Unit 10: Sales Contracts and Practices

mailbox rule

A rule of law stating that once written acceptance is placed in control of the mailing service, and out of the control of the offeree, it is considered accepted - not when the acceptance letter is actually received by the offeror

option

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 i the underlying contract

backup offer

An offer submitted to the property owner with knowledge that the owner is already under contract; a secondary offer

installment land contract

A contract for the sale of real estate financed by the seller whereby the purchase price is paid in periodic installments by the purchaser, who is in possession of the property even though legal title is retained by the seller until a further date, which may not be until final payment.

NCBA/NCAR 2-T Offer to Purchase and Contract (OPC)

A form often used by REALTOR/licensees and/or North Carolina attorneys to establish a legally binding agreement between the buyer and seller concerning the terms of purchase or transfer of residential real property

acceptance

Expression of intent by the offeree to be bound bound by the terms of the offer; must be in writing if the contract pertains to real property. Acceptance must be communicated to the opposite party to create a contract.

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

False - A buyer in an option has the choice to purchase or not purchase the property. However, if the buyer decides to purchase, the seller is bound to sell.

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

False - If there is a counteroffer, the original offer cannot be revived. It has been rejected and no longer exists.

The 2-T Offer to Purchase and Contract states that large-screen TVs and draperies are fixtures.

False - The items are considered personal property, under this contract. The TV brackets and the drapery rods are, however, fixtures.

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

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 offer becomes a binding contract when the offeree accepts the exact terms and conditions of the offer and the acceptance is properly communicated back to the offeror.

True - Acceptance occurs when the offeree signs the offer without making any changes to it. If the acceptance is properly communicated back to the offeror, a binding contract is formed.

Contracts can be created by such electronic means as emails.

True - The Uniform Electronic Transactions Act (UETA) states that electronic methods, such as email, faxes, and DocuSign can create valid contracts.

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

True - These terms, as well as offer to purchase and contract and earnest money deposit, all refer to the same thing.

preemptive right

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

optionor

generally a property owner

optionee

prospective purchaser or lessee

Uniform Electronic Transaction Act (UETA)

North Carolina version of the federal E-sign legislation that validates electronic contracts, documents, and signatures

due diligence

(1) a buyer's investigative process of having experts inspect the property, examine title, and review any leases to determine if the property meets the buyer's needs and if buyer wishes to proceed with the purchase. During the "due diligence period" the buyer can terminate the purchase contract for any reason or no reason; (2) a licensee's affirmative duty to discover and disclose any any material facts about the property in question.

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

True - There is an income tax benefit that comes from receiving the sales price in installments over a time period rather than in a lump sum.

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

True - Time is of the essence is a term to denote strict adherence to a deadline. The due diligence date in the 2-T contract form is characterized by time is of the essence.

contingency

a provision in a contract that requires a certain act to be done or a certain event to occur before the contract becomes binding; a condition of the contract