The Typical Real Estate Transaction
A standard, residential purchase transaction will resemble some version of the following diagram. Let’s look at the pieces.
Process and jargon may vary by state. See here for some common ones.
For unique loan programs, commercial property purchases, or other unconventional processes, visit this page instead.
Pre-Approval & Shopping
Synopsis: Preparation & shopping. Understand your needs, motivations, [ideal] timelines, and limitations. Ensure your Realtor & Lender have what they need first, THEN you go shopping.
Appx Time:
Pre-approval: 5min - 30 Days
Shopping & Offers: 1 - 90 Days (“unmotivated” buyers can spend upwards of 1-2yrs).
Objective(s): Accepted Offer and/or Opening of Escrow
1) Pre-Approval: Unless you have the cash to purchase what you’re shopping for, the first step is always to talk to a lender. During this initial process, you & your loan officer will come up with a plan, determine how much you can afford, and give you some needed direction. After you’ve filled out loan app and begun sending initial docs, you’ll receive your lender’s blessing in the form of a pre-approval.
2) Shopping: Now that you have a lender backing your offer(s), so it’s time to visit homes & open houses w/ your Realtor. Every Realtor will have their own tactics, methods, and processes. For example, one trick I discovered was helpful was to ‘make’ my clients have a rolling top 3 of properties they liked. Having a backup plan (#2 & #3) gives you the most negotiating power AND avoids a LOT of heartache if you’re outbid on a home you grew too attached to.
This is mine
3) Offers & Negotiations: With your pre-approval in-hand and Realtor queued up, you’ll begin making offers. In sum, “making an offer” simply means you’ll discuss terms w/ your Realtor, e-sign the offer docs they email you, and wait to be accepted, ghosted, or countered.
Client’s Primary Tasks:
Connect w/ Realtor:
Determine needs vs wants, understand your market, and once you have a pre-approval, know what you’re looking for the instant it hits the market.
Connect w/ Lender
Complete Loan App
Upload Initial Docs
Receive Pre-Approval Letter
*Brief Overview of the Escrow Process:
You can generally divide an escrow (read: a transaction) into 2 sections:
Due Diligence
Closing Procedures
The Due Diligence phase accounts for the majority of everyone’s time, effort, and bandwidth. Recall the goal of every real estate transaction. In order to accomplish these objectives while keeping all parties safe from one another, the process revolves around safeguards most states call “contingencies”.
For more details, visit the page on escrow.
Escrow - Due Diligence: Part 1
Synopsis: The first of the two “Due Diligence” phases. You’re initiating a clean sweep/inspection of the physical condition, legal history, and general implications of owning the property. Kinda like a base coat of paint. In parallel, the lender’s underwriters will begin their own process doing the same to you.
Appx Time: ~3-12 Calendar Days.
Objective(s): Accepted Offer and/or Opening of Escrow
4) Escrow Opens: Escrow opening marks the beginning of the hard part. Requirements can vary by state law & offer terms, but the overall goal of this phase is the same- removal of contingencies. All parties begin working toward fulfilling the promises made in the contract. As they do, these safeguards are slowly removed.
5) Initial Real Estate Stuff: On the real estate side, you’ll schedule your general inspection, deposit your EMD, begin shopping for insurance, and ensure you attend the last 15min of your general inspection.
6) Initial Loan Stuff: If your loan officer still needs your loan app or initial docs, that needs to happen yesterday. Otherwise, your job is to e-sign some benign docs, lock/float your rate, and ensure the appraisal is ordered. Once disclosures are e-signed, your file will be submitted to underwriting for review.
Client’s Primary Tasks:
Physical Inspection: Schedule & conduct your inspection asap. If possible, prioritize being present for the last 15min so the inspector can give you the scoop verbally.
Deposit to Escrow: Wire your EMD to escrow using wire instructions they’ll provide us.
Title/Escrow Paperwork: Complete, & return any paperwork received from Escrow/Title. May not be applicable in your state.
Loan Tasks in parallel include:
E-sign Initial Disclosures
Rate Lock Discussion(s)
Begin Appraisal & Insurance Processes
Escrow - Due Diligence: Part 2
Synopsis: The second of the two “Due Diligence” phases. Zoom in on areas of concern and/or surprises uncovered in phase 1. Potentially renegotiate terms as needed. All conditions to lender, receive final approval. Commit to closing and remove all contingencies.
Appx Time: 3-10 Calendar Days.
Objective(s): Removal of Contingencies; Commit.
7) Due Diligence Review & Negotiations: Although most contracts have verbiage declaring is to be sold “as-is”, there’s usually a chance to open dialogue on repairs or concessions now that the property’s condition is has been fully revealed.
8) More Lender Stuff: Once you receive conditional approval, you’ll be asked for specific docs (called “conditions”) to check all the lender’s boxes. This is where you’ll deal with appraisal results and any circumstances that make your scenario unique, so it’s inherently the trickiest part of the loan process. Check out the dedicated pages on loan underwriting for more info.
9) Loan Approval & Contingency Removals: Once the property’s condition is verified (or concessions agreed upon), the appraisal came back without issue, and the buyer has received loan approval, the buyer & seller can motion to remove all contingencies and begin closing procedures.
*Be advised- some of these removals happen automatically in certain states. Check w/ your team to ensure you’re not caught off-guard.
Client’s Primary Tasks:
Review All Inspection(s): Review your general inspection and, if you were advised to have additional experts take a look, decide whether the property is in the condition you thought it was in.
*Repair Requests: If surprises were discovered AND the seller(s) are willing to renegotiate to keep you moving forward, THEN you’ll have a chance to ask for repairs or concessions.
RUBICON: At a certain point (e.g. 17 days), you’ll be contractually obligated to remove all contingencies or the seller can unilaterally terminate and pursue your EMD for damages.
Loan Tasks in parallel include:
Clearing Conditions.
Finalize Appraisal & Insurance
Achieve Final Approval
Closing Procedures
Synopsis: It’s typically smooth sailing from here. Wait for escrow’s call to schedule your signings, notarize the closing docs, send any remaining funds to the escrow acct, and pickup your keys!
Appx Time: 5-10 Business Days
Objective(s): Recording w/ the County (aka closing)
10) Closing Disclosure
If the CD hasn’t been acknowledged yet, that’s priority #1. See the Closing Disclosure page for more details.
11) Balancing & Delivery
Balancing: Loan docs are drafted & escrow makes sure the bank's numbers match their own (this is called "balancing"). If there are discrepancies, the bank will adjust their numbers to match escrow.
Docs to Escrow: Once escrow confirms everything is correct, loan docs are sent to them and printed out.
Scheduling: Escrow calls you to schedule the signing. This is most commonly a traveling notary that comes to you at the time and place of your choosing (e.g. your home at 8p, Starbucks at 11a)
12) Signing & Wiring
Doc Signing: Sign docs in the presence of a notary. Takes 15-30 minutes. I'm always available during signings should you have any questions during your appt :)
Wire Remaining Funds: After successfully notarizing docs, head to your bank or online portal to wire your remaining "cash-to-close" funds!
14) Closing!
Funding: Once escrow receives your wire, they'll notify the bank who then wires the loan amt. Once your funds and the bank's loan are in escrow's account, we are officially "funded".
Closing/Recording: Escrow sends your signed closing docs to the bank and county recording office. Once the recording office has recorded the ownership transfer in the public records, you have officially closed!
Keys: Your Realtor will coordinate all keys (and, if applicable, misc remotes, permits, etc) transfers around the time of recording.
Client’s Primary Tasks:
Final Walkthrough: In most states, a few days before closing you’ll have the option to verify the property is still in its original state.
Pickup Keys: Finally, get your keys!
Loan Tasks in parallel include:
CD 3-Day Seasoning (if applicable)
Schedule Doc Signing
Sign Docs
Wire Remaining Funds