Real Estate Transactions Flashcards
What are the 2 general phases of real estate transactions?
- the executory period
- the closing period
What happens before executory period?
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
What happens during the executory period?
- the title of the property is verified
- the condition of the property will be assessed
- the buyer will obtain financing from the lender
- an escrow is opened to consummate the transaction
- various docs are prepared : deed, mortgage, escrow, and promissory note
What happens in the closing period?
- the lender lends money (advances loan funds) to the buyer
- the buyer pays the seller
- the buyer executes the promissory note and mortgage for the seller
- seller transfers the deed to the buyer
What happens after the executory period?
After the executory period, the deed and mortgage are recorded in public land records
What is statute of frauds rule?
an oral agreement for the sale of an interest in real property is generally NOT enforceable
What are the requirements for written contracts?
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
What happens if the statute of frauds is not complied with?
it is unenforceable
What are the different ways that a property can be described?
- metes and bounds: property descriptions using natural landmarks
- government survey: government’s public land survey can describe lot of the property
- subdivision maps can show where each lot is located
What is the property defense of part performance?
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
What is the defense of equitable estoppel?
- if a party in reasonable relied in detriment on another’s oral promise
- not enforcing this promise would cause serious injury
What is a marketable title?
a title on a property that is reasonably free from doubt as to it’s validity
What is the rule for unmarketable title?
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)
What is an encumbrance?
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
What is equitable conversion?
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
Death and Equitable Conversion Rule
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
Modern Disclosure Default Rule
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
What is historical rule for duty to disclose?
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
Remedy for Nondisclosure
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
“As is”Clause
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
Escrow agent
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
Deed Delivery Rule
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
Statute of Frauds for Deeds:
- 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
Remedies for Breach of Contract for Deeds
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
