Real Estate Principles
UNL Finance 382
Chapter 8
Real Estate Sales Contracts

Real Estate Principles, 11th Ed., Charles J. Jacobus
	© 2010 by Cengage Learning

Contracts used in Real Estate

Leases, Rent to Own, Lease Purchase
Real Estate Sales Contracts
Land Contracts or Contracts for Deed
Escrow Agreements
Listing Agreements
Buyer Agency Agreements
Options
Exchange Agreements
Rights of Refusal

Elements of Real Estate Purchase Agreements

C			Parties:
	Offeror: makOr of offer
	Offeree: person rEcEiving offer
L							
Oa							
C							

Signed by the party to be charged

A Properly Drafted Sales Agreement Will

                    the parties to transaction
Define                         and obligations
Commit parties to terms of deal

The Sales Agreement:
Also known as: P                  Contract, Deposit Receipt, O                  to P                      , Purchase agreement	
Four key parts: 
	earnest money deposit	
	offer to purchase	
	acceptance of offer	
	payment of broker commission*	

Purchase Contract Provisions

Earnest Deposit:
Parties N                                   amount (most seller’s agents suggest 2%)
No law sets amount
Show buyer’s earnest I                                     
Possibility of losing deposit as “L                         damages”
Not required for valid contract
Deed and Condition of Title:
	Require “M                                            Title”
	Type of  Deed:	
	Title Insurance/Abstract
Closing & Agent:
	E                              Agent	
	 	May be: Broker, attorney, transactional agent, title company
	May occur by:
		Closing meeting	
		Closing escrow	
Prorations:
	Define Methods of Proration and dates of proration

Inspections
Termite
	HVAC
	VA/FHA
	Whole House/Roof
	Hazardous materials
Possession
Conditional on financing
Property Damage
	Repairs/replacements
	Equitable Title:
		Seller holds “Naked Title”
		Buyer is entitled to specific performance 

Time is of the essence:
	Legal term of art. Does not necessarily mean “hurry up” 
	Mutual obligations must be performed mutually
Time limits and obligations must be faithfully observed or contract voidable
This provision is best left to lawyers to use

Contingencies

Marketable Title, Easements and Restrictions
Financing
Inspections (condition of premises)
Termites, Roof, Structural, HVAC, Compliance with Building Codes, Lead Paint, Radon, Water/Sewer 
Sale of Current home
Zoning (if change of use is being sought)

Addendums and Counteroffers

Addendums 	(additional document                            to document by reference)
Typical:
	VA & FHA clauses
	Hazardous waste
	Other “additions” to the contract

Effect Counteroffers
	Offer becomes  N             and V                  
	Return of earnest deposit

How to Make a Counter Offer

	1.		 in totum
	2. Strike and insert 	 changes.
	3. Draft and attach:	
	4. Submit 	

Letter of Intent & Binder

Outlines agreement of terms
Used to express the mutual intention to buy, sell, lease, develop, or invest
No obligation is created

Binder:
Agreement on Basics – Binding on Parties
Further Negotiations on terms

Disclosures
Defects
	Latent	
	Patent	

On Nebraska Residential Property
	Seller’s Disclosure of Condition of Property

Federal clauses:
	Amendatory language on FHA and VA financed 
	Insulation disclosures (new housing)

Lead Paint
	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 of lead_based paint and lead_based paint hazards

Provide available reports along with the pamphlet “Protect Your Family From Lead in Your Home.”

Exemptions:	
	
Agents Must Avoid 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.  

Agents should not:
	Give advice on which deed form to use
	Give advice on how to take title
	Give advice on tax implications of sale
	Give advice about particular clauses of contracts

Key Terms
Binder
Counteroffer
Default
Earnest money deposit
Equitable title
Installment contract
Lease_option
Letter of Intent
Right of first refusal
Tax_deferred exchange
“Time is of the essence”