Chapter 10: Sales Contracts and Practices

Question 1

acceptance

Answer 1

Expression of intent by the offeree to be bound by the terms of the offer; must be in writing if the contract pertains to real property. Acceptance must be communicated to the opposite party to create a contract

Question 2

backup offer

Answer 2

An offer submitted to the property owner with knowledge that the owner is already under contract; a secondary offer

Question 3

contingency

Answer 3

A provision in a contract that requires a certain act to be done or a certain event to occur before the contract becomes binding; a condition of the contract

Question 4

due diligence

Answer 4

(1) a buyer’s investigative process of having experts inspect the property, examine title, and review any leases to determine if the property meets the buyer’s needs and if the buyer wishes to proceed with the purchase. During the “due diligence period,” the buyer can terminate the purchase contract for any reason or no reason;
(2) a licensee’s affirmative duty to discover and disclose any material facts about the property in question

Question 5

installment land contract

Answer 5

A contract for the sale of real estate financed by the seller whereby the purchase price is paid in periodic installments by the purchaser; who is in possession of the property even though legal title is retained by the seller until a future date, which may not be until final payment. Also called a “contract for deed” or “land contract”

Question 6

mailbox rule

Answer 6

A rule of law stating that once written acceptance is placed in control of the mailing service, and out of the control of the offer, it is considered accepted - not when the acceptance is actually received by the offeror

Question 7

NCBA/NCAR 2-T Offer to Purchase and Contract (OPC)

Answer 7

A form often used by REALTOR®/licensees and/or North Carolina attorneys to establish a legally binding agreement between the buyer and seller concerning the terms of purchase or transfer of residential real property

Question 8

option

Answer 8

An agreement between the property owner (optioned) and the possible buyer (optionee), secured by the payment of an option fee, to buy or not buy property within a specific time period at terms that have been negotiated in the underlying contract; also called “option to purchase” or “option contract”

Question 9

optionee

Answer 9

one who is granted or buys an option

Question 10

optionor

Answer 10

one or grants or sells an option

Question 11

preemptive right

Answer 11

A provision giving a person the first right to purchase real property; most often found in commercial leases

Question 12

right of first opportunity to purchase

Answer 12

The right of a party to have the first opportunity to purchase or lease real estate for a designated price, if the owner ever decides to sell or lease; if the holder of the right does not opt to purchase, the owner may sell to a third party within a specified time. If sale to third party does not occur, the right is still valid and process restarts

Question 13

right of first refusal

Answer 13

The right of a person to have the first opportunity to either purchase or lease real property, if the owner ever decides to sell or lease; no terms are negotiated

Question 14

Uniform Electronic Transaction Act (UETA)

Answer 14

North Carolina version of the federal E-sign legislation that validates electronic contracts, documents, and signatures

Question 15

equitable title

Answer 15

(1) The interest held by a vendee under a contract for deed or an installment contract; the equitable right to obtain absolute ownership to property when legal title is held in another’s name.
(2) The interest held by the grantor in a deed of trust that allows possession and use of the pledged property