Real Estate License Practice Test – Contracts

Question 1

Mr. and Mrs. Collins make an offer on their home to Mr. and Mrs. Gray, but they have yet to hear whether or not the offer has been
 accepted. In the meanwhile, they have spotted another house that they would want to buy. What is the best course of action for them?

Accepted Answer

Withdraw their offer without incurring any penalties.

Answer

An offer to purchase real estate can be legally withdrawn by the offeror at any point before it has been formally accepted and that acceptance communicated back to the offeror. Since Mr. and Mrs. Collins have not yet received communication of acceptance from Mr. and Mrs. Gray, their offer is not yet a binding contract. They are therefore free to withdraw their offer without incurring any penalties.

Question 2

In order to be enforceable, which of the following contracts must be in writing?

Accepted Answer

A buyer's agreement to take over an existing loan secured by a deed of trust.

Answer

The Statute of Frauds requires certain contracts to be in writing to be legally enforceable. Contracts involving the transfer of an interest in real estate, such as a buyer's agreement to take over an existing loan secured by a deed of trust, fall under this requirement. This ensures clarity and prevents fraudulent claims regarding significant real estate obligations.

Question 3

The _, also known as the words of conveyance, contains the phrases that describe the grantee's rights.

Accepted Answer

Clause of grant

Answer

The 'granting clause,' also known as the words of conveyance, is the essential part of a deed that expresses the grantor's clear intention to transfer the property to the grantee. This clause typically contains specific phrases like 'grant and convey' or 'bargain and sell,' and it defines the nature and extent of the interest or rights being transferred to the grantee.

Question 4

When is it not necessary for a broker to propose an offer to acquire real estate to their principal?

Accepted Answer

When the offer is clearly frivolous or the broker is acting on the principal's written instructions.

Answer

A real estate broker has a fiduciary duty to their principal (the seller) to present all offers received. However, this duty can be modified if the principal provides clear, written instructions to the broker specifying which types of offers should not be presented (e.g., offers below a certain price). Additionally, offers that are clearly frivolous or made in bad faith may not require presentation, as they do not constitute a bona fide offer.

Question 5

What is the closest definition of "delivery in escrow" in terms of deeds?

Accepted Answer

The grantor hands over the deed to a trustee, who keeps it until the grantee has completed all of the necessary steps.

Answer

'Delivery in escrow' refers to the process where a deed is given to a neutral third party, the escrow agent or trustee, with specific instructions. This agent holds the deed until all the conditions of the purchase agreement are fully satisfied by both the buyer and seller. Once all conditions are met, the escrow agent then officially delivers the deed to the grantee, thereby transferring legal title.