REP - Lesson 6 Cumulative Quiz

Which of the following is not a requirement that must be met for the parties to treat the good faith deposit as liquidated damages? a. The good faith deposit must be at least 5% of the purchase price b. The good faith deposit may not exceed 3% of the purchase price c. The liquidated damages clause must be in either 10-point bold type or 8-point red type d. The liquidated damages clause of the purchase agreement must be separately signed or initialed by the parties

a. The good faith deposit must be at least 5% of the purchase price Explanation: A good faith deposit may not exceed 3% of the purchase price for it to be treated as liquidated damages.

A counteroffer: a. acts as a rejection of the initial offer b. is used to cancel a previously existing contract c. is used only to make an offer contingent on a particular event d. is used when a buyer wants to make an offer when the seller has already accepted an offer

a. acts as a rejection of the initial offer Explanation: A counteroffer is a rejection of the previous offer. Either a buyer or seller may make a counteroffer, in response to either the initial offer or a previous counteroffer.

A transaction collapses after the buyer makes an offer and the seller accepts the offer. Which of the following forms would be appropriate to use to ensure that the parties' legal duties to each other have terminated? a. Contract amendment b. Cancellation agreement c. Counteroffer d. Contingency

b. Cancellation agreement Explanation: A cancellation agreement form is used when both parties wish to terminate their agreement, either because they have changed their minds or a contingency cannot be met.

Which of the following is the preferred form for a good faith deposit? a. Cash b. Personal check c. Promissory note d. Bill of sale

b. Personal check Explanation: Good faith deposits are most commonly made by personal check. Cash creates additional responsibilities for brokers, while a seller must sue to recover on a promissory note.

Under the mailbox rule, acceptance by mail occurs when: a. the acceptance is delivered to the offeror b. the acceptance is deposited in the mail c. the acceptance is signed d. the offeror receives the acceptance

b. the acceptance is deposited in the mail Explanation: The mailbox rule states that a binding contract is formed as soon as an acceptance is dropped in the mailbox.

Bill phones Sandy and offers her $300,000 for her property. Sandy says that would be acceptable. Bill fills out a purchase agreement and signs it. Before he can put it in the mail, though, Sandy phones Bill and says that she has accepted a better offer instead. Which of the following is true? a. Sandy formed a contract with Bill upon her oral acceptance of his offer b. Sandy has formed contracts with both Bill and the second buyer, and is liable to both c. Bill's offer and Sandy's acceptance were not valid because they were not in writing, so she may accept another offer d. Bill's offer was valid, but Sandy's oral acceptance was not valid, so she may accept another offer

c. Bill's offer and Sandy's acceptance were not valid because they were not in writing, so she may accept another offer Explanation: Both an offer and an acceptance of an offer to purchase real estate must be in writing. As a result, no contract was formed, and Sandy may accept another offer, assuming that it is in writing.

Which of the following practices would NOT be an illegal discriminatory action? a. Using a different, longer prequalification form for African-American buyers under the assumption that they are more likely to default b. Always assigning minority buyers to work with minority agents c. Referring a buyer to a Spanish-speaking colleague after the buyer expressed a preference to work with a Spanish-speaking agent d. Failing to transmit an offer from an Asian buyer to the seller of a property in an all-white neighborhood

c. Referring a buyer to a Spanish-speaking colleague after the buyer expressed a preference to work with a Spanish-speaking agent Explanation: It is unlawful to treat certain types of buyers less favorably than others based on discriminatory reasons. However, there is nothing illegal about honoring a buyer's request to work with an agent of a particular ethnicity or national origin.

A purchase agreement authorizes the selling agent to hold the check for the good faith deposit uncashed until the seller accepts or rejects the offer. If the seller accepts the offer, how long does the selling agent have to deposit the check into her broker's trust account? a. One business day b. Two business days c. Three business days d. One week

c. Three business days Explanation: If a broker is authorized to hold a check uncashed, a good faith deposit must be deposited into the broker's trust account within three business days after the offer is accepted.

All of the following are potential disadvantages (for the seller) of accepting a very small good faith deposit, except: a. The buyer will not be deterred from walking away from the sale if a better opportunity arises b. The seller will have to sue in order to recover a significant amount of money from the buyer in the event of default c. The seller will not have a large deposit as consolation if the transaction fails d. The buyer will lose a significant amount of money if he causes the transaction to fail

d. The buyer will lose a significant amount of money if he causes the transaction to fail Explanation: The purpose of the good faith deposit is to discourage the buyer from walking away from the transaction, since the buyer will forfeit his deposit if he does so. A larger deposit acts as a greater deterrent.

A buyer makes and signs a written offer. The seller writes in one small change to the offer and signs it. This document is known as a/an: a. addendum b. amendment c. modification d. counteroffer

d. counteroffer Explanation: If any change is made to an offer by the offeree, this terminates the original offer and becomes a new offer, known as a counteroffer.

A listing agent receives three offers on a house on the same morning before arriving at the office. The first two offers are for $4,000 and $5,000 less than the listing price, while the third offer is $20,000 less than the listing price. The agent should: a. submit the offers to the seller in the order they were received b. submit the offers to the seller according to how attractive they are c. discard the third offer since it will be unattractive to the buyer d. submit all three offers to the seller at the same time

d. submit all three offers to the seller at the same time Explanation: An agent must present new offers to a seller immediately, regardless of how many offers he has received or whether or not the offers are attractive.

A buyer delivers an offer by fax. Which of the following is true? a. The seller must deliver the acceptance by fax b. The seller must deliver the acceptance to the buyer's attorney c. The seller may deliver the acceptance by fax or any other reasonable means d. The seller may accept the offer over the telephone

c. The seller may deliver the acceptance by fax or any other reasonable means Explanation: If the offer does not specify the manner of acceptance, acceptance may be delivered by any reasonable method, although it must be in writing. The acceptance may be communicated in the same manner as the offer, but this is not required.

An agent representing a Latino family of buyers overhears that a particular seller is strongly prejudiced and will reject any offer from a minority family. Not wanting to provoke a confrontation, the agent does not tell the buyers that the house is available. Which of the following statements is true? a. The agent's actions were legal, since he was trying to avoid putting the buyers into a situation where they would be discriminated against b. The agent's actions were legal, since he did not specifically tell the buyers that he could not show them the house c. The agent's actions were illegal; this is an example of steering d. The agent's actions were illegal, since he refused to show a property based on discriminatory considerations

d. The agent's actions were illegal, since he refused to show a property based on discriminatory considerations Explanation: The agent's actions were illegal; an agent may never refuse to show a property for discriminatory reasons. Because it involves only one property instead of a neighborhood, this is not an example of steering.

In which of the following situations would the buyer not be entitled to a return of his good faith deposit? a. The sale is contingent on the buyer receiving financing, but no lender will provide a loan b. The buyer is unable to sell his previous home in time to satisfy the contingency c. The home inspector finds that the house is infested with termites, and the buyer is unwilling to waive the inspection contingency d. The buyer is transferred by his employer to a new position in a different city, and must withdraw from the transaction

d. The buyer is transferred by his employer to a new position in a different city, and must withdraw from the transaction Explanation: The buyer is entitled to get his good faith deposit back if the sale fails through no fault of the buyer. This occurs if a contingency is not fulfilled and the agreement becomes void.

River Valley Realty works with a large number of Asian-American buyers, and always instructs its agents to show them properties in neighborhoods with large Asian-American concentrations, assuming that the buyers would be more comfortable there. This practice is known as: a. blockbusting b. steering c. redlining d. commingling

b. steering Explanation: Steering is the practice of channeling buyers toward or away from particular neighborhoods based on their minority status.

A real estate licensee may draw up a contract for a party to a transaction without engaging in the unauthorized practice of law: a. when acting as a dual agent b. when preparing a standard pre-printed purchase agreement form c. when charging a separate fee for the services d. if that party is being represented by a different licensee

b. when preparing a standard pre-printed purchase agreement form Explanation: A licensee may draw up a contract for a buyer or seller if he is filling out a purchase agreement form. He may not charge a separate fee for this service.

An agent advises a seller who has accepted an offer from a buyer to breach the contract and accept a higher offer from another buyer. The agent will receive a larger commission as a result. The agent could be: a. guilty of tortious interference with a contractual relationship' b. liable for nay financial harm caused by his actions c. subject to disciplinary action by the licensing authority d. All of the above

d. All of the above Explanation: An agent should never encourage a seller to break a contract to accept a better offer; he could be civilly liable for his actions and suffer license law penalties.

A buyer would make a backup offer if: a. the seller had already accepted an offer from another buyer b. she wanted the offer to be contingent on the sale of he house she currently owns c. she wants to respond to the seller's counteroffer d. she was waiving a contingency from her original offer

a. the seller had already accepted an offer from another buyer Explanation: A buyer makes a backup offer when a seller has already accepted an offer from another buyer. The backup buyer's hope is that the first sale will fail to close, allowing her to buy the property.

If the buyer and seller do not agree on who should get the good faith deposit, the broker holding the deposit should: a. leave the funds in the trust account until the buyer and seller reach an agreement b. file a lawsuit called an interpleader action and deposit the funds with the court c. divide the deposit evenly between the buyer and seller d. turn the funds over to the escrow agent

b. file a lawsuit called an interpleader action and deposit the funds with the court Explanation: If a disagreement arises over who is entitled to the deposit, your broker should file an interpleader action and turn the good faith deposit over to the court, which will decide who is entitled to the funds.

A buyer may revoke an offer to purchase until the point when: a. her offer has been accepted and the acceptance has been communicated to her b. the termination date on the offer has been reached c. the offer has been submitted to the seller d. Either A or B

d. Either A or B Explanation: A buyer may revoke an offer until the offer has been accepted by the seller. Also, if the termination date on the offer is reached, the offer automatically expires and can no longer be revoked.