PERRY REAL ESTATE COLLEGE FULLY UPDATED SET OF EXAMINATION
QUESTIONS WITH VERIFIED CORRECT ANSWERS IN THE MOST RECENT
VERSION (PASS GUARANTEE)
Q1: What is a contract? ANSWER A contract is a legally binding agreement
between two or more parties in which each party promises to perform certain
acts or refrain from performing certain acts in exchange for consideration.
Q2: What are the four essential elements of a valid contract? ANSWER
Offer, acceptance, consideration, and legal purpose.
Q3: Define consideration in a real estate contract. ANSWER Consideration
is something of value exchanged between parties, such as money, property, or a
promise to perform a service.
Q4: What makes a contract void? ANSWER A contract is void if it lacks
one or more essential elements, involves illegal activity, or is made with
someone lacking legal capacity.
Q5: What is the difference between void and voidable contracts?
ANSWER A void contract has no legal effect from the beginning, while a
voidable contract is valid unless one party chooses to cancel it.
Q6: What must happen for an offer to be valid? ANSWER An offer must
be made with the intent to be bound, must be definite and specific, and must be
communicated to the offeree.
Q7: How long is an offer typically valid? ANSWER An offer is valid for the
time specified in the offer, or if no time is specified, for a reasonable period
based on the nature of the transaction.
Q8: What terminates an offer? ANSWER An offer is terminated by
acceptance, rejection, counteroffer, expiration, revocation by the offeror, or
death or incapacity of either party.
Q9: What is a counteroffer? ANSWER A counteroffer is a rejection of the
original offer combined with a new offer made by the offeree to the offeror.
Q10: What happens when a counteroffer is made? ANSWER The original
offer is terminated and the offeror becomes the offeree who must accept or
reject the counteroffer.
,Q11: What is the difference between bilateral and unilateral contracts?
ANSWER A bilateral contract involves mutual promises by both parties, while
a unilateral contract involves a promise by one party in exchange for an act by
the other.
Q12: Are real estate sales contracts bilateral or unilateral? ANSWER Real
estate sales contracts are bilateral because both the buyer and seller make
promises.
Q13: What is an express contract? ANSWER An express contract is one
where the parties clearly state their intentions and terms either verbally or in
writing.
Q14: What is an implied contract? ANSWER An implied contract is created
by the conduct of the parties rather than by express words, but the parties'
intentions are still evident.
Q15: What is an executory contract? ANSWER An executory contract is
one where one or both parties have not yet fulfilled their obligations.
Q16: What is an executed contract? ANSWER An executed contract is one
where both parties have completed their obligations.
Q17: What is the Statute of Frauds? ANSWER The Statute of Frauds is a
law requiring certain contracts, including real estate sales contracts, to be in
writing to be enforceable.
Q18: Why must real estate contracts be in writing? ANSWER Real estate
contracts must be in writing to provide proof of the agreement, prevent fraud,
and ensure all parties understand the terms.
Q19: What must be included in a written real estate contract to satisfy the
Statute of Frauds? ANSWER The contract must identify the parties, describe
the property, state the price, and be signed by the party against whom
enforcement is sought.
Q20: What is part performance? ANSWER Part performance is when a
buyer makes payments or takes possession of property, which may allow
enforcement of an oral real estate contract in some states.
Q21: What is specific performance? ANSWER Specific performance is a
court remedy requiring a party to perform their contractual obligations rather
than awarding monetary damages.
Q22: When would a court order specific performance in a real estate
transaction? ANSWER A court may order specific performance in real estate
, transactions because land is unique and monetary damages would not
adequately compensate the buyer.
Q23: What is liquidated damages? ANSWER Liquidated damages are
predetermined amounts specified in a contract that parties agree will be paid if
one party breaches the contract.
Q24: What is earnest money? ANSWER Earnest money is a deposit made by
the buyer when making an offer, showing good faith intent to purchase the
property.
Q25: What typically happens to earnest money if the sale closes? ANSWER
The earnest money is credited toward the buyer's down payment or closing
costs.
Q26: What happens to earnest money if the buyer defaults? ANSWER If
the buyer defaults without a valid reason, the earnest money is typically
forfeited to the seller.
Q27: What is a contingency in a real estate contract? ANSWER A
contingency is a condition that must be satisfied before a contract is fully
binding on both parties.
Q28: What is a financing contingency? ANSWER A financing contingency
makes the contract contingent on the buyer obtaining a mortgage loan at
specified terms.
Q29: What is an inspection contingency? ANSWER An inspection
contingency allows the buyer to have the property professionally inspected and
to terminate the contract if major defects are found.
Q30: What is an appraisal contingency? ANSWER An appraisal
contingency makes the contract contingent on the property appraising for at
least the purchase price.
PROPERTY DESCRIPTIONS & OWNERSHIP
Q31: What are the three methods of describing real property? ANSWER
Metes and bounds, rectangular survey system (government survey), and lot and
block (subdivision).
Q32: What is the metes and bounds system? ANSWER Metes and bounds is
a method of describing property using measurements (metes) and directional
boundaries (bounds) starting from a known point.
QUESTIONS WITH VERIFIED CORRECT ANSWERS IN THE MOST RECENT
VERSION (PASS GUARANTEE)
Q1: What is a contract? ANSWER A contract is a legally binding agreement
between two or more parties in which each party promises to perform certain
acts or refrain from performing certain acts in exchange for consideration.
Q2: What are the four essential elements of a valid contract? ANSWER
Offer, acceptance, consideration, and legal purpose.
Q3: Define consideration in a real estate contract. ANSWER Consideration
is something of value exchanged between parties, such as money, property, or a
promise to perform a service.
Q4: What makes a contract void? ANSWER A contract is void if it lacks
one or more essential elements, involves illegal activity, or is made with
someone lacking legal capacity.
Q5: What is the difference between void and voidable contracts?
ANSWER A void contract has no legal effect from the beginning, while a
voidable contract is valid unless one party chooses to cancel it.
Q6: What must happen for an offer to be valid? ANSWER An offer must
be made with the intent to be bound, must be definite and specific, and must be
communicated to the offeree.
Q7: How long is an offer typically valid? ANSWER An offer is valid for the
time specified in the offer, or if no time is specified, for a reasonable period
based on the nature of the transaction.
Q8: What terminates an offer? ANSWER An offer is terminated by
acceptance, rejection, counteroffer, expiration, revocation by the offeror, or
death or incapacity of either party.
Q9: What is a counteroffer? ANSWER A counteroffer is a rejection of the
original offer combined with a new offer made by the offeree to the offeror.
Q10: What happens when a counteroffer is made? ANSWER The original
offer is terminated and the offeror becomes the offeree who must accept or
reject the counteroffer.
,Q11: What is the difference between bilateral and unilateral contracts?
ANSWER A bilateral contract involves mutual promises by both parties, while
a unilateral contract involves a promise by one party in exchange for an act by
the other.
Q12: Are real estate sales contracts bilateral or unilateral? ANSWER Real
estate sales contracts are bilateral because both the buyer and seller make
promises.
Q13: What is an express contract? ANSWER An express contract is one
where the parties clearly state their intentions and terms either verbally or in
writing.
Q14: What is an implied contract? ANSWER An implied contract is created
by the conduct of the parties rather than by express words, but the parties'
intentions are still evident.
Q15: What is an executory contract? ANSWER An executory contract is
one where one or both parties have not yet fulfilled their obligations.
Q16: What is an executed contract? ANSWER An executed contract is one
where both parties have completed their obligations.
Q17: What is the Statute of Frauds? ANSWER The Statute of Frauds is a
law requiring certain contracts, including real estate sales contracts, to be in
writing to be enforceable.
Q18: Why must real estate contracts be in writing? ANSWER Real estate
contracts must be in writing to provide proof of the agreement, prevent fraud,
and ensure all parties understand the terms.
Q19: What must be included in a written real estate contract to satisfy the
Statute of Frauds? ANSWER The contract must identify the parties, describe
the property, state the price, and be signed by the party against whom
enforcement is sought.
Q20: What is part performance? ANSWER Part performance is when a
buyer makes payments or takes possession of property, which may allow
enforcement of an oral real estate contract in some states.
Q21: What is specific performance? ANSWER Specific performance is a
court remedy requiring a party to perform their contractual obligations rather
than awarding monetary damages.
Q22: When would a court order specific performance in a real estate
transaction? ANSWER A court may order specific performance in real estate
, transactions because land is unique and monetary damages would not
adequately compensate the buyer.
Q23: What is liquidated damages? ANSWER Liquidated damages are
predetermined amounts specified in a contract that parties agree will be paid if
one party breaches the contract.
Q24: What is earnest money? ANSWER Earnest money is a deposit made by
the buyer when making an offer, showing good faith intent to purchase the
property.
Q25: What typically happens to earnest money if the sale closes? ANSWER
The earnest money is credited toward the buyer's down payment or closing
costs.
Q26: What happens to earnest money if the buyer defaults? ANSWER If
the buyer defaults without a valid reason, the earnest money is typically
forfeited to the seller.
Q27: What is a contingency in a real estate contract? ANSWER A
contingency is a condition that must be satisfied before a contract is fully
binding on both parties.
Q28: What is a financing contingency? ANSWER A financing contingency
makes the contract contingent on the buyer obtaining a mortgage loan at
specified terms.
Q29: What is an inspection contingency? ANSWER An inspection
contingency allows the buyer to have the property professionally inspected and
to terminate the contract if major defects are found.
Q30: What is an appraisal contingency? ANSWER An appraisal
contingency makes the contract contingent on the property appraising for at
least the purchase price.
PROPERTY DESCRIPTIONS & OWNERSHIP
Q31: What are the three methods of describing real property? ANSWER
Metes and bounds, rectangular survey system (government survey), and lot and
block (subdivision).
Q32: What is the metes and bounds system? ANSWER Metes and bounds is
a method of describing property using measurements (metes) and directional
boundaries (bounds) starting from a known point.
