Georgia Real Estate - Section 12 Unit 1

Statement that the letter is binding

Not Included

What's the purpose of a sales contract?

To document the agreement between a buyer and seller in a real estate sales transaction

A binder creates the framework for the contract and may therefore lack specifics, such as contingencies.

True

As with the sales contract, to be valid a binder must be signed by all parties.

True

Depending on how a binder is drafted, it may or may not be valid and enforceable in court.

True

What makes a binder a valid contract?

It's in writing, signed by all parties, and communicated to the offeror.

Which one of the following statements is true about a sales contract that's been signed by both parties, and both parties have been notified of its acceptance?

It's legally binding contract

When is a letter of intent generally used?

-Purchasing a condominium in a new development -Existing tenant wishes to purchase apartment being converted to a condominium

Under the statute of frauds, which of the following agreements must be in writing?

A real estate sales contract

What is a binder?

A written outline of the sales transaction

Binders create the framework for a contract but may lack specifics, such as ______.

Contingencies

A Licensee's Role in Preparing the Sales Contract in Georgia continued

As a buyer's agent, it's your responsibility to describe the contract provisions, discuss how the contract should be formed, suggest an appropriate price based on comparable sales, and help identify the amount and type of earnest money before your client signs. You should also discuss the options for terms—such as closing date, deadline to respond, and date of possession, as well as any contingencies, like financing, inspection, and appraisal. Again, it is NOT your responsibility, however, to provide legal advice to your client because you're not licensed to practice law (unless, of course, you are). When legal questions arise, advise your client to consult with an attorney. Note: Earnest money is best provided in the form of certified funds. If a buyer wants to provide an earnest money deposit in the form of personal property (such as a diamond bracelet, for example), this is allowed under Georgia law. If a broker does accept personal property to be presented with the offer to the seller, the seller and the buyer should agree regarding the monetary value of that personal property. Since the broker is unable to deposit personal property into an escrow account, but is still responsible to safeguard it, it must be held in a way that's acceptable to the parties. Remember, your role isn't to think for your client, but rather to provide them with pertinent information and defer to their wishes (within the limits of the law, of course). If you aren't acting as an agent, don't offer any advice as to how the offer should be structured.

In a real estate transaction, who decides how much earnest money to offer?

Buyer

A binder must contain all of the essential elements of a contract.

False

In Georgia, only one contract form is used for real estate sales transactions.

False

The Use of Binders and Letters of Intent

In some areas, it's more common for licensees to use a binder—a written outline of the sales transaction—for a real property sale. As with a sales contract, all parties must sign for it to be valid; however, the binder doesn't always contain all of the essential elements of a contract. Binders create the framework for the contract but may lack specifics, such as contingencies. Instead, they often contain a checklist of contingencies and other items. The buyer and seller agree on the purchase price, the down payment, and how the balance will be financed. Binders also state the broker commission and contain an agreement to meet to draw up a formal contract. The term "binder" is often used interchangeably with letter of intent. However, they're slightly different. While a binder creates a legal commitment between two parties, a letter of intent is submitted by someone who wants to buy, sell, lease, develop, or invest, but wants to express intent without creating legal obligation. These letters outline the proposal and express mutual intent, but create no liability or obligation.

Agreed upon price and deposit information

Include

Anticipated closing date

Include

Anticipated construction completion date

Include

Permitted use of unit

Include

Statement that the letter is nonexclusive

Include

Intro to the Sales Contract in Georgia

Keira pulled a copy of the F201 Purchase and Sale Agreement form provided by the Georgia Association of REALTORS® from her file folder and showed it to Donny and Linda. "This is the sales contract normally used in Georgia," she said. "We use other sales contract forms depending on the transaction. You might also hear this sales contract referred to as the offer, purchase contract, purchase agreement, or something else. This is the document we'll use to prepare our offer to the sellers." "That whole thing?" Donny asked. "We're only buying one house, right?" Keira laughed. "I know it's lengthy, but that's because it's a legally binding document—once it's signed by both parties—that describes in detail the agreement between you and the sellers. I'll go over each major section, but I've made copies so you can follow along as I explain the provisions. Stop me if you have any questions along the way. I'll also give you time after we've discussed the form to read it over, to ask any questions before you sign, and, of course, we'll be discussing in detail the terms of our offer. Okay?" With a nod from Donny and Linda, Keira began.

The Use of Binders and Letters of Intent continued

Letters of intent are often used for new construction or conversions where construction is ongoing. With conversions, the letter is a statement from the tenant that he wants to buy the apartment when the conversion is complete. All letters of intent should include: ---The agreed-upon price and deposit, and any reservation deposit that's to be held in escrow. When signing the purchase agreement, the tenant or buyer will make an additional deposit. ---The anticipated construction completion date and the closing date of the transaction. ---The permitted use of the unit (i.e., We don't want you running a daycare out of your unit). ---The fact that the letter of intent is nonexclusive (i.e., I reserve the right to continue to market the unit until we have a signed purchase agreement). Remember that the letter of intent is not binding itself. In fact, it states that right in the letter. However, it does obligate the parties to proceed in good faith. It can cause legal issues if some terms of the letter of intent are binding, and one party doesn't negotiate in good faith.

As Keira explained to her clients, the sales contract goes by many names. Review each of these names and determine if the name is another name for the sales contract or not. Buyer representation agreement

No

As Keira explained to her clients, the sales contract goes by many names. Review each of these names and determine if the name is another name for the sales contract or not. Listing agreement

No

A licensee has thoroughly reviewed the sales contract with his clients and confirmed that they understand all of the terms and provisions. In order to avoid the unauthorized practice of law, what should the licensee do next for his clients?

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

In Georgia, offer to purchase, purchase agreement, and purchase contract are all names for the ______.

Sales contract

Which of the following require that contracts for the sale of real estate be in writing to be enforceable?

Statute of frauds

After completing the sales contract, recommend to the buyer that she review the contract with an attorney before signing it.

Should Do

Describe the provisions of the sales contract to your client and ensure she understands them before she signs the document.

Should Do

Discuss the options for terms and any contingencies with your client as you complete the form.

Should Do

Review each statement about your role in preparing the sales contract and determine if the statement is a 'should do' or a 'should not do.' Confer with your client about how the agreement should be formed and the appropriate price to offer based on the comparable research you've done

Should Do

Review each statement about your role in preparing the sales contract and determine if the statement is a 'should do' or a 'should not do.' With your buyer's input, fill in all of the blanks that apply to this specific transaction and write N/A in those that don't apply

Should Do

Review each statement about your role in preparing the sales contract and determine if the statement is a 'should do' or a 'should not do.' You and the buyer agree that you need to add an addendum to the agreement. You write up the addendum using standard language

Should Do

As you're working through the document, your client asks you for legal advice. As her representative, you feel it's appropriate to provide such advice.

Should Not Do

Review each statement about your role in preparing the sales contract and determine if the statement is a 'should do' or a 'should not do.' A you're going through the sales contract, scratch through and revise some of the wording where the buyer asks you to.

Should Not Do

Review each statement about your role in preparing the sales contract and determine if the statement is a 'should do' or a 'should not do.' Tell your client how much earnest money she should put down to ensure the offer is accepted

Should Not Do

You've been showing properties to Dolly Madison all week and now she wants to buy a unit in a condominium development. The parties have agreed on terms, but Dolly won't have time to sit down and fill out the formal contract for a few days. What can she do instead?

Sign a letter of intent

A Licensee's Role in Preparing the Sales Contract in Georgia

The Statute of frauds states that real estate sales contracts must be in writing and signed by the parties to be enforceable. All the terms of agreement between the parties must be in the sales contract or the attached addenda. If there's a conflict between the written contract and parol evidence (such as a remembered conversation or action by the parties), the written words will take precedent. Remind your clients not to make any verbal promises to, or rely on any verbal promises from the other party. If a seller wasn't truthful about their ownership rights or the condition of the property, or some other fraud was perpetrated in forming the contract, the courts may hold that the contract is unenforceable. When you help a buyer complete the sales contract, use caution to not give legal advice or go beyond filling in the blanks when drafting an addendum by using non-standard language. If you do, you could be found guilty of unauthorized practice of law. Using pre-printed contracts allows you to help the buyer make an accurate offer, and it protects you from inadvertently acting as an attorney by writing your own contract provisions. If there's any room for interpretation, the courts usually rule against the party who prepared the contract. All parties should be given the opportunity to review the contract with their attorneys before signing. Fill in all the blanks in a sales contract, writing "N/A" in the blank for a non-applicable item. Be careful about striking out entire paragraphs so you don't accidentally remove important elements or protections.

What is the sales contract?

The buyer's documented offer to the seller to purchase the home

Is the signed sales contract legally binding?

Yes

Which of the following actions can result in the negation of a sales contract?

The seller wasn't truthful about the condition of the property in the property disclosure form.

Which of the following is true about the sales contract form in Georgia?

There's no one standard form for the sales contract

In which of these situations will a letter of intent most likely be used?

When purchasing a condominium in a proposed condominium development

As Keira explained to her clients, the sales contract goes by many names. Review each of these names and determine if the name is another name for the sales contract or not. Purchase agreement

Yes

As Keira explained to her clients, the sales contract goes by many names. Review each of these names and determine if the name is another name for the sales contract or not. Purchase contract

Yes

As Keira explained to her clients, the sales contract goes by many names. Review each of these names and determine if the name is another name for the sales contract or not. The offer

Yes