Unit 5: Real Estate Contracts Flashcards
Implied Contract
Handshake, non verbal, like in a restaurant - it’s implied that you will pay at the end.
There are NO Implied contracts in Real Estate
Express/Declared Contract
1 . Bilateral
2. Unilateral
3. Forbearance
In general, May be written or parol (verbal)
Bilateral
Binding to both sides
Promise in exchange for a promise
Unilateral
Binding on 1 Side
I promise THIS ,IF, you will do that.
Forbearance
An agreement NOT to perform - like a non-compete
Enforceablity of Contracts
Valid
Void
Voidable
Valid
Meets all legal requirements
Enforceable in Court
Void
No Legal Effect, unenforceable by either party, lacks one or more of the essentials of a valid contract
Voidable
One party is not bound but the other is because one party is a minor, or fraud, or duress.
Injured party may take legal action to disaffirm the contract
Essential Elements of a VALID Real Estate Contract
- Contractual Capacity
- Mutual Assent (Meeting of the Minds)
- Lawful Objective
- Consideration
5.
Contractual Capacity
- 18
2 Sane and Sober
Mutual Assent (Meeting of the Minds)
- Offer and communication of acceptance before offer is withdrawn
a. Any offer can be withdrawn prior to acceptance (Think forgot to email it out right away, buyer finds new property before they learn that the seller accepted their offer)
b. Counter offer from seller is a legal rejection and kills the original offer. Either can get out. - No Fraud or misrepresentation - don’t lie about material facts, causes damage to innocent party (hole in roof that won’t show up till rainy season must be disclosed)
- No duress or menace (threats)
- No undue influence - don’t give someone an unfair advantage (don’t give friend broker heads up on offer price)
- No mutual mistake or misunderstanding. Can kill the deal.
Lawful Objective
Must have a LEGAL purchase - marajuana plants don’t convey.
Consideration
- Valuable - Money or something that can be measured in dollars
- Good - Love, or not measured in dollars
Contracts that transfer any interest in real property must be ____ and ______ to be enforcable.
Exception: _______ and _____________
Statute of Frauds: Contracts that transfer any interest in real property must be in writing and signed to be enforceable.
2 Exceptions: Lease or listing of less that 1 year
Executory
Duties are not complete
Executed
Duties are complete - once you are at the closing table
Addendum
Additional material attached to and made part of the contract.
Amendment
Modification of exisiting contract terms
Must be written (or crossed out and rewritted and intialed) by all parties
Assignment
Transfer duties but not liability - like a sublease, or sandwich lease
Novation
Transfers duties AND liablilty, terminate old lease and start new one with new tenant, dont sublease.
New Contract, new party, or both.
Mutual Recission
Cancellation
Both Parties are returned to their pre-contract state, like it never happened.
Breach of Contract
Sets forth the amount of time the non breaching party can take legal action against the breaching party.
- Written contract - 5 years
- Parol (Oral) - 4 years (Not real estate, obvs)
Remedies for Breach of Contract
- Acceptance of Partial Performance - don’t sue
- Unilateral rescission
- Specific Performance
- Actual Damages
- Liquidated Damages
Unilateral Recession
- One sided cancellation by innocent party because breacher didnt’ hold up their end of the bargain.
Specific Performance
Make you do it - sue for completion of transaction
Liquidated Damages
Available only if specified in the agreement
Retain breaching party’s deposit
Damage deposit or earnest money
Actual Damages
Sue for money lost, ex: Lawyer fees
Types of Real Estate Contracts
Contract for Sale and Purchase Option Lease-Option Lease-Purchase Lease
Contract for Sale and Purchase
- I promise to buy and you promise to sell
- Bilateral - bindiing on both sides
- Parties
a. Buyer - vendee - holds EQUITABLE TITLE
b Seller - vendor - holds actual title
Essential Elements of Contract for Sale and Purchase Include
- Signature of Buyer and Seller and non-owning spouses in Homestead.
- Legal description
- Price and Terms
- Personal Property Included (Appliances would be checked off. A house full of furniture would be on a separate bill of sale)
Contract for Sale and Purchase- contingency
May include one or more contingency clauses - inspection, appraisal, financing and many more, stating buyer will not be responsible to complete the purchase under certain conditions.
Contract for Sale and Purchase - Required Disclosures
- Special Assessments, possible lien of same
- Radon gas - get info from county if concerned
- Mold - Contact a professional
- Receipt of enery efficiency
- Foreign person compliance with Foreign Nvetment in Real Property Tax Act (FIRPTA)
- HOA - 3 days to review/can’t waive
- Property Tax summary. Use county calculator to calculate next year’s. Don’t give an opinion here.
- Lead Rider - 1978
Foreign person compliance with Foreign Nvetment in Real Property Tax Act (FIRPTA) -
Buyer must withold money for foreign seller’s income tax unless house is 300k or less.
Lead Rider
On all houses built before 1978
Express Contract
One that;s in words - written or spoken.
Landlord tenant relationship created through a
Lease
Gross Lease
All inclusive, one rent covers everything
Net Lease
Rent plus expenses
Percentage Lease (commercial)
May be Net or Gross, plus % of sales
Variable/graded/index lease
rent charged on predetermined amount to PROTECT LANDLORD FROM INFLATION
Sales-Leaseback
Walgreens, sells property to someone, leases it back,
Sandwich lease
Sublet situaton
Property Management
Big here because of absentee ownership
Management Responsibilities -
- Leasing
- Managing
- Marketing
- Maintenance
Advance Rent and security deposit
- Held in FL
- Interest or non interest bearing account
- If interest bearing, delcare who gets interest
- Surety bond posted with clerk of circuit court
5 Must tell tenant in 30 days where it is
Damage Deposit
- Returned 15 days after lease end
- 30 days to impose a claim by certified mail
- Tenant has 15 days to respond
4 . Total max amoutn of time is 45 days
Termination of Tenancy at Will (No specified Term)
Pay Weekly - 7 days notice required Monthly - 15 days notice required Quarterly - 30 days notice required Annually - 60 days notice required
Contract for deed
Seller Financing
Purchase Price is paid in installments till its paid off. The buyer gets the deed.
Buyer - vendee - equitable title
Seller - Vendor - legal title
Lease-purchase
Created from the beginning that they will purchase the property.
Lease Option
They have the option to buy, during or after the lease
