TRANSFERS OF LAND
Buying and Selling Real Estate
· There are 4 basic stages to a real property sales transaction
o Locating the buyer
o Negotiation the contract
o Preparing for the closing and
o Closing the transaction
Autonomy of a Sales Transaction
· Locating the Buyer
o Seller and broker execute a written listing agreement that entitles the broker to a commission if he obtains a buyer willing to purchase Greenacre for a certain price.
o Commission is usually 6% of the sales price
o Broker places advertisements, has open houses and attacks potential buyers.
· Negotiating the Contract
o Buyer offers a certain price to purchase Greenacre by executing a written contract that satisfies the statute of frauds and submitting it to Seller for signature
o Buyer will provide a good faith deposit.
· Preparing for the Closing
o Inspecting the property
o Negotiating financing
o Evaluating title
· Closing the Transaction
o The sales contract is fully and finally performed at the closing
o Title is conveyed to the buyers by the sellers deed
o The purchase loan is made by the lender
o The sales price if paid to the seller
o The commission is distributed to the brokers
ROLE OF THE ATTORNEY
· Negotiating the deal
· Drafting the sales contract
· Evaluating title documents
· Issuing a title opinion
· Advising the client about zoning, tax, and other issues
· Negotiating the terms of financing
· Helping the client fulfill contract conditions
· Handling the closing
· Negotiating or litigating any disputes that arose
REAL ESTATE BROKERS
· Under the traditional common law a broker earns a commission when a buyer who is ready, willing and able to purchase at the stated price under stated conditions is procured, or, when a buyer is procured and the two parties agree on the terms of the transaction and all conditions are satisfied by the buyer
· The unauthorized practice of law?
o Broker has replaced the attorney as the key professional in home sales transactions.
o Broker will many times negotiate the deal, prepare contracts, handle the transaction until closing and in some places supervise the closing
· Duties of broker
o A broker owes a variety of fiduciary duties to the principal, including the duties of care, skill, diligence, loyalty and good faith
o Technically the cooperating broker is usually deemed a subagent of the listing broker
§ Making the client broker an agent of the seller
· Broker’s right to Commission
o Governed by the listing agreement
§ Listing agreement is a contract between the seller and the listing broker that authorizes the broker to procure a buyer for the property in return for a specified commission
o (1) Open Listing
§ the listing broker gets a commission ONLY if the listing broker procures the buyer
§ obligates the seller to pay a commission if the broker is the first person to procure a ready, willing and able buyer for the property.
o (2) Exclusive Right to Sell
§ Broker receives a commission if anyone – including the seller – procures a ready, willing, and able buyer
o (3) Exclusive Agency Listing
§ If broker finds the buyer, then they are entitled to full commission
§ Broker is designated as the only broker authorized to procure buyers
§ He is entitled to a commission if any broker produces a ready, willing, and able buyer, but not if the seller procures a buyer.
ú if the buyer is obtained by the seller himself, then the listing broker is not entitled to a commission
· Licari v. Blackweldger
o Listing broker consults another broker and enters into a broker agreement with them
o D shows the house to prospective buyer and the broker makes an offer on use for his own account of $115,000
o seller can sell to whomever they want
THE CONTRACT OF SALE
· Basic Elements
o Contract is basically a form, preprinted from seller to buyer
o Traditionally drafted by attorney and in favor of the seller
o Identify the parties
o Manifest the intent to b
ne party has been induced by the other to substantially change position in justifiable reliance on an oral contract
· (b) and serious or irreparable injury would result from refusing specific performance of the contract.
ú Hickey v. Green
· In reliance on an oral agreement to purchase Green’s lot as a future home site, the Hickeys entered into a binding contract to sell their existing home to a 3rd party
· Green Breached
· Hickey’s sued for specific performance, Green denied the oral contract, and asserted the statute of frauds as her defense.
· Court held that the Hickeys had reasonably relied on the contract by agreeing to sell their own home; thus, principles of equitable estoppel required enforcement of the contract.
o Policy Rationale for statute of Frauds
§ Statute was originally enacted to serve the evidentiary function
§ Compliance with the statute ensures clear evidence about the existence and key terms of the contract, thus avoiding the pitfalls of perjury and faulty memory.
§ Provides a simple mechanism for distinguishing between mere negotiations and an enforceable contract, and thereby allows the parties to express their intent in a legally effective manner
IMPLIED COVENANT OF MARKETABLE TITLE
· (1) The seller has an obligation to provide marketable title. It is viewed as both an implied condition and an implied covenant
· (2) Marketable Title
o It is title free from reasonable doubt, but not from every doubt
§ Perfect title is not required, the title must be such that there is no reasonable probability that the buyer will be subjected to a lawsuit.
Title is unmarketable if the seller does not own the estate
