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

2 ©2013 Kaplan, Inc. 11 Contracts Learning objectives –Identify the requirements for a valid contract –Describe the various types of contracts used in the real estate business –Explain how contracts may be discharged –Distinguish among bilateral and unilateral, executed and executory, and valid, void, and voidable contracts

3 ©2013 Kaplan, Inc. 11 Contracts Contract law –A contract is a voluntary agreement or promise between legally competent parties supported by legal consideration to perform (or not perform) a legal act

4 ©2013 Kaplan, Inc. 11 Contracts Types of contracts –Express or implied –Bilateral or unilateral –Executed or executory

5 ©2013 Kaplan, Inc. 11 Contracts Essential Elements of a valid contract –Offer and acceptance –Consideration –Reality of consent –Legal purpose –Legally competent parties

6 ©2013 Kaplan, Inc. 11 Contracts Validity of contracts –Valid: meets all the essential legal elements –Void: lacks some or all of the essential legal elements –Voidable: appears to be valid, but may be rescinded or disaffirmed by one or both parties based on some legal principle –Unenforceable: appears to be valid but neither party can sue the other for performance

7 ©2013 Kaplan, Inc. 11 Contracts Discharge of contracts –Performance: “time is of the essence” –Assignment: transfer of existing contractual rights or duties –Novation: substitution of a new contract in place of the original

8 ©2013 Kaplan, Inc. 11 Contracts Termination –Breach –Statute of limitations –Partial performance –Substantial performance –Impossibility of performance –Mutual agreement –Operation of law –Rescission and cancellation

9 ©2013 Kaplan, Inc. 11 Contracts Contracts used in the real estate business –Listing Agreements (also known as brokerage engagement agreement in Georgia) –Buyer agency agreements –Real estate sales contracts –Options –Land contracts or contracts for deed –Leases –Escrow agreements

10 ©2013 Kaplan, Inc. 11 Contracts Contract details –Sales price and terms –Legal description –Condition of tile and form of deed –Tile evidence and title defects –Land contracts or contracts for deed –All terms and conditions between the parties –Contingencies

11 ©2013 Kaplan, Inc. Sales Contract Issues Offer Counteroffer Acceptance Binder Earnest money deposit Equitable title Destruction of the premises Liquidated damages Parts of a sales contract Contingencies Amendments and addendums Disclosures 11 Contracts