Arkansas Real Estate License FREE Arkansas Real Estate License Real Estate Contracts Questions and Answers 2 — Questions and Answers
Question 1: Under Arkansas law, what happens to earnest money if the buyer defaults on a real estate contract without a valid contingency?
- The earnest money is automatically returned to the buyer
- The earnest money may be retained by the seller as liquidated damages (Correct answer)
- The earnest money is held indefinitely by the broker
- The earnest money is split equally between buyer and seller
Correct answer: The earnest money may be retained by the seller as liquidated damages
When a buyer defaults without a valid contingency, the seller is typically entitled to retain the earnest money as liquidated damages per the contract terms.
Question 2: Which of the following is required for a valid real estate contract in Arkansas?
- Verbal agreement witnessed by two people
- Consideration, offer, acceptance, and legal capacity of the parties (Correct answer)
- Notarization by an Arkansas notary public
- Approval by the Arkansas Real Estate Commission
Correct answer: Consideration, offer, acceptance, and legal capacity of the parties
A valid real estate contract in Arkansas requires consideration, mutual offer and acceptance, legal capacity, and lawful purpose under the Statute of Frauds.
Question 3: In Arkansas, what is the primary purpose of a due diligence period in a real estate purchase contract?
- To allow the seller to find a replacement property
- To give the buyer time to inspect the property and review disclosures (Correct answer)
- To permit the listing agent to market the property to backup buyers
- To allow the title company to record the deed
Correct answer: To give the buyer time to inspect the property and review disclosures
The due diligence period gives the buyer an opportunity to conduct inspections, review property disclosures, and investigate any concerns before finalizing the purchase.
Question 4: What does the Arkansas Statute of Frauds require regarding real estate contracts?
- All real estate contracts must be oral agreements
- Real estate contracts must be in writing and signed by the party to be charged (Correct answer)
- Contracts are valid only if recorded with the county clerk
- Real estate contracts require approval from a licensed attorney
Correct answer: Real estate contracts must be in writing and signed by the party to be charged
The Arkansas Statute of Frauds requires contracts for the sale of real property to be in writing and signed by the party against whom enforcement is sought.
Question 5: A buyer submits a counteroffer on an Arkansas property. What is the legal status of the original offer?
- The original offer remains valid alongside the counteroffer
- The original offer is terminated and replaced by the counteroffer (Correct answer)
- The original offer is automatically extended by 30 days
- Both offers are binding until the seller chooses one
Correct answer: The original offer is terminated and replaced by the counteroffer
Under contract law in Arkansas, a counteroffer acts as a rejection of the original offer and creates a new offer for the other party to accept or reject.
Question 6: In an Arkansas real estate transaction, which clause allows a seller to continue marketing the property while a buyer's contingency is pending?
- Acceleration clause
- Kick-out clause (Correct answer)
- Defeasance clause
- Habendum clause
Correct answer: Kick-out clause
A kick-out clause permits the seller to continue showing the property and accept backup offers, giving the original buyer a set time to remove their contingency or lose the deal.
Arkansas Real Estate License FREE Arkansas Real Estate License Real Estate Contracts Questions and Answers 2
Under Arkansas law, what happens to earnest money if the buyer defaults on a real estate contract without a valid contingency?