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The Typical Residential

Real Estate Sales Transaction:

An Overview for Buyers and Sellers  

NOTE:  This article is intended to be a brief summary of law only, parts of which may or MAY NOT be applicable to your situation and/or your local jurisdiction(s).  Any information you glean from this article DOES NOT constitute legal advice and should be supplemented with the advice of an attorney licensed to practice law in your locality.

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uncovers substantial defects and/or dangerous conditions that were not previously disclosed to the Buyer (or of which he/she would not have reasonably been aware via his/her own walk-through of the property). Note that such inspections provisions in real estate contracts also typically afford protections to the Seller by applying time limits to the inspections issues that can be raised by the Buyer. For example, the Buyer may be required to have the property inspected within five (5) business days of the acceptance date (the date on which the Seller signed the real estate contract) and notify the Seller of any conditions unacceptable to the Buyer within ten business days. By not adhering to such time limits, the Buyer may give up any right to receive compensation for defective/dangerous conditions and/or cancel the contract.

ii.   Mortgage Documents. Few and far between are those who desire to purchase a home outright using cash. In addition to the fact most people simply do not have that much cash lying around, it’s also been a fact that during the past several years taking out loans to finance the purchase of real estate has made a lot of financial sense: with interests rates low, paying only a fraction of the purchase price up front frees up more money to invest in other things. Because mortgages are such an integral part of the typical real estate transaction, home mortgages, too, have become much more standardized (and regulated) during the past few decades. Generally speaking, the two most important mortgage documents for a prospective Buyer of real estate to review and understand prior to signing off on any mortgage loan are the Mortgage itself and the Note:

a.       The Mortgage. A common misperception is that “the mortgage is the loan that secures a home purchase. Actually, the Note (see below) is the loan and the mortgage is a written instrument, not unlike a deed, that explicitly details the bank or loan company’s interest in the property. Basically, a mortgage is like a “back-up deed seeking to evidence the lender’s clear and clean title to the property if the Buyer defaults on the Note.

b.      The Note. This is the document in which the Buyer will make his/her promise to pay. This is the loan for which the Mortgage (see above) acts as security. The Buyer should pay extra attention to the following provisions when reviewing his/her Note: the amount of the loan, the total amount to be repaid assuming the Buyer makes all of the possible payments for the life of the loan (by looking at this number, he/she can see how much the mortgage loan will cost him/her over and above paying for the house out-of-pocket), the interest rate associated with the loan (and accompanying TIL form rate, see below), the term of the loan, any changes in payment or methods/terms of payment (i.e., for adjustable loans only), and any late payment fees and “due on sale clauses.

c.       The Truth-in-Lending Act (TILA) form. The federal government requires that this document be produced by the lender for all prospective mortgage loan borrowers. It was intended to give borrowers a more clear, standardized idea of the true costs involved in a obtaining a particular mortgage. . .


See Also:

Common Law Vs.
Civil Law

The Statute of Frauds

Doctrine of Equitable

in this document:

Preliminary Matters


The Role
of the Attorney


Hiring a Real Estate


Real Estate Seller’s Agent

Real Estate Buyer’s Agent

Real Estate Broker


Negotiating the
Real Estate Contract

‘For Sale By Owner’

Deciding Key Terms


Pre-Closing Matters


Mortgage Issues


The Closing

The Deed

Affidavit of Title
ALTA Statement

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If you would like further information about this topic, or would like to request attorney services for the writing, negotiation or closing of a real estate contract, click here to contact us today.

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* Licensed to practice law in New York and Illinois.

© Roger Galer, 2004

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