RE MA Broker Flashcards
Contracts
A contract is an oral or written agreement to do or not to do a certain thing.
Many oral contracts are valid and enforceable. However, most contracts involving real estate must be in writing to be enforceable.
The statute of frauds determines what
the documents that must be in writing to be enforceable. In most states, real estate documents such as sale contracts, deeds and mortgages must be in writing.
When the phrase “time is of the essence” is written in the contract, it means
hat everything must be done within a specific time. If the requirement is not met, the promisor will be held to have breached the contract and the rescission by the promisee would be justified.
An “as is clause” is what
An “as is clause” in a contract means the buyer is buying the property as he sees it, with all existing conditions. The seller is still bound to disclose property defects, but not to make repair.
An assignment is what
is the transfer of contract rights from one party to another. This could be the transfer of a right, title or interest in a property.
The party transferring the contract is called the
assignor
the party receiving the transferring contract is called the
assignee
An assignment is
does not relieve the assignor from liability unless novation has been granted.
Novation is
the substitution of one contract for another and releases liability.
Just remember Nova is Latin for New, hence Novation, a new contract.
The essentials of a valid contract are
Capable parties
Lawful object
Consideration and
Offer and acceptance
Capable parties
To be a capable party, the person must have the legal capacity to contract. Typically, this means the person must be at least 18 years old and of sound mind.
Other Capable competent parties would include
- Person given authority to enter into contracts on behalf of a corporation
- Person with a proper power of attorney
- Fiduciary given the authority to contract
- Emancipated minor.
Lawful object
A contract must be entered into for a legal purpose. For example, when you see in the movies a contract to kill, that is really no contract at all because it is not lawful.
A contract like this with an illegal purpose is void. A contract must also be entered into freely, without duress, threats, blackmail, misrepresentation or fraud.
Consideration
Consideration is anything of value. It is bargained for and received. Valuable consideration is something of value given or promised by one party in exchange for the promise of the other. Valuable consideration is usually the promise to pay money in exchange for an item that has monetary value.
Offer and acceptance
Offer and acceptance is also called mutual consent or a meeting of the minds.
An offer must contain what
the exact terms and conditions, and the offer must be accepted without changes. The offer must be clear in character, the property must be accurately described to identify the subject matter, and you must have an exact price.
You can not offer to by a house for a whole lot of money, you must say one million dollars or what the exact amount is you are offering.
An offer will be terminated by what
An offer will be terminated by death; or insanity of the offeror or offeree; destruction of the property; or a material change in circumstance.
When a counter offer occurs who is the offeror and offeree
A counteroffer occurs when the seller changes any of the terms made by the offeror. This reverses the legal position of the parties and the offeror becomes the offeree, and the offoree becomes the offeror.
a contract is what
a binding legal agreement that is enforceable in a court of law. That is to say, a contract is an exchange of promises for the breach of which the law will provide a remedy.
A contract can be classified as
valid, void, voidable.
A valid contract is
one that meets the basic elements of contract law. For example, you sign to buy a red house, the house red, thus the contract is valid.
A voidable contract
provides the option to rescind by either party. At the creation of the contract it is valid but it could be voided in the future. Most sales contracts are voidable contracts because they contain contingency clauses.
A contingency is the dependence upon a stated event that must occur before a contract is binding.
If a contingency provision cannot be met, the contract can be legally voided. Contracts entered into under duress, misrepresentation or fraud are voidable.
A void contract
has no legal force. It is missing an essential element, thus it is not a contract. For example a contract to kill would be void, because it has an illegal purpose.
Implied contract
An implied contract is created by the acts of the parties. The old saying comes to mind of “if it walks like a duck, smells like a duck and sounds like a duck, then it must be a duck.” Acting as something can mean you are that thing,
Bilateral & Unilateral contacts
A bilateral contract is one where there is a promise for promise. Sales contracts and listings are examples of bilateral contracts. In a listing contract the seller promises to pay if the agent promises to procure a purchaser.
A unilateral contract is a one-sided agreement, that is, only one party makes a promise to perform.
A lease option is a unilateral contract until the option is exercised.
Another example of a unilateral contract is a lost dog sign, you find the dog, you get paid, but you are not promising to go and look for the dog.
Executed Contract
An executed contract is when all parties have fulfilled their promises.
For example, a sales contract is complete when the transaction closes. Do not confuse an executed contract with the act of signing a document, which is execution of the document.
Executory Contract
An executory contract is when one or both parties have obligations still to be performed. For example, a sales contract is an executory contract until the buyer has obtained financing, and the seller has confirmed a clear and marketable title.
Option contract
In an option contract, the seller is the optionor and the buyer is the optionee. It is a unilateral contract in that the seller is obligated to sell, but the buyer has the option to buy.
When created, an option contract is a unilateral contract. But when the buyer exercises the option, it becomes a bilateral contract. The option is assignable to another party unless the contract forbids it.
In a lease option, the lessee agrees to lease the property with an option to buy the property.
Land Contract
A land contract is a financial agreement between a vendor and a vendee. Generally, title is held by the seller until final payment is made. The land functions as the security device. Unless agreed otherwise, the seller is responsible for paying taxes and insurance because the seller retains legal title to the property.
A land contract is also called
as a contract for deed, an agreement to purchase and sell, or a land installment contract.
A home is located in an area where there are factories with a great deal of smoke and dust experiences
Economic/External obsolescence
If you have a loan and transfer the title to another individual without informing the lender, it is likely that the lender will demand payment of the outstanding loan balance. He is able to to this because of a clause in our mortgage called the
acceleration clause
The anti-fraud provision of the Interstate Land Sales Full Disclosure Act applies to
Sales of lots in subdivisions containing 30 lots
Mass housing’s ability to adjust income and price limits is determined by
U.S. Treasury and HUD
A lender is able to decide if a loan to be made is eligible for FAH insurance. This ability of the lender is known as
direct endorsement
The Truth-in-Lending Act prohibits what
advertising only the percentage of down payments
