B428 Real EstateB428 Real Estate

Day 4Day 4Purchase and Sale Agreements, Purchase and Sale Agreements, Deed, Mortgages, Escrows and Deed, Mortgages, Escrows and

ClosingsClosings

Property Owner LiabilityProperty Owner Liability

GuestsGuests Business InviteesBusiness Invitees TrespassersTrespassers

What is the standard of care owed?What is the standard of care owed?

Purchase and Sale AgreementPurchase and Sale Agreement

Agreement to purchase and sell land Agreement to purchase and sell land to close on a future date.to close on a future date.

At the closing title is transferred in At the closing title is transferred in return for payment of the purchase return for payment of the purchase price.price.

The Installment Land ContractThe Installment Land Contract

Key element: Legal title is not Key element: Legal title is not transferred until the purchase price transferred until the purchase price has been paid in full.has been paid in full.

Questions:Questions:

What happens in the meantime?What happens in the meantime?

Why is the Buyer concerned?Why is the Buyer concerned?

How would the Buyer give notice?How would the Buyer give notice?

Installment Land Contract Installment Land Contract continued…continued…

In many cases an Escrow is established.In many cases an Escrow is established.

Payments are made and disbursed through Payments are made and disbursed through the Escrow Agent.the Escrow Agent.

Deeds, both warranty and quitclaim are Deeds, both warranty and quitclaim are deposited.deposited.

Notice of default I given to the Escrow Agent…Notice of default I given to the Escrow Agent…

Basics of DeedsBasics of Deeds

Delivery and acceptanceDelivery and acceptance AcknowledgementAcknowledgement RecordingRecording ContentsContents

• PartiesParties• ConsiderationConsideration• Words of conveyanceWords of conveyance• DescriptionDescription• RestrictionsRestrictions• HabendumHabendum• SignaturesSignatures

Interests in real property are Interests in real property are transferred by Deed.transferred by Deed.• Deed gives proof of transfer from Deed gives proof of transfer from

grantor to grantee.grantor to grantee.• Deed establishes the quality of the Deed establishes the quality of the

estate transferred.estate transferred.• Deed defines the quantity of real Deed defines the quantity of real

property transferred.property transferred.

Types of DeedsTypes of Deeds

1.1. Warranty DeedWarranty Deed

2.2. Special Warranty DeedSpecial Warranty Deed

3.3. Grant DeedGrant Deed

4.4. Quitclaim Deed Quitclaim Deed

5.5. Gift DeedGift Deed

6.6. Personal Representative’s DeedPersonal Representative’s Deed

Which deed would work best?Which deed would work best?

1.1. Sam Smerch wants to transfer part of the ranch Sam Smerch wants to transfer part of the ranch to his beloved grandchildren each December as to his beloved grandchildren each December as part of his estate plan.part of his estate plan.

2.2. Delores and David Diligent are buying their first Delores and David Diligent are buying their first home in Shangri-Lala Acres. home in Shangri-Lala Acres.

3.3. Gwen Gnashteeth divorced her husband Albert Gwen Gnashteeth divorced her husband Albert several years ago. The divorce settlement several years ago. The divorce settlement agreement granted Gwen the home, but there agreement granted Gwen the home, but there was never any deed filed.was never any deed filed.

Which Deed continued…Which Deed continued…

4.4. Elvin Ernstbrow was appointed personal Elvin Ernstbrow was appointed personal representative of his father’s estate. Under the representative of his father’s estate. Under the will the farm goes to his sister, Edwina, and the will the farm goes to his sister, Edwina, and the cabin in Island Park goes to his brother, Erewon. cabin in Island Park goes to his brother, Erewon.

5.5. Chuck Cashierscheck formed a limited liability Chuck Cashierscheck formed a limited liability company with his former college roommates, company with his former college roommates, Carl Couchpotato and Mel Microwave. Chuck’s Carl Couchpotato and Mel Microwave. Chuck’s capital contribution was to be a five-acre lot in capital contribution was to be a five-acre lot in the suburbs of Mud Lake, Idaho. the suburbs of Mud Lake, Idaho.

The Promissory NoteThe Promissory Note

Represents the obligation to payRepresents the obligation to pay Interest and principalInterest and principal PrepaymentPrepayment DefaultDefault

• InterestInterest• PenaltiesPenalties

SecuritySecurity SignatureSignature

Deed of TrustDeed of Trust

Pledge of real property as securityPledge of real property as security Parties: Grantor, Trustee and Parties: Grantor, Trustee and

BeneficiaryBeneficiary When recorded creates a lien on the When recorded creates a lien on the

propertyproperty Default: Nonjudicial foreclosureDefault: Nonjudicial foreclosure Right to reinstateRight to reinstate

MortgagesMortgages

Pledge of real property as securityPledge of real property as security Parties: Mortgagor-MortgageeParties: Mortgagor-Mortgagee Default requires judicial foreclosureDefault requires judicial foreclosure Usually a right of redemptionUsually a right of redemption

Provisions of Mortgages and Deeds Provisions of Mortgages and Deeds of Trustof Trust

1. Duties of Mortgagor or Grantor1. Duties of Mortgagor or Grantor• A. Pay the note in accordance with its termsA. Pay the note in accordance with its terms• B. Pay real estate taxesB. Pay real estate taxes• C. Maintain insuranceC. Maintain insurance• D. Keep the property upD. Keep the property up• E. Seek lender consent for alterationsE. Seek lender consent for alterations

2.2. Default/AccelerationDefault/Acceleration

3.3. Assignment of MortgageAssignment of Mortgage

4.4. Release-ReconveyanceRelease-Reconveyance

5.5. Taxes and insurance reservesTaxes and insurance reserves

6.6. Assignment of rentsAssignment of rents

7.7. Due on sale clause or restraint on alienationDue on sale clause or restraint on alienation

The PlayersThe Players

Listing AgentListing AgentSelling AgentSelling AgentEscrowEscrowAttorneyAttorneyLenderLenderTitle CompanyTitle CompanySellerSellerBuyerBuyer

Closing ExpenseClosing Expense

Transfer taxesTransfer taxesThird Party FeesThird Party Fees

SurveySurveyTitle InsuranceTitle InsuranceAppraisalAppraisalRE CommissionsRE CommissionsAttorney’s FeesAttorney’s FeesEscrow FeesEscrow Fees

Closing Expenses Continued…Closing Expenses Continued…

Loan FeesLoan Fees• Origination FeesOrigination Fees• Assumption FeeAssumption Fee• Discount PointsDiscount Points• Prepayment Penalty (existing loan)Prepayment Penalty (existing loan)• Mortgage InsuranceMortgage Insurance

Who pays?Who pays?

Transfer taxesTransfer taxes SellerSeller

Third Party FeesThird Party Fees

SurveySurvey SellerSeller

Title InsuranceTitle Insurance Seller/BuyerSeller/Buyer

AppraisalAppraisal BuyerBuyer

RE CommissionsRE CommissionsSeller/BuyerSeller/Buyer

Attorney’s FeesAttorney’s FeesSeller/BuyerSeller/Buyer

Escrow FeesEscrow Fees Seller/BuyerSeller/Buyer

Who pays continued…Who pays continued…

Loan Fees:Origination Fees Buyer Assumption Fee BuyerDiscount PointsBuyer/SellerPrepayment Penalty (existing loan) SellerMortgage Insurance Buyer

ProrationProration

The division of expenses…The division of expenses…

Property taxesProperty taxes

InsuranceInsurance

EscrowsEscrows

Involving a Third PartyInvolving a Third Party

Can hold documents and perform Can hold documents and perform collection and disbursal functionscollection and disbursal functions

AssignmentAssignment

Read an article or other written piece on Read an article or other written piece on one of the following:one of the following:• Income propertiesIncome properties• Tax strategiesTax strategies• Tax deferred exchangesTax deferred exchanges• Real estate loansReal estate loans• Landlord/tenant relationshipsLandlord/tenant relationships

Write a one page summary and be prepared to Write a one page summary and be prepared to describe what you found to the classdescribe what you found to the class