Chapter 10: Sales Contracts & Practices Flashcards
A North Carolina provisional broker obtained an offer for a property listed with his firm along with a check for earnest money. The provisional broker should:
A. give the earnest money check to the sellers within three banking days of their acceptance of the offer
B. hold the check until the settlement meeting
C. deposit the check into his trust account within three days of acceptance
D. immediately turn the check over to his broker-in-charge
D. immediately turn the check over to his broker-in-charge
(Provisional brokers must always deliver all monies received to their broker-in-charge immediately. The broker-in-charge has 3 days to deposit the money, not the provisional broker)
A prospective buyer makes a written purchase offer through a buyer’s agent at ABC Realty. The seller accepts the offer as written. The seller communicates to a listing agent at XYZ Realty that the offer was signed. At this point in time, the:
A. seller is contractually bound
B. buyer is contractually bound
C. both parties are contractually bound
D. buyer can still withdraw the offer
D. buyer can still withdraw the offer
(Offers become contracts when the offer is signed, initialed and that acceptance is communicated back to the offeror and/or their agent. Here the acceptance was communicated only to the listing agent, it must still be communicated to the buyer and/or their agent for the contract to become binding)
On Monday, the seller receives a written offer on his vacant lot for $52,000. On Tuesday, the seller counteroffers to sell for $54,500. On Friday, the seller withdraws the counteroffer and accepts the original offer of $52,000. Under these circumstances:
A. there is a valid agreement because the seller accepted the buyer’s offer exactly as it was originally made
B. there is no valid agreement because the seller’s counteroffer was a rejection of the buyer’s original offer
C. there is no valid agreement because the seller accepted the offer before the buyer withdrew the original offer
D. there is no valid agreement because the buyer’s original offer was not accepted within 72 hours
B. there is no valid agreement because the seller’s counteroffer was a rejection of the buyer’s original offer
(Any change to an offer creates a counteroffer which terminates the original offer and relieves the parties of all liability)
A broker has an exclusive right to sell listing on a building. An offer to purchase the building is received while the owner is out of town. The offer requires a commitment from the seller before the seller is scheduled to return to the city. Under these circumstances, the:
A. broker may create a binding agreement on behalf of the seller
B. broker may collect a commission even if the transaction falls through because of the seller’s absence from the city
C. buyer is obligated to keep the offer open until the seller returns
D. broker must obtain the signature of the seller to effect a contract
D. broker must obtain the signature of the seller to effect a contract
(Licensees may not accept or reject offers on behalf of clients. Only the seller can accept the offer and their signature will be required to create a valid contract)
A real estate Offer to Purchase and Contract becomes valid when:
A. the written offer has been signed by both the offeror and offeree
B. communication of acceptance is given to the offeror or the offeror’s agent
C. communication of acceptance is given to the offeree or the offeree’s agent
D. earnest money has been deposited into the escrow agent’s trust account
B. communication of acceptance is given to the offeror or the offeror’s agent
(The communication of acceptance can occur in many forms including electronic, verbal or written manner. The communication of acceptance must be to the offeror or the offeror’s agent)
The listing agent received a full price offer that she faxed to the out-of-town seller. The seller signed the faxed copy, and faxed the signed copy back to the listing agent. The agent faxed the signed offer to the buyer’s agent. Has a contract been formed?
A. No, because there is not one copy that has ink signatures of both parties.
B. No, because the buyer has not been notified of the acceptance yet.
C. Yes, because the Uniform Electronic Transaction Act states that faxed signatures are as binding as ink signatures.
D. Yes, because faxed signatures are binding for 48 hours until ink signatures can be obtained.
C. Yes, because the Uniform Electronic Transaction Act states that faxed signatures are as binding as ink signatures.
(Any form of communication of the acceptance is permissible. This is due to the Uniform Electronic Transactions Act (UETA).)
The optionee in an option to purchase real estate:
A. has no obligation to purchase the property
B. must purchase the property at any time within the option period
C. must be willing to renegotiate contract terms during the option period
D. is the prospective seller of the property
A. has no obligation to purchase the property
(When an option exists, the optionor is bound, but the optionee has no obligation to purchase the property. For this reason options are considered unilateral contracts where only one party is bound)
During the due diligence period in the North Carolina standard offer to purchase and contract, the buyer who was attempting to obtain a conventional loan did not receive final loan approval, but chose not to terminate the contract based on favorable communications from the lender. A week before closing, after the end of the due diligence period, the buyer’s loan application is denied. If the buyer terminates the contract at this point, the buyer:
A. will forfeit the earnest money deposit and due diligence fee because it is outside the due diligence period
B. will receive a refund of the earnest money, since the termination was related to financing
C. can be sued by the seller for specific performance
D. will receive a refund of the earnest money and the due diligence fee
A. will forfeit the earnest money deposit and due diligence fee because it is outside the due diligence period
(The buyer must complete all of their due diligence during the due diligence period. If the buyer cancels after the expiration of the due diligence period for any reason the seller will retain the due diligence fee and also be entitled to the earnest money)
Carl and Hannah enter into a real estate sales contract. Under the contract terms, Carl will pay Hannah $500 a month for 10 years. Hannah will continue to hold the legal title to the property. Carl will live on the property and pay all real estate taxes, insurance premiums and regular upkeep costs. What kind of contract do Carl and Hannah have?
A. option to purchase contract
B. contract for mortgage
C. unilateral contract
D. installment land contract
D. installment land contract
(When the seller retains title and the buyer will not receive title until making the last payment the parties have used a Contract for Deed, also known as a land contract or an installment land contract)
Under an installment land contract, which title does the buyer hold during the repayment period? 1. Legal title 2. Equitable title
A. 1 only
B. 2 only
C. Both 1 and 2
D. Neither 1 nor 2
B. 2 only
(When a buyer is acquiring property with a land installment contract or a Contract for Deed they do not yet have legal title. The seller is still in title to the property. The buyer does have rights or interests in the property which are referred to as equitable title)
Under North Carolina licensing law, a licensee may disclose the content of multiple offers on the property:
A. only with the consent of the seller
B. only with the consent of the buyers who have made the offers and the agreement of their seller
C. a broker may never disclose the content of multiple offers
D. only if the broker determines that disclosure would be in the best interest of his client
B. only with the consent of the buyers who have made the offers and the agreement of their seller
(The existence of multiple offers is not a material fact and do not have to be disclosed. If the seller instructs the licensee to disclose the existence of the offers, the licensee may not disclose their terms and conditions without the consent of the offerors (buyers).)
All of the following are contained in the standard NCBA/NCAR Offer to Purchase & Contract Form 2T, EXCEPT:
A. A confirmation of agency status of the licensees
B. A disclaimer of liability for actions of the brokerage
C. Buyer representations and warranties
D. Possible delays in settlement date
B. A disclaimer of liability for actions of the brokerage
(The NCREC prohibits limitations of liability from being included in the Offer to Purchase and Contract)
Janice wrote a full price offer on a property and her buyer’s representative submitted the offer to the seller. The next day Janice changed her mind and wanted to withdraw her offer. Which of the following is correct?
A. Janice cannot withdraw an offer that has already been submitted to the seller
B. Janice may withdraw her offer, but she will forfeit her due diligence fee
C. Janice is entitled to withdraw her offer at any time prior to acceptance and will receive a refund of both her due diligence fee and her earnest money
D. Janice can only withdraw her offer after she has given the seller notice of her intentions and provides the seller a reasonable time to act
C. Janice is entitled to withdraw her offer at any time prior to acceptance and will receive a refund of both her due diligence fee and her earnest money
(Both fees can be returned as no contract was ever formed)
Harold, a real estate licensee took a listing on a property. Later one of Harold’s buyers wanted to make an offer on the property. Harold obtained the proper dual agency disclosure and consent from the buyer and seller. Harold emailed the offer to the seller who signed and initialed it without any changes and returned the accepted offer to Harold. Is there a binding contract in this situation?
A. No, there cannot be a binding contract until the acceptance is communicated to the buyer
B. No, because Harold does yet have the contract with the original signatures on it
C. Yes, because once a seller signs and initials the offer is becomes a contract
D. Yes, because Harold is a dual agent and communication of the acceptance to the agent is the same as communication to the buyer client
D. Yes, because Harold is a dual agent and communication of the acceptance to the agent is the same as communication to the buyer client
(In dual agency, telling one is telling all)
In Standard Form 2T in North Carolina, the closing date has an automatic extension of:
A. 5 days
B. 3 days
C. 14 days
D. 10 days
C. 14 days
