A real estate property transaction occurs when rights in a piece of land are transferred from one party to another. The process of real estate transactions varies widely across different countries and legal entities (jurisdictions). In many instances, buyers must obtain a mortgage to finance the purchase. A deed with a proper description of the property is then recorded to transfer ownership. Real estate property transactions can be complex because of the large sums of money involved and government regulations and conventions governing how real estate is bought and sold.
In the United States, most real estate property transactions are handled by licensed real estate brokers. These professionals receive a percentage of the sales price as their commission. The percentage of the sales price is usually set in the contract between the buyer and seller. Brokers may not discriminate against buyers or sellers based on race, religion, sex, national origin or other factors.
The first step in a real estate property transaction Country Hills Plates in Calgary, Alberta is finding a buyer. The seller lists the property on a real estate multiple listing service and then works with prospective buyers to find a match. Often, a pre-qualification letter from a lender is required to help a potential buyer determine how much he can afford to pay for the property. Once a buyer is found, the real estate broker prepares a sales purchase agreement and signs it with both the seller and the buyer.
Most real estate contracts have various contingencies that allow either the buyer or the seller to back out of the deal, such as obtaining financing or a successful inspection of the property for engineering and termites. A down-payment is typically made on the purchase, and this check is delivered to the seller’s attorney, who holds it in an escrow account until the closing of the sale.
Real estate valuation techniques vary considerably. One common approach is to use comparable sales or “comps.” To determine the value of a property, a real estate appraiser compares the subject property with similar properties that have recently sold in the same area. This provides a fair market estimate of the property’s value.
Another common approach to real estate valuation is the cost-to-construct method. To evaluate a commercial or industrial property, a professional appraiser calculates the amount it would take to duplicate the property in a new construction. This provides a reliable estimate of the property’s worth and is used by lenders to assess risk.
Before the final real estate property transaction is completed, all parties must carefully review the closing paperwork. Once the documents have been signed and notarized, they must be submitted to the recording jurisdiction for official filing. Once recorded, the deed and any mortgages and easements affecting the property are legally recognized and recorded and notice of the transfer is given to subsequent purchasers. In most cases, the seller must also file a tax statement with the local taxing authority. Depending on the state, there may be transfer and mortgage taxes, as well as a property tax.