Buying or selling real estate—whether residential or commercial—is a significant legal and financial decision. Although the process might appear simple, issues can happen at any point, from the sale agreement to the closing.
In the majority of U.S. states, standard legal protections apply. However, some states have unique rules or additional requirements, making it critical to understand what applies in your jurisdiction.
Below are key issues to watch out for in real estate transactions, along with state-specific examples that illustrate where laws diverge.
Key Factors To Consider in Real Estate Transactions
1. Title Issues and Ownership Disputes
Having a clear title is essential before property can be legally transferred. Problems such as unpaid taxes, liens, or errors in public records can delay or prevent the sale of real property.
Most buyers choose to purchase owner’s title insurance to protect against future legal claims or title defects. Title insurance provides coverage to protect property owners and lenders against any defects in the title, including liens, fraudulent transfers, or errors in the recording of the deed.
2. Disclosure Laws
The real estate law of most states requires sellers to disclose any known material defects, including issues such as foundation damage, mold, or past flooding. These laws aim to protect buyers and promote transparency and accountability by requiring sellers to complete detailed forms that outline known defects. In some states, sellers are required to disclose only hidden defects that could not be found during a routine inspection.
3. Financing and/or Mortgage Contingencies
Most real estate contracts include a mortgage contingency, which allows the buyer to cancel without penalty if a mortgage or financing cannot be secured by a specific deadline.
These clauses are critical for the protection of buyers and are standard in the majority of states. If a contract lacks this language or is too vague regarding this matter, the buyer risks losing their earnest money, or they may be legally obligated to proceed without a loan.
4. Clear Contract Language
A valid real estate contract must be in writing and must clearly state all essential terms, including the purchase price, legal property description, all deadlines and contingencies, and any items specifically included in the sale.
Standard contract forms are used to simplify residential transactions, often including contingencies for attorney review or property inspections. Legal advice is recommended, especially in complex transactions or non-standard agreements.
5. Zoning and Land Use Restrictions
Zoning laws regulate how land can be used—the most common uses are residential, commercial, agricultural, or industrial—and may restrict construction, renovations, or business activities on a property.
These regulations are typically set at the local level, and rules can vary widely between cities, counties, and even neighborhoods. Whether you’re buying for personal or commercial use, always review local zoning ordinances before closing.
6. Closing and Escrow
The closing process—the final step in the transaction—can vary significantly across states.
In the majority of U.S. jurisdictions, closings are typically handled by real estate attorneys or licensed escrow and title agents, depending on local customs and laws.
Understanding who handles the closing, what documents are needed, and how funds are transferred is essential to avoid last-minute surprises or delays.
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