CHAPTER 11: Real Estate Contracts

Question 1

Licensees may not draw

Answer 1

• Deeds
• Mortgages
• Promissory notes
• Leases

Question 2

A valid contract contains these four essential elements

Answer 2

• Competent parties
• Offer and acceptance
• Legal purpose
• Consideration

Question 3

Two types of consideration

Answer 3

-Valuable (Money)

Good (Promises each party agrees to)

Question 4

Real estate licensees may assist buyers and sellers with these four contracts

Answer 4

Listing agreement- Employment contract between BROKER and SELLER

Buyer brokerage agreement- Employment contract between BROKER and BUYER

Sale and purchase contract- May be prepared by sales associate if licensee acts as agent or facilitates for contracting party

Option contract- Agreement between property owner and party interested in the property to keep open for a specified period of time to sell or lease

Question 5

Ways to terminate an offer?
(HINT)
W
I
L
D
C
A
R
D

Answer 5

Withdrawal 
Insanity 
Lapse of time
Death
Counter offer
Acceptance 
Rejection
Destruction of the property

Question 6

Ways to terminate a contract?

HINT 6 ways

Answer 6

Performance 
Mutual agreement 
Impossibility of performance 
Lapse of time
Bankruptcy
Breach (one of the parties fails to perform a valid obligation)

Question 7

Four remedies to breach contract

Answer 7

Specific performance- Court orders the party to perform according to the terms of the contract

Liquidated damages- Amount of damages in the contract (usually the earnest money)

Rescission- Court orders parties back to their original position as though the contract never existed

Compensatory damages- Involves a lawsuit to remove actual amount of the monetary loss

Question 8

Five types of listings

Answer 8

Open listing- Given to any numbers of brokers

Exclusive agency listing- Given to one broker, but the seller can sell without paying commission

Exclusive right-of-sale listing- Given to one broker, but is assured commission no matter who sells the property

Net listing- Created when the seller agrees to sell a property for an acceptable minimum amount

Multiple listing- Provided by brokers and not a specific typer of listing