A question we hear a lot is: “Can a limited liability company (“LLC”) buy or sell a home in Florida?” The short answer is yes. Whether the reason is asset protection, privacy, or simply investment strategy, buyers and sellers are using LLCs to hold title to residential real estate.
When is it prudent for an LLC to own property in Florida?
Transactions involving LLCs often involve extra steps that can trip up even seasoned buyers and agents if they’re not well informed. Having the right knowledge and information can protect you, your clients, and the deal. Florida law permits LLCs to own and transfer property just like individuals; however, unlike individuals, LLCs can’t simply “sign and go.” Agents need to verify that the person signing for the LLC actually has the legal authority to do so – and that the LLC itself is in good standing with the state of its creation and the State of Florida.
When do LLCs most often appear in residential transactions?
LLCs are most prevalent in transactions involving Investor purchases or flips, short-term or vacation rental strategies, family transfers via entity ownership, probate situations where the property in the estate is held in an LLC, and high-net-worth individuals. In many of these scenarios, the parties may presume it’s “business as usual” – but that’s where the agent’s awareness and experience add real value.
What additional documentation will title and closing professionals need?
Whenever an LLC is involved in a real estate transaction, title and closing agents typically request the LLC’s Articles of Organization, Operating Agreement, a Certificate of Good Standing (from the Florida Division of Corporations), and a Resolution or written authorization (identifying who can sign for the LLC). Be mindful – it’s not unusual for a seller or a buyer to sign a contract before providing these documents and verifying the details these documents provide; that’s where potential delays can start.
What are some common pitfalls that can derail a deal?
All too often, we encounter situations where the wrong person signs the contract or closing documents; the LLC was dissolved or never properly formed; multiple members of the LLC disagree about the sale (or purchase); the buyer thinks their name will not be revealed, not realizing their name(s) will appear in the records; and most often, the buyer’s intended lender will not lend to a LLC. Most institutional lenders will not lend to an LLC on a home purchase. Typically, institutional lenders only lend to individuals on home purchases (i.e., natural persons, not entities).
How can Realtors add value in these deals?
An agent does not need to be an expert on limited liability companies. Yet, asking the right questions shows clients that the agent knows how to handle more complex real estate transactions, and can make all the difference, such as:
- “Will the buyer or seller be using an LLC?”
- “Can you confirm who has signing authority?”
- “Have you worked with a real estate attorney to get everything in order?”
- “Will the buyer be looking to finance the purchase?”
Final Thoughts
Limited liability companies (LLCs) are a great tool for many buyers and sellers, but they do come with extra responsibilities. As a Realtor, your ability to spot these situations early and bring in the right professionals will strengthen your deals – and your reputation. If you’re working with a client who owns or is purchasing property through an LLC, consult your local real estate attorney for advice and assistance.
