Unit 10 Sales Contracts and Practices

Question 1

To sell his property the seller has entered into a contract. While the sale is pending, the listing agent receives another offer to purchase the property from a different firm. Which of the following statements is TRUE?
A The listing agent does not have to present this offer to the seller.
B The listing agent must present this offer to the seller.
C The listing agent has to present this offer only if its terms are better than the terms of the pending sale.
D The listing agent must tell the offeror that offers are prohibited while a sale is pending.

Answer 1

B The listing agent must present this offer to the seller.

Question 2

Which of the following statements is TRUE of a conventional option to purchase contract?
A It need not recite a set amount of consideration for purchase of the property.
B It must be exercised within a specified time period by the optionee.
C It does not allow negotiation on changes to contract terms during the option period.
D It is enforceable by both the optionor and the optionee.

Answer 2

B It must be exercised within a specified time period by the optionee.

Question 3

At 1:30 pm, a broker faxed an offer to purchase to her seller client. At 2:00 pm, after considering the offer, the seller called and informed his agent that he wanted to increase the earnest money deposit by $1,000. To make the seller’s requested change for additional earnest money, the seller’s agent need only
I change the term in the original offer, initial, and date the one change on behalf of the seller.
II prepare a new offer and, with the seller’s permission, sign on behalf of the seller.
A I only
B II only
C Both I and II
D Neither I nor II

Answer 3

D Neither I nor II

Question 4

The buyer’s offer is made on the condition that the buyer's inspection indicates that all working systems of the structure are up to current code. This condition is called
A a first right of refusal.
B a contingency.
C a unilateral offer.
D an option.

Answer 4

B a contingency.

Question 5

The buyer’s offer is made on the condition that the buyer is able to obtain an 80% institutional loan at a specified interest rate by a specified date. If the buyer notifies the seller in writing of the inability to obtain such a loan, the buyer will
A have to go ahead with the purchase anyway.
B not have to purchase the home but will forfeit the whole earnest money deposit.
C not have to purchase the home but will forfeit half of the earnest money deposit.
D not have to purchase the home and will be entitled to a full refund of the earnest money deposit.

Answer 5

D not have to purchase the home and will be entitled to a full refund of the earnest money deposit.

Question 6

An offer to purchase is submitted on a listing while the property owner is out of town on business. The offer is electronically submitted to the owner and the owner signs and returns the offer with no changes in terms. If the signed offer is then electronically submitted to the listing agent who calls the buyer’s agent with this information, which of the following statements is TRUE?
A The seller is under contract to sell his property since electronic signatures are binding.
B The original signatures of both buyer and seller must appear on the same copy of the offer; therefore, a contract does not exist.
C No contract exists yet since the buyer has not been personally told of the contract acceptance.
D No contract exists since no one on the buyer’s side of the transaction has seen the seller’s signature.

Answer 6

A The seller is under contract to sell his property since electronic signatures are binding.

Question 7

Which of the following statements is/are TRUE when an offer to purchase has been signed by the buyer and then given to the seller’s broker with an earnest money deposit check for the seller to consider?
I The earnest money check must be deposited immediately into the listing firm’s trust account.
II If the buyer withdraws the offer before it is accepted by the seller, the earnest money will be forfeited.
A I only
B II only
C Both I and II
D Neither I nor II

Answer 7

D Neither I nor II

Question 8

An offer to purchase real estate can be terminated by all of the following reasons EXCEPT
A failure to accept the offer within a prescribed period.
B revocation by the offeror communicated to the offeree after acceptance.
C acceptance of the offer by the offeree after making one change in terms.
D death of the offeror or offeree.

Answer 8

B revocation by the offeror communicated to the offeree after acceptance.

Question 9

Which of the following statements is TRUE of the due diligence fee in the NCBA/NCAR 2-T Offer to Purchase and Contract?
A The due diligence fee is applied to the purchase price at closing.
B It requires all the systems of the property to be functioning adequately.
C The earnest money check is paid directly to the seller.
D Within three business days after the due diligence period expires, the buyer must notify the seller of the buyer’s decision to proceed with the contract.

Answer 9

A The due diligence fee is applied to the purchase price at closing.

Question 10

When a buyer and seller have entered into an installment land contract,
I the seller retains an interest called legal title.
II the buyer acquires an immediate interest in the property known as equitable title.
A I only
B II only
C Both I and II
D Neither I nor II

Answer 10

C Both I and II

Question 11

Under contract terms, one party will pay the property owner $1,500 a month for 10 years. The property owner will continue to hold legal title to the property. That party will live on the property and pay all real estate taxes, insurance premiums, and regular upkeep costs. What kind of contract is in place?
A Option to purchase contract
B Contract for mortgage
C Unilateral contract
D Installment land contract

Answer 11

D Installment land contract

Question 12

A married couple offers in writing to purchase a house for $320,000, including the draperies, with the offer to expire on Saturday at noon. The owners reply in writing on Thursday, accepting the $320,000 offer, but excluding the draperies. On Friday, while the couple considers this response, the owners reconsider the original offer and decide to accept the original offer in writing, including the draperies. Since it is before Saturday at noon, the couple
A is legally bound to buy the house including the draperies.
B is not bound to buy because they are not under contract.
C must buy the house and is not entitled to the draperies.
D must buy the house but may deduct the value of the draperies from the $320,000.

Answer 12

B is not bound to buy because they are not under contract.

Question 13

A man signs a contract under which he may purchase a house for $800,000 any time within the next three months. The man pays the current owner $5,000 at the time the contract is signed. Which of the following best describes this contract?
A Contingency
B Option to purchase
C Installment land contract
D Contract for deed

Answer 13

B Option to purchase

Question 14

A for-sale-by-owner signs a written offer to purchase without making any changes to the offer. The seller then mails the signed offer to the buyer by express mail without any further contact with the buyer. Before receipt of the envelope from the seller, the buyer changes her mind about purchasing the property and calls the seller to withdraw the offer. Which of the following statements is TRUE?
A Buyer cannot withdraw offer because she is already under contract.
B Buyer can withdraw offer since she has not received the signed contract yet.
C Buyer was under contract as soon as the seller signed the offer to purchase.
D Contract has been formed but is unenforceable since real estate brokers were not involved.

Answer 14

A Buyer cannot withdraw offer because she is already under contract.

Question 15

A seller receives two offers to purchase her North Carolina property at the same time. One offer is for full listing price but wants a delayed closing that is not in the seller’s best interest. The second offer has terms that are very agreeable to the seller but offers less than full price for the property. Without any knowledge or consent of the first offeror, the listing agent contacts only the second offeror and tells them that there is a full price offer on the table and asks if they would like to increase the purchase price in their offer. Listing agent is
A honoring his fiduciary duty to the seller by soliciting a higher offer.
B in violation of Commission Rules because he must also respond to the first offeror.
C in violation of Commission Rules because he revealed offer terms.
D working within Commission Rules as long as his actions were at the direction of his seller client.

Answer 15

C in violation of Commission Rules because he revealed offer terms.

Question 16

Which of the following is TRUE of a right of first refusal given to the tenant of a rental house?
A The landlord must sell the property, if the tenant decides to buy.
B The landlord cannot sell the property to anyone but this tenant.
C The tenant must buy the property, if the landlord decides to sell.
D The landlord must offer to sell the property to the tenant first, if the landlord decides to sell the house.

Answer 16

D The landlord must offer to sell the property to the tenant first, if the landlord decides to sell the house.

Question 17

A preprinted North Carolina sales contract provided for use by a real estate broker may NOT contain a provision about
A negotiated repair issues.
B payment terms of purchase price.
C broker compensation.
D items to be prorated at settlement.

Answer 17

C broker compensation.

Question 18

The effective date of a sales contract is defined as the date that
A the last party to the transaction signs the offer.
B the buyer takes possession of the property.
C the contract parties meet to transfer title.
D notification of acceptance is given to the other party.

Answer 18

C the contract parties meet to transfer title.

Question 19

Per the NCBA/NCAR 2-T Offer to Purchase and Contract, if the seller commits a material breach and the buyer elects to terminate the contract, the buyer is entitled to
A a refund of paid earnest money, due diligence fee, and all reasonable costs of the buyer’s due diligence.
B a refund of any earnest money and due diligence fee.
C a refund of any earnest money only.
D nothing more than contract termination.

Answer 19

A a refund of paid earnest money, due diligence fee, and all reasonable costs of the buyer’s due diligence.

Question 20

During the buyer’s due diligence period in the NCBA/NCAR 2-T Offer to Purchase and Contract, the buyer is entitled to
A renegotiate any term in the contract.
B only request repair of broken items.
C a return of any paid due diligence fee if written termination is given.
D verbally terminate the contract prior to the period’s expiration date.

Answer 20

A renegotiate any term in the contract.

Question 21

If a buyer wishes to make an offer on property that is already under contract, the buyer should ask his broker to add which addendum?
A Back-Up Contract Addendum
B Vacation Rental Addendum
C Buyer Possession Before Closing
D Seller Financing Addendum

Answer 21

A Back-Up Contract Addendum

Question 22

An NCBA/NCAR 2-T Offer to Purchase and Contract offered for use by a real estate broker
I must not include a disclaimer of liability on the part of the broker.
II can include any agent compensation that is being split with the buyer in the contract.
A I only
B II only
C Both I and II
D Neither I nor II

Answer 22

A I only

Question 23

The sales contract says the buyer will purchase only if an attorney approves the sale by the following Saturday. The attorney’s approval is a
A contingency.
B reservation.
C warranty.
D consideration.

Answer 23

A contingency.

Question 24

If a broker receives multiple offers on a listing, the broker must
A present them in the order received.
B advise the seller to respond to them in the order received.
C disclose the terms of the other offers to all the buyers and their brokers.
D present them all at once.

Answer 24

D present them all at once.

Question 25

Shopping offers
A is a practice in which a homeseller’s real estate agent discloses prices and terms of an offer to competing buyers, in an effort to get higher bids.
B is prohibited in North Carolina.
C both of these.
D neither of these.

Answer 25

C both of these.