UNIT 5--Real Estate Contracts

Question 1

A voluntary, binding agreement between 2 or more competent parties to do (or not do) a specific thing

Answer 1

Contract

Question 2

An __________ contract is indicated by intent with action.

Answer 2

Implied—can not use implied contracts for transferring real estate

Question 3

Express(declared) contracts can be _______ or ________.

Answer 3

Oral or Written

Question 4

To be enforceable under the State Statute of Frauds, all real estate contracts must be express ________ ________.

Answer 4

Express Written Documents

Question 5

In this contract, both parties exchange a promise for a promise and both are bound to perform

Answer 5

Bilateral

Question 6

This type of contract is a promise exchanged for performance, only 1 party is bound.

Answer 6

Unilateral

Question 7

A valid contract contains all 5 ______ _______ to be enforceable.

Answer 7

Essential Elements

Question 8

If a contract lacks an essential element, it is said to be _____.

Answer 8

Void–lacks legal effect, NOT enforceable by either party

Question 9

This contract appears to be valid, but one party may disaffirm it because the party is a minor or was subject to duress, fraud, or misrepresentation.

Answer 9

Voidable

Question 10

This stage of a contract has NO legal obligation and could be used on more than one project at a time.

Answer 10

Letter of Intent–usually with Commercial property, it is a way for buyer to seek info about a potential transaction

Question 11

This is the negotiation period before a contract exists.

Answer 11

OFFER stage–offer can be countered, new offers made until there is a “meeting of the minds”

Question 12

T or F: Strikethroughs or changes in a contract must be initialed and dated by both parties to be enforecable.

Answer 12

True

Question 13

Upon a meeting of the minds and communication of acceptance, a _________ is formed.

Answer 13

Contract

Question 14

__________ terminates an original offer and creates a new offer.

Answer 14

Counteroffer

Question 15

Once a contract is made, the only way to change it before closing is with an ____________.

Answer 15

Amendment

Question 16

A contract is considered __________ once it is closed on.

Answer 16

Executed

Question 17

Contractual capacity/legally competent parties means the parties are _____________.

Answer 17

18, sane, and sober

Question 18

Mutual agreement/consent/offer and acceptance is also a meeting ___________.

Answer 18

Meeting of the minds

Question 19

One party to a contract can withdraw an offer before communication of acceptance and it would not be _______.

Answer 19

Binding

Question 20

Contracts become binding upon communication of ____________.

Answer 20

Acceptance

Question 21

Legally, a counteroffer is a rejection that __________ the original offer.

Answer 21

Terminates

Question 22

In a counteroffer, the original offeree becomes the _________.

Answer 22

Offeror

Question 23

T or F: The 5 elements of a RE contract are Competent Parties, Meeting of the Minds, Lawful Objective, Consideration, In Writing and Signed

Answer 23

True

Question 24

In order to be enforceable, the _________________ requires certain contracts must be in writing and signed by all parties expected to perform.

Answer 24

Statute of Frauds

Question 25

If a lease is for 12 months or less, does it have to be in writing?

Answer 25

No

Question 26

A contract that is not yet fully performed, incomplete is considered ___________.

Answer 26

Executory

Question 27

A purchase contract is _________ once the deed has been delivered and accepted at closing.

Answer 27

Executed

Question 28

Additional material attatched to and made part an offer is an __________.

Answer 28

Addendum

Question 29

Transferring contract rights, but NOT liability is called an __________.

Answer 29

Assignment

Question 30

A new contract replacing an old is called a _________.

Answer 30

Novation

Question 31

A __________ will terminate a contract when a condition is not met, such as appraisal or financing.

Answer 31

Contingency

Question 32

This is when all parties agree to return to their original condition before the contract was executed(earnest money will be returned).

Answer 32

Mutual Rescission

Question 33

Does the sale of a property terminate a lease contract?

Answer 33

No--buyer is "subject to" the lease

Question 34

_________ , which are not contracts, terminate upon death of the parties.

Answer 34

Offers

Question 35

When a party is in default without a legal excuse they are __________.

Answer 35

In Breach of Contract

Question 36

Suing to force performance for completion of the contract, available to both buyer and seller, is ____________.

Answer 36

Specific performance

Question 37

Liquidated damages are paid with ________.

Answer 37

Earnest Money--this is only available to the seller

Question 38

In Colorado, a Contract to buy and sell is also called a ____________.

Answer 38

Purchase contract

Question 39

An offer becomes ____________ upon communication of acceptance.

Answer 39

Executory

Question 40

The seller is a vendor, buyer is a ____________.

Answer 40

Vendee

Question 41

The buyer holds ____________ title until the contract is executed.

Answer 41

Equitable

Question 42

A ___________ clause states that the party is not responsible for completing the purchase under certain conditions.

Answer 42

Contingency

Question 43

If a buyer terminates a contract because of a contingency, the ________ is returned to the buyer.

Answer 43

Earnest money

Question 44

Parties can be in breach of contract if they do not adhere to specific dates for action because time is _________________.

Answer 44

of the essence

Question 45

This is a contract where a specific buyer purchases the right to buy in the future from a seller who agrees to sell within a set period for a set price.

Answer 45

Option--Unilateral, binding on the seller, becomes bilateral when exercised by the optionee

Question 46

T or F: Option contracts typically includes a non-refundable option fee to hold the option for the buyer,

Answer 46

True--fee can be applied to purchase price, no recourse for seller if buyer decides not to buy

Question 47

This is used when a tenant wants to purchase a property but can't get financing for the full amount.

Answer 47

Lease-purchase, part of rent may be applied to the purchase price

Question 48

This is when an owner sells property to an investor and leases it back, converting equity to working capital without giving up possession.

Answer 48

Sale-leaseback

Question 49

A promise for possession with the promise to pay rent is a ________.

Answer 49

Lease

Question 50

A lessor/landlord has a ____________interest in property, allowing them to retake possession.

Answer 50

Reversionary

Question 51

In this lease, a tenant agrees to pay fixed rent and the landlord pays all the expenses.

Answer 51

Gross or Fixed lease-most stable income for landlord

Question 52

Commercial lease where the tenant pays base rent plus expenses i.e. property taxes, insurance, maintenance

Answer 52

Net lease

Question 53

This lease is when rent is based on a % of gross sales/income; typically in retail properties.

Answer 53

Percentage lease

Question 54

This lease increases and decreases rent at predetermined levels i.e. can be graduated or Index

Answer 54

Variable lease

Question 55

This lease is used to rent unimproved property.

Answer 55

Ground(land) lease

Question 56

T or F: Termination of a lease happens on the expiration date or required notice.

Answer 56

True

Question 57

This estate tenancy DOES terminate with death.

Answer 57

Estate(Tenancy) at will

Question 58

This is a court action brought by the landlord against a tenant who is in breach.

Answer 58

Actual Eviction

Question 59

The lease is terminated by this when tenant must vacate because landlords failure to act.

Answer 59

Constructive Eviction--cancels the lease and tenant's obligation to pay, but tenant must move i.e. not fixing heater in winter

Question 60

T or F: ACTR, is a way to remember ACTS to lessen Risk,

Answer 60

True--Avoid(remove it), Control(prepare for it), Transfer(shift to another party, insurance company), Retain(chances are it wont happen)

Question 61

This insurance covers a tenant's personal property.

Answer 61

Tenant's rental insurance

Question 62

Theft, burglary, vandalism, and machinery damage are all covered under this insurance.

Answer 62

Casualty

Question 63

This insurance covers brokerage firms, brokers, and salespeople for liability for errors and negligence in listing and selling activities.

Answer 63

E & O insurance

Question 64

This means that there was an offer and acceptance, there was no fraud, misrepresentation, or mistake, and the consent was genuinely and freely given.

Answer 64

Mutual Agreement