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Real Estate > Contracts > Flashcards

Contracts Flashcards

1
Q

Contract

A

voluntary agreement between 2 or more parties calling for them to perform certain acts or not to perform certain acts.

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2
Q

examples of contracts

A

Listing Agreements, Buyer Representation Agreements, Offer to purchase, Purchase and Sale Contracts, Rental Agreements and Property Management Agreements.

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3
Q

Statute of Frauds

A

Contracts that require a writing

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4
Q

examples of statutes of fraud

A
  1. Contracts for the sale of land
  2. Contracts for surety
  3. Contracts for the sale of goods $500 or more
  4. Contracts signed by an executor
  5. Contracts in contemplation of marriage
  6. Comtracts with the impossibility of being completed within 1 year.
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5
Q

Offer to Purchase

A

legal binding contract (McCarthy vs. Tobin). It is the buyer’s proposal to the seller.

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6
Q

Voiding an Offer Contract

A

If the seller does not respond to the offer before the expiration date. If the seller counters the buyer’s offer with his or her own the contract becomes void.

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7
Q

Earnest Money

A

deposit money, escrow money, good faith money. They will make a down payment once the purchase and Sale is signed.

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8
Q

Time is of the essence

A

clause in a contract that requires exact and punctual performance. It is agreed that the parties will abide by the dates in the contract.

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9
Q

Mortgage/Financing Contingency

A

Clause that calls for the buyer to have an opportunity to secure financing by a particular deadline. Protects the buyer’s deposit.

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10
Q

Inspection Contingency

A

Provides the buyer an opportunity to inspect the property for insects, lead paint, radon, and overall condition of the property.

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11
Q

Property Sale Contingency

A

calls for the contract to be subject to the purchaser being able to sell their existing property

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12
Q

Escape Clause

A

allows the seller an opportunity to continue to market the property until the buyer’s conditions have been met

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13
Q

Amendments

A

change to an existing content of a contract

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14
Q

Purchase and Sale Agreement

A

Legal contract that finalizes the agreement. Lawyers construct these and work out all the details.

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15
Q

Equitable Title

A

When the P+S Agreement is signed, the buyer receives equitable title to the property.

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16
Q

Legal Title

A

Once the deed is delivered, the buyer receives legal title.

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17
Q

4 Essentials of a valid contract

A

offer/acceptance
Consideration
Legality of agreement
Reality of Consent

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18
Q

Offer/Acceptance

A

Meeting of the minds. Buyer agrees to purchase with certain conditions, seller agrees to conditions.

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19
Q

Consideration (Bargain for Legal Detriment)

A

Consideration is something provided to one party in return for something given by another party.

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20
Q

2 types of Consideration

A

Valuable consideration: Money, Product, Services

Good Consideration: Love + Affection

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21
Q

Legality of Agreement

A

The contract cannot call for any party to perform illegal actions.

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22
Q

Reality of Consent

A

The contract is free from duress, fraud, and error, and the parties entered the agreement under their own free will.

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23
Q

Misrepresentation

A

misrepresentation of a property can be described as an innocent misstatement about the material fact regarding the condition of the property. Not intentional but could have consequences.

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24
Q

Fraud

A

When an agent deliberately misleads a buyer or seller.

25
Q

Duress

A

when someone conducts an action because they feel under pressure, intimidation or fear of retaliation if they do not comply.

26
Q

Unilateral Contract

A

an agreement that calls for one party to act if another person completed a task.

27
Q

Bilateral contract

A

when two parties agree to enter into an action that calls for them each to perform. example- purchase and sale contract. executory contract calls for future action to occur.

28
Q

Assignment of a Contract

A

allows buyer to assign their right to purchase to someone else. Subject to penalties if the assigned buyer does not purchase.

29
Q

Expressed Contracts

A

agreement that the particulars are known or understood

30
Q

Implied Contracts

A

when an agreement is created by the conduct and the actions of parties involved

31
Q

Rescission (reversal)

A

The parties agree to rescind the agreement and all parties return to the position they were in before the agreement.

32
Q

Liquidated Damages (Known Penalty)

A

This is an identified and specific amount that is to be paid if one of the parties defaults on the contract

33
Q

Forfeiture

A

the breaching party will forfeit either all or a portion of the deposit because they did not honor the terms of the contract

34
Q

Option Contract

A

when one party agrees to sell property to someone else in return for something of value and certain time requirements are met. Unilateral

35
Q

Estate for years (Demised Premises)

A

contract for rental of a year or more. The tenant has a leasehold interest while the owner has a leased fee with reversionary interest.

36
Q

Ways a Lease can be terminated

A

time, bankruptcy, mutual agreement, and condemnation

37
Q

Periodic Tenancy

A

Self extending contract. Runs for month to month, year to year, period to period. Automatically extends for the same period if neither party cancels with proper notice.

38
Q

Novation

A

when a new tenant who is referred by an existing tenant to take over the lease signs a new lease with the owner. Old tenant is no longer responsible for payment.

39
Q

Tenancy at sufferance

A

when a holdover tenancy occurs.

40
Q

Constructive Eviction

A

action a tenant can take to vacate an apartment that is unfit for occupency. Tenant is released from obligation to pay if they vacate through this process.

41
Q

99 year lease

A

Lease of 100 years or longer has the effect of a fee simple estate.

42
Q

Escalator Clause

A

calls for periodic increases in rent payment

43
Q

Lease option

A

Provides the tenant the contractual right to purchase the property they have leased at a predetermined price or formula

44
Q

Right of First Refusal

A

Right to purchase a property in the future. Must be specified in a contract to be valid. Allows an individual to match or beat any offers submitted by a particular time frame

45
Q

Reversionary Interest

A

right to recover at the termination of the lease period. Owner

46
Q

Net Lease ( net-net lease, triple net lease)

A

Commercial property. Tenant pays rent and some fraction of the expenses associated with the property.

47
Q

Common Area Maintenance

A

Landscaping, Snow removal, exterior maintenance.

48
Q

Step-up/Step-down Lease (Graduated Lease)

A

Lease that can go up over time.

49
Q

Percentage Lease

A

Tenant pays a base amount for rent and additional rent payments based on percentage of gross sales generated over a specific amount.

50
Q

Index Lease

A

Cost of living to be used to determine future lease payments after the first year of the lease.

51
Q

Ground Lease

A

Known as land leases. Owner leases the property to a business that wants to build on it. The buildings are security for the lease. Tenant has leasehold interest

52
Q

Sale/Leaseback

A

when someone conveys their property to someone else then agrees to sign a rental agreement.

53
Q

Primary goal of Property Management

A

secure the highest possible net income. They are paid a percentage of the effective gross income

54
Q

Projected Gross Income

A

Most money that can be collected if the property does not have any vacancies. Potential income.

55
Q

Effective Gross Income

A

Income actually collected.

56
Q

Net Operating Income

A

Subtracting the operating expenses from the effective gross income.

57
Q

Debt Service

A

Principal and Interest on a loan. Tenants never pay this

58
Q

cash flow

A

Subtract debt service from the net operating income

Real Estate (6 decks)

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