Unit 11 Real Estate Contracts Flashcards
Name the essentials of a valid real estate contract.
A “valid contract” is one that complies with the provisions of contract law and contains four essential elements:
- ) Contractual capacity of the parties (competent parties)
- ) Offer and acceptance (mutual assent))
- ) Legality of object (legal purpose) “current active license”
- ) Consideration.
Which contracts are governed under the Statute of Frauds?
Contracts covered by Florida’s statue of frauds include the following:
- ) Purchase and sale contracts**
- ) Option contracts**
- ) Deeds and mortgage instruments
- ) Lease agreements for a term longer than one year
- ) Listing agreements for a term longer than one year
Understand the Statute of Frauds.
In addition to the four essential elements required in any contract, to be enforceable in court. real estate sale and purchase contracts must be in writing and signed by all parties who are bound by the agreement. Real estate contracts are not required to be witnessed or notarized.
( Elements of a valid and enforceable RE Sale Contract )
COLIC
Competent parties
Offer and acceptance (meeting of minds)
Legal purpose
In writing and signed (statute of frauds applies to real estate contracts)
Consideration (valuable or good)
Give examples of unilateral and bilateral contracts.
( Bilateral contract ) - obligates both parties to perform in accordance with the terms of the contract. Both parties promise to do something; one promise is given in exchange for another.
( Unilateral Contract ) obligates only one party to an agreement. One party makes an obligation to perform without receiving in return any promise of performance from the other party. There is no obligation on the part of the other party involved.
EXAMPLE: A broker promises to pay a $1000 bonus to the sales associate who gets the greatest number of new listings by the end of the month. The broker has promised to pay a bonus; however, the sales associates working for the broker are under no obligation to acquire new listings.
Know the remedies for breach contract.
1.) Specific performance - Court orders the party to perform according to the terms of the contract
2.) Liquidated damages - Amount of damages (usually the earnest money deposit) stipulated in the contract. If the buyer breaches the contract, typically the seller claims the earnest money deposit as liquidated damages.
3.) Rescission - The contact is canceled and the parties are restored to their original positions.
4.) Compensatory damages - This involves a lawsuit to recover the actual amount of the monetary loss to either party (also called unliquidated damages).
( To rescind is to cancel or annul the contract )
Know the characteristics of a net listing.
A “net listing” is created when a seller agrees to sell a property for a stated acceptable minimum amount, called the sellers net” The broker retains the proceeds in excess of the seller’s net as commission.
Review the requirements of the Lead Based Paint Hazard Reduction Act.
Applies to houses build pre - 1978
- Sellers and landlords disclose to prospective buyers and tenants the presence of known lead-based pain in residential property build before 1978.
- Sale contracts and leases include a disclosure about lead-based paint
- An EPA pamphlet regarding the danger of lead-based pain to be given to buyers and tenants before the sale or lease of residential property build before 1978
- Sellers allow home buyers a 10-day period during which to conduct an inspection for the presence of lead based paint (sellers are not required to pay the cost of inspection).
Know the requirements of the Florida Building Energy-Efficiency Rating Act.
Requires that buyers, before signing a sale contract, receive an information brochure notifying the purchaser of the option for an energy-efficiency rating on the building. The brochure contains a notice to residential purchasers that the energy-efficiency rating may qualify the purchaser for an energy-efficient mortgage from a lending institution.
