Hawaii Broker Practice Exam

Question: 1 / 425

When does the risk of loss pass to the buyer?

At the time of contract signing

At the time of the home inspection

At closing or possession, whichever comes first

The risk of loss passes to the buyer at closing or possession, whichever comes first, because this is typically when the buyer gains control and legal ownership of the property. This principle helps ensure that the buyer assumes the risk associated with the property after they have completed the necessary steps to finalize the transaction, such as financing and legal transfer.

At closing, the buyer receives the title to the property, solidifying their ownership rights and responsibilities. If possession occurs before closing, it indicates that the buyer has taken physical control of the property, which also transfers the risk of loss.

This timing is crucial, as it protects both parties in a real estate transaction. It acknowledges that until the buyer has ownership or control, the seller retains responsibility for any losses or damages that may occur to the property. This structure helps mitigate disputes over responsibility if unforeseen events affect the property after the contract is signed but before the transaction is completed.

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When the earnest money is deposited

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