Chapter 14

Question 1

contingencies

Answer 1

Conditions or requirements
outlined in a real estate
contract that must be met for
the sale to proceed, such as
obtaining financing,
completing inspections, or
selling another property.

Question 2

contract for
deed

Answer 2

real estate agreement
where the seller finances the
purchase of the property for
the buyer, who agrees to
make installment payments
over time until the full
purchase price is paid, at
which point the seller
transfers title to the buyer.

Question 3

contract for
sale

Answer 3

legal agreement between a
seller (vendor) and a buyer
(vendee) outlining the terms
and conditions of a real
estate transaction, including
the purchase price, closing
date, and any contingencies

Question 4

equitable
interest

Answer 4

non-legal interest or claim
in a property that arises from
an agreement or
circumstance, giving a party
certain rights or benefits
without actual ownership.

Question 5

escrow

Answer 5

neutral third-party account
or process used to hold
funds, documents, or
property during a real estate
transaction until all
conditions of the sale are met
and the transaction can be
completed

Question 6

option-to-buy
contract

Answer 6

legal agreement giving a
party the right, but not the
obligation, to purchase a
property within a specified
period of time at an agreed-
upon price, in exchange for
consideration.

Question 7

vendee

Answer 7

buyer of a property in a
real estate transaction, who
acquires ownership rights
from the seller (vendor) in
exchange for payment.

Question 8

vendor

Answer 8

seller of a property in a
real estate transaction, who
transfers ownership to the
buyer in exchange for an
agreed-upon price

Question 9

A buyer makes an offer to purchase a house, and the seller accepts the offer. Both parties sign the sale contract, but the buyer fails to provide an earnest money deposit. What are the seller’s obligations to the buyer?

Answer 9

None. There is no valid contract

Question 10

Which of the following is true regarding the legal nature of option contracts?

Answer 10

They give the optionee an equitable interest in the property

Question 11

An important distinction between a contract for deed and a contract for sale is

Answer 11

the seller retains legal title in a contract for deed transaction until fully executed

Question 12

An option-to-buy is

Answer 12

assignable unless the contract prohibits assignment

Question 13

During the executory period of a sale contract, the buyer acquires an equitable title interest in the property. This means that

Answer 13

the buyer can potentially force the seller to transfer ownership

Question 14

In the event of a buyer’s default, a provision for liquidated damages in a sale contract enables a seller to

Answer 14

claim the deposit as relief for the buyer’s failure to perform

Question 15

Mary Carboy buys a house from Jim Schmidt and at the same time obtains an option to purchase the adjoining vacant lot for $10,000 within one year. A few months later, Carboy informs Schmidt that she is ready to exercise her option, but finds that Schmidt has received an offer of $12,000 from another party. Schmidt states that he will accept the offer unless Carboy is willing to match the $12,000 offer. Which of the following is true of this situation?

Answer 15

Schmidt must sell to Carboy for $10,000. Mary’s option-to-buy contract is enforceable, assuming she paid a consideration for it

Question 16

A “termite” clause in a sale contract states that the seller must provide suitable evidence that the property is free of infestation. On the day of closing, the buyer learns that the inspection service hired by the seller was not properly licensed. The seller expresses surprise, promises to pay for another inspection and/or extermination, and insists on proceeding with the closing. The buyer refuses, and declares that the sale is off. Which of the following is true of this situation?

Answer 16

The buyer may be able to have the contract canceled

Question 17

In assisting a buyer or seller to complete an offer to purchase, what should an agent do to reduce the risk of committing an unauthorized practice of law?

Answer 17

Use a standard contract promulgated by a state agency or a real estate board