Select Page

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

I.                    Buying and Selling real estate
a.      3 act play
                                                               i.      Act one
1.      Owner decides to sell and markets the property.
                                                             ii.      Act Two
1.      time between when the purchase contract become enforceable and the time the contract closes
2.      known as executory period
a.       buyer applies for mortgage, inspections and so forth take place
                                                            iii.      Act 3 the buyer takes possession and records the deed while the seller vacates
b.      Definitions
                                                               i.      Listing agreement
1.      defines the duties and rights of an agency relation ship between the property owner and the broker
                                                             ii.      Multiple listing service
1.      brokers share their listings with other brokers working in the same area
2.      Generally commissions are split if found through the MLS
                                                            iii.      Escrow
1.      any arrangement between tow or more parties designating a third party to hold funds and documents for safekeeping pending the fulfillment or performance of specified acts
                                                           iv.      Escrow instructions
1.      a three party agreement by which buyer and seller authorize an escrow agent to help them implement the performance of the purchase and sale contract
                                                             v.      Deed
1.      the document by which the seller signifies transfer of title to the buyer
                                                           vi.      Title insurance policies
1.      insure the buyer that the seller is transferring marketable title subject to general exclusions and specific exceptions detailed in the policy
                                                          vii.      preliminary report
1.      briefly lists defects in the titles report
2.      Schedule B are item that the insurer is explicitly not covering
3.      Should be cured before going through with the agreement
                                                        viii.      Promissory note
1.      IOU written and unconditional personal promise by the buyer to repay a loan
                                                           ix.      Mortgage
1.      grants to the lender a lien against the property until the loan is fully repaid
                                                             x.      Mortgagor –the owner who is granting the lien
                                                           xi.      Mortgagee – the lender who is receiving the lien
                                                          xii.      Deed of Trust –creates a lien securing repayment of a debt for the benefit of the lender who is called the beneficiary
1.      the property owner created the lien by pledging her property as security for the repayment of the debt and is call the trustor
2.      trustee is the third party who holds limited legal title to the security property for the purpose of enforcing or releasing the lender’s security interest as the lender instructs
II.                 Methods of financing
a.      By paying the full price in cash
b.      By taking title subject to any loan already on the property and paying the difference in cash
c.      By obtaining a new loan either from a lender or from the seller
d.      Combination b and c
III.               Closing
a.      Residential
                                                               i.      Trend toward less lawyer involvement in residential sales
b.      Commercial
                                                               i.      Lawyers participate significantly in large commercial deals
1.      attorney collects every piece of paper relevant to the deal and scrutinizes each one of these to make sure the client is receiving exactly what was promise
c.      Attorney approval clauses

ll provide for an exemption
2.      in any state an attorney can become licensed as a real estate broker
e.      Brokers should not provide legal advice
                                                               i.      Tips to stay in compliance
1.      state generalities rather than specifics
2.      explain but do not advise
3.      make no statement of fact that cannot be supported with available data
4.      when in doubt should refer them to an attorney
f.        Obligations of the sellers broker to the seller
                                                               i.      Pricing information
1.      Owe a duty of confidentiality to their clients
2.      Should not disclose information of what the client is willing to pay
                                                             ii.      When broker is buying seller property
1.      Can do
2.      Have a duty to disclose
3.      Should advise seller to receive outside assistance once accepted
4.      Generally once broker sells to an innocent buyer the courts will refuse to divest the purchasers title
a.       Seller is left with a claim solely against the broker for illicit profit
g.      Obligation of seller’s broker to the buyers
                                                               i.      Does not owe a fiduciary duty to the buyer
                                                             ii.      Most states require a listing broker to tell the buyer any facts materially affecting the value or desirability of the property offered for sale
facts known or accessible only to him and not within the reach of the diligent attention and observation of the buyer