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The signing of a valid real estate contract is the keystone of a real estate transaction. Chapter 11 Real Estate Contracts.

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Presentation on theme: "The signing of a valid real estate contract is the keystone of a real estate transaction. Chapter 11 Real Estate Contracts."— Presentation transcript:

1 The signing of a valid real estate contract is the keystone of a real estate transaction. Chapter 11 Real Estate Contracts

2 11 Contracts Modern Real Estate Practice 17th Edition Learning Objectives ê Identify the requirements for a valid contract ê Describe the various types of contracts used in the real estate business ê Explain how contracts may be discharged ê Distinguish among bilateral and unilateral, executed and executory, and valid, void and voidable contracts

3 11 Contracts Modern Real Estate Practice 17th Edition Contract Law A Contract is a: ê voluntary ê agreement or promise between ê legally competent parties ê supported by legal consideration ê to perform (or not perform) a legal act

4 11 Contracts Modern Real Estate Practice 17th Edition Types of Contracts ê Express or Implied ê Bilateral or Unilateral ê Executed or Executory

5 11 Contracts Modern Real Estate Practice 17th Edition Elements of a Valid Contract ê Offer and acceptance ê Consideration ê Reality of consent ê Legal purpose ê Legally competent parties

6 11 Contracts Modern Real Estate Practice 17th Edition Validity of Contracts ê Valid: meets all the essential legal elements ê Void: lacks some or all of the essential legal elements ê Voidable: appears to be valid, but may be rescinded or disaffirmed by one or both parties based on some legal principle ê Unenforceable: appears to be valid but neither party can sue the other for performance

7 11 Contracts Modern Real Estate Practice 17th Edition Discharge of Contracts ê Performance: “time is of the essence” ê Assignment: transfer of existing contractual rights or duties ê Novation: substitution of a new contract in place of the original

8 11 Contracts Modern Real Estate Practice 17th Edition Termination ê Breach ê Statute of Limitations ê Partial Performance ê Substantial Performance ê Impossibility of Performance ê Mutual Agreement ê Operation of Law ê Rescission

9 11 Contracts Modern Real Estate Practice 17th Edition Contracts Used in the Real Estate Business ê Listing Agreements ê Buyer Agency Agreements ê Real Estate Sales Contracts ê Options ê Land Contracts or Contracts for Deed ê Leases ê Escrow Agreements

10 11 Contracts Modern Real Estate Practice 17th Edition ê Offer ê Counteroffer ê Acceptance ê Binder ê Earnest Money Deposit ê Equitable Title Sales Contract Issues ê Destruction of the Premises ê Liquidated Damages ê Contingencies ê Amendments and Addendums ê Disclosures

11 Despite technology, real estate is not a paperless industry. A wide variety of documents are needed to establish title, transfer title, and track ownership rights. Chapter 12 Transfer of Title

12 12 Transfer of Title Modern Real Estate Practice 17th Edition Learning Objectives ê Identify the basic requirements for a valid deed ê Describe the seven fundamental types of deeds ê Explain how property may be transferred through involuntary alienation ê Distinguish transfers of title by will from transfers by intestacy

13 12 Transfer of Title Modern Real Estate Practice 17th Edition Voluntary Alienation ê A grantor conveys property to a grantee ê A grantee receives property from a grantor ê A deed is the instrument that conveys property from a grantor to a grantee

14 12 Transfer of Title Modern Real Estate Practice 17th Edition Requirements for a Valid Deed ê Grantor with legal capacity to execute the deed ê Identifiable, named grantee ê Recital of consideration ê Granting clause ê Habendum clause ê Accurate legal description of the property conveyed ê Exceptions or reservations ê Signature of the grantor ê Delivery and acceptance

15 12 Transfer of Title Modern Real Estate Practice 17th Edition Types of Deeds ê General warranty deed ê Special warranty deed ê Bargain and sale deed ê Quitclaim deed ê Deed executed pursuant to court order ê Deed in trust ê Trustee’s deed ê Reconveyance deed

16 Modern Real Estate Practice 17th Edition 12 Transfer of Title

17 Modern Real Estate Practice 17th Edition 12 Transfer of Title

18 Modern Real Estate Practice 17th Edition Transfer of Deceased Person’s Property ê Transfer of title by will ê Transfer of title by descent ê Probate proceedings

19 The recording of property ownership is a serious undertaking, and the storage and maintenance of ownership and title records is a function of government. Chapter 13 Title Records

20 13 Title Records Modern Real Estate Practice 17th Edition Learning Objectives ê Identify the various proofs of ownership ê Describe recording, notice and chain of title issues ê Explain the process and purpose of a title search ê Distinguish constructive and actual notice

21 13 Title Records Modern Real Estate Practice 17th Edition Public Records ê Recording: the act of placing documents in the public record ê Notice: constructive, actual and inquiry ê Priority: the order of rights in time ê Chain of title: the record of a property’s ownership ê Title Search and abstract of title ê Marketable title

22 13 Title Records Modern Real Estate Practice 17th Edition Proof of Ownership ê Certificate of Title ê Abstract and Attorney’s Opinion of Title ê Title Insurance êStandard Coverage êExtended Coverage êOwner’s Policy êLender’s Policy ê Torrens System

23 This financing chapter focuses on the documents and concepts involved in real estate lending. Chapter 14 Real Estate Financing: Principles

24 14 Real Estate Financing: Principles Modern Real Estate Practice 17th Edition Learning Objectives ê Identify the basic provisions of security and debt instruments: promissory notes, mortgage documents, deeds of trust and land contracts ê Describe the effect of discount points on yield ê Explain the procedures involved in a foreclosure ê Distinguish between lien and title theories ê Explain the three methods of foreclosure

25 14 Real Estate Financing: Principles Modern Real Estate Practice 17th Edition Mortgage Law ê Mortgagor = Borrower ê Mortgagee = Lender ê Title Theory ê Lien Theory ê Intermediate Theory

26 14 Real Estate Financing: Principles Modern Real Estate Practice 17th Edition Security and Debt ê Hypothecation ê Promissory Note êInterest êUsury êLoan Origination Fee êDiscount Points êPrepayment Penalty

27 14 Real Estate Financing: Principles Modern Real Estate Practice 17th Edition Mortgages or Deeds of Trust ê Duties of the Mortgagor or Trustor ê Default ê Assignment ê Release ê Tax and Insurance Reserves êFlood Insurance Reserves ê Assignment of Rents ê “Subject to,” Assumption or Novation ê Alienation ê Recording and Priority

28 Modern Real Estate Practice 17th Edition 14 Real Estate Financing: Principles

29 Modern Real Estate Practice 17th Edition 14 Real Estate Financing: Principles

30 Modern Real Estate Practice 17th Edition Land Contracts ê Contract for Deed or Installment Contract ê Other financing may not be available ê Buyer = vendee ê Seller = vendor ê Owner Financing

31 14 Real Estate Financing: Principles Modern Real Estate Practice 17th Edition Foreclosure ê Judicial ê Nonjudicial ê Strict ê Deed in Lieu of Foreclosure ê Redemption êEquitable êStatutory ê Deed to Purchaser at Sale ê Deficiency Judgment

32 Modern Real Estate Practice 17th Edition 14 Real Estate Financing: Principles

33 This chapter focuses on the institutions and logistics of real estate lending. Banks are among the lending institutions involved in the real estate financing process. Chapter 15 Real Estate Financing: Practice

34 15 Real Estate Financing: Practice Modern Real Estate Practice 17th Edition Learning Objectives ê Identify the types of institutions in the primary and secondary mortgage markets ê Describe the various types of financing techniques available to real estate purchasers and the role of government financing regulations ê Explain the requirements and qualifications for conventional, FHA and VA loan programs ê Distinguish among the different types of “creative” financing techniques that address borrowers’ different needs ê Review legislation affecting real estate financing

35 15 Real Estate Financing: Practice Modern Real Estate Practice 17th Edition Real Estate Financing Market ê Federal Reserve System êDiscount Rates ê Primary Mortgage Market êThrifts, savings associations, commercial banks êInsurance companies êCredit unions êPension funds êEndowment funds êInvestment group financing êMortgage banking companies êMortgage brokers

36 15 Real Estate Financing: Practice Modern Real Estate Practice 17th Edition Real Estate Financing Market ê Secondary Mortgage Market êFannie Mae êGinnie Mae êFreddie Mac

37 15 Real Estate Financing: Practice Modern Real Estate Practice 17th Edition Financing Techniques ê Straight Loans ê Interest-Only Mortgages ê Balloon Payment Loans ê Amortized Loans ê Adjustable-Rate Mortgages (ARMs) ê Growing-Equity Mortgages (GEMs) ê Reverse-Annuity Mortgages (RAMs)

38 Modern Real Estate Practice 17th Edition 15 Real Estate Financing: Practice

39 Modern Real Estate Practice 17th Edition 15 Real Estate Financing: Practice

40 Modern Real Estate Practice 17th Edition 15 Real Estate Financing: Practice

41 Modern Real Estate Practice 17th Edition Loan Programs ê Conventional Loans êLoan-to-Value Ratio (LTV) êPrivate Mortgage Insurance (PMI) ê FHA-Insured Loans ê VA-Guaranteed Loans ê Agricultural Loan Programs

42 15 Real Estate Financing: Practice Modern Real Estate Practice 17th Edition Other Financing Techniques ê Purchase-Money Mortgages ê Package Loans ê Blanket Loans ê Wraparound Loans ê Open-End Loans ê Construction Loans ê Sale-and-Leaseback ê Buydowns ê Home Equity Loans

43 15 Real Estate Financing: Practice Modern Real Estate Practice 17th Edition Financing Legislation ê Truth-in-Lending Act and Regulation Z êSpecial creditor definition ê3-day right of rescission êAdvertising trigger terms êPenalties ê Equal Credit Opportunity Act (ECOA) ê Community Reinvestment Act (CRA) ê Real Estate Settlement Procedures Act (RESPA)

44 15 Real Estate Financing: Practice Modern Real Estate Practice 17th Edition Computerized Loan Origination ê Electronic network for handling loan applications ê Scoring and Automated Underwriting


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