real estate transactions
A real estate transaction is the process by which rights to real property are transferred between parties, typically involving a contract of sale, title transfer, and financing arrangements such as a mortgage. Real estate transactions are regulated by a combination of federal law, state statutes, and common law. Requirements for real estate transactions may vary significantly among states.
Brokers and Agency
Real estate brokers generally act as the agent of the seller under a listing agreement. In an open listing, the broker earns a commission only if they procure a buyer. In an exclusive listing, the broker is the sole agent entitled to a commission and may be owed payment even if the seller independently finds a buyer. Brokers and salespersons must be licensed and are regulated by state law (for example, California Civil Code § 2079). Professional organizations may also establish additional ethical guidelines, e.g. The National Association of Realtors 2025 Code of Ethics & Standards of Practice.
Fair Housing
The Federal Fair Housing Act prohibits discrimination in real estate transactions based on race, color, religion, sex (including gender identity and sexual orientation), disability, familial status, or national origin (42 U.S.C. §§ 3601–3631). Real estate brokers are expressly prohibited from engaging in discriminatory practices (§ 3606).
Contracts
Agreements to buy and sell real estate are governed by general contract law. The Statute of Frauds requires that contracts for the sale of real property be in writing (for example, California Civil Code § 1624).
Title and Title Insurance
Real estate contracts generally require that the seller convey marketable title, meaning the seller has valid ownership and that no undisclosed third-party claims affect the property. Buyers often engage an attorney or a title insurance company to verify marketability. Title insurance protects buyers against losses caused by defects in title.
Deeds
To transfer ownership, a properly executed deed describing the property must be delivered. Many states also require the deed to be recorded to provide public notice and establish priority of ownership.
Financing
The most common method of financing real estate purchases is through a mortgage loan, in which the property itself serves as collateral.
[Last reviewed in August of 2025 by the Wex Definitions Team]
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