Land Sale Contracts

Question 1

Seller

Answer 1

Owner looking to unload property

Question 2

Buyer

Answer 2

Person looking to buy property

Question 3

Broker

Answer 3

An intermediary between buyer and seller

Question 4

Listing agent

Answer 4

Agent who is assisting the seller in promoting and selling the property

Question 5

Seller’s agent

Answer 5

a sub-agent for the listing agent who helps find buyers

Question 6

Buyer’s Agent

Answer 6

Broker who serves as the representative of the buyer; will receive commission similar to the seller’s gent fee

Question 7

Dual Agent

Answer 7

Represents both buyer and seller (many states forbid this - conflict of interest)

Question 8

Two Stages of Land sale

Answer 8

Contract (parties negotiate terms) & Deed (where parties transfer property)

Question 9

Liability

Answer 9

Determined by the state where the breach occurs

Question 10

Contract stage

Answer 10

Any liability must be based on a contract provision

Question 11

Deed Stage

Answer 11

Any liability must be based on a deed warranty

Question 12

Doctrine of Merger

Answer 12

Convents under the contact are merged into the deed and any remedy will flow from the deed once in the deed stage

Question 13

Statute of Frauds

Answer 13

Land sale contracts are subject to the state of frauds

Three requirements
1. Must be in writing
2. Signed by the party to be charged; AND
3. Must include essential terms

Question 14

Statute of frauds essential terms

Answer 14

1. Parties involved
2. Description of the property (does NOT have to be legal description)
3. Price and payment information

Question 15

Exception to statute of frauds

Answer 15

1. Part Performance
2. Detrimental Reliance (ESTOPPEL)

***These often go hand in hand

Question 16

Part Performance (SOF Exception)

Answer 16

Partial performance by either the seller or buyer is treated as evidence that the contract existed

Question 17

Partial performance may look like…

Answer 17

1. Payment of all or part of the purchase price
2. Possession by the purchaser
3. Improvements by the purchaser

**Many states require at least two acts of performance for partial performance to apply

Question 18

Detrimental Reliance

Answer 18

An estoppel doctrine that applies where a party has reasonably relied on the contract and would suffer hardship if the contract was not enforced

Question 19

Marketable Title

Answer 19

Every land sale contract includes an implied covenant of marketable title.

Title that is free from an unreasonable risk of litigation

Question 20

What would make title unmarketable

Answer 20

1. Title acquired by adverse possession that hasn’t been quieted
2. Private encumbrances
3. Violation of a zoning ordinance

Question 21

Private Encumbrance

Answer 21

A claim against the property by a party that is not the owner

Question 22

Unmarketable Standard

Answer 22

Standard is that of a reasonable buyer

Question 23

If seller cannot deliver marketable title

Answer 23

The buyer’s remedy is recision of the contract

Question 24

Are pets considered an Encumbrance?

Answer 24

Yes - if it would prevent a buyer form having a pet for eventually selling to anyone with a pet

Question 25

Delays for land contracts

Answer 25

Time is not of the essence. Failure to close on the set date may be a breach of contract, but not grounds for recision.

Question 26

Implied Warranty of Fitness or Suitability

Answer 26

Applies to defects in new construction Most jurisdictions: Both initial homeowner-purchaser and subsequent purchaser may recover damages Minority: Only original buyer can enforce this warranty

Question 27

Duty to disclose defects

Answer 27

Most jurisdictions impose a duty on the seller to disclose to the buyer all know, physical and material defects

Question 28

Defects

Answer 28

Latent or hidden effects Material defects must substantially affect the value of the home, health and safety of its occupants, or the desirability of the home "as is" will not satisfy sellers duty to disclose

Question 29

Deed and contract merger

Answer 29

After closing, obligations contained in the contract are merged into the deed. If there was something important in the contract that is not in the deed the cause of action is lost because the deed controls after closing.

Question 30

Sellers remedies on buyer's breach

Answer 30

1. Damages: measure is the difference between the contract price and market price on date of the breach 2. Recision: seller can sell the property to someone else 3. Specific performance

Question 31

Buyers remedies on Seller's breach

Answer 31

1. Damages: measure is the different between contract and market value on date of the breach (if breach was in good faith, can only recover out of pocket expenses) 2. Recision: return payments to the buyer and cancel the contract 3. Specific performance

Question 32

Equitable conversion and risk of loss

Answer 32

Who bears the risk of loss if there is damage to or destruction to the property during the sale of land?

Question 33

Equitable conversion: Majority

Answer 33

The buyer holds equitable title during the period between the execution of the contract and the closing and delivery of the deed.

Question 34

Equitable conversion: minority

Answer 34

Risk of loss is on the seller until the closing and delivery of the deed.