Chapter 14

Chapter 14 - Chapter 14 Contracts for Sale and Closing...

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Chapter 14 Contracts for Sale and Closing 3/25/08 Contracts for Sale- Most Important Document Contract for Sale- an enforceable agreement that requires the Owner/Seller to convey ownership of a property to the Buyer in exchange for the Purchase Price. o Describes the rights and obligations of buyers and sellers. o A contract for sale is the most important document in real estate o Must be in writing to be enforceable. Contract of Terms- refers to the details of the transaction that the parties have agreed to: price, date of closing, payment of closing costs, etc. Contract Conditions: describes the circumstances that are required in order to complete the transactions: Seller delivering “Good Title”, Buyer receiving a mortgage loan, the improvements not being damaged prior to closing, etc. Real estate transactions are a two step process: the parties first reach an agreement, and sometime later they complete the sale at a meeting called the closing. Contracts also include listings, leases, management agreements, broker/salespeople employment agreements, etc. Legal Requirements of a Contract for Sale In order to be enforceable, a contract has 7 essential elements: 1. Competent Parties: o minimum legal age (18 years old) contracts with minors are voidable, at the election of minor o not declared legally incompetent by a court (void) o under the influence of drugs of alcohol (voidable) o corporations- individuals signing have been duly authorized. 2. Legal Objective: an enforceable contract must have a legal purpose (void). o In a contract, you cant say that you are selling the field so that the buyer can grow pot 3. Offer and Acceptance- a contact must have mutual assent by both the parties. o In real estate, an offer with very specific terms is made by one party (the offeror) and must be unambiguously accepted by the other party (the offeree). o Typically a buyer makes the first offer to the seller. o The seller has three options: o 1. Accept the offer within the time frame stated by the Buyer and notify the Buyer. o 2. Reject the offer. o 3. Reject the offer and make a counteroffer. Once a counteroffer is made, the Buyer is no longer bound by their original offer.
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o It may go back and forth if the offeree makes a counter offer, which makes him the oferor. o *Note that a Buyer may withdraw an offer at anytime prior to acceptance. o Notice of Acceptance- Contract is entered into when the offeree gives notice to the offeror of acceptance. o Expiration of Offer: if the offeree does not accept the offer within a time period required by the offer, the offer will terminate or expire. 4. Consideration: an enforceable contract must contain mutual consideration by the parties. Sometimes described as the exchange of a “promise for a promise” o the buyer is legally “promising” to pay the Seller the purchase price and the Seller is legally “promising” to transfer title to the buyer. o
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Chapter 14 - Chapter 14 Contracts for Sale and Closing...

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