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Copyright Gold Coast Schools

Chapter 11

Broker

Contracts


2

Learning Objectives

Describe the characteristics of the 3

major types of listings

Describe at least 3 statutory

requirements for listing agreements

Distinguish between a listing broker's

employment to find a purchaser and

to effect a sale

List the 4 types of legal contracts the

licensee may prepare


3

Learning Objectives

List 4 documents that the licensee

can use to gather information for

preparing a contract

Describe the differences between a

tenancy by the entireties, a joint

tenancy and a tenancy in common

Specify what steps are desirable to

protect the parties if the buyer takes

occupancy before or after the closing

date


4

Learning Objectives

Describe the differences between an

option contract and a right of first

refusal

Describe the effects of Johnson v.

Davis Supreme Court ruling on real

estate practice in Florida

Define the differences between a

lease option agreement and a lease

purchase agreement


5

Brokerage Compensation

A condition of employment must exist for a

broker to be entitled to a commission

Listing agreement in writing

Contract between the owner and real estate

broker (not the licensee)

Both owner and broker (licensee) must sign

Copy to owner within 24 hours

Oral (parol) listing agreement

Enforceable if evidence of existence

Easier to prove if written

Must be in writing if for more than 1 year


6

Types of Listing Agreement

Open listing

Given to many brokers

Only broker who brings a ready, willing and

able buyer is entitled to a commission

Unilateral contract, seller is obligated


7

Types of Listings

Exclusive agency listing

Allows the seller to sell without owing the

listing broker a commission

The listing broker is entitled to a commission

if any brokerage firm sells the property


8

Types of Listings

Exclusive right-of-sale listing

The broker is entitled to a commission no

matter who sells the property

The most widely used listing


9

Types of Listings

Net listings

Seller agrees to accept a minimum amount

Any excess is the broker’s commission

Unjust enrichment

Customary commission

Legal in Florida

Should avoid


10

Written Listing Agreements

Rules Definite expiration date

May not be automatically renewed

Signed copy to owner within 24 hours


11

Entitlement to Commission

Procuring cause

Find a purchaser — ready, willing and able

buyer (Florida)

Effect a sale — transaction must close

Referral fee

May share commission if licensed in

another state

May not share commission if unlicensed


12

Commercial Real Estate

Commercial Real Estate Sales Commission

Lien Act

Broker can lien for earned commission

Applies to the sale of commercial property

Lien is against owner’s net proceeds not property

Broker must disclose lien to seller at:

Listing

Sale


13

Commercial Real Estate

Commercial Real Estate Leasing Commission Lien

Act

Broker can lien for earned commission

Applies to the lease of commercial property

Lien is against owner’s property

Tenant to pay commission

Lien is against tenants leasehold estate

May enforce rights under a renewal commission

Must file lien notice 90 days after tenant takes

possession


14

Purchase and Sale Contracts

Unauthorized practice of law

Brokers may prepare

Listing agreements

Sales contracts

Option contracts

Lease agreements

– On the Florida Supreme Court approved

form (fill in the blanks only)


15

Statute of Frauds

The sale of any interest in real property must

be in writing to be enforceable

Two exceptions

Contract has been performed (executed)

Partial performance

– 1) partial or full payment

– 2) buyer has taken physical possession

– or

– made improvements to property


E-Sign Act

Electronic signatures are legally enforceable

Encryption is a problem

Not commonplace yet


17

Documents Necessary

Seller documents Deed

Title policy

Survey - shows encroachments, easements

and setback violations

Mortgage

Zoning


18

Provisions of Real Estate Contracts

Contract for sale and purchase FAR/BAR and CRSP widely used for routine

residential transactions

Contract date

– “Time is of the essence”

– Use realistic times

Effective date

– Date last party signed contract


19

Parties to the Contract

Seller

Both husband and wife should sign

– Even if only one owns homestead

property

Buyer

Each buyer should be named

Each buyers should sign


20

Types of Ownership

Sole owner

Called owner in severalty

Sole and separate owner

– Married

– If homestead owner is survived by a

spouse and lineal descendants

(remaindermen)


21

Types of Ownership

Joint tenancy versus tenancy in common

Joint tenancy has the characteristic of survivorship

Tenancy in common has the characteristic of inheritability

Tenancy by the entireties

Husband and wife

Characteristic of survivorship

Simultaneous conveyance


22

Co-ownership

Tenancy in

Common

Joint

Tenancy

Tenancy by

the

Entireties

Unities of

title

Same or

differentSame Same

PartiesTwo or

more

Two or

more

Husband

and wife

Survivorship NoMust

stateYes

Second

most

common

Most

common


23

Earnest Money Deposit

Not required with a real estate contract

Entered on the real estate contract

More than $10,000 cash – report to IRS

A broker is not required to have an escrow account

A broker is not responsible for a returned escrow

check if timely deposited

Post dated checks require the seller’s approval and

must be noted on the contract

Licensees as buyers

Must make deposit if on contract

Cannot use commission due as deposit


24

Earnest Money Deposit

Subsequent additional earnest money

Notes as earnest money

Old earnest money for new contract

Licensees as buyers

Must make deposit if on contract

Cannot use commission due as deposit


25

Provisions of Real Estate Contracts

Legal description is an essential element of the

contract

Purchase Price

Method of payment


26

Financing Terms

Time limit for loan application and approval

Owner occupied as principal residence

Conditional on buyer obtaining loan


27

Financing Terms

Cash Sale

Seller to carry first mortgage

Due on sale clause

Balloon payment

Reserves

New conventional first mortgage

VA

Sellers concessions and nonallowables

FHA/VA amendatory clause

Adjustable

Loan Assumption


28

Chattel and Fixture Inclusions

Inaccurate or incomplete descriptions of

personal property can render the contract

unenforceable

Personal property itemized in the contract with

stated amounts is subject to sales tax

A closing date is not a legal requirement of a

sales contract


29

Provisions of a Contract

Evidence of Title

Time to examine title

Date of closing

Proration of expenses

Possession of Property

Time allowed for acceptance

Type of deed


30

Specific Performance vs.

Liquidated Damages

Liquidated damages - available to a seller

when a buyer defaults

Rescission on breach

Compensatory damages

Specific performance


31

Miscellaneous Provisions

Special assessment

Government lien

Seller usually pays lien if improvement

completed

Buyer assumes pending liens unless work

is substantially completed


32

Miscellaneous Provisions

Licensee acting as buyer or seller Disclose

– Information

– That licensee no longer represents the seller

– License status in contract

Provide a no brokerage relationship

disclosure

Licensee may accept a commission


33

Miscellaneous Issues

Contingent on sale of buyers’

properties

Right of first refusal

Contingent on property inspection

Conditional on spouse’s approval

Signing and acknowledgement

Number of copies needed


34

Disclosure

Psychologically impacted or stigmatized

properties

Scenes of murder, suicides or are alleged

to be haunted

Disclosure is not required

Occupant infected with HIV or AIDS

Not a material fact

Disclosure violates Florida law


35

Disclosure

Homeowners’ association

Ad Valorem Tax Disclosure

Energy-efficiency brochure

Radon

Property disclosure (not required)

Lead based paint

– Residential building built prior to 1978

– Information pamphlet

– Seller must disclose presence of lead based paint if seller knows

– Buyer can inspect


36

Other Contracts Lease purchase agreement

Option contract

Unilateral contract,

optionor bound

Optionee is not obligated to purchase

Must contain essential elements of contract

Requires substantial or adequate consideration

Agreement for Deed

Contract for deed, land contract, installment

contract