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					Chapter 1 – Buying and Selling Real Estate in the United States

   I.      Real Estate Sales: Three-Act Plays - 1
           a. Act 1 – owner decides to sell and markets property
           b. Act 2 – Executory Period – parties sign contract to moment contract closes
           c. Act 3 – After seller has vacated and buyer takes possession

   II.     Useful Definitions – 2
           a. Listing Agreement – Defines duties and rights of an agency relationship between
              property owner and broker
           b. Multiple Listing Service – Brokers share their listings with other brokers using
              one
           c. Escrow – Arrangment between two or more parties designating a third party to
              hold funds and documents for safekeeping pending fulfillment of performance or
              act said in escrow instructions
           d. Escrow Instructions – 3rd party agreement by which buyera snd seller authorize
              and escrow agent to implement the purchase-and-sale contract
           e. Deed – document by which the seller signifies transfer of title
           f. Title Insurance Policies – Insure the buyer that seller is transferring marketable
              title
           g. Mortgage – grant lender a lien against subject property until loan is fully repaid
           h. Deed of trust – creates a lien securing repayment of a debt “for the benefit of” the
              lender, called the beneficiary.

   III.    Methods of Financing Real Estate Transactions - 4
           a. Paying full price in case
           b. Taking subject to any loans already on the property and paying difference in cash
           c. Obtaining a new loan either from a lender or from seller
           d. Combination of 2 and 3

   IV.     The Place of Lawyers in Real Estate Transactions - 6
           a. Residential Closings – 6
                  i. Less lawyer involvement
           b. Commercial Closings – 8
                  i. Significant involvement in large commercial real estate transactions

   V.      Attorney Approval Clauses – 8
           a. A clause that empowers the buyer or seller to exit deal scot-free if their attorney
              disapproves it
           b. A few courts have held attorney disapproval base solely on having seller receive a
              higher offer makes party’s obligation illusory

   VI.     Ethical Responsibilities of the Real Estate Transactions Lawyer – 10
           a. Attorney Representation of Multiple Parties -10




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                    i. Can become counsel for the situation is if lawyer representing parties
                       engaged in a joint endeavor or seeking an amicable settlement who is not
                       partisan for any of the parties
          b.   Scrivener Exception – 11
                    i. If used to implement an agreement the parties have already negotiated
                       themselves
          c.   Disclosure and Consent to Dual Representation – 11
                    i. Need to give full discloser and receive informed consent from each party
          d.   Duty of Confidentiality to the Client – 12
                    i. Involves all representation involving representation of client
                   ii. If you discover there’s an undisclosed sinkhole under house, you can’t
                       disclose that t buyer, and you have to withdraw because can’t further a
                       fraud by continuing to represent
          e.   Duty to Unrepresented Party – 12
                    i. Some circumstance where liable to unrepresented party
                   ii. Have to explain so othe party will understand you represent adverse interst
                       and that he fully understand actual effect of contract
                  iii. Florida Bar v. Belleville – 13
                  iv. Brooks v. Zebre – 16 – Duty of loyalty would be compromised if had to
                       represent
                   v. California take middle ground – Have to o over the contract line by line
                       with unrepresented client

Chapter 2 – Real Estate Brokers – Handout 1

   I.     What Brokers Do – H1
          a. Searching for a good broker – H1 – check out heir open houses and then interview
          b. For Sale By Owner – FSBO – H1 – not recommended
          c. Should Buyer Hire a Broker – H2
                 i. Takes some of seller’s commission
                ii. 70-80% do

   II.    Multiple Listing Service – H2
          a. Advantages to seller is assured widest possible dissemination of information on
             seller’s property
          b. Advantage sot buyer has access to all properties available in area

   III.   Broker Licensing Requirements – H3
          a. Required exam, be of good standing and reputation, be associated with real estate
             broker, and pay fee
                  i. CA requires two years of agent’s experience or 4 year degree with RE
                     experience
          b. Exemptions to Broker License Laws – H4
                  i. Owners – Owners marketing own property are exempt
                 ii. Finders – Only limited to bring parties together, and parties negotiate on
                     their own



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            iii. Attorneys – Most states do not provide an exemption to attorney
                 1. In all states, attorneys can become licensed brokers, but cannot
                    represent a client both as an attorney and RE broker in same
                    transaction

IV.   The Listing Agreement – H6
      a. Defines term of the agency agreement between broker and seller
      A. Is a Writing Required? – H6
                 1. An Even Split
                         a. They are personal service contracts, not covered by statute of
                              frauds, so some say they don’t have to be in wring
                         b. CA makes it party of SOF, so needs to be in writing
                                       i. Need to be signed by broker and owner, describe
                                          the property to be sold, and specify the commission
                 2. Exceptions to the Writing Requirement – H7
                         a. Finders
                         b. Buyer’s Broker Claims against Breaching Buyers
                         c. Claims by Seller’s Brokers against Buyer and Seller for
                              Tortious Interference with Listing
      B. Negotiating the terms of Listing Agreement – H8
             a. Should have the following information:
                      i. Names of parties
                     ii. Description of property
                    iii. Sales price, including terms of payment
                    iv. Amount of compensation
                     v. Termination date of broker’s employment
                    vi. Additional specific provision, e.g, whether there is an exclusive
                         agency or right to sell
             1. Types of Listings: Open Listing, Exclusive Agency, Exclusive Right to
                 Sell – H7
                     a. Open Listing – The seller promises to pay a brokerage commission
                         only to that broker who first find a buyer on terms acceptable to
                         seller
                     b. Exclusive Agency – broker becomes the seller’s only sales
                         representative
                     c. Exclusive Right to sell – guarantees the broker’s commission if the
                         “property is sold” during the term of listing “by broker, seller,
                         another broker, or through any source”
             b. Spot Exceptions to Exclusive Right to Sell – H9
                      i. If there are parties who expressed interest to seller before this time,
                         can do a spot exemption saying if they buy the property then won’t
                         have to pay broker
             c. Exclusives and MLS – H10
                      i. Will try to list on MLS and get buyer brokers to take notice
             d. The Broker’s Vulnerability Under an Open Listing: Proof of Procuring
                 Cause – H10



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                      i. Must prove tat he was the cause of the sale
                            i. It’s a “but for” or
                           ii. “unbroken chain” test – Need to be continuous events from
                                finding buyer to closing deal
            2.   Amount of Commission – H11
                     a. Typically it’s 6%
                     b. Can be negotiated
            3.   Length or Term of Listing – H12
                     a. Should be fixed because sellers need protection from ineffectual or
                         lazy brokers
                     b. CA – typically, it’s a 180 day exclusive listing period
                     c. Cancellation Clauses – are possible but may deter aggressive
                         marketing by brokers
            4.   Sellers’ Liability for Commissions on Deals that never Close – H12
                     a. Earned commission when seller receives an offer at the listed price
                         and terms, or on any price and terms acceptable to seller during
                         listing period
                     b. Loses this when deal was on contingent of financing, inspection,
                         title approval, and contingency fails
                     c. Sellers are always liable to broker for “willful breach” of purchase-
                         and sale agreements – H13
                     d. Seller Warranties to the Listing Broker
                            i. If seller says no problems but they know there’s problems
                                and affect the sale, could still be liable to broker
            5.   Limitations on Seller’s Right to Revoke Listing Agreements: Broker’s
                 Entitlement When Seller Withdraws Property from Sale – H14
                     a. Listing Agreements give brokers a right to compensation if seller
                         withdraws property from market before broker has found a buyer
                     b. CA – “Benefit of the bargain” is full commission
            6.   Broker Strategies to Deter Seller Fraud: “Procuring Cause,” Proof of
                 Evasion, and Extension Agreements – H15
                     a. Anti-Price Reduction Provisions – Can say, if seller lowers
                         purchase price to anyone, then I can do the same thing and try to
                         sell it like that and would get commission
                     b. Extension Clauses as a way of Discouraging Sellers from
                         Defeating a Broker’s Claim to a commission – If broker negotiated
                         or dealt with actual buyer, and bought after expiration of
                         agreement, broker still entitled to commission.
            7.   Specifying the Scope of Broker’s Marketing efforts – H17
                     a. Can specify what they expect the exact marketing to be

V.   Defining the Legal Obligations of Brokers to their clients and Counter Parties – H17
     A. Fiduciaries – H17
           a. Owes highest ethical standard, “utmost good faith”
           b. Offer Accurate Pricing Advise
           c. Avoid Indiscriminate Disclosures – confidentiality



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                 d. Not to deceive or Mislead Counter Parties – Cannot lie to Buyer about what
                     they know is not true
                 e. Held accountable to buyers for failing to disclose all material, latent, known
                     defects, even when the seller called those defects to the broker’s attention in
                     confidence
          B.   Sub-Agents – H19
                 a. Construe listing property in an MLS as “an offer of subagency by the listing
                     broker to other MLS members to procure a buyer in exchange for some
                     commission”
                 b. Party is no always aware that their a mere subagent instead of broker
          C.   Buyer’s Fiduciary Agent – H20
                 a. Minority of states treat buyer’s agent as fiduciary of buyer – more in line
                     with buyer’s expectations
                 b. Obligations of Buyers’ Fiduciary Agents to Sellers – negligence
                 c. Lombardo v. Albu – had to disclose any information which the licensee
                     possesses which materially and adversely affects the consideration to be
                     paid by any party to transaction
          D.   Dual Agent – H21
                 a. Need informed consent to have two agents from same brokerage
                 b. Sometimes dual agents encounter unavoidable conflicts of interest – so
                     informed consent is very important
          E.   Transaction Broker – H 23
                 a. A broker who assists one or more parties with the transaction without being
                     advocate for interests of the party
                 b. Twenty states have this
                 c. Can emancipate brokers form increasing burden as fiduciaries or agents

   VII.   When Brokers Become Buyers of listed Property – H24
          a. N rule prohibits this
          b. But have to divulge to the seller all she knows about the value and other salient
             characteristics of the property.

Chapter 3 – Buying a Home – 61

   I.     To Own or Rent? – 61
          A. The Case for Home Ownership
               a. Equity Build-Up
               b. Tenure
               c. Housing Costs Predictability
               d. Portfolio Diversity
               e. Housing as a Social Good
          B. The Case against Home Ownership
               a. Time and Effort
               b. Uncontrollable Costs
               c. Loss of Mobility




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   II.       Federal Income Tax Consequences - 53
             A. Tax Advantages – 63
                    a. Deduct “qualified residence interest” – mortgage up to $1M
                    b. Deduct property taxes
                    c. Deduct Points in year of purchase
                    d. Deduct interest on home equity loan principal of up to $100K
                    e. Not taxed on imputed value of occupancy
                    f. Sellers aren’t taxed on first $250K of gain ($500K if joint file)
                    g. At death, house re-assessed, so devisee’s FMV of acquire will be higher so
                        gain will be less
             B. Disadvantages – 65
                    a. Mortgage deduction makes home prices higher
                    b. Losses on sale of personal residence is not deductible
                    c. Really high gains can’t be deductible because of the cap
                    d. Borrowers mistakenly exaggerate the advantage of home mortgage
                        deductions
                    e. Inflation diminishes impact of deduction

   III.      Finding and pricing the Deal - 69
             A. Sources of data about properties and neighborhoods
                    a. Real estate brokers can pool info about housing prices
             B. Deal-Specific Factors – 70
                    a. How willing buyer is to buy and seller is to sell
                    b. Reservation price – higher price buyer would pay and lowers price seller
                       would accept
                            i. Circumstances determine this

   IV.       The Negotiation Process - 71
          A. Should you negotiate directly, through or with an agent?
                a. Agent keeps seller and buyer from talking to each other directly until deal is
                    signed
                b. Brokers carry offers and counteroffers back and forth
          B. Negotiation Pointer – 71

Chapter 4 – Purchase-and-sale agreements 75

Chapter 4A – Purchase-And-Sale Agreements: Statute of Frauds and Parties to the Agreement –
H1

   I.        Two Questions ancillary to drafting a purchase and sale contract
              A. Why Bother Contracting?
                     1. Custom and Practice
                     2. Brokers insist on it
                     3. Need an enforceable deal for buyers to be ready to spend
                     4. Lenders need something in writing
              B. Should Contract provisions be included which recite the default rules?



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                 1. Default rules fill in the gaps open by contractual silence
II.    The Requirement for a Written Contract: The Statute of Frauds and Electronic
       Contracting – H4
        A. What it takes for a realty contract to satisfy the Statute of Frauds
                 1. Subscribed by the party to be charged
                              a. Signature at end of contract – need the “defendants”
                 2. Identify the parties to the agreement
                              a. All parties be identified in writing
                 3. Specify the price
                              a. Agreed price
                 4. Describe the property
                              a. Need to furnish a means or key to the identification of the
                                   property
                 5. Recite Reciprocal promises to buy and sell
                              a. Can’t be confused with an option to buy
                 6. Financing terms and contingencies.
                              a. Need to have the exact details of all material terms
        B. Electronic Contracts and the Statue of Frauds – H7
                 1. Electronic signature includes “an electronic sound, symbol, or process,
                     attached to or logically associated with a contract or other record and
                     executed and adopted by a person with the intent to sign the record”
        C. Exceptions to Statute of Frauds – H8
                 1. Parole Evidence Rule – admissible to reconcile the ambiguities or
                     uncertainties of written provisions but not to supply essential terms
                     omitted entirely
                 2. Full Performance – If contract is fully performed, SOF is irrelevant
                 3. Admission in Court or Pleadings – Does not forfeit SOF defense by
                     admitting existence or essential terms of the contract in pleadings,
                     affidavits, depositions or testimony
                 4. Part Performance – usually taken possession and paid part of the
                     purchase price
                 5. Equitable Estoppel – Not enforcing the contract would be
                     unconscionable despite SOF
                 6. Fraud and Inequity Exception – Statute is no bar to a court granting
                     rescission and restitution of an oral realty sales agreement to prevent
                     fraud
III.   The Parties to the Transaction – H13
        A. The Grantor
                 1. When should the owning entity be sold instead of the realty
                              a. The buyers might prefer purchasing the entity to preserve
                                   valuable franchise or service contracts, personal property or
                                   goodwill owned by the entity
                 2. Identifying the True Owner
                              a. Title Insurers will help
                 3. Contracting to Acquire the Interest of One of Several Owners – H15




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                              a. Probably can’t compel someone convey interest, unless he
                                  misleads the other person
                              b. But can probably buy for less than market value because
                                  the other person’s interest would impede the value of the
                                  title
                  4. Proper Authorization for Sale of Trust, Partnership, or Corporate
                     Property
                              a. Need all signatures of all parties in the entity
                  5. Buying from a married grantor
                              a. Both spouses must sign the deed for a transfer of jointly
                                  owned property to be valid
                              b. Should insist the spouse at least signs a “quitclaim” even if
                                  one spouse claims sole ownership
           B. The Grantee
                  1. Designating the Right Grantee
                              a. Revocable trust, tenancy in common, joint tenants
                  2. Undisclosed Principals and “Straws”
                              a. Straw men act as agents and sellers can sue them because
                                  they pretend to act on own behalf
                              b. Allows undisclosed principals to sue or be sued on
                                  contracts entered on their behalf by their designated agents
                  3. Setting aside a sale upon learning buyer was a straw, seller must prove:
                              a. A fraudulent misrepresentation
                              b. On which the seller reasonably relied
                              c. Which was material to the deal
                              d. To reep substantial damages, seller needs to prove how
                                  knowing identity of true buyer would have made difference
                                  in price or decision to sell
                  4. Deterring Speculation int Tract Home Sales
                              a. Usually put something saying can’t sell witin a couple of
                                  years, but put in a hardship exception to make it more
                                  likely to stand up in court
           C. Assignment of the Contract
                  1. Law allows a buyer freely to assign her interest in purchase-and-sale
                     agreement
                  2. Presumption favoring assignments is reversed for sellers providing
                     purchase money financing or who have guaranteed existing loans their
                     buyers are assuming
                              a. Here, buyer’s reputation and credit are presumed essential
                                  to sale and would need seller’s consent.

Chapter 4B – Purchase-and-sale agreements: following the Money – H28

   I.     The Purchase Price
          a. Can be based on a formula
          b. Intital Deposit



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                  i. Trade practice dictates that good faith deposit accompany buyer’s offer
          c. “Good Funds”
                  i. Usually pay with personal checks
   II.    Financing Contingencies – H30
          a. Financing Default Rule
                  i. Law of vendor and purchaser presumes-absent clear contrary language in
                     the contract – that the seller will be receiving 100% cash at closing
          b. Contingencies should be quite specific in identifying the terms or may leave the
             terms “subject to Buyer obtaining satisfactory financing
          c. Vague contingency clause are vulnerable to attack as illusory promises
                  i. Courts will either not enforce contract or make it all cash at closing
          d. Buyer is legally obligated to make the effort of applying in good faith for loans at
             reasonable number of lenders and completing the required applications for
             financing
          e. Buyers can make their obligations to purchase contingent on applying for a loan,
             receiving a loan commitment, or actually obtaining a loan
          f. Lender’s Breach – H34
                  i. Seller cannot seek damage against lenders because no third party
                     beneficiary status
                 ii. Can change this by designating jointly with buyer among the parties to
                     whom the lender made the loan commitment
          g. Financing Contingency Time Period – H35
                  i. Should have a short time period so seller won’t have to wait long for buyer
          h. Once the financing contingency date arrives, the seller may be able to compel the
             buyer to choose between terminating the contract if the buyer has obtained no
             loan commitment or relinquishing the financing contingency in the hope of
             eventually obtaining a timely loan
                  i. If getting close, buyer should call seller to ask what they should do, keep
                     looking or cancel the contract. This will lead to estoppel based on what
                     seller says to do

Chapter 4C – Purchase and sale Agreemetns: The Subject Property – 39

   I.     Inspections – 39
            A. Why are there bad houses? – 39
                    1. Houses are being constructed at a furious pace and in record numbers
            B. Finding and Contracting a good inspector – 40
                    1. Visual analysis of home and component systems
                    2. Brokers Inspections – 42
                                  a. Some states require listing brokers to prepare their personal
                                     assessments of condition of property for benefit of buyers
            C. When Inspections should take place – 43
                    1. Make up punch list
                    2. Final walkthrough on day of closing after seller has vacted to check
                        stauts of punch list and make sure fixtures are still there




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               3. Buyer can only back out if condition deteriorated sicne date of contract
                  or last inspection
        D. Why Sellers should contract for their own physical inspections even though
           buyers shouldn’t rely on the sellers’ inspection – 44
               1. Seller could cure embarrassing defects early
        E. Inspectors’ Defenses and Limits to Liability – 45
               1. Defect wasn’t there when inspection took place
               2. Defect wasn’t the sort the inspection was designed to cover
               3. Seller should bear loss for concealing or failing to reveal defect
               4. Buyer didn’t rely on the report, and would have purchased anyway
               5. Inspection was not negligent
               6. Inspector attempts to limit monetary liability – 46
                            a. In contracts limit liability to amount of fee
                            b. But some jurisdictions hold these unenforceable
        F. Framing the buyer’s remedies under an inspection contingency clause in a
           purchase and sale contract
               1. Absolute Discretion or Reasonable Dissatisfaction? – 46
                            a. Most forms allow those unhappy with inspection report to
                               rescend
                            b. Under absolute discretion – CA – buyer can rescend
                               without explination
                            c. Reasonable dissatisfaction calls for buyer to transmit to
                               seller list of defects and a chance to cure them
               2. Active or Passive Removal of Inspection Contingency? – 47
                            a. Active – must provide written waiver, or passive waived by
                               doing nothing
                            b. CAR now embraces active method
               3. Take it or Leave it or Resolution Period Formats? – 48
                            a. Take it or leave it – rescinds based on inspection
                               contingency and cannot make owner cure

II.   Legal Liability of Homebuilders and Homeowners For Defective Property - 49
        A. Caveat Emptor
               1. Buyer Beware
        B. Misrepresentations - 50
               1. Misrepresentations not allowed under caveat emptor
               2. Concealing a defect counts against seller as much as lying about one
               3. Buyer Reliance – if buyer discovers defect before contracting or during
                    inspection period, no reliance because still bought because knew about
                    it
                             a. Probably won’t rely on seller’s statements if buyer has a
                                 professional inspector
        C. The Emergent Norm Calling for Seller Disclosure of Defective Conditions - 52
               1. Most states, seller legally bound to disclose known, material, latent
                    defect not known or readily apperent to the buyer




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                     2. Unless there’s an express warranty in the contract, buyer’s sole remedy
                        for a disclosed defect is rescission
                     3. Debate still out about whether waivers and disclaimers should be
                        permissible
            D. Seller Representations and Warranties - 57
                     1. Representations – sellers making statements about current condition of
                        property
                     2. Warranties - making promises about existing or future conditions
                     3. Implied warranties are imposed to “manufacturers” of housing
            E. “As Is” Clauses – 60
                     1. Meant to negate the existence of any representations by seller as tho the
                        particular condition sold
                     2. “As is” is of date contracted or inspected, not closed
                     3. Only a handful of states read As is as not needing to disclose
   III.   Fixtures - 63
          a. Fixtures Default Rule
                     1. Fixtures are attached to realty – seller needs to exclude it from sale if
                        want to take it.
   IV.    Casualty Losses During Executory Period – 66
            A. The Default Rule Derived from the Doctrine of Equitable Conversion
                     1. Minority – seller responsible for repairs and maintentce
                     2. Slight majority – buyer is responsible
                                  a. Justification – once a realty sales contract is signed, an
                                     equitable conversion occurs
            B. The “Contract-Based” Minority Default Rule – 68
                     1. Seller because the notion that party in possession is best position to
                        safeguard property
                     2. Uniform Vendor and Purchaser Risk Act – 69
                                  a. If buyer has legal title or possession, it’s him; if not, seller
            C. Contracting Out of Risk of Loss Default Rules – 71


Chapter 4D – Purchase and sale Agreements: The Quality of Seller’s Title – 76

   I.     Marketable Title
           A. The Default Title Standard – 76
                 1. Markeatability of title is about legal ownership, the basis for an owner’s
                     claim to possess, use and dispose of the precise parcel of land described
                     first in contract and later in deed
                 2. Question of Fact or Law – 77
                             a. Can be either or
                 3. Timing of Seller’s Contract Obligation – 77
                             a. Title doesn’t have to be markeatable when contract is entered,
                                just at closing
           B. Defining the Defects, liens and encumbrances that could cuase title to be
              unmarketable – 78



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                1. Defect – facts that could result in buyer losing estate or interest she
                   reasonably expected to be buying
                          a. Unsigned deed, adverse possessor, deed signed by minor
                2. Lien – claim or charge against property as security for obligation or debt
                          a. They are obligations to pay money
                3. Encumbrance – “any right of 3rd party that diminses the value to owner
                   but does not prevent passing of interst
                          a. Can also be mortgages, leases, easements
                4. Leases as Encumbrances – 79
                          a. In all but few states, leases unexpired at closing make seller’s
                              title unmarketable
                          b. To force buyer to accept title seller would have to show buyer
                              took contract with lease in mind
                5. Beneficial easements are not deemed encumbrances that make title
                   unmarkeatable – 79
                          a. Like TV, utility, streets
                6. Encumbrances Buyers may desire – 80
                          a. If buyer wants it, have to contract for title “subject to” desired
                              lease.
                7. Encumbrances sellers may desire – 80
                          a. Sellers can condition property sales to keep certain easements,
                              leases, or mortgages in place
                8. Threatened or Pending Litigation – 81
                          a. Mere possibility of litigation doesn’t render title unmarketable
                          b. Buyers only entitled to rescinded if lawsuit is likely to go to
                              trial
                                       i. If not going to survive motion, then no relief
II.    Alternatives to Marketable Title Standard – 82
                1. Insurable title – any title an insurance company would insure
                          a. Same as marketable excepts sometimes goes through with
                              obsolete deed restrictions
                          b. Bigger risk to title insurer
                2. Record title – can’t depend on unrecorded deed, unprobated wills, or
                   adverse possession
                3. Buyer’s Satisfaction – what reasonable buyer would require
                4. Buyer Approval of Deed Restrictions – 83
                          a. If buyer doesn’t like CC&R should rquire a modification
                          b. Sellers are entitled to reasonable time to cure defect by
                              obtaining waiver
III.   Contract Provisions Regarding Buyer’s Title Review – 84
                1. Preliminary report – indicates policy that title insurer will write for buyer
                2. If there’s a basis for reasonable disapproval, buyer may rescend
                3. Contract Provisions Limiting the Seller’s Obligations Regarding Quality
                   of Title – 84
                          a. Sellers should exept all liens, easements, etc. that they know
                              about and aren’t prepared to cure



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   IV.    Pulic Land Use Controsl including Building and Zoning Codes – 85
           A. How Building and Zoning Codes Work and Why Buyers should Care – 85
                  1. Though almost all code violations can be cured, it can be costsly
                  2. Owner needs a variance to cure zoning violation – a lot of administrative
                      process
           B. Building and zoning codes don’t usually impair legal marketability of title – 87
                  1. Not knowing laws and ordinances of property is not a defense
                  2. It’s assumed buyer takes title knowing these
                  3. The buyer should obtain:
                             a. Owner’s representation that he received no notices of violation
                                 and has build nothing without proper permits
                             b. Seller’s representation that he’s aware of no specific violation
                                 of land use plans
                             c. Seller’s warranty that there are no such violations
                             d. Title insurance policy endorsement that present use of property
                                 is consistent with zoning
           C. Use of Doctrines of Mistake and Misrepresentation when buyer’s intended use
               would violate zoning – 89
                  1. Doctine of mistake – granted buyers rescission before and sometimes
                      after closing because their development aspirations were frustrated by
                      land use controls they didn’t realize existed when they signed contract.
                      And the seller knew buyer was buying for that purpose
                             a. Mistake is when seller didn’t know
                             b. Misrepresentation when seller did know.
                  2. The rescinded contract often states purchaser’s intended use

Chapter 4E – Purchase and Sale Agreements: Contract Provisions Regarding the Time for
Performance and Doctrine of Merger – 94

   I.     Defining Timely Performance – 94
           A. The Default Rule – 94
                1. Closing dates in realty contracts are regarded as approximate
                      a. Unless it says “time of the essence”
                2. Once time does go by, then a reasonable drop dead date can be made by
                   either party
                3. If no date specified, then reasonable time must be used to close by
                4. “Time is of the essence”
                      a. Some courts strictly enforce and declares breach
                      b. Other courts look for inconsistent provisions such as allowing there
                          to be a long close to invalidate the clause
                5. If Seller puts house back on market because buyer missed deadline, and
                   buyer sues for specific performance, he has good chance of winning
           B. Strategic Drafting Considerations Regarding the time for Performance – 96
                1. Explain why time is of the essence to make it stronger




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               2. Use words like “reasonable time to cure title defects” instead of “reasonable
                  time to perform contract” – the former will begin when defect found, the
                  other won’t
               3. Homebuilders put explicit language that closing date may be late
           C. Marking Time – 97
               1. Default is mail box rule – the date a contract is sent.
               2. When receiving – 1st day is excluded, but last day is included
                     a. Gets on Monday – 3 days is Thursday, not Wednesday
               3. “Date of Execution” probably refers to date seller signs
   II.    Making Sure the Seller’s Promise survive the Closing: Doctrine of Merger – 99
           A. Merger Defined – 99
               1. A buyer who accept a deed that does not repeat and reaffirm the contractual
                  promises made by the seller to cure title defects may be barred from
                  objecting later by doctrine of merger.
               2. If it could’ve been mentioned clearly in deed, then any prior mention of it is
                  irrelevant
               3. Absent persuasive counter evidence, proof of fraud or mutual mistake, the
                  land description in the deed abrogates a contradictor description in the
                  contract
           B. Contracting out of the Law of Merger – 102
               1. Either party can contract out of it if it’s clear
               2. Buyer who closes before seller has fully performed all contract promises
                  may be deemed to have waived full performance

Chapter 4F – Alternatives to Realty Purchase and Sales Contracts – Options, Deposit Receipts
and Letters of Intent

   I.     Options - 106
          a. Choosing between Conditioned Contracts and Options – 106
                 i. The prospective purchase has no obligation to buy but can compel seller to
                     sell based on terms and conditions specified in the option agreement
          b. Consideration for the option – 106
                 i. It’s usually money, but could be any promise sufficient ot support a
                     bilateral contract
          c. Firm offers – 107
                 i. Firm offer is promise to hold an offer open for a fixed period of time
                         1. But can be withdrawn at any time.
                         2. There is nothing firm about a firm offer – George Lefcoe
          d. Timing Issues – 107
                 i. Time for election to purchase is strictly enforced




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