Chapter 10 Quiz

Question 1

The inspection contingency in the WB-13 Vacant Land Offer to Purchase:

A. Permits inspection by a qualified independent inspector.

B. May be conducted by any third party the buyer chooses.

C. Allows for testing.

D. Requires the seller to cure all defects.

Answer 1

A. The WB-13 permits an inspection by a qualified independent inspector and any specific features listed on lines 324-325. In the contingency, a buyer can give a seller a right to cure on line 343.

Question 2

“Time is of the essence” means that:

A. A party must perform a contractual obligation within a reasonable time of the date stated in the contract.

B. A party cannot extend a deadline by which the other party must perform contractual obligations.

C. If a party does not perform a contractual obligation by the date stated in the contract, the party has breached the contract.

D. A breach of a stated deadline voids the contract.

Answer 2

C. Lines 88-93 of the WB-11 state, “If ‘Time is of the Essence’ applies to a date or Deadline, failure to perform by the exact date or Deadline is a breach of contract. If ‘Time is of the Essence’ does not apply to a date or Deadline, then performance within a reasonable time of the date or Deadline is allowed before a breach occurs.”

Question 3

A buyer submitted an offer on a condominium, but the seller did not provide the condominium disclosure materials by the deadline for delivery, which was a Wednesday. What is the deadline for the buyer to rescind the offer?

A. The following Monday.

B. The following Wednesday.

C. The buyer cannot rescind without first requesting the missing documents.

D. The following Friday.

Answer 3

B. Lines 131-133 of the WB-14 state, “Buyer may rescind the sale within 5 business days of the earlier of Buyer’s receipt of the requested missing documents or the deadline for Seller’s delivery of the documents [Wis. Stat. § 703.33(4)(b)].” When counting deadlines, the deadline begins to run the day after the day of the event. Because the deadline for delivery of the documents was Wednesday, Thursday is the first day of the five business days for rescission. The deadline is in business days, which means that Saturday and Sunday do not count, so Thursday is Day 1, Friday is Day 2, Monday is Day 3, Tuesday is Day 4 and Wednesday is Day 5. Deadlines expire at midnight on the day of the deadline.

Question 4

The Secondary Offer section of the WB-11 Residential Offer to Purchase:

A. Prioritizes secondary offers in the order of receipt.

B. Requires buyers to provide a notice to a seller of all offers made on a buyer’s home.

C. Requires a seller to give a notice of primary status to a secondary buyer with 72 hours of acceptance.

D. Permits a seller to move any secondary offer into primary position.

Answer 4

D. Lines 349-351 of the WB-11 state, “Unless otherwise provided, Seller is not obligated to give Buyer notice prior to any Deadline, nor is any particular secondary buyer given the right to be made primary ahead of other secondary buyers.”

Question 5

The WB-13 Vacant Land Offer to Purchase:

A. Requires a seller to provide a guarantee that any proposed uses will be approved by a local zoning board.

B. Allows a buyer to provide the seller with a right to cure defects discovered during an inspection.

C. Does not include a right to cure provision.

D. Requires a licensee to provide a buyer with a survey of plot lines.

Answer 5

B. Lines 343-353 of the WB-13 give the buyer the opportunity to give the seller a right to cure defects discovered during an inspection.

Question 6

Which of the following is correct in a residential transaction where a cooperating firm wrote the offer for the buyer and the listing firm will hold earnest money?

A. The cooperating firm must deposit the earnest money into the cooperating firm’s trust account within 24 hours of receiving it from the buyer.

B. The cooperating firm should have additional earnest money due upon or after acceptance made payable directly to the listing firm’s trust account.

C. The cooperating firm may hold earnest money until a seller accepts an offer and then must deposit the money within 24 hours of acceptance.

D. The cooperating firm may hold earnest money in the form of jewelry.

Answer 6

B. Lines 60-65 of the WB-11 state, “All earnest money shall be delivered to and held by (listing Firm) (drafting firm) (third party identified as _____________________________________________) STRIKE THOSE NOT APPLICABLE (listing Firm if none chosen; if no listing Firm, then drafting Firm; if no Firm then Seller).”

Question 7

A buyer makes an offer on vacant land contingent on receipt of a map of the property within 15 days of acceptance. A seller accepts the offer on November 1. The seller delivers the map on November 10. The map reveals that the property’s dimensions are less than the minimum acres the buyer included in the map contingency. If the buyer wants to terminate the offer, by when must the buyer deliver notice of termination to the seller?

A. Midnight on November 15.

B. Midnight on November 20.

C. Midnight on November 21.

D. Midnight on November 14.

Answer 7

C. Lines 299-302 of the WB-13 state, “This contingency shall be deemed satisfied unless Buyer, within 5 days after the deadline for delivery of said map, delivers to Seller a copy of the map and a written notice which identifies: (1) the significant encroachment; (2) information materially inconsistent with prior representations; or (3) failure to meet requirements stated within this contingency. Upon delivery of Buyer’s notice, this Offer shall be null and void.”

Question 8

Which of the following is true in a residential transaction?

A. The buyer receives legal title at occupancy.

B. A party may rescind an offer prior to binding acceptance.

C. The buyer always takes occupancy on closing day.

D. Parties have binding acceptance when the seller accepts a buyer’s offer.

Answer 8

B. Line 42 of the WB-11 states, “This Offer may be withdrawn prior to delivery of the accepted Offer.”

Question 9

The WB-14 Condominium Offer to Purchase:

A. Is optional and can be replaced with the WB-11 Residential Offer to Purchase.

B. Is invalid unless accompanied by a radon condition report.

C. Requires that the seller provide the buyer with the condominium disclosure documents within 15 days after closing.

D. Provides a buyer with an option to rescind an offer if condominium disclosure documents are not provided.

Answer 9

D. Lines 131-140 of the WB-14 describe a buyer’s rescission rights if the seller failed to provide condominium documents.

Question 10

Which of the following is true of income and expenses as of the day of closing?

A. The buyer is allowed to keep income.

B. The buyer pays expenses only if closing occurs after 12:01 p.m.

C. The seller pays expenses and keeps the income.

D. The seller is charged for expenses.

Answer 10

A. Line 364 of the WB-11 states, “Any income, taxes or expenses shall accrue to Seller, and be prorated at closing, through the day prior to closing.”

Question 11

The inspection contingency in the WB-13 Vacant Land Offer to Purchase:

A. Includes an optional right to cure.

B. Requires the septic system to be tested.

C. May be conducted by any third party the buyer chooses.

D. Allows for testing.

Answer 11

A. The inspection contingency calls for an inspection by a qualified inspector of the property and any specific features listed by the buyer in the provision. There is an optional right to cure provision, and the contingency authorizes inspections only — not testing.

Question 12

The Distribution of Information section of the WB-11 Residential Offer to Purchase states that:

A. All information may be given to an appraiser.

B. Selling agents may deliver copies of the offer to other interested buyers.

C. The listing firm may deliver a copy of the offer to the title company.

D. It is illegal to modify the delivery provisions of the offer.

Answer 12

C. Lines 458-464 of the WB-11 state, “Buyer and Seller authorize the agents of Buyer and Seller to: (i) distribute copies of the Offer to Buyer’s lender, appraisers, title insurance companies and any other settlement service providers for the transaction as defined by the Real Estate Settlement Procedures Act (RESPA); (ii) report sales and financing concession data to multiple listing service sold databases; (iii) provide active listing, pending sale, closed sale and financing concession information and data, and related information regarding seller contributions, incentives or assistance, and third party gifts, to appraisers researching comparable sales, market conditions and listings, upon inquiry; and (iv) distribute copies of this Offer to the seller, or seller’s agent, of another property which Seller intends on purchasing.”

Question 13

The real estate transfer tax is:

A. Paid at closing to the buyer.

B. Paid by the listing firm as a “thank you” for the commission.

C. Payable by the seller.

D. Only required when the property is changing from a rental to owner-occupied.

Answer 13

C. Lines 391-392 of the WB-11 state, “Seller shall complete and execute the documents necessary to record the conveyance at Seller’s cost and pay the Wisconsin Real Estate Transfer Fee.”

Question 14

If a buyer withdraws an offer prior to binding acceptance, and earnest money was paid to the listing firm, the listing firm:

A. Must return all of the earnest money.

B. Can withhold $250 for legal expenses from the earnest money.

C. Must return half of the earnest money.

D. Can keep the earnest money.

Answer 14

A. Lines 67-69 of the WB-11 state, “If negotiations do not result in an accepted offer, the earnest money shall be promptly disbursed (after clearance from payer’s depository institution if earnest money is paid by check) to the person(s) who paid the earnest money.”

Question 15

An offer to purchase is binding on the parties when:

A. The seller delivers the accepted offer to the buyer by the deadline in the offer.

B. The seller accepts the offer.

C. The seller delivers the offer to the buyer.

D. The buyer delivers the offer to the seller.

Answer 15

A. Lines 39-40 of the WB-11 state, “This Offer is binding upon both Parties only if a copy of the accepted Offer is delivered to Buyer on or before ______.”

Question 16

The appraisal contingency of the WB-11 Residential Offer to Purchase where the seller does not have a right to cure provides a buyer with an opportunity to:

A. Make the seller pay for an appraisal.

B. Terminate the offer if the appraisal values the property at greater than the agreed upon purchase price.

C. Force the seller to reduce the purchase price or terminate the offer.

D. Terminate the offer if the property’s appraised value is not equal to or greater than the agreed upon purchase price.

Answer 16

D. Lines 308-314 of the WB-11 state, “This Offer is contingent upon Buyer or Buyer’s lender having the Property appraised at Buyer’s expense by a Wisconsin licensed or certified independent appraiser who issues an appraisal report dated subsequent to the date stated on line 1 of this Offer, indicating an appraised value for the Property equal to or greater than the agreed upon purchase price. This contingency shall be deemed satisfied unless Buyer, within ________ days after acceptance, delivers to Seller a copy of the appraisal report indicating an appraised value not equal to or greater than the agreed upon purchase price, and a written notice objecting to the appraised value.”

Question 17

The Delivery of Documents and Written Notices section of the WB-11 Residential Offer to Purchase:

A. Allows the parties to designate alternative recipients for delivery by U.S. Mail.

B. Does not permit delivery by email.

C. Requires that fees for commercial delivery always be prepaid to an account.

D. No longer allows personal delivery except by a legal process server.

Answer 17

A. Lines 576-577 of the WB-11 allow the parties to designate recipients for delivery of documents.

Question 18

After a buyer has satisfied all contingencies in an offer, the:

A. Buyer has legal title.

B. Seller gives the buyer ownership rights.

C. Buyer has equitable title.

D. Buyer may take possession of the property.

Answer 18

C. Equitable title is the right to obtain absolute ownership of a property when legal title is held in another’s name. When a sales contract becomes binding on both parties, the buyer has equitable title. This gives a buyer the right to sue for specific performance if a seller breaches the contract.

Question 19

Which of the following is a breach of the sales contract?

A. The buyer is unable to remove the financing contingency because the lender will not
approve the mortgage.

B. A title search completed 10 days prior to closing indicates encumbrances to title that the seller did not disclose.

C. A seller insists that a buyer pays for a special assessment levied after binding acceptance.

D. The buyer fails to pay an additional earnest money payment included in the offer.

Answer 19

D. The buyer breaches the contract by failing to deposit earnest money.

Question 20

The Inspections and Testing section of the WB-11 Residential Offer to Purchase indicate that:

A. Inspections include testing soil at a property.

B. A buyer must repair any damage from an inspection but is allowed to deduct the cost of any improvements from the purchase price.

C. A seller agrees to allow inspectors, testers and appraisers reasonable access to satisfy the contingencies in an offer.

D. A buyer is only required to provide copies of inspection reports when giving a notice of defects.

Answer 20

C. Lines 182-184 of the WB-11 state, “Seller agrees to allow Buyer’s inspectors, testers and appraisers reasonable access to the Property upon advance notice, if necessary to satisfy the contingencies in this Offer. Buyer or licensees or both may be present at all inspections and testing.”

Question 21

The buyer’s inspection contingency gives the seller a right to cure. Upon delivering a notice of defects to the seller, which of the following may occur?

A. A buyer may dictate the contractors and materials used to cure defects.

B. A seller may nullify the contract.

C. A buyer may cure the defects in a good and workmanlike manner.

D. The offer is automatically null and void.

Answer 21

B. Lines 217-226 of the WB-11 state, “If Seller has the right to cure, Seller may satisfy this contingency by: (1) delivering written notice to Buyer within ________ (“10” if left blank) days after Buyer’s delivery of the Notice of Defects stating Seller’s election to cure Defects; (2) curing the Defects in a good and workmanlike manner including obtaining applicable permits where required; and (3) delivering to Buyer a written report detailing the work done and documenting compliance with permit requirements no later than three days prior to closing.”

Question 22

Finish this sentence: “Special assessments levied ___________”:

A. Prior to the date of the accepted offer are the seller’s responsibility.

B. Against the property prior to the date of the offer must be paid by the buyer at closing.

C. After the date of the accepted offer are the buyer’s responsibility.

D. After the date of the offer are the buyer’s responsibility.

Answer 22

D. Lines 416-419 of the WB-11 state, “Special assessments, if any, levied or for work actually commenced prior to date of this Offer shall be paid by Seller no later than closing. All other special assessments shall be paid by Buyer.”

Question 23

Which of the following is a material adverse fact that a licensee must disclose to a prospective buyer?

A. There is a sex offender living in the neighborhood.

B. The seller has a right of first refusal on the property.

C. A murder occurred on the property.

D. There is a nursing home in the neighborhood.

Answer 23

B. A right of first refusal is a material adverse fact. A licensee must disclose it to potential buyers. After disclosing, a licensee may deliver a copy of a buyer’s offer to a party holding the right of first refusal.

Question 24

A seller refused to let the listing firm hold the buyer’s earnest money. The listing licensee should:

A. Recommend that the parties decide who holds the earnest money.

B. Open an escrow account.

C. Deposit it with a third person.

D. Tell the seller that the listing firm must hold the earnest money.

Answer 24

A. See REEB 18.06 Escrow agreement for earnest money not held by the firm. If the parties to a transaction do not desire that the firm hold the earnest money in the firm’s real estate trust account, and wish to designate an escrow agent other than the firm, the firm may not draft the escrow agreement. The escrow agreement shall be drafted by the parties or an attorney. The firm may not hold the funds in the firm’s real estate trust account, nor may the firm act in any way as a custodian of the funds for the parties. Some other party, such as a bank, a savings and loan association, a credit union, or an attorney, shall hold the funds, pursuant to the escrow agreement.

Question 25

The Financing Commitment Unavailability section of the WB-11 Residential Offer to Purchase provides that:

A. After delivery of a loan commitment, if a lender chooses not to lend to the buyer, the buyer can cancel the offer.

B. A buyer does not authorize the seller to obtain any credit information to determine a buyer’s creditworthiness for seller financing.

C. If a buyer cannot get financing, the buyer shall deliver copies of lender rejection letters or other evidence of unavailability.

D. The buyer must provide rejections from three or more lenders.

Answer 25

C. Lines 284-287 of the WB-11 state, “If a financing commitment is not available on the terms stated in this Offer (and Buyer has not already delivered an acceptable loan commitment for other financing to Seller), Buyer shall promptly deliver written notice to Seller of same including copies of lender(s)’ rejection letter(s) or other evidence of unavailability.”

Question 26

The Financing Commitment Contingency of the WB-11 Residential Offer to Purchase provides:

A. Selling agents may deliver any loan commitment received from a buyer’s lender before a buyer has reviewed the loan commitment.

B. A buyer and a seller agree to share the costs of financing up to $1,000.

C. A buyer agrees to deliver to a seller a written loan commitment for a loan that is acceptable to a buyer.

D. A buyer must provide a loan commitment for the loan described in the financing contingency.

Answer 26

C. Lines 270-271 of the WB-11 state, “If Buyer qualifies for the loan described in this Offer or another loan acceptable to Buyer, Buyer agrees to deliver to Seller a copy of a written loan commitment.”

Question 27

The Gap Endorsement section of the WB-11 Residential Offer to Purchase states that:

A. A buyer can give written notice that the title is not acceptable for closing if the seller cannot provide a gap endorsement.

B. Gap endorsements are never available.

C. All transactions must close in escrow.

D. A seller must pay liens prior to closing.

Answer 27

A. Lines 403-405 of the WB-11 state, “If a gap endorsement or equivalent gap coverage is not available, Buyer may give written notice that title is not acceptable for closing (see lines 410-415).”

Question 28

If a listing licensee receives an offer, when must the licensee submit it to the seller?

A. Every time unless the seller has given instructions to the contrary.

B. Unless the offer is so low that the firm thinks the seller will not accept it.

C. Unless the seller has rejected a higher offer.

D. Only if the firm believes the seller will accept the offer.

Answer 28

A. REEB 24 Conduct and Ethical Practices for Real Estate Licensees sets the standards for drafting and submission of offers. REEB 24.13 (1) Refusal Prohibited. Licensees shall not refuse to draft or submit any offer to purchase, exchange agreement or option contract proposal to the owner unless the terms of the offer, exchange agreement or option would be contrary to specific instructions of the owner.

Question 29

A seller accepts a secondary offer that is better than the first offer, which includes a Closing of Buyer’s Property Contingency. The seller:

A. Must elevate the secondary buyer into primary position by the date specified in the secondary offer contingency.

B. Must inform future buyers of the presence of the secondary offer.

C. May approach the primary buyer and attempt to renegotiate.

D. Must give notice to the primary buyer.

Answer 29

C. Lines 349-351 of the WB-11 state, “Unless otherwise provided, Seller is not obligated to give Buyer notice prior to any deadline, nor is any particular secondary buyer given the right to be made primary ahead of other secondary buyers.”

Question 30

The WB-11 Residential Offer to Purchase states that evidence of title is:

A. An abstract of title.

B. Delivered to the buyer at least five business days before closing.

C. A warranty deed.

D. Paid for by the buyer.

Answer 30

B. Lines 406-409 of the WB-11 state, “The required title insurance commitment shall be delivered to Buyer’s attorney or Buyer not less than 5 business days before closing, showing title to the Property as of a date no more than 15 days before delivery of such title evidence to be merchantable per lines 383-391, subject only to liens which will be paid out of the proceeds of closing and standard title insurance requirements and exceptions, as appropriate.”

Question 31

A buyer submits an offer with earnest money to a listing licensee. The listing licensee presents the offer to the seller at the seller’s home and the seller accepts. The licensee plans to deliver the signed offer to the buyer at the buyer’s home. Before the licensee arrives at the buyer’s house, the buyer calls the licensee and withdraws the offer. Which of the following is true?

A. The buyer cannot withdraw the offer because the seller accepted it.

B. The buyer cannot withdraw the offer because the listing agent presented it.

C. The buyer can withdraw the offer at any time.

D. The buyer can withdraw the offer because the seller has not delivered it.

Answer 31

D. Delivery of an accepted offer back to the party who made the offer creates binding acceptance and turns the offer to purchase into a contract for sale that is binding on the parties.

Question 32

The inspection contingency in the WB-14 Residential Condominium Offer to Purchase:

A. Allows for testing.

B. Does not give the seller a right to cure.

C. Requires an inspection of the unit, limited common elements and common elements.

D. Allows for an inspection of the unit and limited common elements.

Answer 32

D. The WB-14 inspection contingency allows for an inspection of the unit and the limited common elements at lines 328-329. A seller may not have the authority or ability to permit a buyer to inspect common elements such as a roof or ventilation system.

Question 33

The Title Evidence section of the WB-11 Residential Offer to Purchase provides that a:

A. Seller can choose to provide an abstract or title insurance policy.

B. Seller can provide title evidence in the form of an abstract.

C. Buyer pays for the owner’s title policy.

D. Seller agrees to provide title evidence in the form of an owner’s policy of title insurance.

Answer 33

D. Line 396-399 of the WB-11 state, “Seller shall give evidence of title in the form of an owner’s policy of title insurance in the amount of the purchase price on a current ALTA form issued by an insurer licensed to write title insurance in Wisconsin. Seller shall pay all costs of providing title evidence to Buyer. Buyer shall pay the costs of providing the title evidence required by Buyer’s lender and recording the deed or other conveyance.”

Question 34

A seller accepts an offer from a buyer contingent on financing and with fax as the buyer’s chosen method of delivery. The buyer does not deliver the loan commitment by the deadline. The seller tells the listing licensee to draft a notice of termination. Before the licensee drafts the notice, the buyer arrives at the seller’s house and presents a loan commitment. What is the status of the offer?

A. The buyer is in breach.

B. The seller can terminate the offer by delivering the notice of termination to the buyer by fax.

C. It is a contract for sale.

D. The offer is null and void.

Answer 34

C. Lines 281-283 of the WB-11 state, “SELLER TERMINATION RIGHTS: If Buyer does not make timely delivery of said commitment, Seller may terminate this Offer if Seller delivers a written notice of termination to Buyer prior so Seller’s Actual Receipt of a copy of Buyer’s written loan commitment.” Even though the buyer breached the contract by not providing a loan commitment by the deadline stated in the offer, because the seller did not deliver a notice of termination prior to the seller’s actual receipt of the buyer’s loan commitment, the buyer has satisfied the financing contingency, and the offer is a contract for sale.

Question 35

Which of the following can a licensee disclose to a prospective buyer about an offer the seller has accepted?

A. The buyers do not have a loan commitment.

B. The offer is for $124,500.

C. The offer has a bump clause.

D. The offer has a home inspection contingency.

Answer 35

C. A licensee can disclose to prospective buyers that a seller has accepted an offer, that the seller has accepted an offer with a contingency, or that the seller has accepted an offer with a contingency and a bump clause. The licensee cannot disclose the nature of the contingencies or the deadline for the bump clause.

Question 36

A seller lists a home for $80,000 and accepts an offer for $78,000. What is the status of the sales contract?

A. An implied contract.

B. A unilateral contract.

C. A bilateral contract.

D. No contract.

Answer 36

D. The parties do not have a contract because the seller has not yet delivered the accepted offer back to the buyer, which would create binding acceptance and turn the offer to purchase into a contract for sale.

Question 37

In a residential transaction involving a cooperating firm, what does a listing licensee strike from lines 1-2 of the WB-11 Residential Offer to Purchase?

A. Agent of Seller/Listing Broker.

B. Agent of Buyer and Seller.

C. Agent of Buyer.

D. Listing licensees do not draft offers in transactions involving a cooperating firm.

Answer 37

D. In a transaction involving a cooperating firm, the cooperating firm — rather than the listing licensee — is drafting the offer for the buyer. The cooperating firm could be a selling agent drafting an offer for a customer as an agent of the listing firm, or the cooperating firm could be a buyer’s agent drafting an offer for a client.

Question 38

When completing the Delivery of Documents and Written Notices section of an offer, the drafting licensee working with a customer should:

A. Strike mail delivery because mail is not
delivered on holidays.

B. Follow company policy for delivery of documents.

C. Complete the form according to the buyer’s direction.

D. Complete the form according to the seller’s direction.

Answer 38

C. A licensee drafts forms to accomplish the instruction of the parties. A licensee drafts the delivery section of an offer according to the directions of the buyer, whether the buyer is a customer or a client.

Question 39

The WB-11 Residential Offer to Purchase:

A. Cautions the parties that short-term deadlines running from acceptance should provide adequate time for attorney review.

B. Recommends that deadlines running from acceptance be no longer than 24 hours.

C. States that acceptance occurs when an offer is signed by all parties and delivered according to the terms of the offer.

D. States that parties have binding acceptance when the offer is signed by all parties and delivered according to the terms of the offer.

Answer 39

D. Lines 39-41 of the WB-11 state, “This Offer is binding upon both Parties only if a copy of the accepted Offer is delivered to Buyer on or before __________________________________________. Seller may keep the Property on the market and accept secondary offers after binding acceptance of this Offer.”