CHAPTER 6

CONTRACTS AND TITLE CLOSING

This chapter introduces students to the types and contents of contracts that are common in real estate sales transactions and discusses the title closing process.

Necessary elements of a contract:Offer and acceptanceConsiderationCapacity of partiesLawful purposeWriting requirement

Statute of fraudsPartial performance

Real estate sales contracts:Groundwork for negotiating a sales

contractNegotiation stage

Sales contract (Figure 11.1)Description of property and fixturesPurchase priceTitleEscrowProvisions for earnest moneyProperty destructionMiscellaneous provisionsBroker's commissionConclusion to the contract

Performance and breach of contract:BreachSpecific performanceRemedies for breach of contract

Option-to-buy contracts:A contract that gives one party the right, but

not an obligation, to purchase a property within a specified time horizon at a specified price.

Contract for Deed(Land Contract or Agreement for Deed)Installment payments over timeSeller retains title until the agreed amount is

paid.If payment is missed, buyer may lose

property; however, many states say buyer is entitled to a refund of their equity (but not interest paid).

Title Closings:Buyer’s responsibilities

Financing the purchase Obtaining a title opinionHaving the property surveyedObtaining property insuranceInspecting the propertyOther responsibilities

Title Closings: con’tSeller’s responsibilities

Preparing the deedRemoving encumbrances Paying the seller’s loanObtaining a termite bondOther responsibilities

Title Closings: con’tCost at Closing

Buyer’s costsSeller’s costsPro-ration of homeowner’s costs

Understanding the settlement statementHUD Uniform Settlement Statement (Fig. 15.1)Example

Parties present at closing Events at closingEscrow closing