The usual documents are the following:

• Sale and purchase agreement

The first document in any real estate acquisition is normally the sale and purchase agreement between the buyer and the seller. This agreement should contain all the necessary business terms for the transaction, including the description of the land, purchase price, deposit (if any), the closing date and any other special terms. These agreements also typically contain conditions for the benefit of the buyer and representations and warranties by the seller. These agreements outline what documents will be required to complete the transaction. Such documents may include deeds, bills of sale, transfer tax declarations, title clearance documents, 1099s, FIRPTA statements, etc.

• Due diligence report

Once the sale and purchase agreement is signed, it is generally the responsibility of the buyer, usually through the buyer’s lawyer, to conduct due diligence with respect to the property being acquired. The due diligence period provides the buyer with the ability to investigate the property and determine if it wishes to proceed with the transaction. This includes title and zoning searches and a review of any leases and surveys of the property. An independent environmental assessment is recommended and an independent engineering review of the property, particularly in the case of property with older buildings, is common. The buyer’s lawyer will also provide a title opinion to the buyer or obtain title insurance for the buyer. A title policy is the universal insurance obtained by a buyer, lender or tenant.

The trend is for sellers to give limited representations and warranties and the buyer often takes a property in its “as-is” and “where-is” condition. This is the concept of caveat emptor (i.e., buyer beware). Thus, a buyer is generally responsible for conducting extensive due diligence with respect to the property to be acquired.

Generally, parties are legally bound as soon as they execute the sale and purchase agreement; however, the trend is for a buyer to have the ability to terminate the deal following a due diligence period if it is not satisfied with the condition of the property.

The signing of a deed or other instrument purporting to convey an interest in real property is typically seen as the act that marks the transfer of title from the seller to the buyer. Usually, the parties agree to a transfer of title on a particular date (closing date) with the deed to be recorded in the public records promptly following such closing.

The buyer usually pays for the following:

• Buyer’s agent’s fees
• Buyer’s own legal costs
• Due diligence costs for consultants who have prepared building condition reports, environmental assessments, valuation appraisals and real estate surveys
• Due diligence inquiries made to statutory and government bodies
• Registration fees
• Lender title policies

The seller usually pays for the following:

• Listing agent’s fees
• Seller’s own legal costs
• Income tax on any profit made on the sale of the real estate

Allocation of certain costs is driven by the customs of each state, including survey costs, title insurance premiums and transfer taxes.