Chapter 12 Real Estate

What is the purpose of the initial inspections?

To allow the buyer to terminate if an issue arised during the inspection that cannot be successfully negotiated

bilateral contract

A mutual contract that involves an exchange of promises or other consideration between two parties.

association fees

States that buyer is responsible for association transfer fees

a contract in which one or more of the essential elements is missing

invalid contract

consideration

is the giving of something of value in exchange for something of value. - valuable consideration= consideration may be an exchange of money for a promise, an exchange of an item of value for money, or an agreement between the parties to do or not to do something. One form of valuable consideration seen in a real estate transaction is an earnest money deposit; it's the buyer's consideration to the seller. - good consideration- gift

A legally competent party means that an individual has the capacity, legally and ______, to enter into a contract.

mentally

Specifies when the seller will relinquish the house to the buyer

possession

voidable contract

A contract that may be cancelled by one or more parties for one of several reasons. It may be missing an essential element and thus invalid; it may contain a mistake or a misrepresentation, or it may have been created or executed by a party under duress.

Why is it important that the legal description in a sales contract be copied correctly?

A mistake in the legal description may lead to more or less land being conveyed to the buyer than was intended.

special assesments

States that the seller is responsible for paying any special assessments that appear prior to closing

Alex and Michael Helbig signed a contract to purchase their first home from sellers Joe and Bonnie Watson. Once all parties have attended closing and the purchase has been funded, the Helbigs are given the keys to their house. What type of contract do they have at this point?

executed contract (bc all parties have met all terms of the contract)

undue influence

exists when an act of persuasion overcomes another individual's free will and judgment. This can include trickery and deception, and usually means that the person doing the influencing is in a position of trust and abuses that trus

t/f All sales contracts are contingent on financing.

false, Although many buyers can't afford to purchase a property without the help of a loan, some buyers don't have to make the contract contingent on financin

the seller is required to convey the property to the buyer at closing using a__________

general warranty deed (provides the most protection to the grantee by guaranteeing that the title is good and marketable.)

part B of inclusions and exclusions

identifies items that either the seller wants to include in the sale or that the buyer wants to include in the sale

Part C of inclusions and exclusions

identifies items the seller wants to retain or that the buyer wants seller to remove

Part D of inclusions and exclusions

identifies lease items that will remain with property & may or may not be assumed by the buyer

what type of contract? You order dinner at a fancy restaurant. Your bill is $500, and you are obligated to pay it.

implied contract

Items that are permanently attached to property, such as the house and garage, and included in the sale price of the property, are referred to as _____________________.

improvements

dures

includes the use or threat of force, such as blackmail or bodily harm.

Lena's buyer Mindy is making an offer on Leo's house. Which party decides how much earnest money to offer?

mindy

When offer and acceptance has occurred, both parties enter into ______.

mutual agreement

s a promise made by one party, requesting something in exchange for that promise.

offer

What element of a valid contract is this an example of? A real estate broker offers to represent a client in a sales transaction. They discuss the terms of the agreement and the client accepts.

offer and acceptance

If the buyer misses the deadline for delivering the earnest money check to the holder, how many days does the buyer have to provide the funds after receiving a late notice from the holder?

one day

Sales contracts are

Express Bilateral Valid (in writing, for starters) Enforceable Executed or executory

void contract

a contract with no legal force or effect

Doris and Kathleen, who are neighbors, enter into an agreement to not permit their real estate agents to sell their homes to families with children. This agreement lacks ______, so it's void.

a lawful objective

lead based paint disclosure

discloses any known lead-based paint hazards within the property

a contract that will stand up in court

enforceable contract

enforceable contract or unenforceable contract? A written purchase agreement to buy a property, accepted in writing by the seller

enforceable contract

By law, the holder must deposit the earnest money to an

escrow account

what type of contract? You purchase a car from a dealer. You sign a purchase agreement detailing the transaction.

express contract

What's the best definition of legal purpose?

written for a lawful objective

earnest money/trust money vs down payment

-earnest money.trust money= can be lost if the buyer defaults on contract, paid up front - down payment= can't be lost, paid to closing agent at closing

When is the seller required to present that lead based paint disclosure?

For any residential property built before 1978

prorations

Identifies expenses that need to be prorated as of the closing date for the current calendar year

Five elements are required for a valid contract:

Legally competent parties Offer and acceptance Consent Legal purpose Consideration

bilateral or unilateral contract? You agree to buy a vacant property from a developer for $10,000.

bilateral contract

Identifies which party is responsible for which closing costs

closing cost/ discount points

Identifies when closing will occur and the expiration time and date of the agreement

closing date

If there is a dispute about how the earnest money should be disbursed, the holder can use the earnest money to cover ______________________

court and attorney costs.

Miscellaneous charges that must be adjusted to the day of closing are referred to in the TAR Purchase and Sale Agreement as ________________________.

prorating

how much the buyer is offering, when the amount is to be paid to the seller, and the form the payment will take?

purchase price

a contract that will not hold up in court

unenforceable contract

enforceable contract or unenforceable contract? An oral agreement to purchase a propert

unenforceable contract

bilateral or unilateral contract? You own an "option to buy" on a property that says if you want to buy the place in two years for $20,000, you may.

unilateral contract

what is purchase and sale agreement contract used for?

used for residential properties that art new construction

a contract that contains all the essential elements

valid contract

Provides notice that the buyer has the option to assume the seller's warranties or service contracts

warranties transfer

Express contract

A stated (written or oral) agreement between two parties to specific terms.

the seller must provide both ____________________ &___________ of the property

a commitment of title insurance and a professional survey

executor contract

A contract in progress; one or more terms of the contract remain undone.

executed contract

A contract in which all the parties have met all terms of the contract.

Unilateral contract

A contract in which consideration (such as a promise) is only given by one party to the other.

implied contract

A contract that is based on the actions or behaviors of the parties, not on words.

What is a down payment?

The amount of money the buyer plans to bring to the table as part of the closing costs

Assuming a buyer has elected to have inspections done, what options does a buyer have if the inspection results indicate significant issues with the property?

1. accept the property as is 2. teminate the agreement 3, .ask the seller in writing to correct specific problems

Expenses paragraph

1. appraisal = Identifies if the purchase of the property is contingent on the appraised value equaling or exceeding the purchase price 2. closing cost/ discount points= Identifies which party is responsible for which closing costs 3. fincancial contingency= Identifies if the purchase of the property is contingent on the buyer obtaining financing

Per the Title and Conveyance paragraph of the TAR Purchase and Sale Agreement, what can the buyer do if the title to the property has defects

1. buyer can accept property with defects 2. buyer can accept the title with defects or require the seller to remedy the defects prior to closing 3. the buyer and seller may mutually agree to extend the closing date and give the seller more time to address any issues with the title

offer and acceptance

- This is also called mutual agreement, or just acceptance. -Offer and acceptance occurs only when there is a meeting of the minds, or when the parties are in complete agreement about the purpose and terms of the contract. - both parties must have clear understanding

what the purpose of final inspection

- To verify that all agreed upon repairs/replacements have been completed -To confirm the property is in the same or better condition than it was on the binding agreement date

the parol evidence rule

- provides that in most cases, a written agreement is the final and comprehensive expression of the parties' agreement, and generally prohibits the introduction of earlier verbal or written statements that contradict, augment, or otherwise change the written contract's terms - prohibiting parties from stating in court that the written contract they signed wasn't really what they intended.

consideration example in a real estate transaction

1. the seller's promise to sell the property to the buyer 2.the earnest money the buyer puts down 3. the property itself

Within ____________ after the binding agreement date, the buyer must provide the seller with written proof that the buyer has available funds to close.

14 days

How many days after the binding agreement date does a buyer have to provide proof of available funds if the buyer has waived the financing contingency?

5

legally competent parties

-has the capacity (legal and mental) to enter into a contract - If a party doesn't have legal capacity and enters into a contract anyway, the contract is voidable -The minor who enters into a contract with an adult to purchase real estate may hold the adult to the contract, but the adult can't legally hold the minor to the contract.

What happens if the title is found to have defects?

-the buyer has the option of accepting the property with defects - requiring the seller to remedy the defects prior to closing. - The buyer and seller may also mutually agree to extend the closing date to give the seller more time to address the any issues with the title.

why is it important that the legal description be written correctly in the sales contract?

It's important to ensure that the legal description is accurate so there's absolutely no doubt as to which property the buyer is purchasing, and which property the seller is conveying. - A mistake in the legal description may lead to more or less land being conveyed to the buyer than was intended.

Reggie has thoroughly reviewed the sales contract with his clients, the Arnolds, and has confirmed that they understand all of the terms and provisions. What should Reggie do next?

Recommend that the Arnolds review the sales contract with an attorney before signing it.

Sandy failed to have the home inspection performed during the time frame specified in the TAR Purchase and Sales Agreement. Based on this information, which of the following statements is true?

Sandy forfeits her right to the inspection and must accept the property as is.

is a promise to be bound by the exact terms made in the offer.

acceptance

Assuming the buyer submitted an earnest money check with the purchase offer, when is the holder required to deposit the check?

as soon as seller accepts the offer

When is the buyer required to deliver the purchase price payment to the seller?

at closing

Carl and Sadie, who are neighbors, got into a disagreement about early-morning noise on the weekends. The two came to an agreement: Carl promised to not mow the lawn before 10 a.m., and Sadie promised to put bark collars on her dogs in the early morning hours. Their promises represent the ______ in their agreement.

consideration

part A of inclusions and exclusions

dentifies items attached or permanently installed and included in sale of property

inclusions and exclusions parts

part A= identifies items attached or permanently installed and included in sale of property part B= identifies items that either the seller wants to include in the sale or that the buyer wants to include in the sale Part C= identifies items the seller wants to retain or that the buyer wants seller to remove Part D= identifies lease items that will remain with property & may or may not be assumed by the buyer

Drew and Hank were camping at Hank's riverfront cabin. Hank told Drew that he rarely used the cabin and was thinking of selling it. Drew said that he'd buy it from Hank for $80,000, which Hank agreed was a fair price. It's two months later, and Hank is upset that Drew now says he won't buy it. Why isn't this contract enforceable?

real estate contracts must be in writting

What's the main point of the statute of frauds?

real estate purchase and sale contracts must be in writing to be enforceable

Offer to purchase, sales agreement, contract of purchase and sale, and purchase agreement are other names for the ______.

sales contract

a law requiring contracts conveying ownership in real property to be in writting to be enforceable

stature of fraud

ou have the right to obtain (and the lender has the option to request) a written report from a Tennessee-licensed pest control company stating that there's no evidence of a current infestation or damage from a current or prior infestation of termites or other wood-destroying insects.

terminate inspection/ Wood Destroying Insect Infestation Inspection Report.

What happens if the seller is unable to remedy the defects by either the closing date or the agreed-upon extension date?

the agreement is terminated, and the buyer is entitled to a refund of the earnest money/trust money

the appraisal contingency is considered satisfied if

the appraised value equals or exceed the purchase price, in which, the buyer does have the option to terminate

who in closing costs pays for loan-related fees, appraisal fees, credit reports, final inspection fees, and insurance fees?

the buyer

who in closing costs transfer taxes and recording fees on deed of conveyance and deed of trust?

the buyer

who sets the closing date?

the buyer

what is the sales contract?

the buyers documented offer to the seller to purchase the home

statute of fraud

the law prevents injury from fraudulent conduct in certain types of agreements, including property transfers. -resolves to ensure that no nonexistent agreement shall be enforced via perjury or fraud

prohibiting parties from stating in court that the written contract they signed wasn't really what they intended.

the parol evidence rule

Who in closing costs pays for deed preparation and notary fees?

the seller

who in closing costs pays for accused or outstanding association dues and fees?

the seller

who in closing costs pays for releases of existing liens?

the seller

Per the TAR Purchase and Sale Agreement, if a buyer elects to accept a property as-is after reviewing the initial inspection reports, which of the following statements is true?

the seller is under no obligation to make repairs

om and Jim are neighbors. Jim wants to buy Tom's rental property. In the contract they sign, Jim is identified only as "the neighbor." Which statute or contract element does this violate?

the statute of frauds

Rex needs to handle some money he acquired during an "unsavory" business deal. He agrees to sign his boat over to his colleague, Ben, if Ben can launder the money and return it to Rex as part of a legal business dealing. What kind of contract do Rex and Ben have?

void contract (A contract for an illegal purpose is void!)

If a party doesn't have legal capacity and enters into a contract anyway, the contract is______________

voidable by the party lacking the capacity.

Sylvia, who's 15 years old, and her neighbor Marge, who's 24, agree that Sylvia will babysit Marge's toddler for the summer for $10 an hour. What type of contract is this?

voidable contract (A voidable contract appears to be valid, but one or both parties have the right to rescind the contract. In this case Sylvia can enforce the contract against Marge but Marge cannot enforce against Sylvia.)

consent

voluntary agreement -consideration may be an exchange of money for a promise, an exchange of an item of value for money, or an agreement between the parties to do or not to do something. One form of valuable consideration seen in a real estate transaction is an earnest money deposit; it's the buyer's consideration to the seller.

express contracts may be ___________ or __________

written or verbal