In the United States, higher education is an optional stage of formal learning following secondary education. It is also referred as post-secondary education, third-stage, third-level, or tertiary education. It covers stages 5 to 8 on the International ISCED 2011 scale. It is delivered at 4,360 Title IV degree-granting institutions, known as colleges or universities. These may be public or private universities, research universities, liberal arts colleges, community colleges, or for-profit colleges. US higher education is loosely regulated by the government and by several third-party organizations.

There is a clear hierarchy of colleges and universities in the US, with the most selective institutions (e.g., Ivy League schools) at the top and the least selective institutions (e.g., community colleges) at the bottom. White supremacy and academic profit-seeking have played major roles in this stratification.

Attending college has been thought of as "a rite of passage" to which the American Dream is deeply embedded. However, there is a growing skepticism of higher education in the US and its value to consumers.

In 2022, about 16 million students—9.6 million women and 6.6 million men—enrolled in degree-granting colleges and universities in the US. Of the enrolled students, 45.8% enrolled in a four-year public institution, 27.8% in a four-year private institution, and 26.4% in a two-year public institution. College enrollment has declined every year since a peak in 2010–2011 and is projected to continue declining or be stagnant for the next two decades.

Strong research funding helped elite American universities dominate global rankings in the early 21st century, making them attractive to international students, professors and researchers. The US higher education system is also unique in its investment in highly competitive NCAA sports, particularly in American football and basketball, with large sports stadiums and arenas adorning its campuses and bringing in billions in revenue.

21st century

Changing technology, mergers and closings, and politics have resulted in dramatic changes in US higher education during the 21st century.

In 2020, when the COVID-19 pandemic upended regular campus life forcing students to take online classes at home, more than 100 colleges, both public and private have been sued for tuition refunds, making many of them to reopen their campuses.

Online education: MOOCs and OPMs

Online education has grown in the early 21st century. More than 6.3 million students in the US took at least one online course in fall 2016. While online attendance has increased, confidence among chief academic officers has decreased from 70.8 percent in 2015 to 63.3 percent in 2016. In 2017, about 15% of all students attended exclusively online, and competition for online students has been increasing

By 2018, more than one hundred short-term coding bootcamps existed in the US. Programs were available at Harvard University's extension school and the extension schools at Georgia Tech, University of Pennsylvania, Cal Berkeley, Northwestern, UCLA, University of North Carolina, University of Texas, George Washington, Vanderbilt University, and Rutgers through Trilogy Education Services.

In 2019, researchers employed by George Mason University claimed that online education had "contributed to increasing gaps in educational success across socioeconomic groups while failing to improve affordability".

A MOOC is a massive open online course aimed at unlimited participation and open access via the web. It became popular in 2010–14. In addition to traditional course materials such as filmed lectures, readings, and problem sets, many MOOCs provide interactive user forums to support community interactions between students, professors, and teaching assistants.[56] Robert Zemsky (2014), of the University of Pennsylvania Graduate School of Education notes that they at first seemed to be an extremely inexpensive method of bringing top teachers at low cost directly to students. However, very few students—usually under 5%—were able to finish a MOOC course. He argues that they have passed their peak: "They came; they conquered very little; and now they face substantially diminished prospects." In 2019, researchers at MIT found that MOOCs had completion rates of 3 percent and that the number of people taking these courses has been declining since 2012–13.[58]

Online programs for many universities are often managed by privately owned companies called online program managers or OPMs. The OPMs include 2U, Academic Partnerships, Noodle, and iDesign. Trace Urdan, managing director at Tyton Partners, "estimates that the market for OPMs and related services will be worth nearly $8 billion by 2020."

In 2023, the US Department of Education announced that OPMs would be subject to greater oversight, to include audits. Higher education institutions would be required to report details about their agreements with OPMs by May 1, 2023.

Edtech expert Phil Hill recently said that the OPM model is now "on life support."

Financial difficulties, mergers and downsizing

Hundreds of colleges are expected to close or merge, according to research from Ernst & Young.[62] The US Department of Education publishes a monthly list of campus and learning site closings. Typically there are 300 to 1000 closings per year. Notable college closings include for-profit Corinthian Colleges (2015), ITT Technical Institute (2016), Brightwood College and Virginia College (2018). Private college closings include Wheelock College (2018) and Green Mountain College (2019).

In December 2017, Moody's credit rating agency downgraded the US higher education outlook from stable to negative, "citing financial strains at both public and private four-year institutions." In June 2018, Moody's released data on declining college enrollments and constraints, noting that tuition pricing would suppress tuition revenue growth.

Other businesses related to higher education have also had financial difficulties. In May 2019, two academic publishers, Cengage and McGraw Hill, merged.

In 2020, higher education lost 650,000 jobs or about 13 percent of the workforce amid the COVID-19 pandemic, despite an infusion of federal funds. The number of US postsecondary institutions receiving Title IV funding has dropped from 7,253 in 2012–2013 to 5,916 in 2020–2021.

Class privilege and the growth of the educated underclass

Social class has a profound influence on higher education. Undergraduates at elite universities have a substantial advantage if their parents also went to a particular college.[73] Educator Gary Roth, a left-wing writer, has argued that with fewer good jobs for graduates, the US has been producing an "educated underclass." While upward social mobility continues to be available for immigrants and first generation people, the route to upward social mobility is more complicated for people from families that have been in the US longer.

Protests, political clashes, and the growth of right-wing politics

The growth of power among right wing groups has been apparent since the mid-2010s. Turning Point USA (TPUS), now the most dominant conservative presence on US campuses, has clubs at more than 2500 college campuses. Charlie Kirk, its founder, also took over Students for Trump in 2019.

The Chronicle of Higher Education has documented groups such as the Groypers who have infiltrated conservative organizations on campus.

Student protests and clashes between left and right appeared on several US campuses in 2017. On August 11, 2017, white nationalists and members of the alt-right rallied at the University of Virginia, protesting the removal of a statue of Robert E. Lee. The following day, one person died during protests in Charlottesville. Following this event, speaking engagements by Richard Spencer were canceled at Texas A&M University and the University of Florida.

Everybody wants a lower tax bill. One way to accomplish that might be to live in a state with no income tax. At present, seven states—Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming—levy no state income tax at all.1 In addition, Washington levies an income tax on investment income and capital gains, but it is only for certain high earners. Elsewhere, New Hampshire currently taxes investment and interest income but is set to phase out those taxes starting in 2023. That will bring the number of states with no income tax to nine by 2027.2

KEY TAKEAWAYS

• Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming do not levy state income taxes, while New Hampshire doesn’t tax earned wages.
• States with no income tax often make up the lost revenue with other taxes or reduced services.
• A state’s total tax burden, which measures the percent of income paid in state and local taxes, could be a more accurate measure of its affordability than its income tax rate alone.
• Other factors—including healthcare, cost of living, and job opportunities—are also important in determining how expensive a state is.

States With No Income Tax

Before you pull up stakes and hire a moving company to take everything you own to one of these enlightened lands, you might want to consider other factors, including:

• Sales, excise, and property taxes
• Affordability
• The impact of lower taxes on a state’s ability to invest in social services, such as infrastructure, education, and healthcare

In addition, legislation is always changing. For example, though Tennessee used to tax investment and interest income, the Hall income tax was fully repealed as of Jan. 1, 2021.3

The table below illustrates the differences among states with no income tax. The first two columns show the state’s total tax burden (state income taxes + sales and excise taxes + property taxes) as a percentage of personal income followed by the rank that the state holds (best to worst) among all 50 states.4

The third column shows the state’s affordability ranking, which combines both the cost of housing and cost of living, and the last column includes the state’s rank on the U.S. News & World Report “Best States to Live In” list.56

Sources: WalletHub Tax Burden by State, U.S. News & World Report Affordability, and U.S. News & World Report “Best States to Live In” rankings

1. Alaska

Total Tax Burden: 5.06%

Alaska has no state income or sales tax. The total state and local tax burden on Alaskans, including income, property, sales, and excise taxes, is just 5.06% of personal income, the lowest of all 50 states.4

All residents of Alaska receive an annual payment from the Alaska Permanent Fund Corp. made up of revenue and investment earnings from mineral lease rentals and royalties.7 The per citizen dividend payment for 2023 was $1,312.8

Alaska has one of the highest and fastest-rising healthcare costs of any state in the U.S.9 That said, at $13,642 per capita in 2020—the most recent year the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary reported statistics as of September 2023—it also spent the most on healthcare, excluding the District of Columbia.10 Alaska also spent $19,540 per student in fiscal year 2021, the highest of any other state.11

2. Florida

Total Tax Burden: 6.33%

This popular snowbird state features warm temperatures and a large population of retirees.1213 Sales and excise taxes in Florida are above the national average, but the total tax burden is just 6.33%—the fifth-lowest in the country.4

As of 2023, Florida ranks 38th in affordability due to its higher-than-average housing costs. It's affordability has also been steadily decreasing, as it was ranked as the 31st most affordable state in 2020.5 Still, Florida came in at 10 on the U.S. News & World Report “Best States to Live In” list.6

In 2021, Florida was one of the lowest states regarding education spending per capita at $10,401.11 In 2021 the ASCE gave Florida a C grade for its infrastructure.14 Six years earlier, Florida received the same grade from the Education Law Center for the fairness of its state school funding distribution.15 In 2014, its healthcare spending per capita was $8,076, $31 more than the national average; six years later, Florida spent $9,865 per capita in 2020.10

Florida does impose a 5.5% corporate income tax but exempts all or part of that tax for LLCs, sole proprietorships, and S corporations.

3. Nevada

Total Tax Burden: 7.69%

Nevada relies heavily on revenue from high sales taxes on everything from groceries to clothes, sin taxes on alcohol and gambling, and taxes on casinos and hotels.16 This results in a state-imposed total tax burden of 7.69% of personal income for Nevadans, the second-highest on this list. However, it still ranks a very respectable 19 out of 50 when compared with all states.4

That said, the high costs of living and housing put Nevada closer to the bottom (34) when it comes to affordability.5 The state ranks 38th on the U.S. News & World Report “Best States to Live In” list.6

Nevada’s spending on education in 2021 was $10,450, among the lowest quartile across the United States and the fourth-lowest in the western region of the U.S.11 The latest infrastructure report card (as of 2023) from ASCE in 2018 gave Nevada a grade of C for its infrastructure.17

Nevada has also historically had low spending habits in relation to healthcare. Nevada’s healthcare spending in 2014 was $6,714 per capita, the lowest on this list and the fourth-lowest nationally. This has since increased to $8,348 per capita but is now the third lowest by state.10

4. South Dakota

Total Tax Burden: 6.69%

Like many states with no income tax, South Dakota rakes in revenue through other forms of taxation, including taxes on cigarettes and alcohol.18 The home of the Lakota Sioux and the Black Hills has one of the highest sales tax rates in the country and above-average property tax rates.51920 South Dakota’s position as home to several major companies in the credit card industry, in addition to higher property and sales tax rates, helps to keep the state’s residents free from income tax, according to reporting by The Atlantic.

South Dakotans pay just 6.69% of their personal income in taxes, according to WalletHub, ranking the state eighth in terms of the total tax burden.4 The state ranks 8th in affordability and 12th on the U.S. News & World Report “Best States” lists.56

South Dakota spent $8,933 per capita on healthcare in 2014, the 14th highest in the nation. This has since improved as the latest report from 2020 shows South Dakota spending $12,495 per capita, good for 8th in the nation.10 Although it spent more money on education, at $10,952 per pupil in 2019, it spent less than any other neighboring Midwestern state.11

South Dakota hasn’t received an official letter grade from the ASCE, though much of its infrastructure is notably deteriorated, with 17% of bridges rated structurally deficient and 90 dams considered to have high hazard potential as reported in 2021.21

5. Texas

Total Tax Burden: 8.01%

The Lone Star State loathes personal income taxes so much that it decided to forbid them in the state’s constitution.22 Still, because infrastructure and services must be paid for somehow, Texas relies on income from sales and excise taxes to foot the bill.423

Sales tax can be as high as 8.25% in some jurisdictions.24 Property taxes are also higher than in most states, the net result of which is a total tax burden of 8.19% of personal income. Nevertheless, Texans’ overall tax bite is still one of the relatively lowest in the U.S., with the state ranking 22nd.4 Texas is average for affordability at 33rd in the nation, but it was ranked 35st by U.S. News & World Report on the “Best States to Live In” list.56

Texas spent $11.005 per pupil on education in 2021.11 Also in 2021, the ASCE awarded it a grade of C for its infrastructure.25 Texas spent $6,998 per capita on healthcare in 2014, the seventh-lowest amount in the U.S. This since increased to $8,406 per capita, good for the fourth-lowest in the nation.10

One advantage of living in a no-tax state is that the $10,000 cap on state and local tax (SALT) deductions imposed by the Tax Cuts and Jobs Act will likely not have as great an impact as it does on residents of high-tax states, such as California and New York.26

6. Washington

Total Tax Burden: 8.24%

Washington hosts a young population, with only 15.9% of its residents over age 65, and many major employers, thanks to the lack of state-mandated corporate income tax (note that high-income earners are subject to state capital gains tax).2728 Residents do pay high sales and excise taxes, and gasoline is more expensive in Washington than in most other states. The state comes in at 26 out of 50, with a total tax burden of 8.24%.294

Unusually higher-than-average living and housing costs hurt Washingtonians, putting the state at 46th in terms of affordability.5 For some residents that might not matter, however, because their state was ranked by U.S. News & World Report as the overall second best state to live in.6

Washington spent $7,913 per capita on healthcare in 2014, $132 below the national average. By 2020, Washington was spending $9,265 per capital, good for 40th.10 Conversely, at $15,570 per pupil, it spent more on education than most in 2021, though it received a C grade for its school funding distribution six years earlier.1115 In 2019, Washington earned the same grade for its infrastructure from the ASCE.30

7. Wyoming

Total Tax Burden: 6.42%

With an estimated six people per square mile, Wyoming is the second least densely populated state, bested only by Alaska, which has roughly one human being for every square mile.31 Citizens pay no personal or corporate state income taxes, no retirement income taxes, and enjoy low sales tax rates.32 The total tax burden—including property, income, sales, and excise taxes as a percentage of personal income—is 6.42%, ranking the state sixth lowest.4

Like Alaska, Wyoming taxes natural resources, primarily oil, to make up for the lack of a personal income tax, according to reporting in the Cowboy State Daily. The state ranks an average 18th in affordability and 26th on the U.S. News & World Report list of “Best States to Live In.”65

In 2021, Wyoming spent $18,144 per pupil; among the best quartile of U.S. states and more than double that per student of it's neighbor Idaho.11 It also earned a grade of A for its school funding distribution back in 2015, the best on this list.15

Wyoming’s healthcare spending in 2020 was also relatively strong at $10,989 per capita.10 Although Wyoming hasn’t received an official letter grade for its infrastructure yet, the ASCE found that 6.9% of its bridges are structurally deficient and 99 of its dams have a high hazard potential in 2021.33

8. Tennessee

Total Tax Burden: 6.22%

Before 2016, Tennessee taxed income from investments, including most interest and dividends but not wages.3 Legislation passed in 2016 included a plan to lower taxes on unearned income by 1% per year until the tax was eliminated at the start of 2021.34

With full implementation of the new legislation, Tennessee expects to attract retirees who depend heavily on investment income. The state’s total tax burden is 6.22%, the fourth-lowest in the nation.4 In the affordability category, Tennessee ranks 14th overall, and on the U.S. News & World Report “Best States to Live In” list, it ranks 24th.56

In 2021, at $10,507 per pupil, Tennessee ranked towards the bottom across the United States in terms of education spending.11 At $9,336 per capita, Tennessee also ranked towards the bottom in terms of healthcare spending in 2020.10 The state hasn’t received an official letter grade for its infrastructure yet, although the ASCE did note that 4.4% of its bridges are structurally deficient and 276 of its dams have a high hazard potential.35

9. New Hampshire

Total Tax Burden: 6.14%

New Hampshire does not tax earned income but does tax dividends and interest. New Hampshire’s Senate passed legislation to phase out the investment income tax by 1% per year over five years, with full implementation by 2027.2 The state has no state sales tax but does levy excise taxes, including taxes on alcohol, and its average property tax rate of 1.86% of property values is the third highest in the country.3637

Even so, New Hampshire’s total tax burden is just 6.14%, according to WalletHub, ranking the state third in the nation.4 The state ranks sixth on the U.S. News & World Report list of “Best States to Live In” and 36th in the nation for affordability.65

New Hampshire almost spent more on education than any other state on this list at $19,443 per pupil in 2021, though it is outspent by several of its northeast neighbors.11 New Hampshire also received a marginally better grade of C- for its infrastructure in 2017.38 At $11,793 per capita in 2020, its healthcare spending is the twelfth highest in the nation.10

Which Are the Tax-Free States?

As of 2023, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming are the only states that do not levy a state income tax. Note that Washington does levy a state capital gains tax on certain high earners.

Why Do States Charge a State Tax?

Following the adoption of the U.S. Constitution, the federal government was granted the authority to impose taxes on its citizens. Each state also retained the right to impose what kind of tax it wanted, excluding any that are forbidden by the U.S. Constitution as well as its own state constitution. These states fund their governments through tax collection, fees, and licenses.39

Which States Don’t Tax Retirement Distributions?

Twelve states do not tax retirement distributions. Illinois, Mississippi, and Pennsylvania don’t tax distributions from 401(k) plans, individual retirement accounts (IRAs), and pensions. The remaining nine states that don’t levy a state tax at all are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Alabama and Hawaii also don’t tax pensions but they do tax distributions from 401(k) plans and IRAs.40

Which States Tax Social Security Benefits?

There are only 12 U.S. states that tax Social Security benefits: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.41

The Bottom Line

Despite the challenges no-tax states face, some seem to find a balance among low taxes, affordability, and providing a great place to live. Others struggle. One thing is clear: Low taxes alone do not provide a complete picture of the cost of living for any state.

Part One:
General Aspects of Purchase and Sale of Real Property

INTRODUCTION: REAL ESTATE TRANSACTIONS: IS A LAWYER REALLY NEEDED?

Ownership of land and improved property ("real property" or "real estate") within the United States has long been a goal and accomplishment of both citizens and noncitizens who arrive in this country. Both in terms of investment and in terms of acquiring a home, real estate transactions often form the single largest purchase of the average person and can be an excellent method to build up wealth. Recent tax laws have made the ownership of a home even more beneficial, not only allowing full deduction of interest on the home loan, but delaying or avoiding entirely capital gains upon the sale of a residence. When these tax benefits are combined with the steadily appreciating real estate market in California over the past five years, ownership of property has been seen to be the most intelligent major investment of the average American.

In the United States any legal entity (individual, partnership, corporation, or limited liability company, whether citizen of the United States or not) can own any real property and the laws of the state in which the property is located normally control the legalities of how to purchase, lease, sell, and use real property. Most understandings regarding real property are required to be in writing or are unenforceable, thus the written documents concerning property are of the highest import.

Increasingly over the past hundred years, the government has imposed additional obligations and controls over use of property, both in terms of allowed use ("zoning restrictions") and in imposing liabilities for various types of misuse (violations of building codes; violations of environmental laws such as improper disposal of waste materials on the property; etc.) Further, especially in the sale of homes, the government has imposed remarkably complex requirements of disclosure of problems and potential problems that the buyer may encounter, from defects in construction, to disclosure to the buyer of the property's location in flood or earthquake zones. The government has become a not so silent partner to every real estate transaction and the parties that ignore that fact take great risks.

It is an oddity that many people who would seek legal counsel for drafting a small will or suing someone who dents a fender on their car do not seek legal counsel when buying an asset which they may own for decades, which may cost a million dollars and which imposes thirty years of obligations on the buyer. Most people execute purchase documents or leases without bothering to carefully read the tens of pages of detailed legalese and only obtain legal advice when something goes wrong...and by then it is often too late. It is an obvious but often ignored fact that someone, sometime took the time and money to draft the complex form document that the real estate broker asks the buyer or seller to execute; clearly whoever drafted that complex document presented to the buyer or seller was drafting that long form for a reason, not at random. For a party to execute such a form without a full and complete understanding of its terms is equivalent to signing a blank check.

As with much of law, the best time to obtain legal advice is before a dispute or problem arises and it is a simple fact that a major portion of the contractual litigation in the United States involves real estate and alleged breach of leases or purchase agreements.

While real estate brokers and agents usually have form agreements, and while most landlords avail themselves of the preprinted form leases created decades ago by unknown persons, the fact of the matter is that these forms are usually antiquated, often inappropriate, and invariably a shock to the persons bound when they finally read them, usually long after signing them and after a heated argument with the other party. Properly drafted documents involving real estate are a necessity and more than any area of the law, written documents are usually required to form a binding obligation regarding real estate.

Another often ignored fact is that almost all professionals involved in real estate transactions have their own interests which do not necessarily conform to those of the buyer, seller, lessor or lessee. Real estate brokers and agents are usually only paid if a transaction culminates and are paid more if the transaction is higher in price. Clearly, such parties do not have an objective stance to take when examining the benefits and detriments of a particular transaction. Likewise, the lenders, the title companies, the builders, and the mortgage brokers are all interested parties who seek to have a transaction culminate simply because that is how they are paid.

If one seeks truly objective analysis of the cost benefit and detriments of a real estate transaction, and if one wishes an objective review of the contractual documents, one is compelled to seek expert legal advice from an attorney whose task is not to encourage the culmination of the transaction regardless of the consequences. It is the fact that attorneys so often advise of the negative aspects of transactions that have given them the reputation for being "deal killers." However, to consider both the good and the bad of the transaction is precisely why lawyers should be retained in real estate matters. One client put it well: often, the most money that can be made from a transaction is made by walking away from the transaction. Usually, the only professional who will so advise is the lawyer reviewing it.

TYPES OF REAL ESTATE TRANSACTIONS:

While the variations on the type of real estate transactions are as broad as the ingenuity of human kind, most transactions involve the purchase, sale, lease, construction, or subdivision of a piece of reality. The topics of commercial leases, rental of residences, construction and of subdivision of real property are each complex enough to justify a lengthy article in themselves and are the topics of other articles on this website. This article will, instead, concentrate on the general topic of purchase and sale of realproperty.

The Basic Purchase/Sale Transaction of Realty in California

The average purchase and sale of realty in California is comprised of the following parties and entities:

1. The Buyer;

2. The Seller,

3. Real estate broker or agent representing either the Buyer or Seller or, at times, both; sometimes two or more brokers are involved in the transaction.

4. A lending institution which finances the transaction;

5. A title company which examines the "chain of title" of the property to ensure that the Seller has title to sell to the Buyer and, in effect, acts as an insurance company insuring the validity of the title to Buyer;

6. The County Recorder who records the title documents showing ownership has vested in the Buyer (usually with a Grant Deed to the Buyer and Deed of Trust or Mortgage in favor of the Lender);

7. Often a mortgage broker who arranges financing between the Lender and Buyer;

8. Various experts who examine the condition of the property and create a report before close of the transactions (such as termite and dry rot inspectors; engineers, soil engineers, architects, etc.);

9. The escrow agent who holds the money and the title documents of all the parties and distributes them pursuant to written instructions;

10. If a condominium or home owners association is involved, that organization must be joined by the buyer.

STEPS IN THE TYPICAL TRANSACTION

While transactions may vary widely, the usual stages are:

1. A real estate broker shows a listed property to a prospective buyer. The buyer decides he/she wishes to make a bid and does so, usually rendering a few thousand dollar deposit along with the bid and signing a form that the broker usually supplies labeled, "Offer."

2. The broker presents the offer to the seller or the seller's broker and they can accept it (signing on the form), reject it, or counter offer with an offer of their own. The counter may involve a different price or different financing or requirements such as requiring buyer to pay for correction of defects discovered by the inspectors, etc. or perhaps accepting the Property "as is."

3. Each offer or counteroffer gives the other party the right to accept. If they accept before one withdraws an offer or counteroffer, both parties are bound. All offers and counteroffers must be in writing to be legally effective.

4. Once there is an acceptance, then within a time period listed in the documents the buyer normally is required to obtain financing, usually from a bank or savings and loan, while various inspectors such as termite and dry rot inspectors, soil engineers, etc, visit the property and render a written report as to its condition. The offer normally requires that the property "pass" all such inspections or the buyer may withdraw the offer and receive the deposit back. Quite often if the property fails to pass a particular inspection, the buyer and seller will negotiate as to who pays for the repairs...often they split them.

5. If financing is not possible, the deal falls through. If financing within the guidelines of the offer is achieved, then the buyer is bound and must proceed with the deal.

6. All deposits, inspection reports, title documents, down payment, bank documents and sums go to an escrow officer who holds the monies and documents pursuant to written instructions and only releases the various documents and sums to the parties when the conditions are met. The parties normally split the costs of the escrow officer. Buyer must also purchase enough insurance on the property to protect the lender if the property is destroyed or damaged and proof of insurance is also deposited into escrow.

7. One of the documents deposited into escrow is title insurance. This is a document prepared by a title insurance company that warrants that the title is in the name of the seller and that seller is empowered to transfer title to the buyer.

8. The brokers are normally paid from the sums deposited into escrow and the typical transaction has the Seller paid in full by a combination of the bank (who takes back a "deed of trust" or "mortgage") and the down payment of the buyer. Down payments are normally between twenty and thirty percent.

Thus, a typical transaction for a three hundred thousand dollar structure will have the following computations:

Down payment will be about sixty thousand dollars. The bank must lend $240,000. Closing costs (costs of escrow, title insurance and the like) will be about six or seven thousand dollars and the broker will be paid by the Seller between $15,000 to $20,000 for their fees. Buyers normally pay for the title insurance, half of escrow costs, and the inspections. Realistically, a buyer in the above scenario should plan on spending cash of close to seventy thousand dollars to close the deal while the Seller will only receive about $280,000 once the broker and the escrow people are paid.

THE ROLE OF THE REAL ESTATE BROKER

In the United States the overwhelming majority of transactions involve real estatebrokers who are licensed professionals who receive, usually, a percentage of the sales price of the property being sold (the "commission.") A broker has a fiduciary duty (duty of loyalty) to the person represented and can only represent both the buyer and seller if they both consent. Usually two brokers are involved and they split the commission which is normally between five and six percent of the selling price of most property. The commission is paid from escrow upon the close of the transaction. The commission is NOT set by law and may be negotiated with the broker.

Brokers take on the bulk of the work of the real estate transaction, seeking property to show to a prospective buyer or showing the listed property of sellers. Brokers often have access to computerized listings of all property for sale thus can quickly ascertain what property may be appropriate for a buyer.

Brokers normally have written contracts with their clients and those contracts, like their commissions, can be negotiated but often are not since most laypersons are intimidated by the lengthy form contracts presented to them by the broker. Most such contracts give the broker an "exclusive" right to list the property for a stated period of time, such as ninety days, during which only the broker can sell the property.

As experts, brokers can often give valuable advice as to the negotiations occurring, the proper price to bid, and the dangers involved in the location of the property, etc. Brokers normally have complex long legal documents which they suggest their clients execute to both bid, accept bids, counteroffer and culminate the sales transaction. These forms, written by the brokers' associations, are quite complete and fully binding on the parties. Just reading such documents can take well over an hour and most buyers or sellers, in a hurry to place or accept a bid or counteroffer, do not bother to carefully read the terms.

Indeed, most brokers simply use the forms without careful analysis of their contents, having received the forms from their associations and usually using them for years without a second thought.

A broker earns nothing if a sale does not occur. This necessarily creates a bias in the minds of most brokers in that they seek to encourage culmination of any sales transaction. Further, the higher the price, the more they earn. While this may seem fine for the seller and bad for the buyer, it actually also distorts their advice even to a seller since they will often recommend costly improvements to the property to help it sell which, of course, increases the sales price thus the commission.

Most brokers are honest and hardworking. It is a competitive and stress filled job requiring long hours on weekends and nights. Nevertheless, while their role is extremely valuable, a wise seller or buyer understands that their economic position within the transaction makes objective advice hard to obtain from a broker.

THE LENDER

Either by use of a mortgage broker who seeks possible loans from banks, or via the broker who usually has connections with various banks, or on their own, the average buyer does not buy real estate for cash but purchases it by borrowing most of the sales price from a bank or savings and loan association. The usual transaction requires a twenty to thirty percent down payment, with fifteen to thirty year financing for the remainder of the purchase price. Thus a three hundred thousand dollar home will normally require a down payment of anywhere from sixty to ninety thousand dollars plus a loan for the remainder, at interest rates that vary but will normally be around seven to ten percent over thirty years. Bank loans come in an enormous variety of terms including variable interest rates, graduated payment schedules, federally insured, etc, etc.

Several thousand dollars are also spent to arrange the loan ("points") and to arrange for title insurance on the title, perform the termite and dry rot inspection to determine the condition of the property, and to obtain the insurance that any lending institution will require before loaning on the property. It is typical to spend perhaps five thousand dollars to "pay" for the loan before the first payment is due.

Most loans in California are secured with a document called a Deed of Trust on the property being financed. Without going into detail, the Deed of Trust allows the lender to foreclose and seize the property by an out of court procedure should payment not be made in a timely manner. Normally, the procedure for foreclosure is to record a Notice ofDefault in the recorder's office which gives the borrower ninety days to cure the default by paying all sums due and the costs of the foreclosure recordation. At the end of ninety days, if no payment has been made, the Notice of Sale is recorded and the right to cure the default in payment expires. The lender can then sell the property to pay down on the loan.

In California, there is no deficiency judgement; that is, assuming the property is a home which the buyer can no longer afford, if the lender forecloses on the property the lender can not also sue the borrower for the difference between the proceeds of the foreclosure sale and the amount due under the loan. Nevertheless, the borrower who suffers such a foreclosure normally has his or her credit history ruined for many years.

CONCLUSION:

The tax benefits of ownership of realty and the usual appreciation of property in California are added incentives for the ownership of property but it must be recalled that real property in California, over the past hundred years, has averaged perhaps 8% appreciation a year and if appreciation for a period exceeds that, it must be expected that there will be years of depreciation to counterbalance the previous rise. In the last twenty years real property has decreased in price for periods of three to five years three or four times and it is critical for the buyer to recall that a vibrant and expanding economy must ultimately end, at least for a period. One must not automatically purchase property relying on future appreciation to justify the debt incurred since location, the surrounding economy, and just plain luck can often have drastic effects on value of property.

Nevertheless, careful and planned purchase of real property has been the typical method of appreciation of wealth for new citizens and Americans alike and an expanding population seems to assure that while cycles may cause temporary downturns in the market, that overall the demand for realty will continue to expand.

(Quelle:https://www.stimmel-law.com/)