Real Estate 29
Sellers must disclose what types of information?
-Additions or alterations to the structure. -Approximate age of the HVAC system. -Potential issues with the plumbing system.
under certain circumstances either the buyer or the seller may unilaterally extend the closing date up to how many days?
8 days
under certain circumstances, either the buyer or the seller may unilaterally extend the closing date by up to how many days?
8 days
A collateral contract is an agreement associated as a second, or side contract made between the original parties, or between a third party and an original party.
A collateral contract is an agreement associated as a second, or side contract made between the original parties, or between a third party and an original party.
A contract may be terminated if left open longer than the statute of limitations prescribes.
A contract may be terminated if left open longer than the statute of limitations prescribes.
What is contingency?
A term in the contract that is required to happen before there can be a closing.
Sam is selling his real estate. He puts in the contract that there are no liens or claims against the property. What is this called?
A warranty.
According to the statute of frauds, a contract for the sale of items greater than $500 must be in writing.
According to the statute of frauds, a contract for the sale of items greater than $500 must be in writing.
Sara is selling her real estate. She signs one real estate contract with Bill dated May 1 for $350,000, and one real estate contract with Brad dated May 2 for $400,000. Which contract will be enforced?
Bill, May 1, because it was signed first.
What is usually the result of a situation of impossibility of performance of a contract?
Both parties go their separate ways in the condition before the contract was signed.
Who must sign an amendment for it to be valid?
Both parties.
Sally enters into a contract with Brad to sell her real estate. The purchase price is $100,000. But Brad pays only $50,000 and promises to pay the other $50,000 10 days after the closing. Sally conveys the property, but Brad does not make the payment. What kind of damages is she entitled to?
Compensatory damages for the balance of the purchase price.
What is performance of a real estate contract?
Completing the undertaking and conveyance contemplated by the contract.
Extrinsic evidence is evidence that relates to a contract, but is not contained within the document itself (for example, circumstances surrounding the negotiations of the contract).
Extrinsic evidence is evidence that relates to a contract, but is not contained within the document itself (for example, circumstances surrounding the negotiations of the contract).
How can the insurance contingency cause a contract to be canceled?
If the buyer cannot obtain title insurance because of a defect in the title, the contract can be canceled.
Under what circumstances could a seller be entitled to compensatory damages?
If the buyer causes damage to his property.
Under what circumstances could a buyer be entitled to compensatory damages?
If there is damage to the property that is discovered after the closing.
Why is the contract date significant?
It gives a reference for deadlines.
Liquidated damages are presented in certain legal contracts as an estimate of otherwise intangible or hard-to-define losses to one of the parties. It is a provision that allows for the payment of a specified sum should one of the parties be in breach of contract.
Liquidated damages are presented in certain legal contracts as an estimate of otherwise intangible or hard-to-define losses to one of the parties. It is a provision that allows for the payment of a specified sum should one of the parties be in breach of contract.
Can an oral mortgage contract be enforced?
No, it must be in writing
can an oral mortgage contract be enforced?
No, it must be in writing
Brian and Seth ask Licensee Larry to help them draft their real estate contract. Seth asks Lenny about what would happen if he cancels the contract before the closing. Larry tells him that he could get sued or may have to pay money. Was this a legal exercise of the licensee's job?
No, it's the unauthorized practice of law to give legal advice.
Brian offers Sam $200,000 for his property in a written document. The document also has the names of the parties, the address of the property, the price, and the closing date. Sam has not signed it. Is this a valid contract?
No. There hasn't been acceptance.
Stan is selling his real estate to Brian pursuant to a real estate contract. Brian's attorney examines the title and finds that there is an easement on the property that will not allow it to be sold and used for the purpose that Brian needs. The contract allows Brian to back out of the contract if there is a significant title problem. What remedy is available to the seller?
None. The contract will be canceled for impossibility and contingency.
When can a contract terminate by the passage of time?
Operation of law through the statute of limitations.
Section 14 states who is authorized to occupy and use the property under this lease agreement. This exhibit form should be used only for leases of residential real estate for residential purposes only, and every adult who will live on the premises must be listed in section 14.
Section 14 states who is authorized to occupy and use the property under this lease agreement. This exhibit form should be used only for leases of residential real estate for residential purposes only, and every adult who will live on the premises must be listed in section 14.
every adult who will occupy property subject to a Georgia "lease for lease" agreement should be listed in this section of the agreement:
Section 14: Use
What is the purpose of an inspection period?
So the buyer can physically examine the property and the title for defects.
Sometimes, sellers in Georgia and prospective purchasers enter into both purchase agreements and lease agreements at the same time. There are several potential reasons for doing so, but the most common reason relates to financing. Sometimes, a prospective buyer is not able to obtain a mortgage loan right away but intends to do so, and believes he or she will be able to secure financing at a later date. A seller might agree to enter into a lease agreement with the buyer either having the obligation or the right to purchase the property at the end of the lease term.
Sometimes, sellers in Georgia and prospective purchasers enter into both purchase agreements and lease agreements at the same time. There are several potential reasons for doing so, but the most common reason relates to financing. Sometimes, a prospective buyer is not able to obtain a mortgage loan right away but intends to do so, and believes he or she will be able to secure financing at a later date. A seller might agree to enter into a lease agreement with the buyer either having the obligation or the right to purchase the property at the end of the lease term.
Jim is a seller on a real estate contract, and Bill is the buyer. Jim receives the purchase price from Bill, and Jim hands Bill a deed for the real estate, but Jim did not sign it. What remedy is available to Bill?
Specific performance to sign the deed. The parties clearly wanted the transaction to go forward
A seller is selling his real estate to a buyer. The purchase price is $200,000. The buyer gives the seller $100,000 with the promise to give the rest to the seller the next day. The seller gives the buyer the deed. However, the buyer never makes the second payment. What remedy is available to the seller?
Specific performance, getting an order from the court, forcing the buyer to pay the rest of the money.
when a contract is canceled by court order, what is this called?
Termination by operation of law.
The LOI includes the basic terms of the agreement, including the offer price. The information in the LOI will later be transferred to the sales contract once all of the terms are agreed upon by both parties.
The LOI includes the basic terms of the agreement, including the offer price. The information in the LOI will later be transferred to the sales contract once all of the terms are agreed upon by both parties.
If a party goes into bankruptcy after a contract is signed but not fully performed, what is likely to happen?
The bankruptcy trustee cancels the contract by operation of law.
what is contained in a letter of intent?
The basic terms of the real estate contract.
Who are the parties usually listed at the beginning of the contract?
The buyer and seller.
what is an example of a buyer default?
The buyer goes into bankruptcy.
what is the result when a contract is terminated?
The contract is void and has no legal affect.
Under termination, what happens to the earnest money?
The earnest money goes back to the buyer.
The effective date of contract is very important since deadlines in the contract will be made in reference to this date. For example, the inspection period ends 14 days after the effective date of contract.
The effective date of contract is very important since deadlines in the contract will be made in reference to this date. For example, the inspection period ends 14 days after the effective date of contract.
What is usually included with the purchase price in the real estate contract?
The payment terms, whether cash or mortgage.
The purpose of the parol evidence rule is to prevent a party from introducing evidence of prior oral agreements that occurred before or while the agreement was being reduced to its final form in order to alter the terms of the existing contract.
The purpose of the parol evidence rule is to prevent a party from introducing evidence of prior oral agreements that occurred before or while the agreement was being reduced to its final form in order to alter the terms of the existing contract.
Which of the following parties is permitted to draft a real estate contract...?
The seller's attorney, The buyer's attorney, The buyer and seller together.
The buyer and seller of a house are having a dispute about whether furniture would stay with the property after the sale. The real estate contract says that the furniture leaves with the seller, but the buyer has a letter dated after the contract was signed that says he gets the furniture. Who should prevail?
The seller. It's written in the contract.
The statute of limitations will prescribe when legal action can no longer be pursued. Until that date, the non-breaching party can sue the breaching party.
The statute of limitations will prescribe when legal action can no longer be pursued. Until that date, the non-breaching party can sue the breaching party.
Bret is the buyer on a real estate contract. He's obligated to pay $100,000 to buy a new home. However, for other reasons, Bret goes into bankruptcy. What will likely happen to the contract?
The trustee will terminate the contract by operation of law.
Two of the most common contract contingencies include a mortgage contingency and an inspection contingency. In a mortgage contingency, the buyer must be able to receive financing under specified terms, otherwise, they may back out of the contract and get their earnest money back.
Two of the most common contract contingencies include a mortgage contingency and an inspection contingency. In a mortgage contingency, the buyer must be able to receive financing under specified terms, otherwise, they may back out of the contract and get their earnest money back.
How long can a party wait to sue for breach of contract?
Up until the statute of limitations
how is the property identified in the contract?
Using a legal description
what is a collateral contract?
a contract to make another contract
what would trigger specific performance>
a court order
what would trigger specific performance?
a court order
what is an amendment?
a document that changes the term of the contract
what is required to obtain liquidated damages?
a liquidated damages clause in the contract
amy is a real estate agent representing the buyer. what type of inspection period should she negotiate for her client?
a long inspection period that allows the buyer to cancel the contract if anything is wrong
What is the statute of frauds?
a state law that says real estate contracts must be in writing
What is an addendum?
additional information added on to the end of the contract
what is the best practice for a licensee when a real estate transaction runs into problems?
advise the parties to seek an attorney and step away from the transaction
an agent could have their license suspended or revoked. they may also have to pay a fine
an agent could have their license suspended or revoked. they may also have to pay a fine
condition precedent
an event or state of affairs that is required before something else will occur
what is specific performance?
an order from the court to complete a term of the contract
if Sally sellers her real estate to Ben on August 15, but the electric bill does not come until August 30, how can this be handled in the real estate contract
ben can pay 1/2 of the electric bill to sally and she can pay the whole thing
who must sign the amendment for it to be valid?
both parties
what is usually the result of a situation of impossibility of performance of a contract?
both parties go their separate ways in the condition before the contract was signed.
what is the benefit of listing personal property in the real estate contract?
both parties know exactly what stays with the property after closing
what must happen for a contract to be binding?
both sides have to agree to all of the terms
how is the amount of earnest money set?
by negotiation of the parties
section d of the seller's property disclosure statement exhibit includes a list of possible fixtures that could be present on the property and included int he sale. what is not likely to be included?
coffee maker
what is not a basic piece of basic property information found in section A of the standard GA "purchase and sale agreement"?
color of the house
Eddie bought real estate from Gil. Eddie did an inspection of the property and Gil provided a list of disclosures. But a week after closing when Eddie moved into the property, he found that under a carpet was a huge crack in the floor. What type of damages can Eddie claim?
compensatory damages
Jess is interested in buying Sam's real estate. They enter into a contract. The contract allows Jess to inspect the property. While inspecting the property, Jess damages a water pipe and causes $10,000 damage to the house. What type of damages can Sam claim?
compensatory damages
what are two types of damages generally available for breach of contract?
compensatory damages and liquidated damages
compensatory damages are awarded in civil court cases where loss has occurred as a result of negligence or unlawful conduct of another party
compensatory damages are awarded in civil court cases where loss has occurred as a result of negligence or unlawful conduct of another party
Gary is selling his real estate. There are numerous liens on the property because Gary is really bad about paying his debts. Deb wants to buy the property and demands that Gary pay off the liens before title passes. What is this called?
condition precedent
when does the statute of frauds apply?
contracts for an interest in real property
what are the public policy grounds for making specific performance a rare remedy?
courts do not want to force people into transactions that they do not want to join in, if there is a monetary remedy available
what are the public grounds for making specific performance a rare remedy?
courts do not want to fore people into transactions that they do not want to join in, if there is a monetary remedy available
what are liquidated damages meant to cover
damages that cannot easily be calculated, like a lost sale
what are liquidated damages meant to cover?
damages that cannot easily be calculated, like a lost sale
what prevents the buyer from backing out of a real estate contract?
earnest money
what is extrinsic evidence?
existence outside of the contract itself
what is the parol evidence rule?
extrinsic evidence
what is the parole evidence rule?
extrinsic evidence
an FHA Loan Contingency Exhibit is required when a real estate transaction depends on a buyer being approved for what type of mortgage loan?
federal housing administration loan
If the escrow agent cannot determine who gets the earnest money, what can he do?
file an interpleader case in court and let a judge decide
if the escrow agent cannot determine who gets the earnest money, what can he do?
file an interpleader case in court and let a judge decide
when ca extrinsic evidence be used in court?
if there is an ambiguity within the contract itself
when can extrinsic evidence be used in court?
if there is an ambiguity withing the contract itself
a buyer and a seller enter into a real estate contract. three days before closing the burns down. what is this called?
impossibility of performance
for a real estate contract to be valid, it must be---?
in writing
what is not a type of closing cost covered under item 4 of the "option agreement to purchase leased property"?
inspection fees
why is the contract date significant?
it gives a reference for deadlines
what happens to earnest money after the closing is completed?
it goes to the seller and is part of the purchase price
When novation brings about a new contract, what happens to the original contract?
it is terminated
if any structure on the property was constructed before 1978, the seller must complete and attach this separate exhibit with the Purchase and Sale Agreement
lead based paint exhibit
if any structure on the property was constructed before 1978, the seller must complete and attach this separate exhibit with the purchase and sales agreement.
lead based paint exhibit
what is LOI
letter of Intent
alex and millet enter into a contract for miller to buy alex's house. the contract allows for miller to obtain a mortgage at 5% interest. however, after due effort, miller can only get a mortgage at 6% interest. he backs out of the contract. does alex have a claim for damages against miller?
likely not. this is a mortgage contingency
Shaun enters into a contract with Bill to sell his real estate. Bill paid $5,000 as an earnest money deposit to an escrow agent. Bill has decided not to continue with the closing and refuses to buy the property. Simple refusal is not permitted by the contract. What type of damages can Shaun claim?
liquidated damages of the earnest money
what is required for a valid contract?
meeting of the minds
what is required to have a valid contract? -meeting of the minds -at least $100K -a third party witness -an elaborate public signing ceremony
meeting of the minds
Bill is selling his real estate to Sam. Bill receives a higher offer, and Sam finds a more suitable property. What can they do about the contract?
mutual termination by agreement
Jimmy and Clyde enter into a contract for $100,000 of car parts by handshake. Is this a valid, enforceable contract?
no it must be in writing
Super Corp is selling real estate to Jim. The secretary of Super Corp was appointed by the Board of Directors to sign the deed on behalf of the corporation. The secretary signed the deed, but didn't affix the corporate seal. The state has a law that says all deeds from a corporation must have a corporate seal. Has there been full performance?
no the corporate seal must be added to the deed
Brian and Sam write a real estate contract and include every term of the agreement, except for the purchase price, which they agree to orally. Is this a valid real estate contract?
no there must be a price
a seller sells real estate to a buyer. according to the real estate contract, the seller was required to pay off all liens prior to closing. the closing is completed the buyer has the deed and the seller has the money. has there been full performance?
no this is partial performance. because of the seller's outstanding liens
Bill and Stan make an agreement for Bill to buy Stan's real estate. They shake hands on the deal. Is this a valid contract?
no, a real estate contract must be in writing?
a buyer and seller sign a real estate contract. the buyer pays the purchase price, and the seller conveys the property to the buyer by deed. three weeks after the closing, there is a tornado that destroys the real estate. the buyer is claiming that the seller made partial performance because he does not have the property anymore. will this claim succeed?
no. there was full performance, and the seller is no longer liable under the contract
brad offers seth $150K for his real estate. seth writes back that he'll take $160K. have they formed a binding contract?
no. there was no meeting of the minds
In the case of impossibility of performance, what remedy is available to the seller? -None of the answer choices apply. -The seller sues for specific performance forcing the sale. -The seller gets 1/2 of the purchase price from the buyer. -The closing attorney's insurance must pay the seller damages.
none of the answer choices apply
a buyer and seller enters into a real estate contract for the purchase and sale of 123 maple street. however the seller does not own 123 maple street. the seller cancels the closings. what remedy does the buyer have?
none. this is a situation of impossibility of performance
jerry enters into a contract to sell his house, 500 jones street, to cam. but cam sees another property, 123 main street, that is also owned by jerry. the parties agree to change the subject real estate of the contract and sign the appropriate documents. what is this called?
novation
what is the most likely contributing factor to the length of the average real estate purchase agreement?
numerous lawsuits over the years about each issue
when can a contract terminate by the passage of time?
operation of law through the statute of limitations
If the buyer pays the seller the purchase price for real estate pursuant to a real estate contract, but the seller does not give the buyer a deed to the property, what is this considered?
partial performance
what does the buyer usually require the seller to do before closing?
pay off liens
what is the purpose of the option payment under the "option agreement to purchase leased property"?
payment for the tenant's right to potentially buy the property in the future
If a bankruptcy is discharged, what happens to payment obligations under a contract?
payment obligations are canceled
what are basic pieces of property information found in section A of the standard ga "purchase and sale agreement"?
property street address. mls number, legal description as recorded with the county
Who usually negotiates real estate contracts?
real estate agents
if the seller is a real estate contract fails to appear for the closing and has not taken any of the purchase price, wat remedy is available to the buyer?
receiving a refund of earnest money
what would happen to a party that does not follow a court order for specific performance?
sanctions fromt he court or imprisonment
Georgia Lease for lease agreement
section 1: address, Section 2: timeframe, Section 3: Rent
what must be given in exchange for a contract being signed?
something of value
a seller is selling his real estate to a buyer. the purchase price is $200,000. the buyer gives the seller $100,000 with the promise to give the rest of the seller the next day. the seller gives the buyer the deed. however, the buyer never makes the second payment. what remedy is available to the seller?
specific performance getting an order from the court, forcing the buyer to pay the rest of the money.
what is usually included in section d of the "seller's property disclosure statement exhibit"?
stove, refrigerator, water heater, microwave etc
what penalties could a licensee face for unauthorized practice of law.
suspension or loss of their license
what penalties could a licensee face for unauthorized practice of law?
suspension or loss of their license
partial performance of a contract can result in forced specific performance or ---
termination
partial performance of a contract can result in forced specific performance or --?
termination
Jim and Evan enter into a real estate contract. The contract allows Evan to get a mortgage at 5% interest. But after due diligence, Evan can only get a mortgage at 8% interest. What will happen to the real estate contract?
termination by contingency
what is the name of the process when a contract is canceled by both parties
termination by mutual agreement
what is the name of the process when a contract is canceled by both parties?
termination by mutual agreement
what is contained int eh letter of intent?
the basic terms of the real estate contract
what is an example of impossibility because of contingency?
the buyer is unable to get a mortgage consistent with the terms of the real estate contract
what is the most common reason a property owner might enter into a "lease for lease" agreement with a prospective buyer?
the buyer is unable to secure financing but believes he or she will be able to get a mortgage at a later date
what usually comes first in the real estate contract negotiation process?
the buyer makes an offer to the seller
Eddie and Sue enter into a real estate contract. But because of an unlimited inspection period, the transaction does not close for five years. Sue files suit against Eddie to complete the transaction. But the state has a law that says contracts are enforceable for only 4 years. What is the result?
the contract is terminated by operation of law, statute of limitations
Jim is selling his real estate to Wayne. The contract allows Wayne to have a 30 day inspection period to include a physical inspection of the real estate. Jim will not let Wayne go onto the real estate, but demands that Wayne complete the closing and pay anyway. Wayne files a lawsuit against Jim. What is the most likely result?
the court will cancel the contract by operation of law
Ben has a real estate contract where he is the buyer. He pays $1,000 earnest money to be held by the closing attorney. The real estate contract says that the closing will go forward if Ben can get a mortgage at 5% interest. After due effort, he can only get a mortgage at 8% interest. What happens to the earnest money?
the earnest money goes back to the buyer
under termination, what happens to the earnest money?
the earnest money goes back to the buyer
who typically pays real estate broker commission sunder a Georgia "Purchase and Sale Agreement
the seller
who typically pays real estate brokerage commissions under a Georgia "Purchase and Sale Agreement"?
the seller
what happens when the buyer cancels the contract without cause?
the seller gets to keep the earnest money
if the buyer on a real estate contract refuses to close for no valid reason allowed by the contract, what remedy is available tot he seller?
the seller gets to keep the earnest money as damages
the seller should deliver the property free and clear of any encumbrances, this includes a mortgage lien
the seller should deliver the property free and clear of any encumbrances, this includes a mortgage lien
if there has been full performance of a real estate contract, what is the end result?
the seller will have the purchase price and the buyer title to the real estate
i there has been full performance of a real estate contract, what is the end result?
the seller will have the purchase price and the buyer will have the title to the real estate
Bret is the buyer on a real estate contract. he's obligated to pay $100,000 to buy a new home. however, for the reasons, Bret goes into bankruptcy. what will likely happen to the contract?
the trustee will terminate the contract by operation of law
If a licensee provides legal advice to their client, they may be guilty of...?
the unauthorized practice of law
Marcus is a real estate agent who represents the seller in a transaction. If Marcus provides legal advice to the seller, he may be guilty of...?
the unauthorized practice of law
marcus is a real estate agent who represents the seller in a transaction. if marcus provides legal advice to the seller, he may be guilty of---?
the unauthorized practice of law
how could a corporation sign a real estate contract?
through an agent appointed by the corporation, usually a corporate officer
what is not one of the seller's responsibilities under the "Seller's Property Disclosure Statement Exhibit"?
to hire home inspectors to complete the disclosure statement
what is not one of the seller's responsibilities under the "seller's property disclosure statement exhibit"?
to hire home inspectors to complete the disclosure statement
what is the primary purpose of the "Seller's Property Disclosure Statement Exhibit"?
to make buyers aware of any potential defect in the property that the seller knows about
what is the primary purpose of the "seller's property disclosure statement exhibit"?
to make buyers aware of any potential defect in the property that the seller knows about
FHA loans require borrowers to purchase mortgage insurance, what is the purpose of this requirement?
to protect the lender in case the borrower defaults on the loan
what items are covered by closing costs in item 4 in the "option agreement to purchase leased property"?
transfer taxes, title search fees, prorated association fees
T/F If, during the due diligence/inspection period, the buyer discovers something material and wants to cancel the Purchase and Sale Agreement, they can do so without penalty.
true
how long can a party wait to sue for breach of contract
up until the statute of frauds
Who holds the earnest money?
usually the closing attorney
who holds the earnest money?
usually the closing attorney
Amy is representing the buyer as a real estate agent. What type of warranties will she want in the contract for the benefit of her client?
warranties that guarantee as must about the good condition of the property and title as possible
what is novation
when a contract is replaced with another between the parties of the contract is materially changed.
what is partial performance?
when one or both parties do not complete all of the requirements of the contract
what is proration?
when part of an expense related to the property is divided by the buyer and seller based on the closing date?
what is an example of termination by contingency?
when the buyer is unable to obtain a mortgage as stated in the contract and the contract is canceled.
What is impossibility of performance?
when the contract be performed because of an event beyond the control of the parties.
When do damages usually occur in a real estate closing?
when the real estate contract is breached
what is a counteroffer?
when the seller does not agree with the buyer's offer and makes an offer of their own
If a person orders a 50-inch television for $1,000 from Best Buy by written contract, but Best Buy delivers a 40-inch TV, is there an enforceable contract?
yes
buyer and seller enter into a real estate contract. seller has paid off all liens, buyer has paid the purchase price, seller has signed the deed and handed over the deed to the buyer. has there been full performance?
yes
can a real estate attorney draft a real estate contract?
yes attorneys can draft any type of contract
Can a buyer and a seller prepare their own real estate contract?
yes but it is not advisable
in theory can a real estate contract be written on a napkin?
yes if all the required terms are there
Abe offers Cal $100,000 for his real estate in a contract. Cal demands $150,000 in his own contract. Abe is willing to pay $125,000. Can he make another offer?
yes there can be unlimited counteroffers
how are compensatory damages generally limited in contract cases?
you cannot claim damages for emotional distress