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Real Estate Transactions
University of South Carolina School of Law
Manning, Claire Tuten

The real estate sale – a three act play
§ Act One: A contract is signed
o    FSBO war story #1: Truth in advertising?
o    FSBO war story #2: My neighbor the master salesman
o    But most sellers list their houses with real estate agents. Why?
o    Enter Lucy and Barney Buyer
§ Act Two: The executory period:
o    the time between the date the contract is signed and the closing; the seller owns fee simple, legal title, but the buyer has an equitable interest by virtue of the contract
§ Act Three: Post Closing.
o    The buyer takes possession, the recording office returns the documents to the attorneys. The prior lender satisfies the underlying mortgage, the title insurance policies are issued. The parties receive their final documents. The buyer has legal title.
§ Definitions:
§ Listing agreement
o    …a bilateral contract
o    It defines the duties between the owner and the broker. The owner promises to maintain the property and allow access. The broker promises to advertise and show the property. The commission is contingent on producing a buyer. The broker does not promise to sell the property.
o    Three South Carolina cases
§ Champion v. Whaley, 280 S.C. 116, 311 S.E.2d 404 (Ct. App. 1984)
§ United Farm Agency v. Malanuk, 284 S.C. 382, 325 S.E.2d 544 (1985)
§ Hilton Head Isl. Realty, Inc. v. Skull Creek Club, 287 S.C. 520, 339 S.E.2d 890 (Ct. App. 1986)
§ FSBO:
o    “For Sale By Owner”: the seller advertises and attempts to sell the property without the assistance of a broker—to avoid the commission.
§ Closing:
o    The final procedure that completes the sale :
§ Documents are executed;
§ Documents are delivered;
§ The title is updated;
§ Documents are recorded;
§ The funds change hands;
§ The keys are given to the buyer.
§ In South Carolina Closings take a variety of forms:
·         One attorney with the parties around the table; may involve “table funding”
·         Two attorneys trade funds and documents;
·         “Mail away” closings
§ Escrow:
o    In other parts of the country—the seller delivers the deed and the buyer and lender deliver the funds to an independent escrow agent.
§ Escrow Instructions; Closing Instructions:
§ Deed
o    …the document whereby the seller transfers title to the buyer. It must be properly signed, witnessed and delivered. It is recorded in the land records to provide notice to the world that the buyer now holds title. By recording the deed, the buyer protects her title from claims of others.
§ Grantor=Seller
§ Grantee=Buyer
§ Mortgage: the document by which a property owner places a lien on property in favor of a lender
§ If the borrower defaults, the lender can foreclose. A foreclosure is usually a judicial sale of the property. The proceeds of the sale are credited against the debt. In some states, mortgages can be foreclosed by non-judicial sales. Mortgages in those jurisdictions contain a “power of sale” provision.
§ Mortgagor: property owner who pledges his property (usually, but not always, the borrower).
§ Mortgagee: Lender
§ Deed of Trust
o    This document is used in other states (not South Carolina) to serve the same purpose as a mortgage. There are three parties to a deed of trust. A third party holds title to enforce and release (or reconvey) the lender’s interest. Foreclosure may be judicial or non-judicial.
§ Beneficiary=lender
§ Trustor=borrower
§ Trustee=third party appointed by lender
§ Promissory note: a promise in writing executed by a maker to pay a specific amount during a limited time, or on demand, to a named person, or to order, or to bearer.
§ Title Insurance: protection for the buyer or lender against a defect in the seller’s or mortgagor’s title. A title policy insures marketable title, subject to general exclusions and specific exceptions.
§ Seller financing or “purchase money mortgage”: a mortgage given by the buyer to the seller to secure a portion of the purchase price.
o    In some states, including South Carolina, a purchase money mortgage can also be given to an institutional lender.
§ Institutional lenders: banks, savings and loan associations and other businesses which make loans to the public in the ordinary course of their business.
§ Closing statements
o    They are much more complicated than this!
o    The buyer rarely pays the exact purchase price to the seller.
o    The closing statement forces the closing attorney to “follow the money”.
o    Software can be useful, but lawyers should know how to do the math!
§ Cash sale of $100,000 with no mortgages
o    Buyer pays seller $100,000
o    Seller delivers deed to buyer
§ Cash sale of $100,000 where the $60,000 is due to ABC Bank on seller’s mortgage, and a $5,000 tax lien and a $3,000 judgment are recorded against the seller
o    Buyer’s closing statement
o    Purchase Price                                              $100,000
o    Net due from Buyer                                    $100,000
o    Seller’s closing statement
o    Sales Price                                                     $100,000
o    Deductions: 
o    ABC Bank (mortgage)                               $60,000
o    Richland County (tax lien)                        5,000
o    Richard Roe (judgment)                             3,000
o                                                                            $68,000
o    Net due to seller                                           $32,000
§ Same as above, but Seller has no mortgage and Buyer obtains an $80,000 loan
o    Buyer’s closing statement
o    Purchase price                                                              $100,000
o    Principal amount of new bank loan                           80,000                                 
o    Net due from Buyer                                                    $ 20,000
o    Seller’s closing statement
o    Sales price                                                                     $100,000
o                                           
o    Deductions: 
o    Richland County (tax lien)                                           5,000
o    Richard Roe (judgment)                                                3,000
o                                                                                            $ 8,000
o    Net due to seller                                                           $ 92,000
§ Same as above, but Seller agrees to loan Buyer $10,000 of the purchase price
o    Buyer’s closing statement
o    Purchase price                                                              $100,000
o    Principal amount of new bank loan            80,000
o    Purchase money loan                                     10,000
o    Net due from Buyer                                    $ 10,000
o    Seller’s closing statement
o    Sales price                                                     $100,000
o                                           
o    Deductions: 
o    Richland County (tax lien)                        $5,000
o    Richard Roe (judgment)                               3,000
o    Purchase money loan                                  10,000
o                                                                            $18,000
o    Net due to seller                                           $82,000
§ Same $100,000 purchase price, same liens, except the Buyer will assume the Seller’s $60,000 loan
o    Buyer’s closing statement
o    Purchase price                                              $100,000
o    Assumption of Seller’s Mortgage                 60,000
o    Net due from Buyer                                    $ 40,000
o    Seller’s closing statement
o    Sales price                                                     $100,000
o                                           
o    Deductions: 
o    Richland County (tax lien)                        $ 5,000
o    Richard Roe (judgment)                                3,000
o    Assumption of mortgage                            60,000
o                                                                            $68,000
o    Net due to seller                                           $ 32,000
§ Advantages of home ownership:
o    Home ownership allows an individual to build equity (wealth accumulation)
o    Home ownership gives the owner control of

d as having responsibility over the actions of all associated licensees and also has the responsibility and control over and liability for any real estate trust accounts.
§ . . . so a broker-in-charge has two main duties:
1. to manage associated licensees and staff members; and
2. to manage the firm’s real estate trust accounts.
§40-57-135 also requires a broker-in charge to establish an office in a specific location and to be available to the public during office hours. It’s ok to have branches, but each branch must have its own broker-in-charge.
§ §40-57-80 the qualifications to obtain a license
o    Age requirement: 21 for a broker and 18 for an agent;
o    Both must submit to a credit report;
o    Both must have a high school diploma or GED;
o    Both must complete educational requirements;
o    A broker has experience requirements; and
o    Both must pass an exam.
§ §40-57-100 educational requirements
o    An agent must have 60 hours and a broker must have 150 hours of classroom instruction in real estate or a legal degree or an undergraduate degree with a major in real estate. And a broker must have 5 years’ experience.
§ §40-57-110(D)
o    an individual holding an active broker or salesman license must be licensed under one, and only one, broker-in-charge.
§ §40-57-130 (A)
o    requires 8 hours of continuing education courses every other year..
§ §40-57-135
o    sets out extensive requirements as to trust accounts; brokers must guard their trust accounts with the same diligence as lawyers.
§ Listing agreements are agency agreements between a seller and a real estate agent. Most real estate agents are in the business of listing properties. When a property owner wants to sell and decides that she is not interesting in treating her home as a FSBO, the first document she will sign will be a listing agreement. Here’s what the listing agreement does:
o    The seller designates the broker as her agent (the names of the parties are required)
o    The real estate is described
o    The seller promises to pay a commission if the agent finds a buyer willing to buy on the seller’s terms
o    The sales price is shown along with any other specific provisions
o    The agent promises to diligently market the property; and
o    A termination date is designated.
§ A buyer cannot force a sale based on the terms of the listing agreement even if the buyer makes an offer on the seller’s exact terms as set out in the listing agreement. (The agent may have a cause of action against the seller, but the buyer does not.)
§ §40-57-135(C)(4) of the South Carolina Code requires that listing agreements must be in writing
o    Half the states agree
o    These agreements are not contracts of sale.
o    They are not subject to the statute of frauds, but some states add listing agreements to their statutes of frauds.
o    Other states, like South Carolina, add this requirement to their licensing laws—but remember the cases we discussed last class.
o    Other states add this requirement to their administrative provisions.
§ Both the listing agreement and the standard real estate sales contracts prepared by state realtors’ associations require that commission to be paid from the sales proceeds.
§ There are three types of listings:
o    Open (non-exclusive) listings: