a Property - List the property with a local real estate agent.
Typically, the first thing a seller
of property does is locate and retain a realtor to “list” the property for sale
with the objective of marketing the property both through advertising and
through the “multiple listing service” of which most realtors are members. The
seller will want to get the broker’s agreement to market the property through
advertising, open houses, broker’s caravans and the like. Broker’s commissions
are not fixed by law and may be negotiated. The typical commission in San Diego
County is 6% of the purchase price, unless a lower rate is negotiated. If a
buyer is procured through another realtor, the commission is split between the
listing office and the buyer’s broker.
Offer - Once a potential buyer expresses an interest in purchasing the
property, a "written offer" is created and presented to the seller.
The "written offer" covers
such subjects as the purchase price, down payment, terms of conventional
financing or financing to be provided by the seller; and covers such other
subjects as the location and duration of the escrow, title insurance issues,
termite and other inspections, seller’s disclosure concerning the property and
any contingencies upon which the parties’ obligation of performance depends.
Contract - If the seller accepts the offer as written, a contract is formed.
Once the contract is formed, the
seller signs the “acceptance” portion of the offer. If the seller makes changes
in the terms of the offer, a “counter offer” is prepared. There may be several
counter offers between the parties. Once both parties have accepted and signed
an acceptable counter offer, an enforceable contract is formed.
Up An Escrow Account - Once both parties have made a binding agreement, escrow
is "opened" and the buyer’s deposit is placed in escrow.
The escrow holder creates a set of
“escrow instructions” that set forth the terms of the transaction. Once the
instructions are signed, the escrow holder obtains information and creates
documents necessary to carry out the terms of the transaction. During the
escrow period, the following events occur: a. The escrow holder orders and
obtains a preliminary report of title for the buyer’s approval that shows all
liens and encumbrances on the property; b. The brokers arrange a structural
pest control report which identifies “required” repairs which are performed at
the expense of the seller and “recommended” repairs. c. Other inspections,
including a home inspection, are provided at the expense of the seller, and
optional inspections by contractors, engineers or geologists are performed. d.
“Contingencies” of the transaction are removed so that the transaction may
close or are disapproved by the buyer. e.Condominiums require specific records
from the condomium associations.
Disclosures - In the early stages of the transaction, the seller is required by
law to make disclosures concerning the property.
Property disclosure includes listing
the properties amenities and physical condition. The seller and the brokers
complete a “Real Estate Transfer Disclosure Statement” to be reviewed and
approved by the buyer. The seller also is required to make disclosures
concerning flood, fire and seismic hazards. It is the seller’s legal obligation
to disclose to the buyer any condition affecting the property that might be
material to the buyer’s decision to purchase it. Failure to make these
disclosures may have significant legal consequences.
Contingencies - Before the escrow closing, the seller may be required to meet
certain buyer requirements.
Before the escrow closing, the
seller may be required to perform various steps such as: “strap” the water
heater, install smoke detectors and low-flow toilets. Some local government
regulations require additional“retrofits”.
Closing - The escrow holder orders all loan documents to be prepared for the
closing of the real estate sale.
The escrow company prepares the
following documents for the clients: a deed for signature by the seller in
favor of the buyer, and requires the buyer to deposit the balance of the cash
consideration. At the “closing”, the escrow records the deed in favor of the
buyer and tenders the net proceeds of sale to the seller after paying real
estate commissions and seller’s closing costs, typically including the cost of
the buyer’s policy of title insurance; one-half the escrow fees; and document
preparation and recording fees. The buyer’s “closing costs” which are deposited
in escrow along with the cash consideration required to complete the purchase,
include one-half of the escrow fees; the cost of the lender’s policy of title
insurance; document preparation and recording fees; and prorations for secured
property taxes and homeowner’s insurance. Following the closing, the buyer
becomes the owner of the property and takes possession.
This article does not constitute legal advice, nor does it create an attorney/client relationship. If you are seeking legal advice upon which you intend to rely, you should hire competent counsel familiar with this area of the law in your locale. Please contact us if you have questions or wish to schedule a free thirty-minute consultation.