Principles of Real Estate Ch. 12

contract

• Parties state the terms and show their intentions in words
• -can be oral or written

-the agreement of the parties is demonstrated by their acts and conduct.

• -express
• -implied

-exchange of promise; meaning both parties promise to do something; sell property, buy property.

• -one-sided agreement; one party makes a promise in order to induce a second party to do something.
• -reward for missing pet; option or right to purchase at specific terms.
• -the first party must follow through if second party does comply

-An executory contract is a partially performed agreement, such as, when a real estate contract is negotiated and signed by both parties, BUT payment and delivery of the deed keep the contract from being completed, aka EXECUTED; Once closing and the purchase price is paid and deed is delivered and the purchaser has possession of the property.

• -valid contract; complies with all the essential elements and is binding and enforceable on both parties. It will happen.
• -void contract; has no legal force, it does not meet the essential elements of a legal contract; ex: commit a crime is void.
• -voidable contract; valid, but may be disaffirmed by one party; contract with a minor.
• -unenforceable contract; valid between the parties, but neither may force performance; certain oral agreements; oral listing, broker cannot sue seller if seller does not pay a commission.

• 1. Competent parties; parities must be of legal age and free of mental handicap that would make them incompetent (could be void or voidable).
• 2. Offer and acceptance; aka mutual assent aka "meeting of the minds"; contract be free and voluntary and the agreement terms be carefully definite and understood by both parties  or the contract can become voidable.
• 3. Consideration; anything that has been bargained for and exchanged; must be "good and valuable" between the parties; buyer gives seller money, seller gives buyer deed, agreement.
• 4. Legality of object; a contract must not contemplate a purpose that is illegal or against public policy.
• 5. Agreement in writing and signed; contracts sale or lease (more than one year) be in writing to be enforceable. Requirements; signature of the party to be charged, a spouse's signature must be included when necessary, an agent may sign for a principal if the agent has proper written authority, and if there are any co-owners, they must sign.
• ***accurate legal description of the property

-permits electronic records and electronic signatures in electronic transactions to be legally enforceable, so long as both parties to a transaction agree to conduct the transaction electronically.

true

a specific time it must be completed.

• -assignment; having someone take over agreement, same contract just with someone else taking it over; finding a new renter to take over lease; exchange for take over slate; substitution of parties; still may be liable.
• -novation; having someone take over an agreement by making a new contract; finding a new renter to end your contract and the apartments will start a new contract for the new renters; exchange for blank slate; substitution of contracts; releases all liability.

time up on contract

• -Partial performance of the terms (written acceptance with partial performed acts) 
• -Substantial performance (does not complete contract agreements, may be force payment.
• -impossibility of performance; an act required in the contract cannot be accomplished legally.
• -Mutual agreement
• -operation of law; voiding contract by a minor, or as a result of fraud or the expiration of the statute of limitations, etc.
• -breach of contract; violation of any of the terms or conditions of a contract without legal excuse; the defaulting party assumes certain burdens.

• -by specific time stated at agreement of contract.
• -or within a reasonable time, which is based on fact through most likely the court.

• -death
• -insanity
• -destruction of property
• -material change in circumstance

• -sue for specific performance to force the defaulting party to carry out the terms of the contract and/or seek such other relief as may be provided by law or
• -terminate the contract and receive the earnest money, releasing both parties from the contract.

A legal action brought to compel a party to carry out the terms of a contract.

-an amount predetermined by the parties to an agreement as the total amount of compensation an injured party should receive if the other party breaches a contract; usually the earnest money in a residential sales transaction.

-an amount of money, deposited by a prospective buyer as evidence of good faith under the terms of the contract, that is to be forfeited if the buyer defaults but applied to the purchase price if the sale is closed.

• -It is generally an option
• -no set amount, but usually 1% of the purchase price
• -usually used for higher priced homes.
• -generally given after the offer has been accepted by the seller.
• -generally and better held by third party; real estate agency; escrow account.
• -kept by the seller if the buyer pulls out for non-ligitamit reasons, or if the sale does not go through.
• -if buyer does back out for legal reasons, the deposit is returned to buyer.

• -can be anything written in the contract that the seller has breached on; ex; color of grass.
• -some good contingencies: inspection contingency (inspection within a certain time frame, and back out if you find something you didn't expect, usually 10 days to back out), finance contingency (if the buyer cannot obtain a loan)
• -the more contingencies you put in your contract, the more leery the seller will be; especially if there are multiple offers.

-sum of three times the amount of the earnest money, the earnest money, reasonable attorney's fees and/or all costs of suit.

• -a specific time limit during which parties to a contract may bring legal suit to enforce their rights.
• -Under Texas Law, any action for the specific performance of a contract for the conveyance of real property must be commenced within four years from the date of the breach.

• -most important document in the transfer of real estate
• -sets forth all details of the agreement and legal rights and obligations between a buyer and a seller.
• -dictates the content of the deed.

-seller signs contract offer in acceptance

-change in terms of an offer

-true

-true

-the date on which the communication of acceptance of the contract was made (acceptance of offer date).

• -all contract offers must be presented to the seller, unless the seller instructed other wise; such as has specifically instructed the listing broker not to bring offers below a certain price.
• -if a broker receives more than one offer, all offers must be presented to the seller, unless otherwise specifically stated by the seller.  **The agent representing each potential buyer should be notified that multiple offers have been received; but terms and conditions of other offers be confidential.
• -Although a real estate broker an an escrow agent may sign agreements on the contract form, they are not parties to the contract, with one exception; a broker who has authority to bind a party to a lease or sale under a power of attorney or property management agreement is also a party to the contract (ex: being in charge of a property while owner is out of town or lives somewhere else and hires someone to manage the property under certain conditions).

-buyers secure the right to legal title; interest in ownership, that is all equitable title means.

-true

-a broker uses the earnest money deposit for personal use; illegal

-false, all earnest money can be deposited into one escrow account as long as the broker keeps accurate records of all earnest money deposits.

• -figuring out a time period to resolve or negotiate a contract or contract controversy.
• -generally begins on the day after the act, event, or default happens, and concludes on the last day of the computed period; calendar days, not business days.

-to make known by open declaration; publish; proclaim formally or put into operation

• -Texas Real Estate Broker-Lawyer Committee drafts and revises the standard contract forms to bee used by real estate licensees.
• -Once the Texas Real Estate Broker-Lawyer Committee has drafted the forms, the Texas Real Estate Commission has the option of approving or promulgating the forms for use by brokers and salespersons.

• -transactions in which the licensee is functioning solely as a principal, not as an agent.
• -Transactions in which an agency of the US government requires a different form to be used.
• -Transactions for which a contract form has been prepared by the property owner or prepared by an attorney and required by the property owner.
• -Transactions for which no standard contract form has been promulgated by the Texas Real Estate Commission, and the licensee uses a form prepared by an attorney-at-law licensed by this state and approved by the attorney for the particular kind of transaction involved or prepared by the Texas Real Estate Broker-Lawyer Committee and made available for trial use by licensees with the consent of the commission.

-licensed real estate brokers or salespersons.

• -MAY NOT DO: fill in legal forms, deeds and mortgages; give legal advice; add to a promulgated contract form factual statements or business details for which a contract addendum, lease, or other form has been promulgated by the commission for mandatory use.
• -ALLOWED: fill in forms for TREC transactions; explain to the principal the meaning of the factual statements and business details contained in the said instruments SO LONG AS the licensee does NOT offer or give legal advice.

-true

-false, it causes more liability for the agent.

-true

-true

-false, it is impossible to find out everything wrong with a home, but it does reduce some risk involved in buying the home.

• -terminate the contract under the Termination Option
• -Obtain further evaluations
• -request the seller make all or some of the necessary repairs at the seller's expense 
• -make repairs himself
• -or simply "live with" the property "as is".

-a home warranty to maintain, repair, or replace all or any part of the appliances, structural components, electrical, plumbing, heating, or air-conditioning systems of residential property.

• -to get or not to get a residential service contract and to ask or not ask the seller to pay for it.
• -Paragraph 7
• -buyer must evaluate the coverage and cost of each before purchasing one.

-true, the licensee must disclose such payments to the client; Disclosure of Residential Service Company.

• -mediation (para 16)
• -parities split costs of meditation equally

-used when the buyer and seller have a dispute in the promulgated sales contract; basically a therapist and resolver for parties on issues

-if a dispute related to a new construction defect arises, the RCLA gives homeowners relief by giving the contractor notice, a time to fix it, and/or moneys for reasonable cost of repairs.

-a one-sided contract by which an optionor (owner) gives an optionee (prospective buyer) the right to buy or lease the owner's property at a fixed price within a stated period of time.-the optionee may pay an option fee for the option right-the optionee cannot recover the moneys paid for option right, however the optionor can put the option right fee towards the purchase of the property.

• -aka land contract, executory contract, installment contract, or contract of sale
• -When closing occurs over 180 days
• -basically a buyer (vendee) finances payment throw the seller instead of a mortgage.
• -generally there is a down payment, but it is an option
• -buyers should be wary of sellers who still have a mortgage on the property; if there is an mortgage, the buyer should request payment statements of mortgage from seller, to restrain from being screwed over and forclosed on. 
• -The seller must record the payments with mortgage company.
• -In a certain time period, the vendee applies for a mortgage, and gets financing through a mortgage company instead of seller or can just keep paying the seller until note has been paid in full.
• -rent-to-own
• -buyer does not receive the deed until the terms of the contract are completed; but does take possession and responsibility

• -states the obligations of each party to a transaction and the duties of the escrow agent, who is a disinterested third party and will not benefit from the contract.
• -requires that the seller deposit the deed and other pertinent documents.

-a deposit for funds, a deed, a mortgage, or other instruments by one party for the delivery to another party upon completion of a particular condition or event.

-true

true

true

-all parties to the contract are bound to act.

-equitable

-unilateral

-have both parties initial or sign i the margin near each change.

-true

-true

-executory

assignment

true

-an attorney licensed to practice law