Chapter 11Real Estate Contracts

The signing of a valid real estate contract is the keystone of a real estate transaction.

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• Learning objectives– Identify the requirements for a valid contract– Describe the various types of contracts used in the real

estate business– Explain how contracts may be discharged– Distinguish among bilateral and unilateral, executed and

executory, and valid, void, and voidable contracts

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• Contract law– A contract is a

• voluntary• agreement or promise between • legally competent parties • supported by legal consideration• to perform (or not perform) a legal act

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• Types of contracts– Express or implied– Bilateral or unilateral– Executed or executory

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• Essential Elements of a valid contract– Offer and acceptance– Consideration– Reality of consent– Legal purpose– Legally competent parties

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• Validity of contracts– Valid: meets all the essential legal elements– Void: lacks some or all of the essential legal elements– Voidable: appears to be valid, but may be rescinded or

disaffirmed by one or both parties based on some legal principle

– Unenforceable: appears to be valid but neither party can sue the other for performance

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• Discharge of contracts– Performance: “time is of the essence”– Assignment: transfer of existing contractual rights or

duties– Novation: substitution of a new contract in place of the

original

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• Termination– Breach– Statute of limitations– Partial performance– Substantial performance– Impossibility of performance– Mutual agreement– Operation of law– Rescission and cancellation

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• Contracts used in the real estate business– Listing Agreements (also known as brokerage

engagement agreement in Georgia)– Buyer agency agreements– Real estate sales contracts– Options– Land contracts or contracts for deed– Leases– Escrow agreements

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• Contract details– Sales price and terms– Legal description– Condition of tile and form of deed– Tile evidence and title defects– Land contracts or contracts for deed– All terms and conditions between the parties– Contingencies

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Sales Contract Issues

• Offer

• Counteroffer

• Acceptance

• Binder

• Earnest money deposit

• Equitable title

• Destruction of the premises

• Liquidated damages• Parts of a sales contract• Contingencies• Amendments and

addendums• Disclosures

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