Who Are All The Players in a Real Estate Transaction?
The attorney for the Seller advocates for the Seller’s best interests, and does not have a stake in the deal as to whether or not it successfully closes. The sale of real estate is a legal transaction, and the Seller’s attorney will handle the legal aspects of it. For details, watch the video on real estate on the Illinois State Bar Association’s website.
The attorney for the Buyer advocates for the Buyer’s best interests, and does not have a stake in the deal as to whether or not it successfully closes. The sale of real estate is a legal transaction, and the Buyer’s attorney will handle the legal aspects of it. For details, read, “You Need an Attorney for a Real Estate Closing,” and the Illinois State Bar Association’s article, “An Attorney’s Role in Purchasing a Home,”
Listing Real Estate Agent
The Listing Real Estate Agent is a salesperson who lists the real estate property on the MLS (Multiple Listing Service), performs a fair market analysis to determine a subjective property value, and markets the property on behalf of the Seller in order to find a ready, able and willing buyer. The Listing Agent works on commission, meaning they only receive payment if and when the deal successfully closes.
Selling Real Estate Agent
The Selling Real Estate Agent is a salesperson who represents the Buyer. The agent will suggest certain real estate properties from the MLS which are for sale based on the price and preferences given to them by the client. The agent will provide guided access and show the properties to the potential Buyer, and then negotiate basic contract terms once the Buyer decides to put an offer on a certain property.
Buyer’s Mortgage Broker
A mortgage broker does not lend money, but rather acts as a middle-man between the buyer and the lender, who shops around for a loan on behalf of a real estate Buyer. The broker works on commission, and thus only gets paid if the deal successfully closes. The broker often has a relationship with a handful of lenders to whom they typically refer Buyers, and does not necessarily “shop around” providing the Buyer with the “best” loan on their behalf. The mortgage broker cannot promise the Buyer any final result and does not have the ability to guarantee a loan approval. For more detailed information about mortgage brokers, visit the Mortgage Professor’s website.
The lender is typically the “loan originator,” meaning that they are the entity who will actually be making the loan to the Buyer and sending the funds to the closing. By contrast, a mortgage broker does not make the loan or typically fund the closing. And a lender does not “shop around” for a loan on behalf of a buyer, as would a mortgage broker. To ensure that your loan originator is registered with the State of Illinois, click here.
The Seller already owns the home and may have a mortgage loan, equity loan or line of credit to pay off at the closing. If the loan amounts exceed the price the purchaser is willing to pay, then the house is referred to as being, “under water.” In such an event, the Seller cannot sell without obtaining written approval from the Seller’s Lender(s) in what is known as a “short sale.” If the Seller has defaulted on the loan and failed to fulfill the loan’s requirements, then the Seller’s lender has the right to foreclose on the property and either acquire ownership of it or obtain the proceeds of a sale at auction.
The Title Company searches title and provides it to the Seller’s attorney to either clear, request more information, or provide insurance over certain defects. The title company is the location where the closing usually takes place, and the company provides a “closer” to facilitate the closing between all the parties. The title company will provide the insurance underwriting company to insure title issues on behalf of the Buyer.
The employee of a title company who facilitates the closing is referred to as the “closer.” The Closer will usually:
*collect all figures from the Seller’s attorney, Buyer’s attorney, lender and title company, and issue a document compiling the same in what is typically referred to as a HUD-1, RESPA or Settlement Statement.
*collect all funds at the closing and issue checks as per the final Settlement Statement
*coordinates with the Buyer’s lender and fulfill any requirements they demand at closing;
*send for recording any pertinant documents including the Deed, Release of Mortgage, and etc.
*ensure all documents are collected to clear certain exceptions raised in the title commitment.
The Home Inspector
The Buyer of real estate is usually entitled to obtain as many inspections of the real estate as they so desire, within a certain time frame, in order for the Buyer to make a more informed decision about whether the condition of the property is worth the agreed upon purchase price. The home inspector is hired by the Buyer to inspect and to inform the Buyer of the physical condition of and defects with the property.
The inspector hired by the Buyer should not be confused with a building inspector who is employed by or works on behalf of the local municipality in which the property lies. The building inspector for the local municipality may inspect the property to discover code violations and to levy these against the owner to ensure that the violations are remedied and property is brought up to code.
In addition, the Buyer’s home inspector should not be confused with the inspector/appraiser hired by the Buyer’s lender, such as with an FHA or VA loan, whose purpose is to assess the property and prepare a report to assist the lender in making a final determination as to whether the Buyer’s loan will be approved.
An appraiser is generally one who is licensed within the State to assess real estate properties and determine a subjective valuation based on a number of factors including location, upgrades and improvements, and recent sale prices of similar, nearby homes.
Typically, the Seller will not hire an appraiser when marketing the property for sale as the real estate agent is able to give the Seller a fair market analysis in lieu of an appraisal report.
Generally, an appraiser is hired by the Buyer’s lender to determine whether the condition of the home supports the agreed upon purchased price. In general, a lender will not approve a real estate Buyer’s loan in the event that the appraisal value is (significantly) less than the contract purchase price.
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