11. Real Estate Contracts / FL

Contract

Is an agreement between the parties to do or not to do something.
If it is in writing, and contains all the valid essentials, it is also enforceable.
In real estate there are a number of contracts including the listing contract, buyer's agency contract, s

Contract validity requirements

- Component parties
- Mutual consent
- Valuable consideration
-Legal purpose
- Voluntary oct of good faith

Component parties

the parties to a contact must have the capacity to contract and there must be at least two such parties.
Capacity to contract is determinate by three factors:
- legal age
- mentally competency
- legitimate authority

Mutual consent

also know as OFFER AND ACCEPTANCE and MEETING OF THE MINDS, requires that a contract involve a clear and define offer and a intentional, unqualified acceptance.
Parties must agree to the terms with out equivocation.
Court may nullify a contract where the

Valuable consideration

contract must contain a two-way exchange of valuable consideration as compensation for performance by other party, must be two way. Not valid if just one party provides consideration.
- can be of TANGIBLE value (money) or INTANGIBLE such as home occupancy

Legal purpose

the content, promise, or intent of a contract must be lawful. A contract that proposes and legal act is void

Voluntary oct of good faith

the parties must create the contact in good faith as a free and voluntary act. Contract is voidable if one party acted under duress, coercion, fraud or misrepresentation.

Statute of Frauds

is based on an old English law which was written to protect consumers from fraud.
It says that all contracts must be in writing to be enforceable and that all leases for more than one year must be in writing to be enforceable.
Enforceable means that the c

Enforcement limitations

certain contracts that fail to meet the validity requirements are voidable if a damaged party take appropriate action. The enforcement of voidable contracts is limited to statues of limitations and statue of frauds.
- Statue of limitation
- Statue of frau

Statute of Limitations

provides a time frame which court cases must be filed on certain offenses.
If the Statute of Limitations runs out, the case cannot be heard.
Some offenses such as murder do not have a limitation on time but most civil cases do.

Statue of Frauds

certain contracts MUST BE IN WRITING to be enforceable. With exception that a lease of one year's duration or less may be oral.
All other contacts to buy, see, exchange, lease must be on writing.
- concerns the ENFORCEABILITY of a contract, NOT its VALIDI

Essential of valid contract

Legally Competent parties
Offer and Acceptance
Consideration
Legality of Object

Is offer a contract?

An offer to purchase is not a contract. When an offer or counter offer is mutually agreed upon and the seller and/or buyer have signed and dated the final change, the offer becomes a valid contract.

CONTRACTS legal status

Some contracts may have legal effect; others do not. The difference lies in whether a contract is:
- valid
- valid but unenforceable
- void
- voidable
- enforceable
- unenforceable.

Valid

is binding and enforceable on all parties. All the essentials of a contract are in place, meets the legal requirement for validity
A valid contract that is made orally is also enforceable within a statutory period, with some exceptions.

Valid but unenforceable

some contracts are enforceable only if they are in writing, ally in particular to the transfer of interest in RE.
While oral contract may meet the test for valid, if it falls under the laws requiring a written contract, the parties will not have legal rec

Void

has no legal effect, eather party can't enforce it.
One of the essential elements is missing or is corrupted. For example, a contract for buying illegal drugs is void since one of the elements in contracts is a legal purpose.

Voidable

initially appears to be valid, but is subject to rescission (revocation, cancellation) by a party to the contract who is deemed to have acted under some kind of disability.
Duress, harassment....
Is valid on the surface but may be rejected by one of the p

Enforceable

means that all of the essentials of a contract are present and that the contract is in writing. This is a contract that can be heard by the court.

Unenforceable

means the contract may be valid between the parties (such as a handshake agreement), that all the essential elements are in place but the contract is not in writing. The courts will not hear the case: therefore, the courts cannot force performance of the

Valid ann Enforceable contract must

essentials, be in writing, and all parts required signed and initialed as required by the parties

sale contract PRIMARY PROVISIONS

- Earnest money
- Equitable title
- Actual title
- Parties, consideration and property str.191
- Loan approval
- Escrow
- Closing and possession dates
- Conveyed interest, type of deed
-Title evidence
- Closing cost
-Damage and destruction
- Default
- Bro

Earnest money deposit

Part of the consideration is paid in an earnest money deposit.
The earnest money deposit is an important part of the home buying process. It tells the seller you're a committed buyer, and it helps fund your down payment.
This is not all of the considerati

Equitable title

The interest a buyer has in a property between the time of acceptance (notification) of the contract and the actual closing. When the transaction closes, the buyer receives legal or actual title to the property.
Equitable title becomes very important if t

Actual title

Is the time when the title actually changes hands- after the delivery and acceptance phase of the deed. All the property rights are now in the hands of the buyer unless otherwise stated in the deed.

Escrow

clausule provides for the custody and disbursement of the earnest deposit money deposit, and releases the escrow agent from certain liabilities in the performance of escrow duties.

Closing and possession dates

contract states when the title will transfer, and when buyer take physical possession. Customary possession occurs on the date when the deed is recorded, unless other agreed.

Conveyed interest, type of deed

provision(s) will state what type of deed the seller will use to convey the property, what condition the deed will be "subject to" like easement, associations, encumbrances, mortgages, liens, special assessments.
Typically seller conveyed a fee simple int

Title evidence

the seller covenants to produce best possible evidence of property ownership, commonly in the form of title insurance

Closing cost

which closing cost each party will pay, note that this can be an item for negotiation

Damages and destructions

in case property is damaged or destroyed, parties may negotiate alternatives.
Ex: seller obligation to repair, buyers obligation to buy if fixed, or portion of each party to cancel

Default

Identify remedies for default (faiture to meet legal obligations or conditions.
Generally:
BUYER may sue for damages, specific performance or cancelation
SELLER may do likewise or claim the earnest one as liquidated damages

Broker's representation commission

discloses the applicable agency relationship in the transactions and names the party who must pay the brokerage commission.

Sellers representation

seller warrants:
- that there will be no liens on the property that cannot be settled and extinguished at closing.
- sll representation are true, and if found otherwise, the buyer may cancel the contract and reclaim deposit

sale contract SECUNDARY PROVISIONS

- Inspections
- Owner's association disclosure
-Survey: agree to survey to satisfy financing requirements
- Environmental hazard
- Compliance with law: no undisclosed code or zone violations
- Due-on-sala clausule: the parties state their understanding th

-TYPE of contracts

- Bilateral
- Unilateral
- Expressed
- Implied
- Executory
-Executed
-Formal Contract
- Informal contract

Bilateral

This is a "two-way" contract where each party to the contract promises to do something.
A good example is a SALES CONTRACT, exclusive listing....
The seller promises to sell and the buyer promises to buy.

Unilateral

This is a "one way" contract in which as in the case of an option, the seller promises to sell IF the buyer wants to buy the property at a later date. Only one party promises to do something, provided the other party does something. The latter party is no

Expressed

is a contract, either oral or written, which contains specific terms and conditions.
The purchase price or the date of loan approval, are examples.
ALMOST ALL REAL ESTATE CONTRAST ARE EXSPRESSED and put into writing to be enforceable.

Implied

is a contract which OCCURS BY THE ACTION of the parties (in other words, by the way people behave).
Is an unstated or d agreement, that may be deemed to exist when the ACTIONS OF ANY OF THE PARTIES suggest the existence of an agreement. .
Many times, this

Executory

is a contract IN PROGRESS. Contract in which performance is YET TO BE completed.
Sale PRIOT TO CLOSING is executory.
Something remains to be completed such as the issuing of the deed, or a contingency has not been met.

Executed

is a contract COMPLETED, FULLY has been performed and fulfilled.
It is finished and all terms have been met and satisfied.
Ex: completed and expired LEASE CONTRACTt is an exceeded contract, landlord may reposes and tent has no further obligation to pay re

Formal Contract

was originally written UNDER SEAL, meaning the wax seal of the parties. This has evolved into the written, signed contract by the parties, valid and enforceable.

Informal Contract

an oral or PAROL contract, usually not enforceable.

Contract NEGOTIATION

In the process of obtaining a contract, certain negotiations must take place. In an offer to purchase, the buyer offers his best price for the property and the seller agrees to the price or sends the offer back to the buyer with a counter offer.
Whoever i

Offer and acceptance

If the offer accepts all terms without amendment, the offer becomes a CONTRACT. The exact point at which offer BECOMES contract is when the offer gives the offeror NOTICE OF ACCEPTANCE.

Counteroffer

Whoever is receiving the offer is the Offeree.
The buyer (Offerer) gives an offer to the Seller (Offeree)
The seller (offeror) gives to the buyer (offeree) a counter offer.
Also called QUALIFIED ACCEPTANCE is an attempt by the seller or buyer to change th

Revocation of an offer

An offer may be revoked, or withdrawn, at any time before rate offer has communicated acceptance.

Option

An option is a contract that gives the optionee the right to purchase or lease real estate in the future
If the offer has paid consideration to the offeror to leave and offer open, and the offeror accepts, and OPTION HAS BEEN CREATED which cancels the off

Assignment of a contract

is when a third person takes the place of one of the original people in the contract.
All the rights and responsibilities remain with the original party to the contract, unless both parties agree to the assignment in writing.
The giver of an assignment is

Assignment of a contract

is a change in the original terms, such as an extension of time for closing or loan commitment. All other terms of the contract remain the same.

Contingency

means conditions or terms yet to be performed. A financing contingency means the buyer will buy the house on the condition that he receives the loan applied for. All contingencies must be met before a contract can be executed.

Mirror Image

A seller agrees to an offer exactly as it was written. No changes are made to the offer; it is signed by the seller as it was written.

Time is of the Essence

means the promises must be performed with a certain time frame or the party will be in breach of contract. Typical time frames to be used are for inspection, loan application, closing date, possession of the property or loan approval.

Parol Evidence Rule

anything in writing (like the contract) takes precedence over oral or verbal agreements.

Termination of an OFFER

- acceptance:
- rejection
-revocation: offeror withdraws the offer before acceptance
- lapse of time: the offer expired
- counteroffer: ofFeree changed the offer
- death or insanity of either party

- Performance

terminates when fully performed by the parties .
May be also terminated:
1. partial performance: of the parties agree
2. sufficient performance: if a court determines a party has sufficiently performed contract, even though not to the full extend of every

Termination of an CONTRACT

Also called CANCELLATION and DISCHARGE, may occur in following causes.
- performance
- mutual rescission
- Impossibility to performance / Infeasibility
- Operation of law
- Cooling -period rescission
- Revocation
-Abandonment
- Lapse of time
- Invalidity

- Impossibility to performance / Infeasibility

Valid contract can be canceled if it is not possible to perform.
Ex: Dead of person that can be substituted,
an earthquake hits the property and both parties agree to rescind the contract.

- Mutual rescission

both parties agree to cancel the contract. If parties wish to create a new contract to replace the canceled, such substitution is called NOVATION.

- Cooling -period rescission

Rescission is the act of NULLIFYING a contract. Im many states allowed statutory amount of time after entering into contract. No reason need to be stated.

- Operation of Law

bankruptcy of either party or eminent domain of the property.

-Revocation

Is cancelation of the contract by one party with out the consent of the other.
Ex: seller may revoke a listing to take the property off the market with out grounds, may be required to pay a combating if the broke found buyer, or reimburse marketing expens

-Abandonment

occurs when parties fail to perform contract obligations. This may allow the parties to cancel the contract.

-Lapse of time

if contract contains an expiration provision and date, the contract automatically expires on the deadline,

-Invalidity of contract

If the contract is void, it ruminates with out the need for disaffirmation. A voidable contract can be canceled by operation of law or by rescission.

- BREACH

Faiture to perform according to the terms of the agreement Also called DEFAULT. this gives to the damaged party the right to take legal action, and may elect legal remedies:
- Rescission
-Forfeiture
- Suit to Cancelation
- Suit for specific performance
-

Rescission

damaged party may rescind the contract. This cancels the contract and returns the parties to pre-contract conditions, including refunding of any money.

Forfeiture

requires the breaching party to give up something according to the terms of the contract.
EX: buyer who default on a sale contract may have to forfeit the earnest money deposit

Suit to Cancelation

(Rescind the contract) the court restores the parties to their original position before the contract.

Suit for specific performance

Is attempt to force the defaulting party to comply with the terms of the contract.
Because no two pieces of property are alike, the buyer wants this house, at this time and asks the court to enforce the contract.
The buyer or seller want the court to comp

Suit for Damages

damaged party may sue for money damages in cicil court.
Because a party may have expenses to the contract (such as an appraisal or moving) the injured party asks the court to make the other party pay damages. Out of pocket expenses such as appraisals and

FL employment agreement

Florida sales associates are agents OF their brokers.
They are also "Independent Contractors" -meaning that they are not employees of the broker, but they have certain duties that they are expected to perform in order for the broker to properly supervise

Listing Contract

A listing contract is the EMPLOYMENT CONTRACT BETWEEN THE BROKER AND SELLER.
The listing agreement sets forth the terms under which a broker is employed to find a buyer for the owner's real property. It outlines the terms under which the seller will owe t

Listing agreement MUST include

- a definite expiration date;
- proper identification of the property;
- price, terms and conditions;
- fee or commission to be paid;
- signature of the owner and the broker or his agent.

Automatic renewal clause

An automatic renewal clause for extension of the listing is FORBIDDEN under Florida Law.
If the broker is a single agent to the seller, he owes the seller fiduciary responsibility.
If the broker is employed as a transaction broker, the seller is a custome

Types of listing agreements

- Open listing
- Exclusive or Exclusive Agency listing
- Exclusive right to sell
-Net listing

Open listing

The seller retains the right to hire any number of brokers to sell his property.
Whoever provides the seller with a ready, willing and able purchaser is entitled to a commission.
If the seller sells the property without the broker, he pays no commission.

Exclusive or Exclusive Agency Listing

Only one broker is allowed to act on behalf of the seller BUT IT the owner sells the property himself, no commission is paid to the broker.
If the broker sells the property, he will be entitled to a commission.
The seller must make the house available for

Exclusive Right to Sell Contract

The listing broker is always entitled to a commission regardless of who procures the buyer.
It provides the most protection to the broker.
If the owner of the property procures the buyer, the owner will be required to pay the listing broker.
Both parties

Net Listings

This is a type of listing that is ILLEGAL in most states and strongly discouraged in Florida by regulatory agencies.
This type of listing states that the seller will receive a certain amount of money from the sale. Any amount over the predetermined sales

Paying the Commission

In most listing contracts, the listing broker (or the cooperating broker) must set into play a series of events leading to the sale.
The buyer must agree to purchase, and be able to pay. A buyer that meets this criteria is known as a ready, willing and ab

Termination of listings

- Fulfillment of the purpose of the listing - "The property sold!"
- Expiration of the time as stated in the agreement - "Too late!"
- Renunciation by the broker - "I quit!"
- Revocation by the seller- "You're fired!"
- Transfer of title by operation of l

Buyer Brokerage Agreement

A Buyer Brokerage Agreement is an EMPLOYMENT CONTRACT between the broker and the buyer. It spells out the terms of employment, of how a broker will find a home for the buyer and exactly who will pay the commission.
Like all contracts, the Buyer Brokerage

SALES contracts

A sales contract is always a BILATERAL contract because it contains promises from both the seller and buyer. In a sales contract, the seller is called the VENDOR and the buyer is called the VEMDEE.
The Vendee makes the offer, Vendor Accepts the offer and

Sales contact MUST contain

-names of the parties (seller and buyer)
-legal description of the property or street address or both
-consideration given/purchase price
-financing or cash terms
-quality and evidence of title to be conveyed
-name, phone number and address of the Escrow

Disclosures Required in a Sales Contract

...

Installment Land Contracts

Occasionally, for a variety of reasons usually related to taxes, a seller may wish to sell his property by an installment land contract, BILATERAL contract, with both parties performing but the time frame is different than a regular sales contract.
In an

Disclosure to the Buyer

The rule of caveat emptor (Let the Buyer Beware) still holds some value in Florida as it does in most states. However, the Florida Supreme Court ruled in the case of Johnson v. Davis (1985) that the seller was responsible for disclosing material facts to

Procuring Cause

There are times when a question comes to a broker as to "who is responsible for the sale and who needs to be paid?"
A sales associate may bring a buyer to a property, show it to them and find out later that the buyer bought the property that they showed a

MLS / Multiple Listing Agreements

Most brokers belong to a Multiple Listing Service, MLS of some type.
The MLS is a database of all the listings of brokers who belong to the service. The brokers have agreed to SHARE the commission with a Cooperating broker".
The listing broker must make t

Ethical Practices

Following a code of honor for a sales associate would prevent many of the problems which have become prevalent in FREC complaints.

Failure to Disclose

If a customer tells the associate not to disclose any certain items, the sales associate should immediately dismiss him or herself from being party to any sale that would be detrimental to the buyer or possibly cost the buyer in the future.
The failure to

TEST

TEST

1. The primary purpose of a listing is to:

Serve as a contract of employment between the seller and broke

A listing which allows the owner to sell the property himself with out being liable for a commission, but which appoints only one broker to act as his sole agents is a

Exclusive agency

An agreement in which brokers pool their listings and all commission is divided between the listing broker and selling broker is

Multiple listing