Real Estate Transactions Real Estate Contracts Marketable Title Equitable Conversion Duty to Disclose Defects Deeds + Delivery Flashcards
What is the general rule regarding oral agreements for the sale of an interest in real property?
An oral agreement for the sale of an interest in real property is not enforceable.
This is known as the Statute of Frauds.
What are the essential terms that must be included in a written real estate contract?
The essential terms include:
* Identities of the parties
* Price
* Property description
These terms must be set forth in writing to be enforceable.
What is the acceptable property description method that refers to the government’s Public Land Survey System?
Government Survey.
This method is commonly used for most property in the United States.
What is the doctrine of caveat emptor?
Caveat emptor is a common law doctrine meaning ‘buyer beware’.
It historically placed the burden of assessing property conditions on the buyer.
What is marketable title?
Marketable title is defined as title reasonably free from doubt as to its validity.
It is also known as ‘merchantable title’.
What are the three rules for unmarketable title?
The rules for unmarketable title are:
1. The seller’s property interest is less than the one she purports to sell
2. The seller’s title is subject to an encumbrance
3. There is reasonable doubt about either (1) or (2)
These rules help define when a title is not marketable.
What is an encumbrance?
An encumbrance is a claim or liability attached to property that may lessen its value.
Examples include liens and mortgages.
When is marketable title required in a real estate transaction?
The seller is not required to produce marketable title until the closing.
This allows the seller time to cure any defects before closing.
What is the default rule regarding risk of loss during the executory period?
Many states place the risk on the buyer through the doctrine of equitable conversion.
This means the buyer is seen as the equitable owner once the contract is signed.
What happens if the buyer or seller dies before closing under equitable conversion?
The contract is still valid and can be enforced by the heirs and devisees of either party.
This ensures continuity in the transaction despite the death of a party.
What is the modern default rule regarding a seller’s duty to disclose defects?
The seller is obligated to disclose defects he knows about that materially affect the value of the property and are not known to or readily discoverable by a buyer.
This contrasts with the historical rule of caveat emptor.
What constitutes a basis for rescission in cases of nondisclosure?
Nondisclosure constitutes a basis for rescission if a condition created by the seller materially impairs the value of the contract and is unlikely to be discovered by a prudent purchaser.
This is grounded in equity principles.
Fill in the blank: An oral contract for the sale of real property may be enforced if the buyer _______.
[takes possession, pays at least part of the purchase price, and makes improvements to the property]
True or False: Public encumbrances make title unmarketable.
False.
Statutes, ordinances, and other public restrictions do not make title unmarketable.
What is the majority rule regarding the seller’s obligation to disclose defects?
The seller must disclose defects that materially affect property value and are not readily discoverable by the buyer.
This rule aims to protect buyers from hidden issues.
What are the three approaches regarding equitable conversion?
The three approaches are:
* Equitable Conversion Majority: Risk of loss is on the buyer from the moment of contracting
* Minority Massachusetts Rule: Seller bears the risk until actual transfer of title
* Uniform Vendor and Purchaser Risk Act Minority Rule: Risk is borne by the one who has the right of possession at the time of loss
These approaches reflect different legal perspectives on property transactions.
What is a rescission?
Rescission is a party’s unilateral unmaking of a contract for a legally sufficient reason.
It allows a party to void a contract under certain conditions.
What is the historical default rule regarding seller liability in property sales?
The seller was liable only if he (a) affirmatively misrepresented the condition of the property, (b) actively concealed its defects, or (c) owed a fiduciary duty to the buyer.
What is the majority rule regarding seller disclosure in residential real property transactions?
The seller is obligated to disclose defects he knows about that (a) materially affect the value of the property and (b) are not known to or readily discoverable by a buyer.
True or False: An ‘as is’ clause can shield a seller from liability for affirmative misrepresentation.
False
What must a deed satisfy according to the Statute of Frauds?
A deed must (1) be in writing, (2) contain the essential terms (identity of the grantor and grantee; description of the property; and words showing an intent to convey title), and (3) be signed by the grantor.
What does it mean when a buyer is in a ‘buyer beware’ state?
The burden is on a homebuyer to do their homework on a property.
List the steps in the real estate transaction timeline.
- The Buyer and Seller sign the contract
- The Seller’s title is examined
- The condition of the property is evaluated
- The Buyer obtains financing from the Lender
- An escrow is opened to consummate the transaction
- Various documents are prepared, including the deed, mortgage, promissory note, and escrow instructions
- The transaction closes
What is the role of an escrow agent in a real estate transaction?
A neutral third party who receives the purchase price, the deed, the mortgage, the promissory note, and any other documents needed to consummate the transaction.
