The Sale of Land – Chapter 7
Buying and Selling a House / Land Transaction (2 step process)
1. K of sale (between K and Closing)
both buyer/seller sign written (statute of frauds) K (pg 454)
Buyer responsibilities:
Get mortgage (section 5)
Apply for mortgage
Do title search
If defective, Buyer notify seller and give him an opportunity to cure
Pay money- earnest money (hold in escrow)
Inspections (section 11)
They can get out of K if they can’t reach agreement about seller fixing/lowering P
Fixtures and Personal prop (section 3)
Seller
Good & Merchantable (marketable) title – prove that there’s no major Encumbrances (restraints on prop- liens, easements, covenants) & seller has land in FS
Discovered by doing title search
During this time the risk of Loss is on the BUYER
Essential terms of a K to purchase real property:
Name of buyer, seller, descrip of prop, agreed upon terms (such as price) and conditions
2. Closing
Title Passes, If Deed validly executed and delivered
When title passes, land sale K is merged into deed (along w/ implied warranty of marketability)
Buyer:
Buyer signs mortgage, gives seller check
Only suit Buyer can bring after title passes is an express covenant in the deed
Buyer must record deed! To protect against subsequent good faith purchasers
The Deed
Short bc all the complex issues were handled at K of Sale
Deed only need to contain: price & who’s bound & descrip of property (address)
Requirements for common law:
Traditional:
Signed by the buyer
Delivered by the lawyer
Sealed in the old days
Seller gives Warranty:
Special warranty deed
General warranty deed: no encumbrances
Quitclaim deed:
Covenants
Present Covenants:
Seisin: grantor promises that he owns prop
Right to convey
Against encumbrances
Buyer can sue if these are violated
Future Covenants: if a prob in future, seller will fix
Gen warranty, quiet enjoyment, further assurances
Statute of Lim- Discovery rule: clock starts to tick whenever you discover
O’Keeife/ Brown v. Lober
Fraud/forgery?
Forger pretending to be OO à buyer à GFP
OO returns and wants his house back
GFP will lose house bc he dealt with scoundrel
OO à buyer (fraud) à GFP
Deed mistakenly says deed for next door
OO will lose
Problem: buyer and GFP could be in cahoots!
If we put the burden of the law on the party who deals w/ the scoundrel, then gives incentives to look for them
Notaries can prevent forgery
K of Sale, before Closing
Brokers
Seller often signs K w/ broker to have him list house/show house
Makes 5-8% commission on selling price
Owe a fiduciary duty to client!!!
2 legal issues w/ brokers:
Broker is entitled to a commission if he produces a customer ready, able, and willing to buy o
ld fashioned rule
Traditional nonfeasance: as long as you didn’t say anything that was a lie, no duty to disclose
Stambovsky v. Ackley- Haunted house. Seller created a condition that materially altered the value of the K for sale, and the condition was uniquely w/in the knowledge of the seller. Failure to disclose the fact that it was haunted, allows Stambovsky to rescind K.
Caveat Emptor only applies where buyer has equal opportunity to discover info about the house, D took unfair advantage.
another way to beat caveat emptor is to show that… seller actively concealed a material fact
New Rule: Johnson v. Davis: where seller of a home knows of facts materially affecting the value of the prop, which are not readily observable, and are not known to the buyer, the seller is under a duty to disclose them to the buyer.
Seller represented that roof didn’t leak
Not in deed: however many courts have said continue on after
Remedies for breach of K of Sale
For buyer/seller
For buyer: rescission, SP, $ to re-buy
SP is always in the discretion of the court
For seller: kept deposit/earnest money
