Real Estate Unit 12

Front 1

contract

Back 1

is a voluntary agreement or promise between legally competent parties, supported by legal consideration, to perform some legal act.

Front 2

A contract must be

Back 2

voluntary—no one may be forced into a contract;

an agreement or a promise—a contract is essentially a promise or set of promises;made by

legally competent parties—the parties must be viewed by the law as capable of making a legally binding promise;supported by lawful

consideration—a contract must be supported by something of value that induces a party to enter into the contract; andfor a legal act—a contract is invalid if it attempts to have an illegal objective.

Hint 2

4

Front 3

Contract law

Back 3

Are the contracts and agreements used to carry out their responsibilities to sellers, buyers, landlords, tenants, and the general public.

Front 4

What are the two ways a contract can be created

Back 4

1. Express contract

2. Implied contract

Front 5

express contract

Back 5

, the parties state the terms and show their intentions in words, either oral or written.

Front 6

implied contract

Back 6

The parties start there terms show their intentions by their acts and conduct.

Front 7

statute of frauds

Back 7

state law that requires certain instruments, such as deeds, real estate sales contracts, and certain leases, to be in writing to be legally enforceable.

Front 8

How are contracts classified

Back 8

Bilateral

Unilateral

Front 9

unilateral contract

Back 9

Is a one-sided agreement. One party makes a promise in order to entice a second party to do something.

The second party is not legally obligated to act, but if the second party does comply, the first party is obligated to keep the promise.

Front 10

bilateral contract,

Back 10

both parties promise to do something; one promise is given in exchange for another.

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executed contract

Back 11

is one in which all parties have fulfilled their promises;

Front 12

executory contract

Back 12

exists when one or both parties still have an act to perform

Front 13

Contract Issues

Back 13

highlights the issues involved in the formation of a contract.

Front 14

offer and acceptance

Back 14

The sales contract sets out the offer by the buyer that is accepted by the seller.

Front 15

offeror

Back 15

person who makes the offer

Front 16

offeree

Back 16

The person to whom an offer is made

Front 17

mutual assent

Back 17

It means that there must be a meeting of the minds; that is, there must be complete agreement between the parties about the purpose and terms of the contract.

Front 18

offer

Back 18

is a promise made by one party in exchange for something else

Front 19

acceptance

Back 19

is a promise by the offeree to follow the exact terms Proposed by the offeror.

Front 20

Consideration

Back 20

is something of legal value offered by one party and accepted by another as an inducement to perform or to refrain from performing some act.

Front 21

How can a contract be described

Back 21

valid, void, voidable, or unenforceable

Front 22

valid contract

Back 22

Meets all the essential elements that make it legally sufficient, or enforceable, and is binding in a court of law.

Front 23

void contract

Back 23

has no legal force or effect because it lacks some or all the essential elements of a contract.

Front 24

voidable contract

Back 24

appears on the surface to be valid, but it may be rescinded or disaffirmed by one or both parties based on some legal principle

Front 25

enforceable contract

Back 25

meets all the elements of a valid contract, including compliance with any applicable statute of frauds or other law that requires it to be in writing and signed by the parties.

Front 26

unenforceable contract

Back 26

may also appear on the surface to be valid; however, neither party can sue the other to force performance

Front 27

Time is of the essence

Back 27

A phrase in a contract that requires the performance of a certain act within a stated period of time.

Front 28

Courts can declare a contract invalid because the contract did not contain what?

Back 28

A time or date performance

Front 29

Assignment

Back 29

refers to a transfer of rights or duties under a contract

Front 30

Novation

Back 30

Substitution of a new contract for an existing contract

Front 31

breach of contract

Back 31

is a violation of any of the terms or conditions of a contract.

Front 32

suit for specific performance,

Back 32

the buyer asks the court to force the seller to go through with the sale and transfer the property as previously agreed.

Front 33

liquidated damages clause

Back 33

Specifies the amount of money to which the seller is entitled if the buyer breaches the contract.

Front 34

A contract may also be discharged or terminated when any of the following occurs:

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Partial performance of the terms, along with a written acceptance by the party for whom acts have not been done or to whom money is owed.

Substantial performance, in which one party has substantially performed on the contract but does not complete all the details exactly as the contract requires.

Impossibility of performance, in which an unforeseen circumstance has made an act required by the contract impossible or impracticable.

Mutual agreement of the parties to cancel the contract. Cancellation by one party will terminate a contract but does not automatically return the parties to their original position, unless provided by law (such as the right of cancellation that accompanies some consumer contracts) or by the terms of the agreement.

Operation of law, such as in the voiding of a contract by a minor, or as a result of fraud, or because a contract was altered without the written consent of all parties involved.

Front 35

Rescission

Back 35

returns the parties to their original positions before the contract, so any monies or property exchanged must be returned.

Front 36

The written agreements most commonly used by real estate professionals

Back 36

1. Client representation agreement

2. Real estate sales contract

3. Options

4. Escrow agreements

5. Property Management agreements

6. Leases

7. Owner financing contracts

Hint 36

CROEPLO

Front 37

Binder or letter of intent

Back 37

Is a buyer's offer presented in a short document.

States the essential terms of the offer

Front 38

Earnest money

Back 38

Is a customary deposit used in real estate to show Evidence of the buyer's intention to carry out the terms. Usually in the form of a check.

Front 39

Real estate sales contact will include

Back 39

1. The sales price and terms

2. Legal description of property and improvements

3. Condition of title and form of deed

4. Evidence of title

5. A statement of all terms of the agreement btw the parties

Hint 39

5

Front 40

Why do people use earnest money in real estate?

Back 40

1. Discourage the buyer from defaulting

2. Compensate the seller for taking the property off the market

3. Cover any expenses the seller might incur if the buyer defaults

Hint 40

Discourage,Compensate,Cover

Front 41

Equitable title

Back 41

Refers to a person's right to obtain full ownership of a property or property interest.

Front 42

When does a buyer receive title to the land

Back 42

Title transfers only upon delivery and acceptance of a deed

Front 43

Legal title

Back 43

Is the actual ownership of land

Front 44

Uniform Vendor and Purchaser Risk Act

Back 44

Provides that the seller bear any loss that occurs before the title passes

Front 45

Liquidated damages

Back 45

Is when one party breaches a contract and the parties may agree on a certain amount of money that will compensate the nonbreaching party.

Front 46

Contingencies

Back 46

Conditions that must be satisfied before a sales contract is fully enforceable

Front 47

Where are the earnest money funds

Back 47

1. They will be in an escrow account according to the terms of the escrow agreement

Front 48

Provisions of a sales contract

Back 48

1. Purchasers name

2. Legal description of the property

3. Sellers name

4. Purchase price

5.

Front 49

The contract that provides a contingency will include the following 3 elements

Back 49

1. The action necessary to satisfy the contingency

2. The time frame within which the action must be performed

3. The party responsible for paying any cost involved

Hint 49

Action, time, party

Front 50

mortgage contingency

Back 50

protects the buyer's earnest money in the event that the buyer is unable to secure a mortgage on the property.

Front 51

inspection contingency

Back 51

provides that the buyer may obtain certain inspections of the property and may cancel the contract if the inspections indicate an unsatisfactory or unsafe property condition.

Front 52

property sale contingency

Back 52

protects a buyer who has to sell a home in order to buy the seller's property.

Front 53

escape clause

Back 53

which permits the seller to continue to market the property until all the buyer's contingencies have been satisfied or removed.

Front 54

amendment

Back 54

A change or modification to the existing content

Used to change existing word or provision

Front 55

lienholder approval

Back 55

, if the contract is a short sale.

Front 56

The most common contingencies are

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1. Mortage contingency

2. Inspection contingency

3. Property sale contingency

4. Lienholder approval

Front 57

addendum

Back 57

is any provision added to an existing contract that may change or be an addition to the content of the original.

Includes the original contracts provision by reference

Front 58

owner financing

Back 58

, the seller provides credit for all or part of the funds that will allow the buyer to move forward with the transaction.

Front 59

land contract, also called a contract for deed, a contract of sale, a bond for title, an installment contract, a land sales contract, or articles of agreement for warranty deed. Under a typical land contract, the owner/seller (also known as the vendor) retains legal title.

Back 59

The buyer, or the vendee, takes possession and gets equitable title to the property. 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 also agrees to pay real estate taxes, insurance premiums, repairs, and upkeep on the property.

Front 60

purchase money mortgage

Back 60

the buyer receives title to the property immediately but places a security interest on the property in favor of the seller.

Front 61

Cancellation

Back 61

Terminates a contract without the parties returning to their original position

Front 62

Revocation after acceptance

Back 62

Will not terminate an offer to purchase real estate

Front 63

When should earnest money be deposited

Back 63

When a offer becomes a contract

Front 64

option

Back 64

is a contract by which an optionor (generally an owner) gives an optionee (a prospective purchaser or tenant) the right to buy or lease the owner's property at a fixed price within a certain period of time.

Front 65

An option binds which party

Back 65

Seller

Front 66

The optionee pays a fee as consideration for the option right.

Back 66

The optionee pays a fee as consideration for the option right.