Chapter 7 Massachusetts. Real Estate Contracts

Transcription

1 Chapter 7 Massachusetts Real Estate Contracts

2 Contract Law A contract is an exchange of promises that is enforceable by law. Massachusetts allows both written and oral contracts. However, in Massachusetts, the sale of real estate requires a written contract to be enforceable. The statute of frauds requires a written memorandum to include the identity of the parties; a description of the property; a recital of the consideration; the date of the agreement; and the signatures of the parties. The signatures of both parties always should be obtained because a party cannot be sued for any breach of a contract unless the contract has been signed. Oral contracts for the sale of real estate are legal but not enforceable in a court of law.

3 Elements of a Contract Legally Competent Parties Mutual Consent - Also called meeting of the minds, Consideration Consideration Offer and Acceptance

4 Broker s Authority to Prepare Documents In Massachusetts, a broker may only fill in the blanks on preprinted forms, such as contract-to-purchase agreements and purchase-and-sale agreements, which are available from stationery stores, the Massachusetts Association of REALTORS, and regional real estate boards/associations. Sales Contracts Offer to Purchase Earnest Money Deposits Equitable Title Liquidated Damages

5 Electronic Signatures Massachusetts Uniform Electronic Transactions Act (MUETA) became effective February 18, 2004 (Codified at M.G.L. c. 100G Chapter 133, Acts of 2003). It applies to any electronic record or electronic signature created, generated, sent, communicated, received, or stored on or after MUETA s effective date. Electronic signatures cannot be denied legal effect or enforceability solely because it is electronic.

6 Installment Contracts Under an installment contract, the seller retains legal title to the property until the entire purchase price is paid, usually over a term of many years. The seller often finances the purchase, and the buyer sends the seller monthly checks until the entire amount, including interest, is paid.

7 Beyond the Unit... Read the Key Point Review in the Unit. Read the quizzes and answers. Are you right or wrong? Why? Go to QBank and customize a quiz on this Unit, selecting the boxes on the bottom to show progress as you go, and to show explanations. Take the quiz- recording your thoughts and how you did. Send us the recording for you to use as accountability. Text us or us any questions.

8 1. For a real estate sale contract to be enforceable in a court of law, the contract must be a. in writing b. signed by the buyers c. signed by the seller d. on a preprinted standard form

9 1. a (92) The statute of frauds requires a contract for the sale of real estate be in writing to be enforceable.

10 2. The age of legal competence in Massachusetts is a. 18. b. 19. c. 20. d. 21.

11 2. a (92) In Massachusetts, a person becomes of age and can be held responsible for his con- tracts upon reaching 18 years of age.

12 3. The memorandum required by the statute of frauds includes all the following EXCEPT a. description of the premises. b. identity of the parties and their signatures. c. consideration. d. closing date.

13 3. d (92) A closing date is not required to be part of a written memorandum. A description of the premises, the identity of the parties and their signatures, and consideration are all required under the statute of frauds.

14 4. A man makes an offer on a house. As soon as both parties have signed the contract, the man is a. immune from the statute of frauds. b. required to deposit the seller s earnest money in an escrow account. c. the legal owner of the property. d. the equitable owner of the property.

15 4. d (104) Once the contract is signed, the man has the right to become the owner or to have the title transferred.

16 5. When an earnest money deposit is received, a broker a. must give it to the seller. b. may deposit it in his checking account. c. must deposit it in an escrow account. d. must hold the check until the closing.

17 5. c (93) Massachusetts License Law requires that all brokers deposit escrow monies immediately upon the pendency of a transaction. Pendency is the term used in license law as a way of helping the licensee understand that as soon as a property goes under agreement, the monies must be deposited.

18 6. When the contract is signed, the buyer becomes the equitable owner. The buyer now has a. legal ownership of the property. b. a partnership with the seller. c. a deed to the property. d. a right to become the owner.

19 6. d (104) As stated in question #4 above, once a contract is signed, the buyer has the right to become the owner or to have the title transferred.

20 7. A liquidated damages clause permits the a. buyer to recover the earnest money deposit. b. seller to retain all or part of the earnest money deposit. c. broker to retain all of the earnest money deposit. d. seller to impose a fine on the buyer in case

21 7. b (104) A liquidated damages clause permits the seller to retain all or part of the earnest money deposit as liquidated damages in the event of the buyer s default.

22 8. A broker received a buyer s earnest money check for $5,000 and immediately cashed it. At closing, the broker handed the seller a personal check drawn on his own bank account for $5,300, representing the original earnest money plus 6% interest. Which of the following statements is TRUE? a. The broker should have deposited the money in a special non-interest-bearing bank account. b. The broker properly cashed the check but should have kept the interest. c. The broker should have deposited the money in his personal bank account and would have been entitled to keep the interest as a service fee. d. The broker should have deposited the money in a special bank account and should have discussed the interest with the parties.

23 8. d (93) The broker is required by law to deposit all monies received on behalf of a buyer or seller into an escrow account. By depositing the money into his personal account, he is in violation of the license law for commingling funds. The broker should have discussed with the parties whether they wanted the monies deposited into an interest-bearing account or non-interest-bearing account.

24 9. A married couple made an offer on a house. The offer was accepted by the seller. The preprinted sales contract used by the broker contained a standard liquidated damages clause. Two weeks later, the couple decided that they did not want the house. Which of the following statements is TRUE? a. They are bound by the sales contract they made and must proceed with the transaction. b. The seller and the broker may keep the earnest money deposit and put the house back on the market. c. The seller may sue both the husband and the wife for breach of contract. d. Because the broker used a preprinted form contract, the liquidated damages clause is legally void.

25 9. b (104) If the contract stipulated that in the event of a default by the buyer, the seller and broker may keep the earnest money deposit, then they may do so. The house can be put back on the market, providing all parties are in agreement.

26 10. Which of the following is seldom used in Massachusetts? a. Purchase-and-sale agreements b. Standard preprinted form contracts c. Installment land contracts d. Statutory memorandum of sale

27 10. c (105) Installment contracts are seldom used in Massachusetts because this type of transaction carries a high level of risk.

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