Real estate transactions are regulated by a wide body of federal statutes, and a combination of state statutes and common law. The requirements established by state law often differ significantly from one state to another.
Real estate brokers act as agents for sellers to find buyers for their properties. See Agency.
The contract between the broker and seller is called a listing agreement, which can be open or exclusive. An open agreement allows the broker to earn a commission only if they find a buyer. In contrast, a listing agreement is exclusive when the broker is the only agent entitled to a commission for finding a buyer. Under an exclusive agreement, a broker may be entitled to a commission even if the seller finds the buyer without the broker's aid. Real estate brokers and salespeople are licensed and regulated by local state laws, with additional guidelines often provided by professional organizations. See, e.g., California Civil Code § 2079.
The Federal Fair Housing Act prohibits discrimination in real estate transactions on account of race, color, religion, sex, or national origin. See 42 U.S.C. §§ 3601-3631. Real estate brokers are specifically prohibited from discriminating by the act. See § 3606 of the act.
The agreement to sell between a buyer and seller of real estate is governed by the general principles of contract law. See Contracts. The Statute of Frauds requires that contracts for real property be in writing. See, e.g., California Civil Code § 1624.
It is commonly required in real estate contracts that the title to the property sold be marketable. This requires that the seller have proof of title to all the property they are selling and that third parties not have undisclosed interests in the title. See Real property.
Buyers commonly employ title insurance companies or attorneys to investigate title marketability and protect against invalid titles. In order to transfer title, a deed with a proper land description must be executed and delivered. Some states require that the deed be officially recorded to establish ownership of the property and/or provide notice of its transfer to subsequent purchasers.
The most common method of financing real estate transactions is through a mortgage.
[Last updated in March of 2024 by the Wex Definitions Team]