real estate law
A buyer wrote an offer contingent on the buyer's spouse approving the property within 24 hours. Would this result in a valid contract? A » It is permissible as long as it is agreed to by both parties B » It is permissible as long as the contingency is on an addendum contract C » It is NOT permissible as a contingency invalidates a contract D » It is NOT permissible as the contingency allows for a personal judgment
A (A) A contingency is something written into the contract that allows a party to "opt out" of the contract should something happen or fail to happen. A spouse`s approval is a valid contingency. It does not have to be on a later addition (addendum) and is usually in the body of the contract itself (B). Contingencies do not automatically invalidate a contract (C). A personal judgment (such as a spouse's approval or an attorney's opinion, etc.) is a valid area on which a contingency can be based (D).
If a seller instructed a managing broker NOT to show a house to buyers with children, what should the managing broker do? A » Inform the seller that the managing broker must show the property to all qualified buyers B » Follow the instructions as this is a single family residence and the seller is within the seller's legal rights C » Follow the seller's instructions but NOT discriminate in the advertising itself D » Follow the seller's instructions but make sure all advertising informs all potential purchasers of the seller's restrictions
A (A) Buyers with children are a protected class under the Amendments Act of 1988. Therefore, the managing broker must inform the seller of that fact and show the property to all interested purchasers. (B) A seller does not receive an exemption if the property is listed with a broker. (C) The managing broker cannot discriminate in advertising or the showing of property. (D) The managing broker CANNOT legally follow the sellers` instructions as the instruction are illegal.
An out of town buyer writes to a seller agreeing to pay the list price of the property and also agreeing to all other terms laid out by the seller. The seller, however, does not receive the letter until after the listing has expired. Would this result in a valid contract? A » No, because there was no consideration given by the buyer B » No, because there was no acceptance by the seller C » Yes, because the listing expiring only affects the broker's commission, not the sales contract D » Yes, because the buyer had met all of the seller's terms
B One of the essential elements of a sales contract is that there must be an offer and acceptance. (B) is the correct answer as there was not an acceptance of the offer by the seller. (A) is incorrect as the promise to pay made by the buyer is sufficient consideration for a contract. (C) is a true statement but does not answer the question dealing with the sales contract being valid. (D) is incorrect because even if a buyer meets the seller`s terms in a listing contract, the seller does not have to agree to sell to that particular buyer.
Which of the following terms describes a court action to bring both parties to a contract back to their original position? A » Reversion B » Rescission C » Reconveyance D » Reverse annuity
B Rescission (B) returns both parties to the status quo, or the way they were before - back to square one. (A) deals with rights reverting back to an original party, (C) is a document given a borrower once a loan has been paid off in a trust deed state, and (D) is where older persons use the equity in their house to obtain money each month to help them live in retirement.
A buyer signed an offer to purchase on a property listed for sale. The offer to purchase contract did not state any time period for which the offer was valid. In this case, which of the following statements is true regarding the offer to purchase contract? A » There would be a 7 day time limit for which the offer is valid B » The buyer is tied to the contract no matter what C » The buyer can revoke the contract at any time before acceptance D » The buyer cannot revoke the offer until the seller makes a counter-offer
C (C) A buyer can always revoke an offer anytime before it is accepted by the seller. (A) There is not 7 day time period for offers to be valid. (B) The buyer is not always tied to the contract as the buyer can rescind the offer prior to acceptance. (D) The buyer does not have to wait for a counteroffer as the offer can be rescinded prior to acceptance.
A 16 year old signed a contract to buy a piece of property. The seller, after realizing that the buyer was a minor, attempted to void the transaction. Is this permissible? A » Yes, because the buyer is not of legal age B » Yes, because the buyer did not inform the seller of the buyer's correct age C » No, only the buyer could void the contract D » No, because both the buyer and seller have to agree
C (C) A contract signed by a minor is voidable only by the minor. Only the injured party can void a contract, i.e., a minor, a person under duress or a person who was misrepresented. (A) The seller cannot void the contract as the buyer is the injured party, not the seller. The buyer is not required to inform the seller of the buyer`s age (B). The minor cannot contract with the seller (D) even to agree to void as the buyer is a minor.
A buyer made an offer on a property with earnest money being part of the contract. The buyer wanted to make sure the earnest money would be returned if the buyer could not qualify for a loan. The buyer would need to put which of the following clauses in the contract to make sure this would happen? A » Escalation clause B » Defeasance clause C » Mortgage contingency clause D » Alienation clause
C (C) A mortgage contingency clause states that a buyer will only buy if the buyer is able to obtain financing. If the buyer cannot, typically the earnest money will be returned to the buyer. (A) An escalation clause is used under two different circumstances: (1) to allow a lender to raise interest rates on a loan and (2) to allow a landlord to raise the rent under a lease contract. (B) A defeasance clause in a mortgage voids the security once the loan is paid off. (D) An alienation clause in a mortgage makes the loan non-assumable.
Q agreed in writing to give a neighbor the piece of land between the rose bush and the neighbor's property line. The transfer was to take place within 6 months. After the 6 month period had passed, Q refused to transfer the property. Would the neighbor have any recourse? A » Yes, if the agreement was in writing, it would be enforceable B » Yes, since the Statute of Frauds had been violated, the agreement would be enforceable C » No, as there was no consideration given, the agreement was not enforceable D » No, as the 6 month period had elapsed, the agreement was not enforceable
C (C) In order for a contract to be enforced, both sides must give some consideration (something of value). The seller was giving something and was under no legal obligation to do so since the buyer gave no consideration in return. The issue of writing (A) & (B) is not relevant nor is the time (D).
Managing Broker Dole was showing a buyer different apartments for rent in a specific area of a city. The buyer asked Dole to find an apartment that did not allow children as the buyer desired peace and quiet and felt that children would destroy their privacy. Managing Broker Dole should: A » tell the buyer to look for ads that read "adults only" apartments B » inform the buyer that this would be "steering" and therefore illegal C » inform the buyer that only bona fide retirement communities can legally restrict children D » inform the buyers that all properties are now open to children due to the 1988 amendments to the Fair Housing Act
C (C) Only certain retirement communities may prohibit children. As a general rule, discriminatory advertising (A) is illegal. Steering is an agent directing persons to an area based on where the agent thought they belonged (B) (usually based on ethnic concerns). (D) is wrong as retirement communities are not required to be open to children.
For an option to be valid, an optionee must: A » sign the option B » complete the option C » pay consideration D » make a down payment
C (C) Since an option is a contract, it must have consideration. (A) Only the optionor (seller) has to sign the option. The optionee (buyer) may or may not complete the option (B). A down payment is not required until the buyer (optionee) exercises the option (D).
A buyer signed a contract to buy a piece of vacant ground for $350,000. The buyer planned on building a commercial building on the vacant ground. After signing the contract, the buyer found the zoning did not allow commercial properties to be built on that ground. The buyer had not told the seller the buyer's plans of building a commercial building on the property. This contract would be: A » void B » voidable C » enforceable D » unenforceable
C (C) The contract is enforceable as no misrepresentations were made to the buyer. (A) A void contract has no legal effect at all, such as a person who has been declared mentally incompetent by a court signing a contract. (B) A voidable contract is typically a contract signed by a minor, by a person under duress or by a person who was misrepresented. (D) An unenforceable contract is typically an oral contract.
A seller's home was listed for sale by a managing broker. A buyer made an oral offer for the property which the seller accepted. The oral agreement between seller and buyer called for the seller to pay all closing costs. When the contract was put in writing for all to sign, the contract read that the buyer would pay all closing costs. Both seller and buyer signed the contract. Who would MOST likely be responsible for paying the closing costs? A » Seller and buyer would split the closing costs equally B » Seller, buyer and managing broker would split the closing costs equally C » Buyer D » Seller
C (C) is correct as a signed written agreement takes precedence over anything that was earlier agreed to orally. (A), (B), and (D) are all incorrect in that the seller would not be liable as the written agreement takes precedence.
Which of the following statements BEST describes the difference between a void and a voidable contract? A » A void contract can not be enforced legally; a voidable contract could remain in force until one of the parties involved decided to void it B » A voidable contract can not be enforced legally; a void contract could remain in force until one of the parties involved decided to void it C » A voidable contract can not be enforced by either of the parties; a void may be enforced by the court if its purpose is legal D » A void contract can be enforced by either or both of the parties; a voidable contract can be voided by either or both of the parties
A (A) Neither side can enforce a void contract (such as a contract to commit a crime) but a voidable contract is enforceable until one of the parties decides to void it. (B) This answer is backwards. (C) A void contract cannot be enforced by the court. (D) Once again, a void contract cannot be enforced. Also, a voidable contract can only be voided by the injured party, for example, a minor or a person who signed a contract under duress (extreme pressure).
An owner gave a buyer an option on a piece of property for 6 months for $300,000, receiving $150 for the option. Was this a valid option? A » Yes, because $150 is considered valuable consideration B » Yes, because it is for longer than 90 days C » No, because options cannot be for a period of longer than 90 days D » No, because 5% would have to be paid to be considered valuable
A (A) Since an option is a contract, consideration must be paid. Consideration is defined as something of value, here the value being the $150. There is no required amount (D). There is no requirement that options be for any specific time period (B) & (C).
A buyer and a seller entered into a contract for the purchase of a property. Prior to closing, one of the parties breached the agreement. What would be the other parties BEST remedy? A » Specific performance B » Rescission C » Sue for damages D » Go ahead and close anyway
A (A) Specific performance is court action to force all parties to perform. This is the most common remedy if one party tries to back out of a deal. (B) Rescission is returning both parties in a contract back to square one. (C) When a party sues for damages, the damages are normally limited to out of pocket expenses, but this is not the most common remedy. (D) One cannot close on a transaction unless all parties consent.
An investor built a three story apartment complex with *no elevators*. Under the 1988 Fair Housing Amendments Act, which of the floors must be accessible to the handicapped? A » Ground floor only B » First and second floors only C » All floors D » Ground floor only unless a handicapped person specifically asks to be on the second or third floors - then modifications must be made
A Under the 1988 Fair Housing Amendments Act, if there is an elevator in the complex, then all floors must be accessible to the handicapped. If there is no elevator, then ground floor units only must be accessible. Therefore, (A) can be the only right answer.
A person invested $5,000 in a limited partnership. One of his concerns was the amount of his liability. Since he is one of the limited partners, can he be held liable for more than his initial investment? A » No, because he is guaranteed a 25% return on his investment B » No, because he is only liable for his initial investment C » Yes, because he is liable for three times the initial investment D » Yes, because limited partners are responsible for a limited amount of all debts
B (B) A limited partner is normally only liable for the amount of initial investment. (A) A limited partner is not guaranteed any return on investment. (C) A limited partner is not liable for three times the investment. (D) Limited partners are not responsible for a limited amount of all debts.
A person owned a retail establishment. The seller was considering selling the retail business through a stock exchange. The seller contacted a licensee about this idea. The licensee should: A » contact the managing broker of the office and have the managing broker handle the transaction B » tell the seller to contact a securities agent regarding this sale C » contact an attorney to assist the licensee in handling the sale D » handle the sale personally
B (B) A securities agent is needed in the sale of property involving stock. (A) A real estate managing broker CANNOT legally handle a sale involving stock. (C) An attorney may not have expertise in the area of stock exchanges as would someone with a securities license. (D) The licensee CANNOT legally handle a sale involving stock.
Which of the following best describes the difference between general and limited partnerships? A » Unlike general partnerships, limited partnerships require all partners to assume full liability B » Unlike general partnerships, limited partnerships must have limited and general partners C » Unlike limited partnerships, general partnerships limit the general partner's ability to make management decisions D » Unlike limited partnerships, general partnerships require stockholders to post bonds equal to their investments
B (B) All partnerships must have at least one general partner as the general partner is the one who makes management decisions. (A) Limited partners do NOT assume full liability as they are only liable for their initial investment. (C) General partners are not limited in their ability to make management decisions. (D) Stockholders do not have to post bonds equal to their investment.
Which of the following statements BEST identifies an option? A » The right to buy at a later date if the property is placed up for sale B » The possibility of buying at a set price at a later date C » The right of a tenant to adjoining space should it become available D » The right to make an offer to purchase at a later date
B (B) An option gives the buyer the right to buy at a set price withing a certain time period. (A) is a right of first refusal (not an option) since the buyer does not have the right to buy unless the seller puts the property on the market (C) is also a right of first refusal. Buyers always have the right to make an offer (D). No option is required.
Lots were being sold in a subdivision that required all building lots contain a minimum of .5 acres. This would be an example of: A » down zoning B » deed restrictions C » directive zoning D » discriminatory pricing
B (B) Deed restrictions are private land use controls, such as minimum acreage, minimum square footage, certain type of roofs, etc. (A) Down zoning is going from a more intensive use to a less intensive use, such as from multi-family to single family. (C) Directive zoning encourages land to be used for the highest and best use. (D) Discriminatory pricing is not a valid term.
A buyer purchased an option on a property. Which of the following statements BEST states the rights of the parties? A » The optionee would have to sue to get the money back if the option is not exercised within the option time period B » The optionee would lose the money paid if the option is not exercised within the option time period C » The optionor could sue the optionee to complete the option D » The optionor must purchase the property at any price another buyer would offer
B (B) The optionee (buyer) paid consideration for the option rights. If the optionee chooses not to exercise the rights, the optionor (seller) gets to keep the money. The optionee cannot sue to get it back (A) since the optionee got what the optionee paid for (the option). The optionor (seller) cannot force the buyer to buy it under an option (C). (D) describes a type of right of first refusal.
$1,000 is paid for a 30 day option to buy. Which of the following BEST describes the listing agent's commission? A » It is earned at the time the option is entered into B » It is earned only if the option is exercised C » The commission comes out of the $1,000 D » The commission is payable at the end of the 30 day option period
B (B) Until the option is exercised (i.e. the buyer agrees to buy it), the buyer is not ready, willing and able. Once exercised, the agent has procured a ready, willing and able buyer so the commission is earned. Entering the option (A) only indicates the buyer MAY buy so no commission is due at that point. The $1,000 (C) is paid to the seller for the option. It is not paid to the broker. The commission may not be paid at all (the option might not be exercised) so it is not payable at the end of the option period automatically (D).
A buyer and seller negotiated a sale by sending contracts through the mail. Would this result in a valid contract? A » Yes, as long as it is filed through an attorney B » Yes, under the Statute of Frauds as long as it is in writing, it is valid C » No, because a buyer and seller must come physically together to have a meeting of the minds D » No, because under the Statute of Frauds, signatures must be witnessed by all parties to be enforceable
B (B) Written contracts are enforceable under the Statute of Frauds even if the two parties have not made actual contact (C). Attorneys are not required (A). The two parties do not have to have seen each other sign (D).
A lot with 15,400 square feet had a depth of 140 feet. The owner bought 2 lots, one on each side directly abutting his property, each having 4200 square feet and 140 feet of depth. What was the total of the front footage? A » 140 B » 170 C » 310 D » 420
B 15,400 plus 4,200 plus 4,200 equals total square footage of 23,800. 23,800 divided by 140 feet equals 170 feet for the frontage
One rectangular piece of property was divided by a stream, separating the property into two equal triangular lots. The frontage of the entire parcel measured 500' and the depth of one of the triangles measured 920'. What was the total acreage of both triangular lots? A » 5.2 B » 10.5 C » 12.7 D » 15.9
B 500` times 920' equals 460,000 total square feet. 460,000 square feet divided by 43,560 equals 10.5 acres.
A corn field was bisected by a road dividing it into 2 equal lots measuring 530 feet by 430 feet each. What was the total acreage of these 2 lots? A » 5.2 acres B » 10.5 acres C » 228 acres D » 456 acres
B 530 times 430 equals 227,900 square feet per lot. 227,900 times two lots equals 455,800 total square feet. 455,800 divided by 43,560 equals 10.5 acres.
A contract would be considered executed when: A » the deed has been delivered and accepted B » all contract terms have been satisfied C » the deed has been recorded D » the deed has been acknowledged
B An executed contract is one where all promises have been completed (B). The deed being delivered and accepted transfers title (A). Recording of the deed gives the public constructive notice of the transaction (C). An acknowledged deed is one that has been signed in the presence of a notary public (D).
A managing broker listed a new home for sale that was nearly complete. The garage on the house was still under construction. A buyer approached the managing broker and said they would buy the house only when and if the garage was completely finished. Was this a contractual obligation for the buyer? A » Yes, because the garage being completed before the buyer would buy would be considered as a contingency clause B » Yes, because the buyer told the managing broker they would buy C » No, this was just an offer from the buyer to negotiate a possible contract D » No, because the offer had to be in writing and notarized to be a binding contract
C In order to have a contractual obligation, there must be a meeting of the minds on behalf of both buyer and seller on the exact terms of the contract. Here, the buyer has just made an offer with the garage being completed as part of that offer. The seller would have to agree to those terms to have a valid contract. Therefore, (C) is the best answer. (D) is incorrect as a contract does not have to be in writing nor notarized.
What is the name of the map that shows the individual lots in a subdivision? A » Record of lots B » Lot Register C » Subdivision map D » Plat map
D (D) A plat map shows how the individual lots are platted (drawn) out. Record of lots (A) is not a real estate term. A lot register (B) is where a person signs to reserve a lot when buying from a developer. A subdivision map is more of a colloquial term for a plat map (C).
A woman lived in a 4 family house and rented rooms to young college students. She advertised that she would only rent to single white women but she did not care about their religion. Was this permissible? A » Yes, because she had not discriminated because of their religion B » Yes, since she lived in one of the units, she was exempt from the Federal Fair Housing Laws C » No, discrimination based upon sex is always a violation of the Federal Fair Housing Laws D » No, discrimination based upon race is unlawful in all cases
D (D) Racial discrimination is always illegal due to the Jones vs. Mayer supreme court case. Advertising the word WHITE is what made the ad illegal. (A), (B) and (C) The woman would be exempt under the Fair Housing Laws as she lived in a 1-4 plex and therefore could discriminate based on religion or sex. Using the racial issue in the ad is what made the ad illegal.
Which of the following statements BEST distinguishes general from limited partnerships? A » Limited partners are involved in the day to day running of the business B » General partnerships also must have limited partners C » Limited partners are totally liable for all debts of a partnership D » Limited partnerships also must have general partners
D (D) There must be at least one general partner to run any partnership. Limited (silent) partners are investors only and are not involved in running the business (A). There is no requirement to have limited partners (B). Limited partners can only lose what they have invested (C).
Which of the following activities is NOT covered under the Fair Housing Law? A » Mortgage lending activities B » Real estate brokerage activities C » Activities of real estate salespersons D » Activities of an owner-occupant of a duplex
D Owner-occupants of up to a 4-plex are exempted from most of the fair housing law. Lenders (A), brokers (B) and salespersons (C) are covered.
Which is NOT true about a metes and bounds description? A » It has a point of beginning B » The metes can be as small as 1/100 of a foot C » It is a good way to define irregularly shaped parcels of land D » In the event of a discrepancy, the distances in the deed prevail over the actual distances between monuments
D The actual distances will prevail over the distances stated in the deed. A metes and bounds description starts at a point of beginning (A) and lists the distances between various bounds (physical markers) with distances as low as 1/100 of a foot (B). For those reasons, it is ideal for describing land that is shaped irregularly (C).
A couple, in trying to buy a house, thought they had been discriminated against. Under the 1988 amendments to the Federal Fair Housing Law, how long does the couple have to file a complaint with HUD? A » 6 months B » 1 year C » 18 months D » 2 years
B (B) Persons have 1 year in which to file a complaint with HUD if they believe discrimination has occurred.
A property totaled 820 square yards. If it was in a rectangular position and the front footage was 45 feet, what was the depth? A » 18.22 feet B » 22.50 feet C » 164 feet D » 188 feet
C 820 square yards times 9 equals 7,380 square feet. 7,380 divided by 45 feet equals 164 feet for the depth.
A buyer signed an offer to purchase contract which was presented to the seller. There was a clause in the contract that said the offer was irrevocable for five days. There was no consideration in the contract for this statement. Which of the following statements is true regarding this contract? A » Since there was no mention of earnest money, there was no consideration with this offer B » The buyer could NOT revoke the offer for five days C » The offer was freely revocable until it had been accepted by the seller D » The buyer could withdraw the offer before the five days was up only with the consent of the seller
C A buyer or seller always has a right to withdraw an offer up until the offer has been accepted (C). The price submitted in the offer by the buyer is sufficient consideration for a contract - no earnest money is required (A). A clause in a contract not allowing revocation is not valid (B).
Which of the following advertisements is a violation of federal law? A » "luxury condominium - singles only" B » "honeymoon cottage in a secluded wooded area" C » "payments less than rent" D » "retirement community with a scenic view"
A (A) "Singles only" implies no children and would be a violation of the Fair Housing Laws regarding familial status. (B) Honeymoon cottage, (C) payments less than rent and (D) retirement community are all legal advertisements.
ABC Incorporated was organized with five stockholders. How would ABC Incorporated take title to the property? A » Tenants in common B » Joint tenants C » Tenancy by the entirety D » Severalty
D (D) A corporation acts as a single entity (just like a single person) and takes title in severalty. The rest require at least two entities or persons. Tenants in common (A) allows different amounts of ownership for the various owners and is inheritable upon an owner`s death. Joint tenants (B) requires the TTIP unities (time, title, interest and possession) and upon one's death would pass to the surviving joint tenants. Tenancy by the entirety (C) is much like joint tenancy but requires the two owners to be married.
A husband and wife listed their home for sale with a real estate agent. The agent received two offers from two different buyers at the same time on the property. What is the best advice the agent can give to the seller regarding these two offers? A » Counteroffer to both buyers at the same time B » Accept both offers since the seller does not know which of the buyers is better qualified C » Hold onto the two offers and wait for a third offer D » Accept or counteroffer only one offer or reject both offers
D (D) When a seller is considering two offers at the same time, the BEST idea is to have the seller counteroffer one at a time to the different buyers. (A) Counteroffering to both buyers simultaneously is not normal BEST advice. (B) Accepting both offers would put the seller in a precarious legal position as both buyers would then claim the property. (C) Holding onto the two offers and waiting for a third could be done, but the seller might end up losing all the buyers.