Colorado Contracts and Regulations Midterm Exam with Complete Solutions

Colorado Contracts and Regulations Midterm Exam with Complete Solutions At closing of a property, who is most likely to pay the discount points and loan origination fees? A) Buyer and seller equally B) Seller C) Buyer D) Lender The answer is buyer. The buyer typically pays these fees. The seller may have given the buyer some funds as a concession; however, since the fees show on the buyer's settlement as a debit, they are considered to be a buyer obligation. The buyer must receive a Lead-Based Paint Disclosures if the A) property improvements were completed prior to January 1, 1978. B) fixtures were attached prior to January 1, 1978. C) building permit was issued prior to January 1, 1978. D) certificate of occupancy was issued prior to January 1, 1978. The answer is building permit was issued prior to January 1, 1978. The federal law requires the disclosure if the property was built before January 1, 1978. Colorado law further defines the federal requirement to disclose lead-based paint by defining the date for compliance as building permits prior to January 1, 1978. What form(s) may earnest money take? A) Cash or good funds only B) Cash or check only C) Cash, check, or promissory note D) Any form the seller will accept The answer is any form the seller will accept. The seller may accept an offer with any form of earnest money (or none at all). In the residential Contract to Buy and Sell Real Estate, which is TRUE regarding the financing language? A) A broker may omit the financing terms and leave a space for licensees to draft the terms that fit. B) All financing provisions must be printed in every contract. C) The form may not be computer generated because it would be too easy to change. D) A broker may print forms with only the financing terms needed for the transaction. The answer is a broker may print forms with only the financing terms needed for the transaction. Rule F-2 permits a broker to omit the financing terms that do not apply to the contract the broker is preparing. The broker is not required to print all financing provisions and only needs to include the header of the section if omitting the language in that section. A broker acting as a transaction-broker, listing agent, buyer's agent, or single agent would owe the consumer all of the following EXCEPT A) advising the buyer or seller regarding the transaction. B) advocating for the best interest of the party being represented. C) keeping all parties fully informed regarding the transaction. D) disclosure of all known material facts about the property. The answer is advocating for the best interest of the party being represented. Advocating or promoting is one of the three additional duties of an agent under the uniform duties in the seller and buyer listing contracts. Which of the following terminates a purchase offer and constitutes a new offer? A) Seller's Property Disclosure B) Counterproposal C) Inspection Resolution D) Agreement to Amend/Extend Contract The answer is counterproposal. A Counterproposal has the legal effect of rejecting or terminating the initial offer. It constitutes a new offer even though it borrows many terms from the initial offer. At listing, the seller declines to complete the Seller's Property Disclosure. The listing broker should A) tell the seller that the buyer will request the form. B) complete the form for the seller. C) tell the seller that disclosure of material facts is optional. D) resign the listing since the seller won't complete the form. The answer is tell the seller that the buyer will request the form. By law, the seller is not required to complete the property disclosure. However, the Contract to Buy and Sell Real Estate requests it for the buyer. The seller would have to counter the buyer's offer to remove the request. The approved residential Contract to Buy and Sell Real Estate calls for general property taxes to be prorated between the seller and buyer A) based on the taxes for the preceding calendar year. B) based on the assessed value and mill levy. C) based on an average of taxes over the past five years. D) as indicated by checking the appropriate box. The answer is as indicated by checking the appropriate box. The proration section of the Contract to Buy and Sell Real Estate has boxes to check for the proration of property taxes. The options are (1) taxes for the calendar year immediately preceding closing; (2) most recent mill levy and most recent assessed valuation, adjusted by any applicable qualifying seniors property tax exemption or qualifying disabled veteran exemption; or (3) other. A Colorado well permit A) guarantees a minimum amount of water. B) is issued by the Real Estate Commission to provide water. C) is real property, but not an appurtenance. D) provides permission to drill and maintain a well. The answer is provides permission to drill and maintain a well. A well permit is not a water right and does not guarantee any water. It permits the holder to drill a well and take limited water, if found. The only item required to be in the brokerage office policy by law is A) how commission splits will be handled at closing. B) when E&O insurance is to be paid. C) how floor time and vacation days will be taken. D) what brokerage relationships are offered by the firm. The answer is what brokerage relationships are offered by the firm. C.R.S. 12-61-808 (1) (a) requires the employing broker to state what relationships the firm will offer in the firm's office policy. The other items might be included but are not required by statute (law). In the approved Contract to Buy and Sell Real Estate, dates and deadlines are A) listed in each relevant section. B) listed and summarized in each relevant section. C) listed only in the section as a checklist for compliance. D) approximate, and reasonable compliance is acceptable. The answer is listed only in the section as a checklist for compliance. The dates and deadlines table is the only location for dates in the contract. If a property is in a special taxing district, the approved residential Contract to Buy and Sell Real Estate provides that the A) seller must pay off the present and future obligations to the district. B) buyer may terminate the contract upon learning of the district. C) buyer has 30 days after closing to rescind the contract. D) buyer must be informed but has no recourse. The answer is buyer may terminate the contract upon learning of the district. The special taxing district section provides this right to the buyer. Per the Loan Objection section of the residential Contract to Buy and Sell Real Estate, all of the following are true EXCEPT A) in subjective opinion, the buyer may decide if the loan terms are acceptable. B) if the buyer does not send the seller written notice of acceptance of terms, the contract terminates. C) the buyer has until the loan objection deadline to decide if the loan terms are acceptable. D) the seller could keep the buyer's earnest money if the terms of this section are not followed. The answer is if the buyer does not send the seller written notice of acceptance of terms, the contract terminates. The contingency, not the contract, terminates if the buyer does not send the seller written notice. A buyer who could not get a loan and, as a result, later terminated the contract would lose the earnest money. Which statement is TRUE regarding an owner's policy of title insurance? A) It is issued prior to closing and paid for after closing. B) It covers title defects found after closing. C) It covers defects and exceptions listed in the title commitment. D) It protects the lender against superior claims. The answer is it covers title defects found after closing. The owner's title policy can only be issued in the buyer's name after closing and the recording of the deed conveying title to the buyer. Premiums are paid once and paid at closing. The policy only covers those defects not listed and applies to defects found after closing. The mortgagee's policy covers the lender, not the owner's policy. According to Rule F, all of the following would be acceptable as a substitute for the Contract to Buy and Sell Real Estate EXCEPT A) a contract drafted by the buyer's attorney. B) a contract drafted by the brokerage firm's attorney for general use by all brokers in the firm. C) a contract drafted by the seller's attorney D) a new home sales contract with builder warranties. The answer is a contract drafted by the brokerage firm's attorney for general use by all brokers in the firm. Colorado brokers must use standard or approved forms when dealing with the public in general. For a specific case, an attorney for the parties or the brokerage firm might draft a contract for that transaction but not for general use. A Colorado broker has a brokerage relationship with both the buyer and seller in a single transaction. The brokerage relationship must be A) single agency. B) dual agency. C) transaction-broker. D) customer. The answer is transaction-broker. Brokerage relationships can be agency or transaction-broker. An agent may represent only one party, so transaction-broker is the only way to have a brokerage relationship with both parties. Customer is the absence of a brokerage relationship. Which is TRUE about association documents in the residential Contract to Buy and Sell Real Estate? A) The seller will have until four days prior to closing to resolve the buyer's issues. B) The association must deliver the documents to the buyer no later than the association documents deadline. C) The association and seller will have until the association documents deadline to resolve the buyer's issues. D) If the buyer finds unsatisfactory issues, the buyer may terminate the contract. The answer is if the buyer finds unsatisfactory issues, the buyer may terminate the contract. Per the Homeowners' Association Documents section, if the buyer finds unacceptable terms, the buyer may terminate the contract by written notice to the seller on or before the association documents objection deadline. A listing broker holding an open house is informed by the buyer that the buyer has signed a buyer representation contract with another broker. The listing broker should A) not show the house to the buyer. B) show the buyer the house and have the buyer sign an Exclusive Right-to-Buy Listing Contract with the listing broker. C) have the buyer call the broker and have the other broker show the house. D) show the buyer the house. The answer is show the buyer the house. It is good business practice for the broker to get the names of the buyer(s) and the buyer's broker, show the property, then call the buyer's broker with details. In a transaction with a listing broker and a buyer's agent, who usually holds the earnest money deposit? A) Listing broker B) Buyer's broker C) A neutral escrow company D) A joint trust account established by the brokers The answer is listing broker. Rule E-1 specifies that the listing broker will be responsible for the earnest money. When and how must you inform a for-sale-by-owner (unrepresented) seller that you are an agent for a buyer who wants to see the house? A) Orally when you meet the seller B) Orally when you first call the seller C) In writing when you first call the seller D) In writing at the first physical contact The answer is in writing at the first physical contact. Disclosure is required in writing at the first physical contact, but remember that you would need to disclose orally on the phone if you were about to elicit confidential information during the conversation. According to the approved residential Contract to Buy and Sell Real Estate, if a built-in dishwasher fails between contract and closing dates and before occupancy by the buyer, the A) seller must replace it with a new appliance. B) buyer is at risk during this time. C) seller may repair or replace it with a similarly used appliance. D) buyer may repair it after closing and charge the seller. The answer is seller may repair or replace it with a similarly used appliance. The Inclusions section provides for what will occur if an inclusion fails. If a buyer is submitting an offer on an approved Contract to Buy and Sell Real Estate in which the seller has requested liquidated damages if the buyer is in default, A) the proper language must be inserted in additional provisions. B) this is the contract default, and the buyer and seller do not need to do anything. C) the seller will check the appropriate box after accepting the offer. D) this may be specified by marking the correct box in the Remedies section. The answer is this is the contract default, and the buyer and seller do not need to do anything. The Default section provides liquidated damages as the remedy for the seller if the buyer is in default. The seller may counter if the seller wants a different remedy, such as specific performance. What is the purpose of the broker's signature on the sales contract? A) It provides a receipt for the earnest money and confirms the brokerage relationship. B) The brokers are fiduciaries and, therefore, parties to the contract who must sign. C) It confirms the commission split between cooperating brokers. D) It confirms the brokers are witnessing this important legal document for the buyer and seller. The answer is it provides a receipt for the earnest money and confirms the brokerage relationship. The Brokers Acknowledgment section states the purpose of the brokers' signatures. During the executory period, the A) seller must buy title insurance. B) vendee has legal title. C) grantor is the offeror. D) buyer has equitable title. The answer is buyer has equitable title. The buyer gains equitable title once a binding contract is formed. Legal title will be conveyed at the end of the executory period through a deed at closing. The earnest money must be deposited within three business days after A) receipt of the money from the buyer. B) offer, acceptance, and communication of acceptance. C) the offer is made. D) acceptance of the offer by the buyer. The answer is offer, acceptance, and communication of acceptance. Earnest money is not deposited until the parties have formed a contract that is represented by offer, acceptance, and communication to the offeror of that acceptance.