B428 Real Estate Day 4 Purchase and Sale Agreements, Deed, Mortgages, Escrows and Closings

Property Owner Liability Guests Guests Business Invitees Business Invitees Trespassers Trespassers What is the standard of care owed?

Purchase and Sale Agreement Agreement to purchase and sell land to close on a future date. At the closing title is transferred in return for payment of the purchase price.

The Installment Land Contract Key element: Legal title is not transferred until the purchase price has been paid in full. Questions: What happens in the meantime? Why is the Buyer concerned? How would the Buyer give notice?

Installment Land Contract continued… In many cases an Escrow is established. Payments are made and disbursed through the Escrow Agent. Deeds, both warranty and quitclaim are deposited. Notice of default I given to the Escrow Agent…

Basics of Deeds Delivery and acceptance Delivery and acceptance Acknowledgement Acknowledgement Recording Recording Contents Contents PartiesParties ConsiderationConsideration Words of conveyanceWords of conveyance DescriptionDescription RestrictionsRestrictions HabendumHabendum SignaturesSignatures

Interests in real property are transferred by Deed. Interests in real property are transferred by Deed. Deed gives proof of transfer from grantor to grantee.Deed gives proof of transfer from grantor to grantee. Deed establishes the quality of the estate transferred.Deed establishes the quality of the estate transferred. Deed defines the quantity of real property transferred.Deed defines the quantity of real property transferred.

Types of Deeds 1. Warranty Deed 2. Special Warranty Deed 3. Grant Deed 4. Quitclaim Deed 5. Gift Deed 6. Personal Representative’s Deed

Which deed would work best? 1. Sam Smerch wants to transfer part of the ranch to his beloved grandchildren each December as part of his estate plan. 2. Delores and David Diligent are buying their first home in Shangri-Lala Acres. 3. Gwen Gnashteeth divorced her husband Albert several years ago. The divorce settlement agreement granted Gwen the home, but there was never any deed filed.

Which Deed continued… 4. Elvin Ernstbrow was appointed personal representative of his father’s estate. Under the will the farm goes to his sister, Edwina, and the cabin in Island Park goes to his brother, Erewon. 5. Chuck Cashierscheck formed a limited liability company with his former college roommates, Carl Couchpotato and Mel Microwave. Chuck’s capital contribution was to be a five-acre lot in the suburbs of Mud Lake, Idaho.

The Promissory Note Represents the obligation to pay Represents the obligation to pay Interest and principal Interest and principal Prepayment Prepayment Default Default InterestInterest PenaltiesPenalties Security Security Signature Signature

Deed of Trust Pledge of real property as security Pledge of real property as security Parties: Grantor, Trustee and Beneficiary Parties: Grantor, Trustee and Beneficiary When recorded creates a lien on the property When recorded creates a lien on the property Default: Nonjudicial foreclosure Default: Nonjudicial foreclosure Right to reinstate Right to reinstate

Mortgages Pledge of real property as security Pledge of real property as security Parties: Mortgagor-Mortgagee Parties: Mortgagor-Mortgagee Default requires judicial foreclosure Default requires judicial foreclosure Usually a right of redemption Usually a right of redemption

Provisions of Mortgages and Deeds of Trust 1. Duties of Mortgagor or Grantor A. Pay the note in accordance with its termsA. Pay the note in accordance with its terms B. Pay real estate taxesB. Pay real estate taxes C. Maintain insuranceC. Maintain insurance D. Keep the property upD. Keep the property up E. Seek lender consent for alterationsE. Seek lender consent for alterations 2.Default/Acceleration 3.Assignment of Mortgage 4.Release-Reconveyance 5.Taxes and insurance reserves 6.Assignment of rents 7.Due on sale clause or restraint on alienation

The Players Listing Agent Selling Agent EscrowAttorneyLender Title Company SellerBuyer

Closing Expense Transfer taxes Third Party Fees Survey Title Insurance Appraisal RE Commissions Attorney’s Fees Escrow Fees

Closing Expenses Continued… Loan Fees Loan Fees Origination FeesOrigination Fees Assumption FeeAssumption Fee Discount PointsDiscount Points Prepayment Penalty (existing loan)Prepayment Penalty (existing loan) Mortgage InsuranceMortgage Insurance

Who pays? Transfer taxesSeller Third Party Fees SurveySeller Title InsuranceSeller/Buyer AppraisalBuyer RE Commissions Seller/Buyer Attorney’s Fees Seller/Buyer Escrow FeesSeller/Buyer

Who pays continued… Loan Fees: Origination FeesBuyer Assumption FeeBuyer Discount PointsBuyer/Seller Prepayment Penalty (existing loan) Seller Mortgage InsuranceBuyer

Proration The division of expenses… The division of expenses… Property taxes Insurance

Escrows Involving a Third Party Involving a Third Party Can hold documents and perform collection and disbursal functions Can hold documents and perform collection and disbursal functions

Assignment Read an article or other written piece on one of the following: Read an article or other written piece on one of the following: Income propertiesIncome properties Tax strategiesTax strategies Tax deferred exchangesTax deferred exchanges Real estate loansReal estate loans Landlord/tenant relationshipsLandlord/tenant relationships Write a one page summary and be prepared to describe what you found to the class