3 Contract Traps in Barrier Islands
Beware of Contract Traps on Florida’s Barrier Islands
Quick Answer
Yes, there are three major contract traps on Florida’s barrier islands that can derail your real estate deal. First, the Florida Statute 718 requires condo associations to provide an estoppel certificate, which can reveal unexpected financial obligations. Second, insurance binding can be denied due to coastal risk factors, potentially increasing costs by thousands or even causing a deal to fall apart. Third, HOA approval processes can delay closings, sometimes requiring additional cash or forcing buyers to walk away. Discovering these issues late can lead to significant financial loss and contract termination. Call me at 941.400.8735 or reach out directly to Michael Renick – I’ll share my approach with you.
What Actually Breaks Deals in Florida
Condo Association Financial Disclosures
Florida Statute 718 mandates that condo associations provide an estoppel certificate, which details any outstanding fees or assessments. In one deal, an estoppel revealed a $10,000 special assessment due, shocking the buyer and threatening to collapse the transaction. If this financial obligation is discovered late, buyers may face unexpected costs or even lose their deposit if they can’t cover the additional expenses.
Recently my husband and I bought a condo in Longboat Key. We initially chose Team Renick simply because they were representing a property we were interested in, but decided to stay with them because they were so attentive. Eric Teoh was the agent assigned to us and he was very efficient, always prompt, and extremely knowledgeable about every property on LBK. When the day came for the walk-thru of the property we decided to bid on, Eric actually helped me measure the walls and even noticed when I wrote the dimensions on the wrong parts of the floor plan. When we had our closing, our attorney was impressed that our realtor was providing us with such a good home warranty. And then there’s Team Renick’s contribution to the LBK nature conservancy for every sale they make. On every front, an outstanding realtor!
– LWGraboys, Zillow Review
Insurance Binding Denials
Barrier-island properties often face unique insurance challenges due to their coastal location. During underwriting, an insurer may refuse to bind a policy if the property is deemed too risky, potentially adding thousands to the buyer’s costs or causing the deal to fall through. This can happen just days before closing, leaving buyers scrambling to secure coverage or risking contract termination.
HOA Approval Delays
HOA approval is a critical step in many barrier-island transactions, and the process can be lengthy and unpredictable. In one instance, an HOA took over a month to approve a buyer, delaying the closing and forcing the seller to renegotiate terms. Such delays can lead to increased costs, strained negotiations, and even contract cancellations.
Where It Usually Blows Up
These issues typically surface during the final stages of a transaction, such as during underwriting or just before closing. This timing is brutal because buyers and sellers have already invested significant time and money, and any disruption can lead to financial loss or deal collapse. When these problems arise late, parties may lose deposits, face increased costs, or have to renegotiate terms under pressure.
Purchasing a home can be a time-consuming and stressful venture: visiting prospective homes; identifying the pros and cons of each property; deciding which properties are right for you; final visit at these properties; making an offer (and counteroffer); dealing with the Sellers realtor; reviewing the Agreement For Sale; finding an attorney; finding a home inspection company; and acquiring home and flood insurance. Then the difficult task starts, working with a bank and filling out all the paperwork (Ugh!). Mike and Eric were very helpful throughout the process and kept us informed of our requirements and responsibilities for each deadline.
– bshea20047, Zillow Review
What I Tell Clients Before They Risk Money
- Review Estoppel Certificates Early: Obtain and review the estoppel certificate as soon as possible to identify any hidden financial obligations.
- Secure Insurance Quotes in Advance: Get multiple insurance quotes early in the process to understand potential costs and avoid last-minute surprises.
- Understand HOA Approval Timelines: Research the HOA’s approval process and timelines to anticipate any potential delays.
- Check for Special Assessments: Investigate any pending or upcoming special assessments that could impact your financial obligations.
- Verify Coastal Construction Risks: Assess the property’s susceptibility to coastal risks and ensure it meets all necessary building codes and regulations.
Let’s continue this conversation.
Call me at 941.400.8735 or schedule a 15-minute call. I’ll tell you what I would look for.
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Questions Clients Actually Ask
What is an estoppel certificate and why is it important?
An estoppel certificate is a document provided by a condo association that outlines any outstanding fees or assessments owed by the property owner. It is crucial because it can reveal unexpected financial obligations that could impact your decision to proceed with the purchase.
How can insurance binding be denied on barrier islands?
Insurance binding can be denied if the property is deemed too risky due to its coastal location. This can lead to increased insurance costs or even the inability to secure coverage, which can jeopardize the entire deal.
What happens if HOA approval is delayed?
If HOA approval is delayed, it can postpone the closing date and potentially lead to renegotiations or contract cancellations. This can result in financial losses and increased stress for both buyers and sellers.
What To Do Right Now
Request an estoppel certificate from the condo association as soon as you enter into a contract to identify any financial obligations early.
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