Contract Review & Risk Management Flashcards

Which practice best reduces a brokerage's exposure in an errors-and-omissions claim involving a transaction file?

Answer: Maintaining a complete, chronological file with all versions, signatures, and communications

A complete, organized record is the strongest defense when a transaction is later disputed.

The appraisal comes in $15,000 below the contract price and the contract has an appraisal contingency. Which is NOT typically one of the parties' options?

Answer: The TC orders a new appraisal to override the lender's valuation

The TC has no authority to override a lender appraisal; the parties resolve the gap by negotiation or termination.

A party signs the contract under a power of attorney. What should the TC verify?

Answer: That the POA is valid, covers real estate transactions, and is acceptable to title and the lender

Title companies and lenders must approve the POA, and it must grant authority for the real estate transaction.

Under RESPA Section 8, which arrangement is prohibited?

Answer: Giving or receiving a kickback for referring settlement service business

RESPA Section 8 bans kickbacks and unearned fees for referrals of settlement services.

The buyer's inspection objection notice is delivered one day after the contract's inspection deadline. What is the most likely consequence under a typical contract?

Answer: The buyer may be deemed to have accepted the property's condition or waived the objection right

Missing a contingency deadline often results in a deemed waiver of that contingency.

A TC notices the HOA resale documents reveal a pending special assessment not mentioned in the contract. What is the appropriate action?

Answer: Promptly notify the agent so the buyer can review it within any HOA document review period

Material HOA information should be promptly flagged so the buyer can act within the review contingency.

A buyer's agent asks the TC to backdate an amendment so it appears signed before a deadline passed. How should the TC respond?

Answer: Decline, because backdating misrepresents the record and can be fraudulent

Backdating documents misrepresents facts and exposes the TC and brokerage to fraud liability.