Real Estate Contracts Flashcards
(11 cards)
Real Estate Brokerage
Real Estate Brokerage
If the real-estate broker and the seller enter into an exclusive agency agreement, the broker obtains a commission only if his agent is the procuring cause of the sale. If the real-estate broker and the seller enter into an exclusive right to sell agreement, the broker is paid no matter who finds the buyer – even if that is the seller herself. In a non-exclusive right to sell agreement, the agent is entitled to commission only when the agent provides the buyer. The agent has to beat other agents and the seller of the home in finding the buyer.
To be valid, these agency agreements need the following: identify the agent, state their commission, describe the property, and contain the principal’s (homeowner) signature.
Creation and Construction
Statute of Frauds and Exceptions
In general, the contract must be in writing, be signed by the party to be charged, and contain essential terms (including the identity of the parties, price, and a general description of the land). A part-performance exception exists if the claimant does two of the following three: takes possession, makes payment in full of a substantial part of the price, or substantially improves the land.
Creation and Construction
Essential Terms
Essential terms include price, general description of the land (it cannot be a vague description), and the identity of the parties. A price or a way to figure out the price is absolutely necessary. The court will not supply a reasonable price term for real estate.
Creation and Construction
Time for Performance
Time is of the essence clauses are allowed, but there must be an explicit and clear deadline the contract itself. If there is no time is of the essence clause in the original contract, a party can make time of the essence by giving the other party reasonable notice and a reasonable date.
Creation and Construction
Disclosure
The seller of the home does not have to disclose defects unless they are not obvious, he knows or should know of them, and the defect is serious. However, the seller cannot *actively *conceal defects.
Creation and Construction
Remedies for Breach
If a buyer wrongfully breaches, the seller may keep their downpayment if it is a reasonable amount, such as 10% of the sales price.
Marketability of Title
Marketability of Title
Marketable title is one “reasonably free from defects.” It must be given on the day of closing (but one can pay off a lien or mortgage with the proceeds of a sale). The following make title unmarketable: defect in the chain of title, enumbrance (mortgage or easement not mentioned in the contract), violation of a zoning ordinance, or title acquired by adverse possession. A violation of a housing or building code does not render title unmarketable.
Remember: A discovery of a zoning violation after closing will not make the title unmarketable. Alsom finding something like hazardous waste on the property will not make the title unmarketable.
Equitable Conversion (Including Risk of Loss)
Equitable Conversion (Including Risk of Loss)
Equitable title passes to the buyer. The buyer’s interest is in the real property, so if something happens to the real property after the contract is signed, the risk of loss remains on the buyer. Legal title remains with the seller. The seller’s interest truly is the money (personal property) that the seller will get from the sale.
Options and Rights of First Refusal
Options and Rights of First Refusal
Options for real estate give a person a right to buy property at a certain price in the future. If you don’t buy it at the stated time, the option terminates. Options are subject to the RAP unless they are exercisable under a lease term, they are subject to the SoF, and normally they need consideration to be valid, but if they are part of a lease, they do not. Right of first refusal means you have the right to purchase property whenever the owner decides to sell. For this to apply, there has to be an offer from a third party. They must be in writing and subject to SoF.
If the right of first refusal is held by just one person, it does not violate the RAP
Fitness and Suitability
Fitness and Suitability
Land contracts contain no warranties of fitness or habitability. The buyer is expected to go through a home and draw their own conclusions about whether the home is in “good condition” and fit for their purposes. For new homes sold by a builder-seller, however, there is an implied warranty of fitness.
Merger
Closing and Merger
The deed must be executed and delivered. Execution means that the deed identifies the parties, has words of grant, is signed by the sller, and describes the land. Delivery means intent to pass title presently. Delivery is presumed to have occurred if the deed is in the grantee’s possession or if it is recorded. Once delivery occurs, merger occurs, so now the buyer can only sue based on covenants in the deed itself, he can no longer sue on the contract. A warranty deed gives six covenants: the present covenants of right to convey, seisin, no encumbrances, and future covenants of further assurances, quiet enjoyment, and warranty. A quitclaim deed gives no warranties.
The merger doctrine does not apply to collateral issues. Also, fraud or mutual mistake can negate the merger and allow you to sue on the contract itself.
