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What are the rules for escrow in Florida?

February 15, 2024

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Not many people would enter a real estate transaction without getting a clear picture of the rules in place. After all, these transactions involve thousands of dollars. There are many ways in which your whole plan could go south.

Among other things, title and escrow companies are there to help clients complete each step of the process without sidestepping any of these regulations. The support of a real estate agent also helps you avoid other hiccups; practices that aren't strictly illegal but still frowned upon in the local real estate market.

How Long Is an Escrow Transaction?

A Hand Holding a Sand ClockMost real estate transactions in Florida last for around 30 days before the closing date. The standard period could be extended if there are last-minute issues and both parties are okay with extending their negotiations. That's why some transactions can go on for months.

When it comes to a real estate purchase, even the most straightforward process will last at least a month. There are several rules to follow during this time and each of them has a specific purpose.

Rules for Escrow in Florida

An escrow process begins after the seller has accepted a purchase offer, opening the negotiations to hash out an agreement with the buyer. From there, a number of specialists, lawyers, and real estate agents will review all relevant documents, give advice, and encourage transparency in the process.

  • The Escrow Account: At the start of the transaction, the buyer deposits an amount of money into the escrow account. This is known as earnest money and it serves to show the buyer's commitment to acquiring the property.

    As explained by NerdWallet , the earnest money deposit usually amounts to 1% to 3% of the home price, but this percentage isn't set in stone. The amount is likely to increase if the property is in high demand or if there are not enough real estate properties on sale.

  • Keeping the Escrow Funds: A third-party will oversee the escrow account until the closing date. This is done in accordance with Florida Statutes 651.033, which state that a certified financial institution must hold the escrow funds for the duration of the transaction.

    There's a clear logic behind this law. If buyers transfer the money directly to the seller/broker's account, they open themselves to scams, which is the worst-case scenario. Similarly, getting the money refunded will be much harder if the transaction falls through and the earnest payment is in the seller's account.

    Most people choose to trust a title and escrow company with their funds, but the money could also be kept by a bank, a credit union, or the seller's real estate agency.

    After the property has been transferred, the funds are usually reimbursed as part of the closing costs.

  • The Closing: The closing date marks the deadline for all the contract terms to be met. Then, the buyer and seller can sign the closing documents to officially transfer the ownership rights.

    As part of the closing terms, both parties are expected to: address/solve errors on the property title, schedule home inspections and follow up on specific issues (plumbing, electricity, pests, property damage, etc), issue the right insurance policy, and pay the corresponding closing costs.

    The closing costs include the down payment and the standard fees attached to a specific aspect of the transfer (attorney fees, homeowner and lender's insurance, homeowner's association fees, etc.). Keep in mind that the type of mortgage and payment plan is bound to affect the closing costs.

    A Woman Checking Some DocumentsThe title and escrow agent takes care of recording the closing in the county or municipal land records office.

The rules of escrow also extend to the cancellation of a real estate process. The escrow agreement must outline the proceedings during this scenario, particularly when it comes to the distribution of the funds in the escrow account.

The sellers will keep the earnest payment if the buyer can't substantiate his reasons for opting out of the agreement. This applies when buyers quit the process for external reasons, like having found a better option elsewhere. The buyer can get the money back if the contract terms aren't met, and this is all the more likely if they include the necessary contingencies in the escrow agreement.

Ensure a Successful Closing and a Satisfying Experience

At Key Title & Escrow, we understand the importance of doing due diligence. That's why we always bring the highest standards with each of our services, so you can count on us if you want to conduct a thorough title search or ensure a safe closing in Florida. Our trained staff understands the local market and knows how to work efficiently while adhering to state and county regulations.

Avoid shady practices and complete your real estate process without a hitch. Key Title & Escrow has the knowledge and resources to assist you. On top of providing a variety of escrow services, we have your best interests at heart so our specialists won't cut corners to get you the desired results. Whether you're a buyer, a seller, or a realtor, you need a licensed escrow service that you can truly rely on. Key Title & Escrow strives to ensure a smooth process where clients can be at ease. We invite you to come to us with any questions or concerns.

Just call (305) 235-4571 or toll-free at (800) 547-0006 to learn more about our services. You can also contact our specialists via the contact form on this page. Key Title & Escrow ensures that you complete your escrow transaction the right way!
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