Real Estate Contracts & Agency 2 — Questions and Answers
Question 1: A financing contingency in a purchase agreement protects the buyer if:
- The home appraises below asking price
- The buyer cannot obtain mortgage financing (Correct answer)
- The seller fails to make repairs
- The closing date is delayed
Correct answer: The buyer cannot obtain mortgage financing
A financing contingency allows the buyer to cancel the contract and recover their earnest money if they cannot secure a loan as specified in the agreement.
Question 2: Specific performance as a remedy in real estate means:
- The seller must lower the price
- The court orders the breaching party to complete the transaction (Correct answer)
- The buyer must pay a penalty fee
- The agent loses their license
Correct answer: The court orders the breaching party to complete the transaction
Specific performance is a legal remedy requiring the defaulting party to fulfill their contractual obligations since real estate is considered unique.
Question 3: An option contract in real estate gives the optionee the:
- Obligation to buy the property
- Right but not the obligation to purchase within a set period (Correct answer)
- Right to list the property for sale
- Title to the property immediately
Correct answer: Right but not the obligation to purchase within a set period
An option contract provides the buyer the right to purchase the property at an agreed price within a specified timeframe, but they are not required to do so.
Question 4: The Statute of Frauds requires that real estate contracts must be:
- Notarized by a public official
- In writing and signed to be enforceable (Correct answer)
- Filed with the county recorder
- Approved by the state real estate commission
Correct answer: In writing and signed to be enforceable
The Statute of Frauds requires contracts for the sale of real estate to be in writing and signed by the party to be charged to be legally enforceable.
Question 5: When a seller responds to a buyer's offer by changing the price, this creates a:
- Ratified contract
- Counteroffer that voids the original offer (Correct answer)
- Binding acceptance
- Contingency
Correct answer: Counteroffer that voids the original offer
A counteroffer legally rejects the original offer and substitutes a new offer, giving the original offeror the right to accept, reject, or counter again.
Question 6: An open listing allows the seller to:
- List with only one broker exclusively
- Sell through multiple brokers and pay commission only to the one who produces the buyer (Correct answer)
- Cancel the listing without notice at any time for free
- Sell only to cash buyers
Correct answer: Sell through multiple brokers and pay commission only to the one who produces the buyer
An open listing is a non-exclusive arrangement where multiple brokers may market the property and only the procuring broker earns a commission.
Real Estate Contracts & Agency 2
A financing contingency in a purchase agreement protects the buyer if: