Key Terms - Chapter 10

Question 1

contract for deed

Answer 1

A contract of sale and a financing instrument wherein the seller agrees to convey title when the buyer completes the purchase price installment payments. Also called installment land contract, land contract, and conditional sales contract.

Question 2

due diligence fee

Answer 2

A non-refundable amount of money paid by the buyer, to the seller, to compensate the seller for the buyer’s rights of due diligence. There is no fee required by law but may be imposed by seller or offered by the buyer.

Question 3

effective date

Answer 3

The date the contract has been both signed and proper notice has been delivered to the offeror that the offeree has accepted in writing

Question 4

equitable title

Answer 4

As opposed to legal title. Equitable title is title that will be conveyed once certain contract obligations are performed. An interest in real estate such that a court will take notice and protect the owner’s rights.

Question 5

installment land contract

Answer 5

A contract of sale and a financing instrument wherein the seller agrees to convey title when the buyer completes the purchase price installment payments. Also called installment land contract, land contract, and conditional sales contract.

Question 6

legal title

Answer 6

Belongs to the party who actually holds the deed.

Question 7

liquidated damages

Answer 7

A predetermined amount of money to be paid and received as compensation for a breach of contract.

Question 8

offeree

Answer 8

One to whom an offer is made

Question 9

offeror

Answer 9

One making an offer

Question 10

option

Answer 10

A contract giving one (optionee) the exclusive right to buy a specified property from the owner (optionor) at a specified price for a specified period of time.

Question 11

optionee

Answer 11

One who receives an option.

Question 12

optionor

Answer 12

One who gives an option

Question 13

right of first opportunity to purchase

Answer 13

The right that a buyer has to purchase a property at a stipulated price should the seller decide to sell. If the seller decides to sell and the buyer does not purchase the property the seller may offer it to another party for a specified period of time. If the purchase does not occur the original buyer will still have the right to purchase and the process is repeated in the future.

Question 14

right of first refusal

Answer 14

A written agreement that provides for a potential buyer to have the first opportunity to purchase a property before it is offered to anyone else or to purchase the property on the same terms as an offer received from another offeror. This agreement may appear in a lease or in articles of association. It does not have to be in another document. It can stand on its own. The seller is not obligated to sell, but if he does, he must give the holder of this right, the first opportunity to purchase the property before it is offered to anyone else