Lesson 9 Questions

If the buyer will assume the seller's mortgage balance of $150,000 and pay the seller $85,000 in cash at closing, the agent should fill in the space provided for the purchase price as follows:

$235,000

A binding contract exists:

After the seller signs the form signed by the buyer and returns it to the buyer

The prohibition against the unauthorized practice of law prohibits a real estate agent from:

Completing a purchase and sale agreement form for a transaction in which the agent is not representing either party

A buyer makes an offer that's accompanied by a deposit. The deposit is sometimes called:

Earnest money

It is not necessary for an agent to note in the purchase and sale agreement that she accepted earnest money in the form of a promissory note, as long as she disclosed it to the seller when presenting the offer?

False

One way for a buyer to get out of a contract that is contingent upon obtaining the necessary financing is to make a half-hearted effort to obtain the financing?

False

The type of deed specified in most purchase and sale agreement forms is a:

General warranty deed

The buyers want to make an offer to purchase a home, but they don't want to be bound to the contract if they are unable to obtain the necessary financing. What should they do?

Include a financing contingency

An offer to purchase real property?

Must be in writing because of the statute of frauds

A bump clause:

Permits a seller to keep the property on the market pending fulfillment of a contingency

A buyer's earnest money deposit can be kept by a seller in the event of a buyer's default only if the:

Purchase and sale agreement includes a forfeiture clause for liquidated damages

The purchase and sale agreement includes a contingency clause for the benefit of the buyer. It is clear now that the contingency will NOT be met by the closing date. The contingency clause can be waived by:

The buyer

A seller accepts an offer, but then a second buyer makes an offer on the same property for a higher purchase price. A licensee should tell the second offeror that:

The second offer should be presented, but should take the form of a backup offer

A transaction will include a home warranty. The seller's agent should find out:

Which party will be responsible for the one-time premium

A buyer would be protected from risk of loss due to a failed heating system through:

A home protection statement

With the exception of sales supervised by the court, the amount of the earnest money deposited by a purchaser along with his offer is determined by:

Agreement between buyer and seller

A contract specifies that "time is of the essence." This means that:

All contractual duties must be fulfilled on or before the date set forth in the contract

A buyer and seller enter into a purchase and sale agreement that specifies that the buyer has 45 days to obtain financing. Through no fault of the buyer, it becomes impossible to obtain a loan commitment from a lender within the prescribed period; so the seller agrees to give the buyer an extension. The real estate agent should have both the buyer and the seller sign a/an:

Amendment

When completing a purchase and sale agreement form, a real estate agent must meet the same standard of care as:

An attorney

A real estate firm handles property management for a number of property owners. Rather than use one standard form, though, each lease must be separately drafted, based on individual negotiations. Which of the following statements is true?

An attorney must be engaged to draft each contract

The purchase and sale agreement includes a financing contingency clause, for the benefit of the buyer. Three weeks after signing the agreement, the seller receives notice that the buyer is backing out of the transaction. The seller will be required to return the buyer's earnest money deposit if the buyer?

Applied for financing and was turned down

After receiving a seller disclosure statement a buyer can rescind the purchase and sale agreement:

At her own discretion

In a typical residential sales transaction, if there was no mention of a possession date, possession would be given:

At the time of closing

If the full legal description of property is too long to fit on the form, the agent should?

Attach a separate sheet with the full description

If the provisions of the purchase and sale form being used do not adequately cover the transaction an agent is handling, the agent may?

Attach a simple addendum form

An earnest money deposit:

Can be any amount the parties agree upon

The date on which the seller receives the proceeds of the sale, the deed is delivered to the buyer, and all documents are recorded is called the:

Closing date

The purchase and sale agreement has been signed and the seller has completed the seller disclosure form. A windstorm damages the property. The seller's agent is obligated to:

Contact the buyer's agent and inform him

A purchase and sale agreement is for $150,000, with 80% financing, closing in 30 days with possession at closing, and a rent provision for possession after closing. This is an example of a/an:

Contract with contingencies

Which of the following items does not need to be included in a purchase and sale agreement?

Copy of the deed

A written extension agreement between buyer and seller serves to:

Defer the closing date

An owner-occupied property qualifies for its state's homestead exemption from property taxes. Shortly after closing, the new assessed value of the property is issued, and the property tax amount increases significantly. The selling agent is obligated to:

Do nothing

All of the following are required for a valid purchase and sale agreement, except:

Earnest money

Maria offered to purchase Alexander's house for $135,000. After talking it over with his agent, Alexander signed the offer and returned it to Maria. At this point, what type of title does Maria have to the house?

Equitable

Once a sales contract is signed by the parties, the buyer immediately receives:

Equitable title

A bump clause is a provision that permits the seller to annul any contract she signed that was contingent upon the sale of the buyer's home and accept another offer that is not a contingent offer?

False

A home seller must give the buyer disclosure statement within 3 days after the purchase and sale agreement is signed?

False

After receiving and reviewing the seller disclosure statement, if the buyer elects to rescind the contract, he must provide, within 5 days, his reasons for doing so?

False

Any modification of the purchase and sale agreement after the parties have signed a binding contract is considered a counteroffer?

False

As a rule, the date possession is transferred to the buyer is two days after closing?

False

As a rule, the date possession is transferred to the buyer is two days after the closing?

False

If a property description is too long to fit in the applicable blank, the licensee filling out the purchase and sale agreement only needs to include as much of the description as will fit?

False

If a purchase and sale agreement makes no reference to compensatory damages or specific performance as remedies for any future breach of contract, a court would not have the power to award those remedies to an injured party in the event of a lawsuit?

False

If any party to the purchase and sale agreement is a minor, the agreement is void?

False

If the property description is too long to fit in the applicable blank, the licensee filling out the purchase and sale agreement only needs to include as much of the description as will fit?

False

If the property is destroyed by fire after the purchase and sale agreement is signed but before closing, the buyer cannot withdraw from the transaction, but she can collect the hazard insurance proceeds?

False

In Washington, a real estate agent may fill in the blanks on an approved purchase and sale agreement form and charge an additional fee for doing so, as long as she doesn't create any contract language from scratch?

False

Samantha Smith, a married woman, is selling her separate property. There would be no reason to ask her husband to sign either the purchase and sale agreement or the deed, since he has no legal interest in the property?

False

Technically, the listing agreement is an offer by the seller to sell the property to a ready, willing, and able purchaser. An interested buyer need only accept the terms offered in the listing to form a valid purchase and sale agreement?

False

The amount of the earnest money deposit is set by the statute?

False

The seller disclosure statement provided to the buyer by the seller is an integral part of the purchase sale agreement?

False

While an original offer from the buyer should have a deadline for acceptance, there is usually no deadline set for acceptance of a counteroffer?

False

Agent Marcus is showing a property that was built in the early 1970s. The buyer asks about the presence of lead-based paint in the house. What should the agent say?

Federal law requires sellers of houses built before 1978 to make disclosures concerning lead-based paint, and the buyer may request an inspection

Siobhan listed her property with ABC Realty. She asks her agent, Robert, to draft deed covenants that will prevent a buyer from subdividing the land in the future. She'd also like the agent to create a trust from the sale, to benefit her disabled sister. Robert's reply should be:

I can't help you with either of these things; you'll need to contact an attorney

The remedy of liquidated damages:

Is available only if provided for in the contract

Which of the following statements is true concerning a lead-based paint disclosure?

It must include an option for the buyer to waive further inspection

A couple with children would like to buy a house that was built in 1950. The home was recently remodeled, with completely new paint and plumbing. In this situation, what does the agent always have to do?

Make sure the buyers receive a pamphlet on lead-based paint

A buyer makes an offer to purchase on May 2. The offer includes a promise to deposit $5,000 in earnest money within two business days after mutual acceptance. The offer is contingent on results of a soil feasibility report. On May 5 the seller accepts the offer. On May 11 the soil report is ordered. On May 17 the soil feasibility report comes back and is approved by the buyer. By what date does the earnest money need to be deposited?

May 7

Legally, how much earnest money must be submitted with a valid purchase and sale agreement?

No earnest money is required

The buyers and the sellers entered into the purchase and sale agreement. The sellers were moving out of state and vacated the property well before the closing date. On the day before closing, the buyers and their real estate agent arrived at the property for a final inspection. When they entered the home, they realized that a pipe had burst and the house had flooded. There was water in the basement, the basement floor and walls were ruined, and the entire house smelled of mold. Are the buyers required to go through with the purchase?

No, because the buyers are entitled to receive the property in the same condition it was in on the day the sales agreement was executed

Transfer of possession?

Normally takes place at closing

P enters into a purchase and sale agreement with Seller H. Shortly thereafter, a title search reveals that H will not be able to deliver marketable title to P because there are some title defects that cannot be corrected. P demands, in writing, that her earnest money deposit be returned immediately. Which of the following is the proper course of action for the brokerage?

Notify the seller of the buyer's demand

In most real estate transactions, the buyer is the:

Offeror

Which of the following types of personal property would be transferred to a buyer in a typical real estate transaction:

Only property listed in the purchase and sale agreement

Jones and Li enter into a purchase and sale agreement. Li agrees to pay $75,000 for Jones's lot. Li gives his real estate agent, Patterson, an earnest money deposit of $1,200. When Jones can't provide Li with marketable title, Li asks Patterson for his deposit back. Patterson should:

Return the full $1,200 to Li

Which of the following is the most commonly used type of disclosure?

Seller disclosure statement

Which of the following statements about the federal law on lead-based paint is false?

Tenants must be given 10 days in which to conduct an inspection, although they may waive this right

The effect of a counteroffer is to:

Terminate the offer

If a buyer makes an offer to purchase a house and sets no deadline for the seller's acceptance:

The offer terminates if not accepted within a reasonable time

Despite a good faith effort, the buyer was unable to obtain financing on the terms spelled out in the contingency clause. As a result?

The purchase and sale agreement terminates and the earnest money is refunded

An apartment building was built in 1960. An apartment is being rented to a couple with no children. Which of the following is true?

The tenants should sign the lead-based paint disclosure and receive a pamphlet on lead-based paint

Purchase and sale agreements typically contain many clauses. All of the following would likely be included in the contract EXCEPT:

The type of listing contract used by the parties, and the date it expires

A buyer and a seller enter into a purchase and sale agreement. The agreement provides that closing must take place by September 30. A clause states that a party's failure to be ready to perform by a date specified in the contract will constitute a breach of the contract. What is the name of this clause?

Time is of the essence clause

If a purchase and sale agreement provides that time is of the essence?

Timely performance is considered an essential term of the agreement

A contract in which time is of the essence is one in which performance on or before the exact dates specified is one of the essential terms of the agreement?

True

Buyers purchasing a home that was built before 1978 must be offered at least 10 days in which to have the home tested for lead-based paint?

True

If a seller accepts a second offer as a backup to a contingent sale, the second agreement should be contingent on the failure of the first contract?

True

If the buyer and seller agree in the purchase and sale agreement that the seller will not vacate the property until 10 days after closing, a separate rental agreement should be signed by both parties?

True

If the buyer and seller agree in the purchase and sale agreement that the seller will not vacate the property until ten days after closing, a separate rental agreement should be signed by both parties?

True

If the seller learns new information about the property after the buyer has received the seller disclosure statement, she must either provide the buyer with an amended statement or take corrective action to make the original disclosure statement accurate?

True

In Washington, the amount of earnest money that can be treated as liquidated damages is limited to 5% of the purchase price?

True

In a contingent sale situation that includes a bump clause, if the seller receives another offer before the contingency is fulfilled, the seller can notify the buyer that their agreement will be terminated unless the buyer waives the condition?

True

In a typical transaction, the type of deed that the seller will execute in favor of the buyer is a general warranty deed?

True

In a typical transaction, the type of deed that the seller will execute in favor of the buyer is a vernal warranty deed?

True

It is standard practice for the seller to provide marketable title, pay for a title insurance policy protecting the buyer, and pay off all liens the buyer has not agreed to assume?

True

Neither the seller nor the seller's agent may be held liable for inaccuracies in the seller disclosure statement unless they knew the information was incorrect?

True

Only the party who benefits from a particular contingency clause has the power to waive that contingency?

True

The liquidated damages provision in a purchase and sale agreement stipulates that, if the buyer defaults the seller can keep the earnest money deposit, instead of suing the buyer?

True

The purchase and sale agreement must provide a specific date for closing?

True

When a buyer makes an offer contingent upon obtaining the necessary financing, he must make a good faith effort to obtain a loan on the terms specified in the contingency?

True

When a contract terminates because a contingent event does not occur, the buyer is usually entitled to a refund of the earnest money deposit?

True

The purchase and sale agreement required the seller to order a pest inspection. The inspector found an infestation, and remedial action was required. Which party was responsible for paying to fix the problem?

Whichever party agreed to pay for the expense in the purchase and sale agreement

The seller accepted an offer for the full purchase price; the offer included a financing contingency. The buyer agreed to provide the seller with a preapproval letter 20 days before closing. It was 15 days before closing, and the seller had not yet received the preapproval letter. That same day, the seller's agent received a better offer: $1,000 over the listing price and no contingencies. Should the agent present the offer to the seller, and if so, what type of clause in the first contract could release the seller from that original first contract?

Yes, the agent can present the second offer; if the first contract included a time is of the essence clause, the failure of the buyer to provide the preapproval letter was a breach of the contract