Unit 3 Tennessee Exam Flashcards
An express contract is a contract created by actions and conduct.
F
A contract is able to be discharged or terminated as long as substantial or partial performance has been achieved.
T
An optionee gives the optionor the right to buy or lease a property at a fixed price within a certain period of time.
F
An optionee gives the optionor the right to buy or lease a property at a fixed price within a certain period of time.
F
A novation refers to a transfer of rights or duties under a contract to a third party.
F
“Time is of the essence” is the part of the contract that establishes the exact time and date for settlement of the transaction.
F
A real estate sales contract does not have to mention any money to be a valid contract.
T
When a counteroffer is made, the original offer is void.
T
The MOST common method of legal description in Tennessee is a combination of the metes-and-bounds and lot-and-block methods.
T
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.
T
An earnest money deposit is required on all sales contracts to insure that the prospective purchaser will NOT back out of the transaction.
F
MOST often, the type of deed used in residential transactions is a general warranty deed.
T
A street address is the MOST common means of including a legal description in a sales contract.
F
No time frame for the removal of a contingency needs to be included in the contract.
F
All contracts must include a mortgage contingency.
F
An amendment form must state that the amendment becomes a part of the original contract but does NOT require any further signatures.
F
If all parties do NOT agree to accept the terms of an addendum, the original contract is void.
F
As long as the lot and block are listed in the contract, nothing further is required for legal description.
F
John G. Clark has gone by the name Jack all his life. The contract should list his name as Jack G. Clark.
F
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.
F
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
Reality of consent = E
Offer and acceptance = C
Legal competency = D
Valuable consideration = F
Good consideration = A
Legal purpose = B
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
Purchase-money mortgage = D
Binding agreement = B
Optionee = F
Loan amount = A
Within three business days of loan application = C
Land contract = E
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
Broom clean = D
Fixture = E
Cloud on title = C
Earnest money deposit = A
Personal property = B
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
Void = D, E
Valid = A, B
Voidable = C
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
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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
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.
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.
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.
