15hr real estate contracts
One thing you should ask any buyer prior to showing a property is
Are you working with another agent
Insurance and indemnity
A landlord isn't required to specify the amount of insurance carried on the building Indemnity provisions in the lead usually require that a tenant pay (indemnify ) a landlord for damages in the event a claim is filed against the landlord
What is meant by "reasonable time"
A time frame is left to the interpretation of the parties as to when all contractual obligations are to be met
Why is a home inspection recommended?
It gives the buyer a snapshot in time of the home's condition.
What happens to an initial offer from the buyer after a seller counters?
It's no longer in play
What's one of the most fundamental of all fiduciary duties and is the one that underlines all other duties
Loyalty
Agency disclosure form
Must always be given in written form
What options does the buyer have once an inspection reports repairs needed?
Negotiate a reduction in sales price Agree to go forward anyway without repairs fixed Back out of the sale
Reasons to counter
Price Closing date Earnest money amount Inspection period and length Contingencies
Main purpose of a buyer representation you should keep in mind?
Building trust with potential clients
Who wouldn't need to request a title contingency
Buyer paying cash transaction
Lease terms
Estate at sufferance- a holdover tenant (someone who didn't leave when the lease expired) has this kind of possession Estate at will- a lease without an established time period Periodic estate- a lease that ends but will automatically renew for another year Estate for years- a lease that ends on a specific date
The listing agreement should contain:
Expiration date Signatures of all parties Marketing permission
How you qualify a buyer depends on large measure on how the buyer
Found you
Why might you opt out of working with a buyer unless you're working under an agency agreement?
Having an agency agreement allows you to represent the buyer's interests.
Residential resale contract
Used when the buyer purchases a residential property that's already had at least one other owner
Seller clients want to keep washer and dryer. How should counter offer be written?
Washer and dryer are excluded from sale
Qualifying questions
Where do you currently live When are you looking to buy How did you hear about me Qualifying questions can't include anything that relates to a federally protected class (children, Marriage)
Lessee lessor
tenant- lessee Landlord- lessor
What's the purpose of contract addendum?
Supplements information in the contract
If the buyer can't get a loan commitment by the deadline the parties have some options they can
Terminate the contract Sign a written mutual agreement to proceed with the transaction
Which section/part makes the contract valid through the offer?
Terms of the contract
What best describes a sales contract
The buyers documented offer to the seller to purchase the home
Sales contract other names
The offer Offer to purchase Contract of purchase and sale Purchase agreement
Which section contains the consideration?
The property price
Seller considerations with contingency's
The sale can take longer than a regular sale The house may be on the market longer
Jacqueline found a ready, willing, and able buyer for her client's condo, with a sales price of $20,000 more than the asking price. However, the appraisal came in just under the asking price. Which number will the lender use to calculate the loan-to-value ratio?
The smaller number Lenders use the lesser of the sales price and appraised value.
What is a common factor of a sales contingency?
The transaction can't close until after the buyers current home sells The seller has the freedom to market and show the property to others If another offer comes in the current buyer has 24 hours to decide whether they will remove the contingency and proceed with the purchase
What isn't considered a valid reason to add an addendum?
There's a new buyer
Structuring offers
Don't ask "what do your clients want" instead ask "what's important to your clients?" Do you want to close sooner or later? Would a rent back help them?
Unilateral contracts
In a unilateral contracts only one person is obligated to act
Where are underground storage tanks primarily found?
In older homes and former industrial sites
Acceptance offers?
Until an offer to purchase has been signed and delivered per the deadlines and delivery methods outlined in the contract it's considered invalid
Which three does a contingency normally include?
A deadline for a removal of the condition Who is responsible for the accompanying actions or costs involved The actions necessary to remove the condition
Elements required in buyer representation agreement
A description of the property the buyer seeks Method and timing of the brokers compensation The buyer and agents obligations to each other under the agreement
Lease
A lease is both a conveyance and a contractor
True about land contracts?
Buyer advantages include lower down payments and closing costs more flexible financing criteria and a chance to improve the buyers credit score Also known as contract for deed The buyer makes payments directly to the seller
What do inspectors look for
Moisture intrusion Evidence of pest intrusion Safety or health hazards Roof condition Drainage issues
Minimum components of a commercial lease
Monthly rent and deposit amount Purpose for which the space is being rented Conditions under which the lease can be terminated
Contracts
Residential resale contract- buyer purchases a home that's pre owned New construction contract- buyer purchases a home that's newly built and hasn't been owned before Contracts for deed- buyer makes payments directly to the seller who keeps the title until the loan is paid off Commercial property contract- buyer purchases property that's used for business
Which of these types of tenants most often uses a percentage lease?
Retail
Tips for conducting buyer presentation
Start the buyer presentation with agency disclosures Prepare Explain the transaction process, including search, negotiations, inspection, appraisal, underwriting, and any out of pocket expenses they will incur Tell buyers how you're paid Mention your unique selling proposition
Common clauses
Subordination- noticed the tenants their lease is subordinate to the mortgage Nondisturbance- assures tenants they won't be evicted as long as they meet the lease terms Sub lease/assignment- bans tenants from leasing to another party without landlord approval Attornment- obligated tenants to continue tenancy if building changes ownership Go dark- allows a retail tenant to cease operations but still requires rent payments Estoppel- verifies facts in writing and stops a party from later disavowing the facts
Options available if a property appraised for a lower value
The can acknowledge a sale fail The buyer can increase the down payment amount The seller and buyer can compromise The seller can lower the asking price
Which clause in a commercial lease determines how the tenant may use the space
Use
How should you draft an addendum?
Use plain language and standard terms
Lease contract requirements
Use provision Legal capacity Consideration Statement of term
Documents involved to execute a disclosed limited agency agreement
Client party ones disclosed limited agency agreement (the seller or one of the two buyers) Client party two disclosed limited agency agreement (the buyer or second of two buyers) The initial agency disclosure pamphlet
Who can enforce an option contract?
Only the optionee
Tom died before having a chance to close on his home. Toms heirs were required to meet the terms of the contract, this is an example of?
Operation of law
Is there a contract?
A contract must contain offer and acceptance between parties that have legal competence
Listing agreement not allowed
Clauses requiring sellers to pay more than one commission for one sale Clauses requiring sellers to notify the licensee of their intent to cancel the listing agreement after the expiration date
Contingency requirements true false
Buyers must act in good faith in the use of contingencies or they may lose their right to revive a refund of their earnest money deposit in the event of termination- True Contingencies must be removed prior to closing- true As long as a contingency is removed prior to closing there is no requirement to document their removal in writing by specified date- false It is the buyer agents responsibility to keep track of all contingency deadlines and ensure they are not missed- true While contingencies provide important safeguards, buyers should bear in mind that inclusion of numerous contingencies makes it less likely that their offer will be accepted- true
Which of the following is true about option period for a valid option contract
If the contract doesn't state the length of the option period a court will require the optionor to make the option period for a "reasonable time"
Strategy for every market: offering price
Neutral market: provided that comparable sales support the list price, offer at or just below Hot market: if competitive offers are expected buyers need to put their best feet forward, this means the best offering price they can afford that's still reasonable for the property and market Cold market: buyers can go low, as much as 10% below asking price (check comparable s always to make sure) buyers can usually get good deals if the houses has been on the market a while. However low ball offers in a cold market may still receive a counter offer. If the property is new on the market buyers may want to wait before making a low ball offer
A strategy for every market: personal items
Neutral market; be judicious in what you ask for. Sometimes asking for personal items will turn sellers off of what would otherwise be a favorable offer Hot market: don't ask for personal items unless they've been listed in the MLS as conveying Cold market: ask for free standing appliances gas grill, ets
Environmental hazardous substances
Radon- radioactive, colorless, odorless gas produced underground that's linked to lung cancer Carbon monoxide- colorless, odorless gas produced by burning certain fuels, creates poisonous air Mold- found both indoors and outdoors, should be treated quickly when discovered indorrs, can contribute to respiratory issues
Vacant land contract
This type of contract is used in the sale of undeveloped property (no improvements have been built upon it) these contracts often involve issues like subdivisions, feasibility studies, and or percolation tests.
What phrase is often used in contracts to convey the need for the parties to proceed in good faith and not unduly delay the process?
Time is of the essence
Which section of the sales contract stipulates that the seller is conveying the property to the buyer with a good and marketable title?
Title policy and survey
Purpose of initial agency disclosure pamphlet
To introduce exclusive and non exclusive agency relationships To introduce an agents affirmative duties to buyer and seller clients To introduce disclosed limited agency and its terms and consequences
Percentage lease
With percentage leases tenants pay the landlord a percentage of their sales once their sales exceed a natural break even point. A tenant would choose this if they want to keep the base rent low
Client receives an acceptable loan commitment before the seller can be informed client must provide
Written authorization to deliver
What is a contingency?
a condition that must be met before the contract is enforceable.
Financing unimproved land truths
A much larger down payment is usually required Land without a structure is less valuable to the bank for collateral purposes
Confession of judgement
Filing of a judgement against one party without allowing any argument The creditor to enter an immediate judgment against the debtor in the event of debtor default
Commercial leases
Proprietary lease- with this type of lease the lease holder has a lease to the residential unit Ground lease- the term for this type of lease is designed to be long enough for the tenant to recoup the investment for the outlay of cash to build the building Ground lease- with this type of lease when the lease expires any improvements to the property belong to the landowner Oil or gas lease- this type typically gives the oil or gas company time to determine whether oil or gas exists and a deadline by which drilling must begin Oil or gas lease- if the option to drill is not exercised within the stated time frame the lease expires Oil or gas lease- the landowner generally receives royalties on the oil or gas extracted
Example of a net listing
A sellers wants to sell the property for at least $400,000 if the property sells for more that money will go to the listing broker as commission
Before states enacted regulations to provide exclusive representation for both buyer and seller, buyers often thought that they were represented by?
A sub-agent of the listing agent who brought the buyers to the deal
Performance, assignment, and Novation
Both parties have met all agreed to terms in the contract- performance One of the original parties transfers rights to a different party but may still be liable for obligations- assignment An original party is replaced with a new party and all rights and obligates belong to the new party - Novation
Terminating a contract with a breach
Both parties must agree to terminate the contract The innocent party can terminate the contract The guilty party can terminate the contract with permission from the aggrieved party
Disclosed limited agency agreement elements
Details from any existing listing agreement The licensees and the principal brokers names A description of Oregon's requirements for a licensees obligations when representing both buyer and seller Disclosure of limited agents duties and responsibilities The parties consent and agreement by way of signature
Clauses
Financing- details how the buyer will pay the purchase price balance Dispute resolution- notice that contract disagreements will be resolved with arbitration, not a lawsuit Closing- sets an agreed upon date for closing to take place Contingencies- Terms that must be resolved or met prior to closing Final agency and acknowledgement- parties recognition of existing agency relationships Seller representations- Property details about ownership, possession, condition, taxes, and notification to buyer if and when there are changes
Marketable title
Good or clear title, reasonably free from the risk of litigation over possible defects.
Activities included in the role of buyer representative
Helping schedule the home inspection Showing properties Preparing and presenting buyers offers Contacting the lender to make sure the loan is in process Attending the closing
Under what circumstances are tenants eligible for relocation assistance from landlords as required by the relocation fee ordinance
If the tenant resides within Portland city limits If the rent increases 10% or more over 12 months and the tenant chooses to move If the landlord doesn't provide the option to renew the lease If the tenant has a fixed term rental agreement If the tenant has a month to month rental agreement Tenants who occupy the same dwelling unit as their landlord are exempt from receiving relocation assistance
Why do you need to write your offer properly?
If your offer is written poorly you may expose your buyers, your brokerage, and yourself to legal trouble
Lease purchase contract
In this type of contract the tenant pays a down payment that may be incorporated into the monthly rent payment. The contracts terms and conditions are negotiated at the time the lease is signed
Gross vs net lease
Includes cost of taxes, insurance and maintenance in the base rent- gross Taxes, insurance, and maintenance costs are covered by the landlord- gross Each of the three N's is charged separately from the base rent- net Only one or two of the three N's are paid separately from the base rent- net
Why are you required to make the initial agency disclosure?
It's the law
LTVR
LTVR refers to the loan to value ratio established by a lender and is the percentage of the sales price or the appraised value (whichever is less) that a lender will allow a buyer to borrow
Types of inspections
Lead based paint inspection- Reports informs such as the location of hazards and any previous inspections conducted and remediation taken Well/septic tank inspection- reports location, levels, system condition, and any code violations requiring repair or replacement UST inspection- reports any contamination affecting soil and water and system status
Terms
Lease option- a clause in a rental agreement that gives the tenant the option to buy the property Lease purchase agreement- a contract with the obligation to buy the property Optionee- the tenant Optioner- the landlord Unilateral- the property owner is bound by the agreement but the tenant isnt Bilateral- both the tenant and the owner are bound to the terms of the agreement
Lease leasehold
Lease- the contract that allows a tenant to live on the property Leasehold estate- a right of possession for a limited period of time
After buyer has completed and signed the buyer representation agreement what should you do next?
Make copies of the agreement for buyer and your files
Addendum truths
May be added to a contract either before or after contract signing Supplements, replaces, or clarifies contract terms Includes additional requirements that aren't spelled out in the contract
Common contingencies
Mortgage contingency- protects the buyers earnest money in the event the buyer is unable to obtain financing Appraisal contingency- if the property does not appraise at or above the sales price the buyer can terminate Inspection contingency- allows the buyer to terminate if an issue arises during the inspection that cannot be successfully negotiated Sale contingency- the buyer has made the offer to purchase based on current property selling Insurance contingency- if the buyer is unable to obtain insurance for a specific amount the buyer can terminate and receive a refund
Net listing true false
Net listings can be written for exclusive right to sell, exclusive, or open listings? True The agent doesn't have to split the amount over the sellers specified price with the buyers agent? False Net listings can lead to conflicts of interest? True Net listings are legal in Oregon? True
A strategy for every market: terms
Neutral market: offer standard terms (usual contingencies, reasonable closing date, and possession on day of closing) Hot market: offer seller-favorable terms like shortened contingency periods, quick closing date, or a grace period for seller possession after closing . The cleaner the offer the better. Cold market: ask the seller to pay some or all of the buyer closing costs
Types of Performance
One or both parties have completed only a portion of the terms agreed to in the contract- partial performance One part did not meet the terms of the contract in the specified timeframe and must now do exactly what was agreed to in the contract-specific performance Due to the circumstances out of their control the parties can't legally or practically do what they've agreed to do- impossibility of performance One party has met most but not all of the terms specified in the contract and may be required to pay damages for the terms not met-substantial performance
Performance true false
Partial performance always results in termination of the contract? False Impossibility of performance occurs when the property is destroyed or is made the subject of eminent domain? True Specific performance requirements can be satisfied through property or monetary damages? False In impossibility of performance situations the parties are released from their contractual obligations? True In substantial performance situations the offending party may be required to compensate the other party for damages resulting from incomplete performance of the contract terms? True
Clients received an offer of 175,000 they want 180,000 how should counter offer be worded?
Sales price to be $180,000
What else is held in escrow?
Security documents Sales agreements Loan documents
What are the two contractual promises of an option contract?
The optionor will not sell the property to anyone else during the option period. The optionor will sell the property to the optionee, if the optionee so chooses, under the contract terms and conditions.
A contingency has what bearing on the rest of the signed sales agreement
The other terms of the sales agreement remain static
Required elements for a valid contract
The property's sales price or the way in which the price will be determined must be stated in the contract. The agreement must be in writing and signed by the seller. The contract must state the length of the option period. The amount of consideration the optionee is paying the optionor must be stated in the contract.
Required in complete financial statement
True sale price Earnest money received When evidence of tile will be given to buyer All monies broker received in transaction The amount and payee(s) of all disbursements made by the broker
Starla, 35, and Gwen, 32, are going into business! Gwen is buying a share of Starla's franchise. Their attorneys drew up a contract that had Gwen providing $45,000 to Starla in return for 50% ownership. Gwen and Starla happily signed the contract, Gwen paid Starla the $45,000, and Starla presented Gwen with a notarized certificate showing Gwen's 50% ownership in the company. What type of contract is this?
Valid *This contract contains all of the essential elements, and so it is valid. The terms of the purchase contract have been completed, so it's an executed contract, not an executory one.
Valid, voidable, and void
Valid real estate contracts contain all 5 essential elements in writing, legally enforceable and ready to move forward Voidable contracts are missing any of the essential elements, can move forward but with caution, has potential to become void if any parties challenge it Void have no legal basis or force, unenforceable and going nowhere
As part of the sales contract, Garth, the seller, was supposed to provide a copy of the seller's disclosure to the buyer, Melanie, but he failed to do so. What type of contract is this?
voidable