Real Estate Principles and Practices Chapter 9 Marketing and Selling Real Estate © 2010 by...
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Transcript of Real Estate Principles and Practices Chapter 9 Marketing and Selling Real Estate © 2010 by...
Real EstateReal Estate Principles and Practices Principles and Practices
Chapter 9Chapter 9
Marketing and Selling Real EstateMarketing and Selling Real Estate
© 2010 by South-Western, Cengage Learning
© 2010 by South-Western, Cengage Learning
Key TermsKey Terms
Auction
Bill of sale
Counteroffer
Disclosure statement
Earnest money
Equitable interest
Errors and omissions insurance
Home buyer’s insurance
Home warranty insurance
Lease option
Marketable title
Purchase agreement
Right of first refusal
Straw man
Trust account
© 2010 by South-Western, Cengage Learning
OverviewOverview
Purchase agreement
Presenting counteroffers
Earnest money deposits
Seller disclosure statement
© 2010 by South-Western, Cengage Learning
The Purchase AgreementThe Purchase Agreement
Prequalify buyer
Buyer’s cost estimate
Purchase agreement
Upon acceptance it becomes a contract
Statue of frauds: in writing to be enforceable
Practice of law?
Presented to seller by listing agent
© 2010 by South-Western, Cengage Learning
Presenting the OfferPresenting the Offer
Copy to offeror
Presented to offereeUsually by listing agent
If sellers agree – sign acceptance
Copy left with seller
Notify buyer of acceptance
Receives signed copy
Offer may be rescinded any time prior to Offer may be rescinded any time prior to acceptanceacceptance
© 2010 by South-Western, Cengage Learning
CounteroffersCounteroffers
Counteroffer: Counteroffer: revokes previous offer with entire new offer
Not a partial acceptance
Available for another offer
Withdraw counteroffer prior to accepting a new offer
© 2010 by South-Western, Cengage Learning
Earnest-Money DepositsEarnest-Money Deposits
Purchaser’s deposit
Demonstrates good intent
Placed in broker’s trust account
Credited to buyer at closing
Returned if offer is not accepted
© 2010 by South-Western, Cengage Learning
Earnest-Money DepositsEarnest-Money Deposits
Buyer default could result in forfeiture of funds
Disclose in writing prior to presentation of contract
May be split between seller and broker after broker expenses
Interpleader
© 2010 by South-Western, Cengage Learning
Trust AccountsTrust Accounts
Clients and customers money must be kept in a trust account
Ledgers & journals
Sales and rents kept separately
© 2010 by South-Western, Cengage Learning
Trust AccountsTrust Accounts
Broker entitle to money only after final sale
Interest v. non-interest bearing accounts
Audits
© 2010 by South-Western, Cengage Learning
Lease OptionsLease Options
Lease option: Lease option: leasing with option to buy
Purchase within a set period of time
Price and terms defined
Rent may be applied to down payment
© 2010 by South-Western, Cengage Learning
Lease OptionsLease Options
Right of first refusal: Right of first refusal: tenant may match any offer owner receives
Tenant is not obligated to purchase
Disadvantage to owner
© 2010 by South-Western, Cengage Learning
Lease OptionsLease Options
Tenant must purchase at the end of the lease
Allows time to arrange financing or clear title
Portion of rent may be applied to purchase
© 2010 by South-Western, Cengage Learning
Lease OptionsLease Options
Equitable interest: Equitable interest: buyers interest in property once offer is accepted
Assignment is allowed unless specifically prohibited
Straw Man: Straw Man: offer made with intent to transfer prior to closing
© 2010 by South-Western, Cengage Learning
Lease OptionsLease Options
Bill of Sale: Bill of Sale: used to transfer chattel
Personal property
© 2010 by South-Western, Cengage Learning
Lease OptionsLease Options
Marketable title: Marketable title: free of defects, liens and encumbrances
© 2010 by South-Western, Cengage Learning
Sale by AuctionSale by Auction
Auction: Auction: absolute sale sold to the highest bidder
Licensed auctioneerLicensed auctioneer
Absolute: Absolute: sold no matter sold no matter how high the bidhow high the bid
Seller is offerorSeller is offeror
© 2010 by South-Western, Cengage Learning
Sale by AuctionSale by Auction
With reserve: With reserve: bid may be bid may be rejectedrejected
Bidder is offerorBidder is offeror
No warranties No warranties exceptexcept
Property is being soldProperty is being sold
Right to sell and Right to sell and transfer titletransfer title
© 2010 by South-Western, Cengage Learning
Representing the SellerRepresenting the Seller
Owe fair treatment to the Owe fair treatment to the buyer buyer
Confidentiality to the Confidentiality to the sellerseller
Full disclosure to the Full disclosure to the buyerbuyer
© 2010 by South-Western, Cengage Learning
Representing the SellerRepresenting the Seller
Disclosure statement: Disclosure statement: checklist of inspections and potential problem areas
Seller must disclose all defects
Latent - hidden
Patent - visible
© 2010 by South-Western, Cengage Learning
Representing the SellerRepresenting the Seller
Errors and omissions insurance: Errors and omissions insurance: malpractice insurance
Mandated by many states
Brokers may require the disclosure in non- mandated states
© 2010 by South-Western, Cengage Learning
Buyer’s WarrantiesBuyer’s Warranties
HOW: Home owner’s warranty
10 year warranty plan for new homes
Covers defects
© 2010 by South-Western, Cengage Learning
Buyer’s WarrantiesBuyer’s Warranties
Insurance for existing homes
Purchased by buyer or seller
Deductible amount
© 2010 by South-Western, Cengage Learning
Buyer’s WarrantiesBuyer’s Warranties
Protection against financial loss due to damage
Premiums are invested to build reserves
Lender requires a policy Endorsement or rider:
covers additional risk
© 2010 by South-Western, Cengage Learning
Buyer’s WarrantiesBuyer’s Warranties
HO-1: basic
HO-2: broader scope
HO-5: covers all risks except specific exclusions
5 different types of policies
© 2010 by South-Western, Cengage Learning
Basic Homeowner CoverageBasic Homeowner Coverage
Fire
Lightning
Windstorm or hail
Explosion
Property removal from endangered premises
Riot
Aircraft
Vehicles
Smoke
Theft
Vandalism
Breaking of glass
Collapse
Falling objects
Weight of ice, snow or sleet
Hot water heating system or appliance
Frozen plumbing
Electrical appliances
Artificially generated current
© 2010 by South-Western, Cengage Learning
Buyer’s WarrantiesBuyer’s Warranties
Tenant insurance for personal belongs
Commercial:Business equipment
Interruption of business
Flood Insurance
Optional coverage
Deductibles
© 2010 by South-Western, Cengage Learning
Buyer’s WarrantiesBuyer’s Warranties
Insurable interest to collect
Rates are in direct proportion to risk
$210 for $60,000 of coverage$210 for $60,000 of coverage
Rate =Rate =210210
$60,000$60,000= .0035 = .0035
or $3.50 per $1,000 or $3.50 per $1,000