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Property II
South Texas College of Law Houston
Festa, Matthew J.




Ch. 7 – The Land Transaction

Intro to Buying and Selling Real Estate

Review: property rights include:

– Possess

– Use

– Exclude

– Alienate


Brokers = fiduciary of the seller

– Broker has legal obligation to make full, fair, and prompt disclosure to client of all facts which may be material

o Fiduciary – someone who is under an obligation to put the other party’s interests before their own; statutes implemented imposing a fiduciary duty on brokers

– Breach of duty:

o Broker liable for any consequential loss

o Precludes recovery of commissions

– Licari v. Blackwelder – broker’s subagent violated fiduciary duty to seller by not disclosing higher offer; fiduciaries have a duty of fidelity and good faith with respect to the principal, and this also applies to subagents of the broker

Types of brokers

– Listing broker – lists property on MLS; duty to seller

o Has duty to inform seller how much buyer is willing to pay

– Selling broker – takes buyer to look at property, meet seller, etc.; duty to seller

MLS – multiple listing service

Real Estate Contracts

Real estate contracts are executory

– As opposed to other Ks where the contract becomes binding at the time of signing

– After K is signed there is a due diligence period

– Title transferred at closing


– Look, negotiate

– Sign K

– Executory period (when inspections, etc. occur)

– Delivery of deed

Multiboard Residential Real Estate Contract includes:

– Purchase price

– Legal description of property

o Lot #, block #, acreage, legal name of plot

– Good title by seller

– Warranties of title

– Date of transfer of possession

– Prorations of expenses

– Assignment of risk

– Itemization of furnishings, fixtures, and personal property included in K

– Escrow agreement

o Escrow = neutral third party

– What happens if K falls through

– Signatures

Statute of Frauds; Texas Statute of Frauds

Statute of Frauds

– Generally requires real property transactions to be reduced to writing; must include:

o Signature of the party to be bound

o Description of real estate

o Price

Violating Statute of Frauds

– If Statute of Frauds violated, injured party can sue for specific performance in equity through part performance doctrine; requires:

o Satisfactory evidence of the K, and

§ “Performance ‘unequivocally referable’” to K

o Detrimental reliance

§ Serves as evidence of K and reason for equity

– Hickey v. Green – buyer and seller had oral agreement to purchase property; buyer sent seller deposit check which was signed by buyer, described the property, and indicated the price (satisfying statute of frauds and barring buyer from backing out); seller backed out; buyer sued for specific performance, which was granted and affirmed on appeal

s – modern trend

– State statutes place duty on seller to disclose defects:

o Known to seller

o But not readily observable to buyer

o Defect must be material

§ Objective – whether a reasonable person would attach importance to it in deciding to buy; or

§ Subjective – whether defect has subjective impact on value of property

It’s not one test or the other, it’s whether it was objectively reasonable for the seller to disclose the information

– Nondisclosure = fraud (Johnson v. Davis)

What “material” defects must be disclosed?

– Structural problems = material

– Environmental/HAZMAT problems

o On the property = probably material

o In the area = maybe material

– Sex offenders or criminals in the area

o Subjectively can be material

o Courts, as a public policy measure, would be reluctant to enforce a duty to disclose these kinds of defects (most of this information is public knowledge)

– Leaky roof = material (because it’s something a reasonable person would consider important)

– Allergy to animal hair = possibly material (if buyer had multiple conversations with seller about this allergy, it would be reasonable for the seller to have disclosed that they had animals in the house)