Real Estate Transactions Outline Summary
1. Real Estate Transfer
1. Real Estate Brokers & Listing Agreements
1. Listing Contract
2. Brokers & Statute of Frauds
3. Broker’s Commission
4. Withdrawal from Sale Clause
5. Duties of Investigation & Disclosure
6. Agency, Dual Agency & Agency Disclosure
2. Contracts for the Sale of Land
1. Statute of Frauds & Part Performance
2. Remedies
3. Time of Performance
4. Title to Be Conveyed
5. Equitable Conversion
6. Intro to Mortgage Financing
7. Conditions in Contracts
3. Commercial Leasing
4. Deeds & Conveyancing
1. Deeds
2. Land Descriptions
3. Delivery & Escrow
4. Warranties of Quality
5. Title Covenants
6. Settlement
5. Title Insurance & Preliminary Reports
1. Title Assurance Methods
2. Title Insurance
2. Real Estate Financing
6. Secured Financing
1. Absolute Deed & Conditional Sale
2. Installment Land Contract
3. Power of Sale Foreclosure
4. Bankruptcy Overview
7. Priorities
1. Purchase Money Mortgage
2. After-Acquired Property Clause
3. Replacement & Modification of Senior Mortgages—Impact on Juniors
4. Fixtures
5. Wrap-Around Mortgages
8. Financial Institutions
1. Mortgage Lending
2. Financial Institutions
3. Government-sponsored Mortgage Market Support Institutions
4. Mortgage Risk
3. Real Estate Development
9. Subdivision & Construction
1. Overview
2. Land Option & Developers
3. Purchase Money Land Financing
4. Mechanics Liens
5. Construction Loans & Other Mortgages to Secure Future Advances
10. Planned Unit Developments, Condominiums and Cooperatives
1. PUDs
2. Condos
3. Coop Apts
4. Conversion of Rental Housing to Condos & Coops
Real Estate Transactions Outline
1. Real Estate Transfer
11. REAL ESTATE BROKERS & LISTING AGREEMENTS
1. Overview
1. Closely-Regulated by States
2. Two Types of Licenses
1. Broker
2. Sales Agent
(1) Only act under broker’s supervision.
3. Broker’s Authority
1. Majority: Broker’s authority is limited to show, advertise & market property.
(1) Cannot force sale. But seller may still be liable for commission.
4. Multiple Listing Service (MLS)
1. Increases market exposure for property.
2. Placing offer on MLS may create implied oral agency agreement b/w listing broker and subagent.
2. The Listing Contract
1. Exclusive Right to Sell
1. For a specified period, even if broker is not the cause of the sale. Implied that broker must use best efforts.
2. Exclusive Agency to Sell
1. If broker does not cause sale, not entitled to commission.
2. Specified period.
3. Open Listing
1. Must be “Procuring Cause”
(1) Broker gets commission only if he finds a buyer.
2. No requirement that broker use best efforts.
4. Net Listing
1. Broker must make deal that will net x dollars.
5. Option Listing
1. Broker has a right as principal to buy property as a last resort.
3. Approaches to Valuation of Property
1. Market Data
1. Empirical approach compares property to similar property. Question re subjective factors.
2. Cost
1. Historical cost vs. replacement cost
(1) Useful where party has peculiar use only.
3. Capitalization of Income
1. Income producing property
2. Net operating income (NOI): Capitalization rate = value.
3. Cap Rate = Multiple of annual NOI x Risk factor
4. Brokers & Statute of Frauds
1. Writing Required. Listing Contract must be in writing. S/F vigorously enforced. [see CA Civ. Code § 1624(d)]
2. Evidentiary & Solemnity Functions
5. Broker’s Commission—When has Broker Earned Commission?
1. Majority Rule: Broker earns commission when he produces a buyer who is ready, willing and able under the terms of the listing or if seller accepts buyer’s different conditions
1. Default Rule Only: Broker and client are free to alter these rules contractually.
2. Presumption in favor of LDs.
2. Minority Rule: Commission is not earned until performance of contract.
1. Generally means close of escrow.
2. Rationale
(1) More realistic b/c people pay commission from funds in escrow.
(2) Public Policy: if deal does not close, buyer was not ready, willing & able. Forces brokers to facilitate actual closing.
(3) Where seller wrongfully prevents closing, courts following this rule will grant specific performance to make seller pay commission anyhow.
3. Drake
1. Facts: Broker entered listing agreement w/Drake specifying conditions to payment of commission. Broker finds buyers, but Drake withdraws offer and refuses to pay commission on gnds transaction did not close.
2. Held: Drake must pay per terms of listing agreement. Court discusses majority and minority approach. Likes minority rule, but says n/a to these facts where seller frustrated deal.
6. Withdrawal from Sale Clause (Breach of Listing Contract)
1. CA Rule: Withdrawal from sale clause in listing contract is enforceable according to its terms. Not a breach nor an unlawful penalty. Gives seller an option to cancel contract. Option price = must pay broker according to K.
1. Equivalent of LDs: Courts likely to uphold unless clearly excessive or punitive.
2. Blank v. Borden
1. Facts: Exclusive 7-mo. listing. 6% comm
like agency may imply one.
(2) Payment of compensation not necessarily determinative of agency relationship.
5. Imputed Knowledge/Actions: for liability purposes an agent’s acts and knowledge are imputed to his principal.
2. Subagency: someone employed to assist agent in performance of services to principal.
1. Listing Broker is liable for wrongful acts of cooperating broker—subagent—toward third parties.
2. Usually created by MLS Listing.
3. Agent’s Fiduciary Duties to Principal—[§ 2079 (12)]
1. Fiduciary duty of utmost care, integrity, honesty and loyalty .
2. Full and Complete Disclosure to principal of all material facts that would affect the principal’s decision to enter into a transaction.
3. No Conflicts: Agent may not compete w/principal.
4. CA Agency Disclosure Statute—[§ 2079 (12)]
1. Higher duty applies to sale of residential property.
(1) Hansen says should apply to commercial as well.
2. As soon as practicable, selling agent shall disclose to seller whether the listing agent is acting exclusively as seller’s agent, or as a dual agent representing both the buyer and the seller…
(1) Must be confirmed in K to purchase.
5. Duty & Disclosures of Seller’s Agent to Buyer—[§ 2079 (16)]
1. Must disclose role in writing per form.
(1) As soon as practicable.
(2) Must be before buyer signs offer to purchase.
2. Reasonable care and skill in performance of duties.
3. Good faith & fair dealing
4. Disclose Material Facts affecting value or desirability of property.
5. Cannot reveal confidential information.
6. Breach of Duty
(1) Buyer has c/a.
(2) S/L: 2 years, but n/a to intentional fraud.
6. Standard of Care—[§ 2079 (2)]
1. Reasonably prudent real estate licensee (broker).
7. Dual Agency—[§ 2079 (16), (21)]
1. Permitted but only w/knowledge & consent of both parties.
2. Timely disclosure required.
(1) Must disclose in writing to both parties.
3. Agent owes full fiduciary duties to both sides
4. May not disclose to either party that the other is willing to sell/buy at lower/higher price w/o that party’s express written consent.
8. Undisclosed Dual Agency
1. No Right to Enforce Commission
Where agent fails to notify both principals of dual agency,
