Unit 6: Real Estate Contracts Flashcards
Voidable contract
One party has the right to void contract
Contract with a minor
Disadvantaged party may take legal action to dis affirm
Express contract
Terms have been explicitly declared, verbally or in writing
Implied contract
Created by the actions of the parties
Gross lease
Tenant pays rent only
Net lease
Tenant pays rent plus operating expenses
Option
Unilateral contract which the buyer has the right to purchase a property from seller is buyer chooses to do so
Owner: optionor
Buyer: optionee
Includes option fee: non refundable, holds option for buyer
Statue of frauds
Party attempting to enforce an oral executory real estate purchase contract would be stopped by thus
Requires real estate contracts be in writing
Mutual agreement
there was an offer and acceptance there was no fraud, misrepresentation, or mistake and the consent was genuinely freely given
Offeror
Party who makes an offer to another party
Communication of acceptance
When an accepted offer becomes binding on the offeror
Fraud
Actual knowledge to enter into a contract by intentionally deceiving a party
Consideration
Something of value given in exchange for something else :
Promise
Money
NOT earnest money (liquidated damages)
Executory contract
Buyer has equitable title
Contract has NOT been fully performed
Specific performance
Rights of parties to a contract to sue each other to perform the terms of the contract
Liquidated damages
When seller keeps only earnest money or other things of value of a buyer who is in default
Must be stipulated as a remedy
Unilateral contract
Exchanges a promise for performance
Essential elements of a contract
1) mutual agreement
2) a lawful objective
3) consideration
Purchase agreement
Creates conditions for closing
Binding on both parties
Offer becomes executory contract
Essential elements: buyer and seller signatures, property description, price a d terms, in writing and signed
Lease
Context that conveys right to quiet enjoyment and possession of property buy does not convey title
Bilateral
Landlord: lessor
Tenant: lessee
Essential elements: names of lessor, lessee and description of the property (street address)
Notation
New contract that transfers all rights
Offer becomes contract
when acceptance a d communication of acceptance take place
2 forms of eviction
Actual
Constructive
Bi lateral contract
Contract between 2 parties who each make a promise to perform certain acts
Valid contract
Meets all essential elements bad all legal requirements
Binding and enforceable in court by both parties
Void
No legal effect
Lacks 1 or more of the essential elements
Offer
During negotiation period, no contract exists
May be countered and new offers made until ‘meeting of the minds’
Strike-thru changes must be initialed and dated by all parties (becomes counter offer)
Termination of offer before acceptance results by any of:
1) revocation or withdrawl
2) rejection by offerer
3) any change to an offer
4) event that destroys property (fire)
5) death of either party
6) use of NCA of realtors Response to Buyer’s a Offer form
Amendment
Required to name changes to a contract
Counter offer
Terminates first offer but carries forward many terms from original offer
Contractual Intent
Intent to be bound
No fraud or misrepresentation
No false statements or omission of material facts
Material fact
If known, might change a decision and must be disclosed
Does NOT include ‘Puffung’: act of making a claim that anyone would understand is not literally true
Caveat emptor
‘Buyer beware’… Not common in most states due to disclosure requirements
Addendum
Additional material attached to and made part of an offer
Assignment
Transfers contract rights but not necessarily all liability
All contracts are assignable unless contract prohibits
Mutual rescission
Return of all parties to their original condition before contract
Breach of contract
Seller who takes fixtures after closing
Earnest money returned for insufficient funds
Parties
Seller is vendor and holds legal title
Buyer is vendee and holds equitable title
Contingency clause
States that a party will not be responsible for completing the purchase under certain conditions
Sale leaseback
Owner sells property to investor and leases it back
Converts equity to working capital w/o giving up possession
Variable leases
Rent increases or decreases at pre determined intervals
1) graduated: increase at predetermined intervals bad amount set in lease
2) index: adjusted based on economic indicator
Termination of leases
1) estate for years : expiration date, not death
2) periodic estate: notice - not death
3) Estate at will - notice or death
4) actual eviction- court action brought by landlord bc tenant is breach
5) constructive eviction : lessee must vacate due to Lessor’s act or failure to act
Leae w/ purchase opinion
Tenant desires to purchase but does not want to fully commit up front
May apply part of rent to purchase price
Agreement for preemptive rights
Rights to first chance to purchase property
Seller/landlord initiates
Right of first refusal
More flexibility for owner then option bc no sry price
Seller’s only obligation is to give potential buyer or HOA first right to buy
Right of first opportunity
More formal then ‘first right of refusal’
Requires seller to give holder first opportunity to buy at designated terms
If opportunity holder declines, seller may fir a specified time accept an offer from another party based on what has Vern agreed to by the holder of opportunity
Uniform Electronic Transaction Act (UETA)
Allows documents to be created and signed electronically
Contracts can be created and emailed or faxed
Electronic signature is binding
Original signatures can be obtained at closing for documents
