CA Realty- Contracts

Of the following, which answer describes why it is critically important to disclose who represents whom in a real estate transaction?

because of the legal effect of the disclosure because of the doctrine of imputed notice because of the ethical and professional responsibility to do so

The broker works on behalf of their principal. All of the following defines the relationship between the two parties, except

A broker does not have an attorney in fact (power of attorney) relationship as part of their normal duties with their principal.

Which of the following does not require agency disclosure

A lease for 10 months The law of agency requires agency disclosure for lease terms greater than one year

Compliance with agency relationship law, which is enacted and part of the civil code, is required in which of the following transactions

A lease for a period lasting for more than one year Civil code requires real estate licensees to disclose the agency relationship to all parties involved in a transaction. In a lease lasting more than one year, an agent may be involved thus creating an agency relationship

An agency cannot be created by

A subordination agreement prioritizes one debt over another, such as in a first and second mortgage. An agency relationship cannot be created on the basis of lies, deceit, or trickery

How can a minor or incompetent person acquire property without requiring court approval

Acquire real property by way of a gift or an inheritance A minor may receive title to real property without court intervention. Sometimes a power of attorney or guardian is needed, but a court would determine that.

According to the Civil Code, which of the following is a fiduciary duty of the agent working for a buyer

Acting with the utmost care, integrity, and honesty when working with buyers The law of agency states the agent must be honest and loyal to their principal

The real estate disclosure law, which came into effect January 1, 1988, refers to the:

Agency Relationship Disclosure Licensees must disclose to all parties involved who they work for, whether it be for the buyer, the seller, or both

Agency can be terminated in many ways. Of the following, which is not a way to terminate agency

Agency relationships can be terminated in many ways, such as by death and fulfillment of the agreement. A notice to perform is not a way to terminate an agency.

A licensee who is working with their client to sell their real property to a third party is said to be operating under the law of

An agent representing a principal in a transaction for real property is working under the law of agency

Per the statute of frauds, which of the following must be in writing

An agreement by a purchaser of real property to pay a debt secured by a mortgage or deed of trust on the property purchased An agreement for real property that is paid for by a mortgage must be in writing

The very best way to create an agency relationship is

An agreement in writing is the very best way to create an agency relationship between an agent and a principal.

A manager for real property may be compensated in all the following ways, except

It is recommended that property managers not receive discounts or be paid commission from contracts, purchases or other expenditures. The only time this is acceptable is when the discount or the commission paid is fully disclosed to the property owner and is agreed upon in writing

The law of agency states that an agent has imputed authority of their principal when dealing with third parties. What does that imputed power allow?

It usually binds the principal as long as the authority is granted to the agent Imputed authority implies the agent's apparent authority. If the third party has reasonable expectation that the agent is acting within their authority, the agent's principal would be bound by the actions of the agent.

When is a real estate agent obligated by law and the state regulations to communicate any offers to a principal

Only if it's in writing Real estate licensees are obligated by law and state regulations to communicate all written offers to the principal. Verbal offers are not offers.

Which of the following is the best way to describe a broker's duty in keeping their principal informed and updated on the transaction

Per the definition of fiduciary duty, the broker must provide loyalty and the utmost care to their principal and must always keep them informed throughout the transaction

The law of agency states that real estate agents have legal responsibilities to their principals. Which of the following does not apply

Research what the reserves and expected expenses may be for the maintenance of a business

Seller Johnson listed his home for sale with agent Mike. The listing stated "cash only offers to be considered and possibly accepted". Agent Mike brought a buyer who was qualified with a VA loan. Seller Johnson rejected the offer from agent Mike. What is agent Mike entitled to in regards to commission?

none of the commission Since the offer was not the exact terms in the listing contract, the agent is not entitled to a commission

The fiduciary obligation to protect a client's confidential information should continue:

after the listing agreement term The information shared is of a confidential nature and the fiduciary duty continues even after the close of escrow

To be enforceable, a contract for real property must

be in writing

If a seller refuses to disclose that his property is in a flood zone on the transfer disclosure statement, what should the licensee do to protect themself

Decline the listing It is illegal not to disclose the material fact that the property is in a flood zone. The agent should not take the listing and the agent should encourage the seller to be truthful with all disclosures in regard t

Investor Joe owns a duplex priced at $100,000 and has a mortgage debt that is outstanding at $30,000. This property was sold using a 1031 exchange for a four-plex priced at $170,000 with a first mortgage balance of $100,000. For the exchange to be completed, on what profit amount will the owner have to pay property gain taxes on the profit of the first property?

0 To take advantage of the 1031 exchange rule, a seller must roll over the property gains into the new property to avoid any property gain taxes. In this scenario, the investor did just that.

When a false transfer disclosure statement is given to a buyer that omits facts about the property , how long does the buyer have to bring a lawsuit against the seller and the broker

2 years A buyer has two years to bring a lawsuit against the seller and the broker for a false disclosure statement that omits material facts

Two months ago a seller had accepted an offer from a buyer to purchase their real property. The contract was in writing and signed by both parties. Later, the seller refused to complete the transaction because they felt their property would increase in value in the near future and wanted to maximize their profit from the sale of the real property. From the information we know, how long would the buyer have to pursue legal action against the seller due to the breach of the written contract

4 years The Statute of Limitations for a breach of contract claim is 4 years

Seller Julie listed her vacation home with Agent Ann. When the sale is executed, the commission will be 7% if Agent Ann is able to find a buyer who is ready, willing, and able to purchase the property at the list price, or more. Agent Ann will utilize her best efforts to find a buyer for the listing. What kind of contract must be in place for any of this to happen

A bilateral executory contract The goal of a listing agent is to have the seller and a buyer agree to a bilateral executory agreement, with promises made from both the seller (transfers ownership) and the buyer (pays an agreed amount). It's executory because it is yet to be performed.

A real estate licensee may represent both sides of a real estate transaction, And

A licensee may represent both sides in a transaction as long as the proper disclosure is completed which makes both principals aware and consent is given. A commission may be received from the buyer and the seller

In order for a contract to be legal, which of the following would be considered consideration

A promise is sufficient consideration for a contract.

Seller Charles put his property up for sale with agent Samantha for $100,000. The property sold very quickly and seller Charles was impressed how quickly everything occurred. Agent Samantha showed the property to buyer Pip and made buyer Pip aware that the seller was having financial difficulties and with that information, buyer Pip submitted an offer for $90,000 which seller Charles accepted. Which of the following is true about agent Samantha's actions

Agent Samantha violated her fiduciary duty to the seller and acted in excess of her authority An agent has the duty to always put their clients best interest above all.

When showing property to potential buyers, what must the listing agent disclose to the third party (buyer)?

All known material facts about the real property The agent must always disclose all material facts about the property, however the principal's personal information should never be disclosed

Of the following, which would create a dual agency situation

An agent is representing both the buyer and seller in the same transaction and all parties are aware and agree Dual agency occurs when the same agent represents both parties, buyer and seller, in the same transaction.

Tenant Greg verbally agrees to mow the lawn for Owner Amanda. Week after week, Owner Amanda asks Tenant Greg to mow the lawn, yet nothing is done. After repeated attempts from Owner Amanda to have Tenant Greg mow the lawn, Owner Amanda writes up a contract and forces Tenant Greg to sign the contract stating that Owner Amanda will evict Tenant Greg if he does not comply with this action. This stipulation will make the contract:

Any contract that is signed under threat is voidable.

Otis bought the Browns' house through the Browns' listing agent Jacob. In October there was a heavy rainstorm and the roof leaked in several different spots. Otis took everyone involved in the real estate sale to court. During the trial it was announced that the seller Browns told their agent, Jacob, about the leaky roof and that its' condition was in disrepair. Agent Jacob withheld this information from buyer Otis because Otis "did not ask about the roof". What is the most likely outcome of the trial

Buyer Otis recovered damages from seller Brown who then recovered damages from agent Jacob The poor condition of the roof is a material fact and whether or not the buyer asked about it, it must be disclosed. The seller told the agent about the roof. The agent should have disclosed that material fact to the buyer. The buyer, Otis, would get damages from the sellers, who then would get damages from agent Jacob.

If a seller declines to fill in their section of the Real Estate Transfer Disclosure Statement, the agent should:

By law, the seller is required to fill in and complete their portion of the transfer disclosure statement. The seller is expected to comply with the law and fill in their portion as the seller of the property, however if they decide not to complete the form, the agent should fill in their information then submit it to the buyer.

If a broker misrepresents his principal's property, what could possibly happen to the principal

Cancellation of the sale by the prospective buyer The seller may owe damages to the buyer for broker misrepresenting facts Damages may be awarded to the buyer The principal is ultimately responsible for their agent's actions regarding the owner's property

All of the following are required for a contract to be valid, except

Certain agreements are only enforceable if they are in writing. Having it in writing is not an essential part of every contract. (It is recommend that you ALWAYS get everything in writing and signed by all parties.)

A licensee receives an offer for a property they have listed. It's in writing, however it's below the asking price and they know the seller will never accept it. Of the following, which would not be acceptable for the licensee to do

Change the terms to what the licensee thinks the seller would accept You can never change the terms of what the buyer wrote on the purchase agreement.

Of the following, none of the individuals may enter into a valid real estate contract to purchase property, except

Emancipated minors have the same rights as adults when it comes to purchasing real property

Seller Andrew sold a home to Buyer Bill. Buyer Bill was deemed to be legally mentally incompetent. In this type of situation, the contract would be:

If either person is legally incompetent, then the contract is void.

When does an agent inform others that they are working on behalf of a buyer

Immediately Real estate licensees are obligated by law and state regulations to communicate all written offers to the principal. Verbal offers are not offers

Of the following, which would not be legal for a licensee to do

Not tell prospective buyers that the foundation has documented structural issues Real estate licensees must always disclose material facts about a property. A defect in the foundation of a property is a material fact

The agent must always disclose all material facts about the property, however the principal's personal information should never be disclosed

The agent has been told by another broker that a higher priced offer is coming within the hour The knowledge that a higher price offer is on its way is a material fact and must be disclosed to the principal as it may influence their decision

Of the following, which cannot create an agency relationship?

The agent offering to work for the principal For agency to be created, an agreement must be reached between the parties. An agent cannot offer to work for a potential principal and expect to have an agency relationship created without the princ

Which of the following scenarios would entitle a prospective buyer to damages against a real estate broker?

The broker exceeds the authority given to them by the principal A real estate licensee would be liable for damages to the buyer if the licensee acts in excess of the power given to him by the principal (seller).

A seller tells their listing agent that the pool is uneven and leaks. The broker does not inform the buyers of this material fact. A few months after the buyer purchases the property, the buyer discovers the pool is leaking and is uneven. The buyer immediately files a lawsuit against the seller and the broker. The seller also files a lawsuit against the broker. What is the most likely outcome

The buyer would win against the seller and the agent and the seller would win against the agent The broker has a fiduciary duty to disclose all material facts that they were made aware of by the seller. The buyer would sue the seller and agent, while the seller would sue the agent for not disclosing the material facts to the buye

In the formation of a contract, which of the following would not make the contract voidable

The illegal purpose makes the contract void, the others would make the contract voidable. The main difference between the two is that a void contract cannot be performed under the law, while a voidable contract can still be performed, although the unbound party to the contract can choose to void it before the other party performs.

Mr. and Mrs. Childers bought a property and they were not informed that it contained an oil tank buried in the ground that is used for heating the home. They would have the right to:

The oil tank that is used for heating the home is a material fact and should have been disclosed. The buyers could rescind the contract.

Which of the following is required to create a legal and valid contract

The only proper choice to comply with a valid contract is offer and acceptance.

Broker Steve has been employed by Seller Mike. Broker Steve has been showing the property to many interested home buyers and has been telling everyone that the roof was in great shape and did not have any issues or leaks, when in fact Seller Mike specifically told Broker Steve that the roof was old and had several leaks and would need to be replaced. Buyer Brian soon discovered that after the first rainstorm the roof was in terrible disrepair and leaked badly. Who would Buyer Brian have recourse against

The seller and the broker for fraud and damages associated with the roof The buyer would have the grounds to bring a lawsuit against the seller and the broker. When you enter into an agency relationship, the principal is responsible for the agent. However, the seller would also be able to sue the broker for breaching his fiduciary duty and committing fraud.

When transferring certain real property, the California Civil Codes states that a transfer disclosure statement is to be delivered by which of the following?

The transferor Per the California Civil Code, if you are part of a divorce, a probate sale, or trustee's sale you are exempt from delivering a transfer disclosure statement

When the broker is an agent to a seller, what is owed to the buyer

When the licensee is an agent of a seller, they have a fiduciary duty with that seller and must be loyal to them. The licensee also has responsibility to the buyer, such as being fair and honest with the buyer.

Agent Mitchell has a listing to sell a home owned by owner Donald. Which of the following actions by the licensee would result in creating an agency relationship with a potential buyer

When the licensee is negotiating for the buyer, they are looking out for the buyer's best interest and a fiduciary duty is formed. This action creates an agency relationship

What is the name of a contract between the seller of real property and a licensed real estate agent, in which the seller agrees to pay a commission to the licensee if they produce a "ready, willing and able" buyer for the real property and the licensee complies and does all the due diligence procuring a buyer

a bilateral executory contract Bilateral suggests that both parties have signed and are bound to the contract. Executory means that the contract has not been executed as of yet

When a money award for damages does not satisfy the damages on a defaulted contract, a lawsuit for specific performance can be brought by all of the following, except:

a broker who has a current license acting on behalf of their principal To sue for a specific performance, the individual must be the principal on the contract. In this example the broker is not.

Of the following, which is not needed to create an agency relationship?

a written agreement to pay consideration An agent can represent either a buyer or seller without receiving compensation. An example would be if a buyer asks the agent to help them get pre-approved for a mortgage loan. The agent would not receive compensation for doing so. They would, however, be able to be the agent for the buyer on the purchase of their home

A licensee who is acting as an agent for their principal in the sale of property can do the following without authority from the principal:

accept a purchase contract from a buyer that is signed and will become binding if the seller accepts it The agent cannot bind the principal to a contract. The licensee works for the principal, therefore the principal has final say.

Licensee Rob acts as an agent for both the buyer and seller and did not disclose that fact to both parties involved. It was not disclosed because licensee Rob was unaware that both buyer and seller considered him as their agent. Agent Rob is now involved in a:

accidental dual agency Acting for both buyer and seller makes the licensee a dual agent. If this occurs without the licensee being aware of this, then it's considered an accidental dual agency.

A broker who looks for buyers and accepts a deposit from a buyer to purchase a piece of real property without the express written authorization and acknowledgment from the owner to sell the property is

acting as an agent for the buyer, not the seller The agent is working for a buyer. When a broker is employed by a buyer the broker has a fiduciary duty to the buyer

Along with due diligence, care, and skill, a real estate agent must also fully disclose all material facts of the property to the principal. If there is any purposeful concealment of material facts by the agent, this could be regarded as

fraud Purposeful concealment of material facts is fraud

Broker Robert is showing buyer Sarah property that he has under contract. Broker Robert is aware of a major defect in the plumbing. Broker Robert should:

inform buyer Sarah of this issue, because it is a material fact about the property A real estate licensee must disclose all known material facts. A material fact would have influence over a principal's decision. A major plumbing defect would definitely affect the decision of a reasonable person

A binding contract between two parties can become voidable if

it is legally retracted by one or both parties A contract valid may become voidable when the injured party evokes their right to rescind the contract. The injured party should take action immediately as the court may note a delay in action from the acceptance of the contract to the rescission request. For example, signing a contract while intoxicated may make the agreement voidable

According to the Statute of Frauds, all contracts must be in writing in order to be enforced in the court of law. Of the following choices, the statement that is not an example of this would be

lease agreement which is less than one year Real estate leases that are longer than one year require a written contract

An agreement for real property that is paid for by a mortgage must be in writing

legal effect imputed authority ethical and professional responsibility Complete and full disclosure of who is representing whom to all parties involved is critical for all of the listed reasons

In order for a seller who owns 1-4 units to be in compliance with the California Civil Code regarding Real Estate Transfer Disclosure Statements, the owner must

make a reasonable effort to inspect the property, then complete the disclosure

An individual who is delegated to legally act for another person is known as:

n attorney in fact is a person who is authorized to perform business-related transactions on behalf of someone else (the principal). In order to become someone's attorney in fact, a person must have the principal sign a power of attorney document

Of the following, what is not needed in the formation of a contract

performance Parties may enter into a contract, however they may never fulfill (perform) the obligations of the contract

When a licensee acts exclusively as a buyer's agent, they can

present offers to the seller and seller's agent When the agent is working exclusively for the buyer, they can present purchase offers to the seller and seller's agent.

During an "exclusive right to sell" listing contract, the principal no longer wishes the broker to work for them. The principal may:

revoke the listing, however the seller may be held liable for damages An exclusive right to sell listing agreement is an employment contract and like all contracts can be broken. However the broker could sue for the monetary value of his time, advertising, and expertise.

concerning an interest in real property, when two parties want to create an enforceable broker/ principal relationship, what is the most important thing to create first

sign a written employment contract There are several important things to consider when dealing with the sale of real property. However a written enforceable employment contract is the most important and necessary form to sign first in order for these real estate activities to take place.

For a contract of real property to be enforceable, the consideration must be relative and of sufficient value in order to enforce a suit for

specific performance The value of the real property must be equal to the amount of money being offered before a court will order someone to specifically perform the terms of a contract.

According to the California Civil Code, real estate relationships can be terminated in many ways. Which of the following is on that list

termination by completion Completion of an escrow by a broker would terminate the agency. The purpose has been completed

According to the Civil Code, when serving as a buyer's agent, the real estate agent has a fiduciary duty to

the buyer A real estate agent working as a buyer's agent has a fiduciary duty to the buyer

The Law of Agency consists of the rights, liabilities, and duties between

the principal and their agent the agent and the third party the principal and the third party whom the agent deals with

When a licensee acts as a buyer's agent on a home listed by their broker, the broker has a fiduciary duty to

the seller

The commission of a real estate listing for a lease property would typically be paid as a percentage of:

the total rent collected over the period (or time) of the lease, but can be negotiated The commission of a leased property is determined by adding the total amount of rent over the whole term of the lease. The commission paid can be any negotiated amount and is always in writing in the lease listing agreement

An agent representing a principal in a transaction for real property is working under the law of agency

voidable The person who was under duress can void the contract if they choose to.