The truth is; the property buying process involves many layers of parties to get the job done.
From the home inspector to mortgage brokers to title representatives, the home buying process is truly not a one-man show.
With so many peoples and companies involved, it can be hard to follow the process and keep up with everything and everyone. But fret not, as we’re here to help. In this article, we will explain the various parties involved in a real estate transaction and their roles.
1. The Seller
We’ll start with the obvious one — the seller.
In this context, the seller is the property owner who puts the home up for sale. It could be an individual, a home builder, a financial institution, or even a government agency.
In most cases, the seller will employ a listing agent to show the property to prospective homebuyers. When the property owner is working alone, they will advertise the property as “For Sale by Owner (FSBO).
When buying an FSBO property, it’s advisable to hire a Realtor to ensure the property you’re buying is not overpriced. The agent will not only perform a comparative market analysis on prices of similar homes in that area but also ensure all applicable laws are duly followed.
2. The Lender
Before you can even start the house buying process, you may need to first involve your bank, financial advisor, and or mortgage lender.
The lender will provide you with a mortgage so you can afford to pay a higher purchase price with debt financing. That said, it’s advisable to start by finding the best mortgage lender before you even start your house hunting journey.
Getting prior approval will give you confidence as you’ll know the maximum loan amount the lender is willing to offer. It’ll also make your house search easier as you’ll only concentrate on the houses that are within the lender’s offer.
3. Real Estate Agent
Your real estate agent is perhaps the most important person you’ll work within your homeownership journey.
These licensed professionals are knowledgeable about the market and will help you find your dream home, negotiate on your behalf, and take you through completing the purchase. When buying a home, there are typically two agents involved:
The buyer’s agent
The seller’s agent
The buyer’s agent works for you to help you find the best home and negotiate the lowest price possible. He/she will help you browse home listings and schedule in-person viewings. And when you find the home of your dream, they’ll also help you prepare an offer and coordinate everything to closure.
Sounds fun, right? For ambitious, hard-working professionals, a career as a buyer’s agent can also be very rewarding. But many agents-to-be wonder, “how long does it take to become an agent?” Well, on average, it takes about five months to get a license, which is a pretty short time.
The seller’s agent, on the other hand, works for the seller. This agent’s role is to sell a home as quickly as possible and for the highest price possible. Some agents also work within a real estate team. Typically, the members of the team will have varying functions to attempt to perform as a cohesive unit. Some teams work out great and others find they may not be a good fit.
It is less common but also possible to have a flat fee MLS arrangement where the seller's agent just puts the property in the multiple listing service and nothing else. There are certainly pros and cons to this scenario worth exploring before considering it.
4. Home Inspector
As the homebuyer, it’s your responsibility to hire an independent expert to assess the condition of the home you intend to buy. And this is where a home inspector comes in.
The home inspector will assess the home to determine if it’s a smart purchase. The inspector will examine the home’s structural components such as walls, roof, and floor to determine whether they are sturdy enough to withstand the elements.
They will also examine the home’s construction, including major systems like HVAC, plumbing, and electrical systems to ensure they’re well maintained and in working condition. The results of the inspection can play a part in determining the home’s final selling price. Since the home inspector works directly for you, you pay for the service. Conducting a home inspection is a vital part of most home sales.
5. Home Appraiser
The home appraiser is hired by the lender to determine the market value of the home. However, you pay the appraisal fee as part of the closing costs.
While the lender schedules the appraisal, by law, it must be conducted by a third party who has no interest in the outcome. Some of the key factors that affect a home’s appraisal value include:
The home’s size
The nature of the neighborhood, including things like amenities, security, etc.
Home sales in the surrounding area
Once the home appraisal is done, the appraiser will present a home valuation report to the lender, which includes the value of the home. In the event the appraisal value turns out lower than the amount you’re offering, the lender will not approve the loan.
6. The Title Representative
The title representative’s role is to review the public records to ensure the home can legally be sold from one person to another.
The title company will conduct a title search on the home on offer to ensure there are no outstanding mortgages or liens against it. Once the search is complete, the company will issue a title insurance policy to both the lender and the owner. This is done to protect your investment.
Final Thoughts on Real Estate Players
As you and your teamwork through the house buying process, all the above parties will play an integral role in getting a deal from origination to closure. Knowing the various players involved and their roles can make a huge difference in the experience you get when buying a house.
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About the author: The above article on the team involved in a real estate transaction was written by Andrew Helling. Andrew is a licensed real estate agent, property manager, and founder of REthority, an online resource for real estate professionals and their clients.