Module 8: Contract for Sale and Purchase

Module 8: Contract for Sale and Purchase

• Contract for Sale and Purchase: An agreement between two or more parties to buy and sell real estate, enforceable by law.
• Importance: This document governs the entire real estate transaction from signing to closing.
• Statue of Frauds: A law requiring essential terms of real estate agreements to be in writing for enforcement. All aspects related to real property must be in writing.

Basic Contract Principles (Florida)

• Requirements for a valid contract:
  • Legal capacity of the parties (over 18 and mentally competent)
  • Mutual agreement (offer and acceptance)
  • Consideration (exchange of value, promises are valid)
  • Lawful purpose (cannot violate laws or public policy - void if it does)
  • In writing (for enforcement)
• Parole Evidence Rule: Courts will not consider evidence beyond the four corners of the written contract.

Need for a Contract for Purchase and Sale

• Parties enter a contract for purchase and sale to be completed at a later date.

Module 8: Process and Terms Common to K for P&S

• Typical process:

  • Offer made by buyer
  • Acceptance by seller
  • Formal contract created
  • Exchange of signed copies

• Important Considerations:

  • If the seller rejects but later tries to accept, then it is too late.
  • If the seller tries to change the terms, it is considered a new offer.
  • If the seller stalls, and the buyer withdraws, it is too late.
  • Buyer can terminate if the seller continues to stall and buyer also withdraws offer.

• All terms are negotiable: Parties can include any terms they want, except for illegal terms.

Module 8: Legal Consequences of Executing K for P&S

• Florida law: No right to back out once a contract has been signed.
• Passing of risk: Risk of loss (like fire) passes from the seller to the buyer.
• Third party rights: The contract doesn't impact the rights of people not involved (i.e., people with claims like lien holders).

Module 9: Possession

• When possession occurs: Usually occurs at closing.
• Seller stays after closing: The contract may include stipulations on the seller's ability to stay beyond the closing date.
• Purchaser moving in early: In cases of an interim period between closing and moving in, proper lease arrangements need to be made for the period.

Module 9: Purchase Price and Payment Terms

• Fixed price: All amounts to be paid (including deposits) are detailed.
• Method of payment: Use of cash, checks, electronic transfers.
• Earnest money deposit: A deposit required by the buyer but is usually tied to a security and held in escrow by an authorized third party (title, attorney, real estate broker).

Module 9: Quality of Title

• Good and marketable title: The title must be free of liens or encumbrances.

Module 9: Time and Place of Settlement

• Tender: Formal offering required by either party to be ready and willing to fulfill obligations.
• Timely execution: Failure to fulfill obligations within agreed times may result in penalties or damages.

Module 10: Recording and Title Abstracting

• Recording importance: Recording is important when priority problems arise, to resolve who has the first claim to a property.
• Priority problems: Concerns in the event of multiple interested parties, like those who claim first lien on the property (mortgages, etc.)
• Successive transfers of partial & total interest: Determining the priority of interest holders who have had subsequent dealings with the property.
• Abstract (aka Title Report): Complete summary of all documents related; shows a property's history.
• Abstractor (aka Title Examiner): Compiles a property's history from public records.

Module 11: Title Insurance

• Title insurance: Covers risks associated with defects in a property's title, including those that already existed. Covers risks that could have arisen in the past.
• Excluded areas of coverage: things like known risks from inspections or problems found in the current survey.
• Who writes the policies: The company that issues is called an "Underwriter", the ones who sell policies to the public are called "Agents".
• Different types of policies: policies for those who hold a mortgage (lender) and those who hold the property (owner) that cover possible risks.