Contracts, Agreements, and Closings
Contract formation
Real estate contracts require offer, acceptance, consideration, capacity, lawful purpose, and a writing sufficient under the statute of frauds. The writing should identify the parties, property, price, and material terms. Counteroffers terminate the original offer; acceptance must be communicated. Contingencies-financing, inspection, appraisal, sale of buyer’s home-must be clear about deadlines and consequences. Earnest money is not the same as liquidated damages unless the contract says so.
Closing mechanics
At closing, candidates should track deed delivery, title evidence, payoff of liens, prorations, settlement charges, and recording. Prorations divide taxes, rents, and similar items as of the closing date. Michigan transfer tax is state imposed at $3.75 per $500 of consideration, with an additional county tax where applicable; custom and contract determine who pays specified closing costs, so read the agreement rather than assume. The seller’s disclosure and lead-based paint disclosures are recurring exam topics.
Traps
Watch for oral modifications of a written contract, missing signatures, ambiguous contingency dates, and “time is of the essence” language. Also watch for a buyer who waives inspection without understanding the consequence, or a closing where possession is transferred before deed delivery.
Worked example
A sale closes on June 30, and annual taxes are $3,650. If the seller owes taxes through closing and the buyer takes the rest of the year, use a 365-day year: $3,650 ÷ 365 = $10 per day. The seller’s share for 181 days is $1,810; the buyer’s share is $1,840.