Sell My House Real Estate Contracts and Closing 2 — Questions and Answers
Question 1: What is the difference between 'under contract' and 'pending' in a home sale?
- They are identical terms with no distinction
- 'Under contract' means an offer is accepted but contingencies remain; 'pending' typically means contingencies are resolved (Correct answer)
- 'Pending' means the offer is still being reviewed
- 'Under contract' means the deal has closed
Correct answer: 'Under contract' means an offer is accepted but contingencies remain; 'pending' typically means contingencies are resolved
While usage varies by region, 'under contract' generally indicates active contingencies remain, whereas 'pending' suggests the deal is on track with contingencies cleared.
Question 2: What is title insurance and who typically pays for it?
- Insurance against fire damage; paid by the buyer
- Protection against title defects or ownership disputes; often the seller pays for the owner's policy (Correct answer)
- Homeowner's insurance required by lenders; paid by the buyer
- Insurance against appraisal gaps; paid by the lender
Correct answer: Protection against title defects or ownership disputes; often the seller pays for the owner's policy
Title insurance protects the buyer (and lender) from financial loss due to defects in the title discovered after closing, and in many US markets the seller customarily pays for the owner's policy.
Question 3: What is an 'as-is' sale in real estate?
- A sale where the seller guarantees all repairs will be completed
- A sale where the seller will not make repairs and the buyer accepts the property in its current condition (Correct answer)
- A foreclosure or bank-owned property sale
- A sale with no inspection contingency allowed
Correct answer: A sale where the seller will not make repairs and the buyer accepts the property in its current condition
In an as-is sale, the seller discloses known issues but refuses to negotiate repairs, and the buyer agrees to purchase the home in its present condition.
Question 4: What is a settlement statement (HUD-1 or Closing Disclosure) used for?
- To document the home's appraisal value
- To itemize all financial transactions, credits, and debits for buyer and seller at closing (Correct answer)
- To record the deed transfer at the county office
- To summarize the home inspection findings
Correct answer: To itemize all financial transactions, credits, and debits for buyer and seller at closing
The Closing Disclosure (replacing HUD-1 for most loans) provides a complete accounting of all money changing hands at settlement, ensuring transparency for all parties.
Question 5: What is a home sale contingency in a purchase offer?
- A requirement that the seller vacate by a specific date
- A clause making the purchase conditional on the buyer successfully selling their current home first (Correct answer)
- A requirement for a professional home inspection
- A clause allowing the buyer to renegotiate the price after appraisal
Correct answer: A clause making the purchase conditional on the buyer successfully selling their current home first
A home sale contingency allows buyers who already own a home to make an offer without the risk of owning two properties simultaneously, though sellers may find it less attractive.
Question 6: What is a 'kick-out clause' in a real estate contract?
- A clause allowing the buyer to walk away without losing earnest money
- A provision allowing the seller to continue marketing and accept a better offer, forcing the original buyer to remove contingencies or exit (Correct answer)
- A clause that reduces the sale price if the home doesn't appraise
- A penalty for the buyer if they miss the closing date
Correct answer: A provision allowing the seller to continue marketing and accept a better offer, forcing the original buyer to remove contingencies or exit
A kick-out clause lets sellers accept a contingent offer while still marketing the home; if a better offer comes in, the original buyer must either remove contingencies or the seller can proceed with the new buyer.
Sell My House Real Estate Contracts and Closing 2
What is the difference between 'under contract' and 'pending' in a home sale?