The process of a real estate transaction can seem a bit overwhelming; most people only complete it a few times in their lifetime, and it’s different in virtually every state. While not an exhaustive list of possible documents, inspections, and roadblocks, below I have an outline of a typical real estate transaction in order to help you become more familiar with what may occur.
Listing Agreement
The first step in a real estate transaction involves the listing agreement. The legal contract must list a sales price, state a commission rate paid to the real estate agents involved in the sale, and also outline the length of time for the property to remain on the market. In Arizona, it is required that the seller disclose in writing any issues they are aware of with the property; everything from a patched roof to flooding issues to termites. The federal government requires sellers to disclose whether there is lead based paint in the home. As your listing agent, I believe it is also my duty to discuss any impediments in getting the highest price or quickest sale for your property. These are things that, while they don’t affect the objective value of the house, they affect the attractiveness of the house, and thus the market value.
The written, formal purchase contract is a 9 page contract written by the Arizona Department of Real Estate. There is a lot of language that will not change in it when the offer is made, so it is important to be familiar with it BEFORE you receive an offer. When a buyer presents an offer, it will include price, fixtures in the house they want included in the sale, which party is responsible for different closing cost, perhaps other contingencies, and a deadline by which the transaction needs to be closed. They will also offer a deposit, called earnest money, that shows they are serious about buying this property. After a certain point in the transaction, if the buyer walks away from the deal, the seller is able to keep the earnest money. Once we receive an offer, we will review the offer and can accept it, counter the buyer with another offer, or reject it outright. The two parties negotiate until an agreement is reached, or one party walks away from the table.
Escrow
Opening escrow is the next step after both buyer and seller sign the sales contract. Escrow is the term we use for the neutral party holding the contracts and funds involved in the transaction. In Sierra Vista, the only escrow company currently is Pioneer Title. They complete a legal title search of the property to ensure the owner has the right to sell the property, and ensure all parties meet the terms as they are outlined in the purchase contract.
Inspections occur within the first few days of the contract agreement. Common inspections include a home inspection to verify the items the seller previously disclosed, as well as insect infestation inspections. But a buyer may decide to have roofing, electrical, radon, or any number of other inspections. It is also during this time that an appraisal is completed by a professional appraiser. The buyer’s lender will always confirm that the property is worth what is being paid for it, and even if it’s a cash deal the buyer may want to have one done as well. There is a time limit during which the buyer is able to walk away from the deal due to issues that arise while still keeping the earnest money they provided along with the purchase contract. If the buyers want anything fixed that came up during the inspection, or if the home appraises for less than the agreed upon purchase price, it is possible to go through another round of negotiating at this point. The buyer will have an additional “final inspection” of their own they can complete prior to closing to ensure the property is in the condition that has been agreed to in the purchase contract.
Lending
The majority of home purchases in the United States include a mortgage, the next step in the transaction. The sales contract lists the number of days the buyer has to obtain a mortgage from a lender. The lending process typically requires an escrow period of between 30 and 60 days to complete the underwriting examination of the worth of the house and the credit worthiness of the new buyer.
The final step to close the transaction requires the seller to transfer the legal title to the new owner. While you may have seen on TV that closing has all parties in attendance, paperwork is signed, and keys change hands, the process is a little different in Arizona. The buyers and sellers do not typically sign at the same time, and there is usually a couple business days between the time the documents are signed and closing officially occurs. Closing is official when the deed records at the county courthouse in Bisbee, and the buyer is now officially the new owner!
These are the steps in a typical closing. Within each one of these steps, there are deadlines that need to be met, possible roadblocks that may arise, and perhaps a little stress. My job is to make this process as smooth as possible for you, my client, and to communicate effectively with you regarding your responsibilities. I understand this is not a process you complete on a regular basis; please give me a call anytime you have any questions about it and I will help you with any concerns you may have.
