Property II Outline
R.T.G.D.D. – Read the God Damn Document this is statutory, different in every state to how much is revealed
• HAVE TO PUT IT IN THE CONTRACT (standard contract will have all this, but it HAS to be in the contract! If it is not in there, its not there)
• The Closing – a ceremony where deeds are actually executed, property transferred, monies paid; the official end of the K (we will have a deed, that will not convey the ownership)
• When Buyer pays, and gets the deed from Seller; old mortgage company paid off; new mortgage company gives money; buyer gets deed (probably a “warranty deed” = most common, best deed you get; has warranties in it)
• If the Vendor had a mortgage on the property; it has to be satisfied, so the encumbrance it removed, so the Vendor can deliver a marketable title
• But can’t pay the mortgage off before he sells the house; so the Vendee’s Bank brings money that is paid to the Vendor who then pays his Lendor to release the mortgage, and can now deliver the marketable title
• Vendor’s Bank now is out of it; Deed is already signed and transferred to the Vendee – Vendee is now the OWNER (the legal and equitable owner of the property)
• The new owner’s insurance takes over right now (one thing you do day of closing is contact your insurance company to make sure casualty insurance takes over)
• Vendee becomes Grantee; Vendor becomes Grantor — CONTRACT HAS ENDED
• Grantee now has to sign and execute a deed conveying to his bank (the mortgagee) a mortgage deed to secure his loan
• 2 Deeds on that Day (Deed Grantor conveyed to Grantee AND Mortgage Deed Grantee (the Mortgagor) executes to the Mortgagee)
• From closing point on, the contract ceases to exist; the rights, obligations, duty to inspect; get financing, etc. – all over under the contract
• If they forgot to fix the furnace that was in the contract; the contract has been performed, so can’t go fix it under the contract; it now gets fixed under the DEED – a whole new group of obligations
• Quit Claim Deed = worst deed you can get; whatever I have, you have now; has no warranties; if contract ended and you have a quit claim deed, you have no recourse ever – contract is over and deed has no warranties
• No one breached; Finance arranged; Marketable Title going to be transferred; everything is ready
• Recording – after deed; when you deliver the deed with intent, the new person is now the owner; officially the transaction is done; but what we do with the deed when we get it – recording; take deed down to public records office and put it on a record (to prevent old owner after delivering the deed to sell it to another person); a protection action the new owner takes so the old owner won’t sell the property to another
• Remedies Available for Breach of Contract of Sale (before closing)
• Monetary Damages
• Specific Performance
• Regarding Earnest Money (historically, if vendee breached, earnest money stays with vendor; if vendor has damages less than that, won’t pursue those and if vendor has damages more than that, he can sue for the difference; but NOW: even if vendee has breached, if the vendor can keep his expenses and damages from his loss, but give back the difference to the vendee)
• If Buyer Breached – more likely to see money damages
• If Seller Breached – more likely to see specific performance, b/c they want the property; if you do go for damages, you try to get
• Possibility a party could get specific performance AND damages in some situations
in the house (federal law) – any house in the last 40 years won’t be; disclosures required by law will be set for the jurisdiction
• Proration – real estate taxes are generally paid twice a year (half taxes due in July, half due in January); if sell house on may 22, you really owe the taxes that have been due since January; have to figure out the proration of those taxes (probably seller pays up to the closing date, and buyer pays after closing date)
• Inspections – buyer may secure at buyer’s expense; buyer must serve upon seller any defects disclosed by inspections which are unacceptable to the buyer
• Home inspection should cover only major components of the real estate, including (but not limited to), central heating, central cooling, plumbing, electrical, roof, walls, windows, ceilings, floors, appliances and foundation; minor repairs and routine maintenance items are not part of this contingency
• Attorney Review – not universal, but not uncommon; lets you take the contract to an attorney to get reviewed before contract gets finalized; 72 hours or something; not as common as one would think
• Title – seller has to deliver marketable title; even though it doesn’t expressly call for it, it is generally implied (can change that by contract; if it says in contract you want an insurable title, don’t want that to be interpreted as meaning you want the insurable title INSTEAD of marketable title; so make sure you say you want insurable AND marketable title); a title that is free from defects;
• Two things that cause defects: (a) chain of title – a lot of things that can cause defects w/in chain of title (Come from incorrect spelling of names; use or non-use of middle initials; forgetting or adding of “jr.”; leaving off spouses; misdescriptions of property on the deed
