Buying and Selling Real Estate
By: Jason Simmons | Published July 18, 2016
Several times a year, potential clients call the office asking for help in either buying or selling real estate. Oftentimes, real estate transactions are viewed as extremely complex and difficult transactions. In reality, they are generally simple. Most of the time, there are several parties involved which can cause it to appear more complex. Real estate transactions typically involve three distinct steps:
1. Negotiating the terms of the deal and signing a contract
2. Allowing time for inspections, appraisals and preparation of a title insurance commitment (if any are called for in the contract)
3. Closing the transaction and conveying ownership
Of course, every real estate purchase transaction involves a buyer and a seller. Missouri (as well as many other states) has what is known as a statute of frauds which requires that all real estate transactions be in writing and contain sufficient terms to identify the nature of the transaction. This is why real estate contracts are required. The key terms of any real estate contract should identify the following items:
• buyer and seller;
• the property to be purchased;
• the purchase amount;
• purchase contingencies, such as financing and inspections;
• identify how certain expenses of sale will be paid;
• whether title insurance is to be provided;
• who will close the transaction and when;
• risk of loss pending the closing;
• when possession will be delivered to the buyer;
• what happens in the event that either party were to default; and
• any other terms that are or can be important to the parties involved.
Certain types of property, such as residential, commercial or agricultural property, may have other items that can or should be covered in the contract.
If title insurance is to be obtained, the contract will be provided to a title insurance company. If earnest money is required, this is delivered too. The title insurance company will then prepare a title commitment to be share with both parties. This commitment identifies what documents and items must be satisfied for the title insurance company to issue a title insurance policy. It also states that the property will be subject to certain exceptions which are identified in the commitment for which no insurance coverage will be provided. These are oftentimes things such as easements and right-of-ways for utilities and roadways, or even covenants that have been placed on top of the real estate to set minimum building restrictions or other neighborhood standards.
Buyers will generally have a chance to review the title commitment to see if there is anything that they are unwilling to accept. If so, they provide objections to the seller. At that point, the buyer and seller can decide to either correct the objections or terminate the contract. The options for each party should be identified in the contract.
While the commitment is being prepared, other tasks are also occurring. The buyer may wish to perform inspections on the property. If financing will be involved, there is typically going to be an appraisal required by the lender. If there are any problems with inspections or appraisals, the contract should identify what the options are in resolving these issues. Oftentimes, if the buyer is timely objecting, they have the right to demand that any problems be corrected or to cancel the contract.
After the parties have completed and resolved any issues regarding the inspections, appraisals and reviewed the title commitment, the closing can occur. This typically will happen at the title insurance company, but occasionally happens elsewhere, such as at the office of the buyer’s lender. The closing will require that both parties sign a number of documents, including closing statements, affidavits and tax reporting forms. Most importantly, the seller will sign a deed that will transfer ownership of the property to the buyer. If the buyer is borrowing money to complete the purchase, they will have loan documents to sign at the closing too.
If you have questions about buying or selling real estate, please give me a call. Cripps & Simmons would be happy to schedule an appointment for you to talk about your real estate transaction.