Chapter 13

Question 1

What are the required elements of a contract?

Answer 1

• In writing
• Competent parties
• Offer and acceptance
• Consideration
• Mutual assent (no coercion, fraud, etc.)
• Description of property (legal description, must be identifiable to be enforceable)

Question 2

“I, Ben Buyer, agree to buy and pay $1, and I, Cecil Celler,
Agree to sell the parcel of real estate at 1013 NE Seventh Road in North Platte, Nebraska.” What is wrong with the description?

Answer 2

A street address isn’t a legal description. Many condos on one street address.

Question 3

What do contracts for sale include?

Answer 3

1. Agreements to buy-sell
2. Identifies parties
3. Defines property
4. Defines price and other terms
5. Defines conditions of the transaction (ex. financing, title insurance, inspection)

Question 4

Earnest money

Answer 4

Money paid alongside an offer

Question 5

Where is earnest money stored?

Answer 5

Listing broker holds earnest money in trust account. Aka escrow account

Question 6

Who does the buyer ACTUALLY pay?

Answer 6

The closing agent! Buyer pays, closing agent takes out everything that’s needed to pay off.

Question 7

What are typical conditions and the benefited party of them?

Answer 7

1. Appraisal/financing (buyer)
2. Acceptable title (buyer)
3. Inspection (buyer) & resolution (both)
4. General due diligence period (buyer)
5. Sale of home contingency (buyer)

Question 8

Rescission

Answer 8

Non-defaulting party declares contract breach.

Question 9

Why is rescission risky?

Answer 9

Defaulting is a LEGAL term. If this argument is used, the seller has to go to court to prove it.

Question 10

What are the four remedies available upon breach of contract?

Answer 10

1. Money (suit) for damages
2. Specific performance (buyer)
3. Rescission
4. Liquidated damages

Question 11

Liquidated damages

Answer 11

Seller gets earnest money if buyer defaults. Not easy to prove!

Question 12

Three steps of contracting

Answer 12

1. Negotiation and contracting
2. Contract administration
3. Closing of sale / purchase.

Question 13

What party typically acts as the closing agent?

Answer 13

The title insurance company!

Question 14

Contract administration (step 2 in three steps of contracting)

Answer 14

Buyer applies for loan, seller provides and buyer reviews title commitment, HOA docs, etc.

Question 15

Recording fee (off deed and mortgage/deed of trust is paid by who? (FIN. ITEMS AT CLOSING)

Answer 15

Buyer

Question 16

Doc fee paid by who? (FIN. ITEMS AT CLOSING)

Answer 16

Buyer

Question 17

Who pays the brokerage commisssion? (FIN. ITEMS AT CLOSING)

Answer 17

Seller

Question 18

Who pays the closing fee to the closing agent? (FIN. ITEMS AT CLOSING)

Answer 18

50/50 split

Question 19

Who pays the title insurance premium and why?

Answer 19

Seller. If I’m selling a million dollar house, I will pay to ensure the buyer is protected against any problems!

Question 20

How much is the doc fee for a $458,000 house

Answer 20

$45.80

Question 21

Pre-closing steps of buyer

Answer 21

Applicable steps, verify condition/occupancy of property, review settlement statement, arrange utility service transfer

Question 22

Issue title insurance commitments (pre-closing TITLE steps)

Answer 22

Confirms seller owns property and what grantor’s got!

Question 23

Obtaining tax certificate (pre-closing TITLE steps)

Answer 23

Says that past taxes are paid and defines current tax prorated amount.

Question 24

Obtain payoff information (pre-closing TITLE steps)

Answer 24

Determine amt for seller’s mortgage/other liens. Closing agent (title co.) will take buyer’s money and deduct this amount to pay off all liens and mortgage payments.