Find a Lawyer
Buying and Selling Real Estate
Each transaction concerning the purchase and sale of real estate involves a three-part process. The first phase is the creation of a property sales contract governing the terms of each party involved. The second phase, closing, is when the contract is implemented and the property is actually transferred from owner to buyer. The last stage is known as recording, when the buyer records the transaction with local record-keeping authorities.
Information on the Property Sale Contract
The land contract generally must be written and signed by both the buyer as well as the seller. It should describe the property to be transferred in such a manner that it is clearly identifiable from the document alone.
A typical property sales contract should cover at least the following areas:
- Marketable Title: The formation of the property sale contract contains an implied promise that the seller will provide "marketable title". Marketable title means that the property being sold is unencumbered by lawsuits or the threat of a lawsuit. Such lawsuits generally relate to zoning laws; for example, if the property is in violation of a city zoning ordinance. This also means that there are no existing liens left over from the previous owner's unpaid debts.
- Implied Warranty of Fitness and Habitability: This means that any residential structure is suitable for living according to health and safety standards. It applies to new homes and guarantees the buyer that it was constructed in a safe manner.
- Other Implied Promises: The contract also implies that the seller has not made any false statements of fact that are related to the property being sold. Some state's statutes hold sellers liable for knowingly making false representations regarding the property or for failing to disclose hidden defects
The sales contract will usually present the buyer with a time frame within which they can conduct a title search as well as obtain financing, such as a loan. The contract is considered to be short lived, as it is ends when it is executed during the closing stage.
Closing the Sale
After the contract has been drafted and signed, the buyer and the seller enter into a phase called "closing". This is when the seller legally delivers the deed to the property to the buyer. Closing is also when the buyer must pay the purchase price stated in the contract. The deed is similar to the contract in that it must be in writing, signed by all parties, and must sufficiently describe the property.
The deed is also similar to the contract because it contains promises from the seller to the buyer. These promises are known as "covenants" and may include:
- A reassurance that the seller has a valid title to transfer
- A promise that the buyer's possession will not be disturbed by competing claims from a third party seeking claims to the title ("Implied covenant of quiet enjoyment")
- Covenant of "further assurances"- the seller promises that they will do what is necessary to perfect the title.
Recording the Transaction
After closing, the final and perhaps most important step is for the buyer to record the deed with the county recorder's office. The deed will be processed by a clerk for filing and indexing. It will contain a record of the transaction as well as the date and description of the property. This is important because it proclaims the buyer as the current owner and secures their interests against any subsequent claims to the property.
Whether you are the seller or the buyer in a real estate transaction, it is important that you work with a lawyer in order to complete the necessary steps. When consulting with a lawyer, here are some points to discuss:
- In drafting the sales contract, it is always good to be as specific as possible and to state the terms of the sale as clearly as possible. For example, if the property cannot be identified from the description in the documents, courts will not be able to enforce the agreement.
- Even though the seller is required to make proper disclosures regarding the property, as a buyer you should take extra steps to ensure that the real estate is not defective or encumbered in any way.
- Be sure to follow up after recording to make sure the county records properly reflect the transaction. The majority of real estate disputes are due to an improperly recorded deed.