UNIT 5--Real Estate Contracts Flashcards
A voluntary, binding agreement between 2 or more competent parties to do (or not do) a specific thing
Contract
An __________ contract is indicated by intent with action.
Implied—can not use implied contracts for transferring real estate
Express(declared) contracts can be _______ or ________.
Oral or Written
To be enforceable under the State Statute of Frauds, all real estate contracts must be express ________ ________.
Express Written Documents
In this contract, both parties exchange a promise for a promise and both are bound to perform
Bilateral
This type of contract is a promise exchanged for performance, only 1 party is bound.
Unilateral
A valid contract contains all 5 ______ _______ to be enforceable.
Essential Elements
If a contract lacks an essential element, it is said to be _____.
Void–lacks legal effect, NOT enforceable by either party
This contract appears to be valid, but one party may disaffirm it because the party is a minor or was subject to duress, fraud, or misrepresentation.
Voidable
This stage of a contract has NO legal obligation and could be used on more than one project at a time.
Letter of Intent–usually with Commercial property, it is a way for buyer to seek info about a potential transaction
This is the negotiation period before a contract exists.
OFFER stage–offer can be countered, new offers made until there is a “meeting of the minds”
T or F: Strikethroughs or changes in a contract must be initialed and dated by both parties to be enforecable.
True
Upon a meeting of the minds and communication of acceptance, a _________ is formed.
Contract
__________ terminates an original offer and creates a new offer.
Counteroffer
Once a contract is made, the only way to change it before closing is with an ____________.
Amendment
A contract is considered __________ once it is closed on.
Executed
Contractual capacity/legally competent parties means the parties are _____________.
18, sane, and sober
Mutual agreement/consent/offer and acceptance is also a meeting ___________.
Meeting of the minds
One party to a contract can withdraw an offer before communication of acceptance and it would not be _______.
Binding
Contracts become binding upon communication of ____________.
Acceptance
Legally, a counteroffer is a rejection that __________ the original offer.
Terminates
In a counteroffer, the original offeree becomes the _________.
Offeror
T or F: The 5 elements of a RE contract are Competent Parties, Meeting of the Minds, Lawful Objective, Consideration, In Writing and Signed
True
In order to be enforceable, the _________________ requires certain contracts must be in writing and signed by all parties expected to perform.
Statute of Frauds
If a lease is for 12 months or less, does it have to be in writing?
No
A contract that is not yet fully performed, incomplete is considered ___________.
Executory
A purchase contract is _________ once the deed has been delivered and accepted at closing.
Executed
Additional material attatched to and made part an offer is an __________.
Addendum
Transferring contract rights, but NOT liability is called an __________.
Assignment
A new contract replacing an old is called a _________.
Novation
A __________ will terminate a contract when a condition is not met, such as appraisal or financing.
Contingency
This is when all parties agree to return to their original condition before the contract was executed(earnest money will be returned).
Mutual Rescission
Does the sale of a property terminate a lease contract?
No–buyer is “subject to” the lease
_________ , which are not contracts, terminate upon death of the parties.
Offers
When a party is in default without a legal excuse they are __________.
In Breach of Contract
Suing to force performance for completion of the contract, available to both buyer and seller, is ____________.
Specific performance
Liquidated damages are paid with ________.
Earnest Money–this is only available to the seller
In Colorado, a Contract to buy and sell is also called a ____________.
Purchase contract
An offer becomes ____________ upon communication of acceptance.
Executory
The seller is a vendor, buyer is a ____________.
Vendee
The buyer holds ____________ title until the contract is executed.
Equitable
A ___________ clause states that the party is not responsible for completing the purchase under certain conditions.
Contingency
If a buyer terminates a contract because of a contingency, the ________ is returned to the buyer.
Earnest money
Parties can be in breach of contract if they do not adhere to specific dates for action because time is _________________.
of the essence
This is a contract where a specific buyer purchases the right to buy in the future from a seller who agrees to sell within a set period for a set price.
Option–Unilateral, binding on the seller, becomes bilateral when exercised by the optionee
T or F: Option contracts typically includes a non-refundable option fee to hold the option for the buyer,
True–fee can be applied to purchase price, no recourse for seller if buyer decides not to buy
This is used when a tenant wants to purchase a property but can’t get financing for the full amount.
Lease-purchase, part of rent may be applied to the purchase price
This is when an owner sells property to an investor and leases it back, converting equity to working capital without giving up possession.
Sale-leaseback
A promise for possession with the promise to pay rent is a ________.
Lease
A lessor/landlord has a ____________interest in property, allowing them to retake possession.
Reversionary
In this lease, a tenant agrees to pay fixed rent and the landlord pays all the expenses.
Gross or Fixed lease-most stable income for landlord
Commercial lease where the tenant pays base rent plus expenses i.e. property taxes, insurance, maintenance
Net lease
This lease is when rent is based on a % of gross sales/income; typically in retail properties.
Percentage lease
This lease increases and decreases rent at predetermined levels i.e. can be graduated or Index
Variable lease
This lease is used to rent unimproved property.
Ground(land) lease
T or F: Termination of a lease happens on the expiration date or required notice.
True
This estate tenancy DOES terminate with death.
Estate(Tenancy) at will
This is a court action brought by the landlord against a tenant who is in breach.
Actual Eviction
The lease is terminated by this when tenant must vacate because landlords failure to act.
Constructive Eviction–cancels the lease and tenant’s obligation to pay, but tenant must move i.e. not fixing heater in winter
T or F: ACTR, is a way to remember ACTS to lessen Risk,
True–Avoid(remove it), Control(prepare for it), Transfer(shift to another party, insurance company), Retain(chances are it wont happen)
This insurance covers a tenant’s personal property.
Tenant’s rental insurance
Theft, burglary, vandalism, and machinery damage are all covered under this insurance.
Casualty
This insurance covers brokerage firms, brokers, and salespeople for liability for errors and negligence in listing and selling activities.
E & O insurance
This means that there was an offer and acceptance, there was no fraud, misrepresentation, or mistake, and the consent was genuinely and freely given.
Mutual Agreement
