Moving on to consider some of the issues surrounding the actual handling of hard cash while buying, owning and selling Florida properties…

There are a number of different insurance's that will be more or less important depending on your circumstances.

US BANK ACCOUNTS
Do you need a Bank Account in the USA?

Yes – you will certainly need a US bank account to get a US mortgage, and it will of course be the most convenient way to handle the financial ins and outs associated with managing your Florida property month to month.

The main thing you have to be aware of as a foreigner in this context is that there is likely to be a great deal of suspicion associated with non-residents opening US bank accounts. Indeed, the Patriot Act added so many new hurdles that if you simply walk in off the street, many banks will not offer you an account – many believe it to be impossible anyway!

It isn’t impossible – but it will be much more straightforward if you get an introduction to a specific branch or individual within a branch from one of your advisers such as your real estate agent or mortgage representative.

It is a good idea to simply open the account with a few hundred dollars cash – walking in with a briefcase full of cash will not help counter any fears that you are an international criminal – then transfer larger amounts through the banking system as required.

CURRENCY CONVERSION

If you are buying a property in Florida, you will inevitably have to pay in US Dollars.

Buying “off plan” means you will have to pay an immediate deposit followed by several “stage payments” as construction progresses and a final payment upon completion.

The amounts of money that are likely to be involved – and the fact that they may be spread over 18 months while your house is built – mean that how and when you convert your money from Sterling to Dollars can play a key role in your property transactions. What may seem like relatively small fluctuations in the published exchange rates can in fact be a percentage shift that translates into thousands of pounds when multiplied up by the scale of the typical property purchase.

For example, a move in the exchange rate from 1.70 to 1.785 is a 5% change – saving you £5000 on a £100,000 house purchase.

However, you don’t have to play the currency markets (which can of course go up as well as down) to make all your currency transactions as cost-effective as possible.

You can obviously walk into any high street bank or bureau de change and exchange your currency for Dollars. This may be convenient for your holidays but for larger amounts of currency it pays to deal with a specialist foreign exchange company. Specialist brokers deal exclusively in high volume transactions and their overheads are much lower, resulting in a better deal for you:

• More competitive exchange rates
  
  
• The ability to “fix” exchange rates for long periods
  
  
• Fast international money transfers
  
  
• No commission charges
  
  
• Professional information (currency dealers are not regulated to give you “advice” in the same way that other financial professions are)
  

Currency dealers make a margin on your money from the high-volume rates they obtain in the money markets, and in general the more money you wish to convert the better the rate. You will often have one or more transaction fees to pay – and it is worth double checking these as it is not impossible to end up paying fees to your UK bank, the currency dealer and your US bank on each transaction. This is why it is always wise to look at the total cost of transferring an amount rather then getting too fixated on the exchange rate.

Once you have set up a client account, you can usually set up regular payments – for mortgages, management fees, etc – via your foreign exchange dealers, and the ability to fix the exchange rate at which these payments are made can be very useful when budgeting. Some dealers will let you fix rates up to two years ahead. For “off plan” purchases in particular, this means you can fix the cost of your home on day one, regardless of any currency fluctuations that occur during its construction.

When you are close to making a large purchase, you can - if you want – play the currency market by setting a target rate at which you would like to make the transfer to your US bank. On the other hand, if you think today’s rate is as good as it’s going to get but you don’t need to transfer the cash right now – you can “forward buy” your currency by making a deposit payment at today’s rate and thereby securing that rate for the full transfer value at a later date.

ESCROW ACCOUNTS

Escrow is a concept that most British buyers are unfamiliar with, but in the Florida real estate system you will come across it in two different contexts; as a mechanism to hold deposits when buying property, and as a way to securely combine tax and insurance with your mortgage payments.

In practice, a third party escrow agent is retained by two parties to act as a trusted “middle man” during the transfer of valuable items under agreed conditions.

When closing on the purchase of a home, the escrow agent holds the buyer’s deposit and various documents that are provided by each party. They ensure that all the terms and conditions of the sales agreement have been fulfilled, and only when everything is in place will they disburse funds and documents to their final destinations.

Using escrow means that each party can proceed with fulfilling their obligations to the agreement, secure in the knowledge that their deposit (or property) is not at risk – it will only be released under predetermined and agreed circumstances.

Escrow agents will fiercely maintain their independence of both parties and will not offer any advice. They are completely bound by procedure, so make sure you understand exactly what they require of you. The most commonly made mistake is to try and give an escrow agent funds that are in the wrong format – they will not accept cash if they have specified bank transfer, for example.

The other type of escrow account is associated with mortgages – and is a useful convenience. A Mortgage Escrow Account is usually established and partially funded during closing, and acts as a fund from which your mortgage lender will pay recurring expenses such as property taxes and home insurance.

Each month, you make a contribution to these costs as part of your mortgage payment – and the escrow account holds the portion that doesn’t belong to the lender. Then, as annual insurance or other costs fall due, they get the money from the escrow account and pay them on your behalf.

Using escrow in this context means your funds are secure and protected from fraudulent access – or even from your lender going out of business.