Checking out a typical real estate transaction

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Because buying and selling houses is the primary business of real estate brokers and salespeople, I want to give you a brief and somewhat generic overview of a typical house sale involving real estate agents. (By "agents" here, I mean either a broker or a salesperson. Remember, however, that the broker is primarily responsible in a transaction, with the salesperson working for her.) I use the word "generic," because although many elements are common to all simple real estate transactions, transactions can include state and even regional differences in some specific elements. Many experienced agents tell you that no two deals and no two closings are exactly alike, even within the same area. I try to point out some of these differences, but you need to compare this overview with the particular way things are done in your state.

In the beginning, there was a house to sell

A couple decides to sell their house and enlist the services of a real estate agent. You're one of several brokers or salespeople the couple invites to their home to hear your listing presentation and explain what services you offer. In addition, you probably advise the couple on what price they'll be able to get for their house. After meeting with several agents, the couple chooses you, signing a listing agreement and agreeing to allow you to represent them as their agent in the transaction. (For more on listing agreements, see Chapter 4.)

As the couple's real estate agent, you begin marketing the property. In communities that have a multiple listing service (MLS), you enter their house information into a computer so that all other agents in the community can see what you've listed for sale. (See Chapter 4 for more about MLS.) In communities with no MLS, agents may spread the word around to other real estate agencies that they have a particular house for sale, and they may depend heavily on advertising.

Eureka, a buyer!

An agent across town who's been working to find a house for another couple sees your house on the MLS and gets in touch with you, asking for more details and making sure the house still is for sale. The cross-town agent then contacts his buyers, and they agree to take a look at the house. After seeing the house, they agree to make an offer.

The way a buyer's offer is presented varies in different communities. Sometimes the offer is made in person with the buyer's agent present. The offer usually is made in writing with a small check from the prospective buyer that's called a binder or earnest money.

Assuming that your seller either accepts the offer immediately or engages in negotiations that result in a deal, a contract of sale then is prepared. Exactly who prepares the contract varies by state and region. In many places, however, the seller's real estate agent prepares the contract, sometimes filling in the blanks of a preprinted contract form, but in other places, only attorneys prepare the contract. After the contract is signed, the conditions within the contract are triggered. (For more about sales contracts, see Chapter 11.)

A typical real estate sales contract includes a provision for the buyer to obtain mortgage financing and may have provisions for the house to be inspected by a home inspector or engineer. The contract usually includes a provision that a marketable title must be conveyed. A marketable title means that a reasonable and proper search of the records has been conducted, showing that the title to the property has been documented from earlier owners to the current seller so that it can be conveyed (or transferred) without questions as to who the owner is. A records search that proves whether a title is marketable is called a title search. Title insurance also may be purchased (or even required) as part of the contract process to ensure that the title is legal. (For more on events before a closing, see Chapter 9.)

Would you like any help? Real estate consulting

Real estate consulting is a relatively new phenomenon that is less about the services real estate agents provide than it is about how agents are paid. In a typical real estate transaction, the real estate agent gets paid when the property is sold. In a relatively new and not widely practiced arrangement called fee for services or real estate consulting, a broker can be paid for individual services leading up to the sale of a piece of property regardless of whether the sale is complete.

Take, for example, the seller who believes she can place her own advertisements in the paper and handle buyer inspections of the house but needs help pricing the house. She agrees to pay the broker (or the salesperson through the broker) a fee to provide a comparative or competitive market analysis of the property to come up with a listing (or asking) price. This arrangement sometimes is referred to as providing a menu of services.

You can find out more about consulting at the Web site of the National Association of Real Estate Consultants:

Att's Wett that closes Wett

When all of the contract provisions are satisfactorily completed and met, the buyer and seller may proceed to closing, taking the real estate agent one step closer to getting paid. Pinpointing the actual moment when a real estate agent earns a commission is a somewhat complex issue (see the next section). In general, it occurs when a ready, willing, and able buyer brings an acceptable offer to the seller. Sometimes contract provisions, such as financing, must be satisfied before for a commission can be earned. By general agreement, the commission usually is paid at the closing. When more than one broker is involved, the broker representing the seller distributes the preapproved share of the commission to the buyer's representative. Each broker then splits a portion or percentage of the commission with the salesperson who worked the deal.

cptClfr/p In many places, real estate agents run the show and are joined at the closing by the buyer, the seller, a representative of the bank, and sometimes an attorney. In other places, lawyers ) do the bulk of the work, and sometimes a representative of the title company may actually conduct the closing. In some states, the closing is done in escrow, which means that as all the paperwork is completed, it is sent to an escrow agent. When the escrow agent gets everything in order, he or she sends checks, deeds, and any other important documents to the appropriate parties. (For more on the closing process, see Chapter 9.)

After the closing, the buyer completes the transaction by officially documenting the transaction by recording the deed in the local office of public records.

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