Purchase Agreements/ Transactions
Mutually rescind the contract.
Both parties can agree to not go forward, known as mutual rescission. If the rescission is mutual, the wronged party may or may not be owed liquidated damages, depending on the agreement between them. It is important to get the agreement to rescind in writing, just as with any other contract.
Who is bound by the purchase agreement? The buyer and seller only Both parties and their immediate families Both parties, their immediate families, and their brokers Both parties, their heirs, personal representatives, successors, and assigns
Both parties, their heirs, personal representatives, successors, and assigns
In Virginia, in what form can a buyer pay earnest money? Cash or check only IOU or cash only Cash, check, bank letter of credit, or promissory note Check, cashier's check, or wired funds
Cash, check, bank letter of credit, or promissory note
In Virginia, what type of deed is used to convey property? Special warranty deed General warranty deed Grant deed Quick claim deed
General warranty deed
How may a signed purchase agreement be legally changed? Only by an attorney Only by court order Only through the written agreement of all parties Only if the buyer and seller give their verbal agreement to the change.
Only through the written agreement of all parties The only way a signed purchase agreement may be changed is with the written agreement of all parties.
What are items that belong to the seller but that the buyer can request be included in the property sale known as? Real property Transferable property Disposable property Personal property
Personal property Items that belong to the seller but that the buyer can request be included in the property sale are known as personal property.
Both the seller and the buyer are required to pay their portion of taxes, assessments, interest, rent escrow deposits, and other ownership fees. These fees are ______ as of the date of settlement. Estimated Prorated Paid in full Apportioned
Prorated
After receiving notice of a title defect, the seller has 60 days to cure the defect.
T
For properties that are not on public water and sewer systems, sellers must provide certificates no more than 30 days prior to settlement proving that water from the well—or other natural source—is safe, and that the sewage disposal system works.
T
If the seller does not cure a title defect within 60 days of receiving notice of the defect, the buyer can terminate the contract and have their deposit returned or waive the defect and proceed to settlement with no adjustment to the purchase price.
T
In Virginia, sellers convey property with a general warranty deed
T
Per Chapter 27.3 of Title 55 of the Code of Virginia, the buyer has the right to select the settlement agent to handle the closing of the sales transaction.
T
Per the Financing section of the Residential Contract of Purchase, the seller may provide a written notice of default to the buyer if the buyer is not showing proof of being able to settle in a timely manner.
T
Sellers are required to give the buyer and the buyer's representatives reasonable access to the property as needed to comply with the terms in the contract.
T
The Financing section of the Residential Contract of Purchase states that the buyer is required to provide written notice to the seller and seller's agent if they are not able to obtain financing.
T
The Residential Contract of Purchase requires that the seller pay for a wood infestation inspection and report.
T
The defaulting party is responsible for paying all damages and expenses that the non-defaulting party, the listing brokerage, and the selling brokerage incurred in connection with the transaction or the contract.
T
The purchase agreement is binding on the parties, their heirs, personal representatives, successors, and assigns.
T
The risk of damage or loss to the property remains with the seller until the contract has been executed and the buyer has received the deed of conveyance at settlement.
T
The seller and buyer each pay a portion of taxes, assessments, interest, rent escrow deposits, and other ownership fees, which are prorated as of the settlement date.
T
The seller is responsible for maintaining the property in the same condition as it is on the contract date, home inspection date, or other date as specified by the buyer.
T
The seller must convey the property to the buyer with a good and marketable title.
T
The seller must pay for any required extermination or repairs to damages identified in the wood infestation inspection report up to $1,000.
T
There is no one standard form used for real estate sales in Virginia.
T
listing company represents the seller.
T
selling company may or may not represent the buyer.
TRUE
Which section of the Residential Contract of Purchase explains the process by which the brokers in the sales transaction will be compensated? The Settlement; Possession section The Brokerage Fee; Settlement Statements section The Expenses; Prorations; Rollback Taxes section The Loans Fee section
The Brokerage Fee; Settlement Statements section
Alexandra is helping her clients, the Kents, fill out the purchase price section of the sales contract. They are ready to enter the purchase price. What amount will they put in this space? The seller's listing price The Kents' offer The difference between the deposit and loan amounts The seller's listing price minus the deposit and loan amounts
The Kents' offer
Which section of the Residential Contract of Purchase is required by Virginia law to be included in any contract for the purchase of real estate that has between one and four residential dwelling units? The Notice to Purchaser Regarding Settlement Agent and Settlement Services section The Notice to Purchaser(s) section The Seller's and Purchaser's Options section The Home Owner's Inspection section
The Notice to Purchaser Regarding Settlement Agent and Settlement Services section
Peggy and her husband, Arnold, have entered into a sales contract with seller Edmond Franks. They are 20 days from closing. Who carries the risk if something should happen to the property before settlement? The buyers (Peggy and her husband) The seller (Edmond Franks) The buyer and the seller split the cost of the repairs. No one. The contract is automatically terminated.
The seller (Edmond Franks)
Lola and Rick's offer on a property is contingent upon financing. What happens if the financing falls through? They'll have to terminate the contract. They'll have to talk the seller into dropping the price of the property. They'll have to put the contract on temporary hold while they find other means of financing. They'll have to obtain the seller's agreement to accept monthly payments.
They'll have to terminate the contract.
The primary type of financing that a buyer is using to purchase a property is referred to as the ______ in the Purchase Price section of the Residential Contract of Purchase. Primary loan source Loan 1 Third party first trust Buyer held trust
Third party first trust
Lead-Based Paint Inspection section of the Residential Contract of Purchase
gives notice to buyers who are purchasing a home built before 1978 about the dangers of lead-based paint.
amendment
is a change to an existing document.
addendum
is an addition; it may be added without changing the original contract.
sales contract
is the buyer's documented offer to the seller to purchase the property identified in the agreement. Other names for it are : the offer to purchase, sales agreement, contract of purchase and sale, purchase agreement, and earnest money agreement.
performance of contract
means meeting the agreed-upon terms. When both parties fully perform the contract, the contract has been executed, and the parties are now discharged from their duties
Specific performance
means that a party must do exactly what it agreed to do. So if a seller agreed to sell a property and then later reneged, the buyer can sue for specific performance, meaning the seller must sell the property as agreed. No other property or monetary damages equal specific performance—only meeting the terms of the original contract qualifies.
partial performance
means that only a portion of what a party has agreed to has been completed. Sometimes it is enough for the other party; sometimes it results in a termination.
Impossibility of performance
occurs when the property is destroyed or made the subject of eminent domain. The parties cannot legally or practically do what they've agreed to do, so they are released from their obligations under the contract.
What are the six remedies for a breached contract?
Accept partial performance, unilateral rescission, Sue for monetary damages Sue for specific performance Accept liquidated damages. mutual rescission
A buyer requests that the warranty for the home's HVAC system be included as part of the agreement of sale. This is called a(n) ______. Contingency Additional provision Standard provision Extraneous clause
Additional provision
The Notice to Purchaser(s) of the Residential Contract of Purchase
serves notice to buyers that they are responsible for doing their own research with regard to the presence of sex offenders in the area.
statute of limitations
takes into account that sometimes buyers of property may not discover a defect until several years after they have taken ownership. Even if the seller failed to disclose a known defect, if the buyer does not initiate a court action within five years of the date of the written contract, the buyer loses the right to sue.
The seller's expenses include but are not limited to:
the preparation of the deed, the recordation fees for grantors, and their legal fees.
The buyer's expenses include but are not limited to
the title exam, survey, recording, and their legal fees.
How many days from the date of contract ratification do buyers have to conduct a risk assessment or inspection of the property for lead-based paint hazards (should they opt to do so)? 5 7 10 15
10 Buyers have 10 days from the date of contract ratification to conduct a risk assessment or inspection of the property for lead-based paint hazards.
How long are licensees and brokers required to keep copies of the real estate forms on file?
3 years
The seller has accepted Ray's purchase offer and they have both signed the contract. How many business days does Ray have to apply for financing? 5 10 15 20
5 Ray must apply for financing within five business days of both parties having signed the contract.
If there are defects to a title, the seller must pay to have the issues resolved and must do so within ______________ of the settlement date. 15 days 30 days 45 days 60 days
60 days
The Title section of the Residential Contract of Purchase stipulates that the seller is conveying the property to the buyer with ________________. All of the keys to the property A good and marketable title A refund of the earnest money deposit Minimal defects
A good and marketable title
What is non-binding mediation? An agreement between the seller and the buyer not to dispute the terms of the contract An approach to resolving a dispute in such a way that both parties are satisfied with the settlement An approach to dispute resolution that does not tie the hands of either party with regard to selecting an attorney to represent them in court Mediation that allows the parties to decide if they want to resolve their dispute through arbitration or litigation
An approach to resolving a dispute in such a way that both parties are satisfied with the settlement Non-binding mediation is an approach to resolving a dispute in such a way that both parties are satisfied with the settlement.
When is the balance of the down payment due? The day the earnest money deposit is submitted Within 30 days after closing The day following contract ratification At settlement
At settlement
Mabel and Marc want to make their purchase of the seller's property contingent upon a home inspection. To do this, which of the following actions must they take? Attach a home inspection addendum to the contract. Give verbal notice to the seller and the seller's agent. Have their agent perform the inspection. Submit a bill to the seller to pay for the cost of the inspection.
Attach a home inspection addendum to the contract.
A buyer pays the balance of the down payment in the form of cash, a certified check, a cashier's check, or ______. Personal check Bank-wired funds A promissory note Bank letter of credit
Bank-wired funds The balance of the down payment can be paid in the form of cash, a certified check, a cashier's check, or bank-wired funds.
Which of the following statements about the lead-based paint inspection in Virginia is true? The inspection is required for homes built after 1978. Buyers are required by law to have the inspection performed if they are purchasing a home built before 1978. If the seller discloses knowledge of lead-based paint in the home, the buyer is required to have an inspection performed. Buyers can waive their right to an inspection.
Buyers can waive their right to an inspection.
In what form may a buyer pay the balance of the down payment? Personal check or cash IOU or bank letter of credit Promissory note or cashier's check Cash, certified check, cashier's check, or bank-wired funds
Cash, certified check, cashier's check, or bank-wired funds The balance of the down payment can be paid in cash or by certified check, cashier's check, or bank-wired funds.
Colin and his wife, Catlin, are 12 days from closing on their new home when they receive word from their agent that a portion of the property has been damaged by fire. Colin and Catlin have a choice to make. They can either terminate the contract and get their deposit refunded, or they can ______. Demand that the seller pay for a contractor to repair the damage Require the seller to pay more of the closing costs at settlement Continue with the contract Deduct the cost of repairing the damage from their purchase offer
Continue with the contract Colin and Catlin's second option is to continue with the contract, in which case the seller will assign the couple all of their rights under any insurance policy that they have on the property.
Per the Well and Septic section of the Residential Contract of Purchase, what can the buyer do if the seller fails to remedy or repair defects to a well or septic system? Contact the EPA and report the seller. Either terminate the contract or waive the defect. Require the seller to take a much lower offer. Sue the seller for damages.
Either terminate the contract or waive the defect.
True or False: the seller has the right to choose the settlement agent.
FALSE! The BUYER has the right to choose the settlement agent.
Seller Bonny doesn't believe that her buyers are going to be able to settle in a timely manner. She hasn't received any information from them about their ability to have secured a loan. What can she do? Require the buyers to assign the contract to someone else. Demand a higher price for the property. Give the buyers a written notice of default. Complain to the buyers' agent that his clients are not adhering to the terms of the contract.
Give the buyers a written notice of default.
Gerald is selling a property that is not on public water and sewer systems. Per the purchase agreement he has signed with the buyers, he must provide a certificate proving that water from the well is safe, and that the sewage disposal system works. When must the certificate be dated? Not more than 15 days prior to settlement Not more than 20 days prior to settlement Not more than 25 days prior to settlement Not more than 30 days prior to settlement
Not more than 30 days prior to settlement
In order to have the funds to settle on her new home, Wynona has to first close on the home she is selling. Given her situation, what is Wynona required to do? Nothing. It's nobody's business but her own. Pay a small penalty fee to the seller Ask the seller to keep the settlement date open until she has closed on the home she is selling. Provide a written disclosure of the contingency and obtain the seller's agreement
Provide a written disclosure of the contingency and obtain the seller's agreement
In which section of the Residential Contract of Purchase do buyers indicate the price they are offering for the property and how they plan to finance the purchase? Parties section Deposit section Real Property section Purchase Price section
Purchase Price section
unilateral rescission
Rescind the contract at the sole discretion of the wronged party; the party who performed the breach may not terminate.
Which section of the Residential Contract of Purchase requires the seller of a property within a development that is subject to the Virginia Property Owners' Association Act to give the buyer a copy of the property owners' association packet? The Notice to Purchaser(s) section The Property Owners' Association Disclosure section The Virginia Condominium Act section The Seller's and Purchaser's Options section
The Property Owners' Association Disclosure section
In which section of the Residential Contract of Purchase does the buyer specify the settlement date? The Settlement; Possession section The Brokerage Fee; Settlement Statements section The Expenses; Prorations; Rollback Taxes section The Loans Fee section
The Settlement; Possession section
Which section of the Residential Contract of Purchase requires the seller of a condo that is subject to the Virginia Condominium Act to give the buyer a copy of the resale certificate from the unit owners' association? The Notice to Purchaser(s) section The Property Owners' Association Disclosure section The Virginia Condominium Act section The Seller's and Purchaser's Options section
The Virginia Condominium Act section
Contingencies normally include the responsible party's name, the deadline for the contingency removal, and ______. The date the contingency was added The reason the contingency was added The actions required for removal Three reasons why the contingency is required
The actions required for removal
Who determines the amount of earnest money the buyer should offer? The seller The buyer The seller's agent The buyer's agent
The buyer
Which of the following statements about the professional home inspection is true? It does not have to be performed by a qualified inspector. The professional home inspection is mandatory. The buyer must pay for the inspection. The amount of the home inspection cannot exceed $1,000.
The buyer must pay for the inspection.
If the buyer is putting earnest money down, which of the following statements is true? The buyer must specify the exact amount in the Residential Contract of Purchase. The buyer can require the seller to subtract that amount from the asking price. The buyer has to pay for an escrow account to be set up and managed. The earnest money must be in the form of a certified check and personally delivered to the seller.
The buyer must specify the exact amount in the Residential Contract of Purchase.
Who is responsible for paying the following expenses: title exam, survey, recording, and legal fees? The seller only The buyer only The seller or the buyer based on the terms of the agreement The seller and buyer split these expenses
The buyer only
Which of the following statements is true if the purchase agreement does not cover the terms needed by the parties? The licensee is required to terminate the contract on the client's behalf. The licensee is at liberty to craft a new amendment using whatever language is needed to capture the missing terms. The licensee can add addenda to the contract if they use standard addenda and standard language. A licensee is not allowed to add addenda to a contract under any circumstances.
The licensee can add addenda to the contract if they use standard addenda and standard language.
Rex is in the process of purchasing a home. He's glad that the purchase agreement required the seller to have a wood infestation inspection done, because the report revealed significant damage to the home. Who is responsible for paying to have the damage repaired? The buyer The seller The buyer and the seller split the cost of the repairs. No one. The cost of any repairs was included in the inspection.
The seller
Who is responsible for paying the following expenses: preparation of the deed, the recordation fees for grantors, and legal fees? The seller only The buyer only The seller or the buyer based on the terms of the agreement The seller and buyer split these expenses
The seller or the buyer based on the terms of the agreement The seller's expenses include but are not limited to the preparation of the deed, the recordation fees for grantors, and their legal fees. However, all fees are negotiable, and the buyer will generally pay their own legal fees.
Who is responsible for disbursing the brokerage fees to the listing and selling companies based on the settlement statements they provide prior to settlement? The seller The buyer An attorney The settlement agent
The settlement agent
Accept liquidated damages
These are often the seller's only remedy in a contract for purchase, and usually mean the earnest money deposited.
Colin and Jenny were not able to obtain financing by the date specified in the sales contract. What are they required to do? They are required to set up a meeting with the seller and seller's agent and give them the news in person. They are required to notify the seller and the seller's agent in writing. They will have to ask the seller for a 30-day extension while they find other means of financing. They will have to forfeit half of their deposit.
They are required to notify the seller and the seller's agent in writing.
The Craigs are in the process of buying the Woodlands' home. As part of the purchase agreement, the Craigs put a remediation limit of $1,000 in the event the Woodlands had to pay to fix any title or property issues. There have been numerous issues and the estimated cost of addressing all the issues will exceed the remediation limit. The Woodlands have agreed to pay up to $1,000 but no more. Which of the following options do the Craigs have? They can require the Woodlands to reduce the purchase price of the home by the difference between the remediation limit and the actual costs to fix the issues. They can sue the Woodlands for breach of contract. They can either accept the property in its present condition or terminate the agreement. They can require the Woodlands to pay them back for the cost of any inspections.
They can either accept the property in its present condition or terminate the agreement.
Purchase Price section of the Residential Contract of Purchase
contains the price the buyer is offering for the property and how the buyer plans to finance the purchase.
Sue for specific performance
This means the party must do exactly what had been promised. If a person sold their property but then later decided to hold out for a higher offer and so refused to provide title, the buyer could sue the seller for specific performance, to try to get the seller to provide title as agreed.
Sue for monetary damages.
This would involve a court case and may or may not include legal fees and court costs. This remedy could be used by a seller for a buyer who defaulted when the seller wishes to pursue the buyer for the cost of removing the property from the market, loss of the sale, moving expenses, etc.
What phrase means the parties will not unduly delay the process? Haste makes waste. Time is of the essence. There's no time like the present. Get the lead out
Time is of the essence.
What's the purpose of a sales contract? To verify that the seller has the legal right to sell the property To notify the public that an offer has been made on a specific property To serve as an agreement between the seller and the licensee that the seller intends to sell the house To document the buyer's offer to the seller to purchase the property identified in the agreement
To document the buyer's offer to the seller to purchase the property identified in the agreement
What's the purpose of the earnest money deposit? To retain the services of a licensee To provide the seller with funds to make required repairs to the property before selling it To show the seller that the buyer is serious and intends to go through with the purchase To encourage the seller to come down in the asking price for the property
To show the seller that the buyer is serious and intends to go through with the purchase The earnest money deposit is the buyer's indication to the seller that the offer is serious and the buyer intends to go through with the purchase.
The settlement agent
disburses the brokerage fee in accordance with the settlement statements provided by the listing and selling companies.
Agents may fill in blanks on the purchase agreement, but should not alter it without attorney review.
True
Although buyers aren't required to put down a deposit, the deposit is a reflection of how serious the buyer is about purchasing the property.
True
If the buyer is putting earnest money down, the buyer must specify the exact amount in the Residential Contract of Purchase and pay with cash, a check, bank letter of credit, or promissory note.
True
It is fine for licensees to add addenda to a contract if the contract does not cover the terms needed by the parties; however, licensees should use standard addenda and standard language.
True
Licensees should cover the options for terms and contingencies with the buyer while the purchase agreement is completed, but they should not offer legal advice.
True
Licensees should not determine the amount of earnest money a buyer should place as a deposit, or that a seller should accept. They can discuss what is ordinary practice, but they should allow the buyer to determine the amount.
True
The Deposit section of the Residential Contract of Purchase indicates the amount of earnest money the buyer is putting down.
True
True or False: The buyer has 15 days to provide written verification of their ability to pay the balance of the purchase price at settlement
True
When might an additional provision be needed in an agreement of sale? When the home inspector discovers defects that require repair and the seller agrees to pay for the repairs When the seller provides disclosures about the property When the buyer requests terms of sale that aren't part of the standard contract When the buyer can't obtain financing within a specific period of time
When the buyer requests terms of sale that aren't part of the standard contract
If you're working with a seller client who's agreed to pay for the cost of a home warranty during negotiations, do you need to add an additional provision to the sales contract? Yes, unless it's already included in the contract. No, because purchase of a home warranty is always part of the sales contract. Yes, because home warranties are never included in the sales contract. No, because the cost of a home warranty is irrelevant to the sale.
Yes, unless it's already included in the contract.
What is a purchase agreement?
a document that buyers and their agents use to prepare the purchase offer to the sellers
The buyer is responsible for paying:
all points, loan origination fees, charges, and other costs imposed by their lender.
Contingencies
are conditions that must be met before the agreement of sale is complete and enforceable. They usually include the actions necessary to remove the condition, a deadline for its removal, and the party responsible for the accompanying actions or costs involved.