Unit 6 - The Sales Contract (Questions)

When should a license holder present a written offer to a property owner? A) As quickly as is reasonably practical B) Within 24 hours of receipt C) Within three business days of receipt D) Only after the license holder has gone over the contract with the license holder's sponsoring broker

As quickly as is reasonably practical

describes a parcel by referencing identifying numbers in a subdivision, as specified on a recorded subdivision plat

Lot and Block

from point of beginning, follows the boundaries, using directions and distances around the tract, back to POB

Metes and Bounds

Which type of legal description starts at a designated place on the parcel called the point of beginning? A) Metes and bounds B) Rectangular survey C) Lot and block D) Perimeter survey

Metes and bounds

What are fixed objects used to identify the point of beginning (POB)? A) Monuments B) Intersections of prime meridians and post meridians C) Satellite imaging D) Survey flags

Monuments

A buyer applies for a loan and then agrees to a contract with a seller. The mortgage company denies the loan because of the buyer's previous bankruptcy. Which of the following is TRUE? A) The buyer could terminate because of loan denial. B) The buyer could terminate but would risk another bankruptcy. C) The buyer is in breach of contract for not disclosing the bankruptcy. D) The seller could require the buyer to release the earnest money to the seller.

The buyer could terminate because of loan denial.

A buyer and a seller agree to all the terms of a contract EXCEPT for who the title company is going to be. What is the result of this disagreement? A) According to TREC, this is a "minor" term and can be waived by both the buyer's title company and the seller's title company. B) None of these results. C) There is no contract. D) TREC-promulgated contracts do not address this issue.

There is no contract.

A buyer and a seller sign a contract to purchase. The seller backs out, and the buyer sues for specific performance. What is the buyer seeking in this lawsuit? A) Money damages B) Transfer of the property C) A new contract D) Deficiency judgment

Transfer of the property

Additional conditions that must be satisfied before a sales contract is fully enforceable are called contingencies. True False

True

If a seller submits a counteroffer to a buyer's offer, the original offer ceases to exist because the seller has rejected it. True False

True

In the event of a breach of contract, the non-breaching party can usually seek rescission of the contract, suit for money damages, or suit for specific performance. True False

True

The metes-and-bounds method and the rectangular survey system provide legal descriptions that can be used to describe property in sales contracts. True False

True

To avoid a lawsuit if one party breaches the contract, the parties may agree on a certain amount of money, called liquidated damages, that will compensate the non-breaching party. True False

True

Once the offer has been accepted, each of the parties are to receive A) a congratulatory letter. B) a demand for earnest money from the buyer. C) an escrow acceptance letter. D) a copy of the final signed contract.

a copy of the final signed contract.

A sales contract may include A) that the sellers are going to jail and are desperate to sell the property at any price. B) the names of any registered sex offenders in close proximity to the property. C) a list of any personal property that is to be left with the property. D) a history of any previous owners who have died while living in the property.

a list of any personal property that is to be left with the property.

As a legal description, "the northwest ¼ of the southwest ¼ of Section 6, township 4 North, Range 7 West" is defective because it contains no reference to A) boundary lines. B) lot numbers. C) a record of survey. D) a principal meridian.

a principal meridian.

An offer or counteroffer may be withdrawn at any time before it has been A) accepted. B) rejected. C) rectified. D) evaluated.

accepted.

Unless there is some legal excuse, the non-breaching party can usually seek A) suit for money damages. B) rescission. C) all of these. D) suit for specific performance.

all of these.

A broker keeps his operating funds in the same account with earnest money from the company trust account. Using escrow funds for this purpose is A) legal if the seller gives consent in writing. B) legal if paper records of the trust account are maintained by the broker. C) conversion of funds and is illegal. D) commingling of funds and is illegal.

commingling of funds and is illegal.

If a broker mixes personal funds with business funds belonging to others it is called A) contingent. B) conversion. C) commonality. D) commingling.

commingling.

The sales contract says the buyer will purchase only if an attorney approves the sale by the following Saturday. The attorney's approval is a A) contingency. B) consideration. C) warranty. D) reservation.

contingency.

If the earnest money is established as the limit of the buyer's liability in case of default, this sum of money is called A) liquidated damages. B) specific performance. C) breach of contract. D) parole evidence.

liquidated damages.

When a buyer default creates a breach of contract, the seller may NOT A) sue for damages. B) file a suit for specific performance. C) rescind the contract. D) place a lis pendens.

place a lis pendens.

Which of the following statements about contracts is TRUE? A) All of these are true. B) A person can sue anytime within a five-year period for a written contract. C) The courts hold that written contracts do not supersede parole evidence if there is a conflict. D) A person can sue anytime within a four-year period for an oral contract.

A person can sue anytime within a four-year period for an oral contract.

Which of the following is TRUE about prequalification and preapproval letters? A) A preapproval is better than a prequalification letter. B) A prequalification letter is better than a preapproval letter. C) A prequalification letter indicates that the buyer is prequalified for a loan, all verifications are in, and credit is checked. D) Both letters mean the same thing.

A preapproval is better than a prequalification letter.

Which of the following could be a remedy in a written contract? A) Money damages B) Specific performance C) Liquidated damages D) All of these

All of these

Which of the following is included in a TREC-promulgated sales contract? A) Purchaser's name B) Purchaser's settlement expenses C) All of these D) Statement of the purchaser's obligation to purchase the property

All of these

Which of the following items could be removed by the seller before the sale of a property? A) Firewood B) Storage shed C) All of these D) Trash

All of these

A buyer and seller enter into a contract. The contract states that the buyer will get an interest rate that will not exceed 4.5%, but the rate goes up to 5%. What are the possible ramifications? A) All of these are possible. B) The buyer could terminate and receive the earnest money back. C) The buyer and seller could agree to reduce the sales price to make up the difference for the buyer. D) The buyer could agree to the additional interest rate increase and buy the property.

All of these are possible.

Which of the following sets out in detail the agreement between the buyer and the seller and establishes the legal rights and obligations of both parties? A) Contract B) Constitution law C) Statutory law D) Offer

Contract

Acceptance occurs at the point one party to a transaction accepts the other party's offer. True False

False

Earnest money deposits are based on a percentage (usually around 3%) of the sales price of the property. True False

False

Financing information is generally not covered in a sales contract. True False

False

To prevent commingling, brokers must maintain separate escrow accounts for each earnest money deposit received. True False

False

When a buyer signs a contract to purchase real estate, the buyer receives title to the land. True False

False

Which of the following is FALSE about earnest money? A) It is evidence of the buyer's intention to purchase. B) It is held in an escrow account. C) It is required on all contracts for the purchase of real estate. D) It is usually in the form of a personal check.

It is required on all contracts for the purchase of real estate.

How much earnest money is required when a purchaser makes an offer to purchase real estate? A) $500.00 B) $1.00 and other valuable consideration C) 1% of the sale price D) None

None

A landlord leases to a tenant on a two-year oral lease. The tenant decides to leave after 18 months. What are the remedies for the landlord? A) Mitigate the damages if possible but sue for the unpaid rent B) Seek relief within two years C) None of these D) Sue the tenant for six months of unpaid rent

None of these

What should the seller do in anticipation of suing the buyer for specific performance for breach of contract? A) Request that the buyer declare a statement of default to obtain the best evidence of breach. B) Terminate the contract. C) Immediately file a lis pendens on the property. D) Proceed to settlement as scheduled to show good faith intent to carry out the terms of the contract.

Proceed to settlement as scheduled to show good faith intent to carry out the terms of the contract.

provides for surveying and describing land by reference to principal meridians and base lines

Rectangular Survey

Which of the following is NOT a valid legal description? A) Metes and bounds B) Survey C) Lot and block D) Street address

Street address

A buyer and seller have a contract. The buyer is self-employed and takes the maximum amount of deductions possible. The buyer has plenty of money, but her tax return indicates not enough income, so her loan was denied. The lender says that the buyer could re-file her tax return and claim less reductions, but she refuses to do so. What could happen because of the buyer's loan denial? A) The seller could sue the buyer for breach of contract because the buyer did not show due diligence in seeking financing. B) The buyer could terminate the agreement and receive her earnest money back. C) The buyer will be required to re-file or be in default. D) The buyer could be at risk for fraud for indicating more deductions than necessary on her tax return.

The buyer could terminate the agreement and receive her earnest money back.

A buyer applied for an FHA 203(b) loan with a 3.5% down payment, and when he made an offer, he placed the appropriate financing information in the Third Party Financing Addendum for Credit Approval. The seller accepted his offer, but the buyer later found out that he did not qualify for the FHA 203(b) loan. So to be able to purchase the home with a conventional loan, he needs to put 20% down. The buyer cannot afford a 20% down payment; what should he do? A) The buyer has a contract with the seller and as such must make the additional down payment or face default. B) The buyer could terminate the contract because he could not get the financing that was written in the contract. He would receive his earnest money back. C) The buyer could terminate it but would lose his earnest money. D) The seller is required to pay the difference in down payment because the seller accepted the terms and at no fault of the buyer, the buyer can't perform.

The buyer could terminate the contract because he could not get the financing that was written in the contract. He would receive his earnest money back.

A buyer makes an offer to purchase a property and leaves an escrow deposit with the license holder to show good faith. The broker should immediately A) deliver the earnest money to the escrow agent named in the contract. B) give the deposit to the seller when the offer is presented. C) put the deposit in the broker's personal checking account. D) apply the deposit to the listing expenses.

deliver the earnest money to the escrow agent named in the contract.

A buyer deposits certain funds that should be an amount sufficient to discourage the buyer from defaulting. These funds also compensate the seller for taking the property off the market and cover any expenses the seller might incur if the buyer defaults. These funds are called A) purchase money. B) a down payment. C) earnest money. D) option money.

earnest money.

When a listing agent receives several offers on a property within one day, the agent must present the offers to the seller as quickly as is reasonable. The agent will A) show the first offer to the seller first because he must make a decision on it before he can consider the next offer. If the seller accepts the first offer, the agent tells the other buyers that a contract has already been accepted. B) make a decision for the seller as to the best offer so as not to confuse the seller. C) go over all offers with the seller and discuss the merits of each to help the seller make a decision as to which offer he wishes to accept, reject, or counter, if any. D) hold the offers for a few days to see if better ones come in before taking up the seller's time.

go over all offers with the seller and discuss the merits of each to help the seller make a decision as to which offer he wishes to accept, reject, or counter, if any.

A seller has listed her home at $250,000. A couple has made an offer to purchase the property for $230,000, including the seller's washer and dryer. The seller counters with a sales price of $240,000 without the washer and dryer. The buyers counter again with a sales price of $234,000, including the washer and dryer. The seller makes no response for five days and the buyers find another property. The buyers should A) tell their agent to withdraw their offer and have the agent put in an offer on the new property. B) keep their offer on the first property but see if they can get a better deal on the new one. C) change agents and make an offer on the new property. D) wait and see what happens to their existing offer first because they have been in negotiations for so long with the first party.

tell their agent to withdraw their offer and have the agent put in an offer on the new property.

The law that requires the seller to bear any loss due to destruction of the property before settlement is called A) the Uniform Vendor and Purchaser Risk Act. B) "time is of the essence." C) "suit for specific performance." D) the Uniform Probate Code.

the Uniform Vendor and Purchaser Risk Act.