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Real Estate > Session 5: Real Estate Contracts & Advertising Regulations > Flashcards

Session 5: Real Estate Contracts & Advertising Regulations Flashcards

1
Q

Real Estate Contracts

A

A real estate contract is a legally enforceable agreement between competent parties who agree to perform or refrain from performing certain acts for consideration

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2
Q

Competent parties

A

Must be viewed by law as being capable of making a binding promise

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3
Q

What makes you a competent party?

A

Over 16

legally emancipated by the court

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4
Q

Meeting of the minds

A

There must be an offer by the offeror and acceptance by the offeree.

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5
Q

Does the acceptance need to be a mirror image of the offer?

A

Yes

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6
Q

What if a client wants to change an offer?

A

Write a counteroffer

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7
Q

Words that end in “or” describe which party

A

The giving party

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8
Q

Words that end in “ee” describe which party

A

The accepting/receiving party

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9
Q

Consideration

A

Something of legal value that two parties agree to

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10
Q

Would property transferred as a gift be a consideration? What is this called?

A

Yes - love and affection

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11
Q

Bilateral Contract

A

Both parties agree to do something

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12
Q

What is an example of a bilateral contract?

A

Residential re-sale contract

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13
Q

Unilateral Contract

A

Only one party is bound by the agreement

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14
Q

What is an example of a unilateral contract?

A

Option contract

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15
Q

If there is a contract dispute between the boiler-plate language or the written word in a contract, which one takes precedence?

A

Written word

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16
Q

Express contract

A

Can be in writing or verbal

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17
Q

Is a verbal contract legally enforceable?

A

No, only written contracts

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18
Q

Which verbal express contracts are legally enforceable?

A

Leases of a year or less

Broker to broker agreements

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19
Q

Implied Contracts

A

Created by the parties ACTIONS and are not expressed

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20
Q

Whose actions does it take to create an implied contract?

A

Both parties

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21
Q

Statute of Frauds

A

All real estate contracts need to be in writing to be enforceable

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22
Q

Executory Contract

A

Promises have been made but have not been fulfilled yet

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23
Q

What is an example of an executory contract?

A

When a buyer prepares an offer and the seller accepts the offer

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24
Q

Executed Contract

A

A contract that has been completed. Close of escrow.

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25
Q

When does an executory contract become an executed contract?

A

after the closing of escrow

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26
Q

Counteroffer

A

A new offer that negates the original offer

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27
Q

Does a counter negate the original offer?

A

Yes

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28
Q

What is a valid contract?

A

Contains all required elements and is binding on all parties.

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29
Q

What is a voidable contract?

A

Can be rescinded by one of the parties but is not in and of itself void

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30
Q

Is a contract with a minor voidable?

A

Yes

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31
Q

Is a contract under duress or coercion voidable?

A

Yes

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32
Q

Is a contract under fraud voidable?

A

Yes

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33
Q

Is a contract for a property in AZ without ingress and egress voidable?

A

Yes

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34
Q

Void

A

Has no legal or binding effect because it is missing one or more of the requirements for a valid contract

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35
Q

Unenforceable

A

The contract appears to be valid but is not legally enforceable by either party

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36
Q

Is a contract expressed verbally enforceable by either party?

A

No

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37
Q

Option Contract

A

Only one party is required to perform to the terms of the contract

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38
Q

If Joe gives Sally the option to buy his house in the future does Sally have to buy it?

A

No

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39
Q

If Joe gives Sally the option to buy his house in the future does Joe have to sell his house when the time comes?

A

Yes

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40
Q

Right of first refusal

A

The right of a person to have the first opportunity to either purchase or lease real property

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41
Q

Does the holder of a right of first refusal have the right to buy the property at any time?

A

No, they have to wait until the seller actually offers the property for sale or entertains an offer to purchase from a third party

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42
Q

Escalation Clause

A

Raises an offer to make sure the buyer is the highest bidder

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43
Q

Equitable title

A

When an offer is accepted by the seller, the buyer is entitled to the equity on the property

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44
Q

Legal title

A

Once the deed is delivered and accepted by the county recorder

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45
Q

Is the equitable title negotiable?

A

Yes

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46
Q

Trust account

A

a neutral account where a broker, attorney or property manager will hold money that belongs to others

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47
Q

Commingling

A

Mixing trust money with operating funds

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48
Q

Conversion

A

Spending trust money

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49
Q

Which is legal? Commingling or Conversion?

A

Neither, both are illegal

50
Q

Addendum

A

An additional term or agreement that is added to the existing contract and needs to be dated and signed by all parties to the contract

51
Q

Amendment

A

Changes existing terms that are already agreed to by the parties and needs to be dated and signed by all parties to the contract

52
Q

Compensation Sharing

A

The broker must disclose to all parties in a transaction, in writing before closing, the name of each employing broker who represents a party to the transaction and who will receive compensation from the transaction

53
Q

Do you have to disclose a referral fee on a transaction?

A

No

54
Q

Property Negotiations

A

Negotiations shall be conducted exclusively through the principal’s broker or the broker’s representative

55
Q

Can the principal wave the right for negotiations by the broker?

A

Yes as long as it’s in writing

56
Q

What happens if the principal can’t locate a licensed representative of the broker for 24hrs during negotiations?

A

They can negotiate directly with the seller and without the broker

57
Q

Does death cancel a purchase contract?

A

No

58
Q

What would be a termination of contract due to impossibility of performance?

A

Bankruptcy or loss of financing

59
Q

Can someone put in multiple offers?

A

Yes but they need to disclose using a multiple offer contract

60
Q

Can a transaction coordinator live out of state?

A

Yes, but they need to have an in-state license.

61
Q

Can a transaction coordinator work for multiple brokers?

A

No, they can only work for one brokerage.

62
Q

Mutual rescission

A

the court finds both parties wrong & restores contract to original state

63
Q

Specific Performance remedy

A

Court forces parts of the contract to be performed

64
Q

Compensatory Damages

A

Court orders payment

65
Q

Punitive Damages

A

Highest level of remedy

66
Q

Liquidated damages

A

Earnest money

67
Q

Arbitration

A

Non-judicial submission of a controversy to selected third parties for their determination in a manner provided by agreement or by law

68
Q

Is arbitration binding?

A

Yes

69
Q

Mediation

A

An alternative process of dispute resolution in which an independent third party works with two disputing parties to help them resolve their differences

70
Q

is mediation binding?

A

No

71
Q

Assignment

A

transferring legal rights from one party to another

72
Q

Are contracts usually assignable?

A

Yes unless they say otherwise

73
Q

Binder

A

Good faith agreement between the parties that includes all the terms that keep the agreement together until the final longer version of the contract is drafted

74
Q

What other name is used for a binder?

A

Letter of intent

75
Q

Nominee

A

a party who will be added to an existing contract or someone who is going to act on behalf of a party

76
Q

Why would you use a nominee

A

Husband and wife are moving to new state but one has not arrived yet

77
Q

Novation

A

The substitution of a new obligation for an old one or obligating a new party to an agreement and releasing the old party

78
Q

In a novation are both parties on the hook?

A

No, it takes the first off the hook.

79
Q

In assignment are both parties on the hook?

A

Yes

80
Q

How long does the brokerage have to keep signed copies?

A

5 years

81
Q

Contingency

A

a condition that must be met before entering into the terms of the contract

82
Q

When do SPUDS need to be delivered?

A

3 days

83
Q

When do home warranty claims need to be delivered?

A

5 days

84
Q

Article 26 (XXVI)

A

Brokers can draft contracts, but can’t charge for this service

85
Q

How long do brokers have to keep rejected offers?

A

1 year

86
Q

How many square feet are in an acre

A

43,560 sqft

87
Q

In the typical real estate transaction, before a sales contract has been signed by the offeree, the earnest money belongs to the

A

Offeror

88
Q

A clause in a sales contract that requires punctual performances is described as

A

Time is of the essence

89
Q

A vendee is best described as one who

A

Buys or offers to buy

90
Q

Under the statutes of fraud, all contracts for the sales of real estate must be

a. originated by a broker
b. on preprinted forms
c. in writing to be enforceable
d. accompanied by earnest money deposits

A

in writing to be enforceable

91
Q

Mr. Sherwood received a net of $86,250 for the sale of his lot after the broker deducted 7% commission. What was the gross sales price of the lot?

A

100%-7% = 93%

86250 / 0.93 = $92,742

92
Q

Buyer James and seller Lyndsie have agreed to mutual assent, this becomes indicated by

a. acknowledgemetn
b. recording
c. close of escrow
d. offer and acceptance

A

Offer and acceptance

93
Q

The seller has died before the real estate transaction closed. The contract is considered to be

a. void
b. voidable
c. enforceable
d. executory

A

Enforceable

94
Q

Kelly approaches Tom and says “I would like to buy your house and close escrow on May 18.” Tom says “sure”, and they agree on a price of $125,000. What kind of contract do they have?

a. unenforceable
b. void
c. expressed
d. there is no contract

A

Unenforceable

95
Q

Which of the following is an essential requirement for a valid contract?

a. legal description
b. competent parties
c. time is of the essence
d. recording

A

Competent parties

96
Q

When buying a home, the amount of the buyer’s earnest money is determined by

A

The buyer and seller

97
Q

Home sold for $125,000 which was 90% of the list price. What was the list price?

A

125000 / 0.9 = $138,889

98
Q

In the typical purchase of a home, the offeror would most likely be the

a. trustee
b. mortgagee
c. lessee
d. mortgagor

A

Mortgagor

99
Q

The transfer of rights under a contract without the release from obligation by the transferor is known as

A

Assignment

100
Q

Which party would a unilateral contract be enforceable against?

a. optionee
b. optionor
c. lessor
d. trustee

A

Optionor, the one who gave the option

101
Q

Based on the validity of a contract, which of the following agreements would be considered voidable?

a. signed by an attorney in fact
b. an oral agreement
c. a contract with a minor
d. an agreement for sale

A

A contract with a minor

102
Q

When both parties to a purchase contract decide to mutually cancel, this is called

A

Rescission

103
Q

A contract that has been agreed to by the actions of the parties is called

A

Implied

104
Q

The purchase contract states that John will purchase the property if John’s wife agrees to the sale by July 18. The wife’s approval is a

A

Contingency

105
Q

Angela was the salesperson for the buyer and earned $4,650 which represented 40% of her broker’s commission. The total commission rate on the sale was 6%. What did the house sell for?

A

4650 / 0.4 = 11625

11625 / 0.06 = $193,750

106
Q

The failure to meet an obligation in a real estate contract is best defined as

A

Breach

107
Q

Rhonda has a very high interest in purchasing Olivia’s home. Olivia has communicated to Rhonda that if she ever considers putting it on the market for sale that she will offer it to her first. This is an example of

A

Right of first refusal

108
Q

The buyer and seller have a disagreement based on the terms of the contract. Rather than going to court, they agree to let a 3rd party make a binding decision after hearing all the facts. This is called

A

Arbitration

109
Q

What law gives real estate licensees in AZ the right to draft contracts without charging for those services?

A

Article 26

110
Q

In AZ the designated broker must review all contracts in how many days?

A

10 business days

111
Q

In AZ, how many years are transaction records kept from completion of the transaction?

A

5 years

112
Q

In Az, rejected offers are kept for how many years?

A

1 year

113
Q

All of the following should be included in a purchase contract except:

a. Starting date
b. Closing date
c. Seller’s signature
d. Commission split

A

Commission split

The commission goes into the employment agreement

114
Q

A buyer purchases a property and at closing discovers that there is no access (no ingress or egress) to the property, what kind of contract do they have?

a. Voidable
b. Void
c. Enforceable
d. Unenforceable

A

Voidable

115
Q

What is another name for a mortgagor?

A

Debtor

116
Q

Marsha and Tim were recently married and they decided to purchase their first home. Tim is 21 and Marsha is 17. What is the status of the purchase contract?

A

Valid, because the minor is emancipated by marriage

117
Q

A licensee who advertises property that is the subject of another person’s real estate employment agreement shall display

A

The name of the listing broker

118
Q

A real estate licensee must make an agency disclosure to prospective purchasers or tenants

a. before they are shown any properties
b. at an open house
c. at the close of escrow
d. before any purchase offers or leases are prepared

A

before any purchase offers of leases are prepared

119
Q

Tom was a real estate agent in CA before moving to AZ. He decided not to obtain a real estate license in AZ. Lisa, his friend, asked Tom if he would help her write a contract on a house and offered him $500. Tom took the $500. What is this a violation of?

A

Article 26

120
Q

Joyce wrote an offer to purchase Marty’s home and he accepted the offer. However, Joyce was informed that she does not qualify for a loan. Based on the lender’s decision both Marty and Joyce cancel the contract. This is known as

A

Recission

Real Estate (20 decks)

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