Real Estate Contracts Flashcards

A buyer submits an offer to purchase a home, and the seller accepts. However, the contract states that the purchase is dependent on the buyer successfully obtaining a mortgage for at least $250,000 within 30 days. What is this clause called?

Answer: A contingency clause

A contingency clause is a condition or action in a contract that must be met for the contract to become binding. In this scenario, the contract's validity is contingent upon the buyer securing financing, which is a common type of contingency known as a financing or mortgage contingency.

Which of the following contracts must be in writing to be enforceable under the Statute of Frauds?

Answer: A contract for the sale of a condominium

The Statute of Frauds is a legal principle that requires certain types of contracts, including those for the sale or transfer of an interest in real property, to be in writing to be legally enforceable. A contract for the sale of a condominium falls into this category. Leases for a year or less are often exceptions to this rule.

A seller gives a potential buyer the exclusive right to purchase their property for a specified price within a 90-day period. The buyer pays the seller $1,000 for this right but is not obligated to make the purchase. This is an example of a(n):

Answer: Option contract

An option contract is a unilateral agreement where a seller (optionor) is obligated to sell if the buyer (optionee) chooses to exercise their option to purchase within a set timeframe. The buyer pays an option fee for this right but has no obligation to complete the purchase.

If a seller breaches a valid and enforceable sales contract, which of the following remedies is available to the buyer?

Answer: Sue for specific performance

When a seller breaches a real estate contract, the buyer may sue for specific performance. This is a legal remedy where the court orders the breaching party to perform their obligations under the contract—in this case, to sell the property. This remedy is common in real estate because each property is considered unique.

A standard real estate purchase agreement, where a buyer promises to buy and a seller promises to sell, is an example of what type of contract?

Answer: Bilateral contract

A bilateral contract is an agreement in which each party makes a promise in exchange for the other party's promise. A real estate purchase agreement is a classic example, as the buyer promises to pay the purchase price and the seller promises to convey title to the property.

For a real estate contract to be valid and legally binding, it must contain several essential elements. Which of the following is NOT a required element for a valid contract?

Answer: Notarization

The essential elements of a valid real estate contract are: competent parties, mutual consent (offer and acceptance), a lawful objective, and consideration. While notarization may be required for recording certain documents like a deed, it is not a requirement for the validity of the contract itself.