– Can closing costs be rolled into the mortgage?

Closing costs can’t be rolled into the mortgage unless the property is being refinanced.

How to Lower or Negotiate Closing Costs

There are several ways you can sway negotiations in your favor; you just have to put the resources at your disposal to good use.

A basic rule of thumb is: Don’t hesitate to ask questions. Ask for a detailed estimate of closing costs. Your title company can gather all the information you need and help you compare lender loan estimates and additional fees. That’s why looking for professional counsel is another step to take when you aim to lower your closing costs.

You can also seek seller concessions for specific closing costs, like inspection fees or mortgage taxes. This option depends greatly on your rapport with the seller and the amount of good faith you’ve earned during the negotiations.

Lastly, you can lower your closing costs if you manage to schedule the closing around the end of the month. This might help you save on mortgage interests, homeowner’s insurance, or any other prepaid items.

Get a Clear Closing Cost Estimate from Key Title & Escrow

Don’t jump into a real estate transaction without knowing what you’ll be expected to pay during closing.

You can count on our specialized assistance, whether you’re a buyer, a seller, an investor, or an agent. Our staff will harness 24+ years of experience to help you stay on top of your fees, so you know exactly what to expect on closing day.

We help you evaluate every cost outlined in the contract and any other legal requirements you might overlook at first. And if Spanish is your first language, you can trust our bilingual closing services. Key Title & Escrow values accuracy and efficiency above all things, so never doubt that we’ll provide complete data and review all records with a fine-tooth comb.

Don’t hesitate to request a closing cost estimate, and we’ll get to work right away! Our escrow and closing specialists are ready to protect your best interests.