What should an agreement to buy or sell
real estate contain?
What happens at the real estate
settlement?
What are the different types of ownership in real estate?
What are the responsibilities of property owners to persons entering the
property?
Q.
What should an agreement to buy or sell real estate
contain?
A. A real estate purchase agreement
is a contract, and therefore must contain the elements that are required by
contracts in general. Thus, the parties entering the agreement must have the
capacity and intention to do so and there must be something of value given by
both sides. In addition, most states require that a contract regarding real
estate must be in writing to be enforceable.
No
particular form of the agreement is required. Whatever the format, the
agreement should contain the names of the purchaser and seller, a description of
the property to be conveyed, the purchase price and the terms of the sale. The
terms generally include: the time period in which settlement (actual transfer of
the property) is to occur; the financing to be utilized, and any points
(percentages of the loan amount) payable by either party to the lender; the
amount of deposit to be placed by the purchaser and with whom placed (often, the
real estate broker holds the deposit); any contingencies or conditions affecting
the sale (such as conditioning the purchase on the purchaser's ability to obtain
financing within a certain time period or selling a presently owned residence);
and what would happen in the event either party defaults.
Q.
What happens at the real estate settlement?
A. The real estate settlement is
the occasion when the purchase and sale is completed; that is, the title to the
property is transferred to the purchaser.
The
parties pay the expenses that are usually required at real estate settlements,
such as transfer taxes and recording costs, broker's commissions, title search
fees and title insurance premiums, fees for document preparation, appraisal
costs, escrow requirements of mortgage lenders, points payable to the lender,
and a pro-rata division of real estate taxes.
A
summary of the settlement transaction is usually contained in a "settlement
statement." The form of the settlement statement and settlement procedure is
governed by a federal law known as the Real Estate Settlement Procedures Act.
The Act requires that the parties be notified, in advance, of the settlement
costs to be incurred at the settlement.
Q.
What are the different types of
ownership in real estate?
A.
In most states, real estate can be owned, or titled in different ways:
This is property owned by a single person or entity.
This is
property held by two or more persons. In this type of ownership, each owner has
a right to the whole of the property, subject to the rights of the co-owners.
The interest of each is the proportionate share depending on the number of
owners. A co-owner as a tenant in common does not have a right of survivorship
as to the other owner's interests. Thus, the property interest of a co-owner
passes to the owner's heirs, rather than to the co-owners, upon death. Owners
can sell their interest without the consent of the co-owners.
This is
another type of ownership held by two or more persons. Unlike tenants in common,
joint tenants have a right of survivorship. Thus, the interest of a co-owner,
upon the co-owner's death, goes to the remaining co-owners and not to the heirs
of the deceased. Owners must acquire the property simultaneously in order to
hold the property as joint tenants.
Twenty-nine states and the District of Columbia recognize this type of
ownership. It is similar to joint tenancy, except that it can only be held by
husband and wife. An important feature of this type of ownership is that under the
law of many states which recognize this tenancy, a creditor of only one of the
parties cannot liquidate the property to satisfy the party's debt to the
creditor. For example, if one spouse borrows money on a "signature" loan or a
credit card and thereafter defaults on payments, the lender or credit card
issuer will not be able to liquidate the real estate held as tenants by the
entireties even if a court judgment is obtained against the spouse only. For
this reason, many lenders require both parties to sign the loan documents.
Q.
What are the responsibilities
of property owners to persons entering the property?
A. Owners are required to exercise
reasonable care to prevent injury to others. Many states classify visitors into
the categories known as invitees and licensees. Invitees are those persons
coming on the owner's property for the benefit, usually financial benefit, of
the owner. Typically, invitees are customers of commercial property owners.
Property owners owe the highest duty to invitees, requiring the exercise of
reasonable care to prevent injury from any dangerous conditions upon the
property. Licensees are persons lawfully on the property but not necessarily for
the financial benefit of the owner. The person delivering pizza to a homeowner
is a licensee. As to licensees, property owners have a duty not to create
unreasonable dangerous conditions.
Those
states that do not recognize the distinctions between invitees and licensees use
the general rule that owners are required to exercise due care to prevent
unreasonable harm to visitors.
