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Real Estate Transactions
UMKC School of Law
Randolph, Patrick A.

REAL ESTATE TRANSACTIONS – RANDOLPH – FALL 2011

A. Steps of a RE K

a. The execution of a K of sale;

b. Inspections of the property and examination of the seller’s title by the buyer;

c. The arranging of financing by the buyer;

d. The closing or “settlement;” and

e. The recording of the deed and any mortgage or other security instrument which the buyer has executed

B. RE Brokers

a. Listing process

i. Involves the execution by the seller of a K appointing the broker to be his or her agent in obtaining a buyer

b. [Sample RE K]

c. Broker’s authority:

i. Have no right to sell the property

ii. Broker may only introduce parties and the seller actually sells the RE

1. No authority to act on behalf of the client

iii. However, may have the power of attorney to consummate a sale, but language must be specific enough in the K

d. RE listing agreement

i. Open Listing

1. Property owner pays the broker if the broker makes the sale, but the buyer can sell on own or w/ another broker

2. Commonly used in commercial RE

ii. Exclusive Agency Listing

1. Limited to a certain time for one broker to sell the property, but the owner may still sell

iii. Exclusive Right to Sell Listing

1. No matter who sells the property, the broker will get the commission

e. Licensure

i. No license = no commission

ii. State-specific

iii. As a lawyer, if a broker violates a RE regulation, I have to report – cannot threaten to report in order to get money = extortion

iv. License can be lost by any fraudulent or dishonest act

f. Disclosure

i. “knew or should have known”

ii. Misrepresentation is the key (negligent or not), so long as it is the proximate cause of the injury

iii. In MO, disclosure laws require revealing all material defects known or should be known

1. Exercise reasonable efforts

2. Broker not liable for seller’s commission

g. Time is of the essence clauses

i. Are not always invoked b/c parties are eager to close

1. Generally, when the clause is inv

ent of whether a loan will be prudent

iv. A broker can easily be held liable for the failure to disclose material defects of residential properties

b. Types:

i. Short term or earnest money

1. Provides for the closing w/in a short time

2. Typically calls for performance by both sides and contains pre-conditions to be satisified

3. Mortgage

ii. RE installment K

1. K for deed

2. Buyer will go into possession immediately and make payments on a monthly basis

3. Seller is financing the purchase

4. Mortgage substitute

c. Req’t of Writing

i. Broker does not want the deal to fall through, and knows that a written K puts pressure on the parties

ii. Printed form Ks are prepared by broker associations

1. Often require payment and reaffirm the seller’s obligation to pay the sales commission