Housing Counselor Certification (HUD) Practice Exam

Which document is essential in finalizing a real estate transaction?

1. Title insurance

2. Purchase agreement

3. Home inspection report

4. Appraisal report

The correct answer is: Purchase agreement

The purchase agreement is a critical document in finalizing a real estate transaction because it serves as a legal contract between the buyer and seller outlining the terms and conditions of the sale. This document details the purchase price, the property being sold, contingencies (like financing and inspection requirements), and the responsibilities of both parties involved in the transaction. Without a fully executed purchase agreement, a transaction cannot move forward legally, as it signifies mutual consent on the terms. Other documents, such as title insurance, a home inspection report, and an appraisal report, play important roles in supporting a transaction but are typically contingent upon or follow the acceptance of the purchase agreement. They provide additional assurance regarding the property’s condition, value, and legal ownership, but they do not replace the necessity of having a signed purchase agreement as the foundational element of the sale.