Contracts Flashcards
The real estate disclosure law, which came into effect January 1, 1988, refers to the:
Agency Relationship Disclosure Transfer Disclosure Statement Residential Listing Agreement Agent Visual Inspection Disclosure
Agency Relationship
Licensees must disclose to all parties involved who they work for, whether it be for the buyer, the seller, or both.
During an “exclusive right to sell” listing contract, the principal no longer wishes the broker to work for them. The principal may:
- cancel the listing and cannot be held liable for damages
- revoke the listing, however the seller may be held liable for damages
- do nothing. The principal understands that an exclusive right to sell listing contract cannot be broken
- be forced to stay with the broker.
revoke the listing, however the seller may be held liable for damages
An exclusive right to sell listing agreement is an employment contract and like all contracts can be broken. However the broker could sue for the monetary value of his time, advertising, and expertise.
Per the statute of frauds, which of the following must be in writing?
A warehouse lease agreement for the winter months A lease listing for 1 year A 10 month lease for a single family dwelling An agreement by a purchaser of real property to pay a debt secured by a mortgage or deed of trust on the property purchased
An agreement by a purchaser of real property to pay a debt secured by a mortgage or deed of trust on the property purchased
An agreement for real property that is paid for by a mortgage must be in writing.
When a money award for damages does not satisfy the damages on a defaulted contract, a lawsuit for specific performance can be brought by all of the following, except:
the seller who is selling 1000 acres of apple orchard farm land someone possessing power of attorney for a principal who lives in another state the person buying the single family home a broker who has a current license acting on behalf of their principal
a broker who has a current license acting on behalf of their principal
To sue for a specific performance, the individual must be the principal on the contract. In this example the broker is not.
A licensee who is working with their client to sell their real property to a third party is said to be operating under the law of:
agency partnership trustor escrow
An agent representing a principal in a transaction for real property is working under the law of agency.
agency
An agent representing a principal in a transaction for real property is working under the law of agency.
When transferring certain real property, the California Civil Codes states that a transfer disclosure statement is to be delivered by which of the following?
The trustee when part of a trustee sale The transferor Probate court as part of the probate sale A wife to her husband in part of a divorce situation
The transferor
Per the California Civil Code, if you are part of a divorce, a probate sale, or trustee’s sale you are exempt from delivering a transfer disclosure statement.
All of the following are required for a contract to be valid, except:
legal capacity mutual consent must be in writing lawful objective
must be in writing
Certain agreements are only enforceable if they are in writing. Having it in writing is not an essential part of every contract. (It is recommend that you ALWAYS get everything in writing and signed by all parties.)
When does an agent inform others that they are working on behalf of a buyer?
Once escrow is closed Immediately Once escrow opens After the home inspection is complete and contingencies removed
Immediately
An agent must disclose who they are representing as soon as possible to all parties involved.
Seller Johnson listed his home for sale with agent Mike. The listing stated “cash only offers to be considered and possibly accepted”. Agent Mike brought a buyer who was qualified with a VA loan. Seller Johnson rejected the offer from agent Mike. What is agent Mike entitled to in regards to commission?
none of the commission Half of the commission All of the commission ¾ the commission
none of the commission
Since the offer was not the exact terms in the listing contract, the agent is not entitled to a commission.
An individual who is delegated to legally act for another person is known as:
a fiduciary representative an attorney in fact a loan officer in gross a matter in court
an attorney in fact
An attorney in fact is a person who is authorized to perform business-related transactions on behalf of someone else (the principal). In order to become someone’s attorney in fact, a person must have the principal sign a power of attorney document.
A broker who looks for buyers and accepts a deposit from a buyer to purchase a piece of real property without the express written authorization and acknowledgment from the owner to sell the property is:
guilty of not having an enforceable bilateral contract with the seller acting correctly because the real property is a pocket listing acting as an agent for the buyer, not the seller guilty of having an implied contract with the seller
acting as an agent for the buyer, not the seller
The agent is working for a buyer. When a broker is employed by a buyer the broker has a fiduciary duty to the buyer.
Of the following, what is not needed in the formation of a contract?
performance consideration offer acceptance
performance
Parties may enter into a contract, however they may never fulfill (perform) the obligations of the contract.
Concerning an interest in real property, when two parties want to create an enforceable broker/ principal relationship, what is the most important thing to create first?
sign a written agreement regarding the commission amount sign a written employment contract sign a written offer to purchase real property sign a written letter that the broker can promote the property for purposes of selling it
sign a written employment contract
There are several important things to consider when dealing with the sale of real property. However a written enforceable employment contract is the most important and necessary form to sign first in order for these real estate activities to take place.
Broker Steve has been employed by Seller Mike. Broker Steve has been showing the property to many interested home buyers and has been telling everyone that the roof was in great shape and did not have any issues or leaks, when in fact Seller Mike specifically told Broker Steve that the roof was old and had several leaks and would need to be replaced. Buyer Brian soon discovered that after the first rainstorm the roof was in terrible disrepair and leaked badly. Who would Buyer Brian have recourse against?
The seller and the broker for fraud and damages associated with the roof The broker alone for fraud and not telling the truth The seller alone. They should have fixed the roof before selling the house No one since real property in the state of California is sold as is
The seller and the broker for fraud and damages associated with the roof
The buyer would have the grounds to bring a lawsuit against the seller and the broker. When you enter into an agency relationship, the principal is responsible for the agent. However, the seller would also be able to sue the broker for breaching his fiduciary duty and committing fraud.
Of the following, an agency cannot be created by:
necessity written formal agreement subordination agreement ratification
subordination agreement
A subordination agreement prioritizes one debt over another, such as in a first and second mortgage. An agency relationship cannot be created on the basis of lies, deceit, or trickery.
Of the following, which cannot create an agency relationship?
Written contract The agent offering to work for the principal Implied contract Oral contract
The agent offering to work for the principal
For agency to be created, an agreement must be reached between the parties. An agent cannot offer to work for a potential principal and expect to have an agency relationship created without the principal’s acceptance.
Of the following, which would not be legal for a licensee to do?
Show properties only on Wednesday after 3 pm Tell the buyer that the listed condo is the nicest in the valley Refuse to bring a verbal offer to purchase to the attention of their principal Not tell prospective buyers that the foundation has documented structural issues
Not tell prospective buyers that the foundation has documented structural issues
Real estate licensees must always disclose material facts about a property. A defect in the foundation of a property is a material fact.
The law of agency states that real estate agents have legal responsibilities to their principals. Which of the following does not apply?
Treat all parties involved fairly Disclose all material facts about the real property Research what the reserves and expected expenses may be for the maintenance of a business Ensure all documents are signed and received by the proper parties involved
Research what the reserves and expected expenses may be for the maintenance of a business
There is no requirement for a real estate agent to research the reserves and expected expenses when referring to the law of agency.
For a contract of real property to be enforceable, the consideration must be relative and of sufficient value in order to enforce a suit for:
damages lawful objective exchange specific performance
specific performance
The value of the real property must be equal to the amount of money being offered before a court will order someone to specifically perform the terms of a contract.
The Law of Agency consists of the rights, liabilities, and duties between:
the principal and their agent the agent and the third party the principal and the third party whom the agent deals with all of these
all of these
The law of agency is concerned with all of these relationships.
The fiduciary obligation to protect a client’s confidential information should continue:
until the end of escrow 1 year for as long as you are working together after the listing agreement term
after the listing agreement term
The information shared is of a confidential nature and the fiduciary duty continues even after the close of escrow.
According to the Civil Code, when serving as a buyer’s agent, the real estate agent has a fiduciary duty to:
the employing broker the seller the buyer everyone involved in the transaction
the buyer
A real estate agent working as a buyer’s agent has a fiduciary duty to the buyer.
The broker works on behalf of their principal. All of the following defines the relationship between the two parties, except:
a broker/client relationship an agency relationship a fiduciary relationship a power of attorney relationship
a power of attorney relationship
A broker does not have an attorney in fact (power of attorney) relationship as part of their normal duties with their principal.
When a licensee acts exclusively as a buyer’s agent, they can:
present offers to the seller and seller’s agent act as the agent for the seller act as the agent for both buyer and seller present offers to other buyers
present offers to the seller and seller’s agent
When the agent is working exclusively for the buyer, they can present purchase offers to the seller and seller’s agent.
When showing property to potential buyers, what must the listing agent disclose to the third party (buyer)?
Any material facts that the listing agent believes are of importance All known material facts about the real property Only the material facts that the seller informed the listing agent about All material facts about the property including all of the seller’s financial’s
All known material facts about the real property
The agent must always disclose all material facts about the property, however the principal’s personal information should never be disclosed.
Agent Mitchell has a listing to sell a home owned by owner Donald. Which of the following actions by the licensee would result in creating an agency relationship with a potential buyer?
negotiating for the buyer presenting all offers from buyers to the seller talking to buyers about ways to finance the property showing the property to buyers
negotiating for the buyer
When the licensee is negotiating for the buyer, they are looking out for the buyer’s best interest and a fiduciary duty is formed. This action creates an agency relationship.
How can a minor or incompetent person acquire property without requiring court approval?
Obtaining a valid power of attorney to place a lien on real property on behalf of the individual Acquire real property by way of a gift or an inheritance Have a guardian purchase the property for them none of these
Acquire real property by way of a gift or an inheritance
A minor may receive title to real property without court intervention. Sometimes a power of attorney or guardian is needed, but a court would determine that.
When the broker is an agent to a seller, what is owed to the buyer?
To answer all questions regarding the seller's profit with the sale of their home Only a duty to disclose anything that may relate directly to the sales price The duty to be fair and honest The same fiduciary obligation that the seller is given
The duty to be fair and honest
When the licensee is an agent of a seller, they have a fiduciary duty with that seller and must be loyal to them. The licensee also has responsibility to the buyer, such as being fair and honest with the buyer.
Two months ago a seller had accepted an offer from a buyer to purchase their real property. The contract was in writing and signed by both parties. Later, the seller refused to complete the transaction because they felt their property would increase in value in the near future and wanted to maximize their profit from the sale of the real property. From the information we know, how long would the buyer have to pursue legal action against the seller due to the breach of the written contract?
90 days 30 days 3 years 4 years
4 years
The Statute of Limitations for a breach of contract claim is 4 years.
According to the Statute of Frauds, all contracts must be in writing in order to be enforced in the court of law. Of the following choices, the statement that is not an example of this would be:
an agent who is employed to do a 1031 exchange an agent who is employed to sell a business opportunity a lease agreement which is less than one year an opportunity for a broker to sell the goodwill of a business
a lease agreement which is less than one year
Real estate leases that are longer than one year require a written contract.
