Real estate contracts

If your clients are in a competitive bidding situation and want to include multiple contingencies in their offer, what should you say to them?

"Let's evaluate which contingencies matter most to you and consider omitting the rest."

James Sawyer evicted his tenant, Kate Abbot, for nonpayment. However, she didn't vacate the apartment as required by law. This is an example of _______.

An estate at sufferance

Your client Katrina is ready to close on her new home, but when you checked yesterday, the seller still hadn't dealt with the foundation issue that the inspector found. What is your responsibility at this point?

Ensure that Katrina knows that not all contingencies have been cleared.

When a contract is executory (for instance, in a land contract), what type of title does the buyer hold?

Equitable

A buyer, hoping to beat out all other offers, included a clause in the offer that reads, "Buyer to beat all competing offers by $1,000 up to a price of $700,000. Seller to provide copies of competing offer to buyer on acceptance." What type of offer is this?

Escalator

Which of the following does the use provision in a lease describe?

How the tenant will use the property, including allowable activities

Jillian's lease for her apartment has a right of first refusal clause. What kind of obligation does this create for her landlord Kathy?

If Kathy decides to sell, she must offer it to Jillian for purchase first.

With a triple net lease, the tenant pays ______ separately from the base rent.

Taxes, insurance, and maintenance

Suzy is the buyer in an installment sales contract. What type of title will she have to the property once she meets her contractual obligations?

Legal

What is put at risk if a buyer misses a contingency deadline?

The buyer's earnest money

Which of the following is a potential disadvantage for a buyer who enters into a lease with an option to buy contract?

The buyer/lessee could lose any funds credited to the purchase price if he breaches the lease's terms.

With this option, the holder must wait until an event occurs (another offer is made on the property by a third party) and then must decide whether to exercise the option, or let the property go.

Right of first refusal

What's a good policy that a buyer's agent should employ regarding contingencies?

Use contingencies judiciously to protect the clients and the deal.

Tristan's offer has been signed by all parties and delivered to the seller. This means that ______ has occurred.

Binding acceptance

You're working as a buyer's agent for Neil and Sharon, who just found the home of their dreams. However, they're concerned about the condition of the roof and the moisture in the basement, and don't have endless funds to make repairs. When they ask you about adding contingencies to their offer, what do you tell them?

"You definitely want to make it as easy as possible for the seller to choose your offer, but you have to protect your interests."

What Is a Land Contract?

A contractual agreement in which the buyer pays the seller the purchase price over time in a series of installments until the buyer has paid the contract in full, then the seller turns over the deed to the buyer

Malcolm loves his apartment, even though he's rarely there. His job in international development has him on the road for months at a time. He doesn't have to worry about missing out on his lease renewal, though, because he has ______.

A periodic estate

What is it called when all parties sign a contract, but before the seller's acceptance is delivered to the buyer?

Acceptance

Your brokerage firm uses pre-printed sales contract forms, but your seller, Marcus, wants to add some language about staying in the house and renting from the buyer for a month after closing. What should you use to add this information?

Addendum

The appraisal on Jean's property came in at $22,000 less than the agreed-upon sales price, so the buyer, Thomas, wants to renegotiate the terms. If they can come up with a new price that is satisfactory to both parties, what will they use to document this?

Amendment

In which of the following situations does a new tenant take the place of a departing tenant?

Assignment

Mary agreed to buy her mother's house when her mother planned to move to a senior living community. They signed a purchase agreement, but when Mary had to move because of work, she signed her rights in the contract over to her sister, Tina. Mary may still owe money if Tina can't come up with the agreed-upon funds. What's happening in this scenario?

Assignment

Ezra's lease on his condo includes an option to purchase. He told his landlord, Sherm, that he's ready to purchase the condo, and they've negotiated a purchase price and closing date. What kind of contract is this?

Bilateral

Which of the following is one reason for the popularity of commercial leasing?

Business owners can often make more money on their business than they can on the appreciation of the building where they conduct that business.

When a tenant pays rent to a landlord, the tenant is satisfying which element of a valid lease contract?

Consideration

What type of an eviction could tenants claim if they're forced to vacate an apartment after the landlord failed to repair the heat?

Constructive eviction

How is the break-even point calculated for a percentage lease?

Divide the monthly base rent by the percentage the landlord established.

What's the role of the mortgage contingency in a sales contract?

Documents the type of and timeline for financing, and outlines what to do if financing falls through.

Glynnis is ready to close on her new house, but her agent told her that they have to wait for the homeowner to fix the electrical box as agreed. What clause in her contract allowed her to request the repair?

Inspection contingency

Which offer would be the most appealing to a seller?

It depends on the seller's needs and motivations.

This option is often used by prospective purchasers who can't purchase immediately but intend to soon, and would like to buy the property they're renting.

Lease with option to buy

What happens to an initial offer from the buyer after a seller counters?

It's no longer in play.

Edna leased her house to Joan with a right of first refusal. Edna's cousin just offered her $250,000 for the house. What does Joan have to do if she wants to buy the house?

Match the offer on the table.

Which of the following is one benefit to business owners for leasing instead of buying real estate for their business?

Monthly rent is a tax deduction as a business expense.

Grant owns a property that's subject to an option contract. Grant is the ______.

Optionor

Chevy is an optionee. What's his sole responsibility?

Pay the option fee.

The owner of a nail salon that is located in a strip mall pays base rent of $1,800 and 10% of gross sales. What kind of lease do they have?

Percentage

Because there were no deadlines specified in the contract, Myron didn't think there was a problem if he waited to apply for a loan to help purchase the property. He was therefore a little surprised and not very happy when the seller sued him for breach of contract, stating that the delay was impacting the seller's ability to purchase a new home. What did Myron fail to do?

Perform his contractual obligations within a reasonable time.

When a contract doesn't provide specific dates for when the terms need to be met, what should the parties assume regarding performance of the contract?

Performance must take place within a "reasonable time."

Which residential sales contract provision specifies the date by which the buyer will have unfettered access to the property?

Possession

When multiple offers are received, which one of the following is something a licensee should do?

Prepare net proceeds statements on all offers.

If a landlord removes the tenant's right of ______, the tenant can claim constructive eviction and vacate the property with no further financial responsibility to the landlord.

Quiet enjoyment

Rose, represented by Sandy, and Tina, represented by Julie, entered into a sales contract for Rose to purchase Tina's home. Rose intended to ask Tina to repair the water heater, but the inspection deadline came and went. Now Rose has to buy the property as-is. Whose responsibility was is it to keep track of all buyer contingency deadlines?

Rose and Sandy

Eleanor is moving from a starter home into something a little larger. Her agent has cautioned her against making the offer on the new place contingent on the sale of Eleanor's starter home. Why the caution?

Sellers would view an offer without that contingency as a stronger offer.

How does the term "break-even point" relate to percentage leases?

The landlord doesn't charge a percentage of sales until the tenant's sales exceed a break-even point.

The tenants in 2B want to make a few improvements to their leased apartment. The couple would like to rip up the carpet in the living room and have the hardwood floors underneath restored. Which of the following statements about the improvements is true?

The tenants need to get the landlord's permission before they make any improvements to the property.

Which term refers to the tenant's right to live in a rental property without harassment or trespass by the landlord?

The right of quiet enjoyment

In commercial lease agreements, tenants pay the owner in exchange for ______.

The right to operate their business on the property

Why Choose a Percentage Lease?

The tenant wants to keep base rent low.

Hank leases 150 acres from Sara and Jesse. He has an option contract attached to his lease, with an option to purchase that can be exercised within the next two years. What type of contract is this?

Unilateral

If you're working with a seller client who's agreed to pay for the cost of a home warranty during negotiations, do you need to add an additional provision to the sales contract?

Yes, unless it's already included in the contract.