Contracts Flashcards

1
Q

All of the following listings require that the broker be the “procuring cause” of the sale if he/she is to be entitled to a commission, EXCEPT:

A) - exclusive listing.
B) - open listing.
C) - exclusive right to sell listing.
D) - None of the above

A

C) - exclusive right to sell listing.

Answer: C—Under an Exclusive Authorization and Right to Sell Listing, the listing broker is entitled to a commission if the property sells through the efforts of the broker or any other person. The broker is not required to produce a buyer or be the procuring cause to be entitled to a commission.

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2
Q

A 17-year-old girl inherits a parcel of vacant land from her uncle. While still a minor, she deeds the land to her church which promptly builds on it. When she turns 18, she decides she wants the land back. In this case she:

A) - cannot get it back under any circumstances.
B) - must buy it back.
C) - can get the land back.
D) - All of the above

A

C) - can get the land back.

Answer: C—Most contracts, except those for necessities such as food and clothing, entered into by a minor are generally voidable at the minor’s option. The minor must disaffirm the contract within a reasonable time after attaining legal age. If the minor does not disaffirm the contract within a reasonable time, it becomes fully enforceable. A minor may receive realty by gift or inheritance.

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3
Q

A contract based on an illegal consideration is:

A) - valid.
B) - void.
C) - legal.
D) - enforceable.

A

B) - void.

Answer: B—A contract must be legal in its formation and operation. Both its consideration and its object must be lawful.

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4
Q

Mr. Owner enters into an exclusive listing with Broker X. One week later, Broker X brings in a full price offer, but Mr. Owner refuses the offer. Seeking an action of Specific Performance would be an option for:

A) - the buyer.
B) - the broker.
C) - both the buyer and the broker.
D) - neither the buyer nor the broker.

A

D) - neither the buyer nor the broker.

Answer: D—Specific performance is an action brought in a court of equity in special cases to compel a party to carry out the terms of a contract. There never was a contract between the buyer and seller since the offer was refused. Specific performance is not used to specifically enforce a contract to perform personal services, such as a broker’s agreement to find a buyer.

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5
Q

Four months ago, a seller entered into a legally binding written contract to sell his property. Later, the seller refused to complete the transaction since he felt the value of the property would increase in the near future. Under these circumstances, the Statute of Limitations could affect the rights of the buyer to prevail in a civil action due to a breach of the written contract within:

A) - 90 days.
B) - one year.
C) - two years.
D) - four years.

A

D) - four years.

Answer: D—A right rising out of a written contract must be pursued in court within four years of the default (breach), according to the Statute of Limitations.

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6
Q

A listing agreement is:

A) - a promise for a promise.
B) - a bilateral contract.
C) - an employment contract.
D) - All of the above

A

D) - All of the above

Answer: D—A listing agreement is an employment agreement between an owner of property and the real estate broker authorizing the broker to find a buyer for the property. They are also bilateral contracts in that the seller promises to pay the broker a commission when the property sells and the broker promises to make reasonable efforts to obtain a purchaser.

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7
Q

When a lessee transfers all of his/her interest in the property, it is called a(n):

A) - assumption.
B) - assignment.
C) - sale.
D) - transfer.

A

B) - assignment.

Answer: B—An assignment of a lease is the transfer of all title, right, and interest that a lessee possesses in a certain property.

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8
Q

Broker Jones takes an exclusive listing on a property owned by three different people. Broker Jones takes the listing contract to each of their places of business to get it signed. Broker Jones must:

A) - give a copy to the first owner who signs only.
B) - give a copy to each owner when he/she signs.
C) - give one copy to any of the three owners.
D) - get them together in one place to sign at the same time.

A

B) - give a copy to each owner when he/she signs.

Answer: B—When there are multiple owners, the broker is required to provide a copy of the listing contract to each owner when they sign.

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9
Q

A broker brought in an offer but the listing agreement did not include an authorization to accept a deposit. Which of the following is correct?

A) - The authorization is implied.
B) - The broker cannot accept the deposit.
C) - If the broker accepts the deposit, he/she would do so as the agent of the buyer.
D) - None of the above

A

C) - If the broker accepts the deposit, he/she would do so as the agent of the buyer.

Answer: C—If the scope of authority of a real estate broker is limited to just producing a buyer, the broker does not have the authority to collect a deposit on behalf of the seller. When an agent does collect a deposit in this case, the agent is acting as agent for the buyer (offeror) and not the seller.

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10
Q

A buyer has entered into an agreement with more than one buyer’s agent at the same time but owes compensation only if she uses the services of a buyer’s broker. This arrangement is known as a(n):

A) - multiple-listing agreement.
B) - exclusive right agreement.
C) - exclusive agency agreement.
D) - open agreement.

A

D) - open agreement.

Answer: D—The open buyer agency agreement is similar to an open listing seller agreement.

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11
Q

A verbal agreement between two brokers to split a commission is:

A) - enforceable.
B) - void under the Statute of Frauds.
C) - unenforceable.
D) - voidable

A

A) - enforceable.

Answer: A—A verbal agreement between two brokers to split a commission is enforceable and is one of the exceptions to the Statute of Frauds.

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12
Q

A broker has listed Mr. Applegate’s property under a net listing. He also has an option to purchase the property within 30 days. If after 27 days, the broker decides to buy the property, he must:

A) - disclose all material facts known to him and to the seller.
B) - inform the seller of any additional offers on the property.
C) - disclose any profit he might make.
D) - All of the above

A

D) - All of the above

Answer: D—If a broker employed to sell property is also given an option to purchase the property himself, he occupies the dual status of agent and purchaser and he is not entitled to exercise his option except by divesting himself of his obligation as agent by making a full disclosure of all material facts known to him. The broker must also inform the principal of the amount of profit the broker will make, and obtain written consent from the principal approving the amount of such profit before the broker may exercise the option.

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13
Q

Which of the following can be recorded?

A) - an Exclusive Authorization and Right to Sell Listing
B) - an Exclusive Agency listing
C) - contracts of sale
D) - All of the above

A

C) - contracts of sale

Answer: C—Listings cannot be recorded. Recording is used for written instruments affecting the title to real property, such as deeds, mortgages, trust deeds, contracts for sale, options and assignments.

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14
Q

A tenant’s five-year lease has expired but they continue to live on the premises and pay their rent monthly. This is considered a(n):

A) - semi-annual tenancy.
B) - periodic tenancy.
C) - estate at will.
D) - estate for years.

A

B) - periodic tenancy.

Answer: B—At the end of the lease term if the tenant offers an additional rent payment and the landlord accepts the payment, the lease is renewed as a periodic tenancy. The lease continues from period-to-period until one of the parties gives notice of termination.

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15
Q

In a new counter-offer:

A) - the counteror becomes the counteree.
B) - the counteror can change the terms of the offer unilaterally.
C) - the counteree can change the terms of the offer unilaterally.
D) - the terms of the offer can never be changed.

A

A) - the counteror becomes the counteree.

Answer: A—In a counter-offer the positions of the parties are reversed – offeror becomes offeree.

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16
Q

On the last day of a 90-day exclusive listing, broker Jones submits a list of names of people with whom he negotiated to the seller. Broker Jones accidentally left out Adams’ name. One week later, the owner sells to Adams. Which of the following is correct?

A) - Adams is liable for the full commission.
B) - The owner is liable for the full commission.
C) - The owner is liable for half of the commission.
D) - The owner is not liable for any commission.

A

D) - The owner is not liable for any commission.

Answer: D—A safety clause in a listing requires the broker to submit the names of all prospective buyers with whom he/she negotiated prior to the expiration of the listing.

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17
Q

Mr. Seller signs an open listing on his home with five different brokers. In this case:

A) - each broker has an opportunity to earn the entire commission.
B) - the brokers will split the commission five ways regardless of who sells it.
C) - the owner must pay a full commission to all five brokers when it sells.
D) - the owner must pay the first broker to take the listing no matter who sells it.

A

A) - each broker has an opportunity to earn the entire commission.

Answer: A—An open listing is one given to any number of brokers who can work simultaneously to sell the owner’s property. The first broker, to secure a buyer who is ready, willing and able to purchase at the terms of the listing, earns the commssion.

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18
Q

An agent acquired a listing for a house and orally promised to hold an open house every week until the house was sold. The agent failed to hold them as promised. This is an example of:

A) - illusory fraud.
B) - constructive fraud.
C) - actual fraud.
D) - deliberate fraud.

A

B) - constructive fraud.

Answer: B—Constructive fraud is a breach of duty as by a person in a fiduciary capacity, without an actual fraudulent intent. Actual fraud is an act intended to deceive another; e.g., making a false statement or false promise without intending to perform it.

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19
Q

On June 10, a prospective buyer gave a deposit to a broker and signed the usual form of an offer to purchase property. The deposit form included the statement, “This offer is irrevocable for five days.” On June 11 and before the offer had been accepted by the seller, the buyer contacted the broker and withdrew his offer and demanded the return of his deposit. The broker:

A) - has until June 16 to obtain the seller’s acceptance.
B) - has until June 15 to obtain the seller’s acceptance.
C) - must return the deposit to the buyer as demanded.
D) - must place the deposit in a neutral escrow until the five day period expires.

A

C) - must return the deposit to the buyer as demanded.

Answer: C—It is a basic tenant of contract law that any offer may be revoked any time prior to acceptance and the buyer gets the deposit back. It doesn’t matter how many days the buyer gave the seller to accept.

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20
Q

The word “laches” most nearly pertains to:

A) - doors and other swinging items.
B) - failure to do something.
C) - doing something within a prescribed time.
D) - failure to do something within a prescribed time.

A

D) - failure to do something within a prescribed time.

Answer: D—Laches means failing to do something which should have been done, i.e., to file a claim or to enforce a right, all within a prescribed time. The Statute of Limitations outlines actions that can be brought within a certain time frame.

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21
Q

A “safety clause” is found in a:

A) - deposit receipt.
B) - loan broker’s statement.
C) - lease.
D) - listing agreement.

A

D) - listing agreement.

Answer: D—A “safety clause” is a clause found in the listing contract that provides payment of a commission to the listing broker should the seller sell the property after the listing expires.

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22
Q

Which of the following requires real estate listings to be in writing?

A) - Real Estate Law
B) - Statute of Frauds
C) - CAR
D) - None of the above

A

B) - Statute of Frauds

Answer: B—The Statute of Frauds generally requires all contracts for the sale of land or any interest therein (including listings) to be in writing.

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23
Q

An exclusive agency listing between a broker and owner incorrectly states 6 dollars rather than 6 percent as the commission payable to the broker if he produces a buyer. If the owner sells the property himself, the broker is entitled to:

A) - 6 percent regardless of the mistake.
B) - an amount to be determined in arbitration.
C) - 6 dollars.
D) - nothing.

A

D) - nothing.

Answer: D—Look out! Since this is an exclusive agency listing, the owner may sell the property himself/herself without being liable for a commission.

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24
Q

A broker enters into an open listing with a seller but fails to give a copy of the listing contract to the owner and also fails to include a termination date. The broker then presents an offer which is accepted.

A) - The broker is entitled to the stated commission.
B) - The exclusion of a termination date does not matter.
C) - Both (a) and (b) are correct.
D) - Neither (a) nor (b) are correct.

A

C) - Both (a) and (b) are correct.

Answer: C—Unlike an exclusive listing, an open listing need not contain a definite termination date. The listing terminates after a reasonable time, usually whatever is customary in the community. All other concurrent open listings are automatically cancelled by the sale. It is not necessary for the broker to give the owner a copy of the open listing at the time of signing.

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25
Q

Under an exclusive agency listing, a broker advertises a home for sale. The owner sells the home prior to the expiration of the listing. The broker is entitled to:

A) - nothing.
B) - the full commission.
C) - half of the commission.
D) - expenses only.

A

A) - nothing.

Answer: A—Since the listing was an Exclusive Agency Listing, the seller may sell the property him/herself.

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26
Q

The broker’s promise to use diligence in finding a buyer:

A) - makes the listing a unilateral contract.
B) - makes the listing voidable by the owner.
C) - makes the listing a bilateral contract.
D) - None of the above

A

C) - makes the listing a bilateral contract.

Answer: C—A bilateral contract is a contract in which each party promises to perform an act in exchange for the other party’s promise to perform. An exclusive listing is an example of a bilateral contract with the broker agreeing to use his/her best efforts (diligence) to locate a ready, willing and able buyer, and the seller promising to pay the broker a commission if the property is sold.

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27
Q

You enter into a contract with a person not knowing he was judicially declared incompetent. The incompetence of one of the parties to this agreement would make the contract:

A) - void.
B) - voidable.
C) - enforceable.
D) - valid.

A

A) - void.

Answer: A—Since one of the parties to the agreement was incompetent, the contract is void.

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28
Q

A broker accepts an exclusive authorization and right to sell listing from a corporation. During the listing term, all of the officers of the corporation die. In this case:

A) - the listing is automatically terminated.
B) - the listing remains in full effect.
C) - the listing must be acknowledged by the newly appointed officers.
D) - the listing must be signed by the corporation’s board of directors.

A

B) - the listing remains in full effect.

Answer: B—One of the main characteristics of a corporation is its perpetual existence, that is corporations never die and only cease to exist when properly dissolved.

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29
Q

A parcel of vacant land is listed for $100,000, requiring 20% down with the seller to carry back the balance. The broker brings in a full-price cash offer, but the owner refuses. The broker is entitled to:

A) - half of the commission.
B) - the full commission.
C) - a commission as a percent of the down payment.
D) - nothing.

A

D) - nothing.

Answer: D—Since the offer does not meet the exact terms of the listing, the broker is not entitled to any commission.

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30
Q

A broker has a combination of a listing and an option. She exercises the option without disclosing that she already has a buyer at a higher price. The broker:

A) - is guilty of fraud.
B) - has made a secret profit.
C) - created an illegal dual agency.
D) - has done nothing wrong.

A

B) - has made a secret profit.

Answer: B—Secret profit refers to a broker making an undisclosed profit at the seller’s expense. Brokers cannot conceal offers from buyers until after they have exercised the option. Full and fair disclosure must be given to the seller.

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31
Q

All of the following would be required to be in writing EXCEPT:

A) - sale of a vacant lot.
B) - sale of a personal residence.
C) - sale of a condominium.
D) - None of the above

A

D) - None of the above

Answer: D—The Statute of Frauds generally requires that all contracts for the sale of land or any interest herein be in writing.

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32
Q

A listing broker agrees verbally to split a commission with a selling broker. The listing broker now refuses to do so. The selling broker should:

A) - notify the Department of Real Estate.
B) - sue the listing broker.
C) - contact the MLS.
D) - do nothing since the agreement was verbal.

A

B) - sue the listing broker.

Answer: B—A verbal agreement between two brokers to split a commission is enforceable. The selling broker’s recourse would be to sue the listing broker. The “selling broker” is the one who brings in the offer.

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33
Q

A family rents a house from January 1st to June 30th. This is considered a(n):

A) - periodic tenancy.
B) - tenancy at sufferance.
C) - estate for years.
D) - tenancy at will.

A

C) - estate for years.

Answer: C—An estate for years is a leasehold created by landlord and tenant for a particular period of time. The period of time could be a fixed number of years, months, weeks, or even days. An estate for years always will have a definite termination date.

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34
Q

Thinking that he is acting properly regarding the safety clause in a listing, a broker notifies the owner verbally of a prospective buyer with whom he negotiated. The day after the listing expires, the buyer purchases the property. Which of the following is correct?

A) - The broker is entitled to a commission.
B) - The broker is entitled to one half of the commission.
C) - The matter would need to go to board arbitration to be resolved.
D) - The broker is not entitled to any commission.

A

D) - The broker is not entitled to any commission.

Answer: D—A safety clause in a listing requires the broker to submit the names of all prospective buyers with whom he/she negotiated in writing.

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35
Q

The Statute of Frauds, outlines what contracts must be in writing to be enforceable through court action. Which of the following contracts would be enforceable?

A) - A verbal lease for one year or less
B) - A verbal listing to secure a loan of $1,500
C) - An exclusive listing taken orally by a broker to sell a single-family residence
D) - An oral agreement to pay a broker a commission for the negotiation of an exchange of two businesses

A

A) - A verbal lease for one year or less

Answer: A—The Statute of Frauds is state law that requires certain contracts to be in writing and signed by the party to be charged (or held) to the agreement in order to be legally enforceable. The Statute of Frauds generally requires that all contracts for the sale of land or any interest herein be in writing. Oral leases for a period not exceeding one year, however are generally valid and enforceable.

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36
Q

A person who had leased a property for three years had to move out of state before the lease period had expired. In reading the lease, there was no mention of either subleasing or assignment of the leasehold. The lessee:

A) - may sublease or assign the lease.
B) - may assign the lease only.
C) - must have the permission of the landlord to either sublease or assign the lease.
D) - the lessee may not either sublease or assign the lease.

A

A) - may sublease or assign the lease.

Answer: A—Failure to discuss either subleasing or assigning a lease automatically gives those rights to the lessee.

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37
Q

Which type of lease requires the lessee to pay a flat rent?

A) - gross lease
B) - percentage of lease
C) - sandwich lease
D) - net lease

A

A) - gross lease

Answer: A—Gross lease: A lease of property under which the lessee pays a fixed rent and the lessor pays the taxes, insurance, and other charges regularly incurred through ownership.

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38
Q

A tenant verbally agrees to lease a house for six months. The following month, the tenant notifies the owner that he has found a more desirable unit and will be moving out. The contract is:

A) - void.
B) - invalid since it was not in writing.
C) - enforceable.
D) - unenforceable.

A

C) - enforceable.

Answer: C—Oral leases for a period not exceeding one year are generally valid and enforceable.

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39
Q

A net leasing agreement would require the lessee to pay his share of all of the following EXCEPT:

A) - leasing commission
B) - property taxes
C) - property insurance
D) - janitorial expenses

A

A) - leasing commission

Answer: A—With a net lease, the lessee (tenant) not only pays the rent for occupancy but also pays maintenance and operating expenses such as taxes, insurance, utilities, maintenance, and repairs. The lessor (owner) would pay the leasing commission. In a true net lease, the tenant is responsible for expenses relating to the premises exactly as if the tenant were the owner. The rent paid is “net” to the lessor. This kind of lease is popular with investors who want to obtain a steady stream of income without having to handle the problems associated with management and maintenance. Commercial or industrial leases, ground leases, and long-term leases are typically net leases.

40
Q

A lease contains a clause in which the parties agree to an adjustment of rent based upon some stated criteria. This lease clause is called a(n):

A) - increase clause.
B) - escalator clause.
C) - index clause.
D) - variable rate clause.

A

B) - escalator clause.

Answer: B—Escalator Clause: Many fixed-rental net leases, particulary long-term commercial leases, contain a clause in which the parties agree to an adjustment of rent based on set increases in taxes, insurance, maintenance and other operating costs. Similarly, the rent may be tied into the cost-of-living index to cover increases in the maintenance expenses and raised at stated intervals. An escalator clause is designed to protect the lessor’s investment position against a reduction in the rate of return over the term of the lease.

41
Q

A broker is going to take a listing on a church that is owned by an unincorporated association. In order to determine who has the proper authority to sign documents and represent the group, the broker should do which of the following:

A) - Contact the head of the group who originally built the building
B) - Check the County Recorder’s records
C) - Check the charter or bylaws of the group
D) - Contact the group members and arrange to have a meeting of the majority for a vote

A

C) - Check the charter or bylaws of the group

Answer: C—Both incorporated and unincorporated associations are governed by bylaws or charters. The president of a corporation, by virtue of his/her office, does not have authority to act for the organization. The minister of a church does not have authority unless conferred by the bylaws.

42
Q

When the letters “HVAC” appear in a commercial or industrial lease, it normally refers to:

A) - Use of a Household Vacuum on the Average Carpet
B) - High Voltage Alternating Current
C) - Homesteads, Vacancies, and Additional Conveyances
D) - Heating, Ventilating, and Air Conditions

A

D) - Heating, Ventilating, and Air Conditions

Answer: D—Heating, ventilating, and air-conditioning (HVAC) system. The unit regulating the even distribution of heat and fresh air throughout a building.

43
Q

Owner Jones gives broker Smith a 90-day exclusive listing. One week later, Jones notifies broker Smith in writing that he is terminating the listing. The next day, owner Jones signs an open listing with broker King. Broker King quickly brings in an offer which owner Jones accepts. As to the commission, which of the following is true?

A) - Broker Smith is not entitled to a commission since the listing was terminated.
B) - Jones cannot enter into an open listing which is concurrent with another listing.
C) - Owner Jones is liable to both Smith and King.
D) - King is entitled to a commission.

A

C) - Owner Jones is liable to both Smith and King.

Answer: C—Assuming nothing else than the information given, it appears that the listing was incorrectly terminated. Owner Jones is liable to both brokers.

44
Q

Which of the following is NOT essential to all contracts?

A) - in writing
B) - mutual consent
C) - capable parties
D) - None of the above

A

A) - in writing

Answer: A—Only real estate contracts are required to be in writing.

45
Q

Most real estate contracts contain preprinted clauses or spaces for information to be added in writing. In the interpretation of such contracts:

A) - Printed parts take precedence over the written parts.
B) - The written parts and the printed parts are given equal consideration.
C) - The written parts take precedence over the printed parts.
D) - No changes or amendments to the printed clauses are permitted by law.

A

C) - The written parts take precedence over the printed parts.

Answer: C—Written parts always take precedence over the preprinted parts.

46
Q

A net leasing agreement would require the lessee to pay his share of all of the following EXCEPT:

A) - leasing commission
B) - property taxes
C) - property insurance
D) - janitorial expenses

A

A) - leasing commission

Answer: A—With a net lease, the lessee (tenant) not only pays the rent for occupancy but also pays maintenance and operating expenses such as taxes, insurance, utilities, maintenance, and repairs. The lessor (owner) would pay the leasing commission. In a true net lease, the tenant is responsible for expenses relating to the premises exactly as if the tenant were the owner. The rent paid is “net” to the lessor. This kind of lease is popular with investors who want to obtain a steady stream of income without having to handle the problems associated with management and maintenance. Commercial or industrial leases, ground leases, and long-term leases are typically net leases.

47
Q

A lease contains an assignment clause requiring the consent of the landlord. If the lessee assigns the lease without approval, the assignment is:

A) - valid.
B) - void.
C) - voidable.
D) - illegal.

A

C) - voidable.

Answer: C—An assignment of a lease in violation of an anti-assignment restriction is not void but is voidable at the lessor’s discretion. If a lease has an assignment clause requiring the consent of the landlord, the landlord may not unreasonably or arbitrarily withhold consent.

48
Q

A broker listed an owner’s home and later received an offer from another licensee that met all of the listing terms and conditions. After considering the offer, the owner informed the broker that the owner no longer wished to sell, and asked to be released from the listing agreement immediately. Which of the following is a TRUE statement about the broker’s position in this situation?

A) - The broker must release the owner without obligation.
B) - The broker must tell the owner that the offeror may sue for specific performance.
C) - The broker may succeed in collecting an earned commission from the owner.
D) - The broker may keep the earnest money that accompanied the offer as liquidated damages.

A

C) - The broker may succeed in collecting an earned commission from the owner.

Answer: C—The owner may terminate the listing contract prior to its expiration, but he/she may still be liable to the broker for a commission. The buyer (offeror) cannot sue for specific performance because the offer was not accepted. The earnest money deposit would have to be returned to the buyer (offeror).

49
Q

Consideration may be:

A) - money.
B) - work.
C) - a promise.
D) - All of the above

A

D) - All of the above

Answer: D—A consideration is the inducement to a contract. It is the cause, motive, or compelling influence which induces a contracting party to enter into a contract. Consideration means something of value in the eye of the law and considered as such by both parties. It may be money, services, or a promise, and consists of either a benefit to the promisee or a loss or detriment to the promisor.

50
Q

If the owner enters into an exclusive agency listing and thereafter sells the property through his own efforts:

A) - no commission is payable.
B) - the broker is entitled to 50 percent of his commission.
C) - the broker is entitled to full commission.
D) - None of the above

A

A) - no commission is payable.

Answer: A—Under an Exclusive Agency Listing, the seller reserves the right to sell the property himself or herself and not pay anyone a commission.

51
Q

A listing that does not require a broker to use diligence in obtaining a purchaser is:

A) - void.
B) - illegal.
C) - a bilateral contract.
D) - not an exclusive listing.

A

D) - not an exclusive listing.

Answer: D—An exclusive listing is an agreement in which the seller agrees to appoint only one broker to sell the property. For this reason, it must include a promise by the broker to use diligence.

52
Q

Bob signs a contract under duress. By whom can the contract be voided?

A) - only by Bob
B) - only the maker voids
C) - both can void
D) - neither can void

A

A) - only by Bob

Answer: A—Duress is a threat, whereby a person is forced to do some act against his/her will. The person who was forced to perform under a threat has the right to void the agreement or let it stand.

53
Q

Which of the following is NOT essential to a contract?

A) - offer
B) - acceptance
C) - consideration
D) - performance

A

D) - performance

Answer: D—You can still have a valid contract without performance.

54
Q

A contract signed under duress is:

A) - void.
B) - voidable.
C) - illegal.
D) - enforceable.

A

B) - voidable.

Answer: B—Duress is a threat whereby a person is forced to do some act against his/her will. The person who was forced to perform under a threat has the right to void the agreement or let it stand.

55
Q

A broker secured a buyer for his principal and the seller accepted the offer presented through the broker. Under which type of listing would the broker not receive a commission from the principal?

A) - net listing
B) - open listing
C) - exclusive listing
D) - exclusive authorization and right to sell listing

A

A) - net listing

Answer: A—A Net Listing is an employment contract in which the broker receives as commission all excess monies over and above the minimum sales price agreed on by broker and seller.

56
Q

One week after entering into an exclusive authorization and right to sell listing, the owner dies. His designated administrator decides not to sell the property. In this case:

A) - the administrator must sell for the full 90-day listing period.
B) - the owner’s estate will be liable for the commission.
C) - the owner’s heirs will be liable for the commission.
D) - the owner’s death terminated the listing contract.

A

D) - the owner’s death terminated the listing contract.

Answer: D—Death of either the seller or the broker automatically terminates an exclusive right to sell listing.

57
Q

Which of the following accurately describes a listing agreement which allows the broker to either find a prospective buyer or purchase the home himself/herself?

A) - exclusive authorization and right to sell
B) - open listing
C) - net listing
D) - option listing

A

D) - option listing

Answer: D—An Option Listing is a listing in which the broker also retains an option to purchase the property for the broker’s own account.

58
Q

An exclusive authorization and right to sell listing has an expiration date of noon on September 5th. At 1 p.m. on September 5th, the owner signed a new listing with Larry, another broker. At 2 p.m. on September 5th, Sally, the original listing broker, presents a full price offer. In this case:

A) - Sally is entitled to a commission.
B) - Sally has acted illegally.
C) - Larry is entitled to a commission.
D) - None of the above

A

C) - Larry is entitled to a commission.

Answer: C—Technically speaking, Larry is entitled to the commission, however many other factors may come into play. Safety clause provisions may apply if Sally documented previous negotiations with this buyer. It is likely that the commission would be split between Larry and Sally.

59
Q

A lease where the rent is based on a percentage of the monthly or annual gross sales of the lessee is called a:

A) - gross lease.
B) - sandwich lease.
C) - net lease.
D) - percentage lease.

A

D) - percentage lease.

Answer: D—Percentage Lease: A lease whose rental is based on a percentage of the monthly or annual gross sales made on the premises.

60
Q

Failure to perform any of the terms or conditions of a contract is called:

A) - breach.
B) - novation.
C) - break.
D) - addendum.

A

A) - breach.

Answer: A—Breach of contract is the violation of any of the terms or conditions of a contract without legal excuse. The non-breaching party can usually seek one of three alternative remedies upon a material breach of the contract: rescission of the contract, action for money damages, or an action for specific performance.

61
Q

Given the subjective nature of market value, the listing price is most likely:

A) - the lower end of the market value.
B) - the average market value.
C) - the higher end of market value.
D) - not related to market value.

A

C) - the higher end of market value.

Answer: C—The listing price set by the owner usually sets the upper limit of market value under normal market conditions. A prospective buyer’s first offer usually sets the lower limit.

62
Q

An exclusive listing contains a provision for termination upon the owner giving the broker 24 hours notice.

A) - This provision has no effect.
B) - This provision makes the contract void at its inception.
C) - This is proper as long as it states 24 hours or more.
D) - The broker may be subject to disciplinary action.

A

D) - The broker may be subject to disciplinary action.

Answer: D—Failure to include a specific termination date (12 noon on December 31st) in an exclusive listing can result in suspension or revocation of the broker’s license.

63
Q

An exclusive authorization, a right to sell listing, does not contain a complete legal description.

A) - The listing is void.
B) - It is a violation of the Real Estate Law.
C) - The listing is unenforceable.
D) - None of the above

A

D) - None of the above

Answer: D—A legal description is not required for a listing, however, the description must be clear and not ambiguous.

64
Q

During the term of an exclusive authorization and right to sell listing, the broker has his license revoked by the Department of Real Estate. To prove that he is entitled to a commission, he must prove all of the following EXCEPT:

A) - He was licensed at the time the commission was earned.
B) - The buyer and seller agreed to the sale during the listing term.
C) - The broker was the procuring cause of the sale.
D) - The listing was a legally binding agreement.

A

C) - The broker was the procuring cause of the sale.

Answer: C—Here is another question that provides lots of irrelevant information. Under an exclusive authorization and right to sell listing, the broker is entitled to a commission regardless of who sells the property.

65
Q

A 17-year-old unemancipated minor enters into a contract to sell real property. The contract is:

A) - enforceable.
B) - valid.
C) - illegal.
D) - unenforceable.

A

D) - unenforceable.

Answer: D—An unemancipated minor is incapable of entering into a contract to sell real property.

66
Q

What is it called when one person is substituted for another in a contract?

A) - redaction
B) - novation
C) - subordination
D) - hypothecation

A

B) - novation

Answer: B—The most general definition of novation is the substitution of a new obligation for an old one. It also means substitution of new parties to an existing obligation, as when the parties to an agreement accept a new debtor in place of an old one. For example, in the assumption of a loan, the lender may release the seller and substitute the buyer as the party primarily liable for the mortgage debt.

67
Q

Under a lease, the leasehold interest lies in the:

A) - lessor.
B) - lessee.
C) - landlord.
D) - beneficiary.

A

B) - lessee.

Answer: B—A “leasehold interest” is the right to exclusive possession and use of real property for a fixed period of time held by the lessee. Remember: lessor (landlord), lessee (tenant).

68
Q

A broker receives a full-price offer on a house he has listed in accordance with the terms of the listing. Before he can present the offer, another broker brings in an offer for $500 less but with slightly better terms. The listing broker should:

A) - refuse to accept the second offer.
B) - present both offers at the same time.
C) - tell the other broker the property has been sold.
D) - present both offers in the order received.

A

B) - present both offers at the same time.

Answer: B—Even though it is a temptation to favor his own offer, it is the listing broker’s fiduciary duty to present both offers at the same time.

69
Q

If one uses the words “of definite duration” to describe a lease, it is most likely a(n):

A) - periodic tenancy.
B) - estate for years.
C) - life estate.
D) - estate at sufferance.

A

B) - estate for years.

Answer: B—An estate for years always will have a definite termination date.

70
Q

A month-to-month lease is considered a(n):

A) - periodic tenancy.
B) - estate for years.
C) - life estate.
D) - estate at sufferance.

A

A) - periodic tenancy.

Answer: A—A periodic tenancy is a lease that continues from period to period until one of the parties gives notice of termination. A periodic tenancy has no definite termination date.

71
Q

The maximum duration of an agricultural lease is:

A) - 10 years.
B) - 51 years.
C) - 99 years.
D) - None of the above

A

B) - 51 years.

Answer: B—Maximum durations of Estate for Years leases are as follows:

Agricultural leases 51 years
Residential property leases 99 years
Mineral, oil, and gas leases 99 years

72
Q

A periodic tenancy lease does not specify exactly when the rent payment is due. If this is the case, it would be due:

A) - on the 1st of each month.
B) - before the 10th of each month.
C) - by the 15th.
D) - at the end of each rent paying period.

A

D) - at the end of each rent paying period.

Answer: D—If the parties fail to stipulate when rent is due, California law provides that it shall be payable at the end of each rent-paying period for a periodic tenancy or at the end of the lease term if the term is one year or less.

73
Q

Brown leases a residence from Baker on a three-month written lease. Upon expiration of the written lease, Brown retains possession of the property without the consent of Baker. Brown now holds a(n):

A) - estate at sufferance.
B) - estate for years.
C) - estate at will.
D) - periodic tenancy subject to eviction.

A

A) - estate at sufferance.

Answer: A—An estate at sufferance is defined as one in which a lessee rightfully comes into possession of the land and retains possession after the expiration of the lease.

74
Q

A tenant signs a lease that stipulates that the lessee pays the property tax. This lease is probably a:

A) - standard lease.
B) - sandwich lease.
C) - net lease.
D) - reverse lease.

A

C) - net lease.

Answer: C—Net Lease: A lease, usually commercial in which the lessee not only pays the rent for occupancy but also pays maintenance and operating expenses such as taxes, insurance, utilities and repairs. The rent paid is said to be “net” to the lessor.

75
Q

Broker Williamsburg obtained an exclusive authorization and right to sell listing from the owner of a residence. During the listing period, Williamsburg found a buyer who made an offer on the property which was accepted. Neither the offer nor the escrow instructions made any mention of Williamsburg being the agent or the payment of a commission. Under these circumstances:

A) - Williamsburg will have no legal right to enforce commission collection.
B) - Williamsburg is legally entitled to a commission.
C) - Williamsburg must prove he was the “procuring cause” in order to collect the commission.
D) - Williamsburg is subject to disciplinary action by the commission for negligence.

A

B) - Williamsburg is legally entitled to a commission.

Answer: B—Williamsburg has earned his commission because the terms of the listing contract with the seller have been met.

76
Q

The transferee in an assignment of a lease is called the:

A) - assignor.
B) - assignee.
C) - sublessor.
D) - sublessee.

A

B) - assignee.

Answer: B—The assignor gives the assignment and remains secondarily liable under the lease. The assignee (transferee) takes over the assignor’s interest and is primarily liable to pay rent to the original lessor.

77
Q

The lessee of an apartment and the owner of a condominium have many things in common. Which of the following is true for both? They each hold:

A) - a fee interest.
B) - an estate in real property.
C) - a less than freehold estate.
D) - an estate of inheritance.

A

B) - an estate in real property.

Answer: B—Although the estates are different, the only thing they have in common is that they each have an estate. A condo owner has a fee interest and an estate of inheritance. The lessee has a less-than-freehold estate. They each have an estate.

78
Q

Which of the following represents the minimum time period for an exclusive right to sell listing on real property?

A) - 30 days
B) - 90 days
C) - 6 months
D) - Whatever time period is agreed to by seller and broker

A

D) - Whatever time period is agreed to by seller and broker

Answer: D—A listing may be for any period of time that is agreed to by the seller and broker.

79
Q

A broker has shown a property which he has authorization to sell under an open listing. After showing the property, he should:

A) - write a memo to his office.
B) - introduce the parties.
C) - phone the seller and notify him of the buyer’s name.
D) - write a memo to the seller saying that he has shown the property.

A

D) - write a memo to the seller saying that he has shown the property.

Answer: D—Most listings contain a safety clause which entitles the agent to a commission should a sale be made to a person with whom the agent has negotiated. All safety clauses in listings require the broker to inform the seller in writing of the parties with whom he/she has been dealing (i.e., shown the property to) in order to later assert his/her rights for a commission on the grounds that he/she was the procuring cause.

80
Q

Licensee A has out-of-town relatives come to visit and he shows them several listings. He ends up helping them rent a property with an option to purchase. He should make a disclosure to:

A) - the listing agent.
B) - the listing broker.
C) - the seller.
D) - All of the above and his relatives

A

C) - the seller.

Answer: C—The prospective purchase of the property by a person related to the licensee by blood or marriage must be disclosed to the seller. Failure to make this disclosure would be considered a violation of the agent’s duty to disclose all material facts.

81
Q

An exclusive authorization and right to sell listing is given to Steve R. Stone (DBA: Steve R. Stone Realty). If Steve R. Stone dies prior to the sale of the property, the listing:

A) - passes to Mrs. Stone provided she is a licensed real estate broker.
B) - terminates.
C) - passes to Steve R. Stone’s heirs.
D) - is retained by the brokerage company.

A

B) - terminates.

Answer: B—Death of either the seller or the broker automatically terminates an exclusive right to sell listing. This will create problems for the deceased’s wife, but the contract as it stands is finished.

82
Q

Which of the following would not be a required payment for the lessee under a net lease?

A) - janitorial
B) - lease commission
C) - property taxes
D) - insurance

A

B) - lease commission

Answer: B—The lease commission is paid by the landlord.

83
Q

To whom does a listing belong?

A) - listing agent
B) - broker
C) - broker and agent
D) - seller

A

B) - broker

Answer: B—This is true even though the listing was prepared by a salesperson. If the salesperson transferred his/her license to another broker, the listing would stay with the listing broker.

84
Q

Which of the following is TRUE concerning promissory notes?

A) - They are used as security for trust deeds.
B) - They are recorded at the county recorder’s office.
C) - They are always used when real estate is sold.
D) - They are the evidence of the debt.

A

D) - They are the evidence of the debt.

Answer: D—The promissory note is the evidence of the debt. The trust deed is the security (or mere incidence) of the debt.

85
Q

Regarding a promissory note:

A) - A promissory note secures the deed of trust.
B) - The deed of trust secures the promissory note.
C) - The promissory note is not part of the deed of trust.
D) - The grant deed secures the promissory note.

A

B) - The deed of trust secures the promissory note.

Answer: B—The deed of trust secures the promissory note and the property. If payment is not made according to the terms of the note and deed of trust, the beneficiary may instruct the trustee to foreclose as set forth in the deed of trust.

86
Q

A tenant has a three year lease with the lessor of an apartment building. At the end of year one, the tenant is transferred to another city. The lease between the lessor and lessee is silent on the tenant’s ability to sublease or assign the lease. In this case:

A) - The lessee may sublease, but not assign the lease.
B) - The lessee may either assign or sublease the apartment without the permission of the lessor.
C) - The lessee may assign but not sublease the apartment.
D) - The tenant must have the lessor’s permission to either sublease or assign the lease.

A

B) - The lessee may either assign or sublease the apartment without the permission of the lessor.

Answer: B—Failure to mention assignment or subleasing in a lease allows the tenant to either assign or sublease the apartment without the permission of the lessor.

87
Q

A licensed real estate broker is successful in securing a buyer for a property who is ready, willing and able to buy. The offer is accepted and signed by both parties and escrow is opened. During the escrow period, the title company discovers that the seller is married but under 18 years of age and notifies the broker and the escrow holder. Under these circumstances, the contract is:

A) - valid.
B) - void.
C) - voidable.
D) - outlawed.

A

A) - valid.

Answer: A—A minor is generallay defined as any person under the age of 18. However, a person under the ae of 18 years is said to be an emancipated minor if the person has entered into a valid marriage, is on active duty in any armed forces, or willingly lives apart from their parents with the parents’ consent and manages their own fiancial affairs regardless of the source of income.

88
Q

Which of the following describes “mutual consent?”

A) - offer and acceptance
B) - tender
C) - counter offer
D) - None of the above

A

A) - offer and acceptance

Answer: A—Mutual consent means a meeting of the minds, usually in the form of an offer and acceptance.

89
Q

Salesperson Kim has several listings and is an agent of Broker Ling. These listings are:

A) - Void if Salesperson Kim changes brokers
B) - The property of Salesperson Kim
C) - The property of Broker Ling
D) - The property of Salesperson Kim and Broker Ling

A

C) - The property of Broker Ling

Answer: C—The listing agreement is a contract between the broker and the seller. It remains the property of Broker Ling if Salesperson Kim changes brokers and the listing remains valid.

90
Q

When there is a counter offer, a new “counter offer” form must be filled out. The reason for this is:

A) - it is a new offer
B) - it requires signatures to become a contract
C) - it is a rejection of the original offer
D) - all of the above

A

D) - all of the above

Answer: D—All of these are true statements.

91
Q

Which of the following lists the essential elements of an enforceable contract?

A) - acceptance, consideration, performance, lawful object
B) - lawful object, competency, mutual consent, consideration
C) - tender, consideration, deposit, performance
D) - execution, consideration, mutuality, competence

A

B) - lawful object, competency, mutual consent, consideration

Answer: B—There are four essentials to all contracts:

1) A lawful object;
2) Competency: Parties capable of contracting;
3) Mutual consent: Their consent which includes the offer and acceptance; and
4) Consideration: A sufficient consideration. A fifth requirement exists for real estate contracts - “in writing.”

92
Q

A listing with an effective date of March 12th and expiring on April 12th is for:

A) - 30 days.
B) - 31 days.
C) - 32 days.
D) - 33 days.

A

C) - 32 days.

Answer: C—You must include all the days in this count. If this doesn’t make sense, count the days on a calendar.

93
Q

To have a valid contract, all but one of the following would be necessary:

A) - paid compensation
B) - lawful object
C) - competent parties
D) - a deed

A

D) - a deed

Answer: D—A deed transfers title to property and thereafter evidences ownership. It is not a part of the contract nor is it necessary to complete a transaction unless made a part thereof. Paid compensation is just another way of saying “consideration.”

94
Q

Seller Smith sold a home to buyer Jones under contract. Shortly before close of escrow, it was judicially determined that Jones was incompetent prior to entering into the contract with Smith. The contract between Smith and Jones is:

A) - unenforceable.
B) - enforceable.
C) - void.
D) - voidable.

A

C) - void.

Answer: C—If Jones was legally incompetent before entering into the contract with Smith, the contract was void at its inception.

95
Q

With an exclusive listing, a broker may be subject to disciplinary action for:

A) - failing to give accurate tax advice.
B) - failing to give a copy to the seller.
C) - failing to include a definite termination date.
D) - both (b) and (c).

A

D) - both (b) and (c).

Answer: D—An exclusive listing must include a definite termination date. The broker must also provide a copy of the listing to the owner.

96
Q

Salesperson Beth took an offer to purchase from her buyer to Broker Smith’s office to present it. The offer included a $1,000.00 promissory note from the buyer as the earnest money deposit. Broker Smith should do which one of the following upon receipt of the offer:

A) - Tell Beth she wasted her time and that he cannot accept the offer without cash or a check for the deposit.
B) - Tell Beth the note is not good enough because it did not come with a deed.
C) - Tell Beth she should have called him first as not to waste her time, so he could call his seller to see if they would consider an offer with a promissory note.
D) - Tell Beth that a promissory note is just as good as cash or a check for the deposit and present the offer to his seller.

A

D) - Tell Beth that a promissory note is just as good as cash or a check for the deposit and present the offer to his seller.

Answer: D—When acting as a listing agent, you must present or cause to be presented to the owner of the property, any written offer to purchase received unless expressly instructed by the owner not to present such anoffer, or unless the offer is patently frivolous. The earnest money deposit is usually in the form of apersonal check, money order or cashier’s check, but may take the form of a promissory note.