California Real Estate State Test Quizzer
Mineral rights, unless there is an agreement otherwise: A. are automatically transferred with the sale of real property B. are always kept by the original owner of the property C. cannot be conveyed separately from the surrounding real property D. cannot be leased
A. are automatically transferred with the sale of real property Mineral rights will automatically pass from the seller to the buyer of real property unless otherwise agreed. Mineral rights can be conveyed or leased separately from the surrounding real property.
Which of the following contracts would be required under the statute of frauds to be in writing? A.Any agreement that is not to be performed within one year B.Employment of a broker to negotiate a six-month lease on manufacturing equipment Incorrect C.Employment of a broker to purchase a real estate mortgage D.Employment of a broker to sell trade fixtures and business goodwil
A.Any agreement that is not to be performed within one year The statute of frauds requires a writing for any agreement that will not be performed within one year of its making. The statute of frauds also requires a writing for an agreement authorizing an agent to find a buyer or seller for real property, but options B, C, and D involve only personal property and do not need to be in writing.
Which kind of listing agreement is one where the seller will pay a commission to her broker, unless the seller sells the property herself? A.Exclusive agency B.Exclusive right to sell C.Net listing D.Open listing
A.Exclusive agency Under an exclusive agency listing agreement, the seller will owe the broker a commission if a buyer is found during the listing term, unless the seller finds the buyer herself.
Under what type of listing is it possible that an agent would receive no commission even if the seller accepted an offer presented by that agent? A.Net listing B.Open listing C.Exclusive agency D.Exclusive right to sell
A.Net listing An agent who found a buyer might not be entitled to a commission under a net listing. For instance, suppose a net listing provides that the agent can keep anything above a selling price of $220,000 as her commission. If the property sells for $220,000 or less, the agent won't be entitled to collect any compensation.
The term "quiet enjoyment" in a lease would refer to which of the following situations? A.Possession with freedom from interference by the property's owner B.Freedom from nuisances created by neighbors C.Freedom from encumbrances created by the previous owner D.None of the above
A.Possession with freedom from interference by the property's owner Every lease carries an implied covenant of quiet enjoyment; the landlord promises the tenant that her exclusive possession of the property will not be disturbed by the landlord (or by third parties with lawful claims to possession).
If a lessor sells the property that is subject to a lease, the lease: A.applies to the new owner B.terminates C.becomes a sublease D.is assigned to the new owner
A.applies to the new owner If a leased property is sold in the middle of the lease term, the lease is still binding on the new owner. The lease would not be assigned to the new owner; an assignment occurs when a tenant transfers his entire leasehold interest to a new tenant.
The broker most likely to qualify for a commission is the one who: A.communicated acceptance to the buyer B.communicated the offer to the seller C.obtained an offer D.obtained an offer with a deposit
A.communicated acceptance to the buyer When a broker communicates the seller's acceptance to the buyer, that is the moment the contract is formed. There may still be contingencies that have to be satisfied, but this is the most important step in creating a contract.
The instrument that would be used by an owner who wanted to sell his property, extend his own credit, and retain legal title, would be a: A.conditional or installment sales contract B.grant deed C.mortgage D.security agreement
A.conditional or installment sales contract This describes a land contract, which may also be referred to as a conditional sales contract or installment sales contract.
Title will be delivered on a different day than the day the buyer plans to take possession on. The parties should use a/an: A.interim occupancy agreement B.quitclaim deed C.assignment of rents D.option agreement
A.interim occupancy agreement If the buyer will be taking possession before closing or the seller will remain in possession after closing, the parties should sign an interim occupancy agreement for that period.
It is important to include a legal description of the property in a contract for the sale of real estate because: A.it makes the contract enforceable and discourages litigation B.it will be used for the description in the deed C.otherwise the broker could be sued if the buyer withdrew from the transaction D.otherwise the title insurance policy will be unenforceable
A.it makes the contract enforceable and discourages litigation A legal description is important because the property must be identified with sufficient specificity. If not, the contract might be unenforceable.
The phrase "time is of the essence" is most likely to be found in a/an: A.purchase agreement B.listing agreement C.grant deed D.option agreement
A.purchase agreement When a contract includes a "time is of the essence" clause, failure to comply with any deadline in the contract can be treated as a material breach of the contract. Almost all purchase agreements have a "time is of the essence" clause.
The buyer and seller enter into a purchase agreement that contains a contingency clause. This may mean that the: A.sale is contingent on the buyer selling his other property B.sales price will be paid in installments from the buyer to the seller C.good faith deposit will serve as liquidated damages D.title may include undisclosed encumbrances
A.sale is contingent on the buyer selling his other property A contingency clause in a purchase agreement may make the sale of the property contingent on whether the buyer is able to sell other property that he already owns. Other commonly used contingency clauses include financing and inspection contingencies.
A broker acting in good faith received misinformation provided by the seller, and passed it on to the buyer, who agreed to purchase the property. When the buyer found out, he rescinded the contract. In this situation: A.the broker is entitled to collect his commission from the seller, and the seller must reimburse him for losses caused by a lawsuit by the buyer B.the broker is entitled to collect his commission from the buyer C.the buyer and seller each owe the broker one-half of his commission D.the broker is not entitled to a commission
A.the broker is entitled to collect his commission from the seller, and the seller must reimburse him for losses caused by a lawsuit by the buyer Because he found a ready, willing, and able buyer, the broker is entitled to collect a commission from the seller. By giving the broker false information, the seller prevented the sale from going forward, so she is liable for the broker's commission much as she would be if she had simply changed her mind and backed out of the transaction.
A land contract was recorded by the seller. The buyer defaulted on the payments. If a quitclaim deed were to be used in order to clear the cloud from the title, it would be executed by: A.the buyer B.the seller C.both the buyer and the seller D.the lender
A.the buyer A quitclaim deed signed by the buyer (the vendee), in which he releases his interest in the property to the seller (the vendor), would be recorded by the seller in order to clear away the cloud on title created by the recorded contract.
With a purchase agreement, the date of formation of the contract is: A.when acceptance is communicated to the offeror B.the date the contract is prepared C.the date the buyer signs D.the date the offer is made
A.when acceptance is communicated to the offeror A contract is considered to be formed on the date that the offeree communicates acceptance to the offeror.
Which of the following would always be categorized as real property? A. Peaches cultivated but not yet harvested B. Stock in a mutual water company C. Timber sold on contract but uncut D. Minerals extracted from the earth
B. Stock in a mutual water company Stock in a mutual water company is always appurtenant to land and is therefore always real property. Peaches still on the tree that have already been sold would be considered personal property, just as uncut timber subject to a contract of sale would be.
Items of personal property that become real property once they are attached to real property are known as: A. attachments B. fixtures C. inclusions D. appurtenances
B. fixtures A manmade attachment that has been incorporated into real property is called a fixture
Which of the following persons is least likely to request an order of specific performance in a real estate transaction? A.Seller of a large, subdividable parcel of land B.Broker acting as agent to the seller C.Buyer of a single-family residence D.Buyer of a commercial property
B.Broker acting as agent to the seller An order of specific performance may be awarded for breach of a purchase agreement, because real property is unique and damages might not fully compensate the aggrieved party. However, a listing agreement simply requires the seller to pay the broker money (a commission), so monetary damages would be sufficient compensation in a broker's breach of contract suit against a seller.
Which one of the following is an illegal act for a real estate broker in California? A.Using a net listing if the amount of commission is disclosed B.Claiming a commission on an exclusive listing that had no specified termination date C.Collecting a commission after the termination date on an exclusive listing has passed D.Selling his own property and claiming a commission for income tax purposes
B.Claiming a commission on an exclusive listing that had no specified termination date A broker in California who does not include a termination date in an exclusive listing agreement will be subject to disciplinary action.
Brokers Frank and Dean both took open listings on the same property. Frank shows the property to a prospective buyer, who decides not to buy it. One week later, Dean shows the same property to the same buyer, who decides to purchase the property. Who receives the commission? A.Frank receives entire commission B.Dean receives entire commission C.Frank and Dean split commission D.Frank and Dean each receive a full commission
B.Dean receives entire commission Even though Frank already showed the property to the buyer, Dean was the one who negotiated and secured the offer and acceptance. Therefore, Dean was the procuring cause of the sale and is entitled to receive the commission.
If there is a 30- or 60-day safety clause in a listing agreement, which of the following is true? A.The agent is owed a commission if the property sells during the safety period B.The agent must provide a list of the people he worked with, and if the seller sells to any of those people during the safety period, she owes the agent a commission C.The seller may 'bump' a contingent offer in favor of an offer that contains no contingencies D.The agent is entitled to liquidated damages if the buyer and seller reach an agreement but then withdraw from the sale
B.The agent must provide a list of the people he worked with, and if the seller sells to any of those people during the safety period, she owes the agent a commission Many safety clauses require the broker to give the seller a list of the potential buyers that the broker had contact with during the listing period. That way, the seller will know whether the safety clause will require payment of a commission if the property is sold to a particular person during the safety period.
A broker received an offer and a deposit on a property she listed. The seller accepted the offer. Before the deal closed, though, the buyer and seller agreed to cancel the deal, without the broker's knowledge. The buyer requests the return of the deposit. What will happen to the deposit? A.The broker may deduct only sales expenses from the deposit before returning it B.The broker must return all of the deposit, but may then sue the seller for her commission C.The broker may deduct the full amount of her commission from the deposit before returning it D.The broker may deduct the full amount of her commission from the deposit, then sue the seller for any further commission owed
B.The broker must return all of the deposit, but may then sue the seller for her commission A broker who has been deprived of an earned commission may not simply withhold the commission from funds she is holding in trust; the trust funds must be returned to the rightful owner. However, the broker may sue the seller for the commission if she found a ready, willing, and able buyer, even if the sale didn't close.
A buyer of a single-family home purchased the home using a land contract that included a clause prohibiting prepayment. After two years of making regular payments, the buyer offered to pay the remainder of the balance as a lump sum in full performance of the contract. The seller refused. Which of the following statements is correct? A.The anti-prepayment clause is illegal and causes the land contract to be void B.The buyer can pay off the entire balance of a land contract at any point after 12 months following the sale C.The buyer must abide by the anti-prepayment clause D.The seller may terminate the contract and refund the amount paid so far to the buyer
B.The buyer can pay off the entire balance of a land contract at any point after 12 months following the sale Under a land contract for residential property, prepayment may be prohibited only for the first 12 months of the contract. A clause that attempts to prohibit later prepayment is unenforceable, but it does not affect the validity of the rest of the contract. The seller may terminate the contract only if the buyer defaults.
If a buyer's contingency isn't fulfilled, what happens? A.The buyer must compensate the seller B.The buyer doesn't have to perform C.The buyer will receive liquidated damages D.The purchase agreement is automatically rescinded
B.The buyer doesn't have to perform If a buyer's contingency isn't met (for instance, the buyer is unable to obtain financing after making a good faith effort to do so), the buyer may withdraw from the transaction without forfeiting her deposit.
A lessee had a one-year lease, on which he made monthly payments of rent. After the lease expired, he continued to pay rent, which the lessor accepted. What happens? A.The lease is renewed for one year B.The lease is renewed for one month C.This is a tenancy at sufferance D.This is an estate at will, terminable by either party
B.The lease is renewed for one month When the landlord accepted another rent payment after the original lease term expired, the tenancy was renewed by implication. However, since the rent was previously paid on a monthly basis, the tenant now has a month-to-month periodic tenancy. In effect, each time the landlord accepts another month's rent, the lease is renewed for one month.
A buyer signs a deposit receipt, but her consent is based on false information provided by the broker. Which of the following is true? A.The broker can't accept a commission B.The offer can be accepted but is voidable by the buyer C.The offer is illusory D.The seller has a nonrevocable counteroffer
B.The offer can be accepted but is voidable by the buyer If an offer or acceptance is influenced by a negative force, such as constructive fraud, then the contract is voidable by the injured party (in this case, the buyer).
What essential element is necessary between broker and principal in a transaction involving real property? A.The agreement must state the terms under which the broker may collect a commission B.There must be a written contract of employment C.The broker must have the right to accept a deposit D.There must be a safety clause so that the seller cannot avoid a commission by waiting until after the listing period ends before selling the house
B.There must be a written contract of employment Under the statute of frauds, any agreement between a real estate broker and a principal authorizing the broker to find a buyer or a property must be in writing.
If a tenant ends his tenancy, how long does the landlord have to return his security deposit? A.Two weeks B.Three weeks C.One month D.Two months
B.Three weeks After a residential tenant moves out, the landlord has three weeks (21 days) to return the tenant's security deposit or else provide a statement explaining why the deposit is being retained.
What is a sublease? A.An assignment of a lease B.Transfer of possession for less than the remainder of the lease term C.Transfer of possession for the entire remainder of the lease term D.The surrender of a lease and substitution of a new lease
B.Transfer of possession for less than the remainder of the lease term A sublease is the transfer of possession of leased property for only part of the remaining lease term. (Alternatively, it can be a transfer of possession of only part of the leased property, or an arrangement in which the tenant shares possession with the subtenant.)
Which of the following elements is not necessary to the existence of every contract? A.Mutual consent B.Written agreement C.Parties capable of contracting D.Lawful objective
B.Written agreement Not all contracts are required to be in writing (although most contracts concerning real estate must be). The four necessary elements for any type of contract are mutual consent, capacity, consideration, and a legal objective.
If a contract has been rescinded, that means that it has been: A.rewritten B.annulled C.rejected D.performed
B.annulled Rescission annuls a contract. In other words, it invalidates the contract and puts the parties back as closely as possible into the positions they would have been in if they had never entered into the contract.
If a tenant transferred an entire leasehold interest, he would do so by: A.alienation B.assignment C.sublease D.surrender
B.assignment Assignment transfers the tenant's entire leasehold interest to a new tenant (an assignee). In contrast, a sublease transfers only part of the tenant's leasehold interest (only part of the remaining lease term, or only part of the property).
A listing agreement concerning community property requires the signature(s) of: A.the husband and the wife, since it's a real estate contract B.either the husband or the wife, since it's a personal services contract C.the husband, the wife, and the broker D.either the husband or the wife, and the broker
B.either the husband or the wife, since it's a personal services contract A listing agreement is a personal services contract, so it only requires the signature of one owner of the property being listed. The signature of the broker is not required; he can demonstrate acceptance of the contract terms by beginning to perform services. The signature of the broker (or the salesperson on the broker's behalf) is customary, though.
Under the terms of a listing, the broker may receive a commission regardless of whether the broker, a cooperating broker, or the seller was the procuring cause of the sale. This must be a/an: A.exclusive agency listing B.exclusive right to sell listing C.non-exclusive listing D.open listing
B.exclusive right to sell listing Under an exclusive right to sell listing, a broker is entitled to a commission if the property sells during the listing period, regardless of who finds the buyer.
A contract that provides for a commission for the broker regardless of who finds a buyer is a/an: A.exclusive agency listing B.exclusive right to sell listing C.net listing D.open listing
B.exclusive right to sell listing Under an exclusive right to sell listing, the broker is entitled to the commission if the property sells during the listing period, regardless of who actually arranged the sale.
In the sale of an owner-occupied home for $400,000, the broker received a $25,000 deposit from the buyer. The buyer breached the contract, and the seller claimed that the buyer had forfeited the deposit. If the liquidated damages provision in the purchase agreement was initialed, in this situation the seller: A.may not retain any of the deposit B.may retain no more than 3% of the sales price as liquidated damages C.could deduct any actual damages caused by the breach from the deposit D.may retain the entire deposit
B.may retain no more than 3% of the sales price as liquidated damages Since this is the sale of an owner-occupied home and the parties initialed the liquidated damages provision, the buyer's breach of contract entitles the seller to keep no more than 3% of the property's sales price as liquidated damages.
A real estate buyer and seller have agreed to terminate their contract, and they direct the broker holding the deposit to refund the buyer's deposit. The broker: A.is automatically entitled to keep half the deposit B.may sue the seller, but cannot keep any portion of the deposit C.must refund the deposit, but may deduct the expenses he incurred first D.has no recourse
B.may sue the seller, but cannot keep any portion of the deposit A broker is not entitled to keep all or part of a deposit, in case a transaction is mutually terminated by the two parties. Because a willing and able buyer had been found, the seller may still owe a commission to the broker, but the broker must return the deposit and then sue the seller for a share, rather than simply withholding the commission amount.
A broker included the following phrase in a listing contract: "In consideration of execution of the foregoing, the undersigned broker agrees to use due diligence in procuring a purchaser." This phrase is: A.necessary to the creation of a unilateral contract B.necessary to the creation of a bilateral contract C.necessary for an open listing D.superfluous language
B.necessary to the creation of a bilateral contract A bilateral contract is one that involves a promise for a promise. By promising to use due diligence to find a purchaser in exchange for compensation, the broker proposes a bilateral contract.
A buyer takes possession of a property before closing, and an earthquake destroys the house. Under the Uniform Vendor and Purchaser Risk Act, the buyer is: A.able to avoid closing the transaction B.not able to avoid closing the transaction C.covered by the seller's hazard insurance D.able to subtract the cost of the destroyed improvements from the agreed-upon sale price
B.not able to avoid closing the transaction The Uniform Vendor and Purchaser Risk Act provides that the seller bears the risk of loss until either possession or legal title is transferred to the buyer. Once possession has been transferred, however, the risk of loss is the buyer's, even before title is transferred. The buyer is obligated to go through with the purchase. (Note that this rule doesn't apply if the risk of loss was allocated differently in the purchase agreement.)
An existing contract was replaced by an entirely new contract. This would be defined as a: A.conversion B.novation C.reformation D.rescission
B.novation A novation is the substitution of a new obligation for an old one. It can involve substituting a new contract for an existing contract between the same parties, or substituting a new party for one of the original parties to a contract.
A broker failed to mention material facts about a property's soil instability problems to a buyer. If the buyer learns about the soil problems after his offer is accepted and decides the property is unacceptable, the buyer may: A.have no choice but to go through with the contract B.request a rescission of the contract C.report this to the local building department D.request a novation of the contract
B.request a rescission of the contract A buyer who entered into a contract based on misinformation has grounds for a rescission of the contract. If the buyer chose to rescind, the contract would terminate and any deposit paid by the buyer would be refunded.
The amount of consideration offered in exchange for real property must be sufficient, relative to the value of the property, to support an action for: A.rescission B.specific performance C.liquidated damages D.unlawful detainer
B.specific performance A court will usually not order specific performance if the consideration offered in exchange for the property is substantially less than the actual value of the property.
A buyer of a property fulfilled his part of the contract and then requested the seller to convey title. The seller refused to do so. By fulfilling his part of the contract and asking the seller to perform, the buyer made a: A.breach B.tender C.warranty D.demand
B.tender When one party to a contract performs or unconditionally offers to perform as agreed, it is known as a tender. This is a necessary step before taking legal action against the other party for failure to perform.
In order to be enforceable, an exclusive listing must be signed by: A.the broker B.the seller C.the broker and the seller D.the broker, the buyer, and the seller
B.the seller A listing agreement must be signed by the seller. The broker is not required to sign, although she almost always does (or the listing salesperson signs on her behalf).
If the terms of a sublease conflict with the terms of the original lease: A.the sublease is converted to an assignment B.the sublease is subordinate to the lease C.the sublease is superior to the lease D.the sublease is void
B.the sublease is subordinate to the lease The terms of the original lease control, even if a sublease has different provisions that conflict with the original lease.
A land sales contract: A.is between a seller and a broker B.transfers equitable title to the buyer C.transfers equitable title to the seller D.transfers legal title to the buyer
B.transfers equitable title to the buyer Under a land sales contract, the seller (or vendor) retains legal title to the property while the buyer (or vendee) makes payments. During this period, the buyer receives equitable title.
The Harrisons submitted an offer to purchase a property with a deposit. The offer to purchase contained a clause that stated, "Contingent upon buyers obtaining VA loan for $175,000 payable over 30 years at interest rate of no more than 8%." Which of the following statements concerning this clause is true? A.If a loan of less than $175,000 is available, the buyers must make up the difference in cash and proceed with the transaction B.If a loan of $175,000 is not available, the buyers and the sellers may renegotiate the purchase price C.If a loan of $175,000 is not available, the Harrisons may withdraw from the transaction and have their deposit returned D.If a loan of $175,000 is not available, the Harrisons may withdraw from the transaction but lose their deposit
C.If a loan of $175,000 is not available, the Harrisons may withdraw from the transaction and have their deposit returned If a purchase agreement includes a financing contingency clause and the buyers are unable to obtain financing on the terms described (after making a good faith effort to do so), the buyers are not required to continue with the transaction. If the buyers decide to withdraw, they are entitled to have their deposit returned.
Which of the following is an encumbrance? A.Freehold estate B.Homestead exemption C.Lease D.Recordation as a subdivision plat
C.Lease A lease is a right in land that reduces the completeness of the owner's title, so it can be considered an encumbrance even though it grants the lessee a possessory right. A homestead exemption may affect foreclosure of a particular kind of encumbrance (a judgment lien), but the exemption itself is not an encumbrance.
A broker was entitled, as a commission, to any amount paid by a buyer that exceeded the seller�s desired sales price of $565,000. What kind of listing is this? A.Exclusive agency listing B.Exclusive right to sell listing C.Net listing D.Open listing
C.Net listing A net listing is one where the seller establishes a required net amount and the broker keeps, as compensation, any part of the sales price in excess of that net amount.
A seller lists a vacant parcel of land for $550,000 with the specification that a buyer must agree to an installment sale and cannot make more than a 23% cash downpayment. A potential buyer makes a full cash offer, which is rejected. Under these circumstances, does the seller owe the broker a commission? A.Yes, he owes the full commission B.Yes, he owes 23% of the commission C.No, the offer did not conform to the listing D.None of the above
C.No, the offer did not conform to the listing If a buyer makes an offer that does not match the terms set forth in the listing, the seller will not owe his broker a commission if the seller does not accept the offer.
Which of the following is not a necessary element in the formation of a contract? A.Offer B.Acceptance C.Performance D.Consideration
C.Performance Performance is the desired result of a contract but is not a necessary element in the formation of a contract.
Rice purchased a vacant residence; the offer was presented by Rice's broker, Boardman. Before the transaction closed, Rice asked Boardman if it would be acceptable if he entered the house to paint it before taking possession. In this case: A.Rice has an equitable interest in the property and may enter as he wishes B.Rice and the property's previous owner should sign an interim occupancy agreement C.Rice may enter if he receives written permission from the property's owner D.Rice should have the extent of any permitted repairs described in writing before beginning
C.Rice may enter if he receives written permission from the property's owner Until the transaction closes and Rice takes possession, he must have the owner's written permission to enter the property and start making changes. (An interim occupancy agreement or rental agreement would be appropriate only if Rice were planning to actually move in before closing.)
An exclusive listing must have a termination date that is: A.30 days after signing B.60 days after signing C.definite D.open-ended
C.definite An exclusive listing can be for as long or short a period as the parties agree on, but the Real Estate Law requires that it must have some sort of definite termination date.
A buyer and seller sign a real property conditional sales contract. At that point: A.the seller retains all interests in the property B.legal title passes to the buyer C.equitable title passes to the buyer D.all interests in the property pass to the buyer
C.equitable title passes to the buyer Under a conditional sales contract (also known as a land contract), equitable title passes to the buyer (the vendee) right away, while legal title is retained by the seller (the vendor) until the contract price has been fully paid off.
If a property owner refuses to pay a broker a properly earned commission, the broker may seek relief by: A.filing a complaint with the Real Estate Commissioner B.filing a statutory vendor's lien on the seller's property C.filing a court action for damages against the seller D.All of the above
C.filing a court action for damages against the seller The broker could sue the seller for compensatory damages (the amount of the commission). A broker is not entitled to a vendor's lien, and the Real Estate Commissioner cannot help a broker recover a commission from a seller.
Hanson contacts a real estate agent to see if a particular ranch property is listed for sale. It isn't listed, but the agent tells Hanson he'll obtain information about the property for him. The agent then contacts the seller, asks about the ranch, and tells the seller about Hanson's interest in buying it. Two months later, the agent learns that the seller sold the ranch directly to Hanson without his knowledge. In this situation, the agent: A.can sue for a commission B.can sue for a commission only if he has proof he was the procuring cause of the sale C.has no recourse D.will automatically be compensated at closing via the escrow process
C.has no recourse There was never a listing agreement between the seller and the agent, so there is no enforceable contract that would require the agent to be compensated.
If a home buyer breaches the purchase agreement, the seller may retain the good faith deposit (or a portion of it) if the buyer and seller have initialed a: A.contingency clause B.default clause C.liquidated damages clause D.risk clause
C.liquidated damages clause A liquidated damages clause in a purchase agreement allows the seller to keep all or part of the good faith deposit if the buyer breaches the contract. In a sale of owner-occupied residential property in California, no more than 3% of the purchase price may be retained as liquidated damages, and the parties must initial the liquidated damages provision in the purchase agreement. Click Here to Close
A voidable contract is one that: A.would be valid but cannot be proven in a court B.has no legal effect, since it was never a valid contract C.may be enforced or rescinded by one of the parties D.contains all four legal elements necessary for validity
C.may be enforced or rescinded by one of the parties A contract is voidable if one party's consent was obtained through fraud, duress, or undue influence, or if one party is a minor and the contract does not involve real property. A voidable contract may be either rescinded or enforced by the victimized party.
A contract in which one party promises not to revoke an offer during a specified period of time is a/an: A.exchange agreement B.novation C.option D.rescission
C.option An option establishes a specified period of time in which the optionee can accept an offer made by the optionor, such as an offer to sell property to the optionee at a specified price. It would violate the option contract if the optionor revoked the offer or allowed someone other than the optionee to purchase the property before the option period expired.
Seller Weiss signs a 60-day exclusive agency listing with Broker Hanada. After 30 days, Hanada has not sold the home and Weiss notifies Hanada in writing that he is canceling the listing. One week later, Weiss signs open listing agreements with several other brokers. Two weeks later, one of those brokers sells the house. Under these circumstances, Weiss likely: A.owes a commission only to Hanada B.owes a commission to the broker under the open listing C.owes commissions to both Hanada and the broker under the open listing D.owes no commission
C.owes commissions to both Hanada and the broker under the open listing Under the terms of an exclusive agency listing, the broker is entitled to the commission if anyone other than the seller finds a buyer for the property during the listing period. The seller can revoke the broker's agency authority but can't unilaterally terminate the listing contract, so Weiss is required to pay Hanada's commission. Under the terms of the open listing, Weiss also owes a commission to the broker who was the procuring cause of the sale.
The payment of a commission to a real estate broker based only on an oral listing is: A.illegal B.contrary to public policy C.permissible if the seller elects to do so D.prohibited by the Commissioner's regulations
C.permissible if the seller elects to do so Ordinarily, a listing must be based on a written employment agreement to be enforceable. However, even though a seller isn't legally required to pay a broker's commission if there is only an oral listing, the seller may still choose to pay the broker.
A salesperson takes a listing and submits the information to the multiple listing service. The property seller has a contract with the: A.multiple listing service B.salesperson C.salesperson's broker D.salesperson, the broker, and the multiple listing service
C.salesperson's broker A listing agreement is a contract between a seller and a real estate broker. Even if the salesperson fills out the listing agreement form on the broker's behalf, the contract is between seller and broker.
A tenant wants to sublease or assign a leased property. If the lease is silent on this issue, then the: A.property cannot be sublet or assigned B.property cannot be sublet or assigned without the landlord's permission C.tenant may go ahead and sublease or assign the property D.tenant may sublease the property but may not assign it
C.tenant may go ahead and sublease or assign the property Unless the lease includes a provision prohibiting or restricting subleasing or assignment, a leasehold interest can be sublet or assigned without asking the landlord for permission to do so.
A seller sued a broker, alleging that the broker had misrepresented material facts during his sales presentation. The broker responded that the listing contract had only been an oral contract and therefore was not enforceable. A court would find that: A.the listing broker can be liable for misrepresentation only to the buyers B.the contract was unenforceable and therefore the seller had no basis for a suit C.the broker cannot use the statute of frauds as a defense, since that is not at issue D.the statute of frauds only applies to purchase contracts, not to agency agreements
C.the broker cannot use the statute of frauds as a defense, since that is not at issue Whether or not the contract was in writing is not an issue in this case, because that isn't relevant to the seller's allegation of misrepresentation. So the broker cannot use the statute of frauds as a defense. (In contrast, whether the contract was in writing would be "at issue" if the broker sued the seller to claim his commission, because a broker must have a written contract in order to sue for compensation.)
On the last day of the term of the listing agreement, the broker submitted a verbal offer to the seller. The next day, the buyer and seller enter into a written purchase agreement. Based on these facts alone: A.the broker is entitled to the commission B.the broker is entitled to one-half of his commission C.the broker is not entitled to a commission D.None of the above
C.the broker is not entitled to a commission The question does not state that the listing agreement included a safety clause. Without a safety clause, the broker is not entitled to a commission on a sale that was agreed upon after the listing term expired.
A buyer presents a written offer along with a deposit to the selling broker, who accepts them on behalf of the seller. The broker's authority to accept the deposit comes from: A.the purchase agreement B.community standards C.the listing agreement D.the broker's status as an agent
C.the listing agreement A listing agreement usually authorizes the broker to accept a good faith deposit from a buyer. (The question states that the selling broker accepts the offer and deposit on behalf of the seller, so the selling broker is acting as a subagent of the seller under the listing agreement.)
An agent may collect a commission only for sales that are made during the listing period, unless: A.the listing agreement contains a liquidated damages clause B.the principal signs a release clause C.the listing agreement contains a protection period clause D.the transaction is a tax-free exchange of properties
C.the listing agreement contains a protection period clause When a listing agreement contains a protection period clause (a safety clause), the broker may still be entitled to a commission if the property is sold during a specified period after the listing agreement expires.
A prospective buyer paid $3,000 for a three-month option to purchase a $400,000 property. In this case, all of the following are true except: A.only the optionor is bound to the sale B.a unilateral contract has been established C.the optionee has acquired a legal interest in the property D.the optionee is under no obligation to purchase the property
C.the optionee has acquired a legal interest in the property The optionee acquires no interest in the property, only a contractual right to purchase it. An option is a unilateral contract because the optionee is free to exercise or not exercise the right, while the optionor is bound to honor the optionee's choice.
A salesperson presented his broker with an offer from a prospective buyer and a good faith deposit in the form of a promissory note. The broker should tell the salesperson that: A.he should not have accepted the promissory note as a deposit B.if the offer is accepted, cash must be substituted for the promissory note within 14 days C.the seller must be informed before accepting the offer that the deposit is a promissory note D.he needed to obtain the permission of the seller before accepting the promissory note as a deposit
C.the seller must be informed before accepting the offer that the deposit is a promissory note A promissory note may be used as a good faith deposit, but the agent must disclose this fact to the seller when presenting the offer. The form of the deposit should also be indicated in the purchase agreement.
A contract to sell real property that a married couple owns as community property is signed only by the wife. This agreement is: A.void B.illegal C.unenforceable D.enforceable
C.unenforceable A purchase agreement involving community property is unenforceable unless it is signed by both husband and wife. The contract is not void without both signatures, but a court will not enforce it.
Unless excepted from the agreement, which of the following are implicitly included in a transfer of real property? A. A building constructed on land B. Mineral deposits underneath the land C. Riparian rights appurtenant to the land D. All of the above
D. All of the above A building constructed on land is a manmade attachment (a fixture), so it is considered part of the real property. That means it is implicitly included in the transfer when the land is sold, unless the parties have explicitly agreed that it will be excluded. Appurtenant rights, including mineral rights and riparian rights, are also part of the real property and included in the transfer unless otherwise agreed.
How is real property most different from personal property? A. Different method of conveyance B. Different method of financing C. Different method of transfer of title D. Real property is considered immovable by law
D. Real property is considered immovable by law Real property is, by definition, that which is immovable. Although the documents used to transfer title to or finance real and personal property have different names (deed vs. bill of sale, deed of trust vs. financing agreement), the general principle behind them is the same.
A nonriparian owner is given permission by the state to use water from a nearby lake. This is known as a right of: A. taking B. percolation C. capture D. appropriation
D. appropriation Under the appropriative rights system (also called the prior appropriation system), an owner of landlocked property may receive the right to take water from a distant source for a particular beneficial use (such as irrigation).
If an owner obtains riparian rights to a property: A. he may take as much water from the stream as he likes B. he may use the water only with a government permit C. he has absolute ownership of the stream D. the riparian rights apply only to the property that is adjacent to the stream and that is located within the watershed
D. the riparian rights apply only to the property that is adjacent to the stream and that is located within the watershed Riparian rights apply only to the property adjacent to the body of flowing water. Properties that are not adjacent to the water may use the water only with a government permit.
A seller accepted a proper offer in writing to purchase his property. He then refused to complete the transaction. If the buyer were to bring suit for failure to perform the contract, under the statute of limitations he would need to do so within: A.1 year B.2 years C.3 years D.4 years
D.4 years In California, the statute of limitations for written contracts is four years. A lawsuit regarding breach of a written contract must be filed within this four-year period.
What form may the commission paid to a real estate broker take? A.Assignment of an existing promissory note B.Assignment of funds from buyer to seller C.A new promissory note D.All of the above
D.All of the above A broker's commission can take the form of anything that has value, if the broker and the seller agree to it. This would include cash, a check, personal property, a new promissory note, assignment of an existing note, or an assignment of funds.
When a contingency clause is used in a purchase agreement, which of the following information should be included? A.Nature of the contingency B.Duration of the contingency C.Conditions for removal of the contingency D.All of the above
D.All of the above A contingency clause should describe what has to be done to fulfill the contingency and set a time limit for getting it done. The clause should also specify how one party will notify the other when the contingency has been fulfilled, and explain the rights of the parties if the contingency isn't fulfilled.
Which statement concerning the good faith deposit is correct? A.It may be a promissory note B.It may be a check that is held uncashed by the broker C.It may be anything that the parties agree is of value D.All of the above
D.All of the above A good faith deposit is customarily a check, but it may take any form that the parties agree upon.
An exclusive listing agreement is: A.a bilateral executory contract B.an employment contract C.a promise for a promise D.All of the above
D.All of the above An exclusive listing agreement contains a promise for a promise, which means that it is a bilateral contract. It is executory -- in the process of being performed -- until a buyer is found and the sale closes. A listing agreement may be regarded as a contract in which a seller employs a broker to find a buyer (although for taxation purposes, the broker is an independent contractor, not the seller's employee).
A buyer under a land contract will acquire: A.the right of possession B.the right to transfer or will the property C.equitable title D.All of the above
D.All of the above Under a land contract, the buyer (the vendee) has equitable title, the right to possession of the property, and the right to sell or will his interest in the property.
State law places limits on the size of the security deposit that can be required for a residential lease. The limits are based on: A.the length of term of the lease B.whether the unit is furnished or unfurnished C.the square footage of the rental unit D.Both A and B
D.Both A and B In California, the security deposit for an unfurnished unit can't exceed two months' rent; for a furnished unit, it can't exceed three months' rent. If the lease term is six months or more, though, the deposit may be equal to six months' rent or more, as long as it's designated as an advance payment of rent.
Once a purchase agreement has been signed, what type of title does a buyer hold in the property? A.Joint tenancy B.Pending title C.Legal title D.Equitable title
D.Equitable title A buyer holds equitable title once the purchase agreement has been signed. This does not entitle the buyer to take possession before the agreed possession date, however.
How is the maximum commission rate a broker may charge established? A.It is set by the local multiple listing service B.It is mandated by the state Real Estate Law C.It must be within limits prescribed by real estate professional associations' ethical codes D.It is set by agreement between principal and broker
D.It is set by agreement between principal and broker There are no legal limits on commission rates. They are determined by agreement between the broker and the principal.
Which of the following clauses must a purchase agreement contain? A.Subordination clause B.Safety clause C.Contingency clause D.None of the above
D.None of the above Contingency clauses are often included in purchase agreements, but they are not required. A safety clause is common in listing agreements; a subordination clause might appear in a mortgage or a deed of trust.
What document would be used to convey possessory rights without conveying ownership rights? A.License B.Mortgage C.Patent D.Sublease
D.Sublease A sublease is used to transfer possessory rights -- the right to possession of leased property -- to a subtenant; the subtenant does not have an ownership interest. Licenses and mortgages transfer neither possessory rights nor ownership rights, while patents convey both possessory rights and ownership rights. (A patent is a grant of land from the government to private owners.)
A buyer made an offer in early June. The deposit was a promissory note for $10,000. The buyer would pay the seller that amount, plus 12% interest, by June 30. Which of the following is correct? A.A deposit must be in check or cash B.A promissory note for more than $5,000 cannot be accepted as a deposit C.A promissory note may not exceed 3% of the purchase price D.The seller must be informed that the deposit is a promissory note when the offer is presented
D.The seller must be informed that the deposit is a promissory note when the offer is presented A good faith deposit may take the form of a promissory note, but this is a fact that must be disclosed to the seller at the time of the presentation of the offer.
A broker received an offer along with a deposit from a prospective buyer. The deposit was a promissory note for $2,000 that was designated "pay to bearer." Which of the following statements is true? A.The deposit is not valid; it must take the form of cash or a check B.A promissory note is considered the same as cash in a real estate transaction C.The promissory note may be used as a deposit if the broker ratifies it D.The seller must be notified that the deposit is in the form of a promissory note when the broker presents the offer
D.The seller must be notified that the deposit is in the form of a promissory note when the broker presents the offer
Gene purchased a property from Paul on a land contract. He made a $2,500 downpayment and made some of the payments, but soon stopped making payments and abandoned the house. Paul reclaimed possession. Which of the following is correct? A.The title to the property is still marketable B.A subsequent cash purchaser of the property would not need to be concerned with the prior failed transaction C.Paul could pursue a deficiency judgment against Gene D.There would be a cloud on the title
D.There would be a cloud on the title The partially performed land contract created a cloud on Paul's title. Paul would need to obtain a quitclaim deed from Gene or else file a quiet title action in order to clear the cloud from the title.
Under a land contract, which party would hold legal title? A.Beneficiary B.Mortgagee C.Vendee D.Vendor
D.Vendor Under a land contract, the vendee (the buyer) receives equitable title right away, but the vendor (the seller) retains legal title until the contract is fully paid off.
What is the standard minimum time limit for employment in an exclusive listing agreement? A.30 days B.Six months C.The average length of time it takes to find a buyer in that particular locality D.Whatever is agreed upon by broker and property owner
D.Whatever is agreed upon by broker and property owner The termination date of an exclusive listing is determined by agreement between the broker and the seller.
The term "laches" refers to: A.a deficiency judgment B.a contract whose contents cannot be proven in court C.a court that does not have jurisdiction to decide a question D.an inexcusable delay in pursuing a legal right
D.an inexcusable delay in pursuing a legal right Laches is a delay in pursuing a legal right. Even if a lawsuit was filed before the deadline set by the statute of limitations, if the plaintiff unnecessarily delayed taking legal action and the delay prejudiced the defendant's position, the court might decide to reject the plaintiff's claim.
A seller contacted a broker to list some property. The broker discovered that the seller was still purchasing the property through a land contract. The contract does not contain an alienation clause or any prohibitions against resale or assignment. The seller could: A.give a warranty deed to the buyer stating "subject to existing contract of sale" B.sell the property only after the land contract was fully paid off C.assign all contract responsibilities to the buyer D.assign to the buyer the right to receive the deed once the contract is paid off
D.assign to the buyer the right to receive the deed once the contract is paid off A land contract vendee may assign the right to receive legal title once the contract is paid off, but the vendee cannot assign responsibility for making the payments. In the situation described in the question, the seller (the original vendee) would remain primarily liable for the payments for the remainder of the contract period. The seller could not give a warranty deed to the buyer (the new vendee) at this point, since the seller won't receive a deed from the vendor until the contract has been paid in full.
Hector gave Kim an option to purchase his property at a price of $390,000. The option was good for 90 days, and Kim gave Hector a check for $100. This would be considered a/an: A.offer to execute a potential future contract B.agency agreement C.encumbrance on Hector's property D.contract to keep an offer open
D.contract to keep an offer open An option is sometimes described as a "contract to keep an offer open." An option to purchase gives the optionee the right to buy property at a specified price during a set period. An option is only a contractual right, not an interest in property, and therefore is not an encumbrance.
Most listing contracts authorize a broker to: A.find a buyer and accept the buyer's offer on behalf of the seller B.guarantee to a prospective buyer that the seller will accept his offer C.deed the property over to the buyer D.find a buyer and accept a deposit with the offer to purchase
D.find a buyer and accept a deposit with the offer to purchase A typical listing agreement only authorizes the broker to find a buyer and accept the buyer's deposit. To authorize a broker to accept an offer or convey title, a seller would need to execute a power of attorney that specifically empowers the broker to do those things.
A prospect calls a broker and asks about a farm property that he wishes to buy. The broker says he does not have a listing on that property, but that he will check into it. He calls the owner of the farm and says that he has an interested buyer. However, the owner of the farm says the property is not for sale. One week later, the broker learns that the owner of the farm sold the property to the prospect. The broker: A.is entitled to a reasonable commission from the buyer B.may sue the seller for a reasonable commission C.is entitled to a reasonable commission from the seller D.is not entitled to a commission
D.is not entitled to a commission The broker is not entitled to a commission, since he did not have a written listing agreement for the property and did not arrange the sale of the property to the buyer.
Broker Beth signed an exclusive agency listing with Chuck and diligently advertised his house. However, during the listing period, Chuck sold the house to a friend, without any assistance from Beth. Chuck refused to pay any commission. Beth is entitled to: A.her full commission B.half her commission C.only her advertising expenses D.no commission
D.no commission Under an exclusive agency listing, no commission will be paid to the broker if the seller sells the property on his own.
A voidable contract remains binding on the victimized party until it is: A.invalidated B.ratified C.qualified D.rescinded
D.rescinded The victimized party to a voidable contract must take action to rescind the contract. If this is not done within a reasonable period of time, a court could decide that the contract has been ratified.
In a tenant's valid assignment of a lease, the assignee becomes the new: A.landlord B.lessor C.sublessee D.tenant
D.tenant In an assignment, the assignee is the new tenant, who takes over the old tenant's entire interest and has primary responsibility for payment of the rent.
A lease for longer than one year will require all of the following, except: A.a written agreement B.a termination date C.an adequate description of the property D.the signatures of the landlord and tenant
D.the signatures of the landlord and tenant A lease for longer than one year must be in writing and signed by the landlord, but the tenant's signature is not required. When the tenant moves in, that's considered implied acceptance of the lease. (Nevertheless, written leases are generally signed by the tenant as well as the landlord.)
In a land sales contract, the seller is often called the: A.trustee B.trustor C.vendee D.vendor
D.vendor The parties to a land contract are usually referred to as the vendee (the buyer) and the vendor (the seller).