Chapter 4 - Real Estate Transactions

Question 1

One of the elements of a valid real estate purchase contract is

a. legal capacity of the seller.
b. approval of the lender.
c. a statement of the listing agent’s commission.
d. the term of the listing.

Answer 1

a. legal capacity of the seller.

Question 2

A valid contract requires

a. parties who are older than 21
b. an offer by one party that is delivered to the other party.
c. an offer by one party that is accepted by the other party.
d. consideration in the form of a cash payment.

Answer 2

c. an offer by one party that is accepted by the other party.

Question 3

A valid contract requires

a. that the contract be in writing.
b. a stated objective.
c. an obligation by both parties.
d. receipt of monetary payment by one party.

Answer 3

c. an obligation by both parties.

Question 4

A contract for the purchase of real estate must be in writing, according to

a. the terms of the contract.
b. the lender’s requirements.
c. the statute of limitations.
d. the statute of frauds.

Answer 4

d. the statute of frauds.

Question 5

The statute of frauds applies to a lease of real estate that

a. will be completed within one year.
b. will be completed in more than one year.
c. involves the services of a real estate agent.
d. includes a security deposit.

Answer 5

b. will be completed in more than one year.

Question 6

6. The form of deed used to return title to real estate to its owner when debt secured by a deed of trust is paid in full is
   a. the warranty deed.
   b. the reconveyance deed.
   c. the quitclaim deed.
   d. the tax deed.

Answer 6

b. the reconveyance deed.

Question 7

7. The form of deed that makes no warranties, express or implied, is
   a. the grant deed.
   b. the reconveyance deed.
   c. the quitclaim deed.
   d. the tax deed.

Answer 7

c. the quitclaim deed.

Question 8

8. A condition to an offer to purchase real estate that is unlikely would involve
   a. the sale of the buyer’s current home.
   b. financing for the purchase loan.
   c. inspection of the property.
   d. the lender’s approval of the contract.

Answer 8

d. the lender’s approval of the contract.

Question 9

9. A contract may be discharged by all the following EXCEPT
   a. performance of the contract terms.
   b. decision of a third party.
   c. reformation.
   d. novation.

Answer 9

b. decision of a third party.

Question 10

10. A change to the contract terms to correct a mistake is
    a. a reformation.
    b. a rescission.
    c. a novation.
    d. a breach.

Answer 10

a. a reformation.

Question 11

11. A default by one of the parties to a contract is
    a. a reformation.
    b. a rescission.
    c. a release.
    d. a breach.

Answer 11

d. a breach.

Question 12

12. The legal action to force a defaulting party to complete a sale transaction is called
    a. assignment of the defaulting party’s interest.
    b. partition.
    c. specific performance.
    d. suit to quiet title.

Answer 12

c. specific performance.

Question 13

13. Title to real estate generally is conveyed by
    a. life estate.
    b. defeasible fee.
    c. contract.
    d. deed.

Answer 13

d. deed.

Question 14

14. The form of conveyance that is used to make real estate security for a debt is
    a. the trust deed.
    b. the reconveyance deed.
    c. the bargain and sale deed.
    d. the warranty deed.

Answer 14

a. the trust deed.

Question 15

15. The deed that contains no warranties against encumbrances but implies that the grantor holds title and possession of the property is
    a. the trust deed.
    b. the sheriff’s deed.
    c. the bargain and sale deed.
    d. the quitclaim deed.

Answer 15

c. the bargain and sale deed.

Question 16

16. The deed that returns title to the borrower when a debt has been paid is
    a. the trust deed.
    b. the reconveyance deed.
    c. the bargain and sale deed.
    d. the sheriff’s deed.

Answer 16

b. the reconveyance deed.

Question 17

17. Before a deed can be recorded, MOST states require that it be
    a. acknowledged.
    b. signed by the grantee.
    c. accompanied by consideration.
    d. prepared in triplicate.

Answer 17

a. acknowledged.

Question 18

18. The record of property ownership that can be discovered by examining the history of transfers to the property starting with the present grantee is called
    a. the property petition.
    b. the chain of title.
    c. the summary of grants.
    d. the document decree.

Answer 18

b. the chain of title.

Question 19

19. MOST states have the greatest number of legal protections for
    a. the commercial property lessor.
    b. the commercial property lessee.
    c. the residential property lessor.
    d. the residential property lessee

Answer 19

d. the residential property lessee

Question 20

20. Rent will increase based on the increase in a specified index under
    a. a gross lease.
    b. an escalator clause.
    c. a percentage lease.
    d. a net lease.

Answer 20

b. an escalator clause.