How a home sale works, from first contact to closing
Every financed purchase runs on the same federal clock: the Loan Estimate, the Closing Disclosure, and the waiting periods between them. This lesson walks a deal from preapproval to the closing table, covers the federal ban on referral kickbacks, and shows how to stop the wire fraud that targets every closing.
Every fact links to its source. Checked Oct 3, 2026
The steps of a financed purchase
The CFPB divides a home purchase with a loan into four steps: prepare to shop, explore loan choices, choose a loan offer, and get ready to close. The first two steps come before the buyer makes an offer. The last two come after. (Source: CFPB)
A preapproval letter shows sellers that the buyer is serious. It does not commit the buyer to that lender. (Source: CFPB)
After a seller accepts an offer, the buyer may have as little as a couple of days to line up financing. For this reason, the CFPB tells buyers to shop for a mortgage before they make an offer. (Source: CFPB)
The CFPB tells buyers to make the offer and the sales contract contingent on getting financing and on a satisfactory inspection. Then, if the loan fails or the inspection finds serious flaws, the buyer is not contractually required to buy. (Source: CFPB)
The CFPB defines earnest money as a deposit a buyer pays to show good faith on a signed contract to buy a home. At closing, it may go toward closing costs or the down payment. If the contract ends for a permitted reason, the buyer gets it back. If the buyer does not perform in good faith, the seller may keep it. (Source: CFPB)
If the buyer does not tell the lender that they intend to proceed within 10 business days from the day the lender sends the Loan Estimate, the lender can close the application as incomplete. (Source: CFPB)
Page 1 of the Loan Estimate shows whether the interest rate is locked, and until when. If the closing happens after the lock expires, even because of the lender's processing time, the buyer may have to pay a fee to extend the lock. (Source: CFPB)
For a loan secured by a first lien on a dwelling, the lender must give the buyer a copy of each appraisal promptly when it is complete, or three business days before consummation, whichever is earlier. The buyer may waive this timing and get the copy at or before consummation. (Source: eCFR)
Most lenders require the buyer to buy a lender's title insurance policy, which protects the amount the lender lends. An owner's title insurance policy, which protects the buyer's own investment, is the buyer's choice. (Source: CFPB)
The CFPB tells buyers to do a final walk-through of the home before they sign any closing papers. (Source: CFPB)
The Loan Estimate and the Closing Disclosure
For these rules, a loan application is complete when the lender has six items: the buyer's name, the buyer's income, the buyer's Social Security number (to get a credit report), the property address, an estimate of the property's value, and the loan amount the buyer wants. (Source: eCFR)
The lender must deliver or mail the Loan Estimate no later than the third business day after it receives the application. (Source: eCFR)
The lender must also deliver or mail the Loan Estimate no later than the seventh business day before consummation. (Source: eCFR)
Consummation is the time the buyer becomes contractually obligated on the loan. (Source: eCFR)
Some fees on the Loan Estimate cannot go up at all, unless the buyer asked for a change to the loan or the buyer's financial information changed. Other fees can go up by no more than 10 percent. A third group of fees has no limit. (Source: CFPB)
The buyer must receive the Closing Disclosure no later than three business days before consummation. (Source: eCFR)
If the Closing Disclosure is not given to the buyer in person, the buyer is treated as having received it three business days after it is delivered or mailed. (Source: eCFR)
For the seven-day and three-day waiting periods, a business day is every calendar day except Sundays and the federal legal public holidays. (Source: eCFR)
Only three changes to the Closing Disclosure start a new three-business-day wait: the annual percentage rate (APR) becomes inaccurate, the loan product changes, or a prepayment penalty is added. For other changes, the lender gives a corrected Closing Disclosure at or before consummation. (Source: eCFR)
In a sale, the settlement agent must give the seller a Closing Disclosure for the seller's side of the transaction no later than the day of consummation. (Source: eCFR)
RESPA Section 8 (kickbacks) and Section 9 (title insurance)
RESPA Section 8 bans giving or accepting any fee, kickback, or thing of value under an agreement, oral or otherwise, to refer settlement service business that involves a federally related mortgage loan. A referral is not a service that can be paid for: a company may not pay another company, or the employees of another company, for a referral. (Source: eCFR)
Settlement services include the services of a real estate agent or broker, title searches and title insurance, loan origination, inspections, appraisals, and homeowner's insurance and home warranties. (Source: eCFR)
Regulation X gives this example of a violation: a real estate broker who is also licensed as a title insurance agent refers buyers in the broker's own transactions to an unaffiliated title company, does little or no title work, and gets a commission or part of the title premium. The regulation says the broker is really being paid for the referral. (Source: eCFR)
A "thing of value" does not have to be money. It includes discounts, commissions, trips, payment of another person's expenses, and services at free or special rates. (Source: eCFR)
The agreement to refer does not have to be written or spoken. When a person receives something of value again and again, and it is connected to the volume or value of the business referred, that is evidence of an agreement. (Source: eCFR)
Normal promotional and educational activities are allowed only when they are not conditioned on the referral of business and do not pay for expenses that the person who refers would otherwise pay. (Source: eCFR)
Section 8 allows payments under cooperative brokerage and referral arrangements between real estate agents and real estate brokers, when all parties act as real estate brokers. This exemption does not cover fee arrangements between real estate brokers and mortgage brokers. (Source: eCFR)
A referral to a company that has an ownership tie to the person who refers (an affiliated business arrangement) is legal only if all three conditions are true: the person who refers gives the client a written Affiliated Business Arrangement Disclosure Statement no later than the time of the referral; the client is not required to use that company; and the only thing of value from the arrangement is a return on the ownership interest. (Source: eCFR)
A person who violates Section 8 can be fined up to $10,000, put in prison for up to one year, or both. The violator is also liable to the person charged for the settlement service for three times the amount of the charge paid. (Source: Cornell LII)
RESPA Section 9: when a federally related mortgage loan helps pay for the purchase, a seller may not require the buyer, directly or indirectly, as a condition of the sale, to buy title insurance from a particular title company. A seller who violates this is liable to the buyer for three times all charges made for that title insurance. (Source: Cornell LII)
Wire fraud at closing
The CFPB warns that scammers can pose as the buyer's real estate agent or settlement agent and suggest last-minute changes to the wiring instructions, so they can steal the buyer's closing funds. (Source: CFPB)
The FBI says business email compromise targets all participants in a real estate transaction: buyers, sellers, real estate attorneys, title companies, and agents. When criminals get into one participant's email, they watch the transaction and time a request to change the payment type (often from check to wire) or the bank account. (Source: FBI IC3)
The FBI says these criminals use public information on real estate listing sites, such as a home's "under contract" status and the agent's contact information, to find victims. (Source: FBI IC3)
The FBI says the best defense is to verify every request to change the payment type or the payment location. It also says to be careful with communication that is only by email, and to set up a second way to communicate for verification. (Source: FBI IC3)
If money goes to a fraudulent account, the FBI says time is critical: contact the bank immediately and ask it to recall the funds. Then file a complaint at www.ic3.gov as soon as possible, whatever the amount lost. (Source: FBI IC3)
In June 2026, the FBI warned that criminals pose as owners of vacant land and contact real estate agents and title companies to sell land they do not own. Warning signs include a seller who communicates only by email, text, or internet phone numbers and will not meet in person, pressure to close fast or below market value, and a request to wire the money abroad or to an account in a different name. (Source: FBI IC3)
For a land purchase, the FBI suggests sending a certified letter to the owner's address on the land tax record to confirm that the seller is real. (Source: FBI IC3)
Not in this lesson
Agency, buyer agreements, and how brokerages work: the other lessons.
Who holds earnest money, deposit deadlines, and trust account rules: your state guide.
Who conducts the closing, attorney closing rules, and transfer taxes: your state guide.
Rules of a specific loan program, and the lender's own underwriting conditions: the lender.
Whether a specific payment, gift, or marketing agreement with a lender or title company is legal under RESPA: your broker and an attorney.
Lead-based paint disclosure, fair housing, and FIRPTA: the lesson "Disclosures and fair housing".
Reddy University
Try it with Reddy
Reddy handles the paperwork side of real estate: deadlines, documents, drafts, and reminders. Ask it something like:
“Track every deadline on my deal and remind me before each one.”
“Draft a wire fraud warning for my buyer to read before closing.”
