Different Types of Real Estate Transactions -

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Different Types of Real Estate Transactions

When any property (residential or commercial) is interchanged between multiple people, it is called a real estate transaction. In simple terms, it’s an exchange of property between the buyer and seller.

Before the seller gets the authority of the same, it’s mandated to complete certain activities and steps timely. After which, the process gets finalized successfully.

There are different types of real estate transactions at present. We will take a look at each in brief. But before that, let’s take a glance at the meaning of real estate.

 Types of Real Estate Transactions

During the process of real estate transactions, one can encounter its different types. These transactions are arranged by both the buyers and the sellers, respectively. Let’s take a quick look into its types.

 Owner Financing

The first type of real estate transaction is owner financing. Here, a mortgage note is rendered by the buyer to the seller for a prearranged time. It is usually issued in the place of property ownership.

The fund amount can be the complete sum or just a portion of the same. Individuals who are given the most privilege here are those sellers who have paid their mortgages completely. Having said that, if at any point the buyer faces a money crisis, they can ask it from the seller.

 Like-Property Exchange

As per section 1031 of the tax code, like-property Exchange implies that business owners can trade their property for a similar rate. By doing so, they should not gain any profit so that the taxes on the gain could be deferred.

Usually, the business owners try to avoid the taxes by interchanging properties with another seller. These are mostly for those properties that can render better capital gains.

 Mortgage Assumption

Sellers with considerable valuations can opt for a mortgage assumption. In this type, the lender will impose a transaction fee. However, the interest rate does not change.

Once the buyer becomes eligible as per the lender’s requirements, they get the leftover loan balance. Besides, buyers will get discounts if the seller has been consistent in paying the mortgage for 10-20 years. Getting discounts can be a useful step for buyers who do not have any equity.

 Role of Individuals in Real Estate Transaction

The individuals mentioned above have a significant role in the transaction process of each type. Let’s take a look into the same.

Real estate agent: These individuals work with either of the two parties. They could be from the buyer’s side or the seller’s side. However, there have been situations where they have worked for both at the same transaction. Mostly, buyers and sellers have distinct agents of their own.

Buyers: Buyer signs an agreement with the real estate agent, confirming their commitment to them. Once the buyer gets their choicest home, they work with the agent to negotiate and purchase the same.

Seller: Seller confirms their property sale along with the real estate agent. They work with the agents to get buyers and make an appropriate sale.

Lenders: Mortgage Lenders help the buyers to conduct the mortgage paperwork. One should always go to the lender before buying a home. They will then render a pre-qualification letter signifying the loan amount he is capable of taking.

Home inspectors: These inspectors inspect the home for its condition. They also ensure whether the property matches the code of the state/country.

Lawyer or title company: Their role may differ as per the states. While some allow title companies for paperwork and closing, others require a lawyer. Both of them ensure the validation of the seller and their capability to transfer the title.

After this step, a Title insurance policy is issued by the title company. It signifies the transferring of the title.

That’s all. These were some of the types of real estate transactions for successful property selling and buying.

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