Chapter 11- Contracts Flashcards
Which documents may a broker NOT legally prepare?
Deeds, mortgages, promissory notes, leases
Contracts for persons not buying through the licensee
What is the difference between finding a purchaser and effecting a sale?
Broker is employed to do one or the other.
If engaged to find a purchaser, Broker is entitled to a commission when he presents the seller an offer from a ready, willing, and able buyer at the list price or any other terms acceptable to Seller.
If engaged to effect a sale, the Broker only gets commission when he brings a buyer who closes the transaction. No closing = no commission.
Statute of frauds application and exceptions
Agreements over 1 year
(Listing agreements for less than one year can be oral)
Exceptions:
Executed/performed contacts and
Partial performance so long as partial or full payment is made and the buyer has taken possession or made improvements to the property.
Estates owned by a single person
Legal for married people to buy and sell property in their sole name.
Exception: can’t sell homestead property without joinder of spouse
Implications of “time is of the essence” in contacts
Any party’s failure to perform strictly within the time period is a default by the non-performing party.
How do you include personal property on a contract?
Separate attached detailed inventory of all personalty included in the price, including disclosing any defects.
Sales tax applies to personalty that is separately priced. If left “for the convenience of the parties,” it’s not taxable.
Survivorship vs inheritable rights of tenancy
JTROS, TBE, and TIC
TIC and sole are inheritable
The other two are survivorship.
How much earnest money deposit is required on a contract?
None
If deposit over $10,000 in cash, file IRS form 8300
If licensee is buyer, must actually make the deposit; can’t use potential commission as the deposit.
What are the remedies for contract default?
Liquidated damages: the emd is given to the seller
Rescission on breach: the emd goes to buyer
Compensatory damages: go to court
Specific performance: go to court
Who pays for special assessments?
Seller usually pays if the improvement is complete (certified and confirmed by the governmental agency).
Buyer assumes pending liens.
Which party is obligated in an option contract?
The seller is obligated to sell if buyer exercises the option.
Watch assignable options with little option money paid by non licensees. That is construed as a listing agreement and is the unauthorized practice of real estate.
Formula to determine gross price to charge in a net listing to get a certain commission.
Net sales price + closing costs \ (100 - commission%)= sales price
