Purchase and Sale Agreements, Options, and Short Sales

Question 1

A time-is-of-the-essence provision

Answer 1

A time-is-of-the-essence provision generally is included in a purchase and sale agreement and in an option. It applies the concept that time is of the essence to all terms and conditions of the agreement. A contract may or may not specify a time for performance. If the contract does not specify a time for performance, by implication, performance would be required within a reasonable time. If a question arises as to what is reasonable, the court will decide.

Question 2

Earnest money

Answer 2

is money or property deposited by the purchaser at the time of signing the sales contract to show her good faith in making the offer. It is not the buyer’s consideration for the purchase of the property; the consideration is the price and terms of purchase offered the seller.

Question 3

Liquidated damages

Answer 3

is an amount predetermined by the parties to an agreement as the total amount of compensation (damages) a party should receive in the event that the other party breaches a specified part of the contract.
The liquidated damages clause found in the purchase and sale agreement will specify that the broker and the seller may keep the earnest money if the buyer defaults.

Question 4

The optionor

Answer 4

is the property owner who gives the option

Question 5

The optionee

Answer 5

is the purchaser or tenant who receives the option

Question 6

a short sale

Answer 6

A real estate transaction for which the sales price is not sufficient to cover the debt and obligations encumbering the property, along with the sale costs, and the seller is unable or unwilling to pay the difference

Question 7

Home Affordable Modification Program (or HAMP)

Answer 7

is designed to help financially struggling homeowners avoid foreclosure by modifying loans so that they are affordable for borrowers now and over the long term. HAMP includes incentives for investors, borrowers, and servicers.

Question 8

Home Affordable Foreclosure Alternative (HAFA)

Answer 8

is designed to give homeowners an alternative to foreclosure and includes incentives for completing a short sale.
If a seller can close a sale under HAFA, he will emerge with no deficiency.
Unlike conventional short sales, a HAFA short sale totally releases the homeowner from mortgage debt after closing the sale on the property.