Module 7 Contracts, Leases and Deeds

Question 1

Identify the 5 elements of a valid contract

Answer 1

1. Voluntary
2. An agreement or promise
3. Legally competent parties
4. Legal consideration
5. Legal Act

Question 2

Differentiate between a gross lease and a net lease

Answer 2

Gross lease : the lessor pays some or all of the operating expenses
Net Lease: the tenant pays all of the operating expenses

Question 3

Identify the 4 types of deeds in which real property can

be legally conveyed

Answer 3

General Warranty Deed
Special Warranty Deed
Bargain and Sale Deed
Quitclaim Deed

Question 4

2 Categories of Contracts

Answer 4

unilateral and bilateral

Question 5

Unilateral Contracts

Answer 5

obligates only one party to perform. an option agreement in real estate is unilateral

Question 6

Bilateral Contracts

Answer 6

There are 2 parties obligated to perform, most real estate contracts
are bilateral

Question 7

3 Categories of a contracts legal status

Answer 7

Valid Contract
Void Contract
Voidable Contract

Question 8

Valid Contract

Answer 8

an agreement in which all the elements of a contract are present
and therefore legally enforceable

Question 9

Void Contract

Answer 9

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

Question 10

Voidable Contract

Answer 10

technically valid but gives one or more parties the power to legally void the agreement and thus cancel performance

Question 11

3 types of contracts

Answer 11

Real Estate Sale Contract
Options Contracts
Land Contract

Question 12

Real Estate Sales Contract

Answer 12

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

Question 13

The essential elements of a sale contract that are of interest to an appraiser

Answer 13

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

Question 14

Option

Answer 14

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

Question 15

Deed

Answer 15

Written, legal instrument that conveys an estate or interest in real
property to someone else, assuming it is executed and delivered

Question 16

Elements of a Deed

Answer 16

-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

Question 17

General Warranty Deed

Answer 17

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

Question 18

Special Warranty Deed

Answer 18

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

Question 19

Bargain and Sale Deed

Answer 19

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.

Question 20

Quitclaim Deed

Answer 20

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

Question 21

Adverse possession

Answer 21

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.

Question 22

Requirements for Adverse Possession

Answer 22

• 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)

Question 23

Prescriptive Easement

Answer 23

The right to use another’s land, which is established by exercising this right openly, hostilely and continuously over a statutory period of time

Question 24

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

Answer 24

d) Express contract

Feedback: Correct. An express contract is one that is written or spoken

Question 25

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

Answer 25

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

Question 26

The initial payment to bind a sales contract is called ________ money

a) legal tender
b) upfront
c) earnest
d) down payment

Answer 26

c) earnest

feedback: Correct. Earnest money is part of the purchase price given to bind the agreement

Question 27

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

Answer 27

a) quitclaim deed

Feedback: Correct. A quitclaim deed conveys any interest held in the property to the grantee without warranty of title