Selling Real Property Flashcards
selling real property
3 major steps in real property sales transactions
- purchase contract
- closing
- title protection
- Purchase Contract- problems
(a) sof
(b) marketable titile
(c) equitable conversion
(d) duty to disclose
a. SOF- requirements
- essential terms - essential terms of the contract (normally the identity of the parties, the porce, and the property description) must be seit forth in writing..
-> common property descriptions (1) gov survey- Public Land Survey System; (2) metes and bounds; (3) subdivision map. - writing- the writing can be a formal contract or an informal memorandum.
- signature- the writing must be signed by the party sought to be bound.
SOF- exceptions
- doctrine of past performance- oral contract may be enforced if buyer (1) takes possession (2) pays part of the purchase price; (3) makes improvements
- Doctrine of estoppel- oral contract may be enforced if (1) one party acts to his detriment in reasonable reliance on another’s promise and (2) serious injury would result if enforcement is refused.
b. Marketable Title
Generally, title is unmarketable if:
1. The seller’s property interest is less than the one she purports to sell.
2. The seller’s title is subject to encumberance- an encumberance is a right ot interest in land (other than a freehold estate) that reduces the value of the land (easements, liens, mortgages)
3. There is a reasonable doubt about (1) or (2)
-> a believes he has obtatained title through adverse possession, while in the process of selling the home to B. the original owner brungs suit to claim land. A’s title is NOT marketable then.
c. Equitable Conversion
- doctrine of equitable conversion- buyer is equitable owner of property once the contract is signed
- massachusetts rule- seller cont. to bear the risk until actual transfer of the title absent an express agreement to the contrary.
- Majority rule- buyer under a contract for teh sale of land assumes the risk of destructiion or injury to the property where he is in possession and destructions is not caused by sellers negligence. (party entitled to possession bears the risk).
d. Duty to Disclose- Caveat Emptor Rule
CL- caveat emptor (lingers in only a few states)- buyer is responsible to ask all of the questions.
* In most jurisdictions, the seller of residential property is oblgated to disclose defects he knows about that (a) materially affect the value of the proeprty and (b) are not known to or readily discoverable by a buyer.
* -> connoted that seller has actual knowledge
* exception- implied warranty of quality- property is fit for the inteded use -> developer may be liable even without knowledge of defects.
2 Closing- elements
- the buyer pays the purchase price to the seller, and executes a mortgage and promissory note for the lender;
- the lender advances the loan funds; and
- the seller transfers title to the buyer by delivering a deed
- deed and mortgage are recorded in public land records.
Closing- (a) the deed
A deed is only effective when it is delivered.
* threshold question- did the grantor demonstrate intent that teh grantee receive an immediate interest in the property
* in cases involving attempted transfers, it is the grantor’s intent at the time the deed is delivered which is of controlling importance.
* -> e.g. where the grantor symbotically delivers but then continues to use the property, live in it, and pay taxes -> he has not shown untent to deliver an immediate interest.
Closing- (b) Remedies for Breach
- specific performance is granted when monetary damages are inadequate.
- courts can deny speciifc performance where it woukd be out of the seller’s
3 Title assurance (3 methods)
- Title covenants- the grantor promises in the deed that he has good title to convey
- title opinion. based on search of public records- an attorneye or other professional renders an opinion about teh state of title after searching public land records
- title insurance- a title insurance company issues a policy that insures the grantee’s title.
first method of title assurance
TA- (a) Title Covenants
grantor promises in dee dthat he has good title to convey
- three types of deeds:
1. general warranty deed (best protection)- the grantor warrants title against all defects whether they arose before or after he obtained title
2. special warranty deed- teh grantor title against all defects that arose after obtained title
3. Quitclaim deed- the grantor makes no warranties about title
TA- (b) Title Opinion based on search of public records
- an attorney or professional renders an opinion about the state of a title
-
A sells to B and 1 week later A sells the same property to C
- If B records the deed -> where a buyer does not retain anyone to search the land records, they are charged with notice of properly recorded deed because thet would have been found in a title search -> B owns the property
- BUT where the deed is never recorded -> there is special protection from a subsequent bonda fide purchaser who azquires title w/out notice of an adverse claim and pays valuable consideration -> C owns the house