Unit 3 Tennessee Exam Flashcards
1
Q
An express contract is a contract created by actions and conduct.
A
F
2
Q
A contract is able to be discharged or terminated as long as substantial or partial performance has been achieved.
A
T
3
Q
An optionee gives the optionor the right to buy or lease a property at a fixed price within a certain period of time.
A
F
4
Q
An optionee gives the optionor the right to buy or lease a property at a fixed price within a certain period of time.
A
F
5
Q
A novation refers to a transfer of rights or duties under a contract to a third party.
A
F
6
Q
“Time is of the essence” is the part of the contract that establishes the exact time and date for settlement of the transaction.
A
F
7
Q
A real estate sales contract does not have to mention any money to be a valid contract.
A
T
8
Q
When a counteroffer is made, the original offer is void.
A
T
9
Q
The MOST common method of legal description in Tennessee is a combination of the metes-and-bounds and lot-and-block methods.
A
T
10
Q
State law requires written, not verbal, offers to be presented to the seller until a contract has been negotiated. Whereas the National Association of REALTORS® Code of Ethics requires all offers to be presented to the seller.
A
T
11
Q
An earnest money deposit is required on all sales contracts to insure that the prospective purchaser will NOT back out of the transaction.
A
F
12
Q
MOST often, the type of deed used in residential transactions is a general warranty deed.
A
T
13
Q
A street address is the MOST common means of including a legal description in a sales contract.
A
F
14
Q
No time frame for the removal of a contingency needs to be included in the contract.
A
F
15
Q
All contracts must include a mortgage contingency.
A
F
16
Q
An amendment form must state that the amendment becomes a part of the original contract but does NOT require any further signatures.
A
F
17
Q
If all parties do NOT agree to accept the terms of an addendum, the original contract is void.
A
F
18
Q
As long as the lot and block are listed in the contract, nothing further is required for legal description.
A
F
19
Q
John G. Clark has gone by the name Jack all his life. The contract should list his name as Jack G. Clark.
A
F
20
Q
No particular agreement is necessary if the purchaser agrees to let the seller remain in the property for another week in order to celebrate a child’s birthday.
A
F
21
Q
Match the following:
Reality of consent, Offer and acceptance, Legal competency, Valuable consideration, Good consideration, Legal purpose
A)
Intangible thing of value in a contract
B)
Intent of a contract
C)
Parties agree to all terms and conditions of a contract
D)
Sound mind and legal age
E)
Conscious decision to enter into a contract
F)
Tangible thing in a contract
A
Reality of consent = E
Offer and acceptance = C
Legal competency = D
Valuable consideration = F
Good consideration = A
Legal purpose = B
22
Q
Match the following:
Purchase-money mortgage, Binding agreement, Optionee, Loan amount, Within three business days of loan application, Land contract
A)
What is capped in a FHA-insured loan
B)
Either party can revoke up to this time
C)
When buyers must receive a Loan Estimate
D)
Owner financing giving possession and title
E)
Owner financing giving possession only
F)
Receiver of an option
A
Purchase-money mortgage = D
Binding agreement = B
Optionee = F
Loan amount = A
Within three business days of loan application = C
Land contract = E
23
Q
Match:
Broom clean, Fixture, Cloud on title, Earnest money deposit, Personal property
A)
Shows purchaser’s intent to proceed
B)
Easily moved away
C)
Defect in title
D)
Condition of property at settlement
E)
Permanently attached to property
A
Broom clean = D
Fixture = E
Cloud on title = C
Earnest money deposit = A
Personal property = B
24
Q
Match:
Void, Valid, or Voidable
A)
Contract that gives the parties the reality of consent
B)
Contract containing good and/or valuable consideration
C)
A contract between an adult and a minor
D)
Contract between a sane and a totally insane person
E)
A contract for an illegal purpose
A
Void = D, E
Valid = A, B
Voidable = C
25
Knowing how to effectively present an offer is important getting the contract accepted. Put the steps of contract presentation in the proper order.
A)
Present the estimate of the Seller's net
B)
Make the call to set up a time to present the offer
C)
Make appropriate change in the MLS when the contract is accepted
D)
Present the offer and then be quiet
B, D, A, C
26
Match the type of contingency:
Loan-to-value, Interest rate, Mold, Escape clause, Cloud on title, Three-day right to cancel
A)
Appraisal contingency
B)
Title contingency
C)
Mortgage contingency
D)
Property sale contingency
E)
POA approval contingency
F)
Inspection contingency
Loan-to-value = A
Interest rate = C
Mold = F
Escape clause =D
Cloud on title = B
Three-day right to cancel = E
27
To state that a buyer must qualify for the loan is an example of
```
A)
a financing contingency.
B)
a property sale contingency.
C)
a kick-out clause contingency.
D)
an inspection contingency.
```
Explanation
The answer is a financing contingency. Most sales contracts allow for the buyer's purchase to be contingent on the buyer's qualifying for the loan. This is a financing contingency.
28
An addendum is
```
A)
a change in the original contract.
B)
additional information given in the offer.
C)
a modification to the original contract.
D)
a change in the offer.
```
Explanation
The answer is additional information given in the offer. An addendum is any additional material that is part of the original agreement. If an addendum is needed, it is ideal to have it added to the original contract form during the offer stage.
29
A seller willing to accept a contingency on the purchasers' selling their present home would be protected by all of the following EXCEPT
A)
requiring the purchasers' property to be entered in the MLS within 24 hours.
B)
including a kick-out clause to allow continued marketing of the seller's home.
C)
leaving the termination date of the contingency open until the projected closing day.
D)
having the listing agent prepare a competitive market analysis on the purchasers' home.
Explanation
The answer is leaving the termination date of the contingency open until the projected closing day. If the sale of home contingency is allowed to continue up to the date of settlement, the seller has no protection. On the projected settlement date, the contract could become void. At the least, the seller should retain the right to continue marketing the property by using a kick-out clause in the contingency.
30
Mr. and Mrs. Seller are separated, and she actually lives in another town. It is still important to have her signature on
```
A)
the listing agreement.
B)
the sales contract.
C)
neither the listing agreement nor the sales contract.
D)
both the listing agreement and the sales contract.
```
Explanation
The answer is both the listing agreement and the sales contract. To avoid any possible problem with marital rights of a current or ex-spouse, the signature should appear on both the listing agreement and the sales contract.
31
A lot-and-block legal description would MOST likely be found in a
```
A)
multi-highrise building area.
B)
Midwest rural area.
C)
lightly populated western state.
D)
highly developed suburban area.
```
Explanation
The answer is highly developed suburban area. The legal description that gives the exact lot number or a specific block or section, followed by the city or county and state, is the way most subdivision developments are described.
32
This is the nicest property we've seen, isn't it?" is an example of
```
A)
a tie-down question.
B)
a multiple-choice question.
C)
a Ben Franklin close.
D)
an assumptive close.
```
Explanation
The answer is a tie-down question. The purposes of the tie-down question are to see how serious the buyer is about a property and to assist the buyer in making a positive decision.
33
A buyer has contracted with a seller to purchase a rural home for the sole purpose of hiding a wanted felon. She included $15,000 as earnest money to show her sincerity. Her intent was discovered, and the court voided the contract. The reason for the court's action was that the contract is
A)
enforceable because of the monetary amount paid.
B)
voidable because the seller was uninformed as to the buyer's intentions.
C)
valid because it was a contract.
D)
void because it was a contract to do something illegal.
Explanation
The answer is void because it was a contract to do something illegal. A void contract has no legal force or effect in law and is neither valid nor enforceable.
34
When describing real estate, the system that uses a property's physical features to determine boundaries and measurements is
```
A)
government survey.
B)
rectangular survey.
C)
metes and bounds.
D)
lot and block.
```
Explanation
The answer is metes and bounds. Metes-and-bounds description is the oldest of the methods used for legal description. It describes a property using linear measurements, natural and specific landmarks, and directions from a point of beginning (POB) around the property's boundaries and back to the POB.
35
The voiding of a contract by a minor is
A)
an example of terminating a contract by the Law of Dower.
B)
an example of terminating a contract by operation of law.
C)
only achieved by challenging the contract through a juvenile court.
D)
not necessary because the contract never truly existed.
Explanation
The answer is an example of terminating a contract by operation of law. A contract may be terminated by the operation of law, such as voiding of a contract by a minor as a result of fraud, due to the expiration of the statute of limitations, or because a contract was altered without the written consent of all parties involved.
36
If a contract including a mortgage contingency is in place and the buyer is not able to obtain financing, the contract is
```
A)
void.
B)
enforceable through specific performance.
C)
voidable.
D)
still valid.
```
Explanation
The answer is void. This is true if the buyer has fulfilled all obligations and it is solely the lending institution that has denied the process of the loan.
37
The disclaimer portion of a preprinted sales contract indicates that
A)
neither party has relied on statements by the agent as to structural integrity.
B)
the seller has chosen not to complete a property condition disclosure form.
C)
neither party has agreed to pay the broker a commission.
D)
the buyer may back out anytime before closing for any reason.
Explanation
The answer is neither party has relied on statements by the agent as to structural integrity. The disclaimer clause is actually a risk-reduction paragraph in the sales contract protecting the listing and selling broker.
38
Details that should be included in any post-closing agreement include all of the following EXCEPT
A)
the amount of rent to be paid to purchasers.
B)
the anticipated date the sellers will vacate.
C)
responsibility for any damages during the post-closing period.
D)
the reason the sellers have requested a post-closing agreement.
Explanation
The answer is the reason the sellers have requested a post-closing agreement. Theoretically, the sellers would not have to explain why they want or need to remain in the property, but it probably would be easier to gain permission if a reasonable cause is given.
39
An offer to purchase becomes a contract of sale when it is accepted, signed, and dated by the offeree and
```
A)
a copy is given to the offeree.
B)
a copy is given to the offeror.
C)
both parties have been notified of the other party's acceptance.
D)
the agent has received commission.
```
Explanation
| The answer is both parties have been notified of the othe
40
If the buyer cannot fulfill the mortgage contingency, the seller has
A)
the opportunity to extend the time for fulfilling the mortgage contingency.
B)
no recourse because of the buyer's protection under the mortgage contingency.
C)
an opportunity to void the contract.
D)
the opportunity to recover the earnest money as liquidated damages because of the buyer's default.
Explanation
The answer is an opportunity to void the contract. If the buyer cannot fulfill this contingency, the seller has an opportunity to void the contract and put the property back on the market.
41
A listing agent has a negotiated sales contract on his listing. He would like to encourage backup contracts. He may do so
```
A)
with his broker's permission.
B)
as a value-added service.
C)
as part of his due diligence.
D)
with his client's permission.
```
Explanation
The answer is with his client's permission. Licensees should encourage the selling client to allow backup contracts until closing. Should the seller refuse permission, the licensee must refuse to accept them.
42
Which of the following is NOT a valid way to define a legal description?
```
A)
Metes and bounds
B)
Lot and block
C)
Survey
D)
Street address
```
Explanation
The answer is street address. While a street address is usually enough to find the location of a particular building, it is not precise enough to describe legal ownership. Addresses change as streets are renamed, or rural roads might become public streets in growing communities. Sales contracts, deeds, and mortgages require a more specific description of property to be binding.
43
The type of deed used MOST often in residential real estate transactions is
```
A)
quitclaim deed.
B)
trustee's deed.
C)
special warranty deed.
D)
general warranty deed.
```
Explanation
The answer is general warranty deed. Most purchase and sales agreements specify in preprinted language that the deed will be general warranty.
44
The purchaser is given three business days to review the condominium association documents. On the second business day, the purchaser is called out of town on a family emergency and does not return until after the third business day has passed. Which of the following is TRUE?
A)
The purchaser is bound to the contract without the right to object to the condominium association documents.
B)
There is an automatic extension for the purchaser to review and possibly object to the condominium association documents.
C)
The purchaser is still within the right to object to the condominium association documents.
D)
The seller has the right to terminate the contract and find a new buyer.
Explanation
The answer is the purchaser is bound to the contract without the right to object to the condominium association documents. The state law specifies that if there is no response from the purchaser within the stated time frame, the contingency may be considered removed and the contract will be in full force.
45
Inspections that are frequently mandated by state or local law include all of the following EXCEPT
```
A)
well and septic inspection.
B)
termite inspection.
C)
underground storage tank inspection.
D)
lead-based paint inspection.
```
Explanation
The answer is lead-based paint inspection. Depending on the state, mandatory inspections for termites, well and septic conditions, or the presence of underground storage tanks are often required. Federal EPA regulations require the disclosure of lead-based paint hazards for properties constructed before 1978, but no actual inspection is required. Buyers must be given a 10-day opportunity to conduct an inspection, and if lead is discovered, they may choose to void the contract.
46
A valid legal contract must have
```
A)
legally competent parties.
B)
earnest money.
C)
consent of at least one of the parties.
D)
an acceptable offer.
```
Explanation
The answer is legally competent parties. The parties must be of legal age and have enough mental capacity to understand the nature or consequences of their actions in the contract.
47
A contract is said to be implied if the
A)
agreement of the parties is demonstrated by their acts and conduct.
B)
seller signs a listing agreement.
C)
buyer signs a buyer representation agreement.
D)
prospective buyers sign the Information About Brokerage Services disclosure.
Explanation
The answer is agreement of the parties is demonstrated by their acts and conduct. In an implied contract, the agreement of the parties is demonstrated by their acts and conduct. For example, when someone enters a restaurant and orders a meal, there is an implied contract that the customer will pay the bill when it comes.
48
A contract between someone sane and someone legally declared insane is
```
A)
enforceable
B)
void
C)
voidable
D)
valid
```
Explanation
| The answer is void. One of the requirements of a valid contract is sound mind. Without that, the contract is void.
49
A contract to perform an unlawful act is considered which of the following?
```
A)
Enforceable
B)
Voidable
C)
Void
D)
Unilateral
```
Explanation
| The answer is void. A contract must be for a legal act. No one may enter into a legal contract for an illegal purpose.
50
The type of contract that has no force or effect in law is
```
A)
a voidable contract.
B)
a void contract.
C)
a sales contract.
D)
an enforceable contract.
```
Explanation
| The answer is a void contract. A void contract has no force or effect in law. It is if the contract never existed.
51
A contract where two parties are entering into the contract, but only one is making a promise to attempt to induce the other party to agreement, is
```
A)
a unilateral contract.
B)
a bilateral contract.
C)
a sales contract.
D)
an agency contract.
```
Explanation
The answer is a unilateral, or one-sided contract. Even though two parties are entering into the agreement, only one side is making a promise in a unilateral contract.
52
A breach of contract is a
A)
violation of any terms or conditions of a contract without legal reason.
B)
revocation of the contract because a court has found a party to the contract to be insane.
C)
buyer's refusal to provide the Seller's Disclosure of Property Condition to the seller.
D)
rejection of the executory contract by a minor.
Explanation
The answer is violation of any terms or conditions of a contract without legal reason. An example is when a seller fails to deliver title to the buyer or a listing broker fails to advertise or otherwise promote the sale of the listed property.
53
The essential elements of a contract include all of the following EXCEPT
```
A)
competent parties.
B)
good-faith deposit.
C)
consideration.
D)
offer and acceptance.
```
Explanation
| The answer is good-faith deposit. Deposits are a customary but not required element for the validity of a contract.
54
In a contract between an adult and a minor, the contract is
```
A)
void.
B)
voidable by the minor only.
C)
binding on both parties.
D)
voidable by both parties.
```
Explanation
The answer is voidable by the minor only. The adult was old enough to understand what she was doing when entering the contract and has no legal excuse to void the contract. The minor has not yet attained the age of majority and has that legal excuse to void the contract—until shortly after reaching the age of majority. Remember, a voidable contract is not void until someone voids it!
55
To fulfill requirements that the buyer be informed of the hazards of lead-based paint for properties constructed before 1978, licensees working with the buyer must be certain before making an offer that the buyer receives
A)
a lead-based paint contract addendum.
B)
a booklet explaining the hazards of lead-based paint.
C)
the address for the Department of Housing and Urban Development (HUD) website, with a link to lead-based paint hazards.
D)
a lead-based paint inspection paid for by the seller.
Explanation
The answer is a booklet explaining the hazards of lead-based paint. HUD publishes the booklet Protect Your Family From Lead in Your Home. Properties built before 1978 may have been painted with lead-based paint. Buyers must be informed of the hazards, and if working with an agent, it is the responsibility of the buyer's agent to make sure the buyer gets a copy of the booklet. Under federal law, sellers must provide homebuyers a 10-day period to conduct an inspection for the presence of lead-based paint or lead-based paint hazards, and if discovered, the buyers may void the contract without penalty.
56
Before changing the status of a listing in the MLS to closed, a status between active and closed is
```
A)
active without any contingency.
B)
closed in advance of scheduled closing date.
C)
active with a contingency.
D)
deactivated without any contingency.
```
Explanation
The answer is active with a contingency. The usual process in the MLS is from active to active with contingency to pending to closed.
57
A backup addendum
```
A)
has no allowable termination.
B)
should state that in the event the primary contract becomes void, the backup contract becomes primary.
C)
allows for the seller to terminate.
D)
allows for the broker to terminate.
```
Explanation
The answer is should state that in the event the primary contract becomes void, the backup contract becomes primary. In the addendum, attention must be paid to disposition of earnest money, time frame for acceptance, and right of the buyer to terminate.
58
Common practice in the United States is for the purchaser to receive keys to the property
```
A)
at the settlement table.
B)
when the contract is signed.
C)
as soon as the walk-through inspection is completed satisfactorily.
D)
two weeks after settlement.
```
Explanation
The answer is at the settlement table. Unless some other arrangement has been agreed to, it is normal practice for the purchaser to receive the keys to the property at the settlement table.
59
For a sales contract to be enforceable, one would need to address
```
A)
contingencies.
B)
the broker's commission.
C)
lifting clause.
D)
liquidated damages.
```
Explanation
The answer is contingencies. Any additional condition that must be satisfied before a contract is fully enforceable is known to have contingencies.
60
An agent represents a seller; she finds a buyer who also wants representation and who wants to purchase her listing. If her selling client and broker allow dual agency, she must complete two agency documents with the buyer. They are the
A)
buyer agency agreement and sales contract.
B)
disclosure statement and listing agreement.
C)
disclosure statement and buyer agency agreement.
D)
sales contract and listing agreement.
Explanation
The answer is disclosure statement and buyer agency agreement. The buyer agency agreement creates the buyer agency, and the disclosure statement, cosigned by the seller, discloses the dual agency. Undisclosed dual agency is illegal.
61
Every metes-and-bounds legal description must have a
```
A)
point of beginning (POB).
B)
government survey.
C)
street address.
D)
lot and block number.
```
Explanation
The answer is point of beginning (POB). Every metes-and-bounds description starts at a POB, proceeds around the property, referring to landmarks, and returns to the POB.
62
Tennessee typically does NOT use the government rectangular survey system because
```
A)
it is too expensive.
B)
it is too complicated.
C)
there are many mountains in Tennessee.
D)
it continued to use the legal description that North Carolina was using.
```
Explanation
The answer is it continued to use the legal description that North Carolina was using. Tennessee did not become a state until 1796. Before that, it was the western territory of North Carolina, and as such, continued with the type of legal description used there. Metes-and-bounds and lot-and-block number descriptions are in common usage. The rectangular survey system is not used in Tennessee except for a few of the southeastern counties, called the Ocoee Land District.
63
A contingency should contain all of the following elements EXCEPT
A)
a personal reason for requiring the contingency.
B)
how the contingency may be removed.
C)
the time frame in which action must be performed.
D)
actions necessary to satisfy the contingency.
Explanation
The answer is a personal reason for requiring the contingency. Either party can make a contract contingent on some action being taken within a given time frame. It is not necessary to disclose any personal reason for requiring the contingency.
64
The purchasers included a contingency addendum with the original offer to purchase making the contract contingent on the purchasers being allowed to have an inspection for mold (the purchaser has severe allergy problems). When the inspection revealed a serious situation with black mold in the walls and foundation, the purchasers sent notice that they want to void the contract. What is the legal position?
A)
The sellers will be obligated to take action to remedy the mold problem.
B)
The contract is now null and void.
C)
The listing agent will be responsible for removal of the mold.
D)
The contract remains in place. The contingency was only to have an inspection. Nothing was said about action to be taken if the inspection resulted in unsatisfactory results.
Explanation
The answer is the contract remains in place. The contingency was only to have an inspection. Nothing was said about action to be taken if the inspection resulted in unsatisfactory results. A contingency addendum must always state the action to be taken, the time frame, and what action is to be taken as a result of the inspection.
65
Under the statute of frauds, all contracts for the sale of real estate must be
```
A)
accompanied by an earnest money deposit.
B)
in writing to be enforceable.
C)
originated by a real estate broker.
D)
on preprinted forms.
```
Explanation
The answer is in writing to be enforceable. A contract for sale must include the elements of offer and acceptance, consideration, legally competent parties, consent and legal purpose, and be in writing to be enforceable. If any element is missing, the contract is void.
66
When is the flyer For Your Protection: Get a Home Inspection required to be given to purchasers?
A)
All lenders are required to make this form available to purchasers.
B)
Brokers are required to give this form to all consumers.
C)
It is never required, but it is always a good idea to give it to consumers.
D)
It is to be given to all purchasers acquiring an FHA loan.
Explanation
The answer is it is to be given to all purchasers acquiring an FHA loan. FHA requires that any potential purchaser planning to obtain an FHA loan for the purchase of property be given the one-page flyer; although, it is good advice for all purchasers.
67
A buyer terminating the home sale contingency creates
```
A)
an unenforceable contract.
B)
a valid contract.
C)
a void contract.
D)
a voidable contract.
```
Explanation
The answer is a valid contract. A buyer who is able to withdraw the sale contingency condition is bound by the sales contract to purchase the seller's property.
68
Which of the following would be a serious cloud on title?
A)
Legal description read "Happy Acres" when the correct name was "Happy Yards"
B)
Date given as January 10, 2012, instead of January 10, 2013
C)
Seller's middle name misspelled
D)
Previous owner's wife never signed off on the deed
Explanation
The answer is previous owner's wife never signed off on the deed. A cloud on the title is a defect that calls into question whether the buyer can be assured against having to defend the title in the future. The missing signature of a previous owner can be very serious. In theory, that person might still have some claim to the property.
69
Contracts are often amended after binding agreement with another document called
```
A)
a deed of trust.
B)
an addendum.
C)
a special stipulations agreement.
D)
a quitclaim deed.
```
Explanation
| The answer is an addendum. An addendum amends an already agreed-to document, such as changing a closing date.
70
When a seller receives multiple offers on the property and wishes to make one offer primary and a second offer a backup, the seller should use
```
A)
an inspection form.
B)
an addendum form.
C)
a contingency form.
D)
an amendment form.
```
Explanation
The answer is an addendum form. When a seller receives multiple offers, it is often advantageous to accept one offer as primary and have another offer as a backup. An addendum must be prepared stating that the second offer is a backup to an accepted offer between named parties and the date accepted. The backup addendum has to be agreed upon by the offeror and should include an opportunity for cancellation.
71
When a seller receives multiple offers on the property and wishes to make one offer primary and a second offer a backup, the seller should use
```
A)
an inspection form.
B)
an addendum form.
C)
a contingency form.
D)
an amendment form.
```
Explanation
The answer is an addendum form. When a seller receives multiple offers, it is often advantageous to accept one offer as primary and have another offer as a backup. An addendum must be prepared stating that the second offer is a backup to an accepted offer between named parties and the date accepted. The backup addendum has to be agreed upon by the offeror and should include an opportunity for cancellation.
72
Some sales contracts, especially those for property in which there is a septic system, require the sellers to disclose their knowledge of a manmade well with a pump that forces treated wastewater into the ground. Such a well is called
```
A)
a distilled-water well.
B)
a well-water well.
C)
an exterior injection well.
D)
an interior fusion well.
```
Explanation
The answer is an exterior injection well. Exterior injection wells force treated wastewater into the ground to better assist with percolation.
73
A contract may be discharged for any of the following reasons EXCEPT
A)
a unilateral decision by either party to terminate the contract.
B)
a breach of contract with legal cause by either party.
C)
an assignment of rights to another party.
D)
a novation substituting a new party to the contract.
Explanation
The answer is a unilateral decision by either party to terminate the contract. Generally, all parties are bound to the promises they made in the contract. A unilateral decision to terminate by one party without the right to terminate would cause the terminating party to be in breach.
74
A contract may be discharged for any of the following reasons EXCEPT
A)
a unilateral decision by either party to terminate the contract.
B)
a breach of contract with legal cause by either party.
C)
an assignment of rights to another party.
D)
a novation substituting a new party to the contract.
Explanation
The answer is a unilateral decision by either party to terminate the contract. Generally, all parties are bound to the promises they made in the contract. A unilateral decision to terminate by one party without the right to terminate would cause the terminating party to be in breach.
75
A listing broker who fails to advertise or otherwise promote the listed property is
A)
not in breach of contract if the broker shows the property to a buyer who inquires about property in the same price range and area as the listed property.
B)
not in breach of the listing agreement if the broker has told the seller that she is acting more as a buyer's agent than as a seller's agent and that the verbiage in the listing agreement is just standard language.
C)
guilty of puffing but is not in breach of the listing agreement.
D)
in breach of the listing agreement.
Explanation
The answer is in breach of the listing agreement. The listing agreement specifically addresses the activities of promoting the property for sale.
76
Which of the following is necessary for a valid legal contract?
```
A)
Legal purpose
B)
Government acceptance
C)
Statutory approval
D)
A Tennessee Real Estate Commission form
```
Explanation
The answer is legal purpose. A contract for an illegal purpose or an act against public policies is not a valid contract.
77
On the original contract, the address of the property is given as 1400 Hillside Dr., Mountain View Condominium, #411, Monroe County, Tennessee. The unit being sold is actually #412. This will require
```
A)
an addendum.
B)
a new contract.
C)
an amendment.
D)
a new listing.
```
Explanation
The answer is an amendment. This is a relatively minor problem as long as all parties are aware of the error. A correction amendment must be prepared immediately and provided to the settlement agent and to the lender.
78
First-time homebuyers with three small children may be MOST concerned about having an inspection for
```
A)
underground storage tanks.
B)
asbestos.
C)
radon.
D)
lead-based paint.
```
Explanation
The answer is lead-based paint. A disclosure of a lead-based paint hazard and an opportunity to conduct an inspection is required for all properties built before 1978. Because lead-based paint has proven to be hazardous to children, a family with young children may want to have the property inspected.
79
First-time homebuyers with three small children may be MOST concerned about having an inspection for
```
A)
underground storage tanks.
B)
asbestos.
C)
radon.
D)
lead-based paint.
```
Explanation
The answer is lead-based paint. A disclosure of a lead-based paint hazard and an opportunity to conduct an inspection is required for all properties built before 1978. Because lead-based paint has proven to be hazardous to children, a family with young children may want to have the property inspected.
80
How long does the purchaser have to review the property owners association (POA) restrictions?
A)
The time stated in the contingency addendum
B)
As long as the purchaser needs
C)
From receipt of the documents until funding
D)
From receipt of the documents until closing
Explanation
The answer is the time stated in the contingency addendum. The purchaser is given a set time to respond with either an approval or a rejection of the documents. This is true for both condominium and property owners associations.
81
If a buyer wishes to back out of a contract in a backup position, the buyer
A)
may do so only with seller's written permission.
B)
must wait to back out pending the primary contract not working out.
C)
may do so, normally with written notice.
D)
may not do so without forfeiture of earnest money.
Explanation
The answer is may do so normally with written notice. Typically, written notice is all that is required to terminate a back-up contract before its becoming primary.
82
If a buyer wishes to back out of a contract in a backup position, the buyer
A)
may do so only with seller's written permission.
B)
must wait to back out pending the primary contract not working out.
C)
may do so, normally with written notice.
D)
may not do so without forfeiture of earnest money.
Explanation
The answer is may do so normally with written notice. Typically, written notice is all that is required to terminate a back-up contract before its becoming primary.
83
Details that should be included in any post-closing agreement include all of the following EXCEPT
A)
the anticipated date the sellers will vacate.
B)
responsibility for any damages during the post-closing period.
C)
the reason the sellers have requested a post-closing agreement.
D)
the amount of rent to be paid to purchasers.
Explanation
The answer is the reason the sellers have requested a post-closing agreement. Theoretically, the sellers would not have to explain why they want or need to remain in the property, but it probably would be easier to gain permission if a reasonable cause is given.
84
Which type of legal description starts at a designated place on the parcel called the point of beginning?
```
A)
Rectangular survey
B)
Lot and block
C)
Metes and bounds
D)
Perimeter survey
```
Explanation
The answer is metes and bounds. A metes-and-bounds description starts at a designated place on the parcel, called the point of beginning (POB). The POB is also the point of ending (POE), but often only the POB is used in describing the property. From there, the surveyor proceeds around the property's boundaries, ending back at the POB.
85
In order for a title to be considered marketable, it must have
A)
only defects that are "insured over" by the title company.
B)
no defects that happened during the present owner's ownership.
C)
no defects appearing in the past year.
D)
no defects that would carry over to the new owner.
Explanation
The answer is no defects that would carry over to the new owner. Defects in the title might have happened two or more owners back but would still create a cloud on title that must be corrected in order to provide a marketable title.
86
A seller who fails to deliver title to the buyer at closing is
```
A)
in an installment sales contract where the mention of title is not necessary to close.
B)
participating in an assignment.
C)
participating in a novation.
D)
in breach of the sales contract.
```
Explanation
| The answer is in breach of the sales contract. A seller's delivery of good title is a covenant in the sales contract.
87
Which of the following is considered personal property?
```
A)
Smoke detector in bedroom
B)
Venetian blinds in living room
C)
Crystal chandelier in dining room
D)
Oriental rug in den
```
Explanation
The answer is Oriental rug in den. Wall-to-wall carpeting becomes part of the real property because it is attached to the home by nails or tacks, but separate rugs are personal property. Anything permanently attached to the house is part of the real property.
88
Which of the following would allow a contract to be discharged or terminated?
```
A)
Redemption
B)
Unilateral transfer by proxy
C)
Statute of performance
D)
Impossibility of performance
```
Explanation
The answer is impossibility of performance. This occurs when an act required by the contract cannot be legally accomplished.
89
A contract is said to be implied if the
A)
prospective buyers sign the Information About Brokerage Services disclosure.
B)
seller signs a listing agreement.
C)
buyer signs a buyer representation agreement.
D)
agreement of the parties is demonstrated by their acts and conduct.
Explanation
The answer is agreement of the parties is demonstrated by their acts and conduct. In an implied contract, the agreement of the parties is demonstrated by their acts and conduct. For example, when someone enters a restaurant and orders a meal, there is an implied contract that the customer will pay the bill when it comes.
90
While there are still items to address in a binding agreement before closing, the contract is said to be
```
A)
performed.
B)
pending.
C)
executed.
D)
closed.
```
Explanation
The answer is pending. A pending contract is one that cannot close yet because there are still items within the agreement that have not been accomplished.
91
When the names of the parties are entered into a sales contract, it is also recommended that
```
A)
where they are moving from be stated.
B)
their relationship be stated.
C)
their country of national origin be included.
D)
their driver's license numbers be included.
```
Explanation
The answer is their relationship be stated. For example, if they are married, that should be included to help identify how they intend to take title.
92
A contingency should contain all of the following elements EXCEPT
A)
a personal reason for requiring the contingency.
B)
the time frame in which action must be performed.
C)
actions necessary to satisfy the contingency.
D)
how the contingency may be removed.
Explanation
The answer is a personal reason for requiring the contingency. Either party can make a contract contingent on some action being taken within a given time frame. It is not necessary to disclose any personal reason for requiring the contingency.
93
When two title insurance policies (owner's and lender's) are issued at the same time by the same title insurance company, it is called
```
A)
same issuance.
B)
simultaneous issue.
C)
double indemnity.
D)
redundancy in insurance.
```
Explanation
The answer is simultaneous issue. When both policies in a transaction are issued by the same title insurance company, it is called a simultaneous issue.
94
All of the following need to be a part of an early move-in occupancy agreement EXCEPT
```
A)
delayed walk-through date.
B)
responsibility for any damage incurred before settlement.
C)
the date of settlement.
D)
amount of rent to be paid to the seller.
```
Explanation
The answer is delayed walk-through date. On the contrary, there should be a walk-through before the early move-in by the purchasers. After that time, the purchasers would be responsible for any damage.
95
What are fixed objects used to identify the point of beginning (POB)?
```
A)
Monuments
B)
Survey flags
C)
Intersections of prime meridians and post meridians
D)
Satellite imaging
```
Explanation
The answer is monuments. Monuments are fixed objects used to identify the POB, all corners of the parcel or ends of boundary segments, and the location of intersecting boundaries. In colonial times, a monument might have been a natural object such as a stone, large tree, lake, or stream, or a man- made marker like a street or fence. Today, monuments are iron pins or concrete posts placed by the U.S. Corps of Engineers, other government departments, or trained private surveyors.
96
In general, contingencies in a sales contract create
```
A)
a voidable contract.
B)
a binding contract.
C)
an enforceable contract.
D)
an optional contract.
```
Explanation
| The answer is a voidable contract. Seller and buyer must be made aware that contingencies are voidable.
97
An essential element of every valid contract is
```
A)
that the contract is in writing.
B)
offer and acceptance.
C)
that the parties are under duress.
D)
the contract is for an illegal purpose.
```
Explanation
The answer is offer and acceptance. In order for a contract to be valid, there must be offer and acceptance by both parties.
98
What type of clause allows a seller to continue to market a property when the seller has a contract in place with a buyer that includes a contingency?
```
A)
Estoppel
B)
Contingency
C)
Holdover
D)
Escape
```
Explanation
The answer is escape. An escape clause, or kick-out permits the seller to continue to market the property until all the buyer's contingencies have been satisfied or removed.
99
When negotiating a backup contract, the earnest money is
A)
kept in the firm's business operating account.
B)
not deposited into the escrow account unless the backup becomes primary.
C)
held by the seller.
D)
deposited when the backup becomes binding.
Explanation
The answer is deposited when the backup becomes binding. Backup contracts are negotiated the same as primary contracts, with earnest money being deposited when the backup is negotiated.
100
The property sale contingency protects
```
A)
the buyer.
B)
both buyer and seller.
C)
the seller.
D)
the backup buyer.
```
Explanation
The answer is the buyer. The buyer is protected from owning two homes at the same time and is ensured of having the funds needed to close on the seller's property.
101
Lead-based paint disclosure is
```
A)
required by state law.
B)
a requirement of most HOAs.
C)
required by federal law.
D)
voluntary.
```
Explanation
The answer is required by federal law. Federal law requires disclosure of known lead-based paint hazards for any property built before 1978.
102
An agent wants to make sure that his client understands that written time contingencies must be met on time as written in the contract. To do so, the sales contract he uses contains the words
```
A)
"time is of the essence."
B)
"time never stands still."
C)
"time for due diligence."
D)
"time to get the ball rolling."
```
Explanation
The answer is "time is of the essence." Most sales contracts include the words "time is of the essence" to impress upon buyers and sellers that any time contingencies written into an agreement are just as important as any agreed preprinted language and must be met on time. Failing to do so might result in accusation of breach, or litigation.
103
The main difference between an amendment and an addendum is that an amendment
A)
does not require signatures from all parties.
B)
is the same as a contingency.
C)
is a change to the existing content in the contract.
D)
is additional material to be added to a contract.
Explanation
The answer is is a change to the existing content in the contract. The use of an amendment and an addendum are often confused. An amendment is a change to what is in the original contract; an addendum is material being added to the contract. In either case, the other party must sign off on the change or addition for the contract to remain in full force.
104
An offer to purchase becomes a contract of sale when it is accepted, signed, and dated by the offeree and
```
A)
the agent has received commission.
B)
both parties have been notified of the other party's acceptance.
C)
a copy is given to the offeree.
D)
a copy is given to the offeror.
```
Explanation
The answer is both parties have been notified of the other party's acceptance. Notice of acceptance is just as important as acceptance.
105
An express contract is a contract that
```
A)
is in writing or oral.
B)
is synonymous with an option contract.
C)
was prepared in a hurry.
D)
is created by actions and conduct.
```
Explanation
| The answer is is in writing or oral. Express contracts may be either in writing or oral agreements.
