Difference Between Escrow And Selling In Canada Please

[FULLTIMEWANABE]

Can someone in the know share of any specific differences between Escrow by comparison to how we sell single family (not condos) homes in Canada please? This is for a Florida property.

 

Here in Canada we list a property, offer is accepted with typically a 5 to 10 day condition of subject to financing approval, subject to home inspection (others can be input as well but not typically) and a possession date is agreed anywhere from 30 days to 90 days as a guide from offer date. A typical $10,000 to $30,000 deposit depending on property value, accompanies the offer or is split between offer time and upon removal of conditions. This is held in the RE brokers trust account until advised otherwise by lawyer. In the event the buyer were to not close as agreed on possession date this deposit would generally be distributed to the seller and their broker as compensation, albeit one can sue further.

 

There are only realtors and lawyers typically involved in the sale, and lawyer will apply for title insurance, typically paid by the purchaser if required due to concerns or non provision of an up to date Real Property Report stamped with compliance (Survey). Once a firm sale is agreed documentation is delivered to the lawyer and for about $750 +/- he/she will finalize the sale, pay out any mortgage, property taxes etc through to advising keys are releasable on possession date once they have the monies from the buyers lawyer in their account.

 

We don't use Title Companies, is there a need or advantage to using them as well as a lawyer in Fla?

 

Once the property becomes a firm sale here there is time from then until possession date to start disposing of furniture/chattles not included with the sale.

 

We are not 100% clear on how "Escrow" works by comparison? What is the typical deposit on final acceptance of an offer to purchase? What is the longest typical possession date one can negotiate to allow time to sell all furniture etc after a sale becomes Firm? Is there a good option for "turn key"? The furniture, is modern, like new and it's frustrating to get pennies on the dollar for it through Craigslist.

 

Thus far we've ascertained it's costing us more than double in commissions to sell there than here, and we'll be subject to 20% taxation on any gains, as well whatever if any Canada Revenue Service determines they want (LOL).

 

Thanks again as always for your invaluable feedback.

 

Helen.

[FULLTIMEWANABE]

Anyone?

[JRP]

Based on what you describe for Canada, the overall process in the US is very similar. The primary difference, in the US its typical for the Title Company Rep to act as the closing agent and perform the duties you describe as being done by the lawyer. No lawyer is typically involved unless you took it upon yourself to have the documents reviewed by your own personal lawyer. The forms, the process and the requirements for a real estate sale are all spelled out in great detail by each US state's laws, so that there is little room for variation. The real estate agents, brokers, and Title Company closing agents are all state tested, licensed, and required to follow a specific process and use specific forms. There is little your own lawyer could change if he wanted to. The only time I've used my lawyer was when the sale was for raw land only, and no real estate agents were involved; the land value was not worth paying a Title Insurance Firm to act as closing agent, and everything was direct between the seller & buyer.

 

All funds held and all payouts due at closing are handled by the Title Company in an escrow account. Instead of a "procession date" as you describe, the key date in the US process is the "closing date", which is when ownership officially transfers, as well as possession & occupancy of the property. As far as the typical deposits and length of time for the process, its all negotiable and varies widely depending on the type of property, the value of the property, whether its being financed or all cash, and whether the parties are in a rush or not. Its all part of the buyers initial offer, subject to negotiation & acceptance by the seller. As a buyer at the initial offer, my deposit would usually be minimal, maybe $5000, just to show its a serious offer. The seller can always ask for a higher deposit in their counter offer.

In some of my all cash deals, I go from offer to closing in 30 days. Where financing is involved, that adds significant time to the process, 90 days or more.

[justRich]

"Except in states where it's mandated, an ordinary real estate transaction doesn't require an attorney's help."

http://www.nolo.com/legal-encyclopedia/hire-real-estate-agent-or-lawyer-29527.html

 

First American Title is a large title company here in the states. . .give a call to one of their offices in Florida with a few of your questions. I think it could be reassuring for you to do that.

 

A title company is all that's needed in California. We sold our first house ourselves - no Realtor or lawyer involved.

I called a title company and they were very accommodating with my questions and I was able to negotiate the deal with the buyer - got the money into escrow (held by the title company) and completed the deal.

The "Purchase and Sale" contract I purchased at Office Depot and modified it to fit our needs.

 

I think that Pennsylvania and maybe New York states require a lawyer. . .so that's something you can find out from a Florida title company regards Florida.

I don't know what a title company will charge in Florida. . .a wild a$$ guess would be between $500 and $1200 USD and that should include a Title Insurance policy and fees associated with the escrow account.

 

The seller pays the realtor fees - not your worry.

You pay the title insurance (it's for your benefit).

You might ask for a homeowners warranty from the seller during the purchase negotiations - a homeowners warranty typically covers "mechanical" stuff like air conditioning. If the AC craps out the insurance will get it fixed, possibly replaced. If a circuit breaker fails, the insurance would get it fixed. . .etc. etc.

 

My best advice is to call a Florida title company (or 2 or 3) with your questions. With a little luck you'll get a chatty person who will offer maximum assistance.

 

 

 

[Kirk W]

 

We don't use Title Companies, is there a need or advantage to using them as well as a lawyer in Fla?

The title insurance policy is a requirement of the mortgage company and it insures that the title is clear of any unlisted encumbrance. Their fee is paid by the buyer as part of getting the loan. In a cash transaction there is no requirement of title insurance and the law doesn't require it either but mortgage companies do for their own protection.

 

The use of a lawyer/attorney is never required but the advantage is that if you are not familiar with the legal process and requirements it is his job to protect your interests and make sure that all is in proper order. In most real estate transactions I'm aware of no attorney is involved, but we did use an attorney in one of the home purchases which we have done. The primary reason for that was that the transaction was not typical of most and no title company was involved. The title company does a record search and inspects all documents and records to be sure that there are no legal issues with the deed to the property because they then become financially responsible if there should ever be a problem with it. If no title insurance is required for the transaction, someone still needs to do the title records search to make sure all is in order and that usually then becomes the job of an attorney who specializes in real property transactions.

 

None of this is based upon Florida as I have never done any kind of real estate transaction in that state but I have done so in 4 different states and in each case the process and legal requirements were quite similar.

 

One other thing that might play into this is the fact of your being a Canadian citizen doing business in the US. I suspect that an attorney might be a good option here because of the added complication of citizenship, but am only guessing.

[Retiredin1993]

I just sold some property last year in FL. The buyer made me an offer. I found a sample contract on the net. Me and they buyer agreed on the Escrow amount $5000.00 and agreed on a closing date. Also agreed upon a date that he would take possession which was about 3 months after closing. He selected a title company to do the title search and necessary paperwork. The buyer has a cashiers check made out to the title company for the remainder of the transaction. The title company then cut me a check for that amount. Closing and possession is agreed upon the party's involved and it can have a wide range of time. No need for a lawyer or real estate agent. Unless you had it listed through a real estate agent and the contract had not expired or if you sold the property to someone within 30 days after the contract expired to some one that looked at the property. This is if the real estate company can prove this. This keeps some one from looking at the property and you cut them a deal to wait until the property is out of contract so you don't have to pay the real estate company a commission.

[LindaH]

In a cash transaction there is no requirement of title insurance and the law doesn't require it either

 

 

While this may be true, I'd still want title insurance in a cash transaction since it protects you, the buyer, from buying a property with an encumbrance. You may never find out about the prior encumbrance until such time as you tried to sell the property to someone who was financing the purchase. And, guess what? You would not be able to sell the property until such encumbrance was paid off!

[Kirk W]

While this may be true, I'd still want title insurance in a cash transaction since it protects you, the buyer, from buying a property with an encumbrance. You may never find out about the prior encumbrance until such time as you tried to sell the property to someone who was financing the purchase. And, guess what? You would not be able to sell the property until such encumbrance was paid off!

There are many issues that title insurance deals in addition to financial obligations of property. While liens and judgements are probably the most common issue, there are a host of other things which can cause a title to be clouded. Property is sold all of the time with various types of encumbrances attached, but the title search is done to document all such issues so that they are clearly a part of the transaction. I'll also point out that what I said was that no title policy is usually required if it is a cash transaction, however there is nothing to prevent one from purchasing a "buyer's policy" and in most cases it is probably a good idea. Here is a pretty link to a pretty good layman's explanation of both types of title policy.

[nana25k]

Always get title insurance. Here's a good example

Our neighbor owned their home for 6 months. One day a lovely lady knocked on their door claiming to be the separated wife of the former owner. Turns out that her husband had some one with fake ID show up, pose as his wife sign all sale documents at closing. Of course he was nowhere to be found. Without title insurance they would have had a huge mess on their hands.

This did happen in the late 70 before all of the new ID requirements we have today

Property purchase is a big deal. Get title insurance

[JRP]

If you read the fine print in a Title Insur Policy, it specifically excludes many types of liens & encumbrances from their responsibility. Basically unless its a publicly filed lien, they exclude it. You & I can just as easily search the applicable County Recorders Files to find any publicly filed Liens, without paying the Title Co $1000 fee. Title Insurance doesn't guarantee there are no encumbrances, it just guarantees their are none of the most obvious liens. More importantly it guarantees the seller had the right to sell you this property.

I buy/sell about 2 or 3 properties a year, and I find the Title company much more valuable in finding irregularities in past transactions involving the property; such as a husband & wife owned the property jointly, but only one of them signed the sales agreement; an incorrect or incomplete legal description of the property; or the previous owners died and their son/daughter signed the sales agreement without also filing a copy of the will or probate order giving them authority to sell the property; etc. Those issues can cause much more trouble in a future sale, than an old $1000 lien. I buy many distressed properties with existing liens, I just consider them a part of the purchase price. I almost always get Title Insurance, but I don't always pay extra to have the title insur company act as the closing agent. On lower value deals, its easy to fill out all my own paperwork, collect & distribute funds, and file the new deed myself.

 

 

 

While this may be true, I'd still want title insurance in a cash transaction since it protects you, the buyer, from buying a property with an encumbrance. You may never find out about the prior encumbrance until such time as you tried to sell the property to someone who was financing the purchase. And, guess what? You would not be able to sell the property until such encumbrance was paid off!

[NJTroy]

I haven't done a real estate transaction in FL, but having worked in mortgages for a bit early in my career I would never close a home purchase without an attorney. Think about it, it's likely to be the largest single financial transaction you will do and you are going into it with a stranger. Relative to the risk, the fee for an attorney to protect your interests is invaluable. Particularly if you are unfamiliar with the laws in the state you are buying/selling.

[Dennis M]

Agree with NJTroy about an attorney, you need your own, especially if you are buying out of state.

 

The DW spent her carrier in the Title business and she points out that Jim2 is correct as far as it goes, BUT, especially if you are looking at new construction, there many be an inchoate lien, commonly called a "secret lien" that is not a matter of public record. These are usually short term liens by sub contractors.

 

The other area the Title company looks at is a comprehensive title search on the property. There may be a flaw in the title stretching back many years and several owners. If the title company finds it it can be corrected, if the search misses it the Title Insurer will stand behind their search.

 

And one more thing she just added - local taxes. "If you think income taxes are complicated, they are child's play compared to searching out local taxes and tax liens."

 

Mortgage holders require title insurance for a reason. IMHO a buyers policy is cheap protection.

[Randyretired]

I don't believe I would buy realestate without title insurance. I had a neighbor show up one day claiming the barn I was building was within his easement. The title company did not show this easement. Simple searches also didn't find the easement but it was a legal easement. The title company negotiated with the neighbor and took care of it at their cost. Another neighbor found a company building a road accross his property. Another missed easement. The title company paid the owner a substantial amount for the loss.

I have 2 daughters that are closers for title companies. They have numerous stories of people who bring attorneys to closing. Unless they are real estate attorneys it sometimes doesn't go well. The laws are so strict that modifications of closing forms are not allowed. Most of the time a well intentioned attorney not familar with real estate just delays and confuses the situation. A good real estate attorney spends time and energy on the initial contract. By the time closing comes they usually just sit there or briefly review the documents before closing.

Often times the seller pays for the title insurance.

[FULLTIMEWANABE]

OK, thank you all very much for your feedback and experiences it's most appreciated. So it appears that in Fla it depends on which county you are in as to whether title insurance is paid for by the buyer or seller = well that's what a realtor told me earlier on today. Because we are Sarasota County apparently it's the buyers that pay it we're told!

 

I'm going to call First American Title tomorrow and find out what's what, thank you for that recommendation. I've googled like crazy trying to find what we do and don't need, and the costs seem to be increasing exponentially on all aspects of title companies, title insurance, lawyers, accountants - man oh man it's complicated and terribly expensive selling down there compared to up here = probably just because we aren't used to it, but real estate commissions alone are double and sounds like lawyers fees are much higher as well.

Really appreciate all your responses sharing your personal experiences. We are hitting the mls market tomorrow with fingers crossed for a speedy sale and long possession to give us chance to sell all the furniture and accessories hopefully. First call tomorrow is the title company and then a lawyer and then an accountant.

[LindaH]

but real estate commissions alone are double

 

You, as the buyer, will not pay the real estate commission...that's paid by the seller.

[FULLTIMEWANABE]

Thanks Linda but we will be the seller in this instance. Bought a lot back in 2009 on canal to Bay/Gulf, hubby built his dream home on it, now he's had long enough for his Fla fishing fixes, it is time to sell as we are getting ready to go FT. As a foreign seller first time in USA just find it so different than what we have been used to = when in Rome etc......

 

Again thanks for all your feedbacks and suggestions. Just waiting to get a call back from a title company as to what's what in that regards. Man oh man they don't respond very quick when messages left, reminds me of when we were building and Fla contractors were supposedly desperate for work, but we couldn't get folks out the bed to even quote us (LOL).

 

Have a great Tuesday folks.

[LindaH]

Thanks Linda but we will be the seller in this instance.

 

Oh, I missed that part. Got the impression that you were buying.

[Jimalberta]

Helen your experience with owning American property and selling it as a Canadian is very interesting. After knowing what you are going through I doubt that we will persue the idea of owning a property in Las Vegas which we were considering doing. Maybe we will just rent for a few years.

[FULLTIMEWANABE]

Million thanks for the America Title company recommendation. The girl who finally returned my call from Sarasota area was very apologetic on the delay having assistant written down wrong telephone number, and gave me FABULOUS information and other contacts we'll need for accounting etc via email afterwards. THANK YOU :)

 

Jim, seriously the saying "you don't know what you don't know" is so very true when it comes to being foreign owner status there, albeit each state has slight differences. English friends of ours that own a deeded property in Venice Fla for over 13 years, just putting theirs on the market and they are shocked what taxes and charges they are going to be paying. Title Insurance depending on county and how offer written can be paid by seller or buyer, then there's transfer tax, then there's realtor commissions at generally 6% split 50/50 (we're paying 3%+$200) but we are doing our own showings etc (think mere posting), and will give our previous realtor some $$$'s upon a successful sale based on how he guides us when an offer comes in to keep the most dollars in our pockets. Whist because we bought a prime lot on seawall with access to the gulf and built house ourselves back in 2009 we will still come out ahead, we never dreamed at the front end what potential costs we'd incur on a sale. Keeping it all in perspective though from a lifestyle point of view hubby's had a fabulous 6 years down there fishing like a crazy person (although past couple of years fish seem to be on permanent vacation = I told him they've gone on a long RV trip LOL).

 

However, calculating the risk we took, compared to other properties locally we've bought/built/sold and used to build our retirement, if we end up paying all the closing costs added to the taxes we have to pay Uncle Sam it's probably the worst investment return we've made in our lives by comparison. Like I said, we have to look at it from a lifestyle decision not investment for sure. The hardest issue for us has been how we've been treated as "non-homesteaders" on property taxes. Ours last November was $8400 and yet our neighbour, with more features as a homesteader pays in the $3K's!!! The other biggest bone of contention with us is that we'd pay contractors in stage payments to do a job, get them to sign lien waivers, yet still get lien threats from suppliers of materials that the contractor hadn't paid. That's just plain wrong, they should only be able to go after him not the innocent folks that paid in good faith. Met several folks that lost their dreams due to the crazy lien laws down there. Don't get me started on how many drivers have no insurance either and get away with it and the drink driving that goes on - semi living there I guess we saw a totally different side to that what we fell in love with as vacationers in the 80's & 90's and early 2000's. We are pretty good at doing our due diligence at the front end as much as possible with everything we do but a few things have thrown us for a loop and depending how it all pans out we could end up dropping 6 figures down there before all's done.

 

To any of those following this out of general interest, in all fairness Alberta is far from perfect - our property taxes have gone up considerably in recent years depending which municipality one is in and due to the Floods, Wind Damage and Fires experienced in recent years, last year our home insurance increased (no claim on our part!) by over 70% YOY.

 

Now we've finally got our heads around to becoming houseless for the first time in our adult lives, we can't wait to off load all our real estate interests (we have no other pension options so that's how we have built our retirement for the past several decades), and associated costs and maintenance, and become hopefully footloose and fancy free FT's. Rome wasn't built in a day but little by little we are getting there. Just got a Conditional Offer on one of our townhomes so fingers crossed that goes firm Monday Night

 

Next will come the issues of where to invest to generate our retirement incomes. Man oh man there's a huge learning curve in all this for sure, but with the help of our friends here we've made over the years, it's all falling into place.