The global real estate industry is expected to reach $673 trillion by 2026, with residential property making up the majority of that value. The United States alone is projected to account for more than $140 trillion. This illustrates the significant role that real estate deals play in the global economy.
This guide explains how a real estate transaction works, from the first offer to closing, covering key steps, timelines, documents, and the tools used to manage transactions efficiently.
What is a real estate transaction?
A real estate transaction is the legal and financial process through which ownership or usage rights to real property are transferred from one party to another. This can include the sale, purchase, lease, or refinancing of residential or commercial property. At its core, a real estate transaction involves agreeing on terms, conducting due diligence, executing legal documents, and transferring rights at closing.
Several parties are involved in a real estate transaction, depending on the type and complexity of the deal:
- Buyer and seller. The primary parties involved in transferring ownership or property rights.
- Real estate agents or brokers. Professionals who represent one or both sides and help negotiate the transaction.
- Lenders. Financial institutions that provide financing when the transaction involves a loan.
- Legal advisors. Lawyers who draft, review, and finalize contracts and ensure regulatory compliance.
- Title companies or notaries. Parties responsible for verifying ownership, recording documents, and facilitating closing.
Residential and commercial real estate transactions follow similar legal steps, but they differ in scale and complexity:
- Residential transactions usually involve homes or apartments and tend to be more standardized, with shorter timelines and fewer negotiated terms.
- Commercial real estate transactions involve office buildings, retail spaces, industrial properties, or multi-unit assets and typically require more extensive due diligence, customized agreements, and longer closing periods.
You may also want to read about recent real estate M&A deals to see how current market trends are shaping transactions.
Step-by-step real estate transaction process
The steps involved in a typical real estate transaction are the following:
- Listing and marketing. The seller lists the property for sale, often with the support of a real estate agent, and markets it to interested buyers.
- Offer and negotiation. A buyer submits an offer outlining price and key terms. The parties may negotiate until they reach an agreement.
- Contract execution. Once terms are agreed, both sides sign a purchase agreement, formally committing to the transaction.
- Due diligence and inspections. The buyer reviews legal, financial, and physical aspects of the property, including inspections, title review, and document checks.
- Financing and approvals. If applicable, the buyer secures financing, and any required lender or regulatory approvals are obtained.
- Closing preparation. Final documents are prepared and closing statements are issued.
- Closing and transfer. Funds are transferred, legal documents are signed, and ownership officially changes.
Real estate transaction timeline
The timeline of a real estate transaction varies depending on property type, market conditions, and how the deal is structured. On average, most transactions take 30 to 90 days from accepted offer to closing, though this can be shorter or longer depending on circumstances.
From the seller’s perspective, the process typically starts with preparing and listing the property, which may take several weeks. Once an offer is accepted, the seller’s timeline is largely driven by the buyer’s due diligence, financing, and ability to meet closing conditions. Delays often occur if negotiations continue after contract signing or if issues arise during inspections or title review.
From the buyer’s perspective, the timeline is shaped by due diligence and financing. Property inspections, legal review, and lender approvals can take several weeks, especially in commercial or higher-value transactions. Potential buyers may also request extensions if additional information is needed or if financing terms change.
Several factors can accelerate or delay a typical transaction. Deals tend to move faster when buyers are paying cash, documentation is well organized, and fewer contingencies are included in the contract. Common sources of delay include financing approvals, unresolved home inspection issues, regulatory requirements, and prolonged negotiations over contract terms.
Roles in a real estate transaction
A transaction typically involves several real estate professionals, each responsible for a specific part of the deal:
- Real estate agent. Works directly with the buyer or seller to market the property, identify opportunities, negotiate terms, and guide the client through the transaction process. Agents focus on representation and day-to-day deal management.
- Real estate broker. Holds a higher level of licensing and legal authority than an agent. Brokers may operate independently or supervise agents, oversee compliance, review contracts, and handle client funds where required by law.
- Real estate transaction coordinator. Manages the administrative and logistical aspects of a transaction after a contract is signed. This includes tracking deadlines, collecting documentation, coordinating with lenders and title companies, and ensuring closing requirements are met.
- Transaction broker. Acts as a neutral facilitator rather than representing one side. A transaction broker assists both buyer and seller with paperwork, closing disclosures, and procedural steps while remaining impartial and avoiding advocacy for either party.
Real estate closing process
Successfully closing real estate deals depends on completing a series of final legal and financial steps in the correct order. The following steps typically occur:
- Final approvals. Confirmation that financing is in place, inspections are completed, and all contractual conditions have been satisfied.
- Execution of closing documents. Signing of deeds, settlement statements, loan documents, and other required agreements. This is often completed using secure digital signatures to speed up the process and allow remote participation.
- Funds transfer. Payment of the purchase price, taxes, fees, and commissions through settlement or escrow accounts.
- Recording and confirmation. Legal recording of ownership documents and formal confirmation that the transaction is complete.
In most real estate transactions, the seller pays the real estate commission, which is deducted from the sale price at closing. The commission is usually a percentage of the final price and is typically split between the seller’s agent and the buyer’s agent. For example, if a property sells for $400,000 with a 6 % commission, $24,000 is paid in total and commonly divided between both agents before brokerage splits.
While commission structures vary by market and deal type, this seller-paid model has long been the standard. Recent rule changes in some markets now allow more flexibility and negotiation around who pays agent fees.
Real estate transaction management tools and software
Effective transaction management helps ensure that nothing is missed, compliance requirements are met, and transactions move forward on schedule, especially when multiple parties are involved.
Traditionally, many real estate transactions were managed through manual processes such as email chains, spreadsheets, paper files, and shared folders. While this approach can work for simple deals, it often leads to version control issues, missed deadlines, and limited visibility.
Modern real estate transaction management software centralizes the entire process in one platform. Compared with manual workflows, software solutions typically offer:
- Centralized document storage with version control and secure access
- Task and deadline tracking to manage key milestones and approvals
- Automated workflows and notifications to reduce manual follow-ups
- Audit trails and compliance support for regulatory and legal requirements
- Collaboration tools for agents, brokers, lawyers, lenders, and clients
For residential deals, transaction management software often focuses on simplicity, speed, and standardized workflows. In contrast, commercial real estate transaction management software is designed for higher-value, more complex transactions. These platforms usually support the due diligence process, multi-party access, customized approval workflows, and integration with legal, financial, and document management systems.
Top real estate transaction software solutions
Some widely used solutions include:
- Dotloop. A popular platform for residential transactions, offering document management, e-signatures, task tracking, and compliance tools for agents and brokers.
- SkySlope. Focuses on transaction compliance and document organization, commonly used by brokerages to manage high transaction volumes.
- TransactionDesk (by Lone Wolf). Combines transaction management with forms, e-signatures, and broker compliance workflows.
- DocuSign Rooms for Real Estate. Provides secure document collaboration and digital signing, often used for both residential and commercial deals.
- Virtual data rooms (VDRs). Used primarily in commercial real estate transactions to manage due diligence, control access for multiple parties, and maintain detailed audit trails.
Real estate transaction documents and due diligence
A typical real estate transaction checklist includes these key documents:
- Purchase and sale agreement. The core contract outlining sales price, terms, contingencies, and closing conditions.
- Title documents. Title reports, title insurance policies, and evidence of clear ownership.
- Disclosure statements. Seller disclosures related to property condition, legal problems, or known title defects.
- Inspection and appraisal reports. Documents covering physical condition, property valuation, and compliance.
- Financing documents. Loan agreements, commitment letters, and lender conditions, if applicable.
- Closing and settlement statements. Final accounting of funds, fees, taxes, and commissions.
Due diligence is the process of reviewing and verifying these materials before closing. A due diligence checklist for real estate transactions often covers legal ownership, zoning and land use, financial performance, physical condition, environmental risks, and existing leases or contracts. The scope and depth of due diligence depend on whether the transaction is residential or commercial.
Managing real estate transaction data securely is critical throughout this process. Sensitive financial, legal, and personal information must be protected through controlled access, secure document storage, and clear audit trails. As a result, many firms rely on digital platforms rather than email or shared drives to manage documents, track reviews, and maintain data security from due diligence through closing.
Commercial real estate transactions
Commercial real estate transactions involve the sale, purchase, or leasing of income-producing properties such as office buildings, retail centers, industrial facilities, and multi-unit residential assets. Compared with residential deals, commercial transactions are typically larger in value, more complex in structure, and driven by financial performance rather than personal use.
Key steps in a commercial real estate transaction commonly include:
- Valuation and marketing. Assessing income, expenses, and market conditions to price and position the property.
- Offer and contract negotiation. Often beginning with a letter of intent before final agreements are signed.
- Due diligence. Reviewing leases, financial statements, zoning, environmental issues, and physical condition.
- Financing and approvals. Arranging debt or equity financing and meeting lender requirements.
- Closing. Finalizing documents, transferring funds, and recording ownership.
To sell commercial real estate, owners typically prepare detailed financial information, engage a commercial broker, market the property to qualified investors, and manage a structured diligence and negotiation process through closing.
Fees, risks, and compliance in real estate transactions
A transaction fee in real estate is an additional charge some brokerages apply on top of commissions to cover administrative or compliance costs. These fees vary significantly by firm and location and must be disclosed in advance.
Beyond commissions and transaction fees, common costs include:
- Closing costs. Title, escrow, legal, and document recording fees.
- Lender fees. Appraisals, underwriting, and loan-related charges.
- Taxes and government fees. Transfer taxes or registration costs, depending on the jurisdiction.
Fraud is an increasing risk, especially in digital transactions. Common threats include:
- Wire fraud and payment redirection.
- Identity impersonation.
- Manipulated or forged documents.
According to LexisNexis Risk Solutions, real estate and mortgage fraud create high downstream costs beyond direct losses.
Strong compliance and recordkeeping help mitigate these risks. Key practices include transparent fee disclosure, secure document storage, and adherence to regulations such as the U.S. Real Estate Settlement Procedures Act (RESPA).
Digital and paperless real estate transaction management
Digital and paperless real estate transaction management replaces manual, paper-based workflows with centralized digital systems that manage documents, approvals, and communication from contract to closing. Instead of relying on physical files, emails, and spreadsheets, transaction teams use secure platforms to keep all deal information organized and accessible.
Paperless real estate transaction management software allows parties to upload, review, store, and sign documents electronically. This reduces administrative friction, improves visibility across the transaction, and supports remote collaboration between buyers, sellers, brokers, lawyers, and lenders.
Key benefits of digital workflows include:
- Faster transactions. Digital document sharing and e-signatures reduce delays and shorten closing timelines.
- Improved accuracy. Version control and standardized workflows reduce errors and missing documents.
- Better visibility. All parties can track deal status, deadlines, and outstanding tasks in one place.
- Stronger security. Access controls, audit trails, and encryption help protect sensitive data.
For larger or more complex deals, especially in commercial real estate, data rooms are commonly used. Virtual data rooms provide a secure environment for managing due diligence materials, controlling access for multiple stakeholders, and tracking document activity. They are particularly useful in transactions involving multiple bidders, cross-border parties, or extensive legal and financial review.