Closing costs in Florida: who pays what in South Florida

What are closing costs in Florida?

Short answer: the taxes, insurance and fees paid when the home is sold, in addition to the price. Some are set by Florida law, and some are set by each company, so you should get quotes.

Florida closing costs fall into four groups:

• State taxes on the documents: documentary stamp tax on the deed, and, with a loan, documentary stamp tax on the mortgage and the intangible tax.
• Title insurance: an owner's policy that protects you if someone later claims the property, and a lender's policy if you have a loan. Florida sets the premium by rule.
• Fees of the closing: the closing agent (a title company or a lawyer), searches, recording the deed, the condo association's estoppel letter and application fee.
• Loan costs: lender fees, the appraisal, and prepaid items such as interest, insurance and a tax escrow deposit.

In Florida, a title company or a real estate lawyer runs the closing. It holds the money in escrow, checks the title, pays everyone and records the deed with the county.

Who pays closing costs in Florida?

Short answer: it is decided by the contract. Most Florida resale contracts use the Florida Realtors and Florida Bar form, which makes the seller pay the deed tax and the estoppel fee, and the buyer pay the loan taxes and the condo application fee.

The standard "AS IS" contract (paragraph 9) splits the costs like this:

Everything is negotiable. A seller can agree to pay part of your costs, and a new-construction developer usually uses its own contract with its own rules. Also, for the stamp tax, the Florida Department of Revenue says all parties to the document are liable for the tax, whatever the contract says about who pays.

Who pays for title insurance in Miami-Dade, Broward and Palm Beach?

Short answer: in Miami-Dade and Broward, the buyer usually pays for the owner's title policy and chooses the closing agent. In Palm Beach County, the seller usually pays.

The Florida Realtors and Florida Bar contract has a special option for this, called the "Miami-Dade/Broward Regional Provision". When it is checked, the buyer chooses the closing agent and pays for the owner's policy and the lender's policy, and the seller pays for the title search (up to $200 if no other amount is written), the tax search and the municipal lien search. The other option, common in Palm Beach and most of Florida, makes the seller choose the closing agent and pay for the owner's policy.

Read which box is checked before you sign. On a $500,000 home, the owner's policy is $2,575, so this choice changes who pays a large amount.

How much is title insurance in Florida?

Short answer: the state sets the premium. The owner's policy costs $5.75 per $1,000 for the first $100,000 of the price and $5.00 per $1,000 from $100,000 to $1 million.

The rates come from Florida rule 69O-186.003, and every title insurer must use them, so the premium is the same at every company. The rule also sets:

• Above $1 million: $2.50 per $1,000 up to $5 million, $2.25 per $1,000 up to $10 million, and $2.00 per $1,000 above that.
• Lender's policy at the same time: if it is not larger than the owner's policy, it costs $25 when issued together with the owner's policy.
• Reissue rate: if the seller's own owner's policy is less than 3 years old, the rate drops to $3.30 per $1,000 for the first $100,000 and $3.00 per $1,000 after that. Ask the closing agent if the home qualifies.

The premium is fixed, but the title company's other charges (search, exam, closing fee) are not. They must be shown separately, so compare them.

How much is the documentary stamp tax?

Short answer: on the deed, $0.70 per $100 of the price in Broward and Palm Beach, and $0.60 per $100 in Miami-Dade for a single home or condo. On a mortgage, $0.35 per $100 of the loan everywhere in Florida.

• Deed, outside Miami-Dade: $0.70 for each $100 or part of $100. On $500,000 that is $3,500.
• Deed, Miami-Dade: $0.60 per $100 when the deed transfers only a single-family residence, and a condo unit counts as one. On $500,000 that is $3,000. Other property in Miami-Dade (for example a duplex or land) also pays a surtax of $0.45 per $100, for $1.05 per $100 in total.
• Mortgage or note: $0.35 per $100 of the loan, with no cap for a mortgage. On a $400,000 loan that is $1,400.

What is the intangible tax on a mortgage?

Short answer: a one-time Florida tax of 0.2% of the loan amount (2 mills), paid when the mortgage is recorded. The buyer pays it.

On a $400,000 loan, the intangible tax is $800. Cash buyers do not pay it, and they do not pay the stamp tax on a mortgage either. That is one reason a cash purchase costs less to close.

What is an estoppel certificate, and what does it cost?

Short answer: a letter from the condo or homeowners' association that says what the seller owes. In the standard contract the seller pays for it. Florida caps the fee, and the cap is now $299 after inflation adjustments.

The estoppel letter lists the monthly fee, any unpaid amounts and any special assessments. The closing agent uses it to pay the association from the seller's money, so you do not inherit the seller's debt. The rules in Florida Statutes 718.116 (condos) and 720.30851 (HOAs):

• The association must deliver it within 10 business days, or it cannot charge a fee.
• The base cap is set in the statute and adjusted for inflation every 5 years. The state's current amounts are up to $299, plus up to $119 for delivery within 3 business days, and up to $179 more if the seller's account is behind.
• It is valid for 30 days if delivered by hand or electronically, or 35 days if mailed.

The association's application or transfer fee is a different cost. If the building must approve the buyer and its documents allow a fee, Florida caps it at $150 per applicant. Spouses, or parents with their dependent children, count as one applicant.

What other fees should I expect?

Short answer: recording fees, searches, the closing agent's fee, an inspection, and with a loan, the appraisal and lender fees. Only the recording fee is set by law.

• Recording: $10 for the first page and $8.50 for each extra page, per document. A short deed costs about $27. A mortgage has many more pages.
• Closing agent's fee and searches: set by each title company or lawyer. Ask for a written quote.
• Home inspection: set by the inspector. Strongly advised even for a condo.
• Survey: often needed for a house or land, usually not for a condo unit. Your lender and title company will tell you.
• Wind mitigation and 4-point inspections: insurers often ask for these on houses and older homes, and they can lower your premium.
• With a loan: origination fee or points, appraisal, credit report, flood zone check, and prepaid items. The lender usually collects some months of property tax and insurance up front for an escrow account.

Under federal rules, your lender must give you a Loan Estimate within 3 business days after you apply, and a Closing Disclosure at least 3 business days before closing. Compare the two. The title costs can look different on these forms because of how federal rules split the owner's and lender's policies, but the total should match.

How are property taxes handled at closing?

Short answer: Florida property taxes are paid in arrears, for the whole calendar year, from November 1. At closing, the seller gives you a credit for its share of the year so far.

The tax bill for a year comes in November of that same year. If you close in June, the seller has not paid that year's tax yet, so the closing agent credits you the seller's part (January 1 to the day before closing), and you pay the full bill in November. Paying early gives a discount: 4% in November, 3% in December, 2% in January and 1% in February. Your new tax bill may be much higher than the seller's if the seller had a homestead exemption. Check the county's property tax estimator before you buy.

How much are closing costs on a $500,000 condo?

Short answer: in taxes and title insurance set by law, a cash buyer in Miami-Dade pays $2,575 and a Broward buyer with a $400,000 loan pays $4,800, while the seller pays the deed stamp tax of $3,000 to $3,500. Recording, association, lender and service fees come on top.

The examples use a $500,000 condo resale with the standard Florida contract. They show only the costs set by law. All other costs vary, so get quotes.

Cash purchase in Miami-Dade (buyer pays the owner's policy)

The buyer's taxes and title insurance: $2,575. With recording and one application fee, about $2,750, plus the closing agent's fee, inspection and any other quotes. If the seller's owner's policy is less than 3 years old, the reissue rate brings the title premium down to $1,530.

Purchase with a $400,000 loan in Broward (buyer pays the owner's policy)

The buyer's taxes and title insurance: $4,800, plus recording and the application fee. On top of that come the lender's fees, the appraisal, the closing agent's fee and the prepaid items, which you will see on your Loan Estimate.

Palm Beach, where the seller pays the owner's policy

The seller pays the deed stamp tax ($3,500) and the owner's policy ($2,575). A cash buyer pays only recording, the application fee and the services it orders. A buyer with a $400,000 loan pays $1,400 + $800 + $25 = $2,225 in costs set by law, plus the lender's costs.

How can I lower my closing costs?

Short answer: compare the fees that are not set by law, ask about the reissue rate, and negotiate a seller credit in the contract.

1. Get written quotes from two or three title companies or closing lawyers for their own fees.
2. Ask if the seller's title policy is less than 3 years old. If so, the reissue rate applies.
3. Compare Loan Estimates from more than one lender on the same day.
4. Ask the seller for a credit toward your costs, written in the contract.
5. Check the estoppel letter and the association's fees early, so there are no surprises.
6. Close early in the month if you want to prepay less interest on a new loan.