section 13 unit 4:

However, he also knows that if Margo decides not to purchase his property, he gets to keep the _________________ and is free to sell the property to someone else. In fact, payment of the fee is Margo's only obligation, and she can fulfill it with a gift card, if Grant agrees to it.

option fee

Rejection; counter-offer; expiration; revocation; operation of law; death (sometimes)

ways an offer may be terminated

Another name for a contract for a deed is ______. a. a land contract b. A lot/land (acreage) contract c. an option contract d. a residential resale contract

a. a land contract

Cynthia loves her apartment and would like to have the option to buy it once her lease is up. Who's the best person to help Cynthia prepare a lease option? a. a real estate attorney b. A real estate investor c. A real estate licensee d. her landlord

a. a real estate attorney

Ezra's lease on his condo includes an option to purchase. He told his landlord, Sherm, that he's ready to purchase the condo, and they've negotiated a purchase price and closing date. What kind of contract is this? a. bilateral b. executed c. unilateral d. voidable

a. bilateral

Stewart can't wait to open his own movie theater. His lawyer has told him that he'll need to be careful to check the zoning type of any property he finds to be sure it can support this type of business. Stewart needs a ______. a. commercial sales contract b. Contract for a deed c. Lot/land (acreage) contract d. residential resale contract

a. commercial sales contract

An option contract attached to a lease gives the lessee the option to purchase the property at some point in the future. a. true b. false

a. true

An option contract that's attached to a lease is known as a lease option, or a lease with an option to buy. a. true b. false

a. true

The agreement must be in writing and signed by the seller. a. true b. fals e

a. true

The amount of consideration the optionee is paying the optionor must be stated in the contract. a. true b. false

a. true

The contract must state the length of the option period. a. true b. fals e

a. true

The property's sales price or the way in which the price will be determined must be stated in the contract. a. true b. false

a. true

Can you define an option contract? a. Another name for a sales contract b. An offer to purchase a specific piece of real estate but without the obligation to buy it c. An agreement in which the seller has the option to withdraw the offer to sell at any time d. An agency agreement that gives the client the option of terminating without a written notice

b. An offer to purchase a specific piece of real estate but without the obligation to buy it

The act of disclosing one's licensed status in a personal transaction

"Stating one's true position"

SCREC-promulgated form that must be given to buyers when a seller rejects an offer without countering it

Real Estate Offer Rejection Form

Which three of the following statements are true regarding land contracts? a. Buyer advantages include lower down payment and closing costs, more flexible financing criteria, and a chance to improve the buyer's credit score. b. The buyer keeps the title while the loan is being paid off. c. It is also known as contract for a deed. d. The buyer makes payments directly to the seller.

a. Buyer advantages include lower down payment and closing costs, more flexible financing criteria, and a chance to improve the buyer's credit score. c. It is also known as contract for a deed. d. The buyer makes payments directly to the seller. Under a land contract—also known as a contract for a deed—the seller finances the property (and holds the title until the loan is paid off), so the buyer makes payments directly to the seller.

What kind of contract is used when a buyer purchases property that's used for business, like an office building or theater? a. a commercial sales contract b. a land sales contract c. A lot/land (acreage) contract d. a residential resale contract

a. a commercial sales contract

Forget the Terrible Twos. When it comes to option contracts, it's all about the Big Three! Three important dates must be named in an option contract for it to be valid. Review the following choices and select the three dates that must be listed. a. The date the seller originally purchased the property b. The date the option agreement is signed c. the inspection date d. The date the option is exercised e. the closing date

b. The date the option agreement is signed d. The date the option is exercised e. the closing date Option contracts must contain the date the agreement's signed, the date the option's exercised, and the closing date. (Don't be surprised if you see a question about this on your licensing exam!)

What two of the following are the contractual promises of an option contract? a. The optionee will purchase the property within the option period. b. The optioner will not sell the property to anyone else. c. The optioner will sell the property to the optionee, if the optionee so chooses, under the terms and conditions of the contract. d. The optionee will not offer less than the sales price stated in the contract.

b. The optioner will not sell the property to anyone else. c. The optioner will sell the property to the optionee, if the optionee so chooses, under the terms and conditions of the contract. The two contractual promises are that the optionor will not sell the land to anyone else, and the optionor will sell it to the optionee, if the optionee so chooses, under the terms and conditions of the option contract.

It's illegal to attach an option contract to a lease. a. true b. false

b. false

The contract must specify the date that the optionee will purchase the property. a. true b. false

b. false

With an option attached to a lease, a landlord can increase the option amount if a better offer comes in. a. true b. false

b. false

A newlywed couple comes to you asking for help with an option contract. What do you do? a. Thank them for coming and politely show them the door. b. Whip out an option contract and begin filling in the blanks. c. Advise them to seek the advice of a real estate attorney. d. Explain to them that a sales contract is a better option.

c. Advise them to seek the advice of a real estate attorney. You should advise the couple to seek the advice of a real estate attorney who understands the ins and outs of option contracts.

Which of the following statements is true regarding an option contract? a. An option contract is always a unilateral contract in which only one party is contractually obligated to keep the duties outlined in the contract, even if the option is exercised. b. An option contract is always a bilateral contract between the optionee and the optionor, regardless of whether the option is exercised. c. An option contract is a unilateral contract that can become a bilateral contract. This only occurs if and when that option is exercised.

c. An option contract is a unilateral contract that can become a bilateral contract. This only occurs if and when that option is exercised. Before the option is exercised, it's a unilateral contract. If the option is exercised, it becomes a bilateral contract.

Buyer purchases property that's used for business (e.g., office building or theater).

commercial property contract

Buyer makes payments directly to the seller, who keeps the title until the loan is paid off.

contract for deed

A partial offer acceptance; the seller accepts some terms but asks the buyer to alter others. Counter-offers negate all previous offers.

counter-offer

Hernando, a real estate attorney, is preparing an option contract for his client, Wilma. Hernando asks Wilma what she and the seller have agreed upon for the option period. Wilma said the seller was leaving that up to her, and she wanted to get Hernando's opinion. What should Hernando put into the contract for the option period? a. "Indefinite" b. "N/A" c. "Negotiable" d. "Six months"

d. "Six months"

At what point does an option contract become binding for both parties? a. Once the optionee pays the option fee b. Once the optionor agrees to sell the property to the optionee c. As soon as both parties sign the option contract d. Once the optionee exercises the option

d. Once the optionee exercises the option A binding contract is created between the two parties once the optionee exercises the option according to its terms and conditions. Thereafter, both parties are obligated to fulfill their contractual obligations.

Which one of the following elements does a valid option contract contain? a. A list of the optionee's financing options b. An opt-out option for the optionor should the optionor be offered a better deal during the option period c. A statement by the optionee of why the optionee wants to purchase the land d. The sales price of the property or the way in which the price will be determined

d. The sales price of the property or the way in which the price will be determined

In this type of contract, the tenant pays a down payment that may be incorporated into the monthly rent payment. This contract's terms and conditions are negotiated at the time the lease is signed. Which type of contract is this? a. a land contract b. a commercial sales contractor c. A new construction contract d. a lease-purchase contract

d. a lease-purchase contract A lease-purchase, or lease-to-own, contract is one in which a tenant pays a down payment—that may or may not be refundable—for the option of purchasing the property after the lease ends.

Chevy is an optionee. What's his sole responsibility? a. exercise the option b. make an offer c. Make monthly payments. d. pay the offer fee

d. pay the offer fee

Party names; sale price; target closing date; earnest money deposit terms; financing terms; proration terms; type of deed granted; seller promise to deliver clear title

items include in an offer

If a party to a personal transaction, licensees must disclose licensed status: upon their first substantive contact with the other party, in any marketing materials, and on page one of all real estate contracts, in bold, underlined, capital letters.

licensed status disclosure

Buyer purchases a home that's newly built or still being built and hasn't been owned before.

new construction contract

An offer to purchase a property without the obligation to buy it. Option contracts are unilateral until the option is exercised, at which point they become a bilateral contract.

option contract

Margo Kent wants to make an offer on a specific piece of property owned by Grant Lee, but she doesn't want to be forced to buy. Grant is okay with this, so the two enter into an option contract. Margo is the ________________ , and Grant is the ____________.

optionee optioner

All offers—written and verbal—must be presented. Licensees must put verbal offers in writing before presentation.

presentation of offers

A prospective buyer's proposal to purchase a home. The person making the offer is known as the offeror, and the person receiving the offer is the offeree.

purchase offer

Buyer purchases a home that's pre-owned.

residential resale contract

A contract clause that states that all parties will proceed in good faith without unduly delaying the process

time is of the essence clause

Grant is fully aware that an option contract is a ____________________ and that only _______________ is bound to carry out the contractual obligations unless the buyer decides to exercise the option to buy.

unilateral contract the seller

A residential resale contract is used when a person purchases a house that has had at least one other owner. Is this true?

yes The residential resale contract is used when a buyer purchases a home that someone's already lived in.