Real Estate Transaction Process Flowchart

Hello everybody, this is Tim Brooks with the Brooks Group at Keller Williams Realty. Today I'm very excited to present to you real estate transaction overview, a bird's eye view of a real estate transaction from the very beginning when we're first meeting with a prospect all the way through the end and we're collecting a check at the closing table. Now I want you to start thinking about the deal flow of a real estate transaction in two phases. The first phase is gonna be the sales process. So that's gonna be meeting your client, prospecting and going all the way through negotiating and ratifying a contract. The second phase is gonna be the contract to close phase and that's gonna be from contract ratification to closing. Now this is an overall view of the transaction deal flow with the seller's portion of the transaction being on the left-hand side and the buyer's side of the transaction is on the right-hand side. Notice the seller has comparatively fewer steps in the transaction process where the buyer actually has a lot more steps in that transaction. So let's start on the seller side and as you can see there really just isn't a whole lot to it so we're gonna start out with a seller, we're gonna have a listing appointment, go on that listing appointment and we're gonna go over the market analysis with them, we're gonna go over the listing paperwork itself that makes them a client, we're also at that time there we're gonna have them sign all of the disclosures that we're ultimately gonna give to the buyer which will then come back to the seller in the form of an offer and then a ratified contract. So present the CMA, establish a listing price which is part of the listing agreement, have the listing agreement signed preferably at that initial meeting that you go to with them and then from there you have a signed listing. You're gonna come back to the office, that's gonna go in the MLS, we're gonna put in all of the advertising we're gonna do which most of it gets fed in through the MLS, Enlist Hub and some of the other means that we advertise through, we're also gonna be in Boomtown making our cold calls, everything else, hold open houses and really once that marketing goes out there and our prospecting calls with our buyers that's about it on the seller side. Don't forget we're gonna have at that point we're gonna order professional photographs, we're gonna make sure that the lockbox gets put on that property but one of my goals is really to go out to that property as few times as possible. So again, go to the property, meet with the seller, establish the price, get the listing agreement signed, get your disclosure signed, put it in the MLS, have your professional photos done and then that's it. That's why sellers are so awesome to work with because it's really it's fire and forget. Guess who's actually gonna go sell that listing? Is it gonna be you? No, it's gonna be somebody else. That's why I've always loved listings more than anything in the world. You do the work up front, let somebody else sell it. Now moving over to the buyer side, there are a few more moving parts. Each one of these parts is very important. So it's important that you follow the deal flow, that you don't skip any steps. That's usually where agents start getting themselves in trouble when it comes to the buyer side of the transaction. Now initially the first thing we're gonna make contact with a buyer, we're gonna identify which buyer's in the market within the next six months and the very first thing is get that buyer agreement signed. We never, ever, ever take a client out looking at a property without a signed buyer agreement and without a pre-approval. So that stands to reason that the very first things you're gonna do is get a buyer agreement and then we're gonna work on the pre-approval process. Once we've spoken with that buyer, we've done our comprehensive buyer interview, we've gone through all of their wants, their needs, their top 10s. We've talked to them about the buyer agreement and why that's important for them and how that benefits them. We've also spoken with them about the lender and why that's important to be pre-approved prior to us going out, then it's time for them to actually speak to the lender. Whether you conference that lender in on a conference call three-way with them or whether you send them to the lender or if they've brought their own lender to the table, the next step is for them to actually apply with that lender. So the lender does the application and at that point there, they're gonna either be pre-approved for a certain amount or they're gonna be unable to qualify, whether it's because of their debt-to-income ratio was too high, credit scores weren't high enough, they didn't have enough money to close, et cetera. If they are unable to qualify because of any of those reasons, then it's time to develop a plan such as, and a lot of lenders will have plans as far as credit repair or we need to figure out do they need a cosigner to go on there and help them with the purchase, do they need to pay off some credit cards to make sure their debt-to-income ratio works, et cetera. Whatever it is that's causing them not to qualify, we need to come up with a plan and put them on a nurture campaign and make sure that that lender is staying on top of them and that they're moving towards their credit worthiness goals to qualify. Now, if they do qualify right off the bat, then the lender is gonna give a pre-approval letter. It's very important that we have that pre-approval letter in hand prior to going out and searching. So the next step from there is we have a pre-approval letter, we've done our comprehensive buyer interview so we know exactly what they're looking for, we know exactly how much they're qualified for. Now, never, never, never take them out looking at properties above what they're qualified for because you're just gonna end up disappointing your buyer at that point and they're gonna become very frustrated and not buy anything. So from there, we're gonna take them out looking at, we're actually gonna send them all of the homes within their buying criteria and their price range. We're gonna have them narrow that down to their top 10. From there, we're gonna ask them which ones are their top five favorites out of those 10 and of those top five, we're gonna let them know these are the ones we're gonna go look at but we're gonna look at the top three first so let's narrow it down one more time. This lets them know that they are looking at the three best properties on the market first so that they don't have a need to have to see everything in the market before making a decision. Now that we've looked at the top properties on the market and they've indicated an interest in making an offer, then it's time to actually put together and craft the offer itself. So we're gonna find out what are our terms of our offer gonna be, settlement date, how much of a deposit are we gonna put down, is there a seller contribution towards closing costs that they need, et cetera. Then we're gonna take the disclosures that the seller provided us initially and then we're gonna take our offer in a purchase contract and we're gonna mix those two together and submit that in the form of an offer. This is actually the exciting part where the two sides finally converge into one. As the buyer's agent, you're gonna have your offer in hand and signed with everything ready to go including a copy of the deposit check and the pre-approval letter. You're gonna submit that to the listing agent. At this point here, this is where the really exciting part of the transaction begins, it's the negotiations. This is where you either save or make your client a lot of money. So now we're in the negotiations phase of the process. The buyer's agent has submitted the offer as well as a copy of the pre-approval letter and a copy of the earnest money deposit check to the listing agent. At this point here, the listing agent submits this to the seller, comes up with a response of either they're gonna accept that offer, they're gonna counter offer with a different price or terms or they're gonna reject the offer outright without a response. So then it goes back to the buyer's agent who then checks in with the buyer for whatever their response is and that can go back and forth a couple times until there's a meeting of the minds and they've agreed upon the price and terms. Once the price and terms have been agreed upon and the offer is then signed by the seller, we now have a ratified contract and we then move into the next phase which is contract to close. As we move into the contract to close phase, things start moving very quickly and then there starts to be a lot of moving parts. The main things to deal with once the contract has been ratified is the title company, the loan approval process, the home inspections and then the appraisal which is part of the loan process. We're gonna break that down here real quick. So as soon as that contract is accepted, you're gonna submit a copy of that contract as well as with that deposit over to the title company as soon as possible. You're also gonna make sure if you're on the buyer side, you're gonna immediately submit that same contract to the lender so they can get started with the loan approval process. The buyer's then immediately gonna contact their insurance company and start the homeowner's insurance process. Now from there, once that loan officer has that contract, they're gonna immediately order the appraisal. The appraisal's gonna be done within say one week of it being ordered. The appraiser's gonna come out to the property, they're gonna look at comparable sales and they're gonna determine a value on that property. The loan is then gonna go through underwriting where the mortgage underwriter's gonna go through and make sure that all of the things that were submitted during the pre-approval process such as the W-2s, pay steps, tax returns, that those things all actually match and are verified and work for this particular loan. They're gonna make sure that the credit scores are still good, the debt to income ratio fits the guidelines for that particular lending program and that we have enough funds to close. And finally, they're gonna issue a loan approval and a clear to close prior to closing. Back to the inspections. As soon as that contract is accepted, if you're working on the buyer side as a buyer's agent, you're gonna order the home inspection with your inspector. Now generally, you're only gonna have between seven and 10 days to actually have that inspection done and then submit any request for repairs, if any, to the listing agent. So you'll have the home inspection completed, you're gonna review that home inspection report and if there are any items that need to be repaired, you're gonna make an addendum and you're gonna submit that over to the listing agent. Now let's go through the title work real quick also. So same thing, as soon as that contract is accepted, you're gonna submit that contract to the title company. In the state of Maryland, the buyer has the choice of title companies. So the title company's then gonna go through, do the title search, preliminary title report and make sure there are no problems there. On the seller side, just as above in the sales process, the seller has very little to do in the contract to close section. Really, you're just gonna make sure that all of the disclosures that are required by law were provided. You're gonna facilitate entry into the home for the home inspector. Please don't have your sellers be there, it gets awkward. Also, finally, once the buyer's agent has submitted any request for repairs, if any, the listing agent is gonna take that to the sellers and then they're gonna negotiate one more time. You're either gonna accept whatever repairs they're requesting and have a contractor do those repairs or you're gonna negotiate some sort of seller credit to the buyer so they can do the repairs themselves after closing. Either way, it's whatever the buyer and seller agree to. So there's that one final little negotiation. And then finally, once all of those moving parts have been completed, meaning, okay, we've checked off the home inspection, the buyer and seller are good with all of that, the insurance has been ordered and sent to the title company, that's all good, the loan has gone through its entire process and we have a clear to close, the property appraised, all of that, finally, we're able to go to closing. And it's very important that all of those things have to happen by the date that was in the contract that we agreed to close by. If not, and sometimes the lender's a little slow, et cetera, or there's a problem, we may need to extend the settlement date. But finally though, we're ready to close, the lender sends over all of its documents and requirements to the title company and the buyer shows up with a buyer agent, the seller shows up with the seller's agent, they meet at the table, they sign all of the closing documents and finally, we're closed. The seller will bring the keys, any garage door openers, important documents, things, warranties for the appliances and things, they'll bring those things, hand them off to the buyer. The buyer's agent, just prior to closing, will take their buyers and do a final walkthrough to make sure that that property is in the same condition on the day of closing as it was when they put it under contract, that there's no new damage or that the seller didn't move all of their stuff out, et cetera. And as long as everything is good there, as a courtesy, the buyer's agent will actually bring the lockbox to closing to give to the listing agent so they don't need to come back out to the property and get it. The keys are exchanged, checks are exchanged, the buyer's thrilled they have a new home, the seller's thrilled they got their home sold and all is well with the world. Now that is how a complete transaction works from start to finish. If you have any questions, let me know down in the comments section. Thank you very much for attending this training session and we look forward to the next one.