real estate section 3

Which of the following agency responsibilities most likely would be limited in dual agency representation? Select one: a. Fairness. b. Reasonable care. c. Disclosure. d. Accounting.

A dual agent may not disclose confidential information about either client, since he represents both clients. The correct answer is: Disclosure.

If the landlord (owner) of property dies during the period of a valid lease, what effect would it have on the lease and the tenant? Select one: a. The lease is void, by operation of law. b. The lease would be voidable, at the option of the tenant. c. The right of possession would revert to the estate of the deceased. d. It has no effect.

Upon the death of the landlord, the lease (contract) continues in effect between the tenant and the estate or heirs of the landlord. Death of either of the parties to a contract has no effect on the contract, EXCEPT in an agency type contract. The correct answer is: It has no effect.

When a contract is breached, the injured party: Select one: a. May not sue for money damages. b. May not sue for specific damages. c. May rescind the contract bilaterally. d. May rescind the contract unilaterally. Feedback

When a contract is breached, the injured party may rescind the contract unilaterally. The correct answer is: May rescind the contract unilaterally.

A broker and salesperson owe all EXCEPT which of the following to the purchaser/customer? Select one: a. Negotiation of the lowest possible price b. Honesty c. Fairness d. Disclosure of defects in the property

A buyer who is treated as a customer is owed honesty, fairness and disclosure of all material defects in the property. A purchaser/customer is not owed a duty to obtain the lowest possible price from the agent. The correct answer is: Negotiation of the lowest possible price

A state law that sets a time frame within which someone must bring a lawsuit is called statute of limitations. Select one: a. True b. False

true

A client is obligated to her agent for... Select one: a. indemnification against loss not caused by the agent. b. reimbursement. c. performance. d. all of the above.

A client is obligated to her agent for indemnification against loss not caused by the agent. The correct answer is: indemnification against loss not caused by the agent.

If a buyer submits an offer to buy and the offer contains a contingency clause, the resulting contract is: Select one: a. Valid if the contingency is accepted by the seller. b. Invalid. c. Only valid if accepted by the seller within 24 hours. d. Illegal.

A contingency is a clause in a contract which identifies a condition. For example. "...I offer this much if you repair the fence..." The condition that the fence be repaired is a contingency. Any contingency is allowable, if accepted by all parties. The correct answer is: Valid if the contingency is accepted by the seller.

To be valid, a contract for sale must contain all of the following EXCEPT: Select one: a. Signatures of all parties. b. An earnest money deposit. c. Consideration. d. An offer and an acceptance.

A contract for the sale of real estate must be in writing and signed by the parties to be valid. The signature of all parties would indicate that there is an offer and acceptance. There is no requirement that there be a deposit, although it is usually expected. The correct answer is: An earnest money deposit

Which of the following best describes a contract? Select one: a. An offer and acceptance between competent parties to do a specific legal act. b. A written agreement between competent parties to abstain from doing a specific act. c. An offer and acceptance between competent parties to do or not to do a specific legal act for consideration d. A mutual agreement between two or more parties.

A contract is BEST described as an offer and acceptance between competent parties to do or not to do a specific legal act for consideration. (Notice that this correct choice includes both "to do" and "or not to do.") The correct answer is: An offer and acceptance between competent parties to do or not to do a specific legal act for consideration

A valid contract is one which: Select one: a. Serves a lawful purpose. b. Is enforceable against one of the parties. c. Has been signed by both parties. d. Contains all of the essential elements of a contract.

A contract which includes all of the essential elements of a contract is a valid contract. A valid contract would be enforceable against both parties. The correct answer is: Contains all of the essential elements of a contract.

An offer is made to a seller and the seller makes a counteroffer. Prior to the buyer accepting the counteroffer, the seller receives a better offer from another prospective buyer. Under these circumstances, the seller: Select one: a. May withdraw the counteroffer. b. Should advise the second offeror to wait. c. Can accept the second offer without recourse. d. Is bound by the terms of the counteroffer.

A counteroffer, like an original offer, may be withdrawn at any time PRIOR to acceptance. The correct answer is: May withdraw the counteroffer

A general agency empowers the agent to... Select one: a. transact matters of all types for the client. b. transact the client's affairs in a certain business. c. perform only specific acts for the client. d. perform any legal act for the client.

A general agency empowers the agent to transact the client's affairs in a certain business or field. The correct answer is: transact the client's affairs in a certain business.

Which of the following is subject to the Statute of Frauds? Select one: a. Six-month lease for an apartment b. Tenancy at will c. Two-year lease for real property d. Month to month rental

A lease for more than one year must be in writing under the Statute of Frauds. The correct answer is: Two-year lease for real property

A listing agreement may be terminated by: Select one: a. The seller b. The buyer's broker c. The salesperson that obtained the listing d. Death of the salesperson

A listing agreement is one type of agency agreement and may be terminated by the client (seller), agent (broker) or by mutual consent. The salesperson cannot terminate the listing. Answer B addresses the buyer's broker. If it had said the LISTING broker, then it too would have been correct. Watch the wording of these questions. The correct answer is: The seller

Which of the following listing agreements is LEAST likely to specify a commission rate? Select one: a. Open listing. b. Net listing. c. Exclusive agency. d. Exclusive right-to-sell.

A net listing (which is illegal in most states) sets the broker's commission as any price received above a specified amount. It is not stated as a percentage of the sale price. The correct answer is: Net listing.

Which of the following is true of a contract under novation? Select one: a. A new contract replaces the old one. b. The old contract is void. c. The original parties to the contract remain jointly and severally liable with the new parties. d. A new party is assigned the rights of an old party.

A new contract replaces the old one is the basic definition of novation. The old contract is not void, but is extinguished (ceases to be). The correct answer is: A new contract replaces the old one.

What is the difference between a novation of a contract and an assignment of a contract: Select one: a. The party that initiates the action. b. A novation is legal while an assignment is not. c. A novation replaces the old contract with a new one while an assignment replaces one party to the contract with another. d. An assignment replaces the old contract with a new one while a novation replaces one party to the contract with another.

A novation replaces an old contract with a new one where an assignment transfers one party's interest in the existing contract to another party. The correct answer is: A novation replaces the old contract with a new one while an assignment replaces one party to the contract with another.

To be legally binding, a real estate contract MUST contain: Select one: a. A termite clause. b. A list of personal property. c. A property description. d. A commission.

A real estate contract probably will include all of the items mentioned, but the contract MUST include a property description. The correct answer is: A property description.

Funds in the escrow account may be dispersed for any of the following reasons EXCEPT when: Select one: a. All principals to the transaction agree in writing to the disposition. b. A court orders disbursement of the funds. c. The seller demands forfeiture of the earnest money deposit. d. The transaction is consummated.

A seller may not dictate the disposition of funds in the broker's escrow account. Disbursement is made through agreement of the parties, court order, or when the transaction is complete. The correct answer is: The seller demands forfeiture of the earnest money deposit.

A unilateral contract is executed: Select one: a. When the offeror signs the contract. b. Upon completion of the requested act. c. When the offeree signs the contract. d. After a reasonable period of tim

A unilateral contract is a promise by one party only, i.e. a broker promises a prize to any salesperson that obtains 15 listings during the month. When and only when a salesperson acquires 15 listings does the broker have to fulfill his promise. Thus, the contract is executed at the completion of the requested act. The correct answer is: Upon completion of the requested act.

When a contract is entered into based strictly on the actions of the parties involved, it would be considered to be which type of contract? Select one: a. Unilateral. b. Executed. c. Implied. d. Expressed.

Actions alone can create an implied contract. For instance, suppose a tenant takes it upon himself to mow the loan and the landlord notices this and reduces the rent by $50 per month. Neither has discussed the matter. After a while, they have what amounts to a contract whereby as long as the tenant keeps mowing the loan, the landlord must continue offering the reduced rent. The correct answer is: Implied.

Which of the following would be included in the duties of an agent to a customer? Select one: a. To disclose material adverse facts about the property. b. To maintain the confidentiality of information provided to the agent. c. Both to disclose material adverse facts about the property and to maintain the confidentiality of information provided to the agent. d. Neither to disclose material adverse facts about the property nor to maintain the confidentiality of information provided to the agent.

Agents owe customers only the duties of fairness and honesty. Fairness would include the obligation to disclose material adverse facts about the property. The correct answer is: To disclose material adverse facts about the property.

How can a contractual relationship be created? Select one: a. Written documents. b. Action of the parties. c. Words of the parties. d. Any of these choices.

All answers given are ways in which a contract may be created. A contract that is in writing is an express contract. Contracts created by actions of the parties create an implied contract. Words between the parties can create either and express or implied contract. The correct answer is: Any of these choices.

A real estate broker wishes to deposit an earnest money check in his business operating account until settlement, so the purchaser can earn a higher rate of interest on his funds. Can he legally do this? Select one: a. Yes, if the purchaser receives a comparison of available interest rates b. Yes, if the broker promises to insure such funds will be available at closing c. No, these funds must be placed in a separate escrow account d. No, the broker cannot guarantee a higher interest rate

All funds held for others must be deposited in a separate escrow account, NOT in the business operating account. The correct answer is: No, these funds must be placed in a separate escrow account

Vernon presents an offer to a seller with the provision that it must be accepted within 72 hours. Under which of the following circumstances would the offer terminate? Select one: a. Seller accepts the offer, but Vernon dies before receiving a copy of the accepted offer. b. The seller resubmits the offer with a minor change as to settlement date. c. The seller wants to wait a week before acceptance. d. Any of these choices would terminate the offer.

All of the listed choices would result in termination. If Vernon dies before being advised of the seller's acceptance, the contract is void. The changes to the original offer (whether settlement date or expiration date) would constitute a NEW offer. The original offer would be terminated. The correct answer is: Any of these choices would terminate the offer.

An offer is accepted by all parties with a settlement date of September 5. Three days prior to settlement the purchaser notifies the seller that funds are not available and settlement cannot take place as scheduled. Which of the following options are available to the seller? Select one: a. Sue for specific performance. b. Sue for monetary damages. c. Allow rescission of the contract. d. Any of these choices.

All of these choices are available to the seller if the purchaser is unable to settle on the scheduled date and all of the other contract provisions are fulfilled. Although not listed as a choice, the seller could also agree to a change of the settlement date. The correct answer is: Any of these choices.

Mr. Gregory has a home for sale with a sign, FOR SALE BY OWNER, in the front yard. Salesperson Gary calls, identifies himself and asks for the key to show the property. Mr. Gregory agrees. Which of the following best describes any agency relationship that may exist? Select one: a. Mr. Gregory is Gary's client. b. Gary is Mr. Gregory's agent. c. Gary's broker is the agent of Mr. Gregory for a reasonable time. d. No agency relationship exists.

An agency agreement between Gary's BROKER (agent) and Mr. Gregory (client) exists by implication. Gary did identify himself and the seller agreed to let him show the property. In absence of a specified time, the agency would continue for a reasonable time. The correct answer is: Gary's broker is the agent of Mr. Gregory for a reasonable time.

A seller and buyer enter into a written agreement. Such action creates: Select one: a. A contract. b. An agency relationship. c. An assignment. d. An estoppel.

An agreement between a buyer and seller is a contract. The correct answer is: A contract.

Mark gives Suzanne the authority to sign for him in a real estate transaction. Suzanne is considered, in the eyes of the law, to be: Select one: a. A broker b. An attorney-in-fact c. An attorney-in-trust d. An attorney-at-law

An attorney-in-fact is a person given authority to perform an act for another through a power of attorney. Regardless of who that person is, legally they are considered to be an attorney-in-fact. The correct answer is: An attorney-in-fact

A contract may be all of the following EXCEPT: Select one: a. Exclusive authorization or right to sell. b. Lease. c. Contract of sale. d. Prospectus. Feedback

An exclusive authorization (or right) to sell is a form of listing agreement, which is an agency contract. A lease and a contract of sale are types of real estate contracts. A prospectus is an outline for a new undertaking or a type of advertisement that you would receive from a stock broker announcing a new stock offer. The correct answer is: Prospectus.

Which type of listing agreement gives the broker maximum protection? Select one: a. An open listing b. A net listing c. An exclusive right-to-sell d. An exclusive agency listing

An exclusive right-to-sell listing gives the broker the maximum protection because the broker gets paid the commission regardless of who finds the buyer. The correct answer is: An exclusive right-to-sell

Which of the following could be recognized as consideration in a valid contract? Select one: a. A mortgage note with interest. b. A promise to install a cabinet. c. A note without interest. d. Any of these choices.

Each of the listed choices would be something of value and would legally be consideration. A promise is considered consideration. The consideration in a contract does NOT have to be money, but can be anything of value. The correct answer is: Any of these choices.

Which of the following statements, made by a broker, would NOT be considered puffery? Select one: a. "This is the most beautiful house in the world." b. "You can double your money on this property in less that 2 years, I guarantee it." c. "This is the best deal we've had in years." d. "The property is close to everything."

Any time that a broker suggests or guarantees the return on investment, he has crossed over the line from puffery to misrepresentation or possibly fraud. Puffery is a matter of opinion. The correct answer is: "You can double your money on this property in less that 2 years, I guarantee it."

Clara offered Bernie $60,000 for his home. Bernie changed the amount of the offer to $62,000, initialed the change, and signed the offer. With respect to the offer, which of the following is true? Select one: a. The offer becomes a binding contract, since Bernie signed it. b. The offer has been rejected and the property may only be sold if the buyer makes another offer. c. The seller changed the price and initiated the change creating a counteroffer, which the buyer may accept or reject. d. None of these choices.

Bernie's action of changing the price constitutes a rejection of the original offer and a counter offer. Clara may now accept this counter offer just by initialing the change also. This is a matter of expedience to save preparation of a whole new contract. Such action by the parties is legal and binding. The correct answer is: The seller changed the price and initiated the change creating a counteroffer, which the buyer may accept or reject.

Broker Bob is holding a buyer's good faith deposit in his escrow account. The offer has an inspection clause which gives the buyer 10 days to have the home inspected and to rescind (cancel) the contract if the inspection reveals adverse facts. The inspector finds that the roof leaks and the buyer notifies the seller in writing of that decision. The seller maintains that the buyer is in breach of the contract. May Broker Bob legally return the buyer's good faith deposit? Select one: a. Yes, since his rescission was clearly permissible under the terms of the contract; b. Yes, in all cases. c. No, since the rescission was clearly not permissible under the terms of the contract. d. No, but Broker Bob could give it to a court through an interpleader action.

Broker Bob cannot make the decision of whether the contract terms have been met. If the two parties do not agree, he must turn the money over to a court and let the judge decide who gets the money. That is an interpleader action. The correct answer is: No, but Broker Bob could give it to a court through an interpleader action.

Broker Bob has opened an escrow account and has deposited a buyer's earnest money deposit in that account. Broker Bob later learns that a different customer is about to file a lawsuit against him so he deposits $100,000 of his own money in that account. This action constitutes: Select one: a. Conversion. b. Commingling. c. Disintermediation. d. Wise business practice. Feedback

Broker Bob has commingled his own money with clients' money, which is a violation. [Conversion is theft of the money.] The correct answer is: Commingling.

Broker Macro was showing a tract of land with irregular boundaries. When asked about a boundary, Macro indicated that it ran from the edge of the stone wall to the creek. Macro knew this was not exactly correct. After the buyer contracted for the property, he was shown a survey which reflected the true boundary. Was Macro guilty of misrepresentation? Select one: a. No, verbal statements are not binding. b. No, the buyer was responsible for having the property surveyed. c. Yes, the broker was responsible for verifying the official records. d. Yes, because Macro knew his statement was not completely accurate.

Broker Macro knowingly misrepresented the facts about the boundaries to the buyer and is therefore guilty of misrepresentation and possibly fraud. The correct answer is: Yes, because Macro knew his statement was not completely accurate.

Brokers must hold their client's funds in a/an... Select one: a. office safe. b. savings account. c. trust or escrow account. d. special account managed by the Board of Realtors. Feedback

Brokers must hold their client's funds in a trust or escrow account. The correct answer is: trust or escrow account.

A salesperson lists a home. The house burns down prior to receiving an offer. Which of the following is true in this situation? Select one: a. The vacant lot is still listed. b. The broker can sue the seller for the commission based on the listed price. c. All advertising must be revised to accurately describe the property. d. The listing automatically terminates.

By law, the listing agreement terminates. The subject matter of the agency contract no longer exists. If the seller wishes to list the vacant lot a new listing agreement with new terms and conditions would need to be agreed to and signed. The correct answer is: The listing automatically terminates.

Sam, an adult, contracted to buy a vacant lot from Jerry. Several months later Sam found out that Jerry was only 17 years old. Which of the following is true regarding the sales contract? Select one: a. The contract is valid and binding on both parties. b. The contract is voidable by either party. c. The contract is voidable by Jerry only. d. The contract is void. Feedback

Contracts between adults and minors are binding on the adult and are VOIDABLE by the minor. The correct answer is: The contract is voidable by Jerry only.

A buyer and seller have a legal real estate contract. The contract does NOT address the issue of death by either party. If the seller dies, prior to closing, which of the following is true? Select one: a. The contract becomes null and void. b. The contract remains valid and enforceable. c. The sellers estate may cancel the contract. d. The contract is void by operation of law.

Death has no effect on the validity of a contract. The contract would be binding on the heirs and the estate of the deceased party. The only exception to this rule is an AGENCY contract. Because it is a personal services contract, death of either party, principal (client) or agent, voids the contract. The correct answer is: The contract remains valid and enforceable

Any of the following could cause a listing agreement to be terminated. Which of the following is NOT by operation of law? Select one: a. The seller discharges the broker. b. The property is destroyed by fire. c. The broker declares bankruptcy. d. The seller dies.

Each of the choices would terminate the agency by operation of law except if the seller discharges the broker, which is an action by the seller, not the law. The correct answer is: The seller discharges the broker.

Helen sells her house to Fred using a contract for deed. Which of the following statements is correct? Select one: a. Helen is the vendor and holds legal title. b. Fred is the vendor and holds equitable title. c. Helen is the vendee and holds equitable title. d. Fred is the vendee and holds legal title.

Helen (the seller) is the vendor and holds legal title. Fred (the buyer) is the vendee and holds equitable title The correct answer is: Helen is the vendor and holds legal title.

Betty has made an offer to purchase Sally's house. The contract would automatically terminate if Sally passed away: Select one: a. Before accepting the offer. b. After accepting the offer. c. Either before or after accepting the offer. d. Neither before nor after accepting the offer.

If a party to an offer to purchase real estate died before the offer was accepted, the offer would automatically be terminated. However, once the offer is accepted the contract would be binding on the estate of the seller. The correct answer is: Before accepting the offer.

If the seller makes a counteroffer, when may that counteroffer be withdrawn? Select one: a. At any time before settlement. b. At any time prior to acceptance. c. Within 72 hours. d. Within 24 hours.

Like an offer, a counteroffer may be withdrawn at any time before acceptance by the offeree. The correct answer is: At any time prior to acceptance.

Which of the following contracts is voidable? Select one: a. One of the parties to the contract is legally insane. b. One of the parties did not sign the contract. c. One of the parties was drunk at the time the contract was signed. d. The subject of the contract was for an illegal purpose.

If one of the parties to the contract was not in control of his or her actions, the contract could be declared void by that party (voidable). In situations A, B and D, the contract would be legally void, not voidable. The correct answer is: One of the parties was drunk at the time the contract was signed.

If an offer is mailed to the seller, a contract exists when Select one: a. the buyer receives the acceptance in the mail. b. the agent receives the acceptance in the mail. c. the seller mails his acceptance. d. the seller calls the agent and informs him of the acceptance.

If the offer was mailed to the seller the offer would become a contract when the seller mails the acceptance back to the buyer. The correct answer is: the seller mails his acceptance.

A purchaser submits an offer to a seller with the condition that the property is to be financed by a conventional loan at no more than 10% interest. If the seller agrees but such financing cannot be obtained, which of the following is true? Select one: a. The purchaser loses his deposit but is relieved of further liability. b. The seller is obligated to return the deposit plus interest. c. The purchaser may request his deposit be returned. d. The seller can sue for specific performance.

If this provision is in the contract and the seller accepts, then it becomes a condition of the contract. If the buyer cannot find financing, then the contract cannot be executed and the purchaser may request the return of his deposit. The correct answer is: The purchaser may request his deposit be returned.

The protection clause in a contract: Select one: a. Protects the buyer and seller from breach of contract. b. Assures the broker will be paid a commission. c. Ensures the broker a commission if the seller and buyer enter into a contract after the listing has expired. d. Safeguards the borrower from foreclosure by a lende

If, after a listing expires, the seller enters into a contract with a buyer that was introduced to the property during the listing period, a commission is due and payable to the listing broker. Usually there is a time limit included in the clause. The correct answer is: Ensures the broker a commission if the seller and buyer enter into a contract after the listing has expired.

Which of the following would cause a contract to be void? Select one: a. Fraud. b. Undue influence. c. Illegal purpose. d. Duress.

In order for a contract to be valid, it must be for legal purpose. If the contract was entered into and there was fraud, undue influence or duress, the contract would be VOIDABLE not VOID or invalid. The correct answer is: Illegal purpose.

The statute of frauds does NOT require a written contract for: Select one: a. Ingress or egress. b. Purchase and sale of real property. c. Legal estates or equitable interests. d. Contract for deed.

Ingress and egress is "coming in and going out." You may not know what answer A means, but you know that items B, C and D all require written agreements, therefore by process of elimination, A is the correct answer. The correct answer is: Ingress or egress.

The listing price of a property is established by: Select one: a. The multiple listing service. b. The owner. c. The appraiser. d. The listing salesperson and/or the employing broker.

It is the owner that sets the price. Licensees should be prepared to advise owners concerning the best price based on market conditions etc, but it is the owner's decision. The correct answer is: The owner.

Which of the following is not required for a contract for the sale of real property to be valid and enforceable? Select one: a. Performance b. Offer and acceptance c. Consideration d. In writing

Offer and acceptance is required to create the contract. Consideration is required in all contracts. Contracts for the sale of real estate must be in writing. Performance is not required, but if either party fails to perform his or her obligations, the person could be sued for damages and sometimes for specific performance. The correct answer is: Performance

A contract of sale CANNOT exist without an offer and: Select one: a. Assignment. b. Mortgage. c. Assessment. d. Acceptance.

One of the essential elements of a valid contract is offer and acceptance. if acceptance is not present, there is no contract. The correct answer is: Acceptance.

Landlord Lloyd hires Property Manager Paul to manage an apartment complex owned by Lloyd. Property Manager Paul would most likely be considered a(n): Select one: a. Subagent. b. General Agent. c. Universal agent. d. Special agent.

Property managers are typically general agents because they represent the owner of the property in many different aspects of property management. The correct answer is: General Agent.

Bill has a contract in place to purchase Sam's house. Bill later changes his mind and defaults on the contract. Sam would have which of the following remedies? Select one: a. Rescind the contract. b. Sue for damages. c. Sue for specific performance. d. Any of these choices.

Sam could choose from any of the first three choices. The correct answer is: Any of these choices.

Licensee Larry has held a real estate license for many years and has completed many residential transactions but never any commercial transactions. His neighbor owns a small strip mall and asks Licensee Larry to sell the property. Licensee Larry should be especially careful to consider which of the following duties to the client? Select one: a. Disclosure. b. Accounting. c. Confidentiality. d. Reasonable care and due diligence. Feedback

Since Licensee Larry has no experience in commercial transactions, he should give special consideration to whether or not he can provide reasonable skill and due diligence. He should either decline the listing or partner with someone who can help him. The correct answer is: Reasonable care and due diligence.

John, an adult, entered into a contract with Paul, who is 16 years old. When John learned that Paul was a minor he decided to terminate the contract. Which of the following statements is true? Select one: a. Contracts with minors are automatically void. b. Contracts with minors are voidable at the option of the adult. c. The contract is valid and binding on both parties. d. The contract is valid and binding only on John.

Since Paul is a minor, the contract is valid and binding only on John (the adult). The correct answer is: The contract is valid and binding only on John.

When a seller makes a counteroffer, which of the following statements is NOT true? Select one: a. It is a partial acceptance of the original offer. b. The original offeror becomes the offeree in the counteroffer. c. It is a rejection of an earlier offer. d. It may be withdrawn at any time prior to acceptance.

The FALSE statement is that the counteroffer is a partial acceptance of the original offer. Actually, a counteroffer terminates the original offer. The correct answer is: It is a partial acceptance of the original offer.

Which of the following is required for a contract to be valid? Select one: a. In writing. b. An earnest money deposit. c. Consideration. d. Signature and seal of a notary public. Feedback

The essential elements of a contract are competent parties, legality of object, agreement of the parties and consideration. The question does not address a REAL ESTATE contract which would require that it be in writing and property description in addition to the other essentials. Even in a real estate contract, an earnest money deposit is not REQUIRED if all parties agree. The correct answer is: Consideration.

The amount of commission or fee that a listing broker is to receive is determined by: Select one: a. The Multiple Listing Service. b. The National Association of Realtors. c. The seller and the broker. d. The Real Estate Board or Commission

The fee charged for an act of real estate brokerage is negotiated between the client and the broker. The correct answer is: The seller and the broker.

The Parol Evidence Rule controls which of the following: Select one: a. An oral agreement leading to a written contract. b. A dispute between cooperating brokers. c. A settlement which occurs while a licensee is imprisoned. d. None of the above.

The Parol Evidence Rule states that a written agreement will override any previous oral agreement. The correct answer is: An oral agreement leading to a written contract.

To transfer the rights contained in a note, mortgage, or lease from one party to another, by a written instrument is referred to as a(n): Select one: a. Easement. b. Assignment. c. Sublet. d. Deed of trust.

The TRANSFER of rights contained in a mortgage, note, lease or other contract is called an assignment. Thus, a mortgagee can transfer his rights to a note and mortgage to an investor buying these documents. The investor has the right to receive the payments through the assignment. The correct answer is: Assignment.

Broker Johnson has listed the property of Cheever and sells it to Brevard for $175,000. Before closing, Johnson finds that the property has a serious structural defect. What should Johnson do? Select one: a. Tell Cheever. b. Tell Brevard. c. Keep it quiet as it might kill the sale. d. Tell both Cheever and Brevard.

The broker is obligated to reveal all adverse material facts known to him about the property to clients and customers. The correct answer is: Tell both Cheever and Brevard.

Seller Corcoran is in very poor health and cannot work his farm. Should a broker, who has a listing on the farm, disclose this fact to prospective buyers? Select one: a. Yes, it is a material fact about the farm which Moore must disclose. b. Yes, it may help to get at least a low offer and help sell the farm. c. No, it may hurt Corcoran's bargaining position and hurt his chances to get a fair price for the property. d. No, it would be a violation of Federal Fair Housing Laws.

The broker is precluded from discussing Corcoran's health with prospective buyers as it may weaken Corcoran's bargaining position which would be contrary to Corcoran's best interest. The sellers health is not an adverse material fact related to the property, nor is it covered under Federal Fair Housing Laws. The correct answer is: No, it may hurt Corcoran's bargaining position and hurt his chances to get a fair price for the property.

The buyer in a contract for deed is known as the: Select one: a. vendor. b. vendee. c. obligor. d. obligee.

The buyer in a contract for deed (installment sales contract) is known as the vendee. The correct answer is: vendee.

A real estate broker presents an offer to the seller on a property with the provision that the seller has 6 days to accept the offer. At the end of the 3rd day, the buyer withdraws the offer. What should the broker do? Select one: a. Return the earnest money deposit to the buyer b. Give the earnest money deposit to the seller c. Split the deposit with the buyer d. Split the deposit with the seller

The buyer may withdraw the offer at ANY time before acceptance of the offer by the seller even though the offer included a provision which gave the seller 6 days for acceptance. There is no offer and acceptance and, thus, no contract between buyer and seller. Therefore, the earnest money deposit is returned to the buyer. The correct answer is: Return the earnest money deposit to the buyer

Smith died and his real property was sold. Which of the following determines the amount of commission paid to the broker handling the sale? Select one: a. The State Real Estate Board or Commission b. The local bar association c. The listing signed by the broker and the executor or administrator for the estate d. The State Association of Realtors

The commission is determined by the listing contract signed by the parties to the transaction (broker and seller). In this case, the seller is the executor or administrator of the estate. The correct answer is: The listing signed by the broker and the executor or administrator for the estate

Mark is 16 years old and has inherited $50,000 from his grandfather. Mark contracts with Harold, an adult, to purchase his video game center. One year later, Mark decides he wants to cancel the contract. Which of the following statements is true? Select one: a. The contract between Mark and Harold is illegal. b. If Harold learns that Mark is a minor, he (Harold) may declare the contract void. c. Mark can sell the property. d. Mark may declare the contract with Harold void and get his money back. Feedback

The contract between an adult and a minor is valid and binding on the adult, but is voidable by the minor. When dealing with a minor, care should be taken to avoid problems. You should insist on dealing with the guardian of the minor. The correct answer is: Mark may declare the contract with Harold void and get his money back.

Barry makes an offer to purchase a home being sold by Pam. Pam does not accept Barry's offer, but makes a counteroffer. Relative to the counteroffer, which of the following statements is INCORRECT? Select one: a. If Barry does not accept the counteroffer, Pam has the choice to then accept Barry's original offer. b. Barry is now considered to be the offeree. c. The counteroffer rejects Barry's offer completely. d. Pam may withdraw the counteroffer at any time, prior to acceptance by Barry.

The incorrect statement is that if Barry does not accept the counteroffer Pam can go back and accept Barry's original offer. The counteroffer terminated the original offer. The counteroffer constitutes a NEW offer, so Barry is the offeree in this counteroffer. As with any offer, it may be withdrawn at any time prior to acceptance. The correct answer is: If Barry does not accept the counteroffer, Pam has the choice to then accept Barry's original offer.

The instrument authorizing one person to act for another person is: Select one: a. An attorney in fact. b. A power of attorney. c. An estoppel certificate. d. A certificate of no defense.

The instrument (the agreement) is a power of attorney. The correct answer is: A power of attorney.

After an offer to purchase has been made and accepted, the salesperson may alter the contract under which of the following circumstances? Select one: a. If there was a minor detail omitted. b. If the closing date changes. c. If the salesperson's broker approves the change. d. With the approval of all parties involved in the contract

The only time that a ratified contract may be altered in ANY way is with the written approval of all parties to the contract. Even minor changes require approval of all parties. The correct answer is: With the approval of all parties involved in the contract.

After an offer to purchase has been made and accepted, the salesperson may alter the contract under which of the following circumstances? Select one: a. If there was a minor detail omitted. b. If the closing date changes. c. If the salesperson's broker approves the change. d. With the approval of all parties involved in the contract.

The only time that a ratified contract may be altered in ANY way is with the written approval of all parties to the contract. Even minor changes require approval of all parties. The correct answer is: With the approval of all parties involved in the contract.

A person that has the legal authority to act for another is: Select one: a. A listing broker. b. An attorney-at-law. c. An attorney-in-fact. d. An ostensible agent.

The person is known as an attorney-in-fact and receives his power to act through a power of attorney. Usually the power of attorney is very specific as to exactly what the agent may do. A broker usually does not have the authority to act for someone else. Under the agency agreement (listing) with a broker, the broker's job is to find a ready, willing and able buyer at the terms and conditions set by the client. The correct answer is: An attorney-in-fact.

A purchase contract has been agreed to by the buyer and seller of a home. The contract calls for closing to occur in 45 days. Later, the closing is actually scheduled for the 47th day. The contract could be rescinded if the contract included which of the following phrases? Select one: a. "Exact times required." b. No special wording is required. c. "Time is of the essence." d. "Time limits are specific." Feedback

The phrase "time is of the essence" means that time limits are to be strictly enforced. The correct answer is: "Time is of the essence."

Wilma lists her house with broker Fred under an exclusive right-to-sell agreement. Fred later abandons the listing. Which of the following is true in this situation? Select one: a. Wilma must maintain the listing with Fred until the expiration date. b. Wilma may terminate the listing. c. Wilma must wait 90 days before she can list the property with another broker. d. Wilma must file a notice of abandonment.

The protection clause in a contract: Select one: a. Protects the buyer and seller from breach of contract. b. Assures the broker will be paid a commission. c. Ensures the broker a commission if the seller and buyer enter into a contract after the listing has expired. d. Safeguards the borrower from foreclosure by a lende

What is the purpose of earnest money being part of a real estate contract? Select one: a. Without it, there would be no consideration. b. It allows the seller to personally hold the earnest money until closing. c. It shows the seller that the buyer is serious about following through with the contract. d. It guarantees the buyer will close.

The purpose of the earnest money deposit is to show that the buyer is serious about purchasing the property, which is why it is also called a good faith deposit. The correct answer is: It shows the seller that the buyer is serious about following through with the contract.

Sara Seller hired Larry Licensee to sell her home under specified terms. Larry Licensee would most likely be a(n): Select one: a. Subagent. b. Universal agent. c. Special agent. d. General agent.

The question describes a listing contract, which almost always make the licensee a special agent -- one whose authority is limited to one specific transaction. The correct answer is: Special agent.

A legal procedure or action initiated by either buyer or seller to enforce the terms of a sales contract is known as: Select one: a. An option. b. A suit for specific performance. c. A suit for quiet title. d. A statute of frauds.

The question describes a suit for specific performance. The correct answer is: A suit for specific performance.

Which of the following is an example of a unilateral contract? Select one: a. A sales contract for a piece of property. b. An appraisal. c. A promise of a reward for the return of a lost dog. d. A marriage.

The reward for return of a lost dog is a simple form of unilateral contract. The owner promises to pay if anyone finds and returns the dog. There is no second promise from anyone to return the dog, which would make it a bilateral contract. Marriages involve promises by both spouses and so would not be unilateral. The correct answer is: A promise of a reward for the return of a lost dog.

A salesperson receives an earnest money deposit on Monday while working with broker Allan. On Friday, the salesperson goes to work for broker Bob. What should be done with the earnest money deposit? Select one: a. It stays with broker Allan. b. It goes to broker Bob. c. It should be given to the seller. d. It is returned to the buyer. Feedback

The salesperson should give the earnest money deposit to broker Allan since the salesperson was an agent of Allan at the time the deposit was received. The fact that the salesperson goes to work for another broker has no bearing on the listing. The correct answer is: It stays with broker Allan.

A real estate sales contract does not survive the death of one of the parties. Select one: a. True b. False

The statement is false. A real estate sales contract survives the death of either party. A listing contract would not survive the death of either party. The correct answer is: False

A salesperson need only disclose such offers to the seller-client that the salesperson thinks the seller-client will seriously consider. Select one: a. True b. False Feedback

The statement is false. A salesperson must disclose all offers to the seller-client. The correct answer is: False

When someone assigns his contract to buy real estate to a third party, he, the assignor, is no longer liable for the performance of the contract. Select one: a. True b. False

The statement is false. An assignor remains secondarily liable on the contract unless released by the original party. The correct answer is: False

A salesperson can set up escrow accounts for each of his or her clients, in the name of the client and the salesperson. Select one: a. True b. False

The statement is false. The escrow account must be in the name of the brokerage firm. The correct answer is: False

A listing contract signed by both the seller and broker, in which the seller promises to pay and the broker promises to do things such as advertise and show the property, is a unilateral contract. Select one: a. True b. False

The statement is false. The question states that both parties make promises, so this is a bilateral contract. The correct answer is: False

"Time is of the essence" means a reasonable time within which a contract (or portion of a contract) must be performed. Select one: a. True b. False Feedback

The statement is false. When the phrase "time is of the essence" is used, it means that the contract must be performed within the specified time limit when time is of the essence. The correct answer is: False

In many states, the Statute of Frauds applies to listing agreements. Select one: a. True b. False

The statement is true. Most states require that all contracts related to the transfer of real estate be in writing to be enforceable. This would apply to listing contracts, among others. The correct answer is: True

Which of the following statements is true regarding time limits for complaints regarding alleged violations of the Fair Housing Act? Select one: a. The time limit is 1 year for both complaints to HUD and federal lawsuits b. The time limit is 2 years for both complaints to HUD and federal lawsuits c. The time limit is 1 year for complaints to HUD and 2 years for federal lawsuits d. The time limit is 2 years for complaints to HUD and 1 year for federal lawsuits

The time limit is 1 year for complaints to HUD and 2 years for federal lawsuits

All listings must include Select one: a. a dragnet clause. b. permission for the listing broker to appoint subagents. c. a description of the property. d. an automatic renewal clause.

There must be a description of the property sufficient to identify the property. In some states the legal description is required. While almost all listings will include permission for the listing broker to appoint subagents, it is not a legal requirement. The correct answer is: a description of the property.

Licensee Lenny shows a home to Prospect Paul. Licensee Lenny tells Prospect Paul that this house has the best view of the lake. Prospect Paul buys the house and later discovers that a neighbor down the street has a view that in Paul's opinion is a better view than his own. This is an example of: Select one: a. Puffing. b. Mistake. c. Misrepresentation. d. Fraud.

This is a matter of opinion and probably exaggeration, which makes it puffing. It is not a violation. The correct answer is: Puffing.

A buyer and seller entered into a valid contract. The buyer, for personal reasons, asked to be released from the contract. The buyer located someone else to buy the property. The seller entered into a new contract with the other person and released the first buyer from any obligation. This would be an example of: Select one: a. Assignment. b. Novation. c. Implied consent agreement. d. Redemption.

This is a novation of the contract. The difference between assignment and novation is that one party agrees to substitute another party and relieve the first party from liability. With an assignment the first party remains at least secondarily liable. The correct answer is: Novation.

A homeowner tells a broker that he would like to sell his house. The broker agrees to sell the house. This agreement would be considered: Select one: a. An express contract. b. An implied contract. c. An illegal contract as it requires a writing. d. An equilateral contract.

This is an example of an express contract. The principal (seller) has expressed what he wants done and the agent (broker) has expressed his intent to comply with the request. This is a verbal listing agreement (contract) and the statute of frauds does not say that verbal real estate contracts are illegal, it just says that they are NOT enforceable. The correct answer is: An express contract.

Mr. Badguy owns a house which he rents to Mr. Chump. Mr. Badguy tells Mr. Chump that at the end of the 2 year lease Mr. Chump will have the right to purchase the property for a specified price. One year into the lease, Mr. Chump pays to replace the roof and is complimented by Mr. Badguy. At the expiration of the lease Mr. Badguy refuses to sell the house to Mr. Chump. What legal doctrine might require Mr. Badguy to sell the house at the specified price? Select one: a. Mens rea. b. Estoppel. c. Statute of Frauds. d. Statute of Limitations.

This is an example of where the legal doctrine of estoppel would likely apply. Mr Badguy obviously allowed Mr. Chump to believe that he had the right to purchase the property since he knew that Mr. Chump replaced the roof and would not likely have done that if he didn't believe that he had the right to buy the house. Mr. Badguy would be estopped from changing his story. The correct answer is: Estoppel.

A salesperson took a listing on a property which had a crack in the foundation caused by water seepage. It was obvious that the owner had filled in and painted over the crack although the owner advised the sales agent that the seepage problem had been corrected, when in fact it had not. If the salesperson shows the property without advising potential buyers of the seepage problem, the salesperson would be guilty of: Select one: a. Fraud. b. Misrepresentation. c. Puffery. d. Nothing.

This is fraud because it would be intentional misrepresentation of a material adverse fact about the physical condition of the property actually known by the licensee. The correct answer is: Fraud.

Court action taken to require the parties to a contract to carry out the terms and conditions of a contract is known as a suit for: Select one: a. Specific performance. b. Quiet title. c. Quiet enjoyment. d. Punitive damages.

To force someone to carry out the terms of a contract that they had previously agreed to is known a suit for specific performance. The correct answer is: Specific performance.

Which of the following real estate documents must be in writing in order to be enforced by the courts? Select one: a. Option. b. Real estate sales contract. c. Lease for more than one year. d. All of these choices. Feedback

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