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Property II
University of Toledo School of Law
Chapman, Douglas K.

 PROPERTY II – Outline
                               
The LAND TRANSACTION
I            Introduction
A    Overview of Sale
1       Brokerage Contract
i        When a person buys / sells a house à usually contracts Broker
ii       Broker is sales agent 99% of the time
iii     The contract is for services and not for sale of land, Oral contract is ok while other jurs make it in writing.
2       Real Estate Agent
i        Types of agreements
a       Nonexclusive: open and ordinary listing, where the broker is entitled to commission only if he’s the first to sell.
b       Exclusive listing or agency agreement: agents or subagent gets commission if he or any other broker sells the house but not if owner sells it
c       Exclusive right to sell: agent gets commission no matter who sells house.
ii       Advantages of having agent:
a       Multiple Listing Service
(1)   Listing of properties for sale made w/ any participating broker are circulated to all other brokers participating in the scheme
b       Broker may fill blanks on forms when info is simple factual data for earnest money forms (ie, names of parties, time for closing, price)
(1)   Lawyer is needed for deeds, mortgages, and other legal instruments.
c       More knowledgeable on land transfer procedures
(1)   Connections to other areas of the industry (title insurance, title search)
(2)   Broker uses experience and connections to sell house for a commission
(3)   Familiar with local areas and laws
d        
iii     Disadvantages
a       Buyer could use own means to title search and find properties
b       Must pay commission to broker
c       Broker may work both sides (seller and buyer) à not always in best interest of buyer
3       Attorney’s Role
i        After seller has accepted buyers offer à Attorney will
a       Draft sale K
b       Examine title
c       Draw up deed
d       Close transaction
4       Conveyancing
Buyer
Buyer’s Lender
Seller
 
Down Payment (Earnest money) ————à
Note ———————————————à {Record}
Mortgage —————————————à {Record}
         (Note & mortgage may be combined)
                                                                          $$$ —————————-à
                                                                                                                          $$$ ——————–à
 {Record} ß————————————————————————– Deed                         
**No need to record to have a valid transfer à only need delivery**
                                                                                                                          {record} ß———————– Release of Mortgage
 
 
Seller / Lender
Buyer / Borrower
Deed
Grantor (GR)
Grantee (GE)
Land Contract
Vendor (VR)
Vendee (VE)
Note
Promisee (PE)
Promisor (PR)
Mortgage
Mortgagee (ME)
Mortgagor (MR)
5       Earnest Money Contract
i        K for deed or sale w/ potential Buyer and Seller
ii       Putting $ upfront à saying “I am serious about purchasing” and take a time out to research deal        (time out)
a       Time Out à try to gain financing and complete a title search
iii     Why Breach Earnest K??
a       Financing à Buyer not able to procure financing
b       Title Protection à
(1)   Seller may not hold title to property
(2)   Property may have encumbrances:
(i)Restrictive covenants
(ii)    Easements
6       Closing
i        All parties get together and exchange the necessary checks and paperwork to close transaction
ii       Buyer/Buyer’s Lender
a       Buyer gives Down Payment à Buyer signs note promising to pay money back and signs a mortgage (mortgage à if Buyer doesn’t pay, bank gets house)
b       B’s lender receives mortgage and records it at the courthouse
c       Seller then passes deed to Buyer or Buyer’s Lender
d       Mortgage is a security interest
iii     Seller/Seller’s Lender
a       Seller receives money and pays off Seller’s Lender
(1)   Seller’s Lender releases mortgage after receiving amount owed on Seller’s mortgage
b       S will record à so title search will show “clear title” and Seller’s Lender no longer has an interest in the land
iv    

he oral K to be enforced. More strict jur. Require all 3.
5       Minority Rule: payment or a substantial amount is enough to enforce K. OR delivery of possession to the purchaser is sufficient.
a        Estoppel  (Reliance)
(1)   When one party materially changes its position in reliance on the other
b       Must be foreseeable and reasonable reliance
c       Statute of fraud does not undue a fully executed contract.
6       Purpose of S/F:
i        Evidence to show proof of deal
a       Meeting of the minds
b       Paper Trail à establishes a record of what happened in the courts of the deal
ii       Prevent Fraud
iii     Ceremonial function underlying the serious nature of land sale
a       Security interests
b       Shows court that an agreement w/ consequences was entered into
iv     Channeling
a       Tendency to push people to professionals and forms
b       When people use forms à more likely to seek professional advice
(1)   Better advice à more proficient & less likely to have future problems
v       Language
a       System will work more efficiently if same language is used
b       Similarity among all transfers in language gives commonality
(1)   Easier to interpret
(2)   Aids familiarity
B    Marketable Titleà “Merchantable”
Ø        Before closing à Buyer sues seller under contract for “marketable title”
Ø        After closing à Buyer sues seller under deed covenants
1       Definition of Marketable Title
i        A title that is free from reasonable doubt. A title is doubtful and unmarketable if it exposes the purchasing party to the hazard of litigation.
a       Is it a title that a reasonable person would purchase?
Only need marketable title at closing or at end of litigation à NOT prior