Contracts of Sale Flashcards
List the 5 elements required for a contract for the sale of real estate to be legally valid.
1) Mutual agreement (offer and acceptance)
2) Consideration
3) Legally competent parties
4) Lawful purpose
5) Description adequate to identify property
What law requires a contract of sale for real estate to be in writing to be enforceable?
The Statute of Frauds
List some names used for a contract to sell real estate
Contract of sale, agreement of sale, purchase and sale agreement, offer and acceptance, earnest money contract
A contract of sale occurs before or after the settlement?
Before
What occurs at settlement (closing)?
The buyer provides payment in direct exchange for a deed to the property delivered by the seller.
Why does contract of sale precede closing?
Time interval is necessary because of the time required for the buyer to research title, arrange financing, and perform inspections.
If the specific form used for a sale by a licensed broker or salesperson requires more than minor changes, who makes the changes?
A broker may not make the changes. They must have a form drafted by an attorney.
A valid contract of sale typically includes what 6 elements?
- Interests and identities of parties
- Description of the real estate
- Price and any financing required
- Contingencies to be resolved and other terms of sale
- Settlement date
- Signatures of buyers and sellers
What is the minimum description required for legal description of property in a contract?
One sufficient to locate the property
The price should state…?
The total to be paid, and the amount, terms, and type of loan that will be sough for the contract to be acceptable.
What are typical contingencies?
Inspections (property condition including structural, mechanical, electrical, plumbing, termites, environmental), and the buyer’s need to do something else, such as arrange financing or sell another property. The contract should specify who is to repair or pay for repairs and what may happen if the cost of repairs exceeds specific amounts.
True or false, prices and terms of reals estate are negotiable?
True!
How does the negotiation process often start?
A prospective buyer presents an offer, often through a broker, to an owner.
An offer can be withdrawn anytime before it is _____.
Accepted.
What is acceptance?
An owner signs an offer as it is presented, making no changes. This creates a contract.
If an owner decides not to respond to an offer, the offer is void when?
On its expiration date, or if earlier, when withdrawn by the prospective buyer
The slightest change of an offer by the owner constitutes a _____ of the offer and substitution of a new offer to the other party, called a ______.
rejection; counteroffer
The negotiation process can continue back and forth until a party decides to break negotiations. However, once an acceptance occurs, a _____ exists.
Contract
The process a buyer performs to be certain that the property’s condition is as described, with no surprises as to its physical, financial, or legal attributes, is called what?
Due diligence
What phrase is included in offers to describe the settlement (closing) date, so that the deadlines are interpreted exactly?
Time is of the essence
Can the deadline for closing be amended by mutual agreement of the parties?
Yes
Describe power of attorney. What is the name for the designated individual?
This is used to give another person authority to act. The person with such authority is called an attorney-in-fact (need not be an attorney-at-law). If the intent is to transfer real estate, the POA should be in writing to be enforceable.
What is earnest money? What happens to this money if a contract falls through?
The deposit given by a buyer to a seller (or a broker if one is involved) to show good faith. Also called hand money. In most situations, the seller keeps the earnest money if the buyer defaults. However, if the contingencies stated in the contract are not met, the buyer is entitled to a full refund of the earnest money.
What are liquidated damages?
These are stated in a contract to define the penalty for failure to complete the contract as specified.
What is the term for a legal remedy sought by a buyer to compel the seller to complete the contract, often enforced in court, and allowed because each piece of real estate is unique?
Specific performance
Do contracts for sale of real estate remain valid on the estate of an owner who died? What about leases/deeds/mortgages?
Are listings valid upon death of any of the following?: either party, the owner, the broker
Yes. Yes.
No. Listings terminate on the death of either party, the owner, or the broker.
What does an assignable contract for real estate mean? What is an assignor?
It is transerrable to someone else. Assignors are the party who assigned the contract. They are not relieved of the obligation unless the opposing party agrees to such a release.
What is the document used to release a party to a contract and substitute another called?
A novation
