Phases of the Transaction of Real Estate purchase Flashcards
Pre-contract period
Seller locates a ready, willing and able buyer.
- Buyer negotiates terms of the contact.
- There MUST be an agreement: offer, acceptance and consideration.
-Contracts for sale of land or interest in land must satisfy the statute of frauds (written agreement signed by the party to be charged)
Executory Contract Period
“Due diligence” phase. Buyer investigates title(legal ownership in property.) and conducts physical inspections.
Marketable title
Fee simple absolute ownership, free from defects such as encumbrances, easements, and mortgages.
Unmarketable Title
The defect of which the buyer complains of must be of a substantial character and one from which he may suffer injury.
Encumbrance
Legal right that someone else who does not have title may have in the property.
Contract Title
partiestion. can deviate from the default rule and agree that the seller will deliver something other than marketable title, or redefine what marketable title means in a particular transac
Physical Inspections
Seller has 30 days to correct any defects.
- If unable to correct, buyer could be relieved of obligations.
Equitable Conversion (Risk of Loss provision)
When the property suffers a physical “casualty” prior to closing, the buyer must still pay the entire price set in the contract.
Majority: the buyer bears the risk as the equitable owner.
Modern minority: the buyer assumes the risk of destruction where he is in possession, and the destruction is not proximately caused by the negligence of the seller.
Contract Closing
Performance is completed when seller delivers title(through deed) and buyer tenders($$) full consideration. Mortgage and note are signed. If there is not a marketable title, client does not have to attend.
Mortgage
The bank has a protected property interest in the property and can foreclose on the property if the borrower does not pay.
Post-closing
Buyer has taken ownership of the property
