Chapter 13 PowerPoint Contracts for Sale and Closing Essay

Submitted By schnee0721
Words: 1182
Pages: 5

Chapter 13:
Contracts for Sale and Closing


Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Contract for Sale: The Most
Important Document in Real

Determines price and terms of the transaction Defines property interest being conveyed
Determines the grantee
Determines other conditions of the transaction 

Date of occupancy
Any repairs or other conditions of the sale


Required Elements of a Contract

All contracts:

Competent parties
Legal objective
Offer and acceptance
No defects to mutual assent

Contract for sale of real estate:

In writing (per Statute of Frauds)
Proper description of property


A Closer Look at Requirements

Competent parties

Of legal age

Not incapacitated at time of signing

Appropriate official if representing a corporation

Power of attorney if acting for another person

Lawful intent
Offer and acceptance
No defects to mutual assent
In writing
Legal Description should be used


Legal vs. Equitable Title

Legal title: Ownership of a freehold estate
Equitable title: Right to obtain legal title
Buyer obtains equitable title when a contract for sale of real estate is fully signed 13-5

Would This Be a Valid
I, Ben Buyer, agree to buy and pay $20,000, and I, Cecil Celler,
Agree to sell the parcel of real estate at 1013 NE Seventh Road in North Platte, Nebraska.
Ben Buyer:
Cecil Celler

Competent parties? Legal objective?
Offer and acceptance? Consideration?


Problems with This Contract?
I, Ben Buyer, agree to buy and pay $20,000, and I, Cecil Celler, Agree to sell the parcel of real estate at 1013 NE Seventh Road In North Platte,

Ben Buyer:
Cecil Celler

What are boundaries of 1013 NE Seventh Road?
When is the closing?
When does Ben get possession?
Cash sale? Earnest money deposit?
Must Cecil deliver marketable title?
Is a quitclaim deed acceptable?
Any fixtures (e.g., fences?)
Is Cecil married?
Are there structures? Condition now? Condition at closing?

Advantages of Form Contracts
Neutral (not prepared by opposite party)
Ready-made treatment of details



Performance dates

Many others

Local real estate boards are a good source

Up-to-date with current relevant law

Adapted to locally important issues
Radon risk
Flood plain
Insulation quality Water supply

Generally neutral between the buyer and seller

Risks with Standard Form

May treat some issues too lightly

Perpetual struggle on contract detail
 Attorneys: More detail reduces future disputes  Brokers: Long contracts put a chill on negotiations  Resolution: Bar Assn.-Realtors jointly drafted contract form

Inappropriate and inadequate application of a form contract:

Residential contract for apartment property
Residential contract for undeveloped land

Components of a Form Contract

Part I: Points particular to the deal

Items to be negotiated (price, date of closing, distribution of expenses)
Items that characterize the property (water source, zoning, flood zone status)

Part II: Items that must be clear (the same for most transactions)

Provisions for survey
Proration procedure
Disbursement of funds
Recourses in case of default

Handling of Funds

Broker normally handles funds for a transaction Broker must put deposits in escrow

Escrow account: An account holding funds dedicated for a particular purpose
Must be with insured institution or title company At closing, money is disbursed in accordance with a closing statement


Contract Terminology

Contingent contract: Obligation of a party to perform depends on one or more conditions being met
Assignment: One party’s contractual rights and obligations are transferred to someone else

Does not relieve assignor of liability
Can be