Foreign Buyers, F.I.R.P.T.A., and Avoiding Legal Pitfalls: A Deep Dive with Attorney Reid McCullough

In this follow up to their first conversation, Jim welcomes back real estate attorney Reid McCullough for another round of legal insights—from handling foreign investors under FIRPTA to navigating local restrictions and homestead nuances. Get an inside look at how to protect yourself from common contract mistakes and ensure a smooth closing process, whether you’re buying or selling on Florida’s Suncoast.

Key Highlights

1. FIRPTA & Foreign Sellers
   • What It Is: The Foreign Investment in Real Property Tax Act (FIRPTA) requires buyers to withhold a percentage of the sale proceeds if the seller is not a U.S. resident.
   • Buyer Beware: Penalties for non-compliance fall on the buyer. Proper disclosure and documentation are vital—often handled by the closing attorney.
2. Local Regulations & Homestead
   • Rental Rules: Sarasota County generally enforces a 30-day rental minimum; the City of Sarasota has a 7-day minimum. Violations can risk homestead exemptions and code enforcement complaints.
   • Partial Homestead: Renting out any portion of your primary residence may reduce your homestead benefit, as the county adjusts taxable value accordingly.
3. New FAR/BAR Contract Updates
   • Closing Costs Split: The latest version allows title agents to allocate closing fees to both buyer and seller, reflecting shared benefits and clearer cost breakdowns.
   • Financing Tweaks: “Loan approval” and conditions replaced the older “loan commitment” language, streamlining financing contingencies.
4. Title & Closing Process
   • Timeline: Within hours of receiving a signed contract, your title agent orders searches (title, lien, utility) and begins clearing title issues, often requiring 30 days or more.
   • Complex Cases: Expect longer closing windows for short sales or commercial/SBA financing—sometimes up to 90 days or more.
5. Negotiating Repairs Post-Inspection
   • Contract Timelines: Missing escrow deposits or inspection deadlines can put you in default, costing you your deposit.
   • Documentation & Maintenance: Document the property’s condition early and verify repairs/condition changes before closing to avoid unwanted surprises.
6. Working with an Attorney
   • When to Consult: For FSBO deals, foreign sellers/buyers, or complex negotiations, bringing an attorney on board early can save you costly pitfalls.
   • Added Value: Attorneys can connect you with inspectors, negotiate lien payoffs, and clarify legal obligations for all parties before closing.

What’s Next?

Looking to buy or sell property on Florida’s Suncoast without falling into legal traps? Reach out to Jim at jim.ahearn@gmail.com or visit Jim Sells the Suncoast. For deeper legal guidance, contact Reid at (941) 484-9714. Safeguard your real estate deal—know the regulations, meet the deadlines, and close with confidence!

A Personal Note from Jim:

Hey there, I’m Jim Ahearn, your go-to real estate guide and host of Jim Sells The Suncoast podcast! 🎙️✨ Dreaming of Florida life? I’ve got you covered! As your dedicated buyer's agent, I’ll handle everything from walk-throughs to closing, making your home-buying journey as smooth as a Florida breeze.

Whether you're local or tuning in from afar, I’ll bring the Suncoast to you with virtual tours and expert advice. Let’s chat about your dream home and I'll connect you with all the right people to make it happen.

Ready to move to paradise? Drop me a line – I can’t wait to help! 🌴🏡

Transcript

Jim: 0:52

Greetings Suncoast. It is my pleasure to have Reed McCullough back with me again for some wild and crazy antics in the legal aspect of real estate. It's all over the board. We're seeing a fantastic new year, lots of things going on. And you and I were talking recently about. Some of the things happening in this area, particularly global investors and global buyers coming in, whether it's from out of the country, whether they're buying or selling. So I thought we'd kick it off a little bit there. And some of the things that may be unique to that, that you have to take into account, whether you're buying or selling.

Reid: 1:25

Absolutely. Yeah. and thank you very much for having me back. the conversation I was looking forward to today regarding the foreign investor and real property tax act. That's the FERP tech, which was created in 1980 to help the United States capture capital gains when somebody sells property in the United States, but does not Pay income tax in the United States,

Jim: 1:51

And we see that here in Florida, it's a prime location, people coming in it's fantastic place to live, second home or whatever. So it has those connotations that impact you, whether you're selling to somebody buying from out of the area, or if you're buying from somebody who owns it, who happens to be out of the area. So it can happen both ways.

Reid: 2:10

That's correct. Yeah. It's definitely something to be mindful of both for buyers and sellers. And the as is FAR BAR contract contemplates this that says in standard V of the contract it says that, the buyer acknowledges when they sign this contract that they're going to be on the hook for determining the status of the seller as a foreign person and remitting the correct amount of the seller proceeds. So all of, because the U S contemplates only, it only has jurisdiction over Americans. It puts all of the onus and all of the penalties on buyers. So it's definitely something for buyers to watch out for more than anything else.

Jim: 2:59

So if I'm selling or buying from somebody else, how do I determine this? What are the steps that I would have to take to know that this impacts me?

Reid: 3:08

the number one issue is seller disclosure in part of the lead up to the closing your closing agent collects information from sellers, including their status as nationals or foreign nationals. And we also disclosed that to you as the buyer's agent and the buyer when there's an issue that you guys need to be aware of sellers will. Volunteer this, but not always, oftentimes we'll find ourselves maybe surprised on a seller's disclosure. Oh, we don't have a social security number. Okay. Why is that? Oh, because we're not a U. S. Oh, great. Good to know. Yep.

Jim: 3:51

Bring out the paperwork.

Reid: 3:52

Exactly right. Yeah. And these are a couple of tax forms that get created and signed. They have the buyer's taxpayer I. D. number on their social or the T. I. N. number if they're a company. And those forms along with the check for 15 percent of the gross proceeds baseline goes to the I. R. S. out in Ogden, Utah, where they process these our job as closing agents. Is to make sure that the forms are all squared away and that money goes straight from the closing because penalties that the irs levies on buyers that don't report this are real nasty they are 15 of the sales price Plus interest, plus late fees, plus collection. They'll get you. We make it a point of pride that all of our closings are smooth and easy, that this doesn't result in any disruption to the sale process.

Jim: 4:49

You know what, I think some of this points back to a lot of people. We'll try to go it alone. That Hey, I can YouTube how to do it. There's consequences for not getting everything right. That I is not dotted. That T is not crossed. You're potentially looking at hundreds of thousands of dollars in fines, et cetera.

Reid: 5:09

Yeah. Forget about it. Imagine if you signed a quick claim deed to your neighbor and he gave you his property for 200, 000. A handshake agreement. I've seen this before. if it came to pass that your neighbor was Canadian or Mexican or from German, for Christ's sake. Then you might find yourself paying 15%, that'd be 30, 000 extra in penalties. Plus, I believe the default rate of interest right now is 15 percent per annum. And there's no statute of limitations on this. The IRS can look back realistically as long as they want and say, Oh we're doing an audit on your sale in 2007. And we're going to hit you with 15 percent on that 30, 000 year on year compounded annually. And now you're on the hook for more than the sale. There's, yeah. And we don't ask, this is something your good realtor will tell you, there's a rule for this. Let's talk to the attorney. Let's talk to the tech because they can set that up correctly.

Jim: 6:16

And I think you brought up a good point there. I think when people think of foreign investors or global and people are buying, they don't think of Canadian people when you're buying and selling, which there's quite a bit. So it could easily sneak up on you if you're not going through the process. Yes. Okay.

Reid: 6:32

Yeah, or just, heck, there could be a somebody who lives here months out of the year, but does not necessarily qualify for one of the exemptions and, there is a silver lining. This is a big dark storm cloud, but. The silver lining is there are a number of exceptions that will allow you to get away with, not get away with, but avoid reporting FERPTA on transaction and those are good targeting chips, honestly if your transaction is for 300, 000 or less and you intend and you declare that you or your family will reside in your home. The property for a fraction of the time that it's occupied. you can sign a waiver of the FERPA withholding, which would the closing agent retains in their file and that prevents the requirement of remitting FERPA. Above 300, 000, if you sign that waiver, you get 10 percent withholding up to a million dollars, and then above a million, it's 15 percent no matter what, but for most retail residential transactions, at least in Sarasota County, where the average price is about half a million bucks, there is some savings that you can enjoy there. And sometimes that's a good bargaining trick, if the properties owned by Canadians or by British or French, whatever, and you present an offer, it might not be the most attractive offer that they're going to get, but you say on this contract, I'm willing to sign an affidavit here and at closing that I will reside in this property as my primary residence or as a vacation rental, whatever, as long as I meet the occupancy requirements. Then they might consider your offer more attractive.

Jim: 8:17

Oh, absolutely. Let's cash out a pocket exam.

Reid: 8:20

the

Jim: 8:20

magic number of 330,

Reid: 8:22

Because 330, 000 at 15 percent withholding means the seller walks away with 280, 500. so if they got a property listed for three 30, And you offer them two 90, they're receiving 10, 000 more accepting that offer with your affidavit. Then if they receive at the closing table without the affidavit at 50, 000 higher.

Jim: 8:47

Yeah. Yeah. You, everybody walks out ahead, knowing what's going on. Yeah, professionals, man, use professionals while we're talking regulations. Are there any specific local regulations in Sarasota or Manatee County that could affect a real estate transaction or anything specific to this area?

Reid: 9:09

Okay. So when you're talking about like local municipal regulations, people are thinking about Building standards and rental rates, rental restrictions. So the city of Sarasota, I know has a seven day rental minimum. Last I checked Sarasota county was 30 days, but they may have updated that since then. Yeah, 30 days is the minimum rental period for Sarasota county Obviously, this is not strongly enforced if you go on Airbnb, but it's something to be mindful of because the county is a reactionary the code enforcement department, the zoning department, all these entities, they don't go out and hunt the neighborhood for violations, even though it feels like that they're really only responding to complaints. And that's one thing that you want to really be mindful of, particularly if you're offering a room in your home for sale. I don't know if we touched on this last week, but the Homestead Tax Act, part of the Florida Constitution, says that for your primary residence, you get a chunk of your property tax bill discounted. Every year and your taxes get locked in year on year to a maximum of three percent annual. This is one thing speaking to your question regarding county restrictions on ownership that you want to be mindful of in a sale. If you plan to buy a property as your primary residence and rent a room to your You are not titled to a hundred percent on that property. You're only entitled to homestead as to the fraction that is not exclusively leased out to your friend. The math gets a little weird because a fraction of your property comes at market value, the rest of it is locked in. But let's say you have a 3, 000 square foot home and you lease out 200 square feet of bedroom. To one guy or with an en suite bag, whatever. So you would get homestead for 2800 square feet of your 3000 square foot home. And then the county would do the math and say, all right, you're entitled to this, but you have to pay this. It wouldn't be the 100 percent homestead. The reason I bring that up is because Airbnb Is a great source of homestead violations for the county. That if you list your property for short term rental, that is not your a hundred percent homestead. That is a fractional homestead.

Jim: 11:40

Oh, wow. Yeah.

Reid: 11:41

And just like the IRS, Sarasota County likes its money. And so the way they do that is they remove your homestead cap going back to the first year that they discovered that property was available as a rental or even a partial rental and then hit you for 15 percent of the difference year on year seems to be the magic number for tax penalty violations. The other way they catch that is with eviction records. If you take someone to court to evict them from something that was your homestead property, they have your sworn affidavit that property was rented because that's a verified pleading. And they say you swore to us that this was your a hundred percent homestead and then swore to the court that it wasn't. So they're going to thing it.

Jim: 12:26

But yeah, I think most people buying a home don't take into effect, they're thinking I own this house. So it's a hundred percent mine thinking size wise or whatever, maybe not necessarily time wise. So that time side. Can have a huge impact, which means if you're an investor, you're looking for the Airbnb, disclose it and do it the right way. So it might be a little more upfront, but you're probably better long term.

Reid: 12:53

Yeah. And in, in the context, going back to foreign sellers, though, all of the, Legislation related to buying and selling property as a foreign individual or a foreign corporation. That's federal legislation that doesn't happen. That's not the, that's not the local. And the best thing to to take away from that is to know that there's a rule and to know to ask a professional because, I don't expect anybody to remember the, 16 possible exemptions, but I expect people to know. Okay. All right. Buying property from a foreign person comes with weird rules and regulations. I should talk to my attorney. I should talk to my tax account. Make sure you got someone looking out for you.

Jim: 13:35

Yep. Yep. Yeah. Go back to the paper and verify it because no one's going to remember all of it.

Reid: 13:41

A hundred percent. Yeah, absolutely. It's weirdos like me who keep this stuff upstairs. And as you can see, it's not all of that. You know what I mean? I think every good attorney is should be measured by how often they review. Yeah. The information that they rely on in their practice, if I let my, my, my knowledge crystallize, time keeps marching on. There's new regulations that come out, last year there was a new far bar contract that changed the way that closing costs are allocated in closing state. And

Jim: 14:09

And that's a nice surprise it is, while we're talking, let's go right into that. So I know now we're, as opposed to one saying, Hey, I, I got the closing, that's my title agent looking out for me now. It's split a little bit and some costs can do both sides. It is yeah. Closing

Reid: 14:27

services in December. The far bar committee in recognition of the fact that there is work that applies to both parties they created this new regime, which some people bought that because, they didn't, frankly they were getting the benefit of the buyer's money or the seller's money, depending on the title. For a long time. And now the the New Far Bar contract permits closing agents to allocate closing fees to both sides of the closing state. And, with mixed results, I think some and every. Every title agent is different, and this isn't to disparage any individual or any particular company. I think different title agencies have a different perception of value in terms of where. Where the real where the real work accrues part of me,

Jim: 15:20

right?

Reid: 15:20

And I guess I looked at this change and I said, okay now people are expecting to have closing costs allocated on both sides of the closing statement what can we do to add value? And so what I did was I looked at the work that we're doing around the state. This is where, thankfully, we've grown out a little bit up and down the Gulf Coast and into the interior of Florida. And I said, okay we have offices in these counties for every county outside of that. This closing fee is going to cover the cost of a mobile notary to attend this closing and sign documents, et cetera, and so forth. And for for wire transfers, my bank hits me for a small wire fee. I said, for for what we're doing we can absorb all of that. So realtors that bring us transactions and they want the commissions wired sellers that want proceeds going to five different investment accounts just absorb that. It's, because. In my mind, if we're charging a closing fee we should be delivering measurable, valuable service. And I wanted to augment that service over the, we generate closing documents, and if you want to sign up, go figure it out. So yeah, that's, that's the way my shop is respond to that. I think I can't really speak to other folks. I think there are different. I think some shops actually particularly Naples. If you ever say transactions down in Naples their policy for a long time was to stick closing fees on both sides of the closing statement or and this, I think this was bad service. There was a lot of there was a lot of tradition of forcing the sellers to get their own attorneys at the buyer pick title, for instance which was inefficient. It didn't really it didn't honor the fact that That a title agent a closing attorney is making money doing what they do and should reasonably, you know allocate their fees accordingly Anyhow, that's off that soapbox. It got a little arcane But

Jim: 17:14

yeah, I think the idea maybe the idea was that both sides are benefiting So, how do we put the cost associated with it? So both sides? Carry their fair weight, maybe something along those lines that, that we're doing.

Reid: 17:28

Yeah, exactly. And that's, I think that's broadly good. I use it as an excuse to add services and to cut the price. I discounted my closing fees by a hundred bucks from last year. And and added, the mobile notaries within the state and the wire transfers and all that good stuff. The, I think other, some companies just kept doing what they were doing, that there's been some people that react, some people raise their fees, but it's definitely set a couple of ripples through the the network of contract parties. I think the other big change that we saw come out with respect to this contract has been with the There's been a lot more, they tightened up the financing provisions. Loan commitments are no longer a thing. Their loan approvals now and the approval they take up the language with respect to the conditions on the approved. So I'm really actually, I'm really happy about that because. The far bar has been this evolving living document over time. I'm really glad to see that the committee is bringing the contract in line with the problems we're facing today and, including, including the fence, the far bar stuff we were talking about recently, it's or the purpose of part of me that we're talking about recently.

Jim: 18:46

I think it's never a bad thing to get a little spotlight on it. Take a second, look at it and bring up some of these things that most people. Probably don't even pay attention. They signed the bottom and they're like okay, I signed it. So now let's talk about, some of these specifics so that everybody is clear as to what's happening versus, a document and it's signed and don't worry about it, they're paying it well, that's great. But what does that mean for me?

Reid: 19:10

Exactly. Yep. That's, and you're experiencing the same thing, I'm sure on your customer side with respect to the the buyer broker agreements. I guess those have sunk in a little bit at this point, I hope.

Jim: 19:20

Yeah. I think, once you get past about six months, all of a sudden that's just standard issue. And you move on, hopefully, what do you think what are you seeing as the most common mistakes that. Buyers are seen as they're looking for a home on the Suncoast to make that offer. What stands out or what is the common mistake? Okay,

Reid: 19:41

So I have a little bit of a weird keyhole view of transactions because they're already, they're usually already executed by the time they come to me. But I would say probably one of the one of the big mistakes I see is people who think that, oh, so I don't know if I mentioned this last week, last time we talked, but people who who think that their verbal agreements will be honored at closing people who think that they're like, but. The escrow deposit doesn't necessarily need to come in when they say it does. That's a great big one for me because that's actually a contract default entitling the seller to cancel and keep your earnest money deposit. So even if you haven't, so you've got three days to make a deposit and on day one, you decide you don't want the property. Even if you even if you decide, if you send a notice on day five but haven't made your escrow deposit by day three, you're in default of your contract. Right? And that's a, and people, I don't use that term lightly because people take it seriously. I think that when you say somebody's in default, they mean that the seller has the right to sue you and they will win. So I want to make sure that everybody, no matter whether you're concerned about inspections no matter whether you're waiting for your loan to come through follow your contract timeline to the letter or to the number, but

Jim: 21:12

Regardless of you think you're going to cancel it at day six and a seven day window, you got to pay by day three, you must pay and then cancel and then get it back. You can't. I was going to get it back. Anyway,

Reid: 21:24

that's what's going to make your deposits. 100%. Yeah. I think another just looking through this and thinking about it. When so this is a little bit more obscure, but if you're if the listing offers a home warranty which is this useful product that kind of ensures your big appliances, your HVAC, that sort of thing for a certain amount of time provides that if something breaks down during your first year or two of ownership that this home warranty program will cover it, which is nice. Make sure it's honored on the contract. This is right under the closing costs in line 184 of the new far bar and make sure that you shop for it because If you have the entitlement to a home warranty, but you don't pick one out Then the seller can either say you didn't exercise that. So I don't want to pay you. Or they might just choose the bottom of the basement one, because it says that it costs the default languages at a cost not to exceed blank. So that might be 120 warranty instead of the 800 that you bargained for. And it's important to make sure that, that if you're entitled to a home warranty first, okay. That your contract says so and to the shop for one. There's lots of providers I think old republic has home warranties american home shield the popular one There's a bunch i'm not a representative of any of those entities

Jim: 22:52

But you know what and we did talk about this last time I think it's still very true for anyone listening is read the contract make sure it's in there if you want the washer and dryer Get it. The contract needs to say washer and dryer is going with it, otherwise that, that seller has every right to, we talked about it, but it wasn't in the contract. So I'm taking it.

Reid: 23:10

Oh, there are, I can't tell you how many fights I've tried. I've had to defuse regarding stuff. Not property. Real estate's easy. If it's bolted down to the property, it's part of the property. But the sale of tangible goods that is adjacent to a real estate transaction very few people get it right. There, there is

Jim: 23:34

things we're seeing too. Ring cameras, TV mounts on the wall, those kinds of things that that buyer has every expectation that's going to be included. So

Reid: 23:46

TV mounts actually are part of the standard contract. That's line 19. So if that's not, if that's not there when the seller moves that seller has something to answer for. I remember a horror story six years ago in my practice, where a seller pulled up a low boy a long low trailer and got a forklift and stole a shed. They're like it wasn't bolted down and I'm like,

Jim: 24:10

no, that's part of the problem. Yeah. If there's any question, make sure it's in writing. If you're the buyer, make sure it's in there. If you're the seller, whatever they have in there, you must convey.

Reid: 24:23

Absolutely. Absolutely. I, there's a good way to nail this down is to create inventories. To just take a college rule tablet and a walk and walk through the house, make a video, take a video, see everything you want to see and then write it down and have everybody sign that. Because that is what you will get at closing. Yeah, it can get very hairy if you don't itemize Exactly what you want.

Jim: 24:56

How do you as a real estate lawyer? The buyers navigate the complexities of purchase property. Obviously you said some of them they come to you afterwards Somebody wants to enlist your help as they go to buy property What are the things that you can do for them and how can you help them?

Reid: 25:12

Sure. Right up front. I'm not a realtor. I don't hold a real estate license or a brokerage license. I know some of my competitors do. I don't really like competing with the people who refer me work. But the what I do first is I walk them through their contract, make sure they know what they've signed up for first And I make sure that they're that they have services lined up for if they want to, if they're getting an appraisal, if they're getting an inspection if they need, termites, pool, septic, sewer, a lot of what I do is I'm the compulsive connector of people, so I can send them out to these various people to get quotes if they want to do repairs or bring a contractor in if they need to fix something up. But most of what I'm doing is I'm. For whoever brings me the contract. I am their representative in their advocate, and it's my job, not just to hold their hand through the anxiety, provoking interactions, the tense negotiations, the conflict sometimes, but also to, to make sure that they feel comfortable with the whole process. So there's a fair amount of boiling down this high minded arcane nonsense into simple terms that people can understand.

Jim: 26:28

Yep. And I think it's important people understand too, if you have a question on what does the contract really mean, or what does this section say? Speak to a lawyer because I'm not a lawyer. I can't practice law for me to interpret that for you may or may not be right. And it's wrong on my part to try to pass that off.

Reid: 26:48

Yeah. Yeah. That's, and that's exactly what I, no, I don't necessarily, admonish my realtor clients, but I always tell them like, all you need to know is, yeah, there's a rule for that. Let me call the guy who knows.

Jim: 26:59

That's right. Who's got the rule book. He does. Let me, yeah, it's nailed it there. So when should they consult with you buyer or seller? Is it or where are you seeing the most benefit? Is it. Hey, I need a lawyer up front depending on the complexity and maybe if it's an investor or something that's got a couple extra steps to it.

Reid: 27:19

That's a great question. And it depends on where you're starting from. If you've got, if you've got a realtor or if you're if you're connected with one of an existing real estate relationship that's the first place to start a hundred percent. You're realtor. Is most talented in the creation of the deal. The negotiation. You guys are not just professional salespeople. You're professional negotiators. And that's super good for having someone to look out for your interests. Without any, and I'm not retained by the Florida Realtors Board, but I can recommend that because oftentimes I get tapped after a deal is already signed and all I can do is interpret and honor the contract to the best of my ability and hopefully in a light favor to my favorable to my client. If you don't have a realtor, if you're being, let's say you've got to deal with your neighbor and, everybody's, you've already agreed on a price. That's, once you've got a verbal agreement or a verbal kind of understanding of the terms, that's a great time to talk to me. If you're not, if you're not planning on, and using the services of a realtor, because because, as an attorney in involved in a for sale by owner deal I can help you not only craft the contract, but I can come up with some terms for closing and payment and escrow finance that make sense. Because, usually these agreements tend to be a bit inarticulate. They tend to be, oh, yeah, Jim told me he sold me his place for 300, 000 and he carried financing for two years. How much is he going to finance the whole thing, or does he actually need 100, 000 to pay off his e lock? That's that's a big question because there's risk with that too, if you if you accept seller financing, but the seller didn't tell you that he's still carrying this mortgage payment. The bank might call your mortgage and suddenly you're involved in a foreclosure proceeding for your brand new house

Jim: 29:18

I think something else you bring to the table too is the being able to lay out potential outlook comes from certain things. Hey, listen, you guys want to do this? Here's how you have to do it if you do it this way instead yeah, this is a potential happening and sometimes They're not good.

Reid: 29:34

I don't want to be Debbie Downer. I think there's a I think one of my maxims is never say no, but price yourself accordingly. But I do come from litigation. I, when I started my career after a brief stint in commercial underwriting for a giant title insurance agent I did two years of nasty stuff, foreclosure defense and PI and divorce and civil lit. And it was it was eyeopening, it gave me a real good. Ballpark of not only what's worth going forwards on, but also what the timeline, the cost and the expected outcome of litigation, that's something that, people don't, the sort of subtext on all of these contracts that we negotiate and we interact in through real estate is that the only way these contracts are enforced. Is in court. And if you're if your party is not willing to enforce their contractual rights in court and basically bluffing, so you gotta make sure that people understand that you're serious and that their actual that there are remedies. But you have to pursue otherwise, which is is a circle circuitous way of saying that the best result of any conflict is a negotiated peace.

Jim: 30:52

And here's the pathway forward that hopefully we go through and it's smooth and that's the ideal outcome.

Reid: 30:57

Yeah, absolutely. And sometimes you gotta get a little rough to get there. But. There's only a few things that I always recommend suing. And it's usually high dollar escrow disputes. When there's clear performance issues. The seller didn't show up and sign closing documents. Now we have a specific performance case.

Jim: 31:22

So let's go back a little bit. You were talking in there about what you do as. An attorney and title, what is the timeline for that? And what's entailed in that step by step process going through Hey, we've got a contract that's boom, it hits your desk. All right. Closings in 30 days.

Reid: 31:40

Oh, yeah. The first thing that, that just from our perspective, so you want to open the door to the sausage factory the first thing we do when we get a contract is we triage it. How are we, how fast are we closing, what needs to be done? Who are we interacting? The within an hour of receiving a contract during the workday, of course, we do sleep sometimes during, within an hour of receiving a contract we've got, A title search running a lean search. We've got welcome emails to everybody. We've got Wire instructions for you to wire your deposit in if you're a partner and we've got information sheets which are clickable pdfs That tell us how to enter your personal information. So we get your closing back within a couple days usually we'll have a title search back depending on the the speed of my underwriter and from there we do an examination. We make sure that any mortgages are being satisfied. Any means are being addressed. If usually our lean searcher will get us documents back around the same time. So we'll know if there are permits that need to be addressed with seller code enforcement violations. Open utility bills come about a week later, but by the a week down the road, we'll know what water bill is. We need to collect for that. If there's any deficiency and from there, we start, we basically start the clearance process. If we're representing a seller. Oftentimes what we're able to do is negotiate down some liens we just, we'll step in and retain personally for the purpose of going to old debtors that have a secure judgment against you and say, Hey, this doubt fire was able to scrounge up a couple thousand dollars to pay off her lien. Are you willing to discount this substantially? Usually they are. Usually creditors don't really expect to get paid if they've got secure judgments that have been sitting there for years. They just have some

Jim: 33:35

is better than none. And so let's move on

Reid: 33:38

exactly. And we've had great success with that, especially in the case where there are multiple competing lien holders for the same property. We can just make them fight and you say, all so the first party that's getting paid off is the federal government, because they have a tax lien and after that the first mortgage holder, because they can foreclose pay off the tax lien, and they still get their equity, but then the equity runs out. Mr. Foreclosing HOA, Mr. Credit card judgment, Mr. Home equity line of credit, you guys really won't get paid if this goes to foreclosure. Let's figure it out. And using those mechanisms, we've managed to negotiate like six figure discounts in the past. For for clients who are having, huge problems with with the property that would otherwise fall apart, get foreclosed on, go to bankruptcy, et cetera.

Jim: 34:29

So it's in their interest. Let's get this deal done so that everything, everybody moves forward and they still get something for theirs.

Reid: 34:35

When you have a property at the waterline where, when I, when that's a term of art, that means the sale price, what you expect to receive at a sale is just about what the debts are equal to. It's the world because you got your nose is just above the water. We try to get people to at least walk away with the dignity

Jim: 34:54

and about how we're talking about timeline. So how long does this take? Still going back like within the hour. And then, so my service,

Reid: 35:02

so that's that's the difference between what my team can do and what we require other people to do, because I can't the utilities only come from the municipality they come from the city or the county and They're a little more laid back than we are. I've got some high energy and slightly neurotic people on my team, which I really appreciate. That's they're a little more. Take it easy. Clock out at five, on weekends down. So they, we expect the stop letters from communities to come back between four and 10 business days. We enjoy some pretty good relationships with with association managers. So we can usually poke them and boost them to get them back a little faster, but the statutory requirement is 10 business days. I'm dealing with that right now with the gentleman who represents an association who owes us an estoppel letter by Wednesday, but the most municipalities would get you utility bills back in 10 days. This is what allows us to. pay any outstanding water bills,

Jim: 36:09

right?

Reid: 36:10

Because the city can chase you down for that property.

Jim: 36:14

Yep. And because I know when I talked to buyers or sellers, one of the things that you know, all right, we're gonna close. We're looking 30 days out or 40 days out. They're like 40 days. Why? You know what? You have to find out what's there, what's missing and what's not missing. Reach out and get the response, get it back. If there's an issue, then settle the issue. It takes, it just takes a little time.

Reid: 36:35

There are matters that demand a longer time particularly short sales. Negotiating with short sale lenders I, it's a tongue in cheek, but I tell people assume two and a half months per lender. If you have two lenders involved, then they have to agree. Imagine a closing in the fall and you're signing a contract in March. If the other thing that takes a long time that I recommend you price into your expectations is commercial financing. Most commercial lenders, particularly small business administration lenders so SBA loans I expect 90 day contract cycles. They usually have 45 days for due diligence, 45 days for closing. And those are complicated loan programs. So I understand. But yeah, what you don't want is when you get to the end of the process and your lender says one more day. So the seller says, okay, one more day. And then tomorrow the lender says one more day. That's when everybody gets pissed. Yeah shorts, yeah, short sales and SBA loans are the big time takers.

Jim: 37:40

So looking at, and this area, we have a lot of both single family homes and condos. Sure. Is there a big difference in what as a title or as an attorney in dealing with these buying and selling processes?

Reid: 37:53

So single family homes are not necessarily in an association. Condos are all in association. So when you are if you're a buyer then if you're building, if you're not buying your whole building, assume that you will be applying to an association and the requirements of application are pretty stringent. They can demand all sorts of things, criminal background checks, credit checks, proof of deposits, proof of funds. They can make sure that you have enough money in your bank accounts to not be a credit risk to the association and that you're not a felon. So very reasonable. From an orbital view, but boiling down to it, it feels a little visceral when you're giving your social security number and your bank statements to, to an association, it doesn't feel good. But you have to price that into your experience as a prospective homebuyer is that. When you're buying condo, the condo wants to know that you're not going to set fire to the building and that you're not going to, that you're not going to default on your dues in a homeowner associations are similar in that they have permissible application processes, your mileage may vary. There's not every condominium is onerous, not every homeowner association. Yeah. And sometimes you might be in a property that doesn't have a formal association but has deep restrictions. Southgate is a prime example of this. That's the neighborhood north of Bee Ridge and south of Bay of Vista. They so Southgate. Doesn't have a dues collecting organization, but it has covenants. You, when you join, when you buy a property there, you're promising that you won't do certain things with your property. You won't build your property in a certain way. And the enforcement mechanism for that is the any of your neighbors in the community to sue you. And that's not great. Obviously you don't want to be the neighbor enforcing that, but you have to take into consideration the fact that right exists. When I'm advising buyers, I want to make sure that the first thing they do after they sign their contract and don't deposit their escrow and fill out their little buyer information sheet. Is that they are applying to their homeowner association and getting everything they need in, just like applying to your lender for your loan, want to make sure that process is done well in advance of your closing.

Jim: 40:13

Last question I have today, let's talk about potential pitfalls in negotiating repairs after home inspection. What are some of the things that can go with that?

Reid: 40:25

After your inspection period closes your right to ask for repairs is dramatically reduced if you have an inspection And if you don't have an inspection, get an inspection. If you have, if you're not getting an inspection, when you buy a property, you are probably leaving money on the table and you're possibly causing yourself huge problems in the future. If you have an inspection and from the inspection date to your final walkthrough, something has happened. A window has been busted out. A hot water heater fails, an AC unit fails. If something goes wrong during that time, then you have the right to demand that they fix it Because you've got that initial inspection, you have put your marker in and you've said that between the contract creation process and the closing, you have failed in your responsibility to maintain the property in substantially the similar condition. It was. We went under contract that that provision is the maintenance provision. I believe that is standard. Standard M is risk of loss. I would believe that paragraph 11 property maintenance. Okay. Except for ordinary wear and tear and casualty loss, sellers shall maintain the property, including the shrubbery in the substantially similar condition as it was as of the effective So when you go to when you go, when you initially see the property, when you go under contract, take pictures of everything, do a video walkthrough, they're great, or your realtor will probably do it for you. And, when you, when, if your video walkthrough shows, Hey, there definitely wasn't a hole in that window when we went under contract and then at the walkthrough, cause your inspector will generally take pictures of problems. They don't necessarily take care of things that are in good shape.

Jim: 42:18

Or they don't know what was there when you saw it, so when you're coming through, you are making an offer to buy what exactly. It needs to be that way when you close.

Reid: 42:28

You don't want to walk up to your property and think, huh, I distinctly remember a shed there.

Jim: 42:34

Yeah. Or, three palm trees out front.

Reid: 42:36

Oh God. Yeah, absolutely. If they cut down the, if they cut down the trees they got to put those trees back or put replace a substantially similar trees. So this can be an expensive difference for a seller too, because If your seller is doing storm cleanup, you want to make sure that's priced in there and say, Hey, we're going to demo this tree. It's dangerous. We don't want it falling on the house. Okay, great. Make sure everyone's everyone sees it. Everyone signs it.

Jim: 43:04

Yep. Yep. When in doubt, write it out.

Reid: 43:08

Perfect. Honestly, you could make that the tagline of the show.

Jim: 43:12

Yeah, read. Thank you for joining me again. I look forward to our next installment of I always walk away with a little tidbit of something that I go, you know what? I wasn't aware of that. I'm really particularly loving the a hundred percent exemption how that can be by rental or not having some of those things in place. So that's. That's not necessarily top of mind, but it is now.

Reid: 43:34

Yeah, absolutely. If you're if you're buyers or sellers are thinking about moving in and also putting it in Airbnb, make sure that they understand that's carved out for the exemption. All right, guys. Thank you very much having me. I can't wait to do this again. It's always a pleasure talking to you, Jim. Let me know if you guys have any questions related to this material or related to anything you're, you've got going on your contracts, even if it's not coming through my office, you just want a second opinion, feel free to reach out. You can always give me a call. My number is 9 4 1 4 8 4 9 7 1 4.

Jim: 44:09

we'll make sure we put those in show notes Bye guys.