Chapter 13 Flashcards
What are the required elements of a contract?
- 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)
“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?
A street address isn’t a legal description. Many condos on one street address.
What do contracts for sale include?
- Agreements to buy-sell
- Identifies parties
- Defines property
- Defines price and other terms
- Defines conditions of the transaction (ex. financing, title insurance, inspection)
Earnest money
Money paid alongside an offer
Where is earnest money stored?
Listing broker holds earnest money in trust account. Aka escrow account
Who does the buyer ACTUALLY pay?
The closing agent! Buyer pays, closing agent takes out everything that’s needed to pay off.
What are typical conditions and the benefited party of them?
- Appraisal/financing (buyer)
- Acceptable title (buyer)
- Inspection (buyer) & resolution (both)
- General due diligence period (buyer)
- Sale of home contingency (buyer)
Rescission
Non-defaulting party declares contract breach.
Why is rescission risky?
Defaulting is a LEGAL term. If this argument is used, the seller has to go to court to prove it.
What are the four remedies available upon breach of contract?
- Money (suit) for damages
- Specific performance (buyer)
- Rescission
- Liquidated damages
Liquidated damages
Seller gets earnest money if buyer defaults. Not easy to prove!
Three steps of contracting
- Negotiation and contracting
- Contract administration
- Closing of sale / purchase.
What party typically acts as the closing agent?
The title insurance company!
Contract administration (step 2 in three steps of contracting)
Buyer applies for loan, seller provides and buyer reviews title commitment, HOA docs, etc.
Recording fee (off deed and mortgage/deed of trust is paid by who? (FIN. ITEMS AT CLOSING)
Buyer
Doc fee paid by who? (FIN. ITEMS AT CLOSING)
Buyer
Who pays the brokerage commisssion? (FIN. ITEMS AT CLOSING)
Seller
Who pays the closing fee to the closing agent? (FIN. ITEMS AT CLOSING)
50/50 split
Who pays the title insurance premium and why?
Seller. If I’m selling a million dollar house, I will pay to ensure the buyer is protected against any problems!
How much is the doc fee for a $458,000 house
$45.80
Pre-closing steps of buyer
Applicable steps, verify condition/occupancy of property, review settlement statement, arrange utility service transfer
Issue title insurance commitments (pre-closing TITLE steps)
Confirms seller owns property and what grantor’s got!
Obtaining tax certificate (pre-closing TITLE steps)
Says that past taxes are paid and defines current tax prorated amount.
Obtain payoff information (pre-closing TITLE steps)
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.
