Contract to Purchase 1 Contracts to Purchase Real Estate Real Estate I Mike Brigner, J.D.

Contract to Purchase 2 Statute of Frauds Contracts for the transfer of an interest in real property are contracts falling under the STATUTE OF FRAUDS (R.C ), which requires certain contracts to be in writing and signed by the party to be charged in order to be legally enforceable.

Contract to Purchase 3 What they want; what they really, really want Buyers want: Minimum deposits Contingencies: attorney approval, financing, zoning, inspection Warranties from seller Limit seller’s remedies Specific performance or damages if seller defaults Sellers want: Large deposits No contingencies allowing buyer legal ways to avoid the contract Minimum warranties Limit buyer’s remedies Specific performance or damages if buyer defaults

Contract to Purchase 4 Need a lawyer for transaction? The Right Way Attorney for both Custom contract Every issue covered Issues spelled out Clean final form Time to deliberate Negotiations Problems identified “up-front” The Typical Way No attorneys Form contract Most issues covered Shorthand Interlineations Pressure for speed Snap decisions Problems litigated after-the-fact

Contract to Purchase 5 Payment Terms Contract Terms Dates Parties Quality of Title Conditions / Inspection Possession Closing / Fees CHECK LIST

Contract to Purchase 6 Dates Closing date Inspection dates Possession date Effective date? After “shuttle diplomacy” between buyer & seller, what is date of contract? When last required party signs. Date by which buyer must obtain financing Date by which seller must prove good title Paralegal must track them all!

Contract to Purchase 7 Parties Legal name of each party Marital status of buyer –Single –Married, buying jointly –Married, buying individually Name under which seller owns property Marital status of seller (if married, spouse must sign away any rights to property) Exact spellings are critical! If party not a natural person, must ID legal entity of party + person with authority to sign

Contract to Purchase 8 Payment terms Purchase price “Earnest money” deposit –How held, –How interest is handled –Escrow account, escrow agent Cash sale or financed sale? –Contingent on financing by buyer? –“Diligent effort” to obtain financing required? –Seller to finance any part of price? Require certified checks Closing costs: who pays what?

Contract to Purchase 9 Options for financing Cash sale Buyer assumes seller’s mortgage –(used when current rates are high) –Beware “Due on Sale” clause in existing mortg. Sale subject to existing mortgage –(same as assumption, but seller remains primarily liable under mortgage note)

Contract to Purchase 10 Options for financing Purchase money mortgage sale –Seller finances all or a portion of the purchase price –Title transfers to buyer –Buyer executes a mortgage in favor of seller Land contract –Buyer takes possession, makes payments for years, usually a balloon payment at end –Title stays in name of seller until final payment

Contract to Purchase 11 Quality of title Buyer wants title free from liens, restrictions & encumbrances Buyer wants “marketable and insurable” title Marketable title = Title that a prudent purchaser with full knowledge of the facts would accept Buyer wants a General Warranty Deed Title search: usually goes back 40 years Seller pays for title search Title insurance: buyer pays for Failure of seller to produce good title means failure of contract and refund of all deposits

Contract to Purchase 12 Conditions / inspections Roof & termite inspections typical Full inspection for defects advisable Seller required to repair defects found? Or, either party may cancel contract without liability if defects found? Ohio requires disclosure of known defects –R.C and Ohio Dept of Commerce form –Not a substitution for a full inspection Seller can purchase a home repair warranty for benefit of buyer, covering named defects

Contract to Purchase 13 Possession Possession at time of closing? 30 days after closing? Occasionally, possession is before closing Risk of Loss: Who is responsible for damages to premises from date of contract to date of closing? From date of closing to date of possession?

Contract to Purchase 14 Closing / fees Date for closing Damages for delay? Usually, a reasonable delay doesn’t allow either party out of the contract But, if “time is of the essence” language, the non-tardy party may back out of contract Who pays what at closing? All fees and closing costs should be covered in contract

Contract to Purchase 15 Special provisions Income-producing property: who gets $? Contract subject to sale of other property Condominiums –Buyer gets to inspect condo documents –Condo association approval may be required Sale subject to re-zoning Option contract: Buyer pays a fee to get exclusive right, or first right, to purchase real estate within set amount of time

Contract to Purchase 16 Federal Fair Housing Act 42 U.S.C. § 3604 (2001) Discrimination in the sale or rental of housing & other prohibited practices [I]t shall be unlawful ‑‑ (a) To refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin. (b) To discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of race, color, religion, sex, familial status, or national origin.

Contract to Purchase 17 Ohio Fair Housing Law It is unlawful for anyone to: Refuse to sell real estate; Refuse to lend money for purchase; Refuse to rent, sublet, negotiate, question, advertise, or otherwise discriminate because of race, color, religion, sex, familial status, ancestry, disability, or national origin R.C. 4112(H)

Contract to Purchase 18 Contracts to Purchase Real Estate Concluded Thank you Mike Brigner, J.D.