Unit 11 Real Estate Contracts

Front 1

Statue of Frauds

Back 1

The statue of frauds requires most contracts to be in writing and signed by all parties to be enforceable

Front 2

The statute of frauds requirement includes all contracts for the transfer of _________.

Back 2

Interest in real estate

a) exception: leases of 12 months or less

i) applies to all commercial and residential leases

Front 3

Statute of Limitations

Back 3

The statute of limitations prescribes the amount of time parties have bringing certain kinds of legal action

Front 4

Implied Contract

Back 4

1. Action indicate intent

2. No implied contract in transfer of any interest in real estate

Front 5

Express (declared) contract

Back 5

1. Express means oral or written

a) To be enforceable, real estate contracts must be express written documents

Front 6

Bilateral

Back 6

Promise exchanges for a promise

Front 7

Unilateral

Back 7

1. Promised exchange for performance

2. Only one party is bound

Front 8

Classification of Contracts:

Vaild

Back 8

1. Meets all legal requirements; contains all essential elements

2. Binding and enforceable in court by both parties

Front 9

Classification of Contracts:

Void

Back 9

1. No legal effects not enforceable by either party

2. Lacks one or more of the essential elements of a valid contract

Front 10

Classification of Contracts:

Voidable

Back 10

1. A voidable contract appears valid, but one party may disaffirm because the party is a minor or was subject to duress, fraud, or misrepresentation

Front 11

Essential Elements of a Real Estate Contract (5)

Back 11

1. Competent parties

2. Mutual Agreement

3. Lawful Objective

4. Consideration

5. In writing and signed

Front 12

Competent parties

Back 12

1. Must be 18 years old or an emancipated minor

2. Must be sane and sober

Front 13

Mutual Agreement

Back 13

MUST HAVE AN OFFER AND ACCEPTANCE

1. Offer and communication of acceptance

a) A contract becomes binding upon communication of acceptance

b) If the offer is withdrawn before communication of acceptance, there is no contract

Front 14

Mutual Agreement:

Counter Offer

Back 14

Any change to the conditions in the offer

1. Legally, a rejection terminates the original offer and it is not a partial acceptance, partial rejection or partial termination. A new offer is created

Front 15

Mutual Agreement:

If a seller made a counteroffer to a buyer and then received a new and better offer from a different buyer, what must the seller do?

Back 15

The seller must withdrawal the counteroffer before accept ion the new offer.

Front 16

Mutual Agreement:

When can an offeror/counterofferor withdrawal their offer?

Back 16

May withdrawal at any time even is their offer allowed a specific period of time in which to accept.

Front 17

Mutual Agreement:

Contractual Intent

Back 17

Intent to be bound

Front 18

Would a seller and agent have to disclose material defects if a property is selling “as-is”?

Back 18

Yes. Must disclose all material defects.

Front 19

What does As-is mean?

Back 19

The seller will not fix anything.

Front 20

Law Objectives

Back 20

Legal purpose

Front 21

Consideration

Back 21

Money, promises, or something of value

Front 22

Can earnest money be a consideration?

Back 22

Earnest money is not a consideration

Front 23

Earnest Money is...

Back 23

Liquidated damages and not required - not an essential element

Front 24

In writing and signed

Back 24

If transferring real restate

Front 25

Performance:

Executory vs Executed

Executory

Back 25

Duties not fully performed, incomplete

a) am executory contract is created upon offer and communication of acceptance

Front 26

Performance:

Executory vs Executed

Executed

Back 26

Duties fully performed

a) purchase contact is executed at closing, upon delivery and acceptance of the deed

Front 27

Addendum

Back 27

Additional material attached to and made part of an offer.

Such as disclosures and contingencies

Front 28

Amendments/modification

Back 28

1. Modification of an existing contract by mutual agreement

2. Must be written and signed by all parties

Front 29

Assignment

Back 29

Transfers contract rights, but not liability

Front 30

Novation

Back 30

1. Transfers contract rights and liability

2. New contract replaces original contract

Front 31

Contingency

Back 31

The contract is terminated if a contingency can not be met

Front 32

Mutual Rescission

Back 32

All parties agree to cancel the contract (earnest money is typically returned)

Front 33

When does a breach on contract occur?

Back 33

Occurs when one party is in default

Example: seller removes fixtures that were not excluded from the purchase contract

Front 34

Remedies for the nonbreaching party:

Acceptance of partial performance

Back 34

Choose not to sue

Front 35

Remedies for the nonbreaching party:

Special performance

Back 35

1. Sue to force performance - completion of the contract

2. Available to both buyers and seller

Front 36

Remedies for the nonbreaching party:

Liquidated damages

Back 36

1. Retain breaching party’s deposit (ie earnest money, damage deposit)

2. Available only to seller in a purchase contract

Front 37

Remedies for the nonbreaching party:

Actual Damages

Back 37

Sue for money loss

Front 38

Types of Real Estate Contracts:

Purchase contract

Back 38

1. Creates the conditions for closing

2. Also known as offer to purchase, contract of sale, or purchase agreement

3. Offer become an executory contract upon communication of acceptance

Front 39

Types of Real Estate Contracts:

When does communication of acceptance occur?

Back 39

Occurs when the last party has signed and the other party has been notified

Front 40

Types of Real Estate Contracts:

Seller is _______ - Holds _______ title a s has possession

Buyer is _______ - Holds _______ title (equitable owner)

Back 40

Vendor - legal

Vendee - equitable

Front 41

Types of Real Estate Contracts:

Purchase contract are unilateral or bilateral?

Back 41

Bilateral - binding on both parties

Front 42

Types of Real Estate Contracts:

Purchase contracts typically include one or more contingency clauses stating that the party will not be obligated to complete the purchase under certain conditions. What are some examples?

Back 42

Typical contingencies include financing and inspections

Front 43

Types of Real Estate Contracts:

Purchase contract

If the buyer terminates per a contingency, ___________ and the contract is terminated.

Back 43

Earnest money is returned

Front 44

Types of Real Estate Contracts:

Purchase contract

What is “time is of the essences” clause?

Back 44

Requires exact adherence to dates specified in the contract.

Front 45

Types of Real Estate Contracts:

Option

Back 45

1. A buyer purchases the right to buy at a set price for a set time

2. Unilateral Contract

Front 46

Types of Real Estate Contracts:

Option

Owner - __________

Potential buyer - _________

Back 46

Optionor

Optionee

Front 47

Types of Real Estate Contracts:

Purchase contract

Option fee

Back 47

1. Typically includes a non refundable option fee

2. If the buyer decides not to buy, the seller has no recourse except to keep the buyers option fee

Front 48

Types of Real Estate Contracts:

Right if First Refusal

Back 48

The right to have the first opportunity to purchase or lease real property

Front 49

Types of Real Estate Contracts:

Sale-leaseback

Back 49

Converts equity to working capital without giving up possession