Real Estate transactions are the process where the rights of a property or certain designated real estate will be transferred between 2 or more parties such as a case of transfer where one party is the seller and the other being the buyer. It may be more complicated due to the complexity of the rights of the property being transferred, the amount of money that is being exchanged, and the various government regulations. Requirements and conventions will also vary among different countries of the world and the smaller jurisdictions or legal entities.
In a more abstract way, real estate transactions are like other financial transactions which may cause a transaction cost. In order to identify and even reduce the transaction costs, the Organization for Economic Cooperation and Development has addressed the issue through a study that was done by the European Commission and through research action.
The research action came from modelling real property transactions helped to investigate methods that describe selecting real estate transaction in a formal way which would allow for comparisons across jurisdictions and countries. The descriptions were performed using a very simple format, basic use case template, and more advanced applications for a unified modelling language. The process models were then compared through a unique ontology based method and the national property transaction costs were then estimated for Denmark and Finland which based the directions of the United nations system of national accounts.
Real estate transactions such as subdivision, mortgaging, and conveyance are performed within many countries now.
The sale of a home in Canada or the United States may involve the following steps:
- Hiring a real estate broker to handle the logistics of advertising and sale, except when it is in cases of for sale by owner property where the owner may want to consult with legal counsel and then obtain copies of a real estate contract.
- The buyer may then enter the picture in multiple ways: from seeing an advertisement, seeing signs outside of the property, or by contacting a real estate agent to look at the property.
- The buyer then may engage the services of a real estate broker to represent them and handle the logistics of finding a suitable property which enables them to become qualified to purchase and then show the appropriate properties within their qualification list.
- There will then be a written offer to purchase. If it is done by an agent, it will be done on legally approved and pre-printed forms that are provided from the broker’s office.
- Then there will be the submission of offers by the interested buyer. Multiple offers may actually be received which causes a result in a bidding war for the property, with the best offer being awarded the sale. A single offer may be below the initial asking price which results in negotiations over the final price or a rejection by the seller. This situation is often called a hold out.