If you're in the market to buy a home, you should know who the key people involved are and what the process is. The key people include buyers, sellers and real estate brokers. The process starts with deciding whether to hire a broker. It proceeds to looking for a home, negotiating a deal and signing a purchase agreement. It ends up with closing on the property.
Key People
The first key person in the purchase of a home is you, as the purchaser or buyer. As this is one of the most important purchases you'll ever make, you'll be making many decisions, all in the effort to find the perfect home.
The second key person in the purchase of a home is the seller. The seller is the owner of the real estate that will be sold.
Next, there are the real estate brokers. An agency relationship under the law is formed through a brokerage contract, and the real estate broker, real estate agent or salesperson acts as the agent for the buyer, the seller, or for both the buyer and the seller as a dual agent. The broker has certain duties toward his client, as indicated in the laws of your state.
If the buyer wants to hire a broker to find a house to buy, the buyer will sign a contract with the broker stating the terms and conditions of the broker's employment. The buyer is responsible for paying that broker when the purchase is completed, but it is also possible that the contract will provide for payment to come from the seller, in the form of a shared or split commission with the seller's broker.
A more common form of agency occurs when the seller hires a broker to sell his home. The seller and the broker sign a brokerage contract or listing agreement, which sets out the obligations that the broker agrees to undertake to sell the house. Typically, these obligations include marketing the house, showing the house, negotiating with prospective buyers, and representing the seller at closing.
The listing agreement also sets the amount of the commission that the listing broker will receive upon sale of the property. The listing broker provides the information on the property to his brokerage firm and sometimes to a multiple listing service, which is a compilation of listings from member real estate brokerages, and increases the exposure of listed properties to prospective buyers. Often, a different broker, called a selling broker, will find prospective buyers for the property. The listing broker will offer to split the commission with the selling broker, so the selling broker is really a sub-agent of the listing broker.
Note that a selling broker is different from a buyer's broker. A selling broker is not the buyer's agent, and the selling broker must disclose his commission agreement with the listing broker to the buyer. If the buyer's broker is involved in the purchase of the property, the listing broker can split his sales commission with the buyer's broker on agreement of the parties.
A dual agent can represent a seller and a buyer if the parties agree. Dual agency is not favored because it is difficult for one agent to seek the best advantage of both the buyer and the seller, and state laws or regulations may detail the duties of a dual agent and the information that the dual agent can disclose if representing both buyer and seller.
Process
If you are buying a home yourself, the next step is to find prospective properties. You can do this by:
- Driving around the neighborhood in which you would like to live and looking for "For Sale" signs
- Looking in the local newspaper for advertisements
- Checking the Web sites of real estate brokerage companies for property listings
- Checking with friends and associates for referrals
- Contacting real estate brokerage firms to see if there are any properties available
If you have hired a broker, he will look for prospective properties for you.
Once you find a home that you are interested in, you should view the home. If you would like to buy the home, you or your broker should make a specific offer for the home. The seller may make a counter-offer. You or your broker can negotiate the price, terms and conditions with the seller or the seller's broker. When you reach an agreement, you and the seller will sign what is called a purchase agreement, sales contract or contract for sale. This contract should contain certain terms, including a description of the property, the price and identify the buyer and seller. It generally includes a down payment (sometimes called "earnest money" or a deposit), which makes the contract binding.
You should make sure that the contract allows you to have the property professionally inspected, and you should follow through with that option. You will also need a title search done by your lawyer or a title insurance company so that you know that you are getting clear title to the property. If you are obtaining financing, your lender will require title insurance, and you should consider buying an owner's policy to protect your interest in the property's title.
Another important step is to obtain financing to purchase the property. It's a good idea to check with a few different lenders to make sure that you are getting a good rate on your mortgage, and that the mortgage will suit your situation.
If everything proceeds smoothly, you can expect to perform a final walk-through of the home shortly before closing to make sure that the seller has met all terms of the sales contract with regard to the property's condition. The last step is to go to the closing where you and the seller will sign the legal documents and the property will be transferred to you.
If you have any questions on purchasing a new home, contact a real estate attorney in your area.
Questions for Your Attorney
- What disclosure forms can I expect to receive from a real estate broker or agent; I'm confused as to who the brokers and agents represent.
- What happens if I find a problem with the house at my final walk-through? Will closing be delayed?
- Who does a real estate broker represent if I drive by a house and ask to see one of her listings? Do I have to ask for the real estate broker or agent to act as a dual agent?