Complex real estate transactions have their own set of challenges and legal issues that are unlike any other area of the law.
Overview of Real Estate Transactions
A real estate transaction is the process in which ownership of real estate is transferred from one party to another. It can involve the sale of a property or even a gift. Because of the complexity of real estate law, all real estate transactions must be recorded in writing. These transactions are complex for a number of reasons, including:
- The amount of money at stake,
- The consequences of even minor clerical errors,
- Government regulation requirements, and
- The potential for the involvement of multiple interested parties.
The Steps in a Real Estate Transaction
While no two real estate transactions are the same, there are five general steps to complete a real estate transaction. These steps follow a typical real estate transaction in Wisconsin, but the steps can deviate from the regular process depending on the circumstances.
Ultimately, the process depends on the steps agreed upon by the involved parties.
Offer and Agreement
The process of a real estate transaction begins with an offer. While informal discussions of price are possible, it takes a formal, written purchase offer to begin the process. Once the property owner receives the offer, he can accept it, reject it, or make a counteroffer. The counteroffer can involve simply negotiating the price or altering some material terms within the agreement.
Once the two sides reach an agreement, they will sign a contract known as a purchase agreement.
Escrow
Escrow is the process where the purchase price of real estate is held by a neutral third party until all parties are happy with the sale and prepared to proceed. In some states, the escrow process can be lengthy. However, in Wisconsin most real estate closings occur quickly - escrow often lasts only a few minutes. In most cases, escrow is closed with 24 hours.
Inspection
After a contract has been agreed upon, it is up to the purchaser of the property to review the potential sale and determine if the seller has met all of the requirements written into the purchase agreement. Inspections can involve anything from the sturdiness of the roof to the upgrades present on the property.
If issues arise during an inspection, the buyer may request the seller address the issues before the sale can be finalized. In some cases, a disagreement over the results of an inspection can be enough to derail a real estate transaction. This is one example where the guidance of a seasoned real estate lawyer can be helpful.
Lender Approval
While some real estate purchases are made entirely with cash, the vast majority require financing from a lender. In the case where a lender refuses to lend the necessary funds, the sale can wind up in jeopardy. Generally speaking, the escrow process can take up to 60 days to allow the lender time to finalize the loan.
Closing
The last step in a real estate transaction is known as a final closing. When all of the conditions for the sale are met and financing is secured, all that is left is for the final title and loan paperwork to be completed and the keys to the building to change hands.
Types of Real Estate Transactions
Real estate transactions can be divided into two broad, general topics: residential real estate transactions and commercial real estate transactions.
Residential Transactions
Residential real estate transactions relate specifically to residential dwellings. These transactions can relate to either new construction or the resale of an existing home. While many residential transactions involve single-family dwellings, many can involve duplexes, apartments, condominiums, or other residential properties.
Commercial Transactions
Real estate that exists for business purposes is known as commercial real estate. Storefronts, factories, or other commercial properties to be sold are included in this list. A commercial transaction also can involve a piece of property that is residential in nature but serves purely as a profit center.
Common Issues with Real Estate Transactions
When it comes to real estate transactions, any number of things can go wrong. These issues can stem from the language in a purchase agreement to issues discovered during the inspection or escrow process. Regardless of the complication, having an experienced real estate lawyer to guide you through the process might prove to be invaluable.
Some common issues that come up during all types of real estate transactions include:
- Health issues like asbestos, radon, or lead paint
- Zoning issues
- Municipal code violations
- Condemnations
- Insurance coverage disputes
- Inconsistent or confusing language included in a purchasing agreement
- Title search complications.
How a Real Estate Attorney Can Help
The work of a real estate attorney starts with the purchase agreement. By eliminating any ambiguous language, an attorney may be able to head off some issues before they become a problem. And by drafting an agreement that is clear from the beginning, there is less risk for a misunderstanding that can complicate a transaction later on.
In both commercial and residential real estate transactions, the complexities and legal issues involved are too sensitive to be left to a real estate agent or handled on your own. Even minor errors in a purchase agreement, a deed, a loan, or any other type of paperwork can have a major impact on the property going forward.
While the goal for any real estate attorney is to avoid disputes before they ever arrive, the reality is that these disputes can happen. If a transaction goes sideways, you will need the guidance of an experienced real estate attorney more than ever.
Our attorneys have extensive experience drafting and negotiating real estate purchase agreements, and have an extensive background in helping clients comply with state and local regulations and zoning codes. A real estate transaction is a complex matter, but with the right legal help, it doesn't have to be difficult for you. To learn more, contact Schuk Law, LLC today.