Contracts, Disclosures, and Transaction Management
Contracts, Disclosures, and Transaction Management is the highest-volume domain on most transaction exams. It tests formation, contingencies, money handling, required disclosures, and the federal timing rules that run from application to consummation.
Formation and remedies
A contract needs offer, acceptance, consideration, capacity, and a lawful purpose, and it must satisfy the statute of frauds in writing and signed. A counteroffer terminates the original offer. Contingencies - financing, inspection, appraisal, sale of the buyer's home - must state deadlines and the consequences of waiver. Remedies include specific performance, rescission, and liquidated damages; an earnest money deposit so large that it functions as a penalty is unenforceable. Assignment transfers rights and duties; novation replaces a party.
The disclosure stack
Federal items include lead-based paint disclosure for pre-1978 housing with a 10-day inspection opportunity, the Closing Disclosure, and fair housing and agency notices. State items typically include a seller property condition disclosure, flood zone and insurance history, HOA documents, Megan's Law notice, and material defect disclosure. Caveat emptor no longer protects a seller who conceals a known latent defect.
TRID timing
The Loan Estimate must be delivered within three business days of application; the Closing Disclosure at least three business days before consummation. The two rules use different definitions of business day: the CD rule counts calendar days except Sundays and federal holidays, while the LE rule uses the lender's own business-day definition.
Worked example
A Closing Disclosure is delivered Thursday, September 19. The waiting period runs Friday (1), Saturday (2), and Monday (3), because Saturday counts and Sunday does not. Consummation cannot occur before Tuesday, September 24. A federal holiday inside that window pushes closing another day, and a corrected CD that changes the APR restarts the three-day clock.
Traps
Accepting a counteroffer while believing the original offer is still live; blurring the two TRID business-day definitions; assuming a seller disclosure cures a known structural defect; letting earnest money sit in an operating account instead of a trust account; and ignoring "time is of the essence" language when a contingency deadline passes.