What does a promissory note signify in a real estate transaction?

A promissory note is a key financial document in real estate transactions that signifies a written promise by one party to repay borrowed money to another party, usually under specific terms regarding interest and repayment schedule. This document serves as evidence of the debt and outlines the obligations of the borrower.

In the context of real estate, the promissory note typically accompanies a mortgage or deed of trust, wherein the borrower promises to repay the lender in exchange for financing the purchase of a property. It is a crucial part of securing funding for the transaction, ensuring that the lender has a legally binding agreement that can be enforced in case of default.

The other options may represent related concepts in real estate but do not accurately define what a promissory note is. For example, it does not guarantee the purchase price nor does it serve as a document for transferring property ownership. Additionally, a verbal agreement lacks the formalization that a promissory note provides, which is essential for legal and financial accountability.