The Real Estate Transaction
From Inspiration to Ownership
Once a potential buyer establishes interest in purchasing real estate, the process begins with a lender prequalifying the buyer for a mortgage amount. This amount is usually subject to the property's appraised value, but there are a variety mortgage types that can include construction, restoration and repairs. This is suggested as a first step in order for the broker to help focus on the buyer's needs, & enables both the buyer and broker to establish a baseline for property research. This prequalification also enables the buyer to negotiate on price since the seller knows in advance that the purchase is assured.
When a property is selected for purchase the buyer signs a Sales Agreement which indicates the buyer's earnest intention to purchase the property. At this time the buyer also writes a check to the Broker further indicating a firm intention to purchase. This is called earnest money.
The seller accepts and signs the Sales Agreement & the document becomes a firm contract between the buyer and seller. The Broker gives a copy of the Sales Agreement to the buyer and the seller.
The buyer makes application for a mortgage specific to the selected property.
On the date specified by the Sales Agreement, the buyer increases the earnest money to the amount specified in the contract.
Both the buyer and the broker make sure that the mortgage commitment is obtained within the time frame outlined in the Sales Agreement. This is where the Broker's knowledge of lending & financial institutions works to ensure a smooth process so that both parties of the sale are kept abreast of the progress of the transaction.
The lending institution then orders a title search to be sure there are no claims on the property other than the seller. They prepare the mortgage & note, then advise the buyer they are ready the set a date to conclude the real estate transaction; this is called the closing date.
The buyer obtains insurance for the property prior to the closing date.
The Broker confirms the date, time and place for the closing to take place.
The buyer is advised of the dollar amount needed to close by the lending institution and obtains a cashier's check or certified check for this amount. The buyer usually views the property prior to closing to be sure all conditions of the sale have been met. This is known as the walk through.
At the closing the seller transfers ownership of the property by transferring title from seller to buyer. In addition the Broker ensures that all utilities have been notified of the new owner and that all necessary compensation has been made to satisfy heating oil or other inventoried assets associated with the property.
Unless otherwise stipulated in the Sales Agreement sellers usually pay commission, real estate taxes as of date of transfer, ½ sales transfer tax, release of mortgage and preparation of deed, and buyers pay title search, and charges related to their mortgage and ½ sales transfer tax.
More Real Estate Tips
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