Question

In a contract for sale of real estate, the buyer obtains equitable title, a ___ property interest, leaving the seller with a ___ property interest in the property, and the ___ then holds the risk of changing value of the property before closing.

Answer 1

In a real estate sales contract, the buyer holds the equitable title and assumes the risk of value changes before closing, while the seller retains the legal title.

Step-by-step explanation:

In a contract for sale of real estate, the buyer obtains equitable title, which is a non-possessory property interest, leaving the seller with a legal title property interest in the property. The buyer then holds the risk of changing value of the property before closing. Equitable title means that while the buyer does not yet have full ownership of the property, they have a right to acquire formal legal title once certain conditions are met, such as payment of the purchase price. Legal title, on the other hand, means the seller retains ownership and control over the property until closing, even though the buyer has equitable interest.

It's important to note that contractual rights to sell or purchase property are based upon having proper property rights. This allows individuals to enter contracts regarding the use of their property and provides legal recourse in the event of noncompliance. Equity, in terms of real estate, refers to the difference between the market value of the property and any outstanding debt owed on it. Therefore, if a property's value increases or decreases before closing, the buyer, holding the equitable title, will benefit or suffer from that change in value.

Answer 2

In a contract for the sale of real estate, the buyer obtains equitable title, a personal property interest, leaving the seller with a real property interest in the property, and the buyer then holds the risk of the changing value of the property before closing.

Equitable title refers to the buyer's interest in the property, even though legal title has not yet been transferred. Real property is the legal term for land and anything permanently attached to it, such as buildings.

Therefore, when the buyer has equitable title, it's a personal property interest until the closing when legal title is transferred, and the property interest becomes real. Until the closing, the buyer bears the risk of any changes in the property's value.