Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
19 Cards in this Set
- Front
- Back
|
PROPERTY - THE SALE OF LAND
Statute of Frauds Generally The typical Statute of Frauds imposes three requirements: |
(1) the essential terms of the sales contract (2) must be contained in a memorandum or other writing that (3) is signed by the party against whom enforcement is sought. To contain the essential terms, the writing must normally identify the parties, contain words showing an intent to buy or sell, state the purchase price, and adequately describe the property.
|
|
|
PROPERTY - THE SALE OF LAND
Purchase of Title Technically, a buyer is purchasing title to the land, not |
the land itself. Accordingly, the prudent buyer will negotiate an express contract condition that specifies the quality of title the seller must deliver. If the contract is silent on the issue, the law fills the gap with an implied covenant that the seller must deliver marketable title.
|
|
|
PROPERTY - THE SALE OF LAND
Implied Covenant of Marketable Title In general, marketable title is |
Title “free from reasonable doubt, but not from every doubt.”
For example, title is unmarketable if the seller does not own the estate he purports to be selling or if his title is subject to any lien, easement, or other encumbrance. |
|
|
PROPERTY - THE SALE OF LAND
§ 20.07 Contract Provisions on Financing Because the buyer is rarely able to pay the purchase price in cash, |
he will ensure that the contract contains a financing condition. It will provide that he is not obligated to buy if he cannot obtain a suitable loan.
|
|
|
PROPERTY - THE SALE OF LAND
The basic measure of damages for breach of a real property sales contract is |
the difference between the contract price and the fair market value of the property at the time of the breach. However, in many states the seller is not liable for such damages if the breach was caused by good faith inability to convey marketable title. Finally, especially when full loss of bargain damages are not available, the non-breaching party may receive incidental damages—reimbursement of out-of-pocket expenses incurred in reliance on the contract.
|
|
|
PROPERTY - THE SALE OF LAND
§ 21.01 “Let the Buyer Beware”? The common law afforded the buyer of real property |
almost no remedy for defective conditions, whether discovered before or after the close of escrow. Over the last 50 years, the law has moved steadily away from this view. There is a clear trend toward holding sellers, brokers, and sometimes builders responsible to buyers for significant defects in dwellings.
|
|
|
PROPERTY - THE SALE OF LAND
§ 21.02 Seller’s Duty to Disclose Defects Common Law Approach Traditionally, the seller of real property had |
no duty to disclose hidden or latent defects to the buyer, absent a fiduciary duty or other special circumstances. A buyer could recover only when the seller intentionally misrepresented facts about the property or physically concealed known defects.
|
|
|
PROPERTY - THE SALE OF LAND
§ 21.02 Seller’s Duty to Disclose Defects Modern Trend Toward Requiring Disclosure Today in most states a seller of residential property who knows of |
a latent defect that substantially affects the value or desirability of the property must disclose it to the buyer. See, e.g., Johnson v. Davis, 480 So. 2d 625 (Fla. 1985). Under this standard, most significant physical or legal defects in the house or lot must be disclosed. The law is less clear concerning the seller’s duty to disclose “intangible” defects, such as whether a house has a reputation for being haunted. See, e.g., Stambovsky v. Ackley
|
|
|
PROPERTY - THE SALE OF LAND
§ 21.03 Broker’s Duty to Disclose Defects The real estate broker representing the buyer has long been required to |
disclose known defects in the property as part of his fiduciary duty. Some jurisdictions also require the seller’s agent to disclose such defects to the buyer.
|
|
|
PROPERTY - THE SALE OF LAND
§ 21.04 Builder’s Implied Warranty of Quality At common law, the builder who constructed a new home and then sold it to a buyer had no liability for defects, even if the home was negligently built. |
Today, however, most jurisdictions hold that—as a matter of law—an implied warranty accompanies the sale of a new home by a builder, developer, or other “merchant” of housing. The warranty provides that the house has been constructed in a workmanlike manner and is fit for human habitation.
|
|
|
PROPERTY - THE SALE OF LAND
§ 21.05 Risk of Loss Before Conveyance [337-339] Under the traditional doctrine of equitable conversion, |
the buyer is deemed to be the equitable owner of the land during the period between formation of the contract and close of escrow.
For example, if A contracts to sell her home to B, and the home burns down before escrow closes, B is still obligated to purchase. A minority of states follows the emerging view that the risk of loss remains with the seller until either possession or title are transferred to the buyer. |
|
|
PROPERTY - THE SALE OF LAND
§ 22.02 What Is a Mortgage? A mortgage is the conveyance of an interest in real property as security for |
performance of an obligation. The obligation is almost always a loan of money evidenced by a promissory note. If the borrower (the mortgagor) fails to make the payments required by the note or otherwise defaults on the obligation, the lender (the mortgagee) may cause the secured property to be sold and apply the sales proceeds to satisfy the unpaid debt. This process is called foreclosure.
|
|
|
PROPERTY - THE SALE OF LAND
§ 22.04 Creation of a Mortgage Because the mortgage is viewed as the transfer of an interest in real property, the formalities required for an |
effective deed also apply to the mortgage. At a minimum, (1) the material terms of the mortgage (names of parties, description of property, words manifesting intent, etc.) must be set forth in a writing signed by the mortgagor and (2) the mortgage must be delivered to the mortgagee.
|
|
|
PROPERTY - THE SALE OF LAND
§ 22.05 The Secured Obligation [346-349] The mortgage is a nullity unless it secures an obligation. Typically, the mortgage secures repayment of |
a loan evidenced by a promissory note. The promissory note is simply a specialized form of contract between the lender and the borrower; it includes the loan amount, interest rate, term, and repayment schedule. Such notes often contain a prepayment clause (allowing the mortgagor to repay the loan in advance of the due date in return for payment of a monetary penalty) and a due-on-sale clause (allowing the mortgagee to demand repayment of the entire loan if the mortgaged property is sold or otherwise transferred).
|
|
|
PROPERTY - THE SALE OF LAND
Judicial Foreclosure Judicial foreclosure is a specialized type of litigation. The successful mortgagee receives a judgment that states |
the amount due on the mortgage, directs the property to be sold at public auction, and specifies the terms of the sale. Once the sale occurs, it must be confirmed by the court; the court has the power to deny confirmation if needed to protect the mortgagor’s legitimate interests (e.g., if the sale was conducted in an illegal manner).
|
|
|
PROPERTY - THE SALE OF LAND
Power of Sale Foreclosure The power of sale foreclosure is a purely private procedure, without |
judicial involvement. It is permitted only when authorized by the express terms of the mortgage. While most states allow this form of foreclosure, statutory safeguards are generally provided for the mortgagor.
For example, specified advance notice must be provided to the mortgagor and to the public, the auction must occur in a public location, and so forth. Most states allow the mortgagor to bring suit to cancel the sale only where the bid price is so grossly inadequate as to “shock the conscience” or if fraudulent or unconscionable conduct has occurred. |
|
|
PROPERTY - THE SALE OF LAND
Anti-Deficiency Legislation If the price received at foreclosure does not fully pay the secured debt, the mortgagee may then be able to sue the mortgagor to receive a deficiency judgment—a judgment requiring the mortgagor to pay the unpaid balance. However, |
many states limit the amount of any deficiency judgment to the difference between (1) the unpaid balance and (2) the fair market value of the property. Some states bar deficiency judgments altogether.
|
|
|
PROPERTY - THE SALE OF LAND
Statutory Redemption About half the states allow the mortgagor to redeem the property and may recover title by |
paying a set amount (usually the foreclosure sale price plus other expenses) to the successful bidder within a specific period.
|
|
|
PROPERTY - THE SALE OF LAND
The Installment Land Contract The installment land contract is often used as an alt to mortgage. Under such a contract, the buyer (or vendee) agrees to |
pay the purchase price in installments to the seller (or vendor) over a period of years. The contract provides that the vendor retains title until all payments are made, and then transfers title to the vendee. The vendee usually holds possession during the contract period.
|
