Purchase and Sale Flashcards
(48 cards)
Pre-contractual Period - Definition
The time preceding the moment at which the owner of real property executes a contract for sale with the purchaser
3 types of listing agreements
Exclusive - commission paid no matter what
Exclusive agency - commission paid unless seller finds buyer on his own
Open - Will pay commission to any broker who finds buyer
Commission - Common law v. Modern Rule
Common law - Commission paid when broker finds a ready, willing and able buyer. Even if the purchaser later walks away
Modern rule - Parties must execute a contract for sale, AND buyer must show at closing. However, if seller is the cause of buyer walking away, must still pay commission.
Broker - Fiduciary duties
Fiduciary of seller not buyer. However some jurisdictions require selling broker to maintain confidential information of buyer
3 duties owed
1) duty of Care
2) duty of loyalty
3) Duty to disclose all non frivolous offers
Broker - Duty of care
Level of care of a hypothetical competent broker specializing in the sale of real property under the circumstances
Broker - Duty of loyalty
Broker must:
- Avoid self dealing
- maintain confidential information
- avoid conflicts of interest
Broker - Duty to disclose
Broker must disclose all non-frivolous offers so the seller may determine whether or not to accept.
Executory / contract period - definition
Period between execution and closing
Statute of frauds applies to?
Conveyance of entire fee Mortgages Leases longer than 1 year Conveyances of fee simple Easements Real covenants
Statute of frauds - must contain (3 P’s)
Price
Parties
Property
Exception to Statute of frauds for real property?
Partial performance:
Demonstrates detrimental reliance AND
acts as evidence of the agreement
When does a meets and bounds description meet the statute of frauds?
When it ends where it begins.
However, if the mistake is simply due to a clear clerical error, a court will probably enforce the contract
Recorded Plat
Survey of subdivision created by developer and filed at the county court house.
Sample description - “Lot 2 as shown of that certain plat of Turtle Ridge, created by Daniel Bogart, registered land surveyor, and recorded in plat book 3 page 10 in the orange county court house
US government survey
Covers 30 western states
All land is divided into 6 Sq mile “townships”
designated by their distance from the “baseline” and the “principle meridian”
Each township is divided into 1 sq. mile “sections”
Marketable Title
Definition - Fee simple absolute ownership that is not subject to any defects such as easements and mortgages
To be unmarketable defect must be substantial in character, and one which causes buyer to suffer injury
Facts must be known at the time which raise reasonable doubt to title. NOT possibility or conjecture that such facts might exist
Default rule - must be delivered at closing unless contracted otherwise
3 (4 in CA) Elements of marketable title
1) Seller must be record owner of title
2) Seller must have fee simple absolute ownership without encumbrances or limitations of any kind
3) By purchasing property, buyer will not be placed into a non-frivolous prospect of litigation over ownership.
4) IN CA - marketability of title must be demonstrated solely from public record
Therefore, adverse possession cannot serve as basis or marketable title unless owner files a suit to quiet title, and obtains a judgment of good title
Insurable title
Buyer will accept any title that a title company is willing to insure.
Not good for buyer because insurance companies will insure anything if the premiums are high enough.
Contract title
Parties choose to change the standard from “marketable title”
Commonly used to allow for defects buyer accepts:
Utility easements
Prior deed covenants the buyer is OK with
Failure to present marketable/contract title - damages?
Most jurisdictions limit to rescission of the contract and return of any earnest money. However if seller intentionally damages title in order to back out of the deal, benefit-of-the-bargain damages are available
A few jurisdictions allow ordinary contract law damages
Caveat Emptor v. Modern Rule of disclosure
Caveat Emptor - Old common law rule
Modern Rule - Sellers must disclose, at a minimum, defects that would not be discoverable by a reasonable inspection and that materially effect the value of the property.
Negligent Misrepresentation
If a seller is unaware of a certain latent defect, but affirmatively asserts that the defect does not exist, he is liable for negligent misrepresentation
“As is” clauses
1) state buyer will accept property as is
2) protects seller against liability for negligent misrepresentation
3) NO DEFENSE against outright fraud
Statutory disclosure requirements
Certain states require disclosure of certain defects by statute, including CA. Some include:
Termite and pest infestations
structural problems
Water damage
Mold
Typically apply to Residential not commercial transactions
Patent v. Latent
Patent defects - one that is obvious or discoverable upon a reasonable inspection
Latent Defects - Not obvious or discoverable upon a reasonable inspection - Must be disclosed if materially affects the value of the property, is peculiarly within the knowledge of the seller or is unlikely to be discovered by buyer using due care
