Lesson 4 - US Land Transfers Flashcards
What does it mean when we say real estate contracts are executory?
It means that title is not transferred immediately upon signing the agreement because both buyers and sellers must do certain things between the time of the contract and closing.
What are the obligations of both parties in the process of transferring ownership of real property?
Buyers typically need to obtain a title search (which is done by lawyers in some states, but title companies in many [like Michigan]).
Buyers also need to obtain a mortgage, so a mortgage contingency is built into purchase agreements.
Buyers usually insist on an inspection as a contingency for sale.(This can be the most contested part of the negotiations.)
Sellers typically agree to allow an inspection, an appraisal, to move out by a certain date, to not harm the property.
Do purchase agreements transfer title?
No. Only deeds do that, and only the seller must sign a deed.
Johnny got a mortgage from the bank. Is this a correct statement?
No. Buyers GIVE a mortgage (the security interest in their house) to the bank as collateral in exchange for a loan
What are the 11 minimum things a purchase agreements must have?
- Purchase price and how it is to be paid, including the amount of cash required, any planned financing, its cost, interest charges, and length of the mortgage.
- Legal description of the property (a street address is not adequate; in some cases a survey of the property should be required).
- The Deed provision. Good title furnished by the seller, as indicated by an abstract of title, certificate of title, or a policy of title insurance.
- Warranties of title, including title restrictions and any other rights and limitations to which the title may be subject.
- Date of transfer of possession.
- Prorations of utility bills, property taxes, and similar expenses.
- Party responsible for risk of fire or other hazard pending closing or transfer of possession.
- Itemization of furnishings, appliances, shrubbery, air conditioners, other personal property, and fixtures included in the sale.
- Basic terms of any escrow agreement. (Payments required to be placed in someone else’s hands to ensure payments. Typically used for taxes and property insurance.)
- Provision for return of initial payment (earnest money or binder deposit) if the sale is not completed.
- Signatures of the parties.
What is the definition of “marketable title”? What is it’s function?
means “a title not subject to such reasonable doubt as would create a just apprehension of its validity in the minds of reasonable, prudent, and intelligent person.”
In other words, marketable title is title in which a reasonable person would be willing to pay fair value.
The seller transfers a title to the buyer a title that is in good and marketable condition
What are the 3 minimum requirements for a purchase contact under the SOF?
What is a rare exception?
(1) A signature by the party sought to be bound – the seller in real estate transactions.
(2) A property description – the agreement must describe the land covered by the transaction.
(3) A price – the writing must state the sale price.
Note: some courts may imply an agreement to pay a reasonable price if no price is stated, but this is the rare exception.
What are the 2 exceptions that would allow a real estate transaction to proceed despite being invalid under the SOF?
Exception #1: Part Performance
Part performance allows the specific enforcement of ORAL AGREEMENTS when certain acts have been performed by one of the parties to the agreement – that is, not enforcing the oral agreement would cause the other irreparable injury.
These acts vary from jurisdiction to jurisdiction, but typically include (1) the buyer’s taking possession and paying all or part of the purchase price or (2) the buyer making valuable improvements to the property based on some oral agreement.
Exception #2: Estoppel
Estoppel applies when unconscionable injury would result from denying enforcement of the ORAL contract after one party has been induced by the other to seriously change their position in reliance on the contract.
What its the Equitable Conversion Rule?
If there is a specifically enforceable contract for the sale of land, the buyer is viewed in equity as the owner from the date of the contract (the buyer has equitable title) and the seller has a claim for money (which is secured by the land’s value, itself).
Under Equitable Conversion, what would happen if the property caught fire in the middle of the equitable conversion period?
If a house is destroyed before the parties close, equitable conversion arises making the buyers the equitable owners, who thus might be entitled to the seller’s insurance proceeds, but the seller would also get the sale price of the house.
What is the majority rule for disclosing defects?
The seller has a duty to disclose of all “material” defects that they know about – whether or not they are asked about.
What’s the minority rule for disclosing defects?
Some jurisdictions won’t find a violation unless the seller did some act to conceal the defect (or lied) – omitting some information doesn’t count in these jurisdictions
Will a “stigmatizing” defect be considered material? How do most jurisdiction treat such defects?
In and of itself, some states do not punish homeowners for stigmatizing defects
ex. a murder in the house, that it might be haunted, that someone died of some infectious disease in the house, etc.
Are Brokers liable for not disclosing “off site” factors like the crime rate?
No. Brokers are only liable for “steering away” a protected class of person becasue of their class
Will an “As is” clause be upheld in court?
If the defect is reasonably discoverable, then yes. If the seller intentionally hid the defect, then the buyer will not be bound to the clause
