Real estate transaction

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A real estate transaction is the process whereby rights in a unit of property (or designated real estate) are transferred between two or more parties, e.g. in the case of conveyance one party being the seller(s) and the other being the buyer(s). It can often be quite complicated due to the complexity of the property rights being transferred, the amount of money being exchanged, and government regulations. Conventions and requirements also vary considerably among different countries of the world and smaller legal entities (jurisdictions).

Contents

In more abstract terms, a real estate transaction, like other financial transactions, causes transaction costs. To identify and possibly reduce these transaction costs, the Organisation for Economic Co-operation and Development (OECD) addressed the issue [1] through a study commissioned by the European Commission, [2] and through a research action. [3]

The mentioned research action 'Modelling Real Property Transactions' investigated methods to describe selected transactions formally, to allow for comparisons across countries / jurisdictions. Descriptions were performed both using a more simple format, a Basic Use Case template, [4] [5] and more advanced applications of the Unified Modelling Language. [6] [7] Process models were compared through an ontology-based methodology, [8] and national property transaction costs were estimated for Finland and Denmark, [9] [10] [11] based on the directions of the United Nations System of National Accounts. [12]

Real estate transactions: subdivision, conveyance, and mortgaging, as they are performed in the five Nordic countries are described in some detail. [13] A translation into English is available for the Danish part. [14]

Residential examples

United States and Canada

The sale of a house in the United States or Canada might involve some or all of the following steps:

See also

Related Research Articles

In law, conveyancing is the transfer of legal title of real property from one person to another, or the granting of an encumbrance such as a mortgage or a lien. A typical conveyancing transaction has two major phases: the exchange of contracts and completion.

An escrow is a contractual arrangement in which a third party receives and disburses money or property for the primary transacting parties, with the disbursement dependent on conditions agreed to by the transacting parties. Examples include an account established by a broker for holding funds on behalf of the broker's principal or some other person until the consummation or termination of a transaction; or, a trust account held in the borrower's name to pay obligations such as property taxes and insurance premiums. The word derives from the Old French word escroue, meaning a scrap of paper or a scroll of parchment; this indicated the deed that a third party held until a transaction was completed.

This aims to be a complete list of the articles on real estate.

Real estate agents and real estate brokers are people who represents sellers or buyers of real estate or real property. While a broker may work independently, an agent usually works under a licensed broker to represent clients. Brokers and agents are licensed by the state to negotiate sales agreements and manage the documentation required for closing real estate transactions. Buyers and sellers are generally advised to consult a licensed real estate professional for a written definition of an individual state's laws of agency.

Title insurance is a form of indemnity insurance predominantly found in the United States and Canada which insures against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage loans. Unlike some land registration systems in countries outside the United States, US states' recorders of deeds generally do not guarantee indefeasible title to those recorded titles. Title insurance will defend against a lawsuit attacking the title or reimburse the insured for the actual monetary loss incurred up to the dollar amount of insurance provided by the policy.

A real estate contract is a contract between parties for the purchase and sale, exchange, or other conveyance of real estate. The sale of land is governed by the laws and practices of the jurisdiction in which the land is located. Real estate called leasehold estate is actually a rental of real property such as an apartment, and leases cover such rentals since they typically do not result in recordable deeds. Freehold conveyances of real estate are covered by real estate contracts, including conveying fee simple title, life estates, remainder estates, and freehold easements. Real estate contracts are typically bilateral contracts and should have the legal requirements specified by contract law in general and should also be in writing to be enforceable.

An earnest payment or earnest money is a specific form of security deposit made in some major transactions such as real estate dealings or required by some official procurement processes to demonstrate that the applicant is serious and willing to demonstrate an earnest of good faith about wanting to complete the transaction.

The closing is the final step in executing a real estate transaction. It is the last step in purchasing and financing a property. On the closing day, ownership of the property is transferred from the seller to the buyer. In most jurisdictions, ownership is officially transferred when a deed from the seller is delivered to the buyer.

<span class="mw-page-title-main">For sale by owner</span> Selling real estate without a broker or agent

For sale by owner (FSBO) is the process of selling real estate without the representation of a broker or agent. Homeowners may employ the services of marketing, online listing companies, or market their own property. Typically, they represent themselves with the help of a lawyer or solicitor throughout the sale. As in most areas, there are detailed legal requirements pertaining to sellers and disclosures they must make.

Closing costs are fees paid at the closing of a real estate transaction. This point in time called the closing is when the title to the property is conveyed (transferred) to the buyer. Closing costs are incurred by either the buyer or the seller.

A listing contract is a contract between a real estate broker and an owner of real property granting the broker the authority to act as the owner's agent in the sale of the property.

<span class="mw-page-title-main">Business broker</span>

Business brokers, also called business transfer agents, or intermediaries, assist buyers and sellers of privately held businesses in the buying and selling process. They typically estimate the value of the business; advertise it for sale with or without disclosing its identity; handle the initial potential buyer interviews, discussions, and negotiations with prospective buyers; facilitate the progress of the due diligence investigation and generally assist with the business sale.

<span class="mw-page-title-main">Commercial property</span> Buildings or land intended to generate a profit, either from capital gain or rental income

Commercial property, also called commercial real estate, investment property or income property, is real estate intended to generate a profit, either from capital gains or rental income. Commercial property includes office buildings, medical centers, hotels, malls, retail stores, multifamily housing buildings, farm land, warehouses, and garages. In many U.S. states, residential property containing more than a certain number of units qualifies as commercial property for borrowing and tax purposes.

<span class="mw-page-title-main">Real Estate Settlement Procedures Act</span>

The Real Estate Settlement Procedures Act (RESPA) was a law passed by the United States Congress in 1974 and codified as Title 12, Chapter 27 of the United States Code, 12 U.S.C. §§ 2601–2617. The main objective was to protect homeowners by assisting them in becoming better educated while shopping for real estate services, and eliminating kickbacks and referral fees which add unnecessary costs to settlement services. RESPA requires lenders and others involved in mortgage lending to provide borrowers with pertinent and timely disclosures regarding the nature and costs of a real estate settlement process. RESPA was also designed to prohibit potentially abusive practices such as kickbacks and referral fees, the practice of dual tracking, and imposes limitations on the use of escrow accounts.

A buyer brokerage or buyer agency is the practice of real estate brokers and their agents representing a buyer in a real estate transaction rather than, by default, representing the seller either directly or as a sub-agent. In the United Kingdom and Australia, the most common term is buying agent.

Flat-fee multiple listing service or flat-fee MLS refers to the practice in the real estate industry of a seller entering into an "à la carte service agreement" with a real estate broker who accepts a flat fee rather than a percentage of the sale price for the listing side of the transaction. A flat-fee MLS brokerage typically unbundles the services a traditional real estate brokerage offers and lists the property for sale in the local multiple listing service (MLS) à la carte without requiring the seller to use all services.

Under Section 1031 of the United States Internal Revenue Code, a taxpayer may defer recognition of capital gains and related federal income tax liability on the exchange of certain types of property, a process known as a 1031 exchange. In 1979, this treatment was expanded by the courts to include non-simultaneous sale and purchase of real estate, a process sometimes called a Starker exchange.

Property finders are companies and individuals representing a buyer in a property transaction. The term is more common in the United Kingdom, but in the United States the situation is referred to as buyer brokerage, and in Australia it is known as buyer advocacy.

A real estate trend is any consistent pattern or change in the general direction of the real estate industry which, over the course of time, causes a statistically noticeable change. This phenomenon can be a result of the economy, a change in mortgage rates, consumer speculations, or other fundamental and non-fundamental reasons.

Real estate business is the profession of buying, selling, or renting real estate.

References

  1. ↑ "Improving Competition in Real Estate Transactions, 2007". Oecd.org. Retrieved 3 January 2012.
  2. ↑ "Conveyancing Services Market, 2007". Europa (web portal). Retrieved 3 January 2012.
  3. ↑ "Modelling Real Property Transactions, 2001–2005". Cost.esf.org. Retrieved 3 January 2012.
  4. ↑ "Alistair A.R. Cockburn: Basic use case template". Alistair.cockburn.us. Retrieved 3 January 2012.
  5. ↑ Default. "WG Law and Modelling: UseCase descriptions of Subdivision Procedures, 2002". Costg9.plan.aau.dk. Retrieved 3 January 2012.
  6. ↑ "Ferlan, Sumrada and Mattsson: Modelling property transactions, pp. 27 – 79 in: Real Property Transactions. Procedures, Transaction Costs and Models. Edited by: J. Zevenbergen, A. Frank and E. Stubkjær". Iospress.nl. Retrieved 3 January 2012.
  7. ↑ "Rados Sumrada: Modeling methodology for real estate transactions, 2005" . Retrieved 3 January 2012.
  8. ↑ "Hess and Vaskovich: Ontology Engineering for Comparing Property Transactions, pp. 183 – 201, and Hess and Schlieder: Ontology-Based Development of Reference Processes, pp. 203- 219, both in: Real Property Transactions. Procedures, Transaction Costs and Models. Edited by: J. Zevenbergen, A. Frank and E. Stubkjær". Iospress.nl. Retrieved 3 January 2012.
  9. ↑ "Vitikainen: Transaction Costs Concerning Real Property – The Case of Finland, pp. 101 – 118 in: Real Property Transactions. Procedures, Transaction Costs and Models. Edited by: J. Zevenbergen, A. Frank and E. Stubkjær". Iospress.nl. Retrieved 3 January 2012.
  10. ↑ "Stubkjær: Accounting Costs of Transactions in Real Estate – The Case of Denmark. Nordic Journal of Surveying and Real Estate Research, 2:1 (2005) 11–36". mts.fgi.fi. Archived from the original on 5 February 2009.{{cite news}}: CS1 maint: unfit URL (link)
  11. ↑ "Stubkjær, Lavrac and Gysting: Towards national real estate accounts: The case of Denmark and other European jurisdictions, pp. 119- 139 in: Real Property Transactions. Procedures, Transaction Costs and Models. Edited by: J. Zevenbergen, A. Frank and E. Stubkjær". Iospress.nl. Retrieved 3 January 2012.
  12. ↑ "UN System of National Accounts 1993". mts.fgi.fi. Archived from the original on 13 August 2010.
  13. ↑ "Ejendomsregistrering i de nordiske lande" (PDF). Archived from the original (PDF) on 13 June 2007. Retrieved 17 February 2018.
  14. ↑ "Property formation in the Nordic countries – Denmark. National Survey and Cadastre (2008)" (PDF).
  15. ↑ "The Need for a Real Estate Escrow" (PDF).
  16. ↑ "Real Estate Buying and Selling Flowchart".
  17. ↑ Chung, Juliet (1 October 2010). "The Holdouts". The Wall Street Journal. Retrieved 15 March 2014.
  18. ↑ "Building and Construction" . Retrieved 4 April 2024.
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