Module 5
Which buyer-broker agreement is the counterpart of the exclusive agency listing agreement?
Exclusive Agency Buyer Agency Agreement
What type of listing agreement is most commonly used for properties listed on the Multiple Listing Service (MLS)?
Exclusive right to sell listings
John has a valid sales contract with Tammy to purchase her estate, Yorkshire Acres. Tammy has a terrible riding accident and dies 2 weeks before the scheduled closing. May John still purchase Yorkshire Acres?
Yes, because Tammy's estate is obligated to carry out the sale
Which of the following instrument(s) gives it's holder the right to be the first person to consider an offer to sell or lease property?
right of first refusal
Liquidated damages from breach of a sales contract are usually available to the:
seller, in the event of the buyer's default
Under the Statute of Frauds, a verbal contract for the sale of real property is:
Unenforceable
Under what circumstances would a lease terminate due to the sale of the rental property?
Only if there is a cancellation clause in the lease contract
A lease entitles a tenant to all of the following except:
Ownership
What options does a buyer have if they find an illegal covenant (such as a fair housing law violation) in the contract?
Any of the above
Which of the following items could be valid consideration for a contract?
Any of the above
Vernon presents an offer to a seller, with the provision that it must be accepted within 72 hours. Under which of the following circumstances would the offer terminate?
Any of the above would terminate the offer
One's rights in a mortgage or lease may be transferred to another through a(n):
Assignment
Sue the seller received an offer from Bryan the buyer on Saturday at 3:00 pm and decided to accept the offer. Sue signed the offer on Sunday at 11:00 pm and then she mailed the offer acceptance to Bryan on Monday at 9:00 am. Bryan received the acceptance of offer on Wednesday at 1:00 pm. On which day and time was the acceptance effective and resulted in a contract?
At 9:00 am on Monday when Sue mailed the acceptance of offer; At 1:00 pm on Wednesday when Bryan received the acceptance of offer
When may a counteroffer be withdrawn?
At any time before acceptance
Baker gives power of attorney to a real estate licensee. The licensee would be best described as a(n):
Attorney-in-fact
Mark is 16 years old and has inherited $50,000 from his grandfather. Mark contracts with Harold, an adult, to purchase his video game center. Which of the following statements is true regarding the contract between Mark and Harold?
The contract between Mark and Harold is voidable by Mark
Agent Brash was helping his daughter Stella and her fiance Beck find a new home. Stella wanted the beach house but Beck wanted the house in town. Agent Brash told Beck to sign the contract for the beach house otherwise he would forbid Beck's marriage to Stella. If Beck signs the contract for the beach house due to Agent Brash's threat is it valid?
The contract is void because Beck was under duress
When does a broker earn commission?
when the agent is the procuring cause of the sale
A listing broker receives an offer, which he presents to his client/seller. The two are elated when they read that the seller has a full 6 days to accept! However, despite this provision, the buyer withdraws her offer at the end of the 3rd day. The buyer is:
Within her rights to withdraw the offer
What must Brokers be aware of regarding commissions when they list properties on the Multiple Listing Service (MLS)?
A Broker may have to split their commission with any member broker who is the procuring cause of the sale
An option on real property is:
A contract
Bill is selling his house for $345,000. Mike and Jan are interested and tell Bill they will pay $340,000 and the sale will be contingent on a home inspection and they are asking for the refrigerator to convey with the sale. Bill tells Mike and Jan he will sell the home to them for $340,000 after their home inspection but the refrigerator is not available to convey. What Bill told Mike and Jan is considered what?
A counteroffer
The best example of rescission is:
A mutual agreement of a landlord and a tenant to cancel a lease
A seller lists his home on the MLS on Monday for $212,000. Agent Black calls the seller on Tuesday and lets him know he has an interested client who would like to make an offer. Agent Black presents the seller with an offer for $212,000 and no contingencies and the seller accepts the offer. What has Agent Black done?
All of the above
How can a contractual relationship be created?
All of the above
The installment sales contract acts as a:
All of the above
When signed by both parties, the offer to purchase becomes a purchase agreement (sales contract, contract for sale). What does the purchase agreement provide to the buyer?
All of the above
All of the following describe a property owner's obligations toward his property manager except?
Allow the property manager first right of refusal of rental units
Clara offered $60,000 to Bernie for his home. Bernie scratched out $60,000, penciled in $62,000, initialed the change, and signed the offer. With respect to the offer, which of the following statements is true?
Bernie made a counteroffer
All of the following facts could render a contract voidable, EXCEPT:
Both A and B
Regarding contracts, what is a "defense"?
Both A and B
Bill the Buyer makes an offer to purchase and gives Broker Joan a $1,000 earnest money deposit. The next day, and before Joan has a chance to present the offer, Bill finds another property that he wishes to purchase instead. What should Bill do?
Both A and C
Regarding leased property, which of the following are examples of involuntary alienation?
Both A and C
The parties to a purchase agreement include:
Both A and C
Which type of lease requires proper written notice in order to terminate?
Both A and C
Peggy was so excited about finally finding a buyer for her home she partied all night. At 0800 am she signed/accepted the Bob the buyer's offer and then drove it to her agent's office. On the way to the agent's office Peggy was pulled over by the police and was issued a DUI for scoring a .25 on her Breathalyzer test. Which of the following statements about the sales contract is not true?
Both B and C
Charlie has an option to buy Jim's property, which expires on July 15th. Charlie does NOT exercise his option. After July 15th, if Jim wants to extinguish his duty to perform under the option, he:
Does not have to do anything
Casper is selling his house and wants the broadest possible exposure. Therefore, he gives an exclusive right-to-sell listing to Bert, an exclusive agency listing to Gail, and an open listing to Mark. Mark sells the property. Assuming that all of these listings are valid, which of the following statements is true?
Casper owes 3 commissions
Which of the following is required for a contract to be valid?
Consideration
A contract clause that permits the buyer to be released from contract upon specified events, without being legally obligated to fully perform (purchase the property), is known as:
Contingency Clause
A lease is a(n):
Contract
What is an invitation to enter into a contract?
Counteroffer
Which of the following circumstances would NOT terminate an offer to sell real property?
Death of the salesperson
What type of compensation do property managers typically receive?
Either A or B
Which of the following is used to clarify the amount of debt owed by one party to another?
Either A or B
When the seller and purchaser sign a sales contract, the purchaser receives:
Equitable title
All of the following types of contracts are assignable, EXCEPT:
Exclusive right to sell listing contract
Broker Fowler located a property for Buyer Cook. Cook paid Seller Allegro a $1,000 fee for a 30-day option. Which of the following statements is true?
Fowler will not get a commission unless Cook exercises the option
Seller Sally tells her potential buyer Beau that the property values in the area have gone up in the last three years, the home has never had water damage and that none of her neighbors owns big dogs. When Sally knows in reality the property values are starting to decline, her basement flooded 3 years ago and her neighbor owns a large Rottweiler dog. What is this an example of?
Fraud in the inducement
Helen listed her property for $145,000. Jim made an offer to purchase for $135,000. Helen made a counteroffer for $140,000. Which of the following statements is correct?
In the original offer, Helen is the offeree
What are the two types of Fraud?
Inducement and Factum
A person has the capacity to contract if he:
Is mentally competent
Jeff's sports gambling addiction has resulted in deep debt. Jeff knows he cant afford his house any longer and decides to sell. He signs an exclusive right to sell listing agreement with Broker Sara. Sara finds a ready, willing and able buyer who makes an offer on Jeff's house but prior to accepting the offer Jeff files bankruptcy. Can the sale still go through? Will Sara earn her commission?
Jeff cannot accept the offer, the listing terminates and the agency agreement terminates with no commission
Chip has been renting a 2 bedroom house from Dale for over four years. Dale offers to sell the house to Chip but chip does not have enough money saved for a down payment on a mortgage. What type of agreement could help Chip and Dale in this situation?
Lease purchase agreement
A seller receives an offer from a buyer and responds with a counteroffer. Before the buyer responds to the seller's counteroffer, the seller receives a better offer from another prospective buyer. Under these circumstances, the seller:
May withdraw the counteroffer
Which of the following could be innocent and unintentional?
Misrepresentation
Which of the following facts could cause an otherwise valid contract to be void and invalid?
Misrepresentation by one of the parties
The signed sales contract states the subject property will be sold by Ben to James for $156,000 provided the home inspection reveals a structural sound foundation. If the home inspection shows a cracked foundation due to severe settling does James still have to buy the property?
No, because there was a structural condition written in the contract
Tom makes a full price offer to purchase property from Jerry, while Jerry considers the offer it is revealed that Tom was deemed legally insane last year. What are Jerry's options, can he accept the offer?
No, insanity terminates all unaccepted offers
A 19 year old inherits property from his great aunt. He wants to use the proceeds to pay off his debts, so immediately enters into contract to sell the home. Can he later refuse to sell the property?
No, the contract is valid and binding on all parties
An option holder is obligated to do which of the following actions?
Nothing
To be legally binding, a real estate sales contract MUST contain a:
Property Description
Which item returns the parties to their original positions?
Recission
Seller Edward feels bad that Sam, who was going to buy Edward's property, lost his job. Edwards agrees to ______________ Sam from his obligations and _______________ the contract.
Release / Rescind
When a contract is breached, the injured party may:
Rescind the contract unilaterally
Which of the following items would cancel a contract without breaching it?
Rescission agreement
Ryanne buys a property from Andy and they close the deal on Friday, August 8th. The same day the new deed for the property is recorded at the county records office. Two weeks later Ryanne calls her agent to say she never received notice of the property being in her name. What should the agent tell her?
Since the deed was properly recorded that serves as constructive notice
A court order requiring parties to perform as agreed is known as a suit for:
Specific performance
If a tenant and a landlord enter into a 3-month lease that expires at the end of the year, which of the following is correct?
The lease may be oral
Marshall enters into a contract to sell his home to Vicki, who puts down a $3,000 earnest money deposit. At the last minute, Vicki backs out of the deal without cause. Marshall keeps the earnest money deposit. This is an example of:
The non-breaching party accepting liquidated damages
Which of the following contracts will provide instruction for the distribution and proration of escrow and impound funds?
The sales contract
What is the primary difference between an installment sales contract and a sales contract?
Title does not pass under an installment sale
What makes a real estate contract bilateral?
Two parties promise to perform
Under the statute of frauds, an oral listing is:
Valid
Which of the following describes the main difference between "void" and "voidable" contracts?
Void = invalid and shouldn't be formed, Voidable = valid but may allow party to escape liability
A contract of sale cannot exist without an offer and:
acceptance
Buyer broker agreements could be:
all of the above
Vernon presents an offer to a seller, with a provision that it must be accepted within 72 hours. Under which of the following circumstances would the offer terminate?
all of the above would terminate the offer
A purchaser receives equitable title to real estate:
by signing a valid sales contract on the property
An owner entered into a valid listing agreement. During the period of the agreement, the seller sells the property himself. The seller is not legally required to pay a commission to any broker. What type of listing agreement did the seller have?
either A or B
In the typical property management agreement, the property manager can do all of the following actions, EXCEPT:
enter into a 2 year lease, verbally
The buyer-broker agreement that is most similar to the exclusive right-to-sell contract is:
exclusive agency buyer agency agreement
When a seller makes a counteroffer, which of the following statements is NOT true?
it is a partial acceptance of the original offer
A listing agreement will automatically terminate:
on the date specified in the listing agreement
An offer is made to a seller, and the seller makes a counteroffer. Prior to receiving an acceptance, the seller receives a new and better offer from another prospective buyer. Under the circumstances, the seller:
should withdraw the counteroffer
If a buyer defaults on a valid sales contract, the seller may have which of the following performance remedies?
specific performance
The law that requires certain real estate contracts to be written is the:
statute of frauds
Joan and Bob negotiate for the sale of Joan's property. Joan lists her property for $150,000. Bob declares that he will pay $125,000. Under these circumstances, Bob has:
Invited Joan to enter into a contract
What does the statute of frauds say regarding real estate sales contracts?
Must be in writing to be enforceable
Which type of listing allows the Broker, not the seller, to set the list price for the property?
Net listing
Which of the following is true of a contract under novation?
A new contract replaces the old one
In addition to the three essential contract elements (offer/acceptance, consideration, no defenses), purchase agreements also commonly contain all of the following provisions except:
Acceleration clause
A landlord is obligated to provide all of the following EXCEPT:
Use as the tenant and landlord negotiate
Under a contract of sale, the seller is most likely to be the:
Vendor
All of the following have a "Limited Capacity" to contract EXCEPT?
Insane (with a court declaration)
Barry makes a $150,000 offer on Pam's home, subject to financing at 4%. Pam accepts Barry's offer, but only agrees to 6% financing. Which of the following statements is INCORRECT concerning Pam's acceptance?
It is a partial acceptance of the original offer
Laws that establish time limits on one's ability to bring a legal action are known as:
statute of limitations
Kent made an offer on Bill's property. Kent rejected Bill's offer, but made a counter-offer. Kent is now considering the counter. Who is Kent in this scenario?
Offeree
Which of the following shows the seller that the buyer intends in good faith to purchase the property?
A seller's earnest money deposit
Under which circumstances could a lessee (renter) move out prior to the end of their lease date and NOT be held liable for the remaining lease/rent?
All of the above
Which of the following is considered termination of an offer?
All of the above
Which of the following BEST defines a valid contract?
An offer and acceptance, between competent parties who, for consideration, agree to do or not to do, a specific legal act
What does a person have if contracted for the opportunity to purchase property at a specified price and within a specified time?
An option
Under which type of contract would the seller withhold legal title to property until the terms of the contract have been fulfilled?
Any of the above
Typical real estate contracts are which of the following:
Bilateral and written
Sharon has a job transfer and needs to sell her home quickly. She calls one Broker to asks him to list her property and agrees to pay his commission if he is the procuring cause of a sale. However, one week later Sharon's neighbor makes her an offer which she accepts and she pays no commission. What type of listing agreement did Sharon have with the Broker?
Open listing
Which of the following is the BEST example of a unilateral contract?
Option
What is NOT required for a valid real estate sales contract?
Performance
If a seller were to accept a buyer's offer by mail, a contract arises when:
The seller mails the acceptance
A broker lists a property. A buyer makes an offer for less than the listed price. The seller makes a counteroffer, which the buyer rejects. Later, the seller informs the buyer that he will accept the buyer's original offer. Which of the following statements is CORRECT?
The seller's proposal to accept the buyer's original offer is an new offer
The legal process to remove a tenant from property is:
Eviction
Tamara and Barry have entered into a real estate sales contract. They are about three weeks into the transaction, with several terms of the agreement yet to be met. What type of contract do Tamara and Barry have?
Executory
During closing, the settlement agent is describing to the buyer the forms that require the buyer's signature. The agent tells the buyer to sign a form validating they are aware they are receiving a warranty deed. However, the agent clearly knows she is actually getting the buyer sign to purchase title insurance. What is this an example of?
Fraud in the Factum
Jim is selling his home and has a signed offer (sales contract) with Nancy. Just before settlement, it is revealed that Nancy is legally insane and has been for years. What circumstance would allow this contract to remain valid?
If Nancy contracted with Jim during a lucid interval
Under which of the following conditions would a buyer most likely sue for specific performance?
If the seller defaulted on the sales contract before closing
When should a buyer and seller receive copies of a contract?
Immediately upon contract ratification
Stella has a valid sales contract with Barney to purchase his three bedroom home in Myrtle Beach, South Carolina. Eight days before closing Hurricane Albert comes through Myrtle Beach and destroys Barney's home. Which contract defense would excuses Barney from liability of the sales contract in this situation?
Impossibility
Jen is selling her vacation home to Bob and they both agree to close on May 20th at noon. The closing date is written into the sales contract and so are the words "time is of the essence". It's 12:35 pm on May 20th and Jen finally arrives at closing. What trouble has Jen caused?
Jen is in breach of contract
In order to be legally binding on all parties, a contract for sale of real estate MUST include:
Legally competent parties
If there is a breach of a valid contract for the sale for real property, which of the following remedies is available to the non-defaulting party?
Rescission
If there is a breach to a valid real estate sales contract, what remedy is available to the non-breaching party?
Rescission
Which of the choices give an example of both an executory contract and an executed contract?
Sales contract and closing
Which of the following is a real estate contract?
All of the above
The parties to a lease agreement include:
the lessee and lessor
What is most likely to be true if an optionee does NOT exercise his option during the option period?
The optionor may keep the optionee's consideration
After closing, a young couple moves into their newly purchased home. They notice that the living and dining room draperies have been removed, despite being specifically included in the ratified sales contract. What can the buyers do?
Either A or B
Under verbal agreement Landlord Larry has been renting to Tim the tenant on a month-to-month basis for the last eight months. Tim calls Larry one day and says he's getting married and wants to secure the apartment for the next two years. Larry congratulates Tim and ensures him the apartment is his for the next two years. Is this a valid lease agreement?
No, lease contracts for longer than one year must be in writing
Jon obtains an option contract for Joan's house. On the last day of the option period, Jon finds another house and declines to exercise his right. Jon then requests that Joan return his previous payment. Must Joan comply?
No, unless the contract is otherwise invalid
What is the main difference between and exclusive right to sell listing agreement and an exclusive agency listing agreement?
Only in an exclusive right to sell listing the Broker gets a commission even if the owner sells the property
Which of the following does NOT have to exist for a valid contract to be enforceable in the sale of real estate?
Performance
Which of the following is an additional requirement specific to a real estate contract that may not be required in other basic contracts?
Property address
Which relationship is most likely a general agency relationship?
Property owner and property manager
Which of the following could have no legal effect on a valid contract to purchase?
The salesperson dies
A seller promises the buyer he will install new deadbolt locks on all the exterior doors before closing, but the seller never gets the new locks installed. At closing, the buyer signs all required documents accepting the property and doesn't ask for any type of allowance for new locks. After settlement the buyer goes back to the seller and asks for the new locks to be installed and the seller knows he has to get them installed. Why does the seller feel this way?
There was a clause in the sales contract stating promises and obligations will survive settlement
Which of the following choices is not a legal requirement for an option?
the exercise of the option by the optionee
Under the typical lease, landlords are legally obligated to provide tenants all of the following EXCEPT:
use of the premises as the tenant and landlord negotiate
A property is listed at $185,000. Four offers are presented. Which offer BEST describes an offer made by a ready, willing, and able buyer?
A full price offer from a financially qualified buyer, subject only to financing at current market rates
What is a legal action available to either the buyer or seller to enforce the terms of a sales contract?
A suit for specific performance
Adam lost his job and missed a few mortgage payments. He received a couple late payment notices but wasn't too worried because he knew once he got a new job he would be able to catch up with payments. Adam then received a notice from the mortgage company stating the entire loan balance was now due. What type of clause must have been in the mortgage contract?
Acceleration clause
A party who has the legal authority to act on another's behalf is referred to as:
An attorney-in-fact
When a purchase agreement is only signed by the buyer, what is it called?
An offer
A legally enforceable agreement under which both parties named in the agreement promise to do something for each other is called a ________________ ________________.
Bilateral contract
When a contract is created based strictly on the words of the parties involved, it would be considered to be which type of contract?
Both B and C
Betty and Billy had a contract for sale, but it discharged. Which of the following statements must be true about Betty and Billy's conduct?
Both Betty and Billy fully performed
A failure to perform without any recognized excuse is:
Breach
Regarding contracts, what does a "cooling off period" refer to?
Buyer has a short period of time, usually less than 10 days, to rescind a contract for any reason
Which of the following is not required to be specified in a buyer-broker agreement?
Buyer's budget/price range
Sharon wants to buy Tyson's home but the property is 12 years old and Sharon does not want a fixer upper. Sharon wants to have a professional inspect the home to ensure everything is in good working order with no hidden defects. What should Sharon be sure is written into the sales contract?
Either A or B
When there is a breach of contract, which of the following could the breaching party be facing if found guilty?
Loss of earnest money deposit or other payments made under the contract
What would NOT be legally sufficient for use as consideration in a sales contract?
Love and affection
Joans's Agent presents her an offer from Buyer Ben. Joan decides she does not want to accept the offer and makes a counteroffer to Buyer Ben. That same day Joan gets another offer from Buyer Betty and chooses to send a counteroffer to Buyer Betty. Now she can wait and see which of her counteroffers gets accepted. Is this ok?
No, only one offer should be countered at a time
Jennifer signed a 12 month lease agreement in September to rent an apartment near her college. She had only been living there for 4 months when she had to reported a heat problem to her landlord, her apartment was always cold. Two weeks later, right in the middle of winter, she still did not have heat so she moved out. Will Jennifer still be liable for the remaining 8 months of her lease?
No, she cant be held liable because the apartment was uninhabitable
A buyer and a seller enter into a valid sales contract. For personal reasons, the buyer asks to be released by the seller. The buyer also locates another person to buy the property. The seller then enters into a sales contract with the new buyer and releases the first buyer. This is most likely an example of:
Novation
Sarah wants to purchase Rico's home and assume his mortgage. Rico's mortgage contract allows for an assumption. However, Rico does not want to be liable. In this situation, the parties should sign a(n):
Novation
When there is a meeting of the minds, what has been accomplished?
Offer and acceptance
Regarding offer acceptance, what is the "mailbox rule" ?
Rule stating if an acceptance is mailed it is effective when it is deposited in the mailbox by the offeree
If a buyer defaults on a valid sales contract, which performance remedy is available to the seller?
Specific performance
A unilateral contract arises:
Upon completion of the requested act
Sue signed a contract with Pete to buy all of his t-shirt printing equipment for one price after Pete closes his business next month. Within the contract there is a provision that states Sue has one year from the purchase date to file a suit relative to the purchase. After the year is up, Sue forfeits this right. What kind of contract clause is this?
Statute of limitations
Which of the following items is NOT essential to a valid sales contract?
Termination date
What is the organization of brokers (local or regional) who formally exchange listing information about real estate called?
The Multiple Listing Service (MLS)
A buyer makes an offer to purchase property. The seller changes the date of occupancy by one day, then signs the contract. If the buyer does not agree with this change, which of the following statements is true?
The buyer has no further liability
All of the following statements about the impossibility defense must be true, EXCEPT:
The contract could be rescinded, pursuant to a rescission agreement
A developer is selling lots in a new neighborhood and has several buyers interested in Lot C and Lot D. The developer signs a contract with his current buyer to purchase Lot D but realizes after the contract is signed he spoke to this buyer about Lot C and the buyer agrees that he is interested in Lot C. Is the contract valid and enforceable or voidable?
The contract is voidable because there was a mutual mistake
At the end of April Margaret listed her home to sell. On May 15th Margaret accepted an offer from Kathy to buy her home and Margaret and Kathy signed a sales contract with the stipulation to close on June 15th. On June 10th Margaret passed away. What happens to the sales contract?
The contract remains valid and Margaret's estate/next of kin must complete the sale with Kathy
When property is sold and a tenant remains in an existing lease:
The lease interests are transferred
A seller promises to deliver the house with new deadbolt locks on all exterior doors, but the seller does not change any of the old locks. The buyer accepts the house at settlement without objection or attempt to get a credit/reduction in price for the cost of new locks. After settlement, the buyer cannot sue the seller for the cost of the locks, why?
The merger doctrine
The vendee is:
The one who buys or offers to buy
Which of the following statements is true about options?
The optionee can allow the option to expire
What do the words "time is of the essence" in a contract mean to the parties named in the contract?
The portion of the contract that binds the parties to perform by a specified time
Fred and Wilma have a signed real estate contract. Fred the seller backs out and Wilma the buyer sues for specific performance. What does Wilma hope to gain from the lawsuit?
The property
Which of the following details what the "risk of loss" clause in a contract states?
The seller assumes risk of total property loss (fire) even after there is a signed sales contract
A buyer and a seller entered into a valid sales contract. Which of the following circumstances is least likely to jeopardize the sale?
The seller dies prior to closing
A purchaser submits an offer to a seller, with the condition that the property be financed by a conventional loan at no more than 1% interest. If the seller agrees, but such financing cannot be obtained, which of the following is true?
The seller is obligated to return the buyer's deposit
Which of the following, if included in a contract, allows a seller to extend the settlement date to correct title defects that may arise during the buyer's title search?
The title clause
Broker Sam lists a house and sells it 2 months into the listing period. After closing, Sam tries to collect his commission, but the seller refuses and correctly asserts that he has no legal obligation to pay. What type of listing did Sam have?
net listing
What type of listing agreement provides for payment of a commission to the broker, even if the owner makes the sale without help from the broker?
exclusive right-to-sell listing
A salesperson took a listing on a property that had a crack in the foundation, caused by water seepage. Although the owner tells her that the water problem had been corrected, it's obvious that the owner had only filled in and painted over the crack. If the salesperson shows the property without informing potential buyers about the issue, she would be guilty of:
fraud
A lease that will terminate within one year of its inception:
need not be written