Contracts & Regulations 10 Test
The Colorado Real Estate Commission has approved all but which of the following forms? A: Closing Instruction and Earnest Money receipt B: Earnest Money Promissory Note C: Agency/Subagency Disclosure D: Intent to Pay off Loan
D: Intent to Pay off Loan Intent to pay off loan is not a Colorado Real Estate Commission approved form.
The approved Agreement to Amend/Extend contract form is used: A: To notify the Seller of any change in deadlines B: Add information to an offer that does not belong in "additional provisions" C: To notify the Buyer of a deadline they missed D: To get mutual agreement of the parties to any change in a deadline
D: To get mutual agreement of the parties to any change in a deadline It is used to modify the Contract to Buy & Sell Real Estate.
When a broker prints the approved forms for use in his office, and he is inserting special wording in Italics, what statement must appear at the top of the first page? A: "The printed portions of this form, except differentiated additions, have been approved by the Colorado Real Estate Commission." B: "The printed portions of this form have been approved by the Colorado Real Estate Commission." C: "The printed Portions and the name of the company have been approved by the state Real Estate Commission." D: None of the above have to be printed at the top of approved forms.
A: "The printed portions of this form, except differentiated additions, have been approved by the Colorado Real Estate Commission." At the top of all Colorado Real Estate Contracts it states that any changes or additions must be differentiated from the printed type.
Buyer Brown makes an offer on Seller Smith's house. Seller Smith counters Buyer Brown's offer at a higher price. Buyer Brown rejects Seller Smith's counter offer. Seller Smith then agrees to accept Buyer Brown's original offer. A: Buyer Brown has no obligation whatsoever to Seller Smith B: Buyer Brown must proceed with the purchase, due to Seller Smith's acceptance C: Seller Smith can sue Buyer Brown if Brown does not proceed with the contract D: Buyer Brown has three days to accept Seller Smith's acceptance of the offer
A: Buyer Brown has no obligation whatsoever to Seller Smith A counter offer is a formal rejection of the original offer, thus relieving the purchaser of all obligations to perform under the original offer. more info on test
Closing instructions are to be signed by all parties: A: at the time the purchase and sale contract is generated B: at the time the transaction is closed C: when the title commitment is reviewed D: when the closing time and place has been established
A: at the time the purchase and sale contract is generated Closing instructions are to be generated by the listing broker when the property is listed, so that they are ready for the buyer's signature as soon as a purchase contract is offered. Although not an absolute rule, the Real Estate Commission prefers the closing instructions are signed by both parties at the same time a purchase contract is signed by both parties. In this way, the closing instructions are signed prior to earnest money being turned over to the closing company. Note: closing instructions appoint the closing agent (title company) and give them authority to do their job.
When a seller is in default in a transaction, pursuant to a Licensee Buyout Addendum, the buyer's remedy is to: A: have the earnest money returned B: sue the seller for specific performance C: sue the seller for specific performance if the specific performance box has been checked D: sue the seller for actual damages only
A: have the earnest money returned The licensee is entitled to have their earnest money returned if there was any (usually there is none) and continue performing per the other terms of the contract. more info on test
Licensee Buyout Addendum are to be used when a real estate broker is purchasing: A: his or her own listing B: a listing of any broker in the office C: a property listed by any broker D: all of the above
A: his or her own listing The Licensee Buyout Addendum need only be used if the agent is purchasing their own listing.
If the purchase is not completed due to a default by the seller and the earnest money deposit is returned to the buyer, the seller's broker may seek compensation, if any, from: A: seller B: buyer C: seller and buyer D: no one--he is not entitled to compensation
A: seller If any commission were to be paid, the seller would be responsible for payment.
The Licensee Buy-Out Addendum to a Contract To Buy and Sell Real Estate becomes a binding contract with the listing company when: A: the listing company supervising broker signs B: the seller & the licensee sign C: the seller signs D: the buyer, and the broker sign
A: the listing company supervising broker signs It is PERSONALLY binding on the seller and the agent (buyer) when they sign the contract. Although there is a place at the bottom for the supervising broker's signature, that signature is not mandatory. If the supervising broker does not sign, this agreement is NOT BINDING on the listing company. In the addendum it says "NOTICE TO SELLER: THIS CONTRACT IS BINDING ONLY UPON THE BUYER (LICENSEE) WHO PERSONALLY SIGNS ABOVE, UNLESS THE SUPERVISING BROKER OF THE BROKERAGE FIRM WORKING WITH SELLER SIGNS HERE:" more info on test
The purpose of Commission Rule F is: A: to help brokers conform to the Conway-Bogue Realty vs. the Colorado Bar Association decision B: to conform to UCC regulations C: to conform to RESPA D: to standardize forms for attorneys who perform closings
A: to help brokers conform to the Conway-Bogue Realty vs. the Colorado Bar Association decision The Conway-Bogue court decision ruled that real estate agents are practicing law without a license but are permitted to do so as long as agents use commission forms and comply with commission Rule F. Through the adoption and promulgation of Commission Rule F, it became compulsory for all real estate brokers licensed by the State of Colorado to use Commission approved forms in most of their contracting. 12-61-803(4) C.R.S. grants the Colorado Real Estate Commission statutory authority to promulgate standard forms for use by licensees. One of the major purposes of the rule is to help to insure broker compliance with the Colorado Supreme Court Conway-Bogue decision. A second purpose is to help promote uniformity in contracting to the end that the public is better protected. The privileges granted should not be abused by the real estate broker.
If a listing broker shows the square footage in the listing information, the broker must: A: Get a disclaimer from buyers that they are not relying on the information B: Disclose the method used to measure or the source of the information C: Measure the property personally to assure accuracy D: Include the area of the basement at only 50% of the footage
B: Disclose the method used to measure or the source of the information The agent must disclose the source of the information that they used to get the square footage.
Computer generated real estate contracts must: A: Be completed using a pen with black ink B: Exactly produce the standard language C: Be prepared only by the employing broker
B: Exactly produce the standard language Through Regulation F and Conway Bogues court decision, we use standardized forms which can be computer generated as long as they follow the standard language.
When sections are omitted from the preprinted portions of a Real Estate Commission approved contract: A: You are not allowed to omit any part of an approved contract B: Only certain paragraphs are allowed to be omitted as not applicable C: You must request the approval of the Real Estate Commission
B: Only certain paragraphs are allowed to be omitted as not applicable Whenever a section which is allowed to be omitted from any approved contract is omitted (such as the Seller Financing section of the Contract to Buy and Sell when the buyer is getting a new loan from a bank), you cannot remove it completely. You need to either: 1) cross it out cleanly such that someone can see what you are crossing out, 2) put n/a for "not applicable" in all the blank fields of the paragraph, or 3) if you are using a contract software package the software will remove the paragraph, but leave the title of the paragraph with the words "omitted as not applicable" next to it.
When a seller wishes to counter an offer made by a purchaser, which of the following documents should be signed by the seller? A: The purchase and sale contract B: The counter offer C: The purchase and sale contract and the counter offer D: The purchase and sale contract after the appropriate changes have been stricken or changed and initialed
B: The counter offer By signing the purchase and sale contract the seller is agreeing to those terms and is bound by the terms of the contract. The counter offer changes the terms so by signing that, the terms of the counter are changed but the rest of the contract remains the same. Changing and initialing the original offer is a poor practice. It is always cleaner to submit a counterproposal.
In which of the following instances would you use the Agreement to Amend/Extend Contract? A: To make changes in the purchase price of an offer that has not been accepted B: To change the loan application deadline in an accepted purchase contract C: To change the time allowed to accept an offer to purchase D: All of the above
B: To change the loan application deadline in an accepted purchase contract The Agreement to Amend/Extend Contract is used to changes the conditions in an accepted contract to purchase. It cannot be used to change the conditions of an offer as an offer has not been accepted. If you want to change the terms or conditions of an offer prior to acceptance, you need to rewrite the contract or use a counterproposal.
Under which circumstance is it NOT necessary to use a Colorado Real Estate Commission-approved form? A: When purchasing a home in the resale market through a licensed broker B: When purchasing a newly constructed home C: When purchasing a duplex D: When purchasing a commercial property
B: When purchasing a newly constructed home Builders use contracts prepared by their own attorneys.
A 1031 Exchange is: A: changing a transaction broker relationship to a buyer broker relationship B: a tax deferred exchange of investment properties C: a tax deferred exchange of owner occupied residential properties D: a transaction where a promissory note will be exchanged for cash prior to closing
B: a tax deferred exchange of investment properties A l031 Exchange is a transaction in which a taxpayer is allowed to exchange one investment property for another by deferring the tax consequence of a sale. The transaction is authorized by 1031 of the IRS Code. The IRS Code actually reads: "No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like kind, which is to be held either for productive use in a trade or business or for investment." Requirements for a 1031 Exchange Timelines for a 1031 Exchange The investor (or exchanger) must follow the strict 45- / 180-day guidelines for an exchange. Once the exchanger sells his/her property (relinquished property) he/she has 45 days to identify property(s) of equal or greater value. Once identified, the exchanger has 180 days from the day he/she sold their property to acquire the property(s) identified (or 135 days from the end of the 45-day period). Like-Kind Property in a 1031 Exchange The investor must acquire "like-kind" property. This means that it must be other qualifying forms of real estate. For example, the exchanger could sell a duplex and purchase a commercial property, or he/she could sell a piece of land and buy an apartment building. The property just needs to be "like-kind."
A counterproposal: A: is a rejection of a proposed contract to buy/sell B: amends the terms and conditions of a proposed contract to buy/sell C: use is mandatory to modify the terms and conditions of a contract to buy/sell D: is used to counter the purchase price only of a proposed contract to buy/sell
B: amends the terms and conditions of a proposed contract to buy/sell The key here is "supersede and replace." This is not merely a rejection of an offer, it is amending the original offer, not rejecting it entirely.
The Definitions of Working Relationships form has the effect of: A: establishing an agency relationship B: disclosing the different types of relationships that are available C: complete disclosure of agency as required by Colorado statute D: disclosing only the types of relationships that the broker prefers to offer
B: disclosing the different types of relationships that are available The definitions form does not establish a specific relationship with a buyer or seller - only discloses the type of relationships that are available.
A seller must provide a Seller's Property Disclosure form based on which of the following? A: seller's opinion of condition at the time of the contract B: seller's current actual knowledge C: results of a professional property inspection D: advice of the listing agent regarding the condition of the property
B: seller's current actual knowledge The Property Disclosure of the Residential Contract to Buy and Sell specifies that the form should be completed by the seller (not the broker) and based on the seller's current actual knowledge.
The Real Estate Commission requires the use of a Lead-Based Paint Disclosure form on all dwellings permitted prior to: A: 1976 B: 1977 C: 1978 D: 1979
C: 1978 Homes permitted before 1978 must use the Lead-Based Paint disclosure form.
The Colorado-approved Agreement to Amend/Extend form should be signed: A: Before the listing expires B: After the purchase contract has expired C: After the purchase contract has been accepted D: After the offer has been made
C: After the purchase contract has been accepted The Amend and Extend is used with contracts between the buyer and seller - the most important one being the Contract to Buy and Sell Real Estate (Purchase Contract). The Amend and Extend With Broker contract is used for contracts between the client and their broker - principally the listing contract or the buyer agency agreement. They are often confused. For either to be used you must have an executory contract, i.e., a contract that is signed but not completed - it is in the process of being executed. Once a contract is complete - neither of these Amend/Extend agreements can be used.
Which form should be used when the licensee wishes to extend one of his listings? A: Extension letter prepared by the attorney of the brokerage firm B: Agreement to Amend/Extend Contract C: Agreement to Amend/Extend Contract with Broker D: Alter the date on the original listing and have the seller initial the change
C: Agreement to Amend/Extend Contract with Broker This is the specific form to be used for this purpose and to make any other changes regarding the listing of the property. Remember, the listing contract is the one between client and agent and the only contract to which the agent is a party.
Under Commission Rule F, all of the following are approved forms except: A: Contract to Exchange Real Estate B: Agreement to Amend/Extend Contract C: Business Opportunity Agreement D: Change of Status
C: Business Opportunity Agreement Because of the diverse and complex agreements associated with business opportunities, they must be prepared by an attorney.
To change the price of a listed property, the broker must: A: Get the Seller's approval and confirm it on Brokerage Firm letterhead B: Change the listing contract using an Agreement to Amend/Extend form C: Change the listing contract with an Agreement to Amend/Extend With Broker form D: Inform the multiple listing service immediately
C: Change the listing contract with an Agreement to Amend/Extend With Broker form The listing price is approved by the Seller in a listing contract. This contract must be amended when the listing price changes. The Agreement to Amend/Extend contract is used to change the conditions of a contract the broker IS NOT a party to such as the Contract to Buy & Sell. The Agreement to Amend/Extend With Broker is to be used for changes to contracts the broker IS A PARTY to such as the the Listing Contract or Buyer Agency Agreement.
A Colorado licensee filling in the blanks in a standard commission approved form: A: Cannot do it because this would be practicing law without having passed the bar exam B: Is allowed if the agent only uses pre-approved standard clauses C: May do so, even though this is the practice of law, but permitted by Colorado law D: May do so, this is not the practice of law
C: May do so, even though this is the practice of law, but permitted by Colorado law This was one of the outcomes of Conway-Bogue court case in 1957 that allowed the broker to fill in the blanks on standardized forms approved by the Colorado Real Estate Commission.
The Agreement to Amend\Extend is used to change the terms of: A: an offer being negotiated B: an Exclusive Right-to-Sell Listing Contract C: an accepted Contract to Buy and Sell Real Estate D: an Exclusive Right-to-Buy Listing Contract
C: an accepted Contract to Buy and Sell Real Estate The Agreement to Amend/Extend Contract is used only to amend the terms and conditions of a sales contract while it is in process. You cannot amend a contract once it is complete (AKA "executed"), or terminated, or expired. more info: First make sure you understand the difference between the Agreement to Amend and Extend and the Agreement to Amend and Extend With Broker. Both agreements are used to alter the terms and conditions of a contract. The Agreement to Amend and Extend is used to alter the terms of the sales agreement between the buyer and seller. The Agreement to Amend and Extend With Broker is used to amend the terms of an agreement with the client and their broker such as a listing agreement or buyer agency agreement. As to why would you extend a contract before it is executed, understand the difference between the terms "executory" and "executed". When a contract is signed by all parties it is in "executory" status. This means it is in process but not complete. When it is "executed" this means it is complete, i.e. fully performed. Real Estate Commission rules say that you cannot amend the terms of an agreement after it has been expired, executed or otherwise terminated. When a closing occurs, the deal is done, the associated listing and sales contracts are fully executed, can't be changed, done, dead, history, ex-contracts, ended, finished, achieved, accomplished, done with, taken to the bank and all over including the shouting.
If an owner refuses to pay the broker an earned commission, the broker may properly seek relief by: A: filing a mechanic's lien B: bringing a formal complaint with the division of real estate C: bringing court action D: bringing a quiet title action against the seller
C: bringing court action The broker must sue the seller for his/her commission. The broker cannot file a mechanic's lien, the CREC doesn't adjudicate commission complaints period, and it's against the law to cloud the seller's title.
Some brokerage companies have standardized addendums they require agents to attach to all purchase or sale contracts. These addendums add to or redefine the terms and conditions of the contract to which they are attached and: A: may be prepared by any licensee of the brokerage firm B: are not legal C: may be prepared by the legal counsel of the employing broker
C: may be prepared by the legal counsel of the employing broker Real Estate Commission Rule F-3. Addenda(a) If a broker originates or initiates the use of a preprinted or prepared addendum that modifies or adds to the terms of a Commission-approved contract form which does not result from the negotiations of the parties (editor note: generally the Contract to Buy and Sell Real Estate), such addendum must be prepared by:(1) an attorney representing the broker or brokerage firm; or(2) a principal party to the transaction; or(3) an attorney representing a principal party.(b) An addendum permitted by this Rule F- 3 (a), shall not be included within the body of, or in the "Additional Provisions" section of, a Commission-approved form.(c) A broker who is not a principal party to the contract may not insert personal provisions, personal disclaimers or exculpatory language in favor of the broker in an addendum.(d) If an addendum is prepared by a broker's attorney, the following disclosure must appear on the first page of the addendum in the same sized type as the size of type used in the addendum: "This addendum has not been approved by the Colorado Real Estate Commission. It was prepared by (insert licensed name of broker or brokerage firm's)legal counsel."(e) If an addendum to a listing, tenant or right to buy contract (editor note: these are contracts the brokerage firm IS a party to), is prepared by a broker or brokerage firm, the following disclosure must appear on the first page of the addendum in the same sized type as the size of type used in the addendum:"This addendum has not been approved by the Colorado Real EstateCommission. It was prepared by (insert licensed name of broker or brokeragefirm).
When a Seller decides to submit a Counterproposal in response to a Contract to Buy and Sell, the Seller: A: signs both the original Contract and the Counterproposal B: initials the original Contract and signs the Counterproposal C: signs the Counterproposal D: signs the orginal offer
C: signs the Counterproposal The client submitting the counterproposal signs only the Counterproposal. The Counterproposal amends and replaces the proposed contract more on test
If a buyer and seller cannot agree on what to do with the earnest money deposit, the broker may: A: Hold the earnest money until receiving written instructions from buyer and seller B: Interplead in court C: Interplead in court and recover attorney and court costs D: All of the above
D: All of the above Instructions from seller and buyer must match before broker will release money. In case of a suit, the broker may "interplead", or turn over, the money to the court and release any future rights to all or a portion of the earnest money. The broker may also recover costs associated with involvement in the suit.
The Colorado Withholding Tax applies only to non-Colorado residents selling property in Colorado. The withholding is: A: 2% of the purchase price B: 2% of the loan amount C: 2% of the purchase price but may not exceed $5000 D: 2% of the purchase price or the net proceeds of the sale whichever is less
D: 2% of the purchase price or the net proceeds of the sale whichever is less The withholding tax which is for income tax purposes is 2% of the selling price or the seller's net proceeds, whichever is less.
Which of the following requires the use of the Licensee Buyout Addendum to the Contract to Buy and Sell Real Estate? A: A listing associate's offer to purchase a listing immediately after it expires B: A broker is not offering a guarantee to sell the property, as an inducement to list with his company C: An associate in the brokerage wishes to purchase another associate's listing D: A licensee offers to purchase a property as an inducement to the Seller to purchase another
D: A licensee offers to purchase a property as an inducement to the Seller to purchase another Rule F-11 specifies certain conditions for the use of the Licensee Buyout addendum. Rule F-11 only applies in one or more of the following instances: When a licensee enters into a contract to purchase a property: (1) concurrent with the listing of such property; (2) as an inducement or to facilitate the property owner's purchase of another property; or (3) continues to market that property on behalf of the owner under an existing listing contract . . . more on test
Licensees are NOT required to use the Licensee Buyout Addendum to Contract to Buy and Sell under which of the following circumstances? A: When the licensee enters into a contract to purchase a property concurrent with the listing of such property B: When the licensee enters into a contract to purchase a property as an inducement or to facilitate the seller's purchase of another property C: When a licensee enters into a contract to purchase a property from the owner but continues to market it for that owner under an existing listing agreement D: When an agent decides to purchase a property listed by another broker
D: When an agent decides to purchase a property listed by another broker The licensee buyout addendum must only be used when the licensee is purchasing his/her own listing. 4 is correct. 4 is the only verbiage listed NOT in the Licensee Buyout Addendum.More info: What Is a Licensee Buyout Addendum? by Maxwell Wallace, Demand MediaA licensee buyout addendum is a form used in certain real estate and property transactions in the state of Colorado. The LBA is used only in the purchase and sale of properties between licensed real estate professionals and their own clients. History and Purpose The Licensee Buy-Out Addendum to Contract to Buy and Sell Real Estate is intended to prevent improprieties and conflicts of interest in licensee/client transactions, as well as to make sellers contractually aware of the potential differences in selling to a licensed real estate professional as opposed to conventional buyers. Situations Dictating Use Licensed real estate agents are required to use an LBA when they enter into contracts to purchase properties concurrently with the initial listing of that property, when it immediately hits the market. Licensees also are required to use the LBA form when they are purchasing a property to facilitate its owner's purchase of another property, as well as when they continue to market that property to other potential buyers. Deleted Provisions Under the provisions of the licensee buyout addendum, several conventional provisions of standard real estate listing contracts reached under Colorado state law are deleted. Deleted provisions include a property's appraisal condition, liquidated damages or pre-assessed damages to the property, provisions related to the seller's financial default status and the broker's acknowledgments and compensation disclosure forms. Profit and Loss Stipulations Colorado's LBA also stands as contractual acknowledgment by a property seller that the buyer is a licensed real estate professional and any future profit or loss on a resale of the property is solely that of the buyer. Similarly, the LBA protects the property seller by acknowledging that any fees related to closing, holding and reselling the property are all absorbed by the buyer and not the property seller as the original or prior landowner.
Fees for the preparation of legal documents at a closing are to be paid by: A: the buyer or seller, when prepared by the attorney representing the parties to the transactions B: the licensee when delegating legal documentation preparation to an agent for their clients C: the licensee if preparing legal documents and closing their own transaction D: all of the above
D: all of the above They may all pay for the preparation fees. The rules regarding who pays for legal document preparation at a closing are a part of the Conway-Bogues court decision that allows a real estate agent to practice a limited form of law. The short version of this ruling as it pertains to contracts and closing documents is that anybody but the real estate agent can draft legal documents.This is logical when you understand that the real estate commission has no jurisdiction over buyers and sellers. Therefore they and their attorneys can create legal documents. Interestingly, an attorney for the brokerage company can create legal documents. Real estate agents can only fill in the blanks on contracts approved by the real estate commission, but we are generally responsible for the cost of legal preparation of closing documents. There is a limit to this; we are not responsible for the cost of preparing documents should the parties decide to use their own lawyers. As a practical matter, the title company prepares the legal documents that are required of the agent. They typically charge us a cursory $5 for this service, as we are the rainmakers that bring them the lucrative title insurance business. Legally, they have to charge us something and so the $5. Here is the legal explanation that covers this area: Closing Fees: Commission position statement CP-7, Closing Costs, and Rule E-37 state that there is no obligation for a broker to prepare any legal document as part of a real estate transaction or closing. However, as the result of the Conway-Bogue decision (see Chapter 5, "Landmark Case Law and Opinions"), brokers may prepare certain legal documents and complete standard and approved forms. Certain fees are generally charged for preparation of real estate documents and closings: (1) a fee for closing and preparing non-legal documents such as the settlement statements, and (2) a fee for preparing legal documents executed by the parties, i.e., contracts, deeds, notes, deeds of trust, mortgages, and other security instruments. Upon agreement of the parties, fees for preparing non-legal documents may be charged to anyone. However, in the absence of an attorney representing one of the parties to the transaction, the broker must pay any fees for preparing legal documents. The broker must ensure that the proper parties pay for the closing costs. Brokers may charge (with written authorization from the parties) for the transactions that they close "in-house," when such charges are not tied to preparation of legal documents. The broker may not designate his or her own attorney to prepare the documents, and then pass these charges to the parties, as if the attorney were representing them.
When an initial contract for sale of property is different than the contract forms approved by the Colorado Real Estate Commission, the contract should be prepared by: A: broker representing the seller B: a real estate attorney C: broker representing the buyer D: an attorney representing one of the parties to the contract
D: an attorney representing one of the parties to the contract An attorney of the buyer, the seller, or both, must prepare contract.
Broker Betty meets a young couple at an open house who are looking to purchase their first home. The couple asked if the Broker thought they had enough income to qualify for a loan to purchase the property. Realizing this information is of a confidential nature Broker Betty makes the agency disclosure that her office policy and state statute require. The buyers are very skeptical about making a commitment and have been coached by family members not to sign anything. They refuse to sign the signature block on the Brokerage Disclosure to Buyer form. Betty should: A: refuse to answer unless they sign B: answer the question, then ask them to sign once again C: call their attorney and make the disclosure to him D: make a note of the date and time the disclosure was made and reference the fact that the buyers declined to sign the form - then have the discussion
D: make a note of the date and time the disclosure was made and reference the fact that the buyers declined to sign the form - then have the discussion Brokers are required to make agency disclosure. Buyers are not required to sign the disclosure. It is acceptable to note the date and time the disclosure was made, and indicate that the buyers declined to sign the form.
All the following contracts fall under Commission Rule F except: A: open listing agreements B: exclusive tenant C: contract to buy and sell real estate D: new construction contracts
D: new construction contracts The builders write their own new construction contracts.
When a seller makes a counter offer to a purchaser, the earnest money check is: A: held by the seller until the purchaser signs the counter offer B: held by the listing broker until the purchaser signs the counter offer C: deposited in the listing broker's trust account within one banking day D: returned to the purchaser with the counter offer form
D: returned to the purchaser with the counter offer form Legally, the earnest money should be returned to the buyer as the counteroffer form has the effect of rejecting the original offer of which the earnest money was a part. Do not confuse "legal" with "practical." Legally - as stated, the earnest money should accompany the written counteroffer. Practically - many negotiations are performed electronically or by phone. In these cases, the earnest money check does not go back and forth. However, the State exam tests on the "legal" and not on the "practical."
Earnest money of a forfeited or defaulted contract: A: belongs to the seller B: belongs to the buyer C: should be released to the first person who requests it D: should be released only after buyers and sellers agree as to its disbursement
D: should be released only after buyers and sellers agree as to its disbursement The buyer and seller must come to an agreement before the earnest money can be released and dispersed.
