There are several items in a real estate transaction that you should be familiar with before beginning the buying or selling process. Here’s a short list of the basic items.
- Pre-approval letter is a letter on bank letterhead from your lender stating your have met the “initial” requirements for a loan of a pre-determined amount. You should have this before beginning your property search and write offers.
- Owners title insurance policy. Most often paid for by sellers disclosing liens, judgements, and adverse facts about a property.
- Loan title insurance policy. Most often paid for by buyers and required by lenders. This is a companion document much like the owners policy insuring the title of the property for the amount of the mortgage.
- Deed, transfers ownership of the property from the seller/grantor to the buyer/grantee. Drafted by an attorney or title company.
- Transfer tax return. This applies to all forms of real estate and is the dollar amount of the sale times a set percent. In Wi. it’s .003 Usually paid by seller.
- Survey map. Land is measured by a licensed surveyor and a map is drawn to create a legal description to be used on all your closing documents. There are several kinds of survey maps and they show the corners, boundaries, access, and possible encroachments.
- Earnest money. A set amount of money determined in your offer to be deposited in a trust account and held in trust until closing. At close buyer receives a credit for the earnest money paid.
- Tax pro-ration. The real estate property taxes are pro-rated through the day of closing. Buyer receives a credit for this amount at close and then will receive and be responsible for the entire years taxes at years end.
- 10-31 exchange. Seller can roll 100% of proceeds from a sale to purchase a like or similar property without paying income tax. Proper forms and an escrow account must be set up to do this.
IF YOU DO NOT UNDERSTAND WHAT YOU ARE SIGNING IT IS HIGHLY ADVISABLE TO HAVE A REAL ESTATE ATTORNEY REVIEW AND EXPLAIN YOUR DOCUMENTS TO YOU PRIOR TO SIGNING AND OR CLOSING.