Unit 5 - Contracts Used in Real Estate (Questions)

In which of the following does the seller retain legal title? A) Land sales contract B) Installment contract C) All of these D) Contract for deed

All of these

Which of the following statements is TRUE? A) Compensation determines an agency relationship. B) Compensation does not determine an agency relationship. C) Compensation only determines an agency relationship with a seller. D) Compensation only determines an agency relationship with a buyer.

Compensation does not determine an agency relationship.

Which of the following is needed for the listing agreement and for other brokers through the MLS? A) Details about any outstanding loans, including information about each lender, type of loan, the loan number, the loan balance, the interest rate, and the monthly payment, which includes their breakdown of PITI, any prepaid penalties, and whether the loan can be assumed by a buyer (and under what circumstances) B) Current (or most recent year's) property taxes C) Zoning classification of the property D) The possibility of seller financing

Current (or most recent year's) property taxes

Which type of leasehold estate lasts for a definite period of time and then ends? A) Estate at sufferance B) Periodic estate C) Estate at will D) Estate for years

Estate for years

one broker; broker is paid regardless of who sells the property

Exclusive-Right-To-Sell Listing

One broker; broker is paid only if the broker is the procuring cause

Exclusive-agency listing

A buyer transfers his equitable interests in a real estate purchase contract to a third party. This is called novation. True False

False

A lease is discharged when the underlying property is conveyed to a buyer. True False

False

A registration agreement is a listing agreement.

False

In an exclusive-right-to-sell listing, one broker is authorized to act as the exclusive agent of the principal, but the seller retains the right to sell the property without the obligation to pay the broker. True False

False

The statute of frauds limits the time during which parties to a contract may bring legal suit to enforce their rights in the event of a breach of contract. True False

False

To be legally enforceable, a contract does not need to be supported by legal consideration as long as the contract was entered into by legally competent parties for a legal purpose. True False

False

Under the statute of limitations, a cause of action accrues when the lawsuit is filed. True False

False

Tenant pays fixed rent; landlord pays taxes, insurance, repairs, utilities, and maintenance connected with the property

Gross Lease

landowner leases unimproved land to a tenant who agrees to erect a building on the land

Ground Lease

tenant pays all or most of the property charges in addition to the rent

Net Lease

Illegal in most states because it can create a conflict of interest for the broker

Net Listing

multiple brokers; selling broker is paid, and the seller retains right to sell without obligation

Open Listing

rent is based on a fixed fee plus a portion of the income received by the tenant doing business on the leased property

Percentage Lease

Which of the five rights to real property does the landlord sell to the tenant in a lease? A) Disposition B) Control C) All of these D) Possession

Possession

The lease between a tenant and the landlord when the tenant subleases to a new tenant

Sandwich Lease

Which of the following is TRUE with a contract for deed? A) The seller retains possession until the terms of the contract have been satisfied. B) The seller must execute and deliver the deed to make the agreement valid. C) The buyer generally could get a new mortgage loan and pay off the contract. D) Because Texas is a lien theory state, the seller must transfer the deed upon closing.

The buyer generally could get a new mortgage loan and pay off the contract.

Who pays the buyer's agent in a buyer agency contract? A) The buyer B) The title company C) The buyer or seller D) The seller

The buyer or seller

A person with a disability has signed a lease and wants to remodel the space to make it more accessible. Regarding this situation, which of the following statements is FALSE? A) The landlord does not have to pay for the tenant's modifications to the property. B) The tenant must be permitted to make reasonable modifications to the property at her own expense. C) The landlord has the right to refuse any modifications if this is the landlord's standard policy. D) If the modifications will interfere with a future tenant's use, the landlord may require that the premises be restored to the original condition at the end of the lease term.

The landlord has the right to refuse any modifications if this is the landlord's standard policy.

A person sees a property that would make a good investment. She makes a written offer to the owner and the owner accepts. She then talks to her friend and offers the property to him. He accepts and pays her $3,000 for her interest in the property. Which of the following is TRUE? A) The transaction is an example of an assignment. B) The buyer is practicing law. C) The seller could sue for the $3,000 in damages. D) The second buyer would not be able to get a title policy on the property.

The transaction is an example of an assignment.

A registration agreement can be used in an FSBO transaction to register a buyer.

True

A registration agreement is used when an owner agrees to pay a fee to the license holder, should the seller end up selling the property to the license holder's buyer.

True

A registration agreement should not be used as a buyer representation agreement.

True

Substitution of a new contract for an existing contract is called novation. True False

True

The statute of frauds in most states requires lease agreements for more than one year to be in writing to be enforceable. True False

True

The statute of limitations for breach of contract in Texas is four years. True False

True

allows for changes in the rental charges during the lease period

Variable Lease

Which of the following is TRUE regarding an estate for years? A) All of these are true. B) When the estate expires, the lessee is required to vacate. C) When the estate expires, the lessee is required to give notice to the landlord. D) If no notice is given, the lease renews for another 30 days.

When the estate expires, the lessee is required to vacate.

A situation in which a seller is retaining title to the property until full payment is made by the buyer is A) an owelty contract. B) a For Sale by Owner. C) a land contract. D) a contract to own.

a land contract.

An employment contract that establishes the rights and obligations of the broker as agent and the seller as principal is A) an exclusive-right-to-list agreement. B) a marketing agreement. C) a listing agreement. D) a buyer's representation agreement.

a listing agreement.

By executing a listing or buyer agency agreement with a client, a real estate broker becomes A) a procuring cause. B) obligated to open a special trust account. C) an agent of the client. D) responsible for sharing commissions.

an agent of the client.

A builder only has a few properties available in a development. He feels that it is no longer necessary to have his onsite sales agent market these properties and decides to list the properties with a local brokerage firm. He wants to reward a particular firm for their past sales of his homes but wants to allow all of the local firms to market these properties. The type of listing that will accomplish this is A) a net listing. B) an exclusive-agency listing. C) an exclusive-right-to-sell listing. D) an open listing.

an open listing.

A retail developer wants to build a strip center in town and has found the best site available for it. The developer negotiates a contract with the landowner but needs a favorable zoning change for the property. The developer decides to have the current owners get the zoning change and executes a contract that allows the developer the right to purchase the property for a set amount and for a fixed period of time that is only enforceable if the landowner is successful in getting the needed zoning changes. This is A) a subsequent contract. B) a commercial land contract. C) a subject-to contract. D) an option contract.

an option contract.

A tenant is interested in leasing at least 85,000 square feet of space over a 10-year lease. A landlord has enough space in a high rise office building that he feels will accommodate their needs. However, the tenant will need extensive tenant finish-out, including some special needs which require a special building permit. As this will take some time and investment from both parties, the parties agree to a contract that will allow the tenant to lease the property at a set rate for certain period of time with the right to terminate the contract if the lessee cannot get an acceptable building permit. This is A) an option contract. B) a commercial feasibility contract. C) an option to purchase. D) a novation contract.

an option contract.

A buyer signs a contract under which he is given the right to purchase a property for $30,000 any time in the next three months. The buyer pays the current owner $500 at the time the contract is signed. Which of the following BEST describes this agreement? It is A) a contingency. B) a successful sale. C) an option. D) an installment.

an option.

The monthly rental payment in the lease contract is BEST defined as A) consideration for the use of the property. B) contractual third party consideration. C) contractually owed by the lessor. D) monies paid by the lessor to the lessee.

consideration for the use of the property.

A property owner is interested in providing financing on a residential property for a buyer. A contract is written where the property owner will retain title to the property until the buyer has paid the owner in full. Once paid, the owner will deliver title to the buyers. This type of sales contract is called a A) lease purchase contract. B) sales contract. C) lease contract. D) contract for deed.

contract for deed.

The right the lessee has to occupy the premises without interference from the owner or anyone else is the A) notice to quit legislation. B) mandatory security provision of state law. C) police power. D) covenant of quiet enjoyment.

covenant of quiet enjoyment.

All of the following are valid reasons for terminating a listing agreement EXCEPT A) destruction of the subject property. B) agreement of the parties. C) sale of the property. D) death of the sales agent.

death of the sales agent.

A tenant's estate for years will expire in two weeks. The tenant plans to move to a larger apartment across town when the current tenancy expires. In order to terminate this agreement, the tenant must A) give the landlord immediate notice or the lease will automatically renew. B) do nothing because the agreement will terminate automatically at the end of the current term. C) sign a lease for the new apartment, which will automatically terminate the existing lease. D) give the landlord one week's prior notice or the lease will automatically renew.

do nothing because the agreement will terminate automatically at the end of the current term.

A person has a one-year leasehold interest in a house. The interest automatically renews itself at the end of each year. The person's interest is called an estate A) at will. B) for years. C) from period to period. D) at sufferance.

from period to period.

A tenant pays a fixed rent and the landlord pays all taxes, insurance, repairs, utilities, and maintenance connected with the property. This type of lease is called a A) fixed lease. B) percentage lease. C) net lease. D) gross lease.

gross lease.

When preprinted forms promulgated or approved by TREC do not sufficiently cover special provisions in a transaction, the license holder should A) provide an explanation in the special provisions section of the sales contract. B) have the parties consult their own attorneys to draft language acceptable to both. C) have his supervising broker write a new contract to cover the special provisions. D) have his attorney to draft some language as a codicil to the sales contract.

have the parties consult their own attorneys to draft language acceptable to both.

A listing may terminate for all of the following reasons EXCEPT A) if the sales agent dies or becomes incapacitated. B) when the agreement's purpose is fulfilled, such as when a ready, willing, and able buyer has been found. C) if the property is destroyed or its use is changed by some force outside the owner's control, such as a zoning change or condemnation by eminent domain. D) when the agreement's term expires.

if the sales agent dies or becomes incapacitated.

A buyer who has a signed buyer agency agreement with one agent but purchases a property through another agent is A) in rescission. B) in breach of the buyer agency agreement. C) not in breach if the buyer tells his agent and his agent says it's alright. D) guilty of partial performance.

in breach of the buyer agency agreement.

A seller who fails to deliver title to the buyer is A) in breach of the sales contract. B) in default, according to the Texas Property Management Association bylaws. C) not in breach as long as the payment is made within 60 days. D) subject to having a rental lien placed against the apartment.

in breach of the sales contract.

A man is interested in purchasing a home but has credit issues that prevent him from getting a mortgage. A seller decides to provide owner's financing to allow the buyers to purchase the home now while the man cleans up his credit. Under the terms in the contract, the seller will deliver title to the man once the contract has been paid in full. This is a A) voidable contract. B) lease purchase contract. C) mortgage contract. D) land contract.

land contract.

When all of the parties to a contract agree to terminate, it is said to be terminated by A) novation. B) severalty. C) mutual agreement. D) codicil.

mutual agreement.

A lease where the rent is based on a minimum fixed rental fee plus a percentage of the gross income received by the tenant doing business on the leased property is called a A) gross lease. B) percentage lease. C) net lease. D) fixed lease.

percentage lease.

A clause in the lease that allows a tenant the right to purchase the leased property before the owner accepts an offer from another party is the A) option to purchase. B) right of first refusal. C) right of acquisition. D) option to terminate and purchase.

right of first refusal.

A restaurant owner has selected a new site to open a restaurant. He has signed a long-term ground lease and contracted with a builder to build the restaurant. The construction of the site is complete and has the restaurant for business. The restaurant owner sells the restaurant to an investor and leases back the restaurant. This type of lease is a A) sale-and-leaseback. B) sandwich lease. C) lease purchase agreement. D) ground lease.

sale-and-leaseback.

Listing agreements address all of the following EXCEPT A) nondiscrimination (equal opportunity) wording. B) signatures of all parties. C) the actual day of closing. D) commissions.

the actual day of closing.

Some leases allow for increases in the rental charges during the lease periods. This type of lease is called a A) net lease. B) variable lease. C) percentage lease. D) fixed indexed lease.

variable lease.