Real Estate Contracts

Question 1

installment note

Answer 1

A note calling for periodic payments of principal
and interest, or interest only, until the principal
is paid in full by amortization or a final balloon
payment.

Question 2

quitclaim deed

Answer 2

A document used to convey whatever interest, if

any, the grantor may hold in the real estate.

Question 3

consideration

Answer 3

Anything given or promised by a party to induce
another to enter into a contract. It may be a
benefit conferred upon one party or a detriment
suffered by the other.

Question 4

choice-of-law provision

Answer 4

A provision specifying California law applies if a
dispute arises with a tenant regarding the lease.
[See RPI Form 552 §23.4]

Question 5

escrow instructions

Answer 5

Directives an escrow officer undertakes as given
by an investor and a seller-in-foreclosure to
coordinate a closing on a purchase agreement.
[See RPI Form 401]

Question 6

liquidated damages

Answer 6

A provision in a contract specifying the amount
of damages one party will receive from the
opposing party if the opposing party breaches
the agreement.

Question 7

addendum

Answer 7

addendum
An attachment to a contract, rental or lease
agreement for incorporating any provision
agreed to but not included in the boilerplate
provisions of the agreement. [See RPI Form 250]

Question 8

Structural Pest Control

Report

Answer 8

A report disclosing any active infestations,
damage from infestations or conditions which
may lead to infestations

Question 9

offer to lease

Answer 9

A document which sets forth all crucial elements
typically negotiated to bring the landlord and
tenant together in final leasing arrangements.
[See RPI Form 556]

Question 10

ground lease

Answer 10

A leasehold interest in which rent is based on the
rental value of the land, whether the parcel is
vacant or improved.

Question 11

exclusive right-to-sell listing

Answer 11

A listing agreement employing a broker to act
as agent for the seller of real property under
the terms of which the broker is entitled to a
commission if the property is sold during the
duration of the listing through another broker or
by the owner without the services of an agent.

Question 12

option to renew

Answer 12

An agreement granting a tenant the right to
continue in possession upon expiration of the
existing lease under a new lease agreement
on the same conditions as the expiring lease
agreement on terms for payment of rent set out
in the option to renew. [See RPI Form 565]

Question 13

listing

Answer 13

An employment contract between principal and
agent authorizing the agent to perform services for
the principal involving the latter’s property; listing
contracts are entered into for the purpose of securing
persons to buy, lease, or rent property. Employment
of an agent by a prospective purchaser or lessee
to locate property for purchase or lease may be
considered a listing.

Question 14

triple net lease

Answer 14

A nonresidential lease which passes the
responsibility for all costs and maintenance of
the property to the tenant. [See RPI Form 552-2
and 552-3]

Question 15

title report

Answer 15

A report which discloses condition of the title,
made by a title company preliminary to issuance
of title insurance policy.

Question 16

counteroffer

Answer 16

An alternative response to an offer received
consisting of terms different from those of the
offer rejected. [See RPI Form 180]

Question 17

deed

Answer 17

Written instrument which when properly executed
and delivered conveys title to real property from
one person (grantor) to another (grantee).

Question 18

use-maintenance provision

Answer 18

A provision in a nonresidential lease agreement
which establishes the landlord’s and tenant’s
responsibility for the care and maintenance of
the premises during the lease term.

Question 19

graduated rent provision

Answer 19

A rent provision in a nonresidential lease
agreement which increases the initial monthly
rent in pre-set increments over the term of the
lease. [See RPI Form 552 §4.4]

Question 20

credit application

Answer 20

A document prepared by a prospective tenant
which includes a provision authorizing the
landlord to investigate and receive information
on the tenant’s creditworthiness. [See RPI Form
302]

Question 21

rescission

Answer 21

The cancellation of a contract and restoration of
the parties to the same position they held before
the contract was entered into.

Question 22

net lease

Answer 22

A nonresidential lease which transfers to the
tenant the obligation, unless modified, to pay all
of the costs of ownership in addition to utilities
and janitorial services. [See RPI Form 552-2 and
552-3]

Question 23

Uniform Residential Loan

Application

Answer 23

A standardized mortgage application
completed by the buyer with the assistance of
the transaction agent and the mortgage lender’s
representative. [See RPI Form 202]

Question 24

voidable contract

Answer 24

That which is capable of being adjudged void,
but is not void unless action is taken to make it
so.

Question 25

loan application

Answer 25

The loan application is a source of information on which the lender bases a decision to make the loan; defines the terms of the loan contract, gives the name of the borrower, place of employment, salary, bank accounts, and credit references, and describes the real estate that is to be mortgaged. It also stipulates the amount of loan being applied for and repayment terms. [See RPI Form 202]

Question 26

option to buy

Answer 26

An agreement granting an irrevocable right to buy property within a specific time period. [See RPI Form 161]

Question 27

option to extend

Answer 27

An agreement granting a tenant the right to extend possession under the original lease agreement on terms set out in the option to extend. [See RPI Form 565]

Question 28

lease agreement

Answer 28

The written document which sets the terms of a fixed-term tenancy. [See RPI Form 550 and 552 -- 552-4]

Question 29

attorney fee provision

Answer 29

A provision in an agreement specifying the prevailing party to a dispute is to receive attorney fees if litigation results. [See RPI Form 552 §23.2]

Question 30

forbearance agreement

Answer 30

An agreement that the lender will temporarily reduce monthly mortgage payments for the homeowner at risk of default, without altering the original loan terms.

Question 31

purchase agreement

Answer 31

The primary document used to negotiate a real estate sales transaction between a buyer and seller. [See RPI Form 150 -- 159]

Question 32

note

Answer 32

A document evidencing an obligation to pay money to a creditor — usually a lender or carryback seller.

Question 33

open listing

Answer 33

An employment entered into by a broker to render real estate services on a best-efforts basis under which a fee is due to the broker if they achieve the client’s objective of the employment before the client or another broker separately first meet the objective, such as the sale or locating of a property.

Question 34

gross lease

Answer 34

A nonresidential lease specifying that the tenant pays for their utilities and janitorial fees, but unless modified is not responsible for any other care, maintenance or carrying costs of the property. [See RPI Form 552 and 552-1]

Question 35

time-essence provision

Answer 35

A purchase agreement provision establishing that dates for performance of any activity or occurrence of an event are to be strictly enforced as essential to the continuation of the transaction.

Question 36

promissory note

Answer 36

A document given as evidence of an underlying | debt owed by one person to another.

Question 37

option listing

Answer 37

A variation of the exclusive right-to-sell listing in which the seller grants the broker an option to buy the property at a predetermined price, if the property does not sell during the listing period.

Question 38

exclusive agency listing

Answer 38

A listing agreement employing a broker as the sole agent for the seller of real property under the terms of which the broker is entitled to a commission if the property is sold through any other broker, but not if a sale is negotiated by the owner without the services of an agent. [See RPI Form 102]

Question 39

letter of intent

Answer 39

A non-binding proposal signed and submitted to a property owner to start negotiations. [See RPI Form 185]

Question 40

instrument

Answer 40

A written legal document; created to effect the rights of the parties, giving formal expression to a legal act or agreement for the purpose of creating, modifying or terminating a right. Real estate lenders basic instruments are promissory notes, deeds of trust, mortgages, installment sales contracts, leases, assignments.