Real Estate Transactions

Question 1

What are the 2 general phases of real estate transactions?

Answer 1

1. the executory period
2. the closing period

Question 2

What happens before executory period?

Answer 2

Before executory period, there is the signing of the purchase contract –> a general standard form which the parties will set forth the payment, the time for performance, the method of payment, and other terms

Question 3

What happens during the executory period?

Answer 3

1. the title of the property is verified
2. the condition of the property will be assessed
3. the buyer will obtain financing from the lender
4. an escrow is opened to consummate the transaction
5. various docs are prepared : deed, mortgage, escrow, and promissory note

Question 4

What happens in the closing period?

Answer 4

1. the lender lends money (advances loan funds) to the buyer
2. the buyer pays the seller
3. the buyer executes the promissory note and mortgage for the seller
4. seller transfers the deed to the buyer

Question 5

What happens after the executory period?

Answer 5

After the executory period, the deed and mortgage are recorded in public land records

Question 6

What is statute of frauds rule?

Answer 6

an oral agreement for the sale of an interest in real property is generally NOT enforceable

Question 7

What are the requirements for written contracts?

Answer 7

a written contract requires (1) essential terms (identities of parties, prices, property description), (2) the document itself (can be a formal document or informal memoranda) , and (3) signature by the party sought to be bound (e-signatures are acceptable

Question 8

What happens if the statute of frauds is not complied with?

Answer 8

it is unenforceable

Question 9

What are the different ways that a property can be described?

Answer 9

1. metes and bounds: property descriptions using natural landmarks
2. government survey: government’s public land survey can describe lot of the property
3. subdivision maps can show where each lot is located

Question 10

What is the property defense of part performance?

Answer 10

if a buyer
1. takes possession
2. pays part of the purchase price
3. and improves the property

an oral contract for the sale of a property can be enforced

Question 11

What is the defense of equitable estoppel?

Answer 11

1. if a party in reasonable relied in detriment on another’s oral promise
2. not enforcing this promise would cause serious injury

Question 12

What is a marketable title?

Answer 12

a title on a property that is reasonably free from doubt as to it’s validity

Question 13

What is the rule for unmarketable title?

Answer 13

1) seller’s property interest is less than one she purports to sell, (2) seller’s title is subject to an encumbrance, or (3) there is reasonable doubt as to (1) or (2)

Question 14

What is an encumbrance?

Answer 14

liability that is attached to the property that may lessen its value (lien, mortgage, easement); exposes the party holding title to the hazard of litigation and makes such title doubtful and unmarketable

encumbrance cannot defeat the transfer of possession, but it remains after the property or right is transferred

Question 15

What is equitable conversion?

Answer 15

the risk of loss is placed on the buyer; buyer is seen as equitable owner of the property once K is signed, while seller is viewed as equitable owner of purchase price (buyer is obligated to pay purchase price even if property is destroyed)
o Minority Mass rule: seller continues to bear risk until actual transfer of title, absent an express agreement to the contrary
o Uniform Vendor and Purchaser Risk Act Minority Rule: risk is borne by who has the right of possession of the property at the time the loss occurs

Question 16

Death and Equitable Conversion Rule

Answer 16

if the buyer or seller dies before closing, under equitable conversion doctrine, K is still valid; it can be enforced by the heirs and devisees of either party

Question 17

Modern Disclosure Default Rule

Answer 17

the seller of residential real property is obligated to disclose defects he knows about that (1) materially affect the value of the property and (b) are not known to or readily discoverable by a buyer

Question 18

What is historical rule for duty to disclose?

Answer 18

seller is liable only if he (1) affirmatively misrepresented the condition of the property, (2) actively concealed its defects, or (3) owed a fiduciary duty to the buyer

Question 19

Remedy for Nondisclosure

Answer 19

where a condition which has been created by the seller materially impairs the value of the K and is particularly within the knowledge of the seller or unlikely to be discovered by a prudent purchaser exercising due care to the subject transaction, nondisclosure constitutes a basis for rescission as a matter of equity
 Rescission = party’s unilateral unmaking of a K for legally sufficient reasons

Question 20

“As is”Clause

Answer 20

no jx will allow an “as is” clause to shield a seller from liability where he has made an affirmative misrepresentation; jx are split as to whether an “as is” clause will be effective to relieve a seller of his duty to disclose

Question 21

Escrow agent

Answer 21

neutral third party who receives the purchase price, deed, mortgage, promissory note, and other documents needed to consummate transaction; also distributes funds and documents as directed by written escrow instructions signed by parties

Question 22

Deed Delivery Rule

Answer 22

a deed is only effective when delivered; the grantor must manifest an intention to immediately transfer title to the grantee

An undelivered deed, even if signed by grantor, conveys nothing

An undelivered deed, even if signed by grantor, conveys nothing

where grantor delivers a deed to a third person with the intent to part with all control, the legal effect of the transaction is equivalent to a delivery of the deed to the grantee (Vasquez)

where grantor delivers a deed under which he reserves a right of retrieval and attaches to that delivery the condition that the deed become operative only after grantor’s death, there is no intent to immediately transfer and the delivery is invalid (Rosengrant)

manual transfer of a deed to grantee creates presumption that deed has been delivered; delivery is also presumed if the deed is recorded
o In some jx, absence of manual transfer creates presumption of nondelivery

Question 23

Statute of Frauds for Deeds:

Answer 23

• SoF Deed Rule: to satisfy the statute of frauds, a deed must (1) be in writing, (2) contain the essential terms (identity of grantor/grantee, description of property, words showing an intent to convey title), and (3) be signed by grantor

Question 24

Remedies for Breach of Contract for Deeds

Answer 24

specific performance is granted only if the monetary damages are inadequate; usually satisfied b/c land is considered unique (court may deny remedy if it would impose undue hardship)

specific performance cannot be decried of an agreement to convey property which has no existence or to which the defendant has no title; when it is out of the power of the defendant to perform the agreement, this is a sufficient reason why the court should refuse to enforce specific performance

Damages: non-breaching party can obtain damages, usually calculated as the difference btwn the K price and the fair market value on the date of breach

Recession: innocent party may rescind the K and receive restitution