Real Estate Principles Tenth Edition Real Estate: An Introduction to the Profession Tenth Edition

Chapter 8 Real Estate Sales Contracts __________________________________

The purpose of the real estate sales contract is to allow time to ascertain that the parties can each perform the terms of the agreement which are written and signed promises to perform.

Earnest Money Deposit Shows buyer’s “good faith” No law governs the amount Earnest money is not consideration Not required for valid contract

Purchase Contracts Provision for buyer’s earnest money deposit Buyer’s offer to purchase Acceptance of the offer by seller Provisions for payment of broker fees Instructions to closing agent Possession

“Time is of the essence” This is a legal term which means the time limits set by the contract must be faithfully observed or the contract is voidable by the nondefaulting party. Due to the legal nature of this term, it should not be used by the real estate agent!

Letter of Intent Used to express the mutual intention to buy, sell, lease, develop, or invest Outlines agreement of terms No obligation is created

Other types of Contracts Installment Contracts Option Contracts Lease with Option to Buy Right of First Refusal Exchange Agreements

Esign Act Effect as of March 1, 2001 Authorizes electronic agreements Allows for electronic signatures State may supercede this legislation

LEAD-BASED PAINT IN HOUSING Approximately three-quarters of the nation's housing built before 1978 contains some lead-based paint. Federal law requires that before a buyer or tenant becomes obligated under a contract for sale or lease the seller or landlord must disclose the possibility of lead- based paint and lead-based paint hazards and provide available reports along with the pamphlet “Protect Your Family From Lead in Your Home.”

TYPE OF HOUSING NOT COVERED Housing built after 1977 (Congress chose not to cover post-1977 housing because the CPSC banned the use of lead-based paint for residential use in 1978). Zero-bedroom units such as efficiencies. Leases for less than 100 days or short-term rentals. Housing for the elderly (unless children live there). Housing for the handicapped (unless children live there). Rentals free of lead & inspected by a certified inspector. Foreclosure sales.

Practicing Law The job of the real estate agent is to determine the business details of the transaction and not to practice law! A real estate license is not a license to practice law.

Deed and Installment Contract Compared DeedInstallment Contract BuyerSeller Deed BuyerSeller BuyerSeller BuyerSeller BuyerSeller Deed

Possible Trading Combinations

Key Terms Binder Counteroffer Default Earnest money deposit Equitable title Installment contract Lease-option Qualified intermediary Right of first refusal Tax-deferred exchange “Time is of the essence”