Real Estate Chapter 7

(Foreign buyers may lawfully enter into a valid contract to purchase property.)

15) The following persons may not lawfully enter into a valid contract to purchase property, except: a. unemancipated minors. b. minors who are wards of the court. c. convicts. d. international buyers.

C. Neither trust deeds nor mortgages transfer possession without concurrently transferring legal title.

17) A real estate transaction in which the buyer gains possession of a property while the seller retains legal title until the debt is fully repaid is an example of a(n): a. mortgage. b. trust deed. c. land sales contract. d. sublease.

A. (In most cases, the party name ending in "or" owns the real estate. In the instance of a land contract, the "ee" (vendee) is the buyer and therefore has possession and equitable title of a property, but not legal title.)

18) The right of possession and equitable title is held by the: a. vendee. b. vendor. c. trustee. d. trustor.

c. (In the instance of a land contract, also known as a contract sale, there is no trustee. Further, the vendor already has legal title to the property so answer selection D would impact them (the seller) rather than the vendee (the buyer). Thus, on a default by the buyer, the seller files a quiet title action.)

20) Upon the default of a buyer under a land sales contract, the seller: a. instructs the trustee to initiate foreclosure. b. requests a deficiency judgment against the buyer through the courts. c. files a quiet title action. d. files a lis pendens action.

D. The open listing guaranteed payment to the procuring broker. The exclusive listing is a bilateral contract which cannot be voided unilaterally. Therefore, the seller owes a commission to both brokers.

35) Broker Matthews took a 90-day exclusive agency listing to sell a property owned by Tyler. After 30 days without selling the property, Tyler sent Broker Matthews a letter cancelling the listing. One week later, Tyler enters into open listings with several other brokers. Two weeks later, one of the brokers sold the property. In this situation, Tyler: a. did not have the right to give open listings to the other brokers. b. had a right to relist the property and had the right to cancel Matthew's listing. c. owes the commission only to the broker who procured a buyer. d. is liable for payment of a commission to Matthews as well as to the selling broker.

B. The optionor is the owner of the real estate. Thus, the optionor is the only party obligated to perform under the terms of the option.

39) Which of the following is true concerning an option? a. A fiduciary duty exists between the optionor and the optionee. b. Only the optionor is bound to perform under the terms of an option. c. Consideration does not actually have to change hands so long as the option says it has. d. The optionee has created a legal interest in the property.

A. Any contract to perform an illegal act is void by definition. This is one of the four essential conditions of a contract.

40) A contract based on an unlawful purpose is: a. void. b. voidable. c. unenforceable. d. enforceable, if in writing.

The amount recoverable under a liquidated damages provision in a purchase agreement is not always limited to 3%, only for one-to-four unit residential property. The only answer that is true is C.

42) A buyer and seller initial the liquidated damages clause in a real estate purchase agreement. The buyer later defaults. The amount recoverable is: a. given to the seller when escrow opens. b. limited to 3% of the selling price. c. given to the seller after the default. d. used to pay any costs incurred by the seller and then returned to the buyer.

c. (To make an offer is to "tender" the offer. Refer to the Real Estate Glossary if any of these terms are unknown.)

51) An offer to perform in accordance with contractual obligations is an example of: a. a conditional offer. b. a covenant. c. tender. d. performance.

C. Both owners of community property need to be involved in the sale of property held by both parties.

52) A husband signed a contract to sell community real estate without his wife's signature. The contract is: a. voidable. b. binding. c. unenforceable. d. void.

c. (The amount of consideration is not relevant. However, the consideration itself needs to be delivered to create a valid and enforceable option.)

53) Which of the following is true concerning an option? a. No consideration is necessary to create an option. b. An option is void if the consideration is inadequate. c. An option is valid so long as consideration is actually delivered. d. None of the above.

B. (An oral contract for more than a year may be valid but unenforceable.)

7) Which of the following is true? a. An illegal contract can be an enforceable contract. b. A valid contract can be an unenforceable contract. c. A void contract can be enforced by one party only. d. "Voidable" means "void unless validated."