Earnest Money: More may be less, and vice versa

We buy and sell property in an odd and awkward way. Among the puzzling steps in the process we use is the packaging of earnest money with our purchase-offer contract.

Earnest money is a buyer’s deposit that’s held in trust, pending ultimate acceptance or rejection of the offer. It is parked in a trust account where it’s not used for any purpose before or during escrow, which is the time when the purchase contract is in effect.

Few other types of purchases involve buyers depositing earnest money.

Real-estate brokers, representing either buyer or seller (but usually the latter), hold these deposits in trust. Real-estate lawyers also have trust accounts. I’ve always felt most comfortable as a buyer putting my earnest money in my lawyer’s trust account, and I’ve never had a seller complain.

A buyer dealing with For-Sale-By-Owner sellers should use his own lawyer’s trust account. Buyers should never give earnest money directly to sellers. I have seen FSBO sellers pocket such deposits when the sale fell apart. Read more »

What is the property that is being sold, and how do you know?

Both sellers and buyers need to understand what is being sold.

When a seller lists property with a broker or advertises as a FSBO, he should establish both the nature of his ownership and its extent.

Real-estate law conceptualizes property as a bundle of rights. A seller may be selling all his rights in a property or just some, with or without limitation in either case.

One or more rights can be severed–sold, leased or given away. A common severance involves separating subsurface minerals from the surface. In some states, where surface is owned by one party and subsurface by another the situation is referred to as a “split estate.” I’ve evaluated properties where ownership of timber, water and wind have been separated from the bundle of surface rights being sold.

The sale, lease or donation of rights in property should be recorded. Most mineral sales and leases are, but I’ve found sales of timber rights not recorded and not disclosed.

A complete bundle of rights in property is referred to as “fee simple absolute.” The shorthand is, property “owned in fee.” Where subsurface rights have been severed from surface rights, that property is not being sold in fee. Read more »

Thanksgiving is no turkey

You can’t go too far wrong with a good Thanksgiving.

For starters, everything smells good all day, even me. Then, everybody’s nice as pie for as long as they can stand it.

It’s our only holiday when we’re supposed to think about what we eat, the folks who produced it and the land it comes from. Thoughts of Pilgrims and Indians may flash by between a wing and the prayer. Then everyone falls asleep watching the Detroit Lions lose another football game.

I’ve shirked my fatherly duties to 23-year-old Molly. She never got either my three-hour, before-the-meal lecture on The True Meaning of Thanksgiving or my four-hour, after-the-meal talk on Indigestion, Its Causes and Cures. Molly has always been happy with her modest vegetarian meal, which excludes all meat and vegetables and incorporates, she says, the good kind of calories that are concentrated in buttered rolls, pies and whipped cream.

I’ve never told her that I was once related by marriage to Oceanus Hopkins, the one child born on the Mayflower during its two-month crossing in 1620. Oceanus made no other history in his three years, though in times like these all of us admire the value his parents placed on liquidity. Read more »

Purchase-offer contracts need to define the seller and what the seller owns

Buying country property raises a number of issues for buyers that differ from those commonly faced when pursuing a house in or near a city. These issues take on legal importance when they are threaded into the language of a purchase-offer contract.

In the next few weeks, I’ll discuss the contract snags that can catch buyers unawares.

Who is the seller and what does he own? In the first or second paragraph of the standard purchase contract, the names of the seller and the buyer are filled in. If the seller is represented by a broker or agent, that individual will insert the seller’s name.

This seems simple enough, but, occasionally, it gets complicated.

The buyer wants the exact name(s) of the seller(s) who owns the property. The buyer does not want a name of an individual included as a seller who is not a legal owner, nor does the buyer want the name of a legal owner left out.

Country property often involves one or more generations of heirs. As the family farm was passed down in equal ownership shares to children and then their children, each ownership share became a smaller percentage of the whole. A dozen heirs is common; two or three times that number is not uncommon in rural communities. I’ve seen one property conveyed by 256 owners. Read more »

How to Profit From the Greatest Land Rush in U.S. History!

At precisely twelve noon on September 16, 1893 a cannon’s boom unleashed the largest land rush America ever saw. Carried by all sorts of transportation - horses, wagons, trains, bicycles or on foot - an estimated 100,000 raced to claim plots of land in an area of land in northern Oklahoma Territory. There had been a number of previous land rushes in the Territory - but this was the big one.

Many would be disappointed. There were only 42,000 parcels of land available - far too few to satisfy the hopes of all those who raced for land that day. Additionally, many of the “Boomers” - those who had waited for the cannon’s boom before rushing into the land claim - found that a number of the choice plots had already been claimed by “Sooners” who had snuck into the land claim area before the race began. The impact of the land rush was immediate, transforming the land almost overnight.

Over 100 years later, we are in the midst of a second rush for land. When it is over it will go down as the greatest land rush in United States history far eclipsing the Oklahoma land rush of the 1890’s.

How will it be different? Baby Boomers, investors and institutional investment firms are preparing to buy over one-half of the useable land in the U.S. in the next ten years. Are you aware there is approximately 1.6 billion acres (Yes, billions – with a big B!) that can be bought and sold? The potential is for millions and millions of land deals in the next few years. Read more »