Contracts- Q
A contract between the seller of real property and a licensee, in which the seller agrees to pay the licensee a commission if he produces a ready, willing, and able buyer and the licensee agrees to use due diligence in procuring the buyer, is called: A. A bilateral executory contract. B. A unilateral executory contract. C. A bilateral executed contract. D. A unilateral executed contract. Both parties are bound, making it bilateral. Executory indicates that the contract is yet to be performed.
A. A bilateral executory contract. Both parties are bound, making it bilateral. Executory indicates that the contract is yet to be performed.
Any advance fee contract used in connection with a real estate or business opportunity listing must include all of the following except: A. A guarantee that the sale, lease or exchange will be completed; B. A detailed description of the services to be performed; C. The total amount of the advance fee to be charged; D. The date the fee is to be paid.
A. A guarantee that the sale, lease or exchange will be completed; - Advance Fee Contract contains no guarantees of success with respect to the sale or rental of a property
Which of the following is necessary for a real property conditional installment sales contract to be valid? A. Consideration, offer and acceptance, lawful object, competent parties, legally sufficient writing. B. Consideration, offer and acceptance, expressed time element, price. C. Lawful object, competent parties, offer and acceptance, legally sufficient writing. D. Consideration, offer and acceptance, mutuality, competent parties, legally sufficient writing.
A. Consideration, offer and acceptance, lawful object, competent parties, legally sufficient writing. - The four legal essentials in any contract are: (1) consideration, (2) an offer and acceptance (i.e., a meeting of the minds), (3) a lawful object, and (4) competent parties. Some contracts, like a land contract (a type of conditional installment sales contract), require writing as well.
The basic purpose of a listing agreement is to authorize the broker to: A. find a buyer. B. market the house. C. negotiate the contract. D. sell the house.
A. Find a buyer - A listing agreement is a contract between an owner (as principal) and a real estate broker (as agent) by which the broker is employed as an agent to find a buyer for the owner's real estate on the owner's terms, for which service the owner agrees to pay a commission
A voidable contract is one which: A. Is valid now but can be voided by an interested party for due cause B. Is subject to disciplinary action C. Is binding on neither party and not subject to ratification D. Has no force or effect
A. Is valid now but can be voided by an interested party for due cause - Voidable Contract is valid until it is rescinded. Examples of Voidable Contracts include contracts signed under duress, or contracts entered into with threat or menace.
Under a lease, the leasehold interest is with the: A. lessee. B. lessor. C. landlord. D. Owner of the property
A. Lessee - A "leasehold interest" is the right to exclusive possession and use of real property for a fixed period of time held by the lessee. Remember: lessor(landlord), lessee (tenant).
Susan who is a buyer, has entered into an agreement with more than one buyer's agent at the same time but owes compensation only if she uses the services of a buyer's broker. Susan's arrangement is known as a(n): A. open agreement. B. exclusive right agreement. C. multiple-listing agreement. D. exclusive agency agreement.
A. Open agreement - Susan's open buyer agency agreement is similar to an open listing seller agreement. An open listing is a contractual agreement under which the listing broker acts as the agent or as the legally recognized non-agency representative of the seller, and the seller agrees to pay a commission to the listing broker only if the property is sold through the efforts of the listing broker.
If a principal no longer desires the broker to act for him during the period of an exclusive right to sell listing, he may: A. Revoke the agency created by the listing contract but may be liable for damages B. Revoke the agency created by the listing contract but not be liable for damages C. Not revoke the agency because an exclusive right to sell listing is an irrevocable contract D. Be forced to sell his property
A. Revoke the agency created by the listing contract but may be liable for damages - A Seller can terminate a Broker before the expiration of the Listing, but he may be liable for damages to the Broker in this instance.
Assume a broker took an open listing and made an oral agreement with another broker to share the commission on a property. The second broker procured an offer resulting in the sale of the property. If the first broker refused to share his commission on the sale, which of these statements is most accurate? A. The second broker would stand a good chance of winning a court suit for his share of the commission B. The second broker should appeal to the Department of Real Estate C. He need not share the commission, as it was an open listing D. He need not share the commission due to the statute of frauds
A. The second broker would stand a good chance of winning a court suit for his share of the commission - If a broker took a listing and made an oral agreement with a second broker to share the commission, then refused to share the commission when the second broker procured an offer resulting in a sale, there is a good chance that the second broker could win a lawsuit for his share of the commission.
To assign a contract for the sale of real estate means to: A. Transfer one's rights under the contract. B. Allow the seller and the buyer to exchange positions. C. Record the contract with the county recorder's office. D. Permit another broker to act as agent for the principal.
A. Transfer one's rights under the contract. - Assigning a contract means to transfer it to another.
Susan is shown a home by her agent, Selwyn. She makes an offer and gives Selwyn a check. At what point does her offer become an enforceable contract to buy? A. When Susan is notified the seller accepts the offer. B. As soon as the seller receives the offer and the check. C. When the deposit check clears. D. As soon as Selwyn receives her offer and her check.
A. When Susan is notified the seller accepts the offer. - Offers are serious business. Once accepted, they cannot be withdrawn without penalty, such as loss of the deposit.
Usually a broker has a right to a commission only on the basis of negotiations which he completes during the term of the listing agreement, unless: A. The listing agreement has a liquidated damages clause B. A protection period clause is included in the agreement C. He brings a court suit against his principal D. The listing involves the exchange of properties
B. A protection period clause is included in the agreement - A Protection Period Clause (safety clause) in a Listing will allow a Broker to collect a commission for a specified period of time after the term of the Listing has expired. It is a designated period of time to close deals with prospects that the licensee has been working with during the term of the listing. This is not a time to find a new prospect. They must put the name of the prospects in writing at the end of the listing period in order to earn a commission during the protection period clause.
A listing agreement is essentially a/an: A. Option to sell B. Employment contract C. Purchase contract D. A unilateral contract
B. Employment contract - A Listing is a Bilateral Employment Contract between Principal and broker whereby the broker is employed by the Principal to find a buyer and accept a deposit.
What listing requires an owner to pay a commission, even though they sell the property themself? A. Open listing B. Exclusive right to sell listing C. Net Listing D. Exclusive agency listing
B. Exclusive right to sell listing - Exclusive Authorization and Right to Sell Listing is a contract where the Owner agrees to sell the property in question through the Listing Broker. The Listing Broker does not need to show that he is the "Procuring Cause" of the buyer- the broker gets paid no matter who brings the buyer.
Under which of the following listings must an owner pay a commission, even though he sells entirely through his owns efforts: A. Non-exclusive listing B. Exclusive right to sell listing C. Exclusive agency listing D. Restricted listing
B. Exclusive right to sell listing - Exclusive Authorization and Right to Sell Listing is a contract where the owner agrees to sell the property in question through the Listing Broker. The Listing Broker does not need to show that he is the "Procuring Cause" of the buyer. They get paid no matter who brings the buyer.
During escrow, if an unresolved dispute should arise between the seller and buyer preventing the close of escrow, the escrow holder may legally: A. Arbitrate the dispute as a neutral party B. File an interpleader action in court C. Rescind the escrow and return all documents and monies to the respective parties C. Consider the contract null and void
B. File an interpleader action in court - As the result of an existing conflict between the Buyer and Seller, and the Deposit is turned over to the Court, this is referred to as an Interpleader.
The buyer of a home was not informed that the house was on a septic tank system. The buyer: A. can sue the title company for failure to discover the problem. B. has the right to rescind the contract. C. signed a contract and must follow through with their purchase of the property. D. can sue the broker for his license.
B. Has the right to remind the contract - A Licensee must reveal material facts about a property, such as a leaky roof, poor insulation and whether or not the home is on a septic tank system. A failure to disclose material facts concerning a property may allow an innocent buyer to rescind the purchase contract.
An Option contract: A. Results in a commission to the broker if the optionee does not exercise the option B. Keeps an offer open for a specified period of time C. Requires the optionee to complete the purchase D. Gives the buyer a lien on the property
B. Keeps an offer open for a specified period of time - An option is a contract to keep an offer to sell or lease real property open for a set period of time.
A tenant signs a lease that stipulates that the lessee pays the property tax. This lease is probably a: A. standard lease B. net lease. C. reverse lease D. sandwich lease
B. Net lease - Net Lease: A lease, usually commercial in which the lessee not only pays the rent for occupancy but also pays maintenance and operating expenses such as taxes, insurance, utilities and repairs. The rent paid is said to be "net" to the lessor.
Broker Pam Wilson sold Matt Cohen a small "starter" home. During the closing process it was discovered that Matt was not nineteen as he claimed, but a seventeen year old unemancipated minor. What is the status of the contract? A. Matt's parents can be forced to complete the transaction. B. The contract is void. C. It's enforceable since an offer was made and accepted. D. The contract is voidable.
B. The contract is void In California, minors are not allowed to enter into contracts for real property per California Family Code section 6701, making this contract "Void". Minors can enter into some other contracts, however, and those contracts can be voided by the minor because of lack of sufficient age. In those cases, the contract is "Voidable" by the minor but not by the other party.
Regarding a promissory note when getting financing: A. The grant deed secures the promissory note. B. The deed of trust secures the promissory note. C. A promissory note secures the deed of trust. D. The promissory note is not part of the deed of trust.
B. The deed of trust secures the promissory note. - The deed of trust secures the promissory note and the property. If payment is not made according to the terms of the note and deed of trust, the beneficiary may instruct the trustee to foreclose as set forth in the deed of trust.
When may a real estate broker, serving as agent of the seller, refuse to transmit an offer to the principal: A. Never. B. When the broker is acting on the express instructions of the principal in his refusal; C. When the broker is acting as a gratuitous agent; D. When the owner has already accepted a "back-up" offer;
B. When the broker is acting on the express instructions of the principal in his refusal; - An agent is employed to carry out the instructions of the principal, they can advise the principal in what to do, but at the end of the day they work for the principal and must carry out the principal's instructions as long as those instructions are lawful.
When a buyer withdraws his offer to purchase real property prior to acceptance by the seller, the: A. seller may sue the buyer for specific performance and will probably win the suit. B. buyer is entitled to the refund of the earnest money deposit. C. seller is entitled to one-half of the earnest money deposit. D. broker may sue buyer for specific performance.
B. buyer is entitled to the refund of the earnest money deposit. - There must be some type of offer and acceptance by the parties for the contract to be binding. If a buyer withdraws their offer before it is accepted by the seller, the buyer gets their earnest money back.
In a real estate purchase contract, the liquidated damages clause is initialed and the buyer defaults. The deposit should be: A. no more than 3% of the selling price or the amount of the deposit, whichever is less. B. used to cover liquidated damages for both the seller and listing broker. C. used to pay any escrow expenses and the balance returned to the buyer. D. given to the seller when escrow is opened.
B. used to cover liquidated damages for both the seller and listing broker. - If a buyer defaults and the liquidated damages clause is initialed, the deposit should be used to cover damages for both the seller and the listing agent (after expenses are paid). However, the listing agent will never get more than his agreed-upon commission.
Which of the following is an acceptable termination date for an enforceable exclusive listing of residential real property: A. whenever the loan is funded B. 3 days after notice of rescission of the seller C. 90 days after listing agreement is signed D. 90 days from the completion of construction
C. 90 days after listing agreement is signed - In an Exclusive Listing only one agent can be hired. It requires a specific termination date (not 90 days from the completion of construction, rather 90 days from signing). If two exclusive listings are signed, the seller may be liable for two commissions.
When leasing commercial property that is merely a "shell" space, the landlord often agrees to spend a specific amount to help a qualified tenant build the space out. This amount is designated as: A. a security deposit. B. earnest money deposit. C. a tenant improvement allowance. D. a rent abatement.
C. A tenant improvement allowance - A tenant improvement allowance is money, labor, supplies or other consideration given by a landlord to a tenant to construct the premises for occupancy. Tenant allowances address the improvements to be done "above the ceiling" (eg HVAC, ducts, electrical lines) and "below the ceiling" (eg, doors, walls, floor covering). They can also be called "TI Allowance", "TI's", or a "Construction Allowance".
In which of the following contracts does one of the parties agree not to revoke an offer for a certain period of time: A. A ratification B. A Listing Contract C. An Option D. Estate for years
C. An Option - An Option is a contract to keep an Offer to sell or lease real property open for a set period of time. The Optionor cannot revoke the offer to sell during the designated period of time. An Optionee is under no obligation to buy the property in question. [The Optionee is NOT bound by the Option.]
"Valuable," "good," " sufficient," and "adequate" are terms most closely associated with: A. Performance B. Bilateral contracts C. Consideration D. Compensation
C. Consideration: - One or more thing(s) of value that is/are exchanged in the contract (not necessarily money); ["Sufficient", "Valuable", "Good" and "Adequate" are all words that are often used to describe Consideration.]
Which of the following prevents a person from adopting a position, which is in conflict with a previous position or a previous action? A. Lis pendens B. Doctrine of good faith C. Doctrine of estoppels D. Fiduciary duty
C. Doctrine of estoppels - The Doctrine of estoppels prevents a person from adopting a position, which is in conflict with a previous position or a previous action.
A family rents a house from January 1st to June 30th. This is considered a(n): A. tenancy at sufferance B. tenancy at will C. estate for years D. periodic tenancy
C. Estate for years - An estate for years is a leasehold created by landlord and tenant for a particular period of time. The period of time could be a fixed number of years, months, weeks, or even days. An estate for years always will have a definite termination date.
Four months ago, a seller entered into a legally binding written contract to sell his property. Later, the seller refused to complete the transaction since he felt the value of the property would increase in the near future. Under these circumstances, the Statute of Limitations could affect the rights of the buyer to prevail in a civil action due to a breach of the written contract within: A. one year. B. two years. C. four years. D. 90 days.
C. Four years - A right rising out of a written contract must be pursued in court within four years of the default (breach), according to the Statute of Limitations.
When zoning changes, but owners are allowed to continue with non-conforming uses, this is a: A. acceleration clause B. Alienation clause C. Grandfather clause D. Subordination clause
C. Grandfather clause - A grandfather clause is the clause in a law permitting the continuation of a use, business, etc., which, when established, was permissible but, because of a change in the law, is now not permissible.
The document that defines the relationship between the broker and the seller is the: A. disclosure statement. B. purchase contract. C. listing agreement. D. exclusive agency contract.
C. Listing agreement - While disclosure statements, purchase contracts, and even exclusive agency contracts are also legal documents that the broker or salesperson enters into with the clients, it is the listing agreement that clearly defines the relationships and agreements between the broker and principal
The seller accepted an offer for the purchase of real property and an escrow was opened. Later the seller discovered misrepresentation on the part of the buyer. The contract: A. Is valid as to the seller. B. Is invalid. C. May be voided by the seller. D. Is void.
C. May be voided by the seller - Such a situation would create a voidable contract. In other words it would give the seller the right to invalidate the contract because of the misrepresentation.
When part of an agreement is changed, or an agreement is replaced by a new one, it is a: A. Abstract B. Amendment C. Novation D. Codicil
C. Novation - is a term used in contract law and business law to describe the act of either replacing an obligation to perform with a new obligation, or replacing a party to an agreement with a new party. A novation must be agreed upon by all original parties to the original agreement.
Carol signs a listing agreement. What is included under the section "Terms of the Sale" on Carol's agreement? A. Price, compensation to broker, and deposit B. Terms of sale, personal property, and additional terms C. Price, method of payment, and personal property D. Loan amount, personal property, and compensation to broker
C. Price, method of payment, and personal property - The "Terms of the Sale" section in a listing agreement lists the price and how the price is to be paid. It also discusses any personal property which is included in the price.
Which of the following requires real estate listings to be in writing? A. CAR B. Statute of limitations C. Statute of Frauds D. Department of Real Estate
C. Statute of frauds - The Statute of Frauds generally requires all contracts for the sale of land or any interest therein (including listings) to be in writing.
Mr. Daniels made a written offer to purchase a home through Broker Starr. However, Daniels died in a car accident before Broker Starr could notify him of a qualified, signed acceptance by the seller. Which of the following statements is most correct? A. The contract would not be binding because the deed had not been delivered into escrow. B. The acceptance does not have to be communicated to the buyer. C. The death of Daniels constituted a termination of the offer. D. Notification of acceptance to the executor would bind the Daniels estate.
C. The death of Daniels constituted a termination of the offer. - In the event that a buyer dies prior to any notification of the acceptance, the offer is terminated.
When a counteroffer is made: A. It is considered a partial acceptance of the original offer. B. The original offeror cannot amend his terms; C. The offeree becomes the offeror; D. The original offer becomes a unilateral offer;
C. The offeree becomes the offeror; - In a counteroffers the offeree becomes an offeror, it is a brand new offer. The one making the offer is the offeror, the one receiving the offer is the offeree. The original offer gets terminated and a new offer gets made "the offeree becomes the offeror."
Most real estate contracts contain pre-printed clauses or spaces for information to be added in writing. In the interpretation of such contracts: A. The written parts and the pre-printed parts are given equal consideration. B. Pre-printed parts take precedence over the written parts. C. The written parts take precedence over the pre-printed parts. D. No changes or amendments to the pre-printed clauses are permitted by law.
C. The written parts take precedence over the pre-printed parts. - The pre-printed parts are often generic so that they can apply to many different situations, but anything handwritten is specific to a particular transaction. If there is a conflict between the written and pre-printed parts of a contract, handwritten parts are given priority over pre-printed parts.
Stephen signs a real estate contract. Most real estate contracts contain pre-printed clauses or spaces for information to be added in writing. In the interpretation of Stephen's contracts: A. The written parts and the pre-printed parts are given equal consideration. B. Pre-printed parts take precedence over the written parts. C. The written parts take precedence over the pre-printed parts. D. No changes or amendments to the pre-printed clauses are permitted by law.
C. The written parts take precedence over the pre-printed parts. - The pre-printed parts are often generic so that they can apply to many different situations, but anything handwritten is specific to a particular transaction. If there is a conflict between the written and pre-printed parts of a contract, handwritten parts are given priority over pre-printed parts.
Which of the following statements BEST shows the difference between an exclusive right to sell and either an open or an exclusive agency? A. An exclusive right-to-sell appoints only one agent; the others do not B. An exclusive right-to-sell agreement permits the seller to sell his house without paying a fee; the others do not C. An exclusive right-to-sell agreement enables the seller to negotiate a commission; the others do not D. An exclusive right-to-sell guarantees the listing broker a commission if he/she, or any other cooperating broker, procures a ready, willing and able buyer under the seller's terms and conditions; exclusive agency and open listing do not provide the same
D. An exclusive right-to-sell guarantees the listing broker a commission if he/she, or any other cooperating broker, procures a ready, willing and able buyer under the seller's terms and conditions; exclusive agency and open listing do not provide the same - Exclusive agency, in fact, means that the seller will owe no commission if he finds his own buyer. Open listings are even riskier for brokers because they will lose the commission if any other broker or salesperson provides a buyer.
An optionor and an optionee make a contract for an option on a commercial piece of property. If the optionee decides to exercise his option, when must he perform? A. He must exercise his option when the optionor demands it. B. He can exercise his option whenever he wants. C. He must exercise his option within 6 months under state law. D. He must exercise his option under the terms of the option contract.
D. He must exercise his option under the terms of the option contract. - Options are generally concerned with only two things: time and price. Whatever the parties agree to in those regards defines the terms of the option and the obligations of the parties.
Broker Oscar brought in an offer but the listing agreement did not include an authorization to accept a deposit. Which of the following is correct? A. Oscar cannot accept the deposit. B. None of the other options are correct C. The authorization is implied. D. If Oscar accepts the deposit, he/she would do so as the agent of the buyer.
D. If Oscar accepts the deposit, he/she would do so as the agent of the buyer. - If the scope of authority of a real estate broker is limited to just producing a buyer, the broker does not have the authority to collect a deposit on behalf of the seller. When an agent does collect a deposit in this case, the agent is acting as agent for the buyer (offeror) and not the seller.
Which of the following is created when possession and title do not occur at the same time? A. Subordination clause B. Writ of execution C. Estate at Sufferance D. Interim Occupancy Agreement
D. Interim Occupancy Agreement - is created when possession and title do not occur at the same time
A parcel of vacant land is listed for $100,000, requiring 20% down with the seller to carry back the balance. The broker brings in a full-price cash offer, but the owner refuses. The broker is entitled to: A. the full commission. B. half of the commission. C. a commission as a percent of the down payment. D. nothing.
D. Nothing - Since the offer does not meet the exact terms of the listing, the broker is not entitled to any commission. In this case, the seller could be looking forward to the interest that would be earned from seller-financing 80% of the purchase price.
Henry made an offer to purchase real property. However, he died of a heart attack before the listing broker could notify him of an unqualified, signed acceptance by the seller. Based on these facts, which of the following is true? A. The offer and acceptance constitute an enforceable contract B. The sale would not be binding because the deed was not delivered before Henry's death C. Notification to the administrator or executor would bind the estate D. The death of Henry constituted a revocation of the offer
D. The death of Henry constituted a revocation of the offer - In the event that a buyer dies prior to any acceptance by the seller, the offer is terminated. A valid contract requires "offer and acceptance", which actually consists of 3 parts- offer, acceptance, and communication of the acceptance. Since Henry died before acceptance had been communicated, there was never a valid contract.
A bilateral contract is a contract that: A. one party agrees to perform. B. applies only to leases. C. one party is given an option to perform. D. a promise by one party is given in exchange for a promise by another party.
D. a promise by one party is given in exchange for a promise by another party. - A contract in which each party promises to perform an act in exchange for the other party's promise to perform
Mr. Seddon, an owner of a property, enters into an exclusive listing with Broker Sparks. One week later, Broker Sparks brings in a full price offer, but Mr. Seddon refuses the offer. Seeking an action of Specific Performance would be an option for: A. both the buyer and broker Sparks. B. broker Sparks. C. the buyer. D. neither the buyer nor broker Sparks.
D. neither the buyer nor broker Sparks. - Specific performance is an action brought in a court of equity to compel a party to carry out the terms of a contract, and in this case there was never a contract between the buyer and seller since the offer was refused. Specific performance is not used to specifically enforce a contract to perform personal services, such as a broker's agreement to find a buyer.
The effective date of a real estate purchase contract is the date that: A. the offer is made. B. the security deposit was made. C. the seller accepts the offer. D. the acceptance is communicated to all parties.
D. the acceptance is communicated to all parties. - Mutual agreement, or Offer and Acceptance, is actually a 3 step process: offer, acceptance and communication of the acceptance back to the offeror.