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Property > Land Transfer and Financing > Flashcards

Land Transfer and Financing Flashcards

1
Q

Basic Requirements of Real Estate K

6

A

1) Parties with contractual capacity
2) K has legal purpose
3) Offer
4) Acceptance
5) Consideration
6) Statute of Frauds

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2
Q

Statute of Frauds 1677

A

The agreement or some memorandum thereof must be IN WRITING and SIGNED

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3
Q

Common Issues of Oral Ks

A 
Oral K: 
- void or unenforceable
- signed or subscribed
- signed by whom? 
     Both parties, party to be charged, or seller
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4
Q

Oral K

Void or Unenforceable

A

Void: K is no good; as if K does not exist

Unenforceable: courts won’t enforce but you are free to carry it out on your own (bound by agreement)

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5
Q

Oral K

Signed or subscribed

A

Signed: mark made with present intent to convey

Subscribed: underneath; signed at the bottom/end of the document

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6
Q

Statute of Frauds in TX

A

Promise or agreement MUST be in writing
NOT enforceable
Signed by party to be bound (or authorized rep)
Oral amendments MUST be in writing

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7
Q

Who does the Statute of Frauds protect?

A

Non-parties

Meant to protect against false claims

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8
Q

Partial Performance

A

K enforceable if proof of oral K plus:

  • Possession by purchaser, or
  • Possession plus pmt, or
  • Possession plus valuable improvements, or
  • Possession plus change in position causing irreparable injury, or
  • Writing req’d
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9
Q

Partial Performance in TX

A

Purchaser takes possession, AND
Purchaser pays consideration, AND
Purchaser EITHER:
- makes valuable and permanent improvements on land with seller’s consent, or
- other factors exist to show transaction would be fraud on purchaser if not enforced

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10
Q

Contents of Writing (Req’ts)

A

1) Identity of buyer and seller
2) Description of property
3) Key terms (date, price, etc.)
4) Signature
Without these, agreement is too vague or inconsistent

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11
Q

Real Estate K must:

A

Comply with state laws
Be adapted to local custom
Individualized for client’s exact situation

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12
Q

Sources of Forms

A 
Real Estate Commissions
State Bar Associations
Commercial Publications
User Developed Forms
Form might be mandated by state law
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13
Q

Benefits of using Forms

A

Predictability
Efficiency
Reduces chances of error
Provides safety against malpractice (not immunity though)

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14
Q

Detriments of using Forms

A

Not all forms are universal
Bends client’s situation to fit the form
Form may not be up-to-date

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15
Q

Time for Performance Situations

A

1) No time stated/silent
2) Exact time stated
3) Time of the essence

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16
Q

Time for Performance:

Silent

A

Bad K

Reasonable time from K date

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17
Q

Time for Performance:

Exact time stated

A

At law: time deemed of the essence
At equity: Specific performance

which is used depends on what remedy is being sought; at law if looking to get out of the K; at remedy if wanting performance anyways

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18
Q

Time of Performance:

Time of the Essence

A

How do you know time is of the essence?
By express statement (use exact phrase)
By surrounding facts and circumstances
Nature of the property

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19
Q

Financing Arrangements Buyer’s Performance

A

Situation: someone wants to buy property but does not have the money to do so
Needs to become a debtor

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20
Q

Seller’s Options to Buyer’s Performance

4

A

Refusal
Obtain promise to repay
Obtain surety
Obtain collateral

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21
Q

Seller’s Options to Buyer’s Performance:

Refusal

A

Seller does not have to accept financing; can request cash payment (not common)

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22
Q

Seller’s Options to Buyer’s Performance:

Obtain Promise to Repay

A 
Unsecured creditor (high interest rates)
General creditor

If buyer fails to pay, seller has right to sue to recover payment

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23
Q

Seller’s Options to Buyer’s Performance:

Obtain surety

A

Co-signer
Accommodation Party
Guarantor

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24
Q

Seller’s Options to Buyer’s Performance:

Obtain Collateral

A

Safest thing for creditor to do
Personal property: security interest
Real property: mortgage or deed of trust

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25
Q

Purchase Money Mortgage
Seller = Lender
(5)

A

1) Mutual K
2) Purchaser gives down payment to seller
3) Purchaser signs promissory note
4) Seller delivers deed to Purchaser
5) Mortgage: provides collateral for note

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26
Q

Purchase Money Mortgage
Seller = Lender
Purchaser roles

A 
Debtor
Maker of note
Borrower
Grantee
Mortgagor
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27
Q

Purchase Money Mortgage
Seller = Lender
Seller roles

A 
Payee
Creditor
Lender
Grantor 
Mortgagee
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28
Q

Purchase Money Mortgage
Seller is not Lender
(6)

A

1) Mutual K
2) Purchaser gives down payment to seller
3) Lender = Bank; purchaser gets note from lender
4) $ from note goes to Seller
5) Seller conveys to Purchaser
6) Purchaser has mortgage with Lender

Seller happy b/c gets $ up front

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29
Q

Purchase Money Mortgage
Seller is not Lender
Purchaser roles

A 
Maker of note
Borrower
Debtor
Grantee
Mortgagor
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30
Q

Purchase Money Mortgage
Seller is not Lender
Seller role

A

Grantor

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31
Q

Purchase Money Mortgage
Seller is not Lender
Lender’s role

A

Payee
Creditor
Mortgagee

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32
Q

Deed of Trust

TX (5)

A

1) Mutual K
2) Down payment from Purchaser to Seller
3) Lender = bank; Purchaser gets note from Lender
4) $ from note goes to Seller
5) Purchaser gains Deed of Trust through Lender from Trustee

33
Q

Deed of Trust

Purchaser roles

A

Maker of note
Debtor
Borrower
Grantor of Deed of Trust (not deed)

34
Q

Deed of Trust

Seller roles

A

Grantor of deed

35
Q

Deed of Trust

Lender role

A

Payee
Creditor
Mortgagee
Beneficiary

36
Q

Deed of Trust

Trustee role

A

Holds deed until Purchaser fulfills payment on note

Attorney for lender, corp. officer of lender, or any third party

37
Q

Installment Land K or K for Deed

4

A

1) Mutual K
2) Purchaser gives down payment to Seller
3) Purchaser pays Seller
4) Seller gives Purchaser deed once paid in full

38
Q

Failure to Pay Mortgage

CL

A

Mortgagor lose all rights to property

39
Q

Failure to Pay Mortgage
ML
(3)

A

Equity of Redemption
Strict Foreclosure
Foreclosure by Sale

40
Q

Equity of Redemption

A

Ability to redeem if in default; can get property back tendering full payment of the note

Problem b/c if couldn’t make the pmts, how can you pay the full note off?
Allowed for debtor to sell the property and possibly make a profit (won’t work if upside down on the note)

41
Q

Strict Foreclosure

A

Rare
Mortgagee keeps property and forgives debt
Mortgagor unhappy b/c he won’t get anything back (down payment, improvement costs)
States are reluctant to use b/c the mortgagee gets a windfall

42
Q

Foreclosure by Sale

A

Common
Auction off property; competitive bidding
Mortgagee can only receive the amount left unpaid on the note (to prevent windfall)
Money earned in excess of note balance is given to the mortgagor

43
Q

Failure to pay Deed of Trust

A

Allows trustee to sell property without court proceedings
Faster, cheaper than traditional mortgage
Mortgagor gets surplus
If deficiency in amount sold for, the trustee can sue mortgagor for the difference

44
Q

Failure to pay Installment K

A

CL: seller keeps all pmts and land; buyer has no redemption rights
ML: buyer has protections

45
Q

Merchantable/Marketable Title

A

Seller’s Performance

46
Q

Tests to Determine Merchantable/Marketable Title

2

A

Reasonable Person test (TX)

Specific Performance test

47
Q

Merchantable Title:

Reasonable Person Test

A

TX

Title does not have to be perfect so long as it is not subject to doubt by a reasonable

48
Q

Merchantable Title:

Specific Performance Test

A

Title is good enough that a court is willing to order an unwilling purchaser to buy (forced sale)
- forced performance of sales K

49
Q

What would make a title un-merchantable?

A

Interest less than FSA
Encumbrances (mortgages, tax liens)
Restrictions (easement, covenant)
Break in chain of title (lacks vertical privity)

50
Q

Correction of Defects

A

Before seller is in breach of K, buyer MUST:
Give seller NOTICE
Allow seller REASONABLE time to fix

51
Q

Remedy for Un-merchantable Title

A

Quiet Title Suit

52
Q

Quiet Title Suit

A

Bring all claimants together to resolve claims

53
Q

Tender

A

One party MUST tender to place the other party in brech

  • Buyer: tenders $ or agreed upon financing
  • Seller: tenders deed which conveys merchantable title and K
54
Q

Anticipatory Repudiation

A

Excuses tender b/c retracted tender before performance date

55
Q

Assignment

A

Ability to transfer K right or performance (unless performance is a personal service; CANNOT transfer duty to perform but can transfer right to $)

56
Q

Why might the seller assign their rights?

- Why transfer to someone else before the sale?

A

Need $$ quick

A sells property to B for $200k but transfers to C for $180k; C must go through with the sale; A gets $180k quickly and C makes $20k profit

57
Q

Why might the seller assign their rights?

- Why transfer the land to someone before the sale for MORE than amount from sale?

A

Someone is willing to pay more
Seller wants more $$

A sells property to B for $200k but transfers to C for $220k; C must still go through with sale to B; why would C do this? C believes he can make money off of the land (cultivating, drilling for oil, etc.) he can make a profit if he can get more than $20k out of the land before the sale

58
Q

Why might the buyer assign his rights?

A

Doesn’t want to buy the land anymore

Got a better deal from someone else

59
Q

Who is liable for the rights of the assigned?

A

Original Party

60
Q

What type of land is usually affected by Assignment?

A

Residential/Farmland

Rarely used with commercial land

61
Q

Buyer Remedies for Breach of K:

Seller has breached

A

Terminate K and recover funds already paid
Specific Performance
Damages

62
Q

Buyer Remedies for Breach of K:

Terminate K and recover funds already paid

A

Was time of the essence?

Was seller given reasonable time to fix title problems?

63
Q

Buyer Remedies for Breach of K:

Specific Performance

A

Court may force the seller to sell to the buyer b/c every piece of property is unique

64
Q

Buyer Remedies for Breach of K:

Damages CL

A

English Rule
damages only if bad faith on seller’s part
- Pre-K position (“do over”) give everyone back what originally had and try again

65
Q

Buyer Remedies for Breach of K:

Damages ML

A

American Rule (TX)
Benefit of the Bargain
Market value minus K price
As if K were fully performed (make whole)

66
Q

Law date

A

Performance date when parties tender
Closing date
Exchange of $ for deed

67
Q

Seller Remedies for Breach of K:

Buyer Breached

A

Specific Performance
Damages
Terminate K

68
Q

Seller Remedies for Breach of K:

Specific Performance

A

Court can force buyer to purchase the property

69
Q

Seller Remedies for Breach of K:

Damages (3)

A

Benefit of the Bargain
Out of pocket
Liquidated damages

70
Q

Seller Remedies for Breach of K:

Benefit of the Bargain

A

K price minus market price

71
Q

Seller Remedies for Breach of K:

Liquidated Damages

A

Seller keeps down payment
Often deemed void as penalty
If reasonable amount is difficult to calculate, then it is allowed and not a penalty

72
Q

Equitable Conversion

A

Time between SIGNING date and CLOSING date
Purchaser: equitable owner and has interest in real property
Seller: creditor holding title as security for pmt and has interest in real property

73
Q

Significance of Equitable Conversion

A

How property passes through intestacy or will if death occurs btwn K date and closing date
Method for creditors to reach property
Risk of Loss

74
Q

Risk of Loss

What happens if house burns down, is flooded, or a tornado destroys it?

A

Prior to K: all risk on SELLER
After closing: all risk on BUYER

What about in between? depends

75
Q

Risk of Loss (TX)

A

Seller shall restore property to its previous condition as soon as REASONABLY possible, but in any event by the CLOSING DATE.

76
Q

Risk of Loss if K is silent

3

A

Majority (English)
Minority (Massachusetts)
Uniform Vendor and Purchaser Risk

77
Q

Risk of Loss:

Majority Rule

A

English rule
Purchaser has risk of loss b/c of equitable conversion
ALL risk on purchaser
Hardly any state follows anymore

78
Q

Risk of Loss:

Minority Rule

A

Massachusetts Rule
Seller has risk of loss b/c of implied condition that the premises will be transferred as they existed on date of K
ALL risk on seller b/c of implied condition that property will be in same condition as when purchase was agreed to

79
Q

Risk of Loss:

Uniform Vendor and Purchaser Act

A

TX follows

SELLER has risk of loss UNLESS buyer has taken possession of property prior to closing date

Property (7 decks)

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