Free Arkansas Real Estate License Real Estate Contracts Questions and Answers

Question 1

According to the Arkansas Statute of Frauds, which of the following agreements related to real estate MUST be in writing to be enforceable?

Accepted Answer

A contract to purchase a property that will close in 6 months.

Answer

The Arkansas Statute of Frauds requires that contracts for the sale of land, or any interest in land, must be in writing to be enforceable. A contract to purchase a property, regardless of the closing date, falls directly under this statute. Month-to-month leases are generally exempt, agreements between brokers are separate from the real estate contract itself, and personal property promises should be in writing but aren't governed by the Statute of Frauds for real property.

Question 2

A buyer in Arkansas makes an offer on a home that includes a financing contingency. The contingency states the buyer must obtain a loan within 30 days. On day 28, the buyer's loan is denied. What is the most likely outcome?

Accepted Answer

The contract is automatically void, and the earnest money is returned to the buyer.

Answer

A financing contingency protects the buyer if they are unable to secure a loan under the specified terms and within the agreed-upon timeframe. If the buyer acts in good faith but fails to meet the contingency, the contract is typically rendered void, and they are entitled to a refund of their earnest money.

Question 3

A seller accepts a buyer's full-price offer. Before the agents can deliver the signed acceptance back to the buyer, another, higher offer comes in. According to Arkansas Real Estate Commission regulations, what is the listing agent's obligation?

Accepted Answer

The agent must present the second offer to the seller, who may consider it as a backup.

Answer

AREC regulations state that the acceptance of an offer does not remove the broker's obligation to present additional offers as they are received. The seller can be notified of the new offer and may choose to accept it as a backup offer in case the first contract does not close. It would be a violation of the agent's duties to the first buyer to simply ignore the existing accepted offer, and it would violate confidentiality to disclose the terms of one offer to another potential buyer.

Question 4

Which of the following is an essential element required for a real estate contract to be valid and enforceable in Arkansas?

Accepted Answer

Consideration (e.g., the sale price).

Answer

For a contract to be legally enforceable in Arkansas, it must contain several essential elements, including: legally competent parties, a legal purpose, a valid offer and acceptance, and consideration. Consideration is the price or thing of value exchanged. While earnest money, notarization, and inspections are common and often wise, they are not strictly required for the contract itself to be considered valid.

Question 5

A seller in Arkansas breaches a valid and enforceable real estate sales contract by refusing to close. Which of the following is a remedy the buyer could pursue?

Accepted Answer

Sue the seller for specific performance.

Answer

Because real estate is considered unique, a buyer may sue for specific performance, which is a court order compelling the breaching party (the seller) to perform their obligations and complete the sale as agreed in the contract. The AREC handles licensing matters, not contract enforcement. Punitive damages are rarely awarded in contract cases, and a mechanic's lien is for those who provide labor or materials to improve a property.

Arkansas Real Estate License Practice Test

Arkansas Real Estate License Practice Test

Free Arkansas Real Estate License Real Estate Contracts Questions and Answers