The Real Estate Transaction Process Overview

Got a question via email today, asking about the Real Estate Transaction Process. Let’s take a broad look at what actually happens - the steps a buyer and seller go through - when real estate is bought or sold, in Tucson and the State of Arizona.

Disclaimer: This is just an overview, and assumes the standard AAR Purchase Contract for Resale Real Estate is being used! If you’re currently in an agreement to buy or sell real estate in Tucson, you should ask your agent for more specific information.

Stage One: Offers and Negotiations

A Buyer starts the transaction by writing an offer and submitting it to the Seller. The Buyer proposes a set of terms and conditions, which may include:

the purchase price
the inspection period length
the amount of earnest money
the closing date
if a home warranty will be provided and by whom
which party will pay for the loan costs
and how long the Seller has to respond to the offer.

This begins negotiations. The Seller may accept, reject, or create a counter offer to that offer. The Seller sends their response to the Buyer. The Buyer has the same choices, and the negotiations continue until both parties can agree, or until one party rejects the other’s offer. If everyone can agree, then we move to Stage Two.

Stage Two: Inspections and Appraisals

Once everyone agrees, the inspection period begins and the Buyer’s Agent opens escrow. Escrow is just a neutral third party that, among other things, deposits and holds onto the Buyer’s earnest money.

During the inspection period, the Buyer should hire a home and termite inspector, and should have all of their questions answered so that they are comfortable purchasing the home. It’s the Buyer’s job to do all of the inspections, and the Seller’s job to disclose everything they know about the property. The appraisal may also be done within the inspection period.

Once a Buyer has conducted all of their inspections, before the inspection period ends, the Buyer may decide to back out of the deal, to take the house as-is, or may write up a repair request. This is a one-shot time to ask for repairs, and is the start of Stage Three.

Stage Three: Second Round of Negotiations

Stage Three is the second round of negotiations, which involves repairs. Once the Buyer is done with inspections, they write a repair request and deliver it to the Seller. The Seller has three options: they can do all the repairs, do none of the repairs, or counter the request in some manner. The Seller sends their decision to the Buyer, and the Buyer gets one last chance to say “yes” or “no” to the property, knowing what the Seller will and will not repair.

This last Buyer decision to purchase or not purchase the property is what I call the point of no return. Usually (remember my disclaimer at the beginning?), this is the last point in the real estate transaction where a Buyer can walk away from the deal and still get their earnest money back.

Stage Four: Underwriting, Loan Processing, and Repairing

Once the Buyer and Seller have agreed on repairs, then there’s typically a bit of a wait before closing. During this time, the Seller has the time to make the required repairs to the house, the Buyer’s lender has time to send the loan through final approval and underwriting, and the title and escrow people prepare title insurance and manage the lender documents, and calculate final costs for both parties. Once all of that work has been done, we move to Stage Five.

Stage Five: Signing and Recordation

Stage Five is where documents are signed and are recorded downtown at the County Recorders office. The Buyer and Seller independently come into the escrow office and sign documents. The Seller signs over the deed and tax information, and the Buyer signs their loan documents and brings in the remainder of their money for the down payment and closing costs. In Tucson, the Buyer and Seller are supposed to sign documents three days before the scheduled close of escrow. Once all the right papers are signed, the escrow officer disperses the documents, receives money from the Buyer’s lender, transfers the money to the proper people, and sends the papers downtown to record. Once those documents record, that’s the end of the transaction! The Buyer now owns the house and usually has the right to enter and take possession of it as soon as those documents record. The Seller can have their profits wired into their account, or can pick up a check from escrow, usually the next day.

So there you have it. That’s the general overview of the real estate transaction process, at least in Tucson. More questions or comments? Send ‘em over!