8.1 Florida Contracts, Disclosures, and Closing
Key Takeaways
- Florida's standard residential contracts are the FR/BAR (Residential Contract for Sale and Purchase) and the FR/BAR AS IS version; the AS IS form lets a buyer cancel for any reason during the inspection period and recover the deposit.
- Johnson v. Davis (Fla. 1985) requires a seller to disclose known latent material defects not readily observable that materially affect property value; this is a common-law duty, not a statutory disclosure form.
- Documentary stamp tax is $0.70 per $100 on deeds, $0.35 per $100 on promissory notes, and the nonrecurring intangible tax is $0.002 (2 mills) per dollar on new mortgages.
- Federal disclosures apply in Florida: lead-based paint for pre-1978 homes, FIRPTA 15% withholding on dispositions by foreign sellers (with a residence exception at or under $300,000), and a state-mandated radon gas notice.
- The closing agent (title company or attorney) prepares the closing disclosure/settlement statement, conducts the title search, issues title insurance, records the deed, and disburses funds.
The Florida Residential Sale Contract
Unlike Texas, Florida does not use state-promulgated contract forms. The dominant residential contracts are jointly developed by Florida Realtors and The Florida Bar, which is why licensees call them the FR/BAR contracts (older materials say "FAR/BAR"). Two versions matter on the exam:
- The Residential Contract for Sale and Purchase (the standard FR/BAR), which obligates the seller to deliver the property in roughly the condition it was in on the effective date and contains a repair-limit framework.
- The "AS IS" Residential Contract for Sale and Purchase, under which the seller makes no repairs. Its defining feature is the inspection period: the buyer may cancel for any reason or no reason before the period ends and receive a full refund of the deposit.
A licensee filling in the blanks of these standard forms is engaged in the authorized practice of real estate, not the unauthorized practice of law. Drafting custom clauses or addenda that change legal rights, however, crosses into lawyering and must be left to an attorney.
Both FR/BAR forms have an effective date — the date the last party signs and communicates acceptance — which starts every contract clock (deposit delivery, inspection period, loan-approval period, closing). Standard contingencies include a financing contingency (the buyer must apply within a set number of days and pursue loan approval in good faith), an appraisal contingency, and a title contingency giving the buyer time to review the title commitment and the seller time to cure defects.
Earnest-money deposits are placed with the escrow agent named in the contract, and a broker who holds the deposit must follow FREC's escrow timelines.
Required Disclosures
Florida has no single mandatory seller's disclosure form, but several disclosure duties are heavily tested:
| Disclosure | Trigger | Rule |
|---|---|---|
| Johnson v. Davis duty | All residential resales | Seller must disclose known latent material defects not readily observable that affect value (e.g., a roof leak, sinkhole history). |
| Radon gas | Every sale and lease | State-required notice that radon, a naturally occurring gas, may be present and can pose health risks. |
| Lead-based paint | Homes built before 1978 | Federal disclosure plus the EPA pamphlet and a 10-day inspection opportunity. |
| Property tax | Residential sales | Buyer must be told that taxes may change after purchase; the prior owner's assessment is not a reliable estimate. |
| HOA / condominium | Property in an association | Governance, fees, and the statutory condominium/HOA disclosure summary must be delivered. |
| FIRPTA | Seller is a foreign person | Buyer withholds 15% of the amount realized; an exception applies for a residence at or under $300,000. |
The Johnson v. Davis decision is the cornerstone of Florida disclosure law. It abolished pure caveat emptor ("buyer beware") for residential resales: a seller who knows of a hidden defect that a buyer could not discover by ordinary inspection must disclose it, and silence can support rescission and damages. The duty covers latent (hidden) defects only — patent defects a buyer can readily see are not covered.
Transfer Taxes on Deeds, Notes, and Mortgages
Florida funds real estate transfers through documentary stamp taxes and a nonrecurring intangible tax. Memorize the three rates:
| Tax | Rate | Base |
|---|---|---|
| Doc stamps on the deed | $0.70 per $100 (rounded up) | Sale price / consideration |
| Doc stamps on the note | $0.35 per $100 | Face amount of the promissory note |
| Nonrecurring intangible tax | $0.002 per $1 (2 mills) | Amount of the new mortgage |
(In Miami-Dade County the deed rate differs slightly — $0.60 per $100 plus a surtax on non-single-family — but the statewide $0.70 figure is what the exam tests.)
Worked example. A buyer purchases a home for $300,000 with a $240,000 mortgage:
- Deed doc stamps: $300,000 ÷ 100 = 3,000 units × $0.70 = $2,100.
- Note doc stamps: $240,000 ÷ 100 = 2,400 units × $0.35 = $840.
- Intangible tax: $240,000 × 0.002 = $480.
Note that the deed tax is based on the price, while the note and intangible taxes are based on the loan. A cash buyer pays deed stamps but no note or intangible tax because there is no financing instrument.
The Closing Process and the Closing Agent
Florida closings are typically handled by a title company or a real estate attorney acting as the closing (settlement) agent. The agent is a neutral party to the transaction and performs the steps that actually transfer ownership:
- Order and review the title search to confirm marketable title and identify liens, easements, and clouds.
- Issue title insurance — an owner's policy protecting the buyer and a lender's policy protecting the mortgagee.
- Prepare the Closing Disclosure / settlement statement, itemizing prorations (taxes, HOA dues), the transfer taxes above, and closing costs.
- Collect and hold funds in escrow, then disburse to the seller, lienholders, and service providers after closing.
- Record the deed and mortgage in the county's official records to give constructive notice and establish priority.
Florida is a "wet" funding state for many lenders, meaning funds are disbursed at or near the signing. Real estate taxes are paid in arrears in Florida (the November bill covers the calendar year just ending), so at closing the seller typically credits the buyer for taxes accrued through the closing date.
Prorations follow a consistent logic: items the seller has prepaid beyond closing (such as HOA dues paid for the full month) are credited to the seller, while items owed but unpaid that the buyer will eventually pay (such as accrued property taxes) are credited to the buyer. Florida also requires a lien search so that municipal liens, code-enforcement fines, and unpaid utility or special-assessment balances do not pass to the buyer.
By custom, the seller usually pays the deed documentary stamps and owner's title policy in most counties, while the buyer pays the note stamps and intangible tax — though all of these items are negotiable.
A Florida home sells for $250,000 with a $200,000 mortgage. What is the documentary stamp tax on the deed?
Under Johnson v. Davis, what must a Florida residential seller disclose?
Which contract feature is distinctive to the FR/BAR "AS IS" Residential Contract?