REP - Lesson 8 Cumulative Quiz
Which party to a purchase agreement usually Fbenefits from a contingency? a. Buyer b. Seller c. Broker d. Second Buyer
a. Buyer Explanation: The buyer benefits from the most common types of contingencies. He receives protection against being obligated to buy a house if it turns out that he is unable to obtain financing, if the house has physical problems, or if he is unable to sell his own property.
Which party has the responsibility of ordering the inspection and paying for the inspection? a. Buyer b. Seller c. Broker d. Lender
a. Buyer Explanation: The inspection is the responsibility of the buyer. The buyer pays for the inspection and is responsible for any damage caused by the inspection.
In which of the following circumstances involving a sale of buyer's property contingency would the buyer not be entitled to a refund of her good faith deposit? a. Buyer removes contingency after the seller accepts a second offer and notifies the buyer under a release clause b. The sale of the buyer's property collapses during the closing process, through no fault of the buyer c. Buyer cancels agreement after the seller accepts a second offer and notifies the buyer under a release clause d. The buyer fails to sell her home before the contingency deadline
a. Buyer removes contingency after the seller accepts a second offer and notifies the buyer under a release clause Explanation: If the buyer removes the contingency upon receiving notice under a release clause, then the sale will proceed, and the good faith deposit will be applied to the purchase price.
Carl agrees to purchase Anna's property, subject to a contingency stating that he will obtain financing from an institutional lender. Carl has 20 days to remove or fulfill the contingency, but after 20 days has provided no notice of having removed or fulfilled the contingency. At this point, what can Anna do? a. Give Carl a Notice to Buyer to Perform, informing him that she will terminate the agreement if he does not remove the contingency b. Terminate the agreement immediately c. Terminate the agreement immediately and retain the good faith deposit d. Sue Carl for breach of contract
a. Give Carl a Notice to Buyer to Perform, informing him that she will terminate the agreement if he does not remove the contingency Explanation: If the buyer gives no notice of having removed or fulfilled a financing contingency within the allotted time period, the seller may terminate the agreement. First, however, the seller must notify the buyer of the missed deadline and give him a final opportunity.
A certain contingency benefits the seller. Whose consent is needed to remove this contingency? a. Seller consent only b. Buyer consent only c. Both the buyer's and the seller's consent d. No consent is needed
a. Seller consent only Explanation: Only the party benefited by a contingency can remove it.
A seller accepts an offer from a second buyer and notifies the first buyer under a release clause. The first buyer decides to remove the sale of buyer's property contingency. What happens? a. The seller and first buyer will complete the transaction, assuming the buyer can still come up with a downpayment b. The good faith deposit will be refunded to the first buyer c. The second buyer will then be obligated to complete the transaction with the seller d. The second buyer will be entitled to purchase the property only if she has made a good faith deposit
a. The seller and first buyer will complete the transaction, assuming the buyer can still come up with a downpayment Explanation: If the first buyer removes the sale of buyer's property contingency, the sale may proceed, so long as the buyer can complete the transaction without cashing out the equity from his previous house. The second buyer will not purchase the property unless the first sale falls through.
If an inspection reveals problems with the property, the buyer may do any of the following except: a. have the problems repaired without telling the seller b. cancel the agreement c. request that the seller make repairs d. negotiate a lower sales price
a. have the problems repaired without telling the seller Explanation: If the buyer disapproves of an inspection report, the buyer may cancel the agreement, or the buyer and seller may negotiate over how to resolve the issues. The buyer will be required to compensate the seller for any unauthorized damage or alteration to the property that results from the inspection.
Pat and Abe do not sign a contingency for the sale of the buyer's property. However, it is clear that if Pat is not able to sell her home, she will not have the downpayment funds necessary to buy Abe's home. This is a/an: a. hidden contingency b. de facto contingency c. contingency by estoppal d. acceptable sales practice
a. hidden contingency Explanation: This is a hidden contingency, since it makes the sale contingent on an event which hasn't been fully disclosed to the seller. This is misleading to the seller and should always be avoided.
If the sale of buyer's home contingency only allows the seller to accept additional offers as backup offers, then: a. the buyer does not need to make a good faith effort to remove the contingency b. a release clause would not apply c. the contingency is meaningless d. the seller is not allowed to advertise the property
b. a release clause would not apply Explanation: A release clause allows the seller to accept another offer and require the first buyer to remove the contingency or cancel the agreement. If the seller is only allowed to accept additional offers as backup offers, there is no need for a release clause.
If the buyer requests repairs as the result of an inspection, the seller may do any of the following except: a. reject the request b. cancel the agreement c. ask that the buyer pay for the requested repairs d. agree to perform only some of the repairs in exchange for removal of the inspection contingency
b. cancel the agreement Explanation: Because the inspection contingency benefits the buyer, only the buyer may remove the contingency or cancel the agreement. However, the seller does not have to agree to the buyer's requests, and the parties may negotiate which repairs to do and who will pay for them.
A buyer and seller agree that the sale will be contingent on the buyer obtaining financing. The buyer later decides that she doesn't want the property, so she doesn't bother to fill out any loan applications. The contingency is dropped from the agreement because: a. the contingency would be considered illegal b. the buyer did not make a reasonable, good faith effort to fulfill the contingency c. the only allowable contingencies are those that benefit the seller d. the contingency has been fulfilled
b. the buyer did not make a reasonable, good faith effort to fulfill the contingency Explanation: The buyer must always make a reasonable, good faith effort to fulfill a contingency. If she doesn't, the contingency will be dropped and the buyer will be bound to the agreement.
Which of the following financing contingencies would a seller prefer? a. A contingency calling for below-market interest rates b. A contingency calling for no-closing costs for the loan c. A contingency calling for a loan on current market terms d. A contingency calling for a 15-year loan term
c. A contingency calling for a loan on current market terms Explanation: A seller would like to use a financing contingency that will be the easiest for the buyer to fulfill. If the buyer wants special terms, such as a low rate, low costs, or a shortened loan term, such a loan may be harder to obtain.
The seller accepts an offer that includes a contingency for the sale of the buyer's current property. What must the buyer do once he accepts an offer on his current home? a. Hand the good faith deposit on the buyer's current home over to the seller b. Give the seller copies of any inspection reports for the buyer's current property c. Give the seller copies of the purchase agreement and escrow instructions d. Remove the contingency
c. Give the seller copies of the purchase agreement and escrow instructions Explanation: The buyer should give the seller copies of the contract for the sale of the buyer's property, so that the seller is aware of any issues that may arise. The contingency does not have to be removed at this point.
Which of the following is true about a sale of buyer's home contingency? a. It commits the buyer to accept the first offer on her house that comes along b. It should only be used together with a contingency for the seller's purchase of replacement property c. If the buyer's home is already in escrow, the contingency deadline will be the closing date d. It allows the seller to decide which offer the buyer will accept for her property
c. If the buyer's home is already in escrow, the contingency deadline will be the closing date Explanation: The contingency deadline should allow the buyer to market her property without delaying the transaction too long. The deadline can be set as the closing date if the buyer's home is already in escrow.
Which type of clause enables a seller to keep a property on the market after receiving a contingent offer, and to accept an offer from a second buyer? a. Extender clause b. Safety clause c. Release clause d. Hold harmless clause
c. Release clause Explanation: A release clause is a provision that allows a seller to continue to market his home during a contingency period. The seller may accept a second offer and notify the first buyer that the sale to the second buyer will proceed unless the first buyer removes the contingency.
A provision that is related to a financing contingency and often included as part of that contingency is a/an: a. purchase of replacement property contingency b. title insurance contingency c. appraisal contingency d. closing costs contingency
c. appraisal contingency Explanation: An appraisal contingency is often included because most lenders want an appraisal showing that the property is worth at least the value of the sales price. The appraisal contingency must be removed at the same time as the financing contingency is removed.
If a contingency is not fulfilled despite a good faith effort to fulfill it, what may the person who benefits from the contingency do? a. Terminate the agreement and have the good faith deposit returned b. Remove the contingency and continue with the agreement c. Sue the other party for a breach of contract d. Either A or B
d. Either A or B Explanation: The party who benefits from a contingency may, if the contingency is not fulfilled, terminate the agreement or remove the contingency and complete the purchase anyway.
Which of these types of contingency is the least common? a. Inspection contingency b. Sale of buyer's home contingency c. Financing contingency d. Seller's purchase of replacement property contingency
d. Seller's purchase of replacement property contingency Explanation: Since the seller's ability to find a suitable replacement property does not directly affect whether the transaction can be completed, this type of contingency is much less common.
Which of the following is not a necessary element in a contingency? a. The deadline by which point the condition must be met or removed b. The rights of the parties if the condition isn't met or removed by the deadline c. A clear description of how the condition can be met d. The damages that the party unable to fulfill the contingency will pay the other party
d. The damages that the party unable to fulfill the contingency will pay the other party Explanation: If a buyer is unable to fulfill a contingency, he has not breached the contract. Instead, the agreement will terminate and the buyer will be entitled to a refund of the good faith deposit.
A contingent sale collapses because the buyer is unable to sell his own property. At this point, the parties should complete a: a. contingency removal b. contingency supplement addendum c. notice to perform d. cancellation agreement
d. cancellation agreement Explanation: A cancellation agreement should be used to finalize the termination of any transaction that will not result in a sale. This is important even if the transaction terminated automatically because of the failure of a contingency.
