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VA RE: CONTRACTS QUESTIONS WITH
DETAILED VERIFIED ANSWERS
Listing Ans: Casper is selling his house and wants the broadest possible
exposure. Therefore, he gives an exclusive right-to-sell listing to Bert, an
exclusive agency listing to Gail, and an open listing to Mark. Mark sells
the property. Assuming that all of these listings are valid, which of the
following statements is true? Casper owes 3 commissions.
Bert's listing means that regardless of who sells the property, Bert will
still get a commission. Gail's listing means that if anyone other than the
owner sells the property, she will get a commission. Mark's listing means
that if he sells the property, he gets a commission. Therefore, Casper is
obligated to pay 3 full commissions.
Release / Rescind Ans: Seller Edward feels bad that Sam, who was
going to buy Edward's property, lost his job. Edwards agrees to
______________ Sam from his obligations and _______________ the
contract.
Release / Rescind
"Release" is when one party (Sam) wants out of the contract and the
other party (Edward) agrees to release that party from any obligations.
To "Rescind" a contract is when both parties mutually agree that it makes
sense to terminate the contract.
Void vs. Voidable Ans: Which of the following describes the main
difference between "void" and "voidable" contracts?
Void = invalid and shouldn't be formed, Voidable = valid but may allow
party to escape liability.
Contract defenses either prevent a contract from forming (invalid or void)
or renders an otherwise valid contract unenforceable (voidable). Certain
defenses may exist that prevent a contract from being formed in the first
place (void). Other defenses permit a party to escape liability from the
contract, even though the contract is valid (voidable).
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If a defense (such as an illegal act) makes a contract void it is invalid and
shouldn't be formed, If a defense (such as insanity arises) a contract can
become voidable = valid but may allow party to escape liability.
Attorney-in-fact Ans: Baker gives power of attorney to a real estate
licensee. The licensee would be best described as a(n): Attorney-in-fact
The person who grants a power of attorney is the principal and the
person who receives power of attorney is called the attorney-in-fact.
Although he/she could be Baker's agent, the question does not specify
(requires an agency agreement). The question also doesn't specify
whether the licensee is a broker or salesperson. Therefore, these are not
the best answers.
Withdraw offer Ans: Bill the Buyer makes an offer to purchase and gives
Broker Joan a $1,000 earnest money deposit. The next day, and before
Joan has a chance to present the offer, Bill finds another property that he
wishes to purchase instead. What should Bill do?
-Ask Joan to return his money
-Attempt to withdraw his offer
A buyer can withdraw his offer anytime before the offer is accepted. If Bill
withdraws his offer before acceptance, he is entitled to have his earnest
money deposit returned. Therefore, if Bill wishes to purchase another
property, Bill should attempt to withdraw his offer and request his
earnest money to be returned.
Condition/Contingency Ans: Sharon wants to buy Tyson's home but the
property is 12 years old and Sharon does not want a fixer upper. Sharon
wants to have a professional inspect the home to ensure everything is in
good working order with no hidden defects. What should Sharon be sure
is written into the sales contract?
-Condition, sale occurs if a home inspection is performed with favorable
results.
-Contingency, sale occurs if a home inspection is performed with
favorable results.
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Sharon should be sure there is a home inspection condition/contingency
in the sales contract prior to signing. Contracts may contain various
conditions, or contingencies. A condition is an event which may not be
certain to occur, but which must occur before performance under a
contract is due. The presence of conditions is often indicated by words
such as "if ", "when", "unless", or "provided". Since Sharon does not want
a fixer upper the home inspection needs to show favorable results.
Unenforceable Ans: Under the Statute of Frauds, a verbal contract for
the sale of real property is: Unenforceable
The statute of frauds does not determine whether verbal contracts are
illegal, void, or voidable. However, it does require that contracts for real
property be in writing to be ENFORCEABLE.
Voidable contract Ans: Peggy was so excited about finally finding a
buyer for her home she partied all night. At 0800 am she
signed/accepted Bob the buyer's offer and then drove it to her agent's
office. On the way to the agent's office Peggy was pulled over by the
police and was issued a DUI for scoring a .25 on her Breathalyzer test.
Which of the following statements about the sales contract is true? The
contract is voidable by Peggy.
Persons who were intoxicated at the time of contracting have a limited
capacity to contract. If intoxication at the time of contracting is
established (in this case the DUI within minutes of signing), such
contracts may be voidable by the intoxicated person if they act promptly.
The contract is not void, it is valid and if the intoxicated person does not
act promptly to cancel the contract, their inaction will be taken as
agreement, and the contract will be valid.
Earning commission Ans: A seller lists his home on the MLS on Monday
for $212,000. Agent Black calls the seller on Tuesday and lets him know
he has an interested client who would like to make an offer. Agent Black
presents the seller with an offer for $212,000 and no contingencies and
the seller accepts the offer. What has Agent Black done?
-Became the procuring cause of the sale
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-Produced a ready, willing and able buyer
-Earned a commission
Agent Black has done all three. Real estate agents (brokers) generally
earn payment (commission) upon one of two events: when the agent
(broker) produces a ready, willing, and able buyer; and when the agent
(broker) is the procuring cause of any sale or purchase.
An option Ans: What does a person have if contracted for the
opportunity to purchase property at a specified price and within a
specified time? An option
A person who contracts for the opportunity to buy property within a
specific period of time has an option contract. A right of first refusal is a
contractual agreement for the right to purchase, but only after the owner
offers the property for sale or entertains an offer from a third party.
Unilateral contract Ans: A unilateral contract arises:Upon completion of
the requested act.
A unilateral contract is a promise by one party only. For example, a
broker promises a prize to any salesperson who can obtain a certain
number of listings in the month. The broker is only obligated to fulfill his
promise if and when a salesperson acquires that number of listings.
Therefore, the contract arises upon completion of the requested act.
Assignment Ans: One's rights in a mortgage or lease may be transferred
to another through a(n): Assignment
The TRANSFER of a contractual obligation or right from one person to
another is an assignment. The substitution of one party for another is a
novation. Unlike an assignment, novation results in a new contract with a
different party and the same terms. A deed of trust is a real estate
financing agreement, wherein a neutral third person (trustee) holds title
until the loan is paid in full. While a deed of trust does involve a transfer
of title rights after the loan is paid in full, the question was limited to a
mortgage or a lease. Therefore, assignment is the best answer.
VA RE: CONTRACTS QUESTIONS WITH
DETAILED VERIFIED ANSWERS
Listing Ans: Casper is selling his house and wants the broadest possible
exposure. Therefore, he gives an exclusive right-to-sell listing to Bert, an
exclusive agency listing to Gail, and an open listing to Mark. Mark sells
the property. Assuming that all of these listings are valid, which of the
following statements is true? Casper owes 3 commissions.
Bert's listing means that regardless of who sells the property, Bert will
still get a commission. Gail's listing means that if anyone other than the
owner sells the property, she will get a commission. Mark's listing means
that if he sells the property, he gets a commission. Therefore, Casper is
obligated to pay 3 full commissions.
Release / Rescind Ans: Seller Edward feels bad that Sam, who was
going to buy Edward's property, lost his job. Edwards agrees to
______________ Sam from his obligations and _______________ the
contract.
Release / Rescind
"Release" is when one party (Sam) wants out of the contract and the
other party (Edward) agrees to release that party from any obligations.
To "Rescind" a contract is when both parties mutually agree that it makes
sense to terminate the contract.
Void vs. Voidable Ans: Which of the following describes the main
difference between "void" and "voidable" contracts?
Void = invalid and shouldn't be formed, Voidable = valid but may allow
party to escape liability.
Contract defenses either prevent a contract from forming (invalid or void)
or renders an otherwise valid contract unenforceable (voidable). Certain
defenses may exist that prevent a contract from being formed in the first
place (void). Other defenses permit a party to escape liability from the
contract, even though the contract is valid (voidable).
, Page | 2
If a defense (such as an illegal act) makes a contract void it is invalid and
shouldn't be formed, If a defense (such as insanity arises) a contract can
become voidable = valid but may allow party to escape liability.
Attorney-in-fact Ans: Baker gives power of attorney to a real estate
licensee. The licensee would be best described as a(n): Attorney-in-fact
The person who grants a power of attorney is the principal and the
person who receives power of attorney is called the attorney-in-fact.
Although he/she could be Baker's agent, the question does not specify
(requires an agency agreement). The question also doesn't specify
whether the licensee is a broker or salesperson. Therefore, these are not
the best answers.
Withdraw offer Ans: Bill the Buyer makes an offer to purchase and gives
Broker Joan a $1,000 earnest money deposit. The next day, and before
Joan has a chance to present the offer, Bill finds another property that he
wishes to purchase instead. What should Bill do?
-Ask Joan to return his money
-Attempt to withdraw his offer
A buyer can withdraw his offer anytime before the offer is accepted. If Bill
withdraws his offer before acceptance, he is entitled to have his earnest
money deposit returned. Therefore, if Bill wishes to purchase another
property, Bill should attempt to withdraw his offer and request his
earnest money to be returned.
Condition/Contingency Ans: Sharon wants to buy Tyson's home but the
property is 12 years old and Sharon does not want a fixer upper. Sharon
wants to have a professional inspect the home to ensure everything is in
good working order with no hidden defects. What should Sharon be sure
is written into the sales contract?
-Condition, sale occurs if a home inspection is performed with favorable
results.
-Contingency, sale occurs if a home inspection is performed with
favorable results.
, Page | 3
Sharon should be sure there is a home inspection condition/contingency
in the sales contract prior to signing. Contracts may contain various
conditions, or contingencies. A condition is an event which may not be
certain to occur, but which must occur before performance under a
contract is due. The presence of conditions is often indicated by words
such as "if ", "when", "unless", or "provided". Since Sharon does not want
a fixer upper the home inspection needs to show favorable results.
Unenforceable Ans: Under the Statute of Frauds, a verbal contract for
the sale of real property is: Unenforceable
The statute of frauds does not determine whether verbal contracts are
illegal, void, or voidable. However, it does require that contracts for real
property be in writing to be ENFORCEABLE.
Voidable contract Ans: Peggy was so excited about finally finding a
buyer for her home she partied all night. At 0800 am she
signed/accepted Bob the buyer's offer and then drove it to her agent's
office. On the way to the agent's office Peggy was pulled over by the
police and was issued a DUI for scoring a .25 on her Breathalyzer test.
Which of the following statements about the sales contract is true? The
contract is voidable by Peggy.
Persons who were intoxicated at the time of contracting have a limited
capacity to contract. If intoxication at the time of contracting is
established (in this case the DUI within minutes of signing), such
contracts may be voidable by the intoxicated person if they act promptly.
The contract is not void, it is valid and if the intoxicated person does not
act promptly to cancel the contract, their inaction will be taken as
agreement, and the contract will be valid.
Earning commission Ans: A seller lists his home on the MLS on Monday
for $212,000. Agent Black calls the seller on Tuesday and lets him know
he has an interested client who would like to make an offer. Agent Black
presents the seller with an offer for $212,000 and no contingencies and
the seller accepts the offer. What has Agent Black done?
-Became the procuring cause of the sale
, Page | 4
-Produced a ready, willing and able buyer
-Earned a commission
Agent Black has done all three. Real estate agents (brokers) generally
earn payment (commission) upon one of two events: when the agent
(broker) produces a ready, willing, and able buyer; and when the agent
(broker) is the procuring cause of any sale or purchase.
An option Ans: What does a person have if contracted for the
opportunity to purchase property at a specified price and within a
specified time? An option
A person who contracts for the opportunity to buy property within a
specific period of time has an option contract. A right of first refusal is a
contractual agreement for the right to purchase, but only after the owner
offers the property for sale or entertains an offer from a third party.
Unilateral contract Ans: A unilateral contract arises:Upon completion of
the requested act.
A unilateral contract is a promise by one party only. For example, a
broker promises a prize to any salesperson who can obtain a certain
number of listings in the month. The broker is only obligated to fulfill his
promise if and when a salesperson acquires that number of listings.
Therefore, the contract arises upon completion of the requested act.
Assignment Ans: One's rights in a mortgage or lease may be transferred
to another through a(n): Assignment
The TRANSFER of a contractual obligation or right from one person to
another is an assignment. The substitution of one party for another is a
novation. Unlike an assignment, novation results in a new contract with a
different party and the same terms. A deed of trust is a real estate
financing agreement, wherein a neutral third person (trustee) holds title
until the loan is paid in full. While a deed of trust does involve a transfer
of title rights after the loan is paid in full, the question was limited to a
mortgage or a lease. Therefore, assignment is the best answer.
