Real Estate Test Unit 11

Question 1

addendum

Answer 1

any provision added to an existing contract without altering the content of the original. must be signed by all parties

Question 2

amendment

Answer 2

a change to the existing content of a contract (i.e. if words or provisions are added to or deleted from the body of the contract) must be initialed by all parties

Question 3

assignment

Answer 3

the transfer in writing of interest in a bond, mortgage, lease, or other instrument

Question 4

binder

Answer 4

an agreement that may accompany an earnest money deposit for the purchase of real property as evidence of the purchaser’s good faith and intent to complete the transaction

Question 5

breach of contract

Answer 5

violation of any terms or conditions in a contract without legal excuse; for example, failure to make a payment when it is due

Question 6

contract

Answer 6

a legally enforceable promise or set of promises that must be performed and for which, if a breach of the promise occurs, the law provides a remedy. a contract may be either unilateral, by which only one party is bound to act, or bilateral, by which all parties to the instrument are legally bound to act as prescribed

Question 7

consideration

Answer 7

1) that received by the grantor in exchange for the deed 2) something of value that includes a person enter into a contract

Question 8

contingencies

Answer 8

provisions in a contract that require a certain act to be done or a certain event to occur before the contract becomes binding

Question 9

counteroffer

Answer 9

a new offer made in response to an offer received. it has the effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offeror

Question 10

discharge

Answer 10

the act of terminating a contract or agreement; this may be done when it has been completely performed for by another party’s breach or default

Question 11

earnest money

Answer 11

money deposited by a buyer under the terms of a contract, to be forfeited if the buyer defaults but to be applied to the purchase price if the sale is closed

Question 12

enforceable contract

Answer 12

a contract that meets all the elements of a valid contract, including compliance with any applicable statute of frauds or other law that requires it to be in writing and signed by the parties

Question 13

equitable title

Answer 13

the interest held by a vendee (buyer) under a contract for deed or an installment contract in which title is not immediately transferred; the equitable right to obtain absolute ownership to property when legal title is held in another’s name

Question 14

estate tax

Answer 14

federal tax on a decedent’s real and personal property

Question 15

executed contract

Answer 15

a contract in which all parties have fulfilled their promises and thus performed the contract

Question 16

executory contract

Answer 16

a contract under which something remains to be done by one or more of the parties

Question 17

legally competent parties

Answer 17

people who are recognized by law as being able to contract with others; those of legal age and sound mind

Question 18

liquidated damages

Answer 18

an amount predetermined by the parties to a contract as the total compensation to an injured party should the other party breach the contract

Question 19

mutual assent

Answer 19

requirement that there must be complete agreement between the parties about the purpose and terms of a contract

Question 20

novation

Answer 20

substituting a new obligation for an old one or substituting new parties to an existing obligation

Question 21

offer and acceptance

Answer 21

two essential components of a valid contract; a “meeting of the minds.” an offer is a promise made by the offeror, requesting something in exchange for that promise. acceptance is a promise by the offeree to be bound by the exact terms proposed by the offeror

Question 22

offeror/offeree

Answer 22

the person who makes the offer is the offeror. the person to whom the offer is made is the offeree

Question 23

option

Answer 23

an agreement to keep open for a set period an offer to sell or purchase property

Question 24

owner financing

Answer 24

the seller is the primary lender, securing the property by means of a deed, note and mortgage, deed of trust, or contract for deed. in its traditional form, the buyer takes possession of the property and the seller retains legal title until paid in full, but some states have softened this outcome to provide that the buyer is entitled to legal title after a specified period of successful loan payments

Question 25

purchase money mortgage

Answer 25

a note secured by a mortgage or deed of trust given by a buyer, as borrower, to a seller, as lender, as part of the purchase price of the real estate

Question 26

revocation

Answer 26

canceling or annulling licensed privileges or rights

Question 27

specific performance

Answer 27

a legal action to compel a party to carry out the terms of a contract

Question 28

statute of limitations

Answer 28

the law pertaining to the period of time within which certain actions must be brought to court

Question 29

“time is of the essence”

Answer 29

a phrase in a contract that requires the performance of a certain act within a stated period of time

Question 30

unenforceable contract

Answer 30

a contract that has all the elements of a valid contract, yet neither party can sue the other to force performance of it. for example, an unsigned contract is generally unenforceable

Question 31

unilateral contract

Answer 31

a one-sided contract wherein one party makes a promise so as to induce a second party to do something. the second party is not legally bound to perform; however, if the second party does comply, the first party is obligated to keep the promise

Question 32

valid contract

Answer 32

a contract that complies with all the essentials of a contract and is binding and enforceable on all parties to it

Question 33

vendee

Answer 33

a buyer, usually under the terms of a land contract

Question 34

vendor

Answer 34

a seller, usually under the terms of a land contract

Question 35

void contract

Answer 35

a contract that has no legal force or effect because it does not meet the essential elements of a contract

Question 36

voidable contract

Answer 36

a contract that seems to be valid on the surface but may be rejected or disaffirmed by one or both of the parties