Real estate transactions bring about many questions from both the buying and selling end. After learning the flow of real estate transactions as a rookie, I put together a roadmap for buyers to understand the mechanics of the transaction. As opposed to making it dull, dry and boring ‘”like everything else involved with a home sale'”I opted for something a little more entertaining; describing the flow of a transaction like a relay race.
First leg: The buyer
The buyer runs the first leg of the race, by selecting an agent.
Second leg: The agent
The buyer passes the baton to the agent, who runs the second leg in advice and home selection. Then, the agent passes the baton to the loan officer.
Third leg: The loan officer
The loan officer runs the next leg of the race, getting the buyer pre-approved for a loan. Then, he passes the baton back to the agent.
Fourth leg: The agent (again)
The agent, who is now likely getting tired, picks up the baton for the fourth leg by taking the buyer to look at homes and write a contract. Once the contract is written and earnest money and option fees collected, the agent puts the contract in to escrow with the title company, kicking off the closing process. Then, the agent works with the buyer through the home inspection and repair negotiation before the loan officer picks up the fifth leg of the relay. ‘”This is a very long leg of the race.
Fifth leg: The loan officer (again)
The real estate agent isn’t the only one who runs more than one leg, the loan officer is right there with him. For the fifth leg, the loan officer meets with the buyer to collect all pertinent information to the contract to send to underwriting; who then becomes the sixth leg.
Sixth leg: Underwriting
The underwriting department reviews ‘”and normally requires'”additional information from the buyer for the next leg of the race. Then, the underwriting department passes the baton to the appraiser.
Seventh leg: Appraiser
The appraiser evaluates the property, ensuring that it is worth what the buyer is paying during the seventh leg of the race. If appraisal problems are discovered, the racers may not make it to the finish line ‘”this can be complicated. However, if the appraisal gets the thumbs up, the underwriter runs a second leg of their own.
Eighth leg: Underwriting (again)
During the eighth leg, the underwriting department makes sure that all documentation is in order and matches up, before issuing an approval.
Ninth leg: Title Company
Assuming that the title company hasn’t found any discrepancies in the title transfer of the house ‘”another story in itself'”the approved loan paperwork is sent to the title company to run the next leg in the transaction. They make certain all of the documentation to sign off on the loan and transfer the title is in order, and then schedule your closing.
Tenth leg: The agent
Once again, your agent picks up his baton, and you are closer than ever to the finish line. He schedules a final walk through of the house with you, and once complete, you are ready to close.
Eleventh leg: Title Company
Finally, you are sprinting to the finish. The title company has your paperwork, and closing is scheduled. Once you sign and make your down payment and closing costs contributions, you have crossed the finish line.
Real estate transactions require a lot of working parts, fitting together like a jigsaw puzzle. There are any number of ways that a closing can be delayed or fall through, if one of these pieces doesn’t fit together quite right. Remember: real estate is a very long relay race, worth of triathlon-like patience and understanding from everyone involved. Knowing the mechanics of the transaction helps buyers to navigate the waters from a contract to a closing with unprecedented ease.
More from this Contributor:
How Your ‘Armchair Expert’ Can Kill Your Deal
The Importance of Trust in Real Estate
The Real Estate Process: From Contract to Closing