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Elements of a valid contract
- Lawful subject
- 2 or more competent parties
All terms and conditions are specified and agreed to by the parties; a complete understanding exists
Some or all of the terms and conditions can be assumed by the nature of the agreement or the words and actions of the parties.
Both parties to the contract mutually agree to be bound to performance of the terms and conditions specified. - promise for a promise
Only one party expressly agrees to perform an act. Only on is bound by the terms of the contract. - promise for an act
if any of the terms or conditions remain to be performed.
all parties fully performed
Statute of Frauds
If requires a contract for the transfer of a right or interest in land to be in writing to be enforceable.
Exception to Statutes of Fraud
Buyer makes partial payment and either takes possession of, or makes improvements to the property
Termination of offers
- Lapse of time
- Death or Insanity
- Destruction of the property
Acknowledgement and Seal
Acknowledgement is necessary if a document is to be recorded in the public records.
Termination of Contracts
- Lapse of time
Legal remedies for breach of contract
Suit for cancellation (recission) - one who didn't breach the contract can bring suit to put parties back in the original positions
Suit of specific performance - forcing the one in default to perform
Suit for damages - injured party can sue (including monetary compensation)
Types of damages
Liquidated damages: agreed upon and specified in the contract. Usually involves the seller retaining the deposit in the event of the buyer defaulting
Unliquidated damages: Not specified in the contract, but determined by a court. A suit for damages involves unliquidated damages
Written listing contracts
- definite term date
- legal description of property
- price and terms offered
- fee or commission to be earned by the broker
- signature of property owner
Types of listing contracts
Open listing - not in MLS - unilateral contract
Exclusive listing - unilateral - seller promises to list the property with only one broker, but reserves the right to sell the property
Exclusive right of sale listing - bilateral - commission is paid to broker regardless of who sells the property
- Seller needs: $200,000
- Closing: 5,000
- 205,000/ 94% (after commission) = sales price
the right to buy a property during a specified period of time, at a specified price - lease to own.
Unilateral - must pay a definite valuable consideration
borrower retains the ownership (title) of the property during the loan period.
provides protection for the mortgagor (borrower) as it requires the lender (mortgagee) to acknowledge performance by the borrower.
allows lender to declare the entire outstanding balance immediately due and payable whenever default occurs.
allows borrower to borrow additional funds based on the same mortgage after the loan balance has been paid down.
used in mortgages on income-producing real estate. a trustee is appointed to manage the property should the investor default on the loan
limits the lender's right to foreclose to the amount received from the sale of the foreclosed property.
Due on Sale clause
loan or promissory note stipulates that the full balance may be called upon transfer of ownership