Real Estate Sales Contract Flashcards
Reality of consent in a contracts includes that the agreement in the contract must be free of the following factors:
- Menace - Harrassment
- Duress/Undue Influence - some one coercing another person; blackmail.
- Mistake of fact - Buyer or seller make a mistake of fact
- Misrepresentation or Fraud - Lying
“Buyer beware” – applies to the sale of homes
- This is changing over time.
- In Alabama; NOT in all states
Caveat emptor
Sellers talk up the house to enhance the appeal of house
Puffery
Initial step in the contract
Offer
What must an offer be?
- Definite
- Complete (location, price, addendums, signatures, etc.)
- Communicated and Delivered
Final step of the Contract (Sign-Off)
Acceptance
What must an acceptance be?
- Only done by the one(s) whom the offer was made.
- Unconditional and Identical to the offer
- Communicated and Delivered
A counter offer includes
- Changes in Price
- Physical Items you want
- Closing Costs (Common=Seller Pays)
When would we have an illegal contract?
- Property Flipping
2. Inflating Price
The promises and actions of the consideration must be legal.
Contract and Payment
The mutual exchange of promises and actions stated in the agreement
Consideration
What must be exchanged in a real estate contract?
Money
The guiding principal is whether the person understands the nature and consequences of the agreement.
Competent Parties
What is generally in a R. E. Sales Contract?
- Parties and Property
- Financial Section
- Contingency Clauses
- Miscellaneous Clauses
Deposit to hold the contract (agreed-upon amount)
Earnest Money
What are the financial assets ivolved in a real estate deal?
Earnest Money New Loan Loan Assumption Seller Financing Cash at Closing
Take over the Seller’s loan, occurs when:
- Interest Rates are high
- Buyer might not be able to qualify for a loan
Loan Assumption
Most common type of seller financing?
Land
What actions end a contract?
Discharge of the Contract
Nonperformance of the Contract
Breach of Contract
What can one do if a buyer or a seller breaches a contract?
- Liquidated Damages (Seller)—keep earnest money
- Rescission—mutual decision to not do contract
- Sue for damages—legal fees may not be justified
- Sue for specific performance (Buyer)
Mutual decision to not do contract
Recission
Lease payments that go toward your principle
Lease option contract
Trade Property for Property
- 1031 Exchange—Like-Kind Exchange
- Deferring Capital Gains taxes
Exchange agreements
A contract where you do not record the deed when the buyer purchases the property; Buyer makes payments and gets title at the end when full payment made
Land sales contract or installment contract or contract for deed
- Land sales contract or installment contract or contract for deed
- Lease-option contract
- Exchange agreements
Other types of Contracts
Buyer must diligently seek information about the property such as physical condition, title problems and zoning issues
Buyer’s “Duty to Seek”
Caveat emptor – “buyer beware” – applies to the sale of homes.
Seller’s “Duty to Speak”
The following are all examples of:
- Buyer to obtain “suitable” financing
- Buyer to obtain home inspection w/ possible repairs to be negotiated $1,000 toward repairs
- Appraisal to meet or exceed sales contract price
- Sale is subject to the sale of previous home
Contingency Clauses
Contract essentials include:
Reality of Consent Agreement Consideration Legality of Purpose Sales Contract Competent Parties Necessity of Writing
