Purchase Transaction Timeline
Contract to close timeline: offer → acceptance → escrow opened → inspections → contingencies removed → closing
Purchase Transaction Timeline
The key stages from offer to closed deal
Offer submitted → Seller accepts (or counters) → Earnest money into escrow → Inspection period (typically 7-17 days) → Loan application and appraisal → Contingency removal deadlines → Final walk-through → Closing day: sign documents, fund loan, record deed, keys delivered.
Closing Disclosure
RESPA Closing Disclosure: must be provided 3 business days before closing. Replaced HUD-1 in 2015.
Closing Disclosure
The federal form detailing all closing costs — required 3 days before closing
Closing Disclosure (CD): itemizes all costs, loan terms, and cash needed to close. Lender must provide at least 3 business days before closing. If certain terms change, new 3-day waiting period begins. Replaced the HUD-1 Settlement Statement for most residential transactions in 2015 under TRID.
Closing Cost Responsibilities
Closing costs: buyer typically pays 2-5% of loan amount. Seller typically pays commission plus transfer taxes.
Closing Cost Responsibilities
Who typically pays which closing costs
Buyer typically pays: loan origination fees, appraisal, title insurance (lender's policy), prepaid interest, escrow setup, recording fees. Seller typically pays: real estate commission, transfer taxes, owner's title insurance, payoff of existing mortgage, outstanding liens. Negotiable — can be split or shifted as part of deal.
Closing Prorations
Prorations at closing: taxes, HOA, rent collected in advance, insurance — split by days of ownership
Closing Prorations
How ongoing costs are divided at the closing table
Items prorated at closing: property taxes (paid in arrears in most states — seller owes for days they owned), HOA dues, prepaid rent if tenant-occupied, prepaid insurance. Seller's prorated share shown as credit to buyer or debit to seller on Closing Disclosure.
Title Search and Title Insurance
Title search: examines public records for liens, easements, judgments — ensures clean title
Title Search and Title Insurance
What a title search finds — and why insurance is still needed
Title search: examines county recorder's records going back years to find: existing mortgages, liens, easements, judgments, unpaid taxes, encroachments, missing heirs. Even a thorough search can miss: forgeries, undisclosed heirs, errors in records, off-record claims. Title insurance covers these risks.
Recording Documents
Recording: notarized deed recorded at county recorder — gives constructive notice to the world
Recording Documents
Why recording is the final critical step in a real estate transaction
Recording puts the world on constructive notice of the ownership transfer. Until recorded: deed is valid between parties but not against subsequent buyers or lenders who didn't know. Race-notice states: first to record wins (if they didn't know of prior claim). Notice states: bona fide purchaser without notice wins.
Actual vs Constructive Notice
Actual vs Constructive notice: actual = you personally know. Constructive = public records say you should know.
Actual vs Constructive Notice
Two types of notice that affect ownership rights
Actual notice: you have direct personal knowledge of a fact. Constructive notice: the law presumes you know something because it was publicly recorded or visible. 'You should have checked the public records' — that's constructive notice. Recorded documents give constructive notice to the world.
Counter Offers
Counter offer: original offer dies, new offer is made. Creates new offer that original offeror can accept or reject.
Counter Offers
How counter offers work in contract law
When seller makes a counter offer: original offer is legally dead and cannot be revived. The counter offer is a brand new offer from the seller to the buyer. Buyer can: accept (creates binding contract), reject, or counter again. Either party can withdraw their offer at any time before acceptance.
Liquidated Damages
Liquidated damages: pre-agreed remedy for breach. If buyer defaults, seller keeps earnest money (if liquidated damages clause signed).
Liquidated Damages
The pre-agreed remedy for buyer default
Liquidated damages clause: both parties agree upfront that if buyer defaults, seller keeps earnest money as full compensation — cannot sue for more. If no liquidated damages clause: seller may sue for actual damages, which could exceed the earnest money. Buyers: protects from unlimited liability. Sellers: limits recovery.
Novation vs Assignment
Novation: replace one party to a contract with a new party, releasing the original
Novation vs Assignment
Two ways to transfer contractual obligations
Assignment: original party remains secondarily liable. Novation: complete substitution of new party — original party fully released. Loan assumption without novation: original borrower still liable if new buyer defaults. Novation of mortgage: lender must agree to release original borrower.
1031 Tax-Deferred Exchange
1031 Exchange: defer capital gains tax by reinvesting in like-kind property. Must identify in 45 days, close in 180.
1031 Tax-Deferred Exchange
How investors defer capital gains taxes through property exchanges
Section 1031 of IRS code: investors can defer capital gains tax by exchanging investment property for like-kind investment property. Rules: must use qualified intermediary, identify replacement property within 45 days of sale, close on replacement within 180 days. 'Like-kind' is broad — any investment real estate.
TRID — Know Your Before and After
Good faith estimate → Loan Estimate. HUD-1 → Closing Disclosure. TRID combined them in 2015.
TRID — Know Your Before and After
Understanding the major 2015 mortgage disclosure reform
TRID (TILA-RESPA Integrated Disclosure): replaced old Good Faith Estimate and Truth-in-Lending disclosure with Loan Estimate (within 3 days of application). Replaced HUD-1 and final TIL with Closing Disclosure (3 days before closing). Makes it easier for consumers to compare loans and understand closing costs.