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Land Transfer and Financing Flashcards

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1
Q

Basic Requirements of Real Estate K

6

A

1) Parties with contractual capacity
2) K has legal purpose
3) Offer
4) Acceptance
5) Consideration
6) Statute of Frauds

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2
Q

Statute of Frauds 1677

A

The agreement or some memorandum thereof must be IN WRITING and SIGNED

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3
Q

Common Issues of Oral Ks

A 
Oral K: 
- void or unenforceable
- signed or subscribed
- signed by whom? 
     Both parties, party to be charged, or seller
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4
Q

Oral K

Void or Unenforceable

A

Void: K is no good; as if K does not exist

Unenforceable: courts won’t enforce but you are free to carry it out on your own (bound by agreement)

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5
Q

Oral K

Signed or subscribed

A

Signed: mark made with present intent to convey

Subscribed: underneath; signed at the bottom/end of the document

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6
Q

Statute of Frauds in TX

A

Promise or agreement MUST be in writing
NOT enforceable
Signed by party to be bound (or authorized rep)
Oral amendments MUST be in writing

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7
Q

Who does the Statute of Frauds protect?

A

Non-parties

Meant to protect against false claims

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8
Q

Partial Performance

A

K enforceable if proof of oral K plus:

  • Possession by purchaser, or
  • Possession plus pmt, or
  • Possession plus valuable improvements, or
  • Possession plus change in position causing irreparable injury, or
  • Writing req’d
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9
Q

Partial Performance in TX

A

Purchaser takes possession, AND
Purchaser pays consideration, AND
Purchaser EITHER:
- makes valuable and permanent improvements on land with seller’s consent, or
- other factors exist to show transaction would be fraud on purchaser if not enforced

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10
Q

Contents of Writing (Req’ts)

A

1) Identity of buyer and seller
2) Description of property
3) Key terms (date, price, etc.)
4) Signature
Without these, agreement is too vague or inconsistent

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11
Q

Real Estate K must:

A

Comply with state laws
Be adapted to local custom
Individualized for client’s exact situation

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12
Q

Sources of Forms

A 
Real Estate Commissions
State Bar Associations
Commercial Publications
User Developed Forms
Form might be mandated by state law
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13
Q

Benefits of using Forms

A

Predictability
Efficiency
Reduces chances of error
Provides safety against malpractice (not immunity though)

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14
Q

Detriments of using Forms

A

Not all forms are universal
Bends client’s situation to fit the form
Form may not be up-to-date

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15
Q

Time for Performance Situations

A

1) No time stated/silent
2) Exact time stated
3) Time of the essence

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16
Q

Time for Performance:

Silent

A

Bad K

Reasonable time from K date

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17
Q

Time for Performance:

Exact time stated

A

At law: time deemed of the essence
At equity: Specific performance

which is used depends on what remedy is being sought; at law if looking to get out of the K; at remedy if wanting performance anyways

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18
Q

Time of Performance:

Time of the Essence

A

How do you know time is of the essence?
By express statement (use exact phrase)
By surrounding facts and circumstances
Nature of the property

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19
Q

Financing Arrangements Buyer’s Performance

A

Situation: someone wants to buy property but does not have the money to do so
Needs to become a debtor

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20
Q

Seller’s Options to Buyer’s Performance

4

A

Refusal
Obtain promise to repay
Obtain surety
Obtain collateral

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21
Q

Seller’s Options to Buyer’s Performance:

Refusal

A

Seller does not have to accept financing; can request cash payment (not common)

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22
Q

Seller’s Options to Buyer’s Performance:

Obtain Promise to Repay

A 
Unsecured creditor (high interest rates)
General creditor

If buyer fails to pay, seller has right to sue to recover payment

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23
Q

Seller’s Options to Buyer’s Performance:

Obtain surety

A

Co-signer
Accommodation Party
Guarantor

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24
Q

Seller’s Options to Buyer’s Performance:

Obtain Collateral

A

Safest thing for creditor to do
Personal property: security interest
Real property: mortgage or deed of trust

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25
Purchase Money Mortgage Seller = Lender (5)
1) Mutual K 2) Purchaser gives down payment to seller 3) Purchaser signs promissory note 4) Seller delivers deed to Purchaser 5) Mortgage: provides collateral for note
26
Purchase Money Mortgage Seller = Lender Purchaser roles
``` Debtor Maker of note Borrower Grantee Mortgagor ```
27
Purchase Money Mortgage Seller = Lender Seller roles
``` Payee Creditor Lender Grantor Mortgagee ```
28
Purchase Money Mortgage Seller is not Lender (6)
1) Mutual K 2) Purchaser gives down payment to seller 3) Lender = Bank; purchaser gets note from lender 4) $ from note goes to Seller 5) Seller conveys to Purchaser 6) Purchaser has mortgage with Lender Seller happy b/c gets $ up front
29
Purchase Money Mortgage Seller is not Lender Purchaser roles
``` Maker of note Borrower Debtor Grantee Mortgagor ```
30
Purchase Money Mortgage Seller is not Lender Seller role
Grantor
31
Purchase Money Mortgage Seller is not Lender Lender's role
Payee Creditor Mortgagee
32
Deed of Trust | TX (5)
1) Mutual K 2) Down payment from Purchaser to Seller 3) Lender = bank; Purchaser gets note from Lender 4) $ from note goes to Seller 5) Purchaser gains Deed of Trust through Lender from Trustee
33
Deed of Trust | Purchaser roles
Maker of note Debtor Borrower Grantor of Deed of Trust (not deed)
34
Deed of Trust | Seller roles
Grantor of deed
35
Deed of Trust | Lender role
Payee Creditor Mortgagee Beneficiary
36
Deed of Trust | Trustee role
Holds deed until Purchaser fulfills payment on note | Attorney for lender, corp. officer of lender, or any third party
37
Installment Land K or K for Deed | 4
1) Mutual K 2) Purchaser gives down payment to Seller 3) Purchaser pays Seller 4) Seller gives Purchaser deed once paid in full
38
Failure to Pay Mortgage | CL
Mortgagor lose all rights to property
39
Failure to Pay Mortgage ML (3)
Equity of Redemption Strict Foreclosure Foreclosure by Sale
40
Equity of Redemption
Ability to redeem if in default; can get property back tendering full payment of the note Problem b/c if couldn't make the pmts, how can you pay the full note off? Allowed for debtor to sell the property and possibly make a profit (won't work if upside down on the note)
41
Strict Foreclosure
Rare Mortgagee keeps property and forgives debt Mortgagor unhappy b/c he won't get anything back (down payment, improvement costs) States are reluctant to use b/c the mortgagee gets a windfall
42
Foreclosure by Sale
Common Auction off property; competitive bidding Mortgagee can only receive the amount left unpaid on the note (to prevent windfall) Money earned in excess of note balance is given to the mortgagor
43
Failure to pay Deed of Trust
Allows trustee to sell property without court proceedings Faster, cheaper than traditional mortgage Mortgagor gets surplus If deficiency in amount sold for, the trustee can sue mortgagor for the difference
44
Failure to pay Installment K
CL: seller keeps all pmts and land; buyer has no redemption rights ML: buyer has protections
45
Merchantable/Marketable Title
Seller's Performance
46
Tests to Determine Merchantable/Marketable Title | 2
Reasonable Person test (TX) | Specific Performance test
47
Merchantable Title: | Reasonable Person Test
TX | Title does not have to be perfect so long as it is not subject to doubt by a reasonable
48
Merchantable Title: | Specific Performance Test
Title is good enough that a court is willing to order an unwilling purchaser to buy (forced sale) - forced performance of sales K
49
What would make a title un-merchantable?
Interest less than FSA Encumbrances (mortgages, tax liens) Restrictions (easement, covenant) Break in chain of title (lacks vertical privity)
50
Correction of Defects
Before seller is in breach of K, buyer MUST: Give seller NOTICE Allow seller REASONABLE time to fix
51
Remedy for Un-merchantable Title
Quiet Title Suit
52
Quiet Title Suit
Bring all claimants together to resolve claims
53
Tender
One party MUST tender to place the other party in brech - Buyer: tenders $ or agreed upon financing - Seller: tenders deed which conveys merchantable title and K
54
Anticipatory Repudiation
Excuses tender b/c retracted tender before performance date
55
Assignment
Ability to transfer K right or performance (unless performance is a personal service; CANNOT transfer duty to perform but can transfer right to $)
56
Why might the seller assign their rights? | - Why transfer to someone else before the sale?
Need $$ quick A sells property to B for $200k but transfers to C for $180k; C must go through with the sale; A gets $180k quickly and C makes $20k profit
57
Why might the seller assign their rights? | - Why transfer the land to someone before the sale for MORE than amount from sale?
Someone is willing to pay more Seller wants more $$ A sells property to B for $200k but transfers to C for $220k; C must still go through with sale to B; why would C do this? C believes he can make money off of the land (cultivating, drilling for oil, etc.) he can make a profit if he can get more than $20k out of the land before the sale
58
Why might the buyer assign his rights?
Doesn't want to buy the land anymore | Got a better deal from someone else
59
Who is liable for the rights of the assigned?
Original Party
60
What type of land is usually affected by Assignment?
Residential/Farmland | Rarely used with commercial land
61
Buyer Remedies for Breach of K: | Seller has breached
Terminate K and recover funds already paid Specific Performance Damages
62
Buyer Remedies for Breach of K: | Terminate K and recover funds already paid
Was time of the essence? | Was seller given reasonable time to fix title problems?
63
Buyer Remedies for Breach of K: | Specific Performance
Court may force the seller to sell to the buyer b/c every piece of property is unique
64
Buyer Remedies for Breach of K: | Damages CL
English Rule damages only if bad faith on seller's part - Pre-K position ("do over") give everyone back what originally had and try again
65
Buyer Remedies for Breach of K: | Damages ML
American Rule (TX) Benefit of the Bargain Market value minus K price As if K were fully performed (make whole)
66
Law date
Performance date when parties tender Closing date Exchange of $ for deed
67
Seller Remedies for Breach of K: | Buyer Breached
Specific Performance Damages Terminate K
68
Seller Remedies for Breach of K: | Specific Performance
Court can force buyer to purchase the property
69
Seller Remedies for Breach of K: | Damages (3)
Benefit of the Bargain Out of pocket Liquidated damages
70
Seller Remedies for Breach of K: | Benefit of the Bargain
K price minus market price
71
Seller Remedies for Breach of K: | Liquidated Damages
Seller keeps down payment Often deemed void as penalty If reasonable amount is difficult to calculate, then it is allowed and not a penalty
72
Equitable Conversion
Time between SIGNING date and CLOSING date Purchaser: equitable owner and has interest in real property Seller: creditor holding title as security for pmt and has interest in real property
73
Significance of Equitable Conversion
How property passes through intestacy or will if death occurs btwn K date and closing date Method for creditors to reach property Risk of Loss
74
Risk of Loss | What happens if house burns down, is flooded, or a tornado destroys it?
Prior to K: all risk on SELLER After closing: all risk on BUYER What about in between? depends
75
Risk of Loss (TX)
Seller shall restore property to its previous condition as soon as REASONABLY possible, but in any event by the CLOSING DATE.
76
Risk of Loss if K is silent | 3
Majority (English) Minority (Massachusetts) Uniform Vendor and Purchaser Risk
77
Risk of Loss: | Majority Rule
English rule Purchaser has risk of loss b/c of equitable conversion ALL risk on purchaser Hardly any state follows anymore
78
Risk of Loss: | Minority Rule
Massachusetts Rule Seller has risk of loss b/c of implied condition that the premises will be transferred as they existed on date of K ALL risk on seller b/c of implied condition that property will be in same condition as when purchase was agreed to
79
Risk of Loss: | Uniform Vendor and Purchaser Act
TX follows | SELLER has risk of loss UNLESS buyer has taken possession of property prior to closing date

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