EQUITABLE CONVERSION
What is the definition of Equitable Conversion
When the contract is signed, the buyer gets equitable title and the seller has legal title. On closing day, they merge and the buyer gets both legal and equitable title (full ownership).
What is the definition of selling homes?
The sale of a home is a contract between the real estate agent and the seller of the property.
The executory period is
the time between formation of the real estate contract and closing. The executory period gives parties to the contract time to investigate the title, find a new place to live and secure financing.
What do options do for people in real estate?
give a person a right to buy property at a certain price in the future.
What is the definition of Merger
Once a buyer accepts a deed at closing, there is no more contractual relationship. The seller is no longer liable for anything in the contract once a Lawfully Executed and Delivered Deed is issued. The deed now controls and the buyer can no longer sue on the contract, only covenants in the deed itself.
After a contract has been signed. How does the law treat the contract?
The buyer has the property and the money
What is the Seller considered when selling a home?
The seller of the home is the principal.
what is a deed?
The seller conveys title to the buyer by execution of deed in exchange for the buyer paying the purchase price.
Options typically need consideration to be valid unless what?
unless they are part of a lease
What is an example of Collateral Promises
The contract says, “ After I give you the deed, you still agree to mow my lawn every day and this promise will survive the merger.” – This will survive since it doesn’t contradict anything in the deed and is a collateral issue unrelated to the deed or title to the land.
If the property is destroyed or taken by the government (eminent domain) after the contract is signed but before closing, then what happens?
the buyer bears the risk of loss.
What does "Ready, willing, and able" mean?
This means that the homeowner must pay the commission even if they refuse to do business with a ready, willing, and able buyer that the agent finds. The buyer has to agree to all the essential terms that the seller wants (i.e. closing date, listing/asking price).
What is the Doctrine of Part-Performance?
If a buyer takes possession of the property and either 1) pays all or part of the purchase price, and/or 2) makes substantial improvements, then the seller cannot say there was no writing. Part performance destroys the statute of frauds requirement for real estate contracts.
The right of ____________ gives the buyer the right to purchase property whenever the owner decides to sell.
first refusal
When will a collateral issue apply?
A collateral issue will apply after merger if it is unrelated to the deed or title to the land. The merger doctrine does not apply to collateral promises.
What happens if the Seller Dies After the Contract is Signed
If the seller dies after the contract is signed and devised his real property to his heirs, the heirs get money not the land. At that point in the sale, the seller had legal title meaning he had cash which is personal property.
Unless the agency agreement states otherwise, the agent is entitled to commission if the agent can establish that they found a what?
ready, willing, and able buyer who agreed to all the materials terms of the sale.
what is the side rule for, "satisfy the statute of frauds":
Contract for the sale of real estate may be rescinded orally.
For the right of first refusal to kick in, there must be an offer from a third party. Then the buyer has the right to
1) make the same offer, or 2) refuse to make an offer and lose the home to the new buyer.
What are the Seller Duties
The seller must disclose known latent defects; AND
The seller cannot take affirmative steps to conceal defects; AND
Using “as is” language will not protect the seller from non-disclosure tort claims
If a seller is unaware of defects then they can’t be found liable for nondisclosure.
What is the exception for The Uniform Vendor and Purchase Act
is adopted by some states and changes the risk of loss rules for equitable conversion. The UVPA says that so long as the buyer is without fault then the risk of loss remains with the seller if the home gets destroyed before the buyer closes and take possession.
What is the agent’s duties to the buyer
Fiduciary Duty – The agent has a fiduciary duty to the buyer (a duty of loyalty).
Duty to disclose – The agent must disclose like whether the prospective buyer is family member.
The agent cannot represent both the buyer and the seller without full disclosure to all parties involved in the transaction.
BLANK is a phrase in the contract which makes timing material.
Time is of the Essence Clause
Side Note: If the sale is not completed by the time stated, then the buyer does not have to pay the seller. These clauses are valid but must have an clear and explicit deadline in the actual contract itself.
What are two out of the three things you should know about options?
1) Options are subject to the RAP unless they are exercisable only under a lease term (i.e. at the end of your 12-month lease, you have the option to purchase this property . . . there is not uncertainty here, so there is no RAP. When there is certainty it is not subject to RAP).
2) Options are subject to the Statute of Fraud.
3) Options typically need consideration to be valid, but if they are part of a lease then they don’t – i.e. “At the end of your 12-month lease, you have the option to purchase this property” – this is valid without separate consideration because the consideration you paid for the lease itself is enough.
What is the implied warranty of habitability?
The implied warranty of habitability extends to new homes. The implied warranty extends to remote grantees, so there is no privity of contract required, meaning the second person who buys the home can still bring a claim for breach of the implied warranty of habitability for latent defects so long as they appeared within a reasonable time after construction.