Unit 12 Quiz

All of these are essential to a valid real estate sales contract EXCEPT

an earnest money deposit, held in an escrow account.

A contract is said to be bilateral if

both parties to the contract exchange binding promises.

The buyer and seller agreed to a closing date of September 7 and that time is of the essence. Which of these is the closest meaning of the phrase?

closing must be on or before September 7.

The mixing of trust funds with a broker's personal funds is

commingling

Additional conditions that must be satisfied before a sales contract is fully enforceable are called

contingencies.

The sales contract says the buyer will purchase only if an attorney approves the sale by the fol lowing Saturday. The attorney's approval is a

contingency

In case the buyer decides not to buy for no legal reason, the contract may provide that the earnest money is there as

liquidated damages.

A buyer makes an offer on a house, and the seller accepts in writing. What is the current status of this relationship?

the buyer and seller have an express, bilateral executory contract.

A real estate professional has found a buyer for a seller's home. The buyer has indicated in writing a willingness to buy the property for $1,000 less than the asking price and has deposited $5,000 in earnest money with the real estate professional. The seller is out of town for the weekend, and the real estate professional has been unable to inform the seller of the signed document. At this point, the buyer has

an offer.

What is minimum consideration in a valid contract?

anything the parties agree is good and valuable.

Broker Peder listed the Kleins property for sale under an exclusive-right-to-sell agreement. Today, Toby, one of Peder's salespeople, obtained a signed offer to purchase the property along with a certified check for 5 percent of the purchase price as earnest money. What should Toby do with the earnest money check?

Give the money to Peder for deposit in the brokerage trust account.

A buyer and a seller agree on a purchase price of $200,000 for a house. The contract contains a clause stating that "time is of the essence." Which statement is TRUE?

If the closing date passes and no closing takes place, the contract may be rescinded by the party who was ready to settle on the scheduled date.

A buyer and a seller enter into a sales contract for the sale of a home. The seller changes his mind at the last minute, and the buyer suffers a financial loss of $1,500 and must rent a home in which to live. Unless the contract provides otherwise, all of these are legal actions that are likely to succeed EXCEPT

the seller is not liable because the buyer should not have incurred the $1,500 cost before the sale

The term statute of limitations is BEST described as the limitation on the

time period in which parties to a contract may bring a lawsuit to enforce their rights.

To assign a contract for the sale of real estate means to

transfer one's rights under the contract.

On March 7, a buyer and a seller execute a contract for the purchase of the seller's property. Closing is set for June 10. On April 15, the property is struck by lightning and destroyed by the resulting fire. If the Uniform Vendor and Purchaser Risk Act has been adopted by the state in which the property is located, which party bears liability for the loss?

under the act, the seller bears the loss alone.

If a contract seems to be valid, but neither party can sue the other to force performance, the contract is said to be

unenforceable.

A contract that is entered into by a person who is under the age of contractual capacity is

voidable.

A void contract is one that

was never legally enforceable.

When is an offer considered to be accepted?

when the broker notifies the buyer that the seller has accepted the offer.

Which of these is NOT typically a factor in determining the amount of the earnest money deposit?

whether it is an amount sufficient to cover the broker fees.

The broker receives an earnest money deposit with a written offer to purchase that includes a ten-day acceptance clause. On the fifth day, before the offer is accepted, the buyer notifies the broker that she is withdrawing the offer and demands the return of her earnest money deposit. In this situation

the buyer has the right to revoke the offer at any time until it is accepted and recover the earnest money.

In order for a contract to be valid, the offeree must accept the offer before

the offer expires.

A 14-year-old comes into a brokerage office and says, "I want to make an offer on this property. Here is a certified check for 10% of the asking price. Please help me with the paperwork." Why should the broker be concerned?

the sales contract may be disaffirmed by the minor.

During the period of time after a real estate sales contract is signed, but before title actually passes, the status of the contract is

Executory

Which of the following best describes a voidable contract?

A contract that may be either enforced or declared void by one of the parties, but not the other

A seller accepted all of the terms that the buyer offered, making only one small change in the amount of the earnest money. At the moment, these agreements constitute

A counteroffer.

A real estate professional uses earnest money placed in the company trust account to pay for the rent owed on the real estate professionals office. Using escrow funds for this purpose is

Illegal

A buyer and a seller enter into a real estate sales contract. Under the contract's terms, the buyer will pay the seller $500 a month for 10 years. The seller will continue to hold legal title, while the buyer will live in the home and pay all real estate taxes, insurance premiums, and regular upkeep costs. What kind of contract do the buyer and seller have?

Land sales contract

Money that serves to compensate a seller in the event of a buyer default is known as

Liquidated damages

All of the following are essential to the formation of a contract EXCEPT

Performance

A buyer makes an offer to purchase certain property listed with a real estate professional and leaves an escrow deposit with the real estate professional to show good faith. The real estate professional should

Put the deposit in an account, as provided by state law.

What action returns a contract's parties to their position before the contract, including return of any deposit?

Rescission

An option to purchase binds which of the following parties?

Seller only

While suffering from a mental illness that caused delusions, hallucinations, and loss of memory, a person signed a contract to purchase ; real estate. Which statement regarding the contract to purchase is TRUE?

The contract is voidable.

Which of the following gives the best evidence of the buyer's intention to carry out the terms of the real estate purchase contract?

The earnest money deposit

A lease agreement is signed by a lessee who is 16 years of age. Which of the following is true?

The lease agreement is voidable.

A woman offers to buy a man's house for the full $215,000 asking price. The offer contains this clause: "Possession of the premises on August 1." The man is delighted to accept the woman's offer and signs the contract. First, however, the man crosses out "August 1" and replaces it with "August 3", because he won't be back from vacation on the first of the month. He then begins scheduling movers. What is the status of this agreement?

The man has rejected the woman's offer and made a counteroffer, which the woman is free to accept or reject.

All of the following are correct about contingencies EXCEPT

They create a contract that is unenforceable

A person approaches an owner and says, "I'd like to buy your house." The owner says, "Sure," and they agree on a price. What kind of contract is this?

Unenforceable

A woman is buying a man's house and wants to take over the mortgage. The lender releases the man from the obligation, substituting the woman as the party liable for the debt. This new agreement is called

a novation.

A buyer makes an offer to buy a seller's house. Pursuant to this offer, the buyer is obligated to perform only if the buyer is first able to sell her condominium. This is an example of

a property sale contingency.

If a contract does NOT contain a time or date for performance, the act should be done within

a reasonable time.

The amount of the earnest money in a sales contract should

discourage the buyer from walking away from the agreement.

A real estate broker announces to the salespeople in her office that she will pay a $1,000 bonus to the top-selling salesperson each quarter. This contract is an

express unilateral contract.

The purchaser of real estate under an installment contract

has only an equitable interest in the property's title.

In a preprinted sales contract, several words were crossed out or inserted by the parties. To eliminate future controversy as to whether the changes were made before or after the contract was signed, the usual procedure is to

have each party write a letter to the other approving the changes.

The essential elements of a contract include all of the following EXCEPT

notarized signatures.

If an owner takes his property off the market for a definite period of time in exchange for some consideration, but he grants an individual the right to purchase the property within that period for a stated price, this is called a/n

option.

Which of these is an example of a unilateral contract?

option.

If, upon the receipt of an offer to purchase a property, the seller makes a counteroffer, the prospective buyer is

relieved of the original offer.

If a man allows a woman to back out of a contract, returns the earnest money to her, and both are back to the positions they held before the contract, the contract has been

rescinded.

After making an offer but prior to receiving any response from the seller, a buyer changed her mind about buying a particular lot. She called her agent and said, "Withdraw my offer." Her action is called a

revocation.

The legal proceeding or legal action brought by either the buyer or the seller under a purchase contract to enforce the terms of the contract is known as

specific performance.

The law that requires real estate contracts to be in writing to be enforceable is th

statute of frauds.