1. Thomson/South-Western©2008 Chapter 8 Real Estate Sales Contracts _______________________________________

2. Thomson/South-Western©2008 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.

3. Thomson/South-Western©2008 Earnest Money Contracts 1.Must be in writing. 2.Must be signed by parties to be charged. 3.Must be evidence to convey an interest. 4.Must have identifiable vendor & vendee 5.Must identify property to be conveyed.

4. Thomson/South-Western©2008 Texas real estate agent must use standard forms promulgated by TREC - forms available at www.TREC.state.tx.uswww.TREC.state.tx.us

5. Thomson/South-Western©2008 What is in 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 details

6. Thomson/South-Western©2008 “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!

7. Thomson/South-Western©2008 Disclosures Rollback taxes Pipelines Lead-based paint Water districts Annexation Property owner’s association Property Located in a Certificated Service Area of Utility Service Provider

8. Thomson/South-Western©2008 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 lead based paint and lead based paint hazards and provide available reports along with the pamphlet “Protect Your Family From Lead in Your Home.”

9. Thomson/South-Western©2008 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.

10. Thomson/South-Western©2008 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.

11. Thomson/South-Western©2008 DeedInstallment Contract BuyerSeller Deed BuyerSeller BuyerSeller BuyerSeller BuyerSeller Deed Deed and Installment Contract Compared

12. Thomson/South-Western©2008 Other Methods Option Contracts Repossession Lease with Option to Buy Right of First Refusal 1031 Exchanges Delayed Exchanges –45 days to identify property –180 to complete purchase –Must use intermediary

13. Thomson/South-Western©2008 Possible Trading Combinations

14. Thomson/South-Western©2008 Key Terms “As Is” Counteroffer Default Earnest money deposit Equitable title Installment contract Lease-option Right of first refusal Tax-deferred exchange “Time is of the essence”