In the past few months I’ve received many calls from people who are either trying to buy or sell a home and have general questions about the process. Many people opt to use a realtor who can help you through the paperwork process. Others choose to try it on their own, venturing into the world of For Sale By Owner. So just what steps are there to a residential sale?
The basic steps and paperwork you will absolutely want to include are:
- Real Estate Condition Report disclosing any “defects” in the property which MUST be given to the buyers before they make an offer. It is required by Wisconsin Law!
- Offer to Purchase (including any contingencies from the buyers such as financing, selling their current home, inspection, closing date, etc.) Traditionally the buyer generates the offer and seller accepts, creating a binding sale agreement.
- After the sale agreement is in place, the buyers and sellers get busy arranging financing, inspection, and making sure all the contingencies are met.
- Proof of title. If buyers are financing the purchase with a loan, their bank is likely going to require title insurance. This process involves a title company who checks the history of piece of land for any outstanding owners, rights, liens, etc. Usually if a title company is involved, they handle all the rest of the closing documents.
At the “closing” you will see the following documents:
- Settlement statement. This sets out the purchase price, reduction for the current year’s taxes which will be paid by the new owners, costs for title insurance, fees for recording the documents, the tax that sellers have to pay, any mortgage payoff you may have, and details the exact amount of money that the buyers will be paying and the seller will be receiving.
- A deed transferring the property and any other documents needed to ensure the title to the property is clean such as a Satisfaction of Mortgage from the bank who holds the sellers’ loan.
- Tax reporting. Whether a title company, lawyer, or realtor handles the “closing” there usually is a 1099-S disclosing the sale price to the IRS. You will need to talk to your tax preparer to get advice on reporting the sale for purposes of income tax.
Because realtors, banks and title companies handle so much of the paperwork, there usually is very little for a lawyer to do in the typical home sale, unless they are hired by the realtor, bank or title company. That doesn’t mean you absolutely won’t or don’t need a lawyer. You should always feel free to contact a lawyer if you have concerns about the process, documents, or if issues arise.
If you are interested in more details about the sale process, the State Bar of Wisconsin’s website has a page that explains Buying/Selling Real Estate. The site provides information about each step and the documents in more detail.