Transaction Management and Closing Process Flashcards

What is the primary role of an escrow company in a US residential real estate transaction?

Answer: To act as a neutral third party holding funds and documents until all conditions are met

Escrow serves as a neutral custodian, ensuring that funds and documents are transferred only when all contractual conditions have been satisfied.

Under TRID regulations, how many business days before closing must a buyer receive the Closing Disclosure?

Answer: 3 business days

TRID requires lenders to deliver the Closing Disclosure at least three business days before consummation, giving buyers time to review final costs.

What does 'prorating' mean in the context of a real estate closing?

Answer: Dividing ongoing expenses like property taxes or HOA fees proportionately between buyer and seller based on the closing date

Proration ensures each party pays only for the portion of recurring costs (taxes, HOA, etc.) that falls within their period of ownership.

Which contingency allows the buyer to exit the contract if the property appraises below the purchase price?

Answer: Appraisal contingency

An appraisal contingency protects the buyer if the lender's appraised value is less than the agreed purchase price, preventing the buyer from overpaying.

What does 'time is of the essence' mean when included in a purchase contract?

Answer: All contractual deadlines are strictly binding and failure to meet them can constitute default

This clause makes all specified dates and deadlines in the contract legally enforceable; missing them can be treated as a breach of contract.

What is the purpose of title insurance in a residential purchase?

Answer: To protect against losses from defects or claims against the title discovered after closing

Title insurance protects the owner and/or lender from financial loss due to title defects, liens, or ownership disputes that arise from events prior to purchase.