Utah Law School Practice Exam

In the context of seller carry back financing, it is crucial for the agent to disclose potential ramifications surrounding a "due on sale" clause. This clause is often included in mortgage agreements and allows the lender to demand full repayment of the loan if the property is sold. If the property is transferred without the lender's consent, this clause can be triggered, leading to significant consequences for both the buyer and the seller.

As the agent facilitates the financing arrangement, they have a responsibility to ensure that all parties are informed about this particular risk. It is essential that buyers understand that while they may be taking over payments or assuming the loan, they could also face unexpected demands if the lender enforces the clause upon a transfer of ownership. By disclosing this potential effect, the agent helps protect the buyer's interests and is acting in accordance with ethical standards in real estate transactions.

The other options do not address the critical nature of the due on sale clause in seller carry back financing and therefore would not adequately inform the parties involved in the transaction.