In the not-so-distant past, a typical residential real estate transaction involved just a couple of people outside of the buyer, the seller and the real estate agents.
These days, a baseball stadium would barely hold the crowd needed to close some residential deals. The real estate industry has become a sophisticated, rules-and-regulation-ridden affair.
When you multiply the number of transactions by two, the list can grow even longer, which sums up the year-long experience of Russell and Kathryn Mehrtens.
Between July 1996 and July 1997, the Mehrtenses sold one house and bought another. The closings were held back-to-back on the same day.
Fortunately, both transactions were handled by Fox & Lazo offices in Marple, Pa., and Media, Pa., so the couple didn’t have to deal with more than one real estate firm and separate–and often highly competitive–sets of agents and brokers.
Still, the transactions involved the services of four agents, the office manager, several inspectors, contractors to make repairs, mortgage underwriters, appraisers, title companies, a conveyancer, one or two homeowners’ insurance agents and employees of the Upper Darby Township, Pa., office.
Still, there could have been more, had each of the parties involved lawyers, for example. Or had the houses needed asbestos and radon inspections.
Had the Mehrtenses been unfamiliar with the area’s school systems, early in their selection process they might have needed the services of an independent reporting service that provides such information.
If they had been relocating from out-of-state, there would have been another layer of people from the relocation company.
As real estate grows more complex, the list of specialists involved in a sale or purchase will continue to grow. The typical house buyer, for example, has to wade through almost 40 sheets of paper to make it to the end of the transaction.
“In 1967, the settlement sheet was three-quarters of one side of one page,” said Noelle Barbone, office manager at Weichert Realtors in West Chester, Pa.
Because you can’t tell the players without a playbill, here’s who the current players are and what they do:
– The agent. The agent who obtains the contract to list the property for sale is the “listing” agent. The agent who sells the house is the “selling agent.” But it’s not that simple, thanks to a consumer-driven change in the law of agency in recent years.
Disclosure laws in some states require agents to divulge details of business relationships they might enter into when working on a transaction. They are: buyer’s agent, seller’s agent, dual agent (representing both sides) and transaction broker (who represents neither side).
Each agent may have a personal assistant. Such assistants handle details of each transaction.
– Broker of record. This is typically the owner of a small firm or the office manager of the branch of a larger one who is legally responsible for the transaction, oversees each detail and holds all money in escrow.
– Conveyancer. It’s the job of Alexis Artese of the Media office to coordinate all the pieces of paper involved in each transaction. She orders tax certifications, schedules settlement dates and times, and sends reminders to all parties to make sure contract dates are met, among many other duties.
– The lender. There were two, Shelter Mortgage and Founders Bank, involved in the Mehrtenses’ transactions, so that means there were two sets of people involved in the process.
Among them are the mortgage solicitor, who takes the mortgage application; the processor, whose duties are similar to those of the conveyancer in the real estate office; and the underwriter.
The underwriter is the one who approves or denies the loan based on the property or the applicant.
The processor is the medium through which the underwriter and the applicant interact.
The underwriter obtains credit information on the applicant from a reporting service — and that adds one or more people to the process. There are three major credit-reporting services in the United States.
Thirty years ago, when mortgage options were limited and everyone who had a conventional fixed-rate mortgage put 20 percent down, there was no need for private mortgage insurance.
In these days when buyers can put a minimum of 3 percent down on a mortgage of their own design, someone must guarantee the difference between the actual down payment and the required 20 percent in case the borrower defaults.
That’s the job of the private mortgage insurer, and while arrangements for such coverage are made between insurer and lender, it does add another person or two to the transaction.
– The appraiser. Although the appraiser is hired by the lender, the job is so crucial to a transaction that it deserves a place by itself. The appraiser’s job is to estimate the value of real property so that the lender will know whether the amount being lent to the purchaser can be recovered if the borrower defaults on the mortgage.
– The inspector. Thirty years ago, when you said inspector, you meant “termite.”
Now, inspector means termite as well as radon and asbestos. For many suburbanites, it also means well and septic. For houses built before 1978, it may also mean lead paint.
Some house-inspection companies are qualified or licensed to do it all. Most aren’t, so for houses with extremely careful buyers, inspections can add six more people to a transaction.
Upper Darby Township sent its own inspector to the house the Mehrtenses were selling. The inspector required the replacement of several concrete blocks and curbing.
Upper Darby Township also provided tax certifications required for settlement, with another clerk involved.
Because the Mehrtenses’ buyer was getting a Federal Housing Administration mortgage, FHA inspector Robert Barr was added to the list. He required the Mehrtens to put a new roof on the garage, install relief valves on the furnace and hot-water heater, paint the window sills and install a new concrete sidewalk.
The termite inspection uncovered infestation at the Mehrtenses’ old house. The termites were treated by an exterminator, and a general contractor was hired to do repairs.
Both the FHA inspector and the exterminator reinspected the Mehrtenses’ house, and it passed.
– Insurers. Although private mortgage insurance is needed only in transactions with down payments of less than 20 percent, hazard insurance is needed on all houses, at least to the extent of the mortgage debt. That involves at least one insurance agent.
All new houses and many resales also have home-warranty insurance, which protects against certain defects over a specified period. That also typically involves an agent.
Title insurer. All property sales are contingent on a title examination, usually conducted by a title company. The title search shows that the seller owns the property, has clear title, and that all liens and claims have been eliminated by closing. A title clerk who conducts the research and a service representative who arranges for title insurance to protect the buyer against unanticipated claims also are involved.
A title-company employee typically presides at the closing.
– Lawyers. In some transactions, one or both parties can hire a lawyer to represent their interests. A lawyer is usually brought on before the agreement of sale is signed and stays with the buyers or sellers to the point the papers are signed.
There were no lawyers involved in the Mehrtenses’ transactions. In fact, the people who sold the Mehrtenses their new home gave their agent their power of attorney to sign all necessary closing documents for them, so they didn’t even have to show up for settlement.
If you are keeping score, that means you can subtract two from the final list.
