Module 4 Flashcards
Which of the following best represents rescission of a contract?
A) Option to purchase can be transferred by a lessee to a lessor
B) Lease was terminated with the mutual agreement of both parties
C) One of the parties can change the contract at a later date
D) Offer to buy
B) Lease was terminated with the mutual agreement of both parties
An offer, where no earnest money or deposit is given with the contract, is valid.
A) True
B) False
A) True
True. Deposits are not an indication of valuable consideration. There could be no money down and be a valid contract although the seller may question the sincerity of the offer with nothing down.
After signing a contract for the sale of real estate, a deed can be given to a buyer or third party designated as the: A) Principal B) Assignee C) Grantor D) Escrow agent
B) Assignee
The assignor is still liable for the consummation of the contract if the assignee defaults on the purchase.
An agent is considered to have earned his commission when the:
A) Listing contract is signed by the seller
B) Title insurance policy is delivered to the buyer
C) Title search is completed and title is recorded
D) Purchase agreement is signed and all the conditions are satisfied
D) Purchase agreement is signed and all the conditions are satisfied
A "Power of Attorney": A) Must be in writing B) Is revoked by the death of either party C) Both of the above D) None of the above
C) Both of the above
A salesperson, with full knowledge, writes deceptive information in a sales contract. One of the parties to the contract acts on the information provided and incurs damages. The action of the salesperson constitutes: A) Undue influence B) Duress C) Breach of contract D) Misrepresentation or fraud
D) Misrepresentation or fraud
A real estate sales contract that binds one party but allows the other party to withdraw is: A) A land contract B) An installment contract C) A voidable contract D) A void contract
C) A voidable contract
The contract can be voided by the party that is lied to but not by the party that lied.
Which is true regarding a buyer’s earnest money deposit and offer to purchase?
A) They may demand full repayment if they withdraw the offer prior to the seller’s acceptance
B) It is subject to forfeiture to the seller in the event the buyer fails to consummate the agreement
C) Both of the above
D) None of the above
C) Both of the above
A broker recommends to a seller that he remodel the kitchen before selling his home. A contractor is hired and completed the remodeling. Escrow closes within 30 days. After closing, the buyer was not aware that the contractor was not paid for the remodeling. The contractor has a right to file: A) Mechanic's lien B) Building Permit Violation C) Circuit Court Judgment D) Indemnification agreement
A) Mechanic’s lien
A mechanic’s lien can be filed by the contractor and any supplier of services and materials for the subject property. The seller and buyer may be liable for the removal of the lien.
The seller must give the buyer a disclosure form:
A) Upon receipt of the Purchase Contract
B) Within 5 days of acceptance of the offer
C) Within 10 days of acceptance of the offer
D) Anytime before closing
C) Within 10 days of acceptance of the offer
A faxed acceptance is: A) Binding with hard copy to follow B) Fully binding and effective whether or not originally executed documents are transmitted to escrow C) Is not binding if not legible D) Must be confirmed
B) Fully binding and effective whether or not originally executed documents are transmitted to escrow
The Purchase Contract clearly states that faxed copies are binding on both parties.
A sales agent takes a listing where the owner states that the refrigerator will not be included in the sale. When writing up the Purchase Contract, the sales agent inadvertently checks the “refrigerator included” box. Now both the seller and buyer want the refrigerator.
A) Since the listing and MLS forms state no refrigerator, the buyer has not given legal notice in writing that the refrigerator is included
B) The Purchase Contract is enforceable
C) The listing form takes precedence
D) The sales agent would probably have his license revoked
B) The Purchase Contract is enforceable
The sales agent will most likely be paying for a refrigerator from his commission.
A seller signs a contract to sell to a buyer pursuant to the Purchase Contract. The buyer elects to have boundaries surveyed at cost of $800, even though the property is already staked. The survey determines that the stakes are accurate. The seller owes the following: A) $0 B) $200 C) $400 D) $800
A) $0
The Purchase Contract states in C-41 that if the stakes are visible and the buyer requests C-41 staking and the position of the stakes do not differ from what is in the ground, the buyer is to pay for the survey.
All are elements of a Purchase Contract, EXCEPT: A) Location B) Sales price and method of payment C) Signature of buyers and sellers D) Commission rate
D) Commission rate
The commission is usually established in the listing contract.
When obtaining the buyers’ signatures, the buyers’ broker notices errors in the financing computations. The buyer’s broker should:
A) Let escrow fix it
B) Ask sellers’ agent for a new Purchase Contract with changes
C) Correct errors and forward to sellers’ agent without pointing out errors
D) Change the figures and have the buyers initial changes prior to sending to the seller
D) Change the figures and have the buyers initial changes prior to sending to the seller
All changes to a contract need to be initialed by all the parties that are signing the contract.
An option is generally defined as:
A) An informal agreement between a prospective purchaser and a listing broker that the purchaser can buy a listed property at a price quoted by the broker
B) A contract by which the seller gives a prospective buyer the right to purchase property at a fixed price within a stated period of time
C) An informal agreement with a listing broker to accept only those offers that meet the listing price
D) A contract by which the purchaser gives the listing broker a bid and down payment on the property
B) A contract by which the seller gives a prospective buyer the right to purchase property at a fixed price within a stated period of time
The seller (optionor) is obligated to sell but the buyer (optionee) does not have to buy the property.
Certain elements must be present in a real estate sales contract involving a single-family residence if the contract is to be valid. Although the following elements are recommended, which one is NOT an absolute necessity? A) Description of land B) Type of deed C) Names of the parties D) Sales price
B) Type of deed
Type of deed is not specified in the Purchase Contract. Most transactions will involve a General Warranty Deed.
If fire destroys a home after the contract of sale is signed by both parties but prior to closing, all of the following are true under the Uniform Vendors and Purchasers Risk Act EXCEPT:
A) The party in possession generally bears the risk of loss
B) The seller bears the risk of loss if in possession and holding legal title at the time of the loss
C) The buyer assumes responsibility on signing the sales contract
D) Responsibility generally passes to the buyer on closing or occupancy, whichever occurs first
C) The buyer assumes responsibility on signing the sales contract
Risk of loss does not transfer to the buyer until the buyer has taken title to the property or has taken early occupancy.
A portion of a printed form contract is changed by typing in contrary provisions, which are then initialed by both parties. Which takes precedence?
A) Printing over typing
B) Neither-the contract is voidable because of the changes
C) Typing over printing
D) Neither-the parties may void the contract because of the changes
C) Typing over printing
Handwritten over typing also prevails in a contract.
A real estate salesperson has been working with buyers. After helping them negotiate for their dream home, the buyers ask the salesperson if she can help them secure a mortgage. The salesperson knows a lender that pays a fee for referring purchasers to them. Should the salesperson refer the buyers to this lender?
A) No, this would be an unwise referral
B) Yes, if the salesperson and the buyers have previously entered into a written buyer agency agreement
C) Yes, if the salesperson discloses the referral fee to the sellers
D) Yes, if the lender offers the best interest rates and terms available in the market
A) No, this would be an unwise referral
The agent is not in violation of the law if the agent discloses that a referral fee will be received for referring clients to the lender. The agent should be licensed as a mortgage solicitor and follow the law in being paid. It is not a good idea to refer clients when referral fees are paid.
