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Chapter 8: Real Estate Sales Contracts

to allow time to ascertain that the parties can each perform the terms of the agreement which are written and signed promises to perform.

THE PURPOSE SALES CONTRACT

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Shows buyer’s “good faith”No law governs the amount Earnest money is not considerationNot required for valid contract

EARNEST MONEY DEPOSIT

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Provision for buyer’s earnest money deposit

Buyer’s offer to purchaseAcceptance of the offer by sellerProvisions for payment of broker feesInstructions to closing agentPossession

PURCHASE CONTRACTS

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Closing AgentProratingInspectionsLoan ConditionsProperty damageBuyer defaultTime limits

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CONTRACT TERMS

This is a legal term which means the time limits set by the contract must be faithfully observed or the contract is voidable by the non-defaulting party.

Due to the legal nature of this term, it should not be

used by the real estate agent!

“TIME IS OF THE ESSENCE”

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SignaturesAcceptanceNotificationFederal ClausesPreprinted ClausesRidersNegotiation

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ADDITIONAL CONTRACT TERMS

LEAD-BASED PAINT IN HOUSING

Approximately three-quarters of the nation's housing built before 1978 contains some lead-based paint. Federal law requires that before a buyer or tenant becomes obligated under a contract for sale or lease the seller or landlord must disclose the possibility of lead-based paint and lead-based paint hazards and provide available reports along with the pamphlet “Protect Your Family From Lead in Your Home.”

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A short purchase contract used to secure a real estate transaction until a more formal contract can be signed .

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BINDER

Used to express the mutual intention to buy, sell, lease, develop, or invest

Outlines agreement of termsNo obligation is created

LETTER OF INTENT

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If the preprinted form requires extensive cross-outs, changes, and riders, the contract should be drafted by a lawyer.

A real estate license is not a license to practice law.

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PRACTICING LAW

Installment ContractsOption ContractsLease with Option to BuyRight of First RefusalExchange Agreements

OTHER TYPES OF CONTRACTS

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Deed and Installment Contract Compared

Deed Installment Contract

Buyer SellerDeed

Buyer Seller

Buyer Seller

Buyer Seller

Buyer Seller

Deed

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Possible Trading Combinations

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The job of the real estate agent is to determine the business details of the transaction and not to practice law!

A real estate license is not a license to practice law.

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Remember

Binder Default Earnest money

deposit Equitable title Installment

contract

Lease-option Qualified

intermediary Right of first

refusal Tax-deferred

exchange “Time is of the

essence”

Key Terms

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