Parties in a Transaction

It’s no secret or surprise whether you’re an experienced investor, or a first time buyer or seller that the housing transaction can be a complicated process. Although on paper it could look self-explanatory and each step makes sense, when a person is in a transaction, many things can be moved around and can change the course of the outcome. Many of the reasons are as vast and different from each other as it relies on and depends on each client’s situation. Delving deeper, it may be something that is affecting the result of the transaction financially, materially, or even emotionally. Sometimes, the reason for transactions to not follow through to closing could be the fault of neither principle, maybe both, or other parties involved in the transaction, even if the situation is viewed objectively!

This topic will be covering something that is often overlooked, but we feel could be just as important as learning other real estate topics. Although not as popular of a subject like closing costs, or a first time home buyer guide, understanding who makes up the team of people involved in a housing transaction could be just as important! We find this may be something many people may not take the time to help clients and customers understand. However, we feel it’s important for those seeking knowledge in becoming more educated buyers, sellers, and investors, to know what parties are involved in the sale of a home. Doing so could not only help in understanding the process of a housing transaction, but will also assist those during the sales process to know who to contact, the importance of each party, and develop a deeper understanding on what’s going on.

The way this post will be presenting the information will be simple. The following parties will be bolded, the primary contact or person in the role italicized, and a description along with their responsibilities during the transaction process. To make this as objective as possible, the parties will be addressed in third person, and not by the point of view as any party during a transaction. The roles are also who is typically involved in a transaction involving third-party financing, as that is what we find to be most common.

Principle

Buyer, Seller

• The buyer or seller in the transaction. Principles have the final say in what decisions will be made during the entire housing transaction process. Automatically, they are also the clients to real estate agents, lenders, and escrow agents.

Agent

Buyer, Seller

• Refers to the buyer’s agent, or the seller’s agent. Depending on who the agent represents, they are an agent specialized and required to serve fiduciary duties to their client. They are the first contact for the principle to relay their negotiations and commentary to the other parties (including the other principle). They represent the principle and always act in their principle’s best interest.

Lender

Buyer, Buyer’s Agent, Seller’s Agent

• If a buyer is taking out a loan to purchase a home, a lender is involved in processing, assisting, and closing on a loan for the buyer. The buyer is the client for the lender as well, and they must offer their fiduciary duties to their client just like an agent. Most of the time utilized when under contract for third-party financing will be towards the loan approval process because it will contain many other steps to fully close on the loan to purchase the home.

Inspector

Buyer, Buyer’s Agent

• The inspector works for the buyer. Although not a necessary step, it is always, if not often, advised by the agent to have an inspector look at a home prior to purchase with an option period (aka inspection period). This will help the buyer receive a general overview of the home from a third-party who specializes in examining properties to help a buyer feel good about their purchase. Although the seller side is not involved, it also benefits them because it could help in processing negotiations and may waste less time during the transaction.

Surveyor

Lender, Escrow Agent

• If needed, the title company may need to order a new survey if applicable to the property. This typically happens if the survey has not been updated since improvements were done, or is older than 10+ years. The escrow agent representing the title company will be the one who orders, but will need permission from the lender prior to ordering as to potentially not waste any time.

Appraiser

Lender

• Simply put, an appraiser’s job is to see if the home is worth what it is being purchased for. Unlike a CMA (comparative market analysis) or BPO (broker’s price opinion) that an agent provides, an appraisal is an official documented method of exacting a price for a property. The price may dictate the loan amount, and the mortgage company is only able to lend what the property is worth. Hence, how the appraisal can affect the ability for home purchase on the buyer.

Underwriter

Buyer

• This happens far along the process of loan approval. The underwriter goes a step further than the initial pre-approval process of the loan, and goes through the buyer’s financial information with a fine tooth comb. This is usually the step where the lender may be reported of anything specific during credit checks or any misinformation that is now known that can affect the buyer’s ability to follow through with the loan.

Escrow Agent

Buyer, Seller, Buyer’s Agent, Seller’s Agent, Lender

• The escrow agent is established the moment the contract has been executed. They represent the title company, and will act as the representative of that company for the transaction. Their job is to act as a third-party by collecting all necessary documents to the transaction and to close on the transaction on the closing date. Their primary job is to update and keep track of the process of the transaction for all parties involved.

Phew, that was a lot to cover! Although this is a lot of information, we wanted to provide a guide to help people understand just a little bit more on what we do during the housing transaction process. No, we do not expect our clients, not even customers, to memorize and know all this. What we strive to do in our posts is to always provide more factual material rather than less. We still and always will believe in bringing power to the clients, and providing original educational material is just a small way for us to do so.

We hope this will help whoever needs it. It will be here whenever you need it to use it for reference! Of course, if you need our assistance to make heads and tails of the housing process in general, that’s our specialty. If you would like to let us know what you’d like to see us cover for other blog topics or need our assistance, please let us know using our Contact form, or email us @ [email protected]. We cannot wait to hear from you!