Option Agreements, Contracts for Deed, and Escrow Agreements Flashcards
What is an option-to-buy contract?
An enforceable contract where option gives option to optionee
Explain a unilateral contract
The seller must perform. The buyer doesn’t need to. If the option is exercised, option becomes a bilateral sale contract
Contract requirements must include:
- Non-refundable consideration for the option right
- Price and terms of the sale
- Option period expiration date
- Legal description
- Must be in writing and meet contract validity requirements
What common provisions are included in a contract?
- How to deliver notice of election
- How to exercise option
- Terms of option money forfeiture
- How option money will be applied to purchase price
List the 3 legal aspects of a contract
- Creates equitable interest
- Is assignable
- Should be recorded
What is a contract for deed? What else is it called?
Also called a land contract or conditional sales contract. It facilitates a sale that might otherwise be impossible. May give the seller certain tax benefits.
During the period of a contract for deed, the vendor retains _ and the vendee acquires _
Legal title, equitable interest
In a contract for deed, this is a sale where:
- Purchase price is paid over time in installments
- Seller retains title
- Buyer takes possession
- At end of period, buyer pays balance of price, gets legal title
Contract for Deed: Interests and Rights
Seller may _ or assign interest; seller remains _ for underlying mortgage
Encumber, liable
What may the buyer do during a contract for deed?
Buyer may use, possess, profit
What must a buyer do during a contract for deed?
Buyer must make periodic payments, maintain the property, and purchase at end of term
If seller defaults, buyer may _
Sure for cancellation and damages or specific performance
If buyer defaults, _
the remedies prescribed to the seller vary by area
What is a lease?
A lease is a contract by which one party conveys property to another for a specified time, usually in return for a periodic payment
What are escrow agreements used for?
As part of a closing
