Contracts in Practice

Question 1

Listing Contract

Answer 1

Also known as Broker “employment” contracts.
Used to hire real estate agent to sell a home.
Always negotiable.
Include: What property the broker is selling, the designated agent, what commission they will be paid, the broker’s authority & deadline for the sale.
Does not have to be in writing.

Question 2

Entry Only Listing

Answer 2

Seller pays a flat fee to put their property on MLS.
Broker offers limited services to the seller.
Typically, seller shows their own home & negotiates their own sale.

Question 3

Open Listing

Answer 3

Seller hires multiple brokers.
Can be verbal or written.
No commission earned if the seller finds a buyer w/out the broker’s help.

Question 4

Exclusive Agency

Answer 4

Seller hires 1 broker.
Must be in writing w/ an expiration date.
No commission earned if the seller finds a buyer w/out the broker’s help.

Question 5

Exclusive Right to Sell

Answer 5

Seller hires 1 broker.
Must be in writing w/ an expiration date.
Broker earns a commission & may co-broke.
Seller MUST pay a commission even if they find a buyer on their own.

Question 6

For exam purposes, who pays the commissions?

Answer 6

The seller.

Question 7

Buyer’s Agency Contracts

Answer 7

Buyer’s agency contracts cover exclusivity, but not always commission or payment.
-Could say agent agrees to accept co-broke offered.

Question 8

What is the purpose of an offer?

Answer 8

To reach an acceptable agreement between the buyer and the seller so that the agreement is signed w/ the intention to move forward.

Question 9

offeror v. offeree

Answer 9

Offeror-seller
Offeree-buyer
*These roles switch if there is a counter offer.

Question 10

What does an offer lead to?

Answer 10

An offer leads to the signing of the Purchase & Sale agreement.

Question 11

Verbal offers/acceptance are…

Answer 11

non binding per statute of frauds. Offers must be in writing to be enforceable.

Question 12

What if the seller is okay w/out having an offer in writing.

Answer 12

Suggest they consult w/ an attorney to discuss the possibility of risks.

Question 13

Aside from a acceptance, what can terminate an offer?

Answer 13

At the end of time limit stated in the offer “time is of the essence”.
Death of either party to the offer.
Destruction of object of offer.
Withdrawal of offer before it have been accepted in writing.
Counter-offer-Terminates the original offer.

Question 14

What has no effect on an offer?

Answer 14

Agency relationships.

Question 15

What can also serve as an offer?

Answer 15

A binder or letter of intent.

Question 16

Purchase & Sale Contracts

Answer 16

Agreements about how a sale will take place.

Question 17

What is in a P&S?

Answer 17

Obligations
Contingencies
Date of Performance/Closing.

Question 18

What are the basic essentials of a valid P&S?

Answer 18

Name of buyer(s) & seller(s)
Legal description
Offer & Acceptance 
Consideration
Terms & Conditions
Contingencies (like financing) 
Date of Performance (like closing)

Question 19

Any contract can be assigned unless…

Answer 19

The writing in the contract prohibits it.

Question 20

Optionor v. Optionee

Answer 20

Optionor-gives the option

Optionee-gets the option

Question 21

What are options?

Answer 21

Written contract where the owner of a piece of property grants another party an the right to purchase or lease the property.
Must be signed by the Optionor/Grantor.
Consideration is exchanged.
Certain timeframe at pre-agreed terms.

Question 22

How do agents earn a commission in an option?

Answer 22

Agents who bring an Optionee will only earn a commission if the option is exercised.

Question 23

What type of contract is an option?

Answer 23

Unilateral-only the Optionor makes a promise.

Question 24

Right of First Refusal

Answer 24

Prospective buyer is offered “first right” to match the best offer made on a property.
Right doesn’t give the buyer control over the price or terms.
Allows for the seller to better track the market to ensure fair market value.

Question 25

Right of First Offer

Answer 25

Prospective buyer is offered the “first right” to purchase a property.

Question 26

Power of Attorney

Answer 26

Written document giving the right to act as a proxy for another.
Creates an “attorney-in-fact”.

Question 27

Multiple Listing Clause

Answer 27

Permits the listing broker to advertise the property to other brokers on the MLS.