Chapter 13 Quiz

Question 1

Which of the following is true of an offer accompanied by a diamond worth $2,000?

A. The diamond is good consideration.

B. The diamond is valuable consideration.

C. The diamond is unacceptable consideration.

D. The buyer cannot offer nondepositable items as earnest money.

Answer 1

B. The diamond is valuable consideration. The term “good consideration” refers to promises made between the parties, and a buyer can offer anything the buyer chooses as consideration. The firm cannot hold nondepositable items.

Question 2

When must a licensee leave a copy of a listing contract with a seller?

A. In all cases.

B. If the listing agent receives an offer to purchase.

C. If the listing contract is not on a state-approved form.

D. If the seller requests it.

Answer 2

A. Wis. Admin. Code § REEB 15.02 Obligation to Furnish Copies and Maintain Records: A licensee shall promptly provide an exact and complete copy of any document utilized in real estate practice to any person who has signed the document.

Question 3

Which of the following is permissible under Wisconsin administrative rules?

A. Tom explains that seller warranties and representations must be disclosed to the buyer and then advises the seller not to disclose anything to the broker that the seller does not want disclosed to a buyer.

B. Tom explains to his client that a seller may be held liable for misrepresentation made about the condition of the property.

C. Tom tells his client to title her property as a joint tenancy with her sister.

D. Tom drafts a new listing contract because his client did not want to use the state-approved form.

Answer 3

B. All other answers are examples of providing legal advice and are prohibited under Wis. Admin. Code Ch. REEB 16.

Question 4

To create a valid sales contract, which parties must sign it?

A. Seller.

B. Seller, buyer and all firms that participated in the transaction.

C. Seller, buyer and listing firm.

D. Seller and buyer.

Answer 4

D. Wis. Stat. § 706.02 requires that the signatures of all parties are required on a lease or a contract to convey. The parties to a sales contract are the seller and the buyer.

Question 5

What kind of contract is a listing contract?

A. Unenforceable contract.

B. Bilateral contract.

C. Implied contract.

D. Unilateral contract.

Answer 5

B. The sales contract has both parties exchanging promises.

Question 6

When can a licensee modify an approved form?

A. Only when acting as the listing agent.

B. When needed.

C. When it is in the licensee’s best interest.

D. To accomplish the instruction of a party.

Answer 6

D. See Wis. Admin. Code § REEB 16.06(8) Approved Forms and Legal Advice: A licensee shall use approved forms and prepare addenda in such a manner as to adequately accomplish the contractual instruction of the person for whom the licensee uses the forms and prepares the addenda.

Question 7

Which is NOT necessary to create a valid real estate contract?

A. An offer and acceptance.

B. A notary acknowledgment.

C. Consideration.

D. Signatures of the parties to be bound by the contract.

Answer 7

B. A notary’s acknowledgement is required on documents that are recorded in public records. An offer to purchase is typically not recorded or notarized. A notary’s acknowledgement does not affect the validity of a contract.

Question 8

The statute of frauds:

A. Requires written contracts for all residential leases.

B. Permits parties to negotiate their own definition of an enforceable real estate contract.

C. Requires enforceable real estate contracts to be in writing.

D. Encourages parties to develop verbal contracts to avoid committing fraud in writing.

Answer 8

C. Real estate contracts must be in writing to satisfy the statute of frauds. Leases over one year must be in writing.

Question 9

What is the status of a sales contract that contains an incorrect legal description?

A. Voidable.

B. Unenforceable.

C. Void.

D. Enforceable.

Answer 9

B. An incorrect legal description in an ambiguous term that would make a contract unenforceable by a court.

Question 10

What is the status of a contract that does not contain all the essential elements?

A. Unenforceable.

B. Void.

C. Enforceable.

D. Voidable.

Answer 10

B. A void contract is one that lacks legal purpose or essential requirements.

Question 11

According to Wisconsin Administrative Code, when can a real estate licensee fill out approved forms?

A. After explaining the legal effect of the forms and providing advice in the case of breach of contract.

B. If the attorney who drafted the form has included the attorney’s identification on the form.

C. In transactions in which the licensee is acting as an agent or a principal.

D. If separate compensation is charged for this service and all parties consent.

Answer 11

C. See Wis. Admin. Code § REEB 16.05(3) Approved Forms and Legal Advice: A licensee may use approved forms only in those transactions in which the licensee is acting in a capacity as a licensee or in which the licensee is a principal, and in either case, the use of such forms is incidental to the real estate practice of the licensee.

Question 12

An option to purchase is an example of:

A. An executed contract.

B. A bilateral contract.

C. A unilateral contract.

D. An offer prior to acceptance.

Answer 12

C. An option to purchase is an example of a unilateral contract because only the optionor is bound by the contract.

Question 13

Mutual termination of a contract occurs when:

A. A seller rescinds because of buyer breach.

B. The seller sues the buyer for liquidated damages.

C. The parties agree to terminate the contract.

D. The contract is performed by the parties.

Answer 13

C. Parties can agree to terminate a contract prior to its predetermined termination date. Mutual termination must be agreed upon by the parties.

Question 14

Which of the following describes a licensee’s authority to prepare real estate contracts?

A. Licensees shall use Wisconsin State Bar-approved listing contracts and offers to purchase.

B. Licensees shall charge a flat fee for preparing offers for customers.

C. Licensees shall counsel buyers on the legal status of a contract.

D. Licensees shall complete department-approved forms.

Answer 14

D. See Wis. Admin. Code § REEB 16.04 Approved Forms and Legal Advice: Salespeople shall use forms prepared and approved by the Department (Department). Brokers may use State Bar forms, however, the State Bar does not create the same forms as the Department.

Question 15

What do parties achieve when they agree on all terms of a contract?

A. Mutual consideration.

B. A meeting of the minds.

C. Consequential undertaking.

D. Specific performance.

Answer 15

B. A meeting of the minds means that there is a complete agreement about the purpose and terms of a contract.

Question 16

Which of the following is true of a licensee’s use of approved forms?

A. Licensees may use approved forms when acting as an agent or principal in a transaction.

B. Licensees may only prepare forms if the form is drafted by an attorney.

C. A salesperson may not prepare forms for or get involved in a government transaction.

D. Licensees may not use approved forms when they are working for a family member.

Answer 16

A. Wis. Admin. Code § REEB 16.05(3) Approved Forms and Legal Advice: A licensee may use approved forms only in those transactions in which the licensee is acting in a capacity as a licensee or in which the licensee is a principal, and in either case, the use of such forms is incidental to the real estate practice of the licensee.

Question 17

Licensees are permitted to use forms drafted by the WRA:

A. Only in commercial transactions.

B. When drafting offers to purchase.

C. Because the forms were drafted by an attorney and the drafter’s name is on the form.

D. Only if their firms have run out of state-approved forms.

Answer 17

C. In addition to state-approved forms, licensees can use forms drafted by an attorney as long as the drafter’s name appears on the form.

Question 18

When does a licensee present a copy of a lease to a property owner who is represented by a property manager?

A. When the tenant pays the first month’s rent.

B. When the tenant accepts the rental agreement.

C. When it is signed by all parties.

D. When the property owner requests it.

Answer 18

D. See Wis. Admin. Code § REEB 15.02(3) Obligation to Furnish Copies and Maintain Records: A licensee shall promptly distribute an exact and complete copy of a lease that has been accepted and signed by all parties to the tenant when the tenant leases the property and to the property owner upon the property owner’s request.

Question 19

What should a licensee do to protect parties in a transaction?

A. Create oral contracts as long as the parties understand the terms.

B. Require an attorney approval contingency in all offers to purchase.

C. Create contracts that are complete, exact and in writing.

D. Create general contracts with the details to be filled in later.

Answer 19

C. Contracts should be drafted with clear language so that each party knows how to perform to accomplish the terms of the contract. A licensee drafting a contract needs to accomplish the intent of the party and does not have the authority to require an attorney’s approval contingency in every contract.

Question 20

Andy lists a property on July 1 and sells it on August 15. The closing takes place on October 1. What should Andy do to comply with mandatory record retention rules?

A. The closing documents must be retained for two years after October 1.

B. The offer should be retained for two years beginning with the day of acceptance.

C. All documents should be retained for two years after July 1.

D. All documents should be retained for two years after October 1.

Answer 20

D. Wis. Admin. Code § REEB 15.04 Obligation to Furnish Copies and Maintain Records: A firm shall retain for at least two years exact and complete copies of all listing contracts, offers to purchase, leases, closing statements, deposit receipts, cancelled checks, trust account records and other documents or correspondence received or prepared by the firm in connection with any transaction. The retention period shall run from the date of closing of the transaction or, if the transaction has not been consummated, from the date of expiration or termination of the agency agreement.

Question 21

Can a licensee use an offer to purchase created by a relocation company to prepare an offer for a client?

A. No, the licensee cannot be involved in the sale and must refer the buyer to an attorney.

B. No, the licensee can negotiate the terms but must have the buyer or the buyer’s attorney fill in the blanks.

C. Yes, if the licensee is working as a buyer’s agent.

D. Yes, if it is accomplishing the contractual intent of the buyer.

Answer 21

B. Wis. Admin. Code Ch. REEB 16: A licensee can only complete the state-approved form. Buyers and sellers are permitted to use any form they like. If the parties want to use a form other than the state-approved forms, the parties must fill in the blanks.

Question 22

How should a licensee delete a provision from an approved form?

A. Erase it.

B. Strike it out so that it remains legible.

C. Strike it out so that it is no longer visible.

D. Use white-out to remove it.

Answer 22

B. See Wis. Admin. Code § REEB 16.06(3) Approved Forms and Legal Advice: A licensee may cross out provisions on approved forms to reflect the agreement of a party to a transaction, provided that the deleted provisions remain legible.

Question 23

A party to a valid contract must be:

A. Pure of heart.

B. Of sound mind.

C. Of considerate disposition.

D. Fit in character.

Answer 23

B. Entering into a contract requires the capacity to be a party to the contract, which means the person must be of sound mind and over the age of 18.