Real Estate Law Research Paper Starter

Real Estate Law

This article is an overview of the laws regarding real estate transactions, or real property law, and the obligations that arise under purchase and sale contracts. Real property means land and things permanently attached to the land such as houses, buildings and other structures. There are numerous federal and state laws affecting real estate transactions, and each state's laws contain significant differences. Specific real estate transactions include purchases, sales and leases, and contract law governs the sale of real estate. This article will focus on laws related to residential property.

Keywords Closing Agent; Closing; Community Property; Contract of Sale; Covenant; Deed; Easement; Encumbrance; Equal Credit Opportunity Act (ECOA); Fair Housing Act; Home Mortgage Disclosure Act (HMDA); Joint Tenancy; Lien; Listing Agreement; Mortgage; Mortgage Closing; Ownership Interest; Promissory Note; Real Estate Settlement Procedures Act (RESPA); Real Property; Residential Property; Sole Ownership; Survey; Tenants by the Entirety; Tenants in Common; Title Insurance; Truth-in-Lending Act (TILA)

Law: Real Estate Law


The number of people becoming homeowners continues to rise, and more people are investing in real estate than at any time in history. Despite increases in housing prices, this trend is likely to continue. There are many federal and state laws that govern real estate transactions. The following is a brief summary of the federal laws:

Federal Real Estate Law

The Fair Housing Act

This law was initially authorized by Congress in the 1960's and was aimed at prohibiting discrimination in the rental or sale of a home based on race, color, religion or national origin. The Act was amended in 1974 to include sex as one of the protected classes and again in 1988 to include family status and disability.

The Equal Credit Opportunity Act (ECOA)

This Act prohibits lenders from denying credit to a mortgage loan applicant based on the same criteria set forth in the Fair Housing Act.

The Real Estate Settlement Procedures Act (RESPA)

RESPA is a disclosure regulation that requires lenders to disclose to loan applicants the costs that will be charged for the loan, known as closing costs. Such costs include origination fees, application fees, mortgage broker compensations and title charges. Lenders are required to provide a good faith estimate (GFE) of these charges within 72 hours of the taking or the completion of an application. Closing costs average 2 percent of the loan balance (Dreier et al., 2012).

The Truth-in-Lending Act (TILA)

TILA is another federal disclosure law that requires lenders to provide complete and accurate information to loan applicants about the cost of credit and the terms of payment.

The Home Mortgage Disclosure Act (HMDA)

HMDA is a federal law that requires banks and mortgage lenders to collect, report and disclose information about mortgage applicants. The Act is aimed at preventing discrimination based on the above-mentioned criteria (Clark 2006).

State Real Estate Law

These are just some of the laws that affect real estate transactions. There are also state laws that come into play and these vary widely from state to state. For example, the requirements for closing agents can differ greatly. A closing agent is the responsible party for conducting a mortgage closing, ensuring that all parties are paid, and that all required documents are properly prepared, executed and recorded, as well as reviewing title issues. In many states preparing form documents is considered the practice of law, and so only attorneys admitted to the bar can prepare documents. In other states, settlement agents are allowed prepare those documents. A settlement agent is usually an agent of a title insurance provider.

Not only are there different state laws that affect real estate transactions, the actual practices involved in the sale and purchase of real estate differ state by state. The balance of this article will be a general description of those practices and legal concerns in New York.


Real property is the legal term for real estate and ownership of real estate. Real property, in turn, means land and things permanently attached to the land such as homes, buildings and other structures.

Ownership Interests

There are a number of types of ownership interests:

  • Joint Tenancy: property that is owned by two or more people in equal interests. Each tenant has the right to possess the entire property, and ownership interests pass to the surviving tenant in the event of death.
  • Tenancy in the Entirety: a form of joint tenancy when the joint tenants are husband and wife.
  • Sole Ownership: property owned by one person.
  • Tenants in Common: property that is owned by two or more people but not necessarily in equal interests or with equal rights of possession. Property passes to heirs in the event of death.
  • Community Property: applies only in states that recognize community property — a form of joint tenancy between husband and wife with each owning half, and whose interests pass to heirs upon death. Please note that New York is not a community property state. A state that does recognize community property is California. (Beck and Arad, LLP, October 1997).


A person can assume ownership of real property in a number of ways, but the most common method by which one becomes a homeowner is by a purchase and sale. In a real estate transaction, a seller often uses a real estate broker, and the broker acts as an agent of the seller. Acting as an agent requires the broker to meet certain ethical standards to ensure that they will use their best efforts to locate a buyer for the property at a price that the market will bear. Real estate brokers are required to be licensed by the state. While the seller and the broker are not required to entire into a formal written agreement, they usually have an agreement that is also referred to as a listing agreement. The various types of listing agreements are as follows:

  • Non-Exclusive Agreement: Sometimes referred to as an open listing. Here the owner can hire several brokers and a commission is paid only to the broker who finds a buyer.
  • Exclusive Agency Agreement: The seller is only permitted to hire one broker, but the seller can also find a buyer without the broker's assistance. In such a case, the broker is not entitled to a commission.
  • Exclusive Right to Sell: The broker has the exclusive right to sell. This means that the broker must be paid a commission even if the seller finds the buyer.
  • Multiple Listings: In this scenario, a listing broker lists the property with a number of brokers. The broker who sells the property splits the commission with the listing broker. The listing broker customarily also receives a fee for providing listing services. (Beck & Arad, LLP. October 1997).


Once a buyer and seller have been brought together, they will enter into a real estate sales contract. There are certain basic requirements for a sales contract to be valid. The contract must be in writing, and it must include all relevant provisions regarding the purchase of the property, including but not limited to, the name(s) of the seller(s) and the buyer(s), the property address and the legal description, the purchase price, whether the property is being sold "as is" (this means that the buyer is required to make any needed improvements to the property or repairs to any of the structures on the property), or in the alternative, if the seller is required to make any such repairs.

Further, the contract should also indicate whether the seller is entitled to an upfront commitment fee (usually a percentage of the sales price), and whether that fee is refundable in the event that the buyer cannot secure financing for the property. In this regard, it can be helpful for the buyer to obtain a "pre-approval" from a bank or mortgage lender. (Please note that a pre-approval does not commit the lender to make a loan to a prospective borrower). It is also probably in the best interest of the seller to have a deadline for when the sale will be consummated. In some cases, a buyer's ability to secure financing can be delayed by a host of factors. This can cause undue harm to the seller if the proceeds of the transaction are being used to pay for the purchase of a new home or meet another financial obligation or agreement. Finally, all the parties involved must sign the contract, and the contract must be dated.

In general, the seller's attorney will prepare the contract. In order to do so, the attorney will need to review a number of the underlying legal documents including the deed, survey, title insurance policy, outstanding promissory notes and mortgages, and leases if any. In some cases, a pre-existing note or mortgage may have a restrictive covenant regarding the sale...

(The entire section is 4089 words.)