The Guts of a Real Estate Transaction

Reads: 277  | Likes: 0  | Shelves: 0  | Comments: 0

More Details
Status: In Progress  |  Genre: Non-Fiction  |  House: Anthony Ziuimmerman

Submitted: May 08, 2016

A A A | A A A

Submitted: May 08, 2016



We start our discussion with our hypothetical buyers, Bill and Sally, who want to buy a house in the hypothetical state of  Widemount..At first they look in the newspaper and then the internet to see if there is anything that suits their needs.Then they contact a real estate agency for help.

It is important to note that a real estate agent works for a real estate broker.In the case of a house for sale listed under a multilisting agreement, the seller of a house typically pays a commission to the broker/agent, upon the agent finding a ready, willing, and able, buyer.This commission is split between the two brokers.A common commission is 6% of the sale price, so that each broker get 3% which is then split with the respective broker and real estate agent working for the broker. 

Traditionally, there have only been seller's brokers.Technically, when the potential buyer is represented by a broker, that broker really works for the seller, because the seller pays the commission to both brokers.However,  now, in some states, in addition to a seller's broker and agent, there is also a buyer's broker and agent, who  represents the buyer, but still collects a fee from the seller from the purchase money.In either case, the buyer must be careful since the broker and real estate agent that you are primarily dealing with gets paid out of the purchase money with a percentage, and thus it is in their rational self interest to get a higher price from the buyer, which is not in the buyer's rational self interest.

The next step in the real estate transaction is the "short fuse'  Purchase Agreement. (the PA).   The PA must contain the following provisions:   1. the names of the buyer and seller,  2.  a description of the property being sold,  3.   the price,  4. the closing date when the deed will pass, and 5. the requirement that the seller provide marketable title to the buyer. With respect to marketable title,  the seller must provide a title that a reasonable person would accept in the circumstances.

There are also contingency clauses that can be put in the PA.A contingency clause makes the enforcement of the agreement dependent upon the contingency clause being satisfied.Other contingency clauses include:agreement subject to financing;  agreement subject to engineering inspection;  agreement subject to a radon test, agreement subject to the buyer obtaining a title insurance policy.

Also, during the period between the signing of the PA and the closing when the deed and the purchase money are exchanged, there typically is a title search made to insure that there is good title, also known as marketable title.Also, it must be kept in mind that there is a title recording statute which comes into play in considering if the seller can provide good title.

The foregoing is a brief summary of the law of the real estate transaction,This article is for general educational purposes and is not intended to provide a legal opinion.If you wish to have legal advice regarging a real estate transaction, please contact an attorney.

© Copyright 2018 Anthony Zimmerman. All rights reserved.

Add Your Comments: