Contract Consideration Myth?
Can anyone actually point to a contract in modern times that has been thrown out specifically because of a lack of $ down?
Is this idea of putting at least $10 down grounded in current legal reality? I realize that most posters adhere to this formality, but I have not heard of any contracts being voided over this issue.
The lack of consideration is one of the standard ways to try to back out of a contract not only in real estate but whenevery you're trying to get out of an agreement. Yes, I have had a contract voided by the court for lack of consideration. However even "nominal" consideration is occasionally ruled to be not consideration sometimes. Ultimately in most real estate transactions the consideration is not the "$10 and other good and valuable consideration" it is the promise to pay in the future, i.e. a note, a short sale, watever.
That's exactly why I was asking... because no money down deals aren't no money deals... just none from the buyer at that given moment. There's consideration coming in every month.
Now, I suppose in a sub2 deal it could be argued that there is no automatic consideration to from the buyer to the seller without something down since the $ is paid directly to the mortgage company... thus the parties who came to agreement via the contract have a deed going one way, and nothing tangible going the other... hmm...
student,
Consideration given and received is an essential element of a contract. Consideration does not have to be money.
You agree to sell and agree to purchase your property for a mutually agreeable price. The consideration you give me is a clear and marketable title to your property. The consideration I give you is money (in cash or notes) equal to the purchase price we agreed upon.
In the Subject To transaction, the seller's consideration given is deed to the propery (hopefully a warranty deed). The buyer's consideration given is the agreed purchase price SUBJECT TO the existing lien(s).
Whether earnest money is given to demonstrate good faith (the ten dollars down) is independent of whether consideration is exchanged.
DISCLAIMER: I am not an attorney. The foregoing is just my opinion, presented for informational use only, and is not to be construed as legal or financial advice.
For a legal contract to be created, there must be three elements: Offer, Acceptance and Consideration. RE contracts MUST also be written per the Statue of Frauds. The Offer is just that, the Acceptance is your accepting the offer, and the consideration is that which is given in exchange for the contract. The consideration can be $1, $10, or as simple as "love and affection" as is sometimes used. The amount of $ down is not a factor in a valid or voidable contract, it is the consideration provided to create the contract. Valid contracts, voidable contracts, etc is a whole area of RE law. Was there a actual issue, or was this just a question?
It comes up regularly in the arena of timeshare resales. I recently watched a well-funded contract get torn up over a disagreement over validity without the $ down.