Real Estate Contracts Part #1

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sales contract

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the most important document in the transfer of real estate because it sets forth all details of the agreement between a buyer and a seller and establishes their legal rights and obligations. It is even more important than the deed because the sales contract dictates the content of the deed

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offer

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A contract is signed by the prospective buyer and presented by the broker to the seller

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counteroffer

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Any attempt by the seller to change the terms proposed by the buyer. buyer is relieved of his or her original offer because the seller has, in effect, rejected it. The buyer can accept the seller's counteroffer or reject it and, if desired, make another counteroffer

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notification of acceptance

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must be given directly to the buyer after seller acceptance because the buyer has no agent; but notification of acceptance, to the seller can be given to the seller's broker or the salesperson working for the seller. In a buyer brokerage transaction, notification of acceptance is complete when the other party's agent has been notified. The real estate broker or salesperson must transmit all offers, acceptances, or other responses as soon as possible to avoid questions that might arise regarding whether an acceptance, rejection, or counteroffer has effectively taken place. Notification of contract acceptance may be made orally, with written confirmation recommended to avoid future disputes.

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effective date

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the date on which the communication of acceptance was made

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equitable title

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after both buyer and seller have signed a sales contract, the buyer acquires an interest in the land. may give the buyer an insurable interest in the property. If the parties decide not to go through with the purchase and sale and if the contract has been recorded, the buyer will be required to give the seller a quitclaim deed to release the buyer's equitable interest in the land.

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earnest money deposit

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evidence of the purchaser's intent to carry out the terms of the contract. It is customary for a purchaser to put down a cash deposit when making an offer to purchase real estate.

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computation of time

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In computing a period of time prescribed or allowed for negotiating a contract or for meeting a contract obligation, the time period generally begins on the day after the act, event, or default in controversy. It concludes on the last day of the computed period. Calendar days, not business days, are used. For example, if the last day to exercise a contract option were Saturday, December 25, the buyer would not have the right to exercise the option after that date

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Texas Real Estate Broker-Lawyer Committee

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drafting and revising of standard contract forms to be used by real estate licensees because most real estate transactions are basically similar in nature. Once the they has drafted the forms, the Texas Real Estate Commission has the option of approving or promulgating the forms for use by brokers and their salespeople. When a contract form or addendum has been promulgated by the commission, it must be used by a licensee for that particular contract situation

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four exceptions

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Transactions in which the licensee is functioning solely as a principal, not as an agent
Transactions in which an agency of the United States government requires a different form to be used
Transactions for which a contract form has been prepared by the property owner or prepared by an attorney and required by the property owner
Transactions for which no standard contract form has been promulgated by the Texas Real Estate Commission, and the licensee uses a form prepared by an attorney at law licensed by this state and approved by the attorney for the particular kind of transactions involved or prepared by the Texas Real Estate Broker-Lawyer Committee and made available for trial use by licensees with the consent of the Texas Real Estate Commission

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Texas Residential Construction Commission (TRCC).

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buyers of new homes are able to request dispute resolution through
A builder is required to obtain a certificate of registration from TRCC. Remodelers are also subject to registration requirements if involved in projects to (a) make interior renovations exceeding $20,000 or (b) modify a home to increase or decrease the home's total square footage of living space.
A builder must register a new home with the commission and pay a registration fee of not more than $125 for each home registered.
If a dispute arises out of an alleged construction defect, the homebuyer or builder may file a written request through the commission for state-sponsored inspection and dispute resolution.
A builder is required to convey limited statutory warranties with each new home and to adhere to specified building and performance standards.

Front 12

option

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contract by which an optionor (generally an owner) gives an optionee (a prospective purchaser or lessee) the right to buy or lease the owner's property at a fixed price within a stated period of time. The optionee must pay an option fee for this option right. The optionee has no other obligation until he or she decides to either exercise the option right or allow the option right to expire. An option is enforceable by only one party—the optionee
not a sales contract. At the time the option is signed by the parties, the owner does not sell and the optionee does not buy. The parties merely agree that the optionee will have the right to buy and the owner will be obligated to sell if the optionee decides to exercise his or her right of option

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contract for deed

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sometimes called a land contract, an installment contract, or a contract of sale. Under a typical contract for deed, the seller (also known as the vendor) retains legal title. The buyer (called the vendee) takes possession and gets equitable title to the property, which establishes a homestead shield against the buyer's creditors. The buyer agrees to give the seller a down payment and pay regular monthly installments of principal and interest over a number of years. The buyer usually also pays real estate taxes, insurance premiums, repairs, and upkeep on the property. Although the buyer obtains possession under the contract, the seller is not obligated to execute and deliver a deed to the buyer until the terms of the contract have been satisfied.

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lease

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a contract in which the owner agrees to give possession of all or part of certain real estate to another person for a specified time period in exchange for a rental fee.

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escrow

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means by which the parties to a contract carry out the terms of their agreement. The parties appoint a disinterested third party to act as the escrowee, or escrow agent. This escrow agent must be someone who is not a party to the contract and will not benefit in any way from the contract.

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escrfow agreement

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which may be part of the contract) that sets forth the duties of the escrow agent and the obligations and requirements of the parties to the transaction. An escrow agreement may be used in closing such real estate transactions as a sale, a mortgage loan, an exchange of property, a contract for deed, or a lease. In Texas, a title company typically acts as the escrow agent.