Real estate transaction
A typical real estate transaction varies somewhat with the various state laws and regional customs, but certain steps are usually involved--
- The seller selects a real estate agent or realtor to represent him. He signs a listing contract with the realtor that specifies details including commissions to be paid, the term of the listing, and any other details.
- The real estate agent prepares information about the property usually entered into the listings on Realtor.com or other similar databases of properties for sale. The realtor also advertizes the property and conducts various activities to market it including open house.
- A buyer typically will meet with a realtor to represent his interests, but sometimes will contact the selling realtor directly from the listing.
- The buyer will usually prearrange financing. A preapproved loan makes the process go faster and lets the buyer know the limit of his financing.
- The buyer makes an offer on the property of interest by submitting a signed sales contract with earnest money through the realtors. Buyer and seller negotiate a price through their realtors.
- Once the sales contract has been accepted by the seller, buyer has 10 days to inspect the property or hire experts at his expense to investigate various aspects. Results of the inspection can result in requests to have defects corrected or negotiations for an allowance from the seller.
- The mortgage lender has the property appraised to see that it is worth the money being loaned on it. As part of this, the property is often surveyed to insure its description in the title is accurate.
- The buyer arranges homeowners insurance for the property, usually required by the mortgage lender, and often paid via escrow payments to the mortgage company. The insurance company may require inspection of the property for compliance with electrical and fire codes. Distance to the closest fire hydrant and qualifications of the local fire department are often factors in determining if the property can be insured and at what rates. The mortgage lender may or may not require flood insurance or earthquake insurance.
- The title company brings the title up to date and checks to see that the title is clear of any outstanding liens. Title insurance is often required by the mortgage lender.
- Requirements vary widely, but usually a building inspector or fire inspector will inspect the building for compliance with codes. This often requires updating electrical, adding smoke detectors, etc.
- Once all is ready, the buyer and seller meet at close where buyer presents payment and seller turns over the keys and title.
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