unit 10

movement of a sales contract

1. Sign an agency disclosure 2. Sign an offer to purchase 3. Offer submitted to seller 4. Seller counteroffers 5. Buyer acceptance of a counteroffer 6. Inspection of property 7. Contingency released 8. Appraisal and title complete 9. Underwriting complete 10. Closing based on contract

preemptive right

A provision giving a person the first right to purchase real property; most often found in commercial leases.

installment land contract

A real estate sale can be made under an installment land contract, sometimes called a land contract, land sales contract, or contract or agreement for deed. An installment land contract is not only a sales contract but also a financing instrument. The seller agrees to owner financing with some type of installment payment method for the buyer. Under an installment land contract, the seller, also known as the vendor, retains legal title, while the buyer, known as the vendee, secures possession of and an equitable interest in the property. The buyer holds equitable title, and the contract is a cloud on the seller's title. The buyer usually agrees to give the seller a down payment and pay regular monthly installments of principal and interest over a number of years. The buyer also agrees to pay real estate taxes, assessments, homeowner dues, insurance premiums, repairs, and upkeep on the property. While the buyer obtains possession when the contract is signed by both parties, the seller does not execute and deliver a deed to the buyer until the final payment has been made and all the terms of the contract have been satisfied.

agreements for preemptive rights

Agreements for preemptive rights include right of first refusal and right of first opportunity to purchase.

option to purchase or option contract

An agreement between the property owner (optionor) and the possible buyer (optionee), secured by the payment of an option fee, to buy or not buy property within a specific time period at terms that have been negotiated in the underlying contract; also called option to purchase or option contract.

installment land contract

Installment land contract (contract for deed or land contract) is a sales contract and a financing document for owner-financed purchases: The seller's advantages include a tax benefit, earned interest, and selling feature. The buyer can overcome poor credit, and income-producing property can help pay for itself.

brokers can legally

Key Point Review Real estate brokers in North Carolina can legally fill in the blanks on preprinted, standard contract forms. Real estate brokers who are not licensed attorneys may not draft legal contract language for others for compensation (unlawful practice of law): If North Carolina brokers offer preprinted contract forms, they must contain the mandated 19 items enumerated in NCREC Rule A.0012. Brokers' compensation and liability disclaimers are prohibited from inclusion in North Carolina sales contracts. A real estate sales contract is usually accompanied by an earnest money deposit held in trust or escrow account to avoid commingling with broker's own funds, contains contingencies or conditions to the sale (such as property sale contingencies or seller's lienholder's approval for a short sale) that must be stated in the contract, may provide for the purchaser's right to inspect the property during a due diligence period, and includes disclosure forms required by state law or contract terms that must be given, such as the Residential Property and Owners' Association Disclosure Statement. Electronic contracting includes the Uniform Electronic Transactions Act (UETA), which has been adopted in most states and does not require electronic communication, but if it is used, the contract cannot be denied legal effect just because electronic method was used, and the signature cannot be denied legal effect just because it is in electronic format. Communication of offers and acceptance can be oral: includes phone, voice mail, or in person; written: includes traditional, special, and electronic mail; mailbox rule: where placement of signed offer in mail to other party constitutes acceptance; or directed to the party's agent, which is the same as communicating with the principal. Termination of offers occurs if the offeree rejects the offer or creates a counteroffer; if the offer is not accepted by specified time or within reasonable time; if the offeror revokes prior to acceptance; or by death of either party. All offers must be submitted, including multiple offers. Shopping offers is prohibited. The North Carolina REALTORS® Response to Buyer's Offer form rejects the offer and lists desirable contract terms; it does not create a counteroffer; it is created primarily for use with multiple-offer scenarios. In North Carolina, all parties must receive a copy of any legal instrument they sign immediately but no later than three days from execution. Installment land contract (contract for deed or land contract) is a sales contract and a financing document for owner-financed purchases: The seller's advantages include a tax benefit, earned interest, and selling feature. The buyer can overcome poor credit, and income-producing property can help pay for itself. Option to purchase is when the optionee pays an option fee to purchase time to make a decision to purchase on terms in option or renegotiate terms before the option period expires. The seller (optionor) cannot sell property to anyone else during the option period. Agreements for preemptive rights include right of first refusal and right of first opportunity to purchase.

option to purchase

Option to purchase is when the optionee pays an option fee to purchase time to make a decision to purchase on terms in option or renegotiate terms before the option period expires. The seller (optionor) cannot sell property to anyone else during the option period.

response to buyers offer form

The North Carolina REALTORS® Response to Buyer's Offer form rejects the offer and lists desirable contract terms; it does not create a counteroffer; it is created primarily for use with multiple-offer scenarios.

mailbox rule

Traditional, special, or electronic mail are acceptable ways to communicate an offer or an acceptance. If an acceptance is placed into the mail service to the other party or that party's agent, it is considered as having been delivered when mailed, not necessarily when actually received; this is known as the mailbox rule.

All of the following will terminate an offer EXCEPT A) an offer from a third party. B) death of the offeror before acceptance. C) revocation of the offer before acceptance. D) a counteroffer by the offeree.

a

An offer to purchase real estate can be terminated by all of the following reasons EXCEPT A) acceptance of the offer by the offeree after making one change in terms. B) revocation by the offeror communicated to the offeree after acceptance. C) failure to accept the offer within a prescribed period. D) death of the offeror or offeree.

b

The effective date of a sales contract is defined as the date that A) the buyer takes possession of the property. B) notification of acceptance is given to the other party. C) the contract parties meet to transfer title. D) the last party to the transaction signs the offer.

b

Which of the following statements is/are TRUE when an offer to purchase has been signed by the buyer and then given to the seller's broker with an earnest money deposit check for the seller to consider? The earnest money check must be deposited immediately into the listing firm's trust account. If the buyer withdraws the offer before it is accepted by the seller, the earnest money will be forfeited. A) II only B) Neither I nor II C) I only D) Both I and II

b

A broker presented a written offer to a seller on behalf of a prospective buyer. The seller changed the offer amount from $142,000 to $142,800, initialed and dated the change, and signed the offer. This action by the seller was A) a partial acceptance of the buyer's offer. B) a qualified acceptance of the buyer's offer. C) a new offer by the seller. D) an illegal counter offer.

c

During the due diligence period in the NCBA/NCAR 2-T Offer to Purchase and Contract, the buyer did not receive final loan approval but chose not to terminate the contract based on favorable communications from the lender. A week before closing, the buyer's loan application is denied. If the buyer terminates the contract at this point, the buyer A) will receive a refund of the earnest money and the due diligence fee. B) will receive a refund of the earnest money, because the termination was related to financing. C) will forfeit the earnest money deposit, because it would be a buyer breach. D) can be sued by the seller for specific performance.

c

If a broker receives a due diligence fee from a buyer under the North Carolina standard offer to purchase and contract, when can the seller receive the fee? A) At the settlement meeting B) When the offer is presented to the seller C) When a contract is created between the seller and the buyer D) After the deed is recorded

c

Per the NCBA/NCAR 2-T Offer to Purchase and Contract, if the seller commits a material breach and the buyer elects to terminate the contract, the buyer is entitled to A) a refund of any earnest money only. B) nothing more than contract termination. C) a refund of paid earnest money, due diligence fee, and all reasonable costs of the buyer's due diligence. D) a refund of any earnest money and due diligence fee.

c

A broker is preparing an offer for a buyer he represents as an exclusive agent. The buyer wants to make certain there is a clear acceptance deadline for the offer. To accomplish this, the broker should A) use the Contingent Sale Addendum to define the time frames. B) write an addendum and attach it to the Offer to Purchase and Contract (NCAR/NCBA). C) add the time frame to the signature section of the offer. D) use a preprinted form that defines the time frame for acceptance.

d

A land contract provides for A) the sale of unimproved land only. B) the immediate transfer of reversionary rights. C) the sale of real property under an option agreement. D) the conveyance of legal title at a future date.

d

In real estate, an option to purchase contract and the option fee are used to A) allow a buyer a period of time to complete due diligence and negotiate the price, terms, and full-option fees. B) create a bilateral contract allowing both parties time to negotiate price, terms, fees, and closing date. C) give the optionee notice and the first right to buy if the seller decides to sell. D) compensate the seller for holding the property for the buyer while the buyer has the choice to terminate or proceed with the sale within the option period.

d

To sell his property the seller has entered into a contract. While the sale is pending, the listing agent receives another offer to purchase the property from a different firm. Which of the following statements is TRUE? A) The listing agent has to present this offer only if its terms are better than the terms of the pending sale. B) The listing agent must tell the offeror that offers are prohibited while a sale is pending. C) The listing agent does not have to present this offer to the seller. D) The listing agent must present this offer to the seller.

d

Under the NCBA/NCAR 2-T Offer to Purchase and Contract, which of the following BEST describes the due diligence fee? A) Purchase price deposit B) Good-faith money C) Liquidated damages D) Legal consideration

d

Which of the following is TRUE about an installment land contract? A) The seller delivers a deed to the buyer. B) The seller delivers legal title to the buyer at settlement. C) The buyer obtains a mortgage loan from a traditional lender. D) The buyer is given immediate possession and use of the property.

d

The original offer can be revived if there is a counteroffer. True False

f

When a buyer has an option contract, he must purchase the property within a certain period of time. True False

f

termination occurs

if the offeree rejects the offer or creates a counteroffer; if the offer is not accepted by specified time or within reasonable time; if the offeror revokes prior to acceptance; or by death of either party.

a real estate sales contract

is usually accompanied by an earnest money deposit held in trust or escrow account to avoid commingling with broker's own funds, contains contingencies or conditions to the sale (such as property sale contingencies or seller's lienholder's approval for a short sale) that must be stated in the contract, may provide for the purchaser's right to inspect the property during a due diligence period, and includes disclosure forms required by state law or contract terms that must be given, such as the Residential Property and Owners' Association Disclosure Statement. Electronic contracting includes the Uniform Electronic Transactions Act (UETA), which has been adopted in most states and does not require electronic communication, but if it is used, the contract cannot be denied legal effect just because electronic method was used, and the signature cannot be denied legal effect just because it is in electronic format.

communication of offers and acceptance can be

oral: includes phone, voice mail, or in person; written: includes traditional, special, and electronic mail; mailbox rule: where placement of signed offer in mail to other party constitutes acceptance; or directed to the party's agent, which is the same as communicating with the principal.

right of first opportunity to purchase

right of first opportunity to purchase The right of a party to have the first opportunity to purchase or lease real estate for a designated price, if the owner ever decides to sell or lease; if the holder of the right does not opt to purchase, the owner may sell to a third party within a specified time. If sale to third party does not occur, the right is still valid and process restarts.

right of first refusal

right of first refusal The right of a person to have the first opportunity to either purchase or lease real property, if the owner ever decides to sell or lease; no terms are negotiated.

An installment contract can be advantageous to the seller for tax reasons. True False

t

Contracts can be created by such electronic means as emails. True False

t

The term time is of the essence is used to characterize the due diligence date and time in the 2-T contract form. True False

t

The terms sales contract, offer to purchase, and buy-sell agreement are synonymous. True False

t