Contracts in Practice Flashcards
Listing Contract
Also known as Broker “employment” contracts.
Used to hire real estate agent to sell a home.
Always negotiable.
Include: What property the broker is selling, the designated agent, what commission they will be paid, the broker’s authority & deadline for the sale.
Does not have to be in writing.
Entry Only Listing
Seller pays a flat fee to put their property on MLS.
Broker offers limited services to the seller.
Typically, seller shows their own home & negotiates their own sale.
Open Listing
Seller hires multiple brokers.
Can be verbal or written.
No commission earned if the seller finds a buyer w/out the broker’s help.
Exclusive Agency
Seller hires 1 broker.
Must be in writing w/ an expiration date.
No commission earned if the seller finds a buyer w/out the broker’s help.
Exclusive Right to Sell
Seller hires 1 broker.
Must be in writing w/ an expiration date.
Broker earns a commission & may co-broke.
Seller MUST pay a commission even if they find a buyer on their own.
For exam purposes, who pays the commissions?
The seller.
Buyer’s Agency Contracts
Buyer’s agency contracts cover exclusivity, but not always commission or payment.
-Could say agent agrees to accept co-broke offered.
What is the purpose of an offer?
To reach an acceptable agreement between the buyer and the seller so that the agreement is signed w/ the intention to move forward.
offeror v. offeree
Offeror-seller
Offeree-buyer
*These roles switch if there is a counter offer.
What does an offer lead to?
An offer leads to the signing of the Purchase & Sale agreement.
Verbal offers/acceptance are…
non binding per statute of frauds. Offers must be in writing to be enforceable.
What if the seller is okay w/out having an offer in writing.
Suggest they consult w/ an attorney to discuss the possibility of risks.
Aside from a acceptance, what can terminate an offer?
At the end of time limit stated in the offer “time is of the essence”.
Death of either party to the offer.
Destruction of object of offer.
Withdrawal of offer before it have been accepted in writing.
Counter-offer-Terminates the original offer.
What has no effect on an offer?
Agency relationships.
What can also serve as an offer?
A binder or letter of intent.
Purchase & Sale Contracts
Agreements about how a sale will take place.
What is in a P&S?
Obligations
Contingencies
Date of Performance/Closing.
What are the basic essentials of a valid P&S?
Name of buyer(s) & seller(s) Legal description Offer & Acceptance Consideration Terms & Conditions Contingencies (like financing) Date of Performance (like closing)
Any contract can be assigned unless…
The writing in the contract prohibits it.
Optionor v. Optionee
Optionor-gives the option
Optionee-gets the option
What are options?
Written contract where the owner of a piece of property grants another party an the right to purchase or lease the property.
Must be signed by the Optionor/Grantor.
Consideration is exchanged.
Certain timeframe at pre-agreed terms.
How do agents earn a commission in an option?
Agents who bring an Optionee will only earn a commission if the option is exercised.
What type of contract is an option?
Unilateral-only the Optionor makes a promise.
Right of First Refusal
Prospective buyer is offered “first right” to match the best offer made on a property.
Right doesn’t give the buyer control over the price or terms.
Allows for the seller to better track the market to ensure fair market value.
Right of First Offer
Prospective buyer is offered the “first right” to purchase a property.
Power of Attorney
Written document giving the right to act as a proxy for another.
Creates an “attorney-in-fact”.
Multiple Listing Clause
Permits the listing broker to advertise the property to other brokers on the MLS.
