Real Estate Sales Real Estate Contracts Questions and Answers Flashcards

A buyer and seller have a valid purchase agreement, but both mutually decide to cancel it. This is known as which of the following?

Answer: Rescission

Rescission is the mutual agreement by both parties to cancel a contract and return to their pre-contract positions.

Which of the following would make a real estate contract voidable rather than void?

Answer: A contract signed by a minor

A contract signed by a minor is voidable because the minor has the option to either enforce or disaffirm the contract.

An earnest money deposit in a real estate transaction primarily serves what purpose?

Answer: It demonstrates the buyer's good faith intention to complete the purchase

Earnest money shows the seller that the buyer is serious about purchasing the property and intends to follow through.

If a seller fails to disclose a known material defect and the buyer closes on the property, the buyer may have grounds for which legal action?

Answer: Fraud or misrepresentation

Intentionally concealing known material defects constitutes fraud or misrepresentation, giving the buyer grounds for legal action.

Under the parol evidence rule, which of the following is true about a fully integrated written real estate contract?

Answer: Prior oral agreements that contradict the written contract are generally inadmissible

The parol evidence rule prevents prior or contemporaneous oral agreements from contradicting the terms of a fully integrated written contract.

A contract clause that requires the seller to pay a specified amount if they default is known as which of the following?

Answer: Liquidated damages clause

A liquidated damages clause pre-establishes the amount of damages one party must pay if they breach the contract.