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e Contracts to Purchase

Real Estate

Real Estate I

Mike Brigner, J.D.

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eStatute of Frauds

• Contracts for the transfer of an interest in real property are contracts falling under the STATUTE OF FRAUDS (R.C. 1335.05), which requires certain contracts to be in writing and signed by the party to be charged in order to be legally enforceable.

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eWhat they want; what they really, really want

• Buyers want:

• Minimum deposits

• Contingencies: attorney approval, financing, zoning, inspection

• Warranties from seller

• Limit seller’s remedies

• Specific performance or damages if seller defaults

• Sellers want:• Large deposits• No contingencies

allowing buyer legal ways to avoid the contract

• Minimum warranties• Limit buyer’s remedies• Specific performance or

damages if buyer defaults

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eNeed a lawyer for transaction?

• The Right Way

• Attorney for both

• Custom contract

• Every issue covered

• Issues spelled out

• Clean final form

• Time to deliberate

• Negotiations

• Problems identified “up-front”

• The Typical Way

• No attorneys

• Form contract

• Most issues covered

• Shorthand

• Interlineations

• Pressure for speed

• Snap decisions

• Problems litigated after-the-fact

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Payment Terms

Contract Terms

Dates

Parties

Quality of Title

Conditions / Inspection

Possession

Closing / Fees

CHECK LIST

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eDates

• Closing date• Inspection dates• Possession date• Effective date? After “shuttle diplomacy”

between buyer & seller, what is date of contract? When last required party signs.

• Date by which buyer must obtain financing• Date by which seller must prove good title• Paralegal must track them all!

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eParties

• Legal name of each party• Marital status of buyer

– Single

– Married, buying jointly

– Married, buying individually

• Name under which seller owns property• Marital status of seller (if married, spouse must sign

away any rights to property)• Exact spellings are critical!• If party not a natural person, must ID legal entity of party

+ person with authority to sign

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ePayment terms

• Purchase price• “Earnest money” deposit

– How held, – How interest is handled– Escrow account, escrow agent

• Cash sale or financed sale?– Contingent on financing by buyer?– “Diligent effort” to obtain financing required?– Seller to finance any part of price?

• Require certified checks• Closing costs: who pays what?

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eOptions for financing

• Cash sale

• Buyer assumes seller’s mortgage– (used when current rates are high)– Beware “Due on Sale” clause in existing mortg.

• Sale subject to existing mortgage– (same as assumption, but seller remains

primarily liable under mortgage note)

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eOptions for financing

• Purchase money mortgage sale– Seller finances all or a portion of the purchase

price– Title transfers to buyer– Buyer executes a mortgage in favor of seller

• Land contract– Buyer takes possession, makes payments for

years, usually a balloon payment at end– Title stays in name of seller until final payment

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eQuality of title

• Buyer wants title free from liens, restrictions & encumbrances

• Buyer wants “marketable and insurable” title• Marketable title = Title that a prudent purchaser

with full knowledge of the facts would accept• Buyer wants a General Warranty Deed• Title search: usually goes back 40 years• Seller pays for title search• Title insurance: buyer pays for• Failure of seller to produce good title means failure

of contract and refund of all deposits

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eConditions / inspections

• Roof & termite inspections typical• Full inspection for defects advisable• Seller required to repair defects found?• Or, either party may cancel contract without

liability if defects found?• Ohio requires disclosure of known defects

– R.C. 5302.20 and Ohio Dept of Commerce form– Not a substitution for a full inspection

• Seller can purchase a home repair warranty for benefit of buyer, covering named defects

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ePossession

• Possession at time of closing?

• 30 days after closing?• Occasionally, possession

is before closing

• Risk of Loss: Who is responsible for damages to premises from date of contract to date of closing? From date of closing to date of possession?

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eClosing / fees

• Date for closing• Damages for delay?• Usually, a reasonable delay doesn’t allow

either party out of the contract• But, if “time is of the essence” language, the

non-tardy party may back out of contract• Who pays what at closing? All fees and

closing costs should be covered in contract

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eSpecial provisions

• Income-producing property: who gets $?• Contract subject to sale of other property• Condominiums

– Buyer gets to inspect condo documents

– Condo association approval may be required

• Sale subject to re-zoning• Option contract: Buyer pays a fee to get

exclusive right, or first right, to purchase real estate within set amount of time

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eFederal Fair Housing Act

• 42 U.S.C. § 3604 (2001) Discrimination in the sale or rental of housing & other prohibited practices

• [I]t shall be unlawful‑‑• (a) To refuse to sell or rent after the making of a bona fide

offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.

• (b) To discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of race, color, religion, sex, familial status, or national origin.

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eOhio Fair Housing Law

• It is unlawful for anyone to:• Refuse to sell real estate;• Refuse to lend money for purchase;• Refuse to rent, sublet, negotiate, question,

advertise, or otherwise discriminate • because of race, color, religion, sex, familial

status, ancestry, disability, or national origin• R.C. 4112(H)

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e Contracts to Purchase Real Estate

Concluded

Thank you

Mike Brigner, J.D.