Real Estate License Practice Test – Contracts
A buyer agrees to purchase a home once the sale on her current home is completed. Legally, this is known as ____?
Contingencies, or contingency clauses, are a part of the contract of sale that allow a buyer or seller to get out of the contract without penalty in the case of certain specified events.
Mr. and Mrs. Cox make Mr. and Mrs. Green an offer on their home, but they have not heard back from them on whether or not the offer has been accepted. In the meantime, they have found another home they would like to purchase instead. What is their best legal option?
Before an offer has been accepted, the buyers have the right to withdraw their offer with no penalty. However, if the seller has already accepted the offer, the offer now becomes a contract that carries with it legal obligations.
Which part of a traditional deed contains warranties?
The testimonium part of a deed contains warranties, if applicable.
Which type of deed contains no warranties at all?
In a quitclaim deed, the grantor gives up his property rights without implying he has or ever had any rights.
Joan sells her house to her brother Mike on a handshake. This contract is:
In order of a contract of sale to be valid, there must be signatures from both parties.
A buyer and seller agree to wait until the seller’s listing is expired to make the sale in order to avoid paying the broker his share. How can the broker get his commission?
A court will likely grant commission to a real estate broker if he can prove he was the procuring cause of sale, even if the listing has expired. Legally, this is referred to as a broker protection clause.
The listing period for a single family home vs. a commercial property differs in that:
All listings should have a fixed expiration date, and this period is negotiable as no laws regulate this aspect of sale. However, most contracts are 60-120 days for a single family home and 6 months- 1 year for a commercial property.
Which of the following is not true regarding a contract of sale?
Signatures on a contract of sale do not have to be notarized. The other options are all true regarding contracts of sale. Preprinted contracts are typically used in residential transactions, and if something is not desired/not applicable, both parties need to initial the alterations they make.
Why are net listings generally frowned upon in the real estate industry?
In a net listing, the seller names a price they want for their property, and any amount above that sale price goes to the broker. Net listings are frowned upon in many states (and illegal in others) because they can lead to brokers not acting in the best interest of the seller. For example, if a seller wanted $150,000 for their home, and there was an offer for $152,000, in a net listing the broker may be tempted to not accept the offer because his commission on the sale would be relatively small.
Who is responsible for establishing the listing price of a property?
The property owner is responsible for determining a listing price for their property, although they are often given market information by their real estate broker.
What are the four elements required of every valid and enforceable contract?
Every legal contact must have parties of sound mind, a clear legal purpose, and agreement between parties, and something of value given in exchange for something of value (compensation).
A contract can become voidable if one of the parties was being victimized because ____.
All three provide legal cause for the contracted to be voided.
A contract can be unenforceable if ____.
All these are cause for a contract to be deemed unenforceable in court.
An express contract is ____.
An express contract is created in words, either written or oral. The other answer choices are not true.
A good example of an implied contract is ____.
The owner shows through his actions that the contract is still valid, even though it is now simply implied.
A bilateral contract is one where ____.
Both parties have obligation to perform.
For a listing agreement to be valid, it must be ____.
Listing agreements must be for a certain amount of time, be in writing, and be signed.
The seller disclosure statement contains ____.
The seller is required by law to disclose any material defects to the property to the best of his/her knowledge.
Substituting a new obligation for an existing one with the intent to cancel the latter is called ____.
Novation is when a new contract is used to replace the initial contact.
An example of substantial performance is when ____.
Substantial performance is when the performance is substantial but not exactly as the contract requires.
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