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Florida Real Estate Broker Chapter 11 - Contracts

Terms in this set (140)

Which of the following best describes a "balloon payment"?
The final lump sum payment due at the termination of a balloon mortgage
A listing agreement in which the seller agrees to list the property with only one broker who
will receive the agreed-on commission if during the term of the listing, the property sells or
if the broker procures a buyer who is ready, willing, and able to meet all of the terms of a
sale contained in a listing agreement, regardless of who is responsible for procuring the
buyer is called
An exclusive right to sell listing
the employment contract between the broker and the seller.
A listing contract
Legally per Florida Statutes Chapter 475, listing contracts can be in
writing, verbal, or even implied
if a listing agreement is for longer than one year, then it must be
in writing to be enforceable
copy of the listing contract be given to the seller within
24 hours of execution
know that the listing agreement must not contain a provision for automatic
renewal
A written listing agreement must have the following
• Definite expiration date
• Description of property
• Price and terms
• Broker commission or fee
• Signatures of all owner
• 24 hours copy to the owner
There are four basic types of listing agreements:
Open Listing
Exclusive or Exclusive Agency Listing
Exclusive Right to Sell Contract
Net Listing
What type of listing the seller may sell his/her property themselves without owing the broker a commission. However, the broker that the seller lists the property with has exclusivity over the listing, and even if other brokers procure a buyer for the property, the commission is due to the listing broker.
Exclusive or Exclusive Agency Listing
What type of listing The seller retains the right to hire any number of brokers to sell his/her property, Whoever provides the seller with a ready, willing, and able purchaser is entitled to a commission
Open Listing
What type of listing the listing broker is always entitled to a commission regardless of who procures the buyer.
Exclusive Right to Sell Contract
What type of listing listing that is illegal in most states and strongly discouraged in Florida by regulatory agencies.
Net Listing
A unilateral listing contract is one because
the broker does not guarantee a sale
The commission is considered earned when the broker brings a
ready, willing, and able" buyer to the seller
There are two parts to Florida's commercial lien law
Commercial Real Estate Sales Commission Lien Act, Chapter 475 Part III, Florida Statutes
Commercial Real Estate Leasing Commission Lien Act, Chapter 475 Part IV, Florida Statutes
Which commercial lien law statute deals with commercial liens on sale transactions, which attaches to the owner's net proceeds only and not any interest in real property
Commercial Real Estate Sales Commission Lien Act, Chapter 475 Part III, Florida Statutes
Which commercial lien law statute deals with on lease transactions
Commercial Real Estate Leasing Commission Lien Act, Chapter 475 Part IV, Florida Statutes
Florida law provides a real estate broker has a lien upon the owner's
net proceeds from the sale of commercial real estate for the commission earned by the broker.
owner's net proceeds is defined as the
gross sales proceeds less the amount of money secured by any encumbrance, lien or
claim that has priority over the recorded commission notice, and any costs incurred by the owner to dispose of the property, which may include real transfer tax, title insurance premium, ad valorem taxes, and assessments and escrow fees
If a broker wishes to enforce a lien for a commission pursuant to the Act on Commercial lien he must send a statutory proscribe commission notice within
30 days after commision is earned or 1 day prior to closing.
The statutory proscribed commission to claim commission on commercial lien must be delivered to
(1) the owner of the commercial property as specified in the brokerage agreement; and (2) the closing agent designated to close the transaction,
Under the Florida Commercial Real Estate Sales Commission Lien Act the Broker's Commission Notice must include;
• The name of the owner of the commercial real estate is obligated to pay the claimed commission. • The legal description of the commercial real estate. • The broker's name, mailing address, telephone number, and license number. • The effective date of the brokerage agreement. • The amount of the commission claimed by the broker. • A statement under penalty of perjury that the broker has read the commission notice, knows its contents, believes the same to be true and correct, and makes the commission claim pursuant to the brokerage agreement described in the notice. • A statement that the notice or a copy thereof has been delivered to the owner and that the notice may be recorded in the public records of the county or counties where the commercial real estate is located. • A statement that if the owner disputes the claimed commission the owner must notify the closing agent of the dispute not later than 5 days after the closing or the owner will be deemed to have confirmed the commission the
closing agent will be required to pay the commission to the broker from the owner's net proceeds.
Florida Statute also states the commission notice must be delivered by: •
• Service of process; • Registered or certified mail with return receipt requested; or • Personal or electronic delivery and obtaining evidence of delivery in the form of a receipt or other paper or electronic acknowledgment by the party to whom the notice is delivered.
The Doctrine of Procuring Cause defines Procuring cause as
referring to a broker's efforts to match a ready willing and able purchaser with a seller and for sale to take place as a result of the broker's continuous negotiation and involvement.
factors that can influence a court or arbitration decision on procuring cause
the Nature of the transaction (listing and buyer representation agreements),
the offer of cooperative compensation, the conduct of the seller, the buyer, and the brokers and their affiliated licensees, the Roles and relationships of the parties,
the Initial contact with the purchaser,
and the Continuity of contact.
A contract of sale for real estate is a the purchase and sale contract that governs
a transaction between a buyer and a seller concerning the property that is being sold/bought
In Florida, the four types of contracts a broker may assist buyers and sellers with are:
• Listing Agreements,
• Sale Contracts,
• Buyer Brokerage agreements,
• Lease Agreements.
The practice of law is defined by the American Bar Association:
• The "practice of law" is the application of legal principles and judgment about the circumstances or objectives of a person that require the knowledge and skill of a person trained in law. A person is presumed to be practicing law when engaging in any of the following conducts on behalf of another: • Giving advice or counsel to persons as to their legal rights or responsibilities or those of others; • Selecting, drafting or completing legal documents or agreements that affect the legal rights of a person; • Representing a person before an adjudicative body, including, but not limited to preparing or filing documents or conducting discovery; or
• Negotiating legal rights or responsibilities on behalf of a person.
The primary consideration in defining the practice of law is the
protection of the public.
an old English statute passed in 1677, which has been adopted in almost all of the United States
Statute of Frauds
Purpose of statute of frauds is to prevent fraud among the parties by requiring
that all contracts be in writing and signed by all the parties to be charged.
Which Florida Statute prescribes how real estate must be conveyed
Florida statute 689.01
According to the statute of Frauds, the following contracts must be in writing to be enforceable.
Real estate purchase sales agreements, an option contract - because it contains an option to purchase real estate,
deeds, and mortgages,
Lease agreements that are for more than one year,
listing agreements that are for longer than one year,
and any contract (even if not real estate related) if it cannot be performed within one year of the date created.
verbal contracts that may be legal and valid are only enforceable
if it can be proved
contracts that would otherwise be invalid under a "statute of frauds" will still be enforced, based on
"partial performance
Before drafting the listing agreement, the broker should request certain documents
1. Deed
2. Survey
3. Mortgage
4. Zoning, Zoning Variances, and Nonconforming Uses
This document that tell
1. who owns the property and who must sign the listing and sale contract.
2. the interest in the property held and how it is held (tenants by the entireties, joint tenants, etc.).
3. The legal description denotes the written description of the property and other specific information that helps identify a piece of property.
The Deed
A current survey will reconfirm
the legal description and help identify any easements or encroachments existing on the property.
real estate contract has certain provisions included to make it legal and understandable to all parties.
A. Dates
B. Parties to the Contract
C. Earnest Money Deposit
D. Legal Description
E. Street Address
F. Purchase Price
G. . Financing Terms
H. Chattel and Fixture Inclusions
I. Evidence of Title
J. Date and Place of Closing
K. Proration of Taxes, Rent, etc
L. Possession of property
M. Time allowed for Acceptance
N. Type of Deed to be Delivered
O. Specific Performance Versus Liquidated Damages
P. Miscellaneous
Q. Signatures and Copies
Important dates about the property sale transaction must be appropriately listed in the purchase and sale agreement...these are
the mortgage contingency
date -the cut-off date for the buyer to acquire their mortgage commitment,
the date on which the closing is scheduled,
and any other dates related to special conditions or important milestones
The buyer's earnest money deposit fulfills
the consideration requirements for a valid sale contract.
Earnest money deposits are usually in the form of
personal or business check. However, other types are permissible, including cash, third-party checks, and promissory notes.
accepting a promissory note as earnest money would require
seller's approval
When a buyer breaches a real estate contract, by failing to pay a deposit
a seller must decide whether to walk away from the transaction, seek specific performance of the agreement or seek monetary damages for the breach.
The choice to sue for breach of the sales contract is called a
remedy "at law."
The choice to compel the buyer to go through with the purchase of the property for breach of contract for failure to pay deposit is called
remedy "inequity
failure to include the legal description is a basis to
invalidate a contract
The buyer's financial statement is important part of a sale contract because
indicating his or her assets, liabilities, and income.
What are some methods Types of Financing
a. Cash Sale
b. Seller to Carry First Mortgage
c. New conventional First Mortgage
d. New conventional first mortgage plus seller to carry second mortgage
e. New VA loan
f. New FHA loan
g. Adjustable-Rate Loans
h. Loan Assumption
A promissory note is a promise
to pay an agreed amount of earnest money by a certain date in the future.
the borrower gives a mortgage and note to the seller to finance some or all of the purchase price of the property
Purchase Money Mortgage Liens
the most common type of voluntary real estate lien
A mortgage lien / a deed of trust lien
an existing borrower can convey or transfer the terms (or obligations) and balance of the existing mortgage to other interested homebuyers who are qualified under the lender/guarantor guidelines
An "assumable" mortgage
clause that requires the mortgage to be fully repaid in case the property is sold
"due-on-sale"
A contract for deed is also called
a land contract,
an installment sale,
a conditional sales contract,
and an agreement for deed
a bilateral agreement between a seller, the vendor, and a buyer, the vendee, in which the vendor defers receipt of some or all of the purchase price of a property over a specified period
an installment sale,
In an installment sale, the vendor retains ______ title and the vendee acquires an ________ title.
Legal, equitable
installment sale lowers the
seller's tax liability in the year of the sale.
When is there a requirement by the lender to maintain a reserve account.
when a home buyer purchases the property with a down payment that is under 20 percent of the home's sale price
Judgment liens are created as a result of a
court action
judgment liens also can be attached to
personal property, such as a car, boat, or antique, furniture.
Liens in order of hierarchy
Tax Liens
Mortgage Liens
Mechanics,
judgement
Other
taxes that vary in proportion to the value of the property taxed
ad valorem
a provision in a mortgage or deed of trust under which the lender may, upon default by the trustor, take possession of the property, collect income from the property and apply it to the loan balance and the costs incurred by the lender.
An assignment of rent
A seller is only permitted to make concessions to a buyer, up to
4% of the value of the property
a provision in a contract that allows one or more of the parties to cancel all or part of the contract if certain events or situations do or do not occur.
The VA escape clause
the VA will guaranty a home loan for the appraised value as listed on
the Notice of Valuation or NOV.
Clause states that if in the case that a VA or FHA appraisal is lower than the purchase price of a property, the buyer has the option to void the contract, if he or she wishes, or can continue with the purchase
The FHA/VA Amendatory Clause
What is a loan assumption?
This right allows the borrower to transfer the mortgage loan with the property to another party
Despite lender approval of changes in assumption, original borrowers
remain liable for the mortgage debt
the buyer took the property "subject to" the loan, but did not assume it, the sellers
remain solely liable for default.
If personal property is not described sufficiently in the contract, then the contract may become
unenforceable
The seller covenants to produce the best possible evidence of property ownership. This is commonly in the form of
title insurance
The place of closing will usually occur in the
county where the property is located unless otherwise agreed upon by the parties.
an expression used when time is to be strictly enforced. Otherwise, a reasonable time is given
Time is of the Essence
What type of closing costs customarily the seller pays
title and property-related costs
What type of closing costs customarily the buyer pays
financing-related costs
What type of closing costs are prorated
Annual costs, such as taxes and insurance,
Customarily, possession occurs on the date when the deed
recorded, unless the buyer has agreed to other arrangements.
where the seller remains in the property for an agreed duration of time after the closing of the transaction
Delayed possession
in the case of delayed possession,
A lease agreement should be drawn up and rent agreed upon, whereby the buyer becomes the Landlord, and the seller becomes the tenant.
When the property is tenant occupied at the time of purchase
estoppel letters must be submitted by the seller, from the tenants, acknowledging the rent payments and terms and lease agreements, prior to closing the transaction
The most common form of deed
the general warranty deed
offers the buyer the greatest amount of protection and offers the greatest number of title warranties from the seller.
general warranty deed
the seller conveys a fee simple interest using
a general warranty deed.
he injured party may sue by any of the following methods when a breach of the sale and purchase contract
Suit for Cancellation: (Rescind the contract.)
Suit for Specific Performance
Suit for Damages
If a buyer fails to perform under the terms of a sale contract, The usual remedy is
forfeiture of the buyer's deposit as liquidated damages, provided the deposit is not grossly more than the seller's actual damages
Buyer makes an offer to buy a home, conditional on them selling their existing property during a set period of time
the Condition of Sale of a Property
proof of acceptance of the terms and conditions stated therein by both the parties and makes the agreement legal, binding, and enforceable
The signing of the purchase and sale
The acknowledgment of a contract or any other statement must be done in the presence of a
notary of the public and the person making the acknowledgment states for the notary that he is making the statement of his own free will.
Florida Law does not require real estate licensees to disclose the claim that a property may be
stigmatized.
Before showing the property or before the formation of a contract, whichever occurs first, potential buyers and sellers of residential property must be provided with an agency disclosure form. The potential buyer or seller must
Notice of Non-Representation or Single Agent Notice
The following elements of a Brokerage Relationship
• Names of the parties;
• Definite beginning and expiration date;
• Terms and conditions of employment;
• General description of the property sought;
• Retainer or compensation;
• Type of broker-buyer relationship;
• Signatures of the parties.
Energy Efficiency brochure
at the time of or before the purchaser's execution of the contract for sale and purchase, notifying the purchaser of the option for an energy-efficiency rating on the building.
disclose all known property defects that are not openly visible to potential buyers as soon as possible
Florida Supreme Court decision of Johnson v. Davis
if the subject property was built before 1978.
Federal law requires disclosure about lead-based paint
If a licensee is charging a transaction fee in addition to receiving compensation through a commission, notice of the transaction fee must be provided to the person being charged before
the formation of the purchase and sale agreement. If a broker charges fees in addition to the commission for listing or selling a property, these charges must be disclosed before closing.
a written agreement between 2 or more parties where the successors to the real estate agree to use or not to use the real estate in a particular way.
A real estate covenant
local, special purpose government authorized by Chapter 190 of the Florida Statutes as amended and is an alternative method for managing and financing infrastructure required to support community development.
A Community Development District (CDD)
When a tenant is provided with the possibility of purchasing the leased premises at the end of the lease term, two different types of agreements are available.
A. Lease-Purchase Agreements
B. Option Contract
the tenant leases for a term, and, upon the term's conclusion, the tenant is obligated to purchase based on contract terms established at the lease's inception.
Lease-Purchase Agreement
grants an option the right to buy the subject property within a specified period for a specified price and other terms.
An option contract
The buyer takes possession of the
property, makes installment payments to the seller, and, when the final payment is
made, the deed is delivered to the buyer.
An Agreement for Deed, also known as a
Contract for Deed, is considered
A listing agreement in which the seller agrees to list the property with only one broker who
will receive the agreed-on commission if during the term of the listing, the property sells or
if the broker procures a buyer who is ready, willing, and able to meet all of the terms of a
sale contained in a listing agreement, regardless of who is responsible for procuring the
buyer is called
An exclusive right to sell listing
A listing broker should not offer assistance to a potential buyer, because:
It violates the agency obligation to the seller created by the listing agreement.
A listing agreement in which a seller reserves the right to sell the property to a buyer the
seller pro-cures without obligation to pay a commission to the seller's exclusive agent is
called
An exclusive agency listing.
Disputes among brokers on who should receive the commission for the sale are called
satisfied by the doctrine of:
Procuring cause.
Knowing that contracts may be oral, written, or parole, which of the following is correct?
Certain oral contracts can be valid and enforceable.
A real estate sale contract becomes valid or in effect when it has been signed by the:
seller and two witnesses.
Which of the following statements is/are correct regarding a purchase and sale agreement
a. All parties' names and signatures must be included on the document.
b. Signing the document provides proof that terms and conditions of the contract have been
accepted by the parties
c. A signed purchase and sale agreement is legally binding and enforceable.
Legal description denotes:
a. The written description of the property.
b. Specific information that helps identify a piece of property.
c. The name of the county.
Bob was selling his house to Fred. He believes that Fred breached the sale and purchase
agree-ment. Bob then accepted liquidated damages from Fred, which was an earnest money
deposit. Which of the following statements are TRUE?
Upon accepting liquidated damages no further action can be taken.
The deal between two or more parties, where they agree on buying or selling real property
is called:
Contract of sale.
The employment contract between the broker and the seller is called:
Listing Agreement.
An "assignment of rents" clause in a trust deed:
permits the beneficiary to collect rent directly from the lessee in the event of default by the
trustor and apply the rent to the payment of the loan
If a broker charges fees in addition to the commission for listing or selling a property:
These charges must be disclosed before closing.
The seller of a residential dwelling unit built before 1978 must
Select
Provide the buyer with an EPA pamphlet titled Protect Your Family From Lead In Your Home
The concept of "procuring cause" refers to:
broker's efforts to match a buyer with a seller
In Florida, stigmatized property does not require disclosure, which includes circumstances
such as;
person died on the property three years ago
Which of the following elements must be included in the Buyer's Agency Contract
a. Type of broker-buyer relationship.
b. Names of the parties.
c. General Description of the property sought.
In simple terms a judgment is
Select
a decision made by a court of law
The purpose of the statute of frauds, as it applies to real estate , is to
eliminate fraud in real estate contracts
Which of the following remedies allows a seller to keep the deposit in the event of a buyer
default?
Liquidated damages.
Your neighbor has given you a right of first refusal on a piece of land he plans to sell. What
does this mean?
He has given you the first opportunity to purchase it before he offers it for sale to others
You are selling the house you live in, but the house you're moving to is not completed. You
need to stay on in the house a while after closing. You work out a deal with the new purchaser
called a a) no-rent lease agreement
delayed possession
A broker has the least protection with
An open listing.
Electronic signature software___________.
Allows transmission of legally binding documents for obtaining signatures anytime.
Which of the following contracts must be in writing to be enforceable
A two-year lease.
A financing device that grants a buyer equitable title without a deed from grantor to the
grantee is called: t.
a land contract, an installment sale, a conditional sales contract, and
an agreement for deed.
Which of the following would not be paid by escrow disbursements if it was included as part
of the purchase price?
Personal property taxes
Which of the following does a survey show?
a. Precise legal boundaries of a property
b. Location of improvements, easements, rights of way
c. Encroachments
Which of the following is correct about closing provisions
a. The place of closing will usually occur in the county where the property is located unless
otherwise agreed upon by the parties.
b. A specific date for closing should be stated and not state that closing will occur within a certain
number of days.
______________________ are exempt from property taxation as long as the property is used for
tax-exempt purposes
a. Religious organizations.
b. Organizations owned by the government.
c. Educational institutions.
Florida statute of frauds provides that certain types of contracts are not valid and cannot be
enforced, unless they _______________
Are in writing and signed by the party against whom enforcement is sought.
An option contract is a type of:
Unilateral contract.
A written listing contract must be
a. Signed by all legal owners of the property.
b. Witnessed by an attorney.
c. A copy must be sent to the owner.
In case that the buyer cannot obtain the money to purchase the property,
The broker is not entitled to a commission
Which lawsuit requires Florida sellers and their agents to disclose latent property defects
that affect value?
Johnson v. Davis.
Parties involved in a property sale transaction must ________.
a. Remain flexible on the dates of closing.
b. Not cause any delay, to avoid problems.
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