REAL ESTATE TRANSACTIONS
Role of the Lawyer.
In most cases both the
buyer and seller of real estate are
represented by a lawyer, and the lending
institution relies on the buyer's lawyer to
prepare a Title opinion to assure marketable
title will be passed on to the buyer.
Some lending institutions engage
separate counsel, and buyers often choose to
rely on the lender's counsel in order to
keep legal fees at a minimum.
Offer to Purchase Agreement.
In most residential
transactions, the real estate agent prepares
an offer to purchase agreement (once the
parties reach agreeable terms) and has both
parties sign it.
The agent also deposits earnest money
in a trust account.
Certain disclosure forms on the
condition of the property and the possible
presence of lead-based paint must be
completed by the seller and delivered to the
buyer before the buyer signs the purchase
Most purchase agreements
require the seller to provide a certificate
that the property is free of wood-destroying
insects (or to provide treatment, if
necessary); require the seller to pay unpaid
real estate taxes and to prorate to the date
of closing taxes that have not yet been
billed by the county; and specifies that the
closing of the sale will occur on or before
a certain date.
For Sale by Owner.
If an owner sells real
estate without the assistance of a realtor,
the lawyer for either the seller or buyer
usually prepares the offer to purchase
agreement, and assists the seller in the
completion of any required property
The seller is required by
provide an Abstract of Title that has been
continued to the current time by an abstract
The buyer and lender usually rely on
a written Title Opinion prepared by the
buyer's lawyer and based upon an examination
of the Abstract.
Any objections are resolved by both
parties' lawyers before the closing.
After the closing a Deed (and usually
a Mortgage) are recorded.
The Abstract is continued again and
returned to the lawyer, who issues a
Certificate of Title to the lender that
certifies that the buyer has clear title to
the property and that the lender's Mortgage
is the first lien on the property.
State law prohibits the
sale of title insurance in Iowa.
The Legislature has taken this
position because of
recording of all material that may affect
title to real estate, and as a result of
studies that show title insurance increases
the cost to the consumer without any
The Iowa Finance
Authority (a state agency) in recent years
has developed a title guaranty system in
which a lawyer may issue title commitments
and guarantee certificates to the owner and
The guarantees are backed by the Iowa
Title Guaranty Fund.
This satisfies any requirements of
out-of-state lenders that may be more
familiar with the use of title insurance.
In addition to providing
the Abstract of Title showing good title and
delivering a Warranty Deed to the buyer, the
seller has these other obligations:
Iowa Transfer Tax.
The seller must pay (to the
Recorder) a transfer tax
based on the actual sale price of the real
The tax rate is 80 cents for each
$500 or fractional part of $500.
The first $500 of the sale price is
exempt from tax.
Declaration of Value.
The seller must submit with the Deed
a form that describes the property being
sold and certifies the sale price of the
Groundwater Hazard Statement.
The seller also submits with the Deed
a statement concerning known hazardous
waste, underground storage tanks, and wells
on the property.
Real Estate Taxes.
operates on a fiscal year of July 1 to the
following June 30.
Real estate taxes that accrue during
one fiscal year are due and payable in the
following fiscal year.
For example, taxes for the 2007-2008
fiscal year become a lien on the property on
July 1, 2008, and are due and payable to the
County Treasurer in the 2008-2009 fiscal year.
The first half is delinquent if not
paid on or before September 30, 2008, and
the second half is delinquent if not paid on
or before March 31, 2009.
Since real estate taxes
due and payable in the fiscal year are a
lien against the property, the taxes must be
paid in full in order to provide good and
marketable title to the buyer.
Since most purchase agreements
require the taxes to be prorated to the date
of closing, the seller must pay a prorata
portion of the taxes that will be due and
payable in the following fiscal year.
Proration requires calculating the
number of days from July 1 through the day
of closing and prorating the estimated
Since those taxes are not actually
set by the county until July or August of
the following fiscal year, the proration
typically is based on the taxes for the
current tax year and paid or credited to the
buyer at closing.
If a lending institution
is involved in lending the buyer funds for
the purchase, the closing usually occurs at
the lending institution (or another place
designated by them).
If no lender is involved, the most
common practice is to have the closing at
the seller's lawyer's office (but sometimes
at the buyer's lawyer's office).
--June 6, 2008.
Copyright © 2010 by
Brown, Fagen & Rouse. All
rights reserved. You may reproduce
materials available at this site for
your own personal use and for
non-commercial distribution. All
copies must include this copyright