Module 7 Contracts, Leases and Deeds Flashcards
Identify the 5 elements of a valid contract
- Voluntary
- An agreement or promise
- Legally competent parties
- Legal consideration
- Legal Act
Differentiate between a gross lease and a net lease
Gross lease : the lessor pays some or all of the operating expenses
Net Lease: the tenant pays all of the operating expenses
Identify the 4 types of deeds in which real property can
be legally conveyed
General Warranty Deed
Special Warranty Deed
Bargain and Sale Deed
Quitclaim Deed
2 Categories of Contracts
unilateral and bilateral
Unilateral Contracts
obligates only one party to perform. an option agreement in real estate is unilateral
Bilateral Contracts
There are 2 parties obligated to perform, most real estate contracts
are bilateral
3 Categories of a contracts legal status
Valid Contract
Void Contract
Voidable Contract
Valid Contract
an agreement in which all the elements of a contract are present
and therefore legally enforceable
Void Contract
Has no legal effect and cannot be enforced in a court of law. This may be due to the absence of one or more specific contract elements
Voidable Contract
technically valid but gives one or more parties the power to legally void the agreement and thus cancel performance
3 types of contracts
Real Estate Sale Contract
Options Contracts
Land Contract
Real Estate Sales Contract
Serves 2 purposes: a receipt for the buyers earnst money deposit that is made with the offer to purchase and written evidence of the agreement
that will bind both parties to perform as stipulated in the contract
The essential elements of a sale contract that are of interest to an appraiser
a) Sale Price and Terms
- Financing details and any seller concessions
- List of personal property included in the sale
b) Contract Date and Potential closing date
c) Legal description of the land
d) Identification of the title and form of deed to be conveyed
e) Contingencies, if any
f) Sellers disclosure statement (listing known defects)
g) Signature of all parties to ensure a valid contract
Option
A legal contract, typically purchased for a consideration, that
permits but does not require the holder of the option (known as the optionee) to buy, sell, or lease real property for a stipulated period of time in accordance with specified terms; a unilateral right to exercise a privilege
Deed
Written, legal instrument that conveys an estate or interest in real
property to someone else, assuming it is executed and delivered
Elements of a Deed
-Identification of the parties
-Grantor who is legally competent
-Words of conveyance
-Legal description of the real estate
¬-Consideration (usually in dollars) received by the grantor
-Executed by means of a written document signed by the grantor
-Delivery by the grantor and acceptance by the grantee
General Warranty Deed
binds the grantor to defend the title against all lawful claims that
might be made against the property. In other words, the seller is stating to the buyer that he or she is the owner of the property and no one else has a claim of ownership
Special Warranty Deed
The grantor provides two covenants:
1. The grantor received title to the property
2. The grantor and his heirs will defend titlae to the lands against
legal claims created by the actions or omissions of the grantor or
his heirs
Bargain and Sale Deed
The grantor conveys the property but does not guarantee clear
title; this is used by court officials and fiduciaries to convey property
they hold by force of law but to which they do not hold title. It is also
used in foreclosure and tax sales.
Quitclaim Deed
Grantor conveys any interest held in the property to the granteewithout warranty of title. Offers the least protection to the buyer. It is often used to clear a defect in the title when someone is thought to have an interest or right in a particulate property
Adverse possession
Involuntary transfer of property that takes place when a party makes a claim by taking possession over a period of years, and the owner fails to contest possession. The law recognizes possession and the use of the property is essential component of ownership. The time required to obtain title legally by this process varies from state to state.
Requirements for Adverse Possession
- Open (possession must be obvious to everyone)
- Notorious (others know about it)
- Continuous possession and occupation
- Hostile (without consent of the true landowner)
- Adverse (to the true owners right of possession)
Prescriptive Easement
The right to use another’s land, which is established by exercising this right openly, hostilely and continuously over a statutory period of time
An agreement that is presumed to exist because of the parties actions is called an implied contract. In contrast, an agreement that is put into words (spoken or written) is what type of contract?
a) Unilateral Contract
b) Forbearance Contract
c) Legal purpose contract
d) Express contract
d) Express contract
Feedback: Correct. An express contract is one that is written or spoken
The type of deed that provides the greatest warranty against lawful claims is a
a) A deed of trust
b) General Warranty deed
c) A title insurance certificate
d) special warranty deed
b) General Warranty deed
Feedback: Correct. A general warranty deed is the best typed of deed because it binds the grantor and heirs to defend against unlawful claims
The initial payment to bind a sales contract is called ________ money
a) legal tender
b) upfront
c) earnest
d) down payment
c) earnest
feedback: Correct. Earnest money is part of the purchase price given to bind the agreement
When a party conveys whatever interest he or she has with no warranties, the type of conveyance used is called a
a) quitclaim deed
b) bargain and sale deed
c) general warranty deed
d) special warranty deed
a) quitclaim deed
Feedback: Correct. A quitclaim deed conveys any interest held in the property to the grantee without warranty of title
