Kovats Real Estate School Practice Test 2025 - Free Real Estate Practice Questions and Study Guide

The inclusion of a due on sale clause primarily serves to maintain control over the loan agreement. This clause allows the lender to demand full repayment of the loan if the property is sold or transferred to another party without their consent. By having this clause in place, lenders ensure that they can enforce the terms of the mortgage and protect their investment. When a borrower sells their property, the lender may want to review the creditworthiness of the new owner or may prefer to be involved in any potential reassessment of loan terms, particularly if market conditions have changed.

In essence, this clause gives the lender the authority to reevaluate the loan agreement in light of the property's sale, thereby allowing them to mitigate risks associated with transferring the loan obligation to another party who may not meet the original lending criteria. This mechanism is an important tool for lenders in managing their loan portfolios and ensuring the continued viability of the mortgage agreement.