Chapter 11 - Real Estate Contracts Flashcards Preview

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Flashcards in Chapter 11 - Real Estate Contracts Deck (73):
1

What is a listing agreement?

A broker's employment contract with a seller and, indirectly, it is the sales associate's authorization to operate

2

What is a buyer brokerage agreement?

An employment contract with a buyer

3

What is a sale and purchase contract?

A contract between a buyer and seller; the licensee acts as agent or facilitator for one or both of the contracting parties

4

What is an option contract?

An agreement to keep open for a specified period of time an offer to sell or lease real property; in order to reduce liability, it is strongly advised that licensees recommend to the buyer or the seller to have a real estate attorney draw option contracts

5

What types of contracts does the statute of frauds apply to?

Purchase and sale contracts
Option contracts
Lease agreements for more than one year
Listing agreements for more than one year

6

What are the two exceptions that the statute of frauds provides to the requirement that real estate contracts be in written form?

1. When an oral contract has been formed and the buyer has paid part of the purchase price and then has either taken possession of the property or made some improvements of the property
2. If both parties have fully performed as promised

7

What is the period of time during which a written contract may be enforced according to the statute of limitations?

Five years

8

What is the period of time during which an oral contract may be enforced according to the statute of limitations?

Four years

9

What is the period of time during which a partly written and partly oral contract may be enforced according to the statute of limitations?

Five years for the written portion and four years for the oral portion

10

A valid contract is one that complies with the provisions of contract law and contains what four essential elements?

Contractual capacity of the parties (competent parties)
Offer and acceptance (mutual assent)
Legality of object
Consideration

11

A person may only have limited contractual capacity if:

He is insane, intoxicated, or legally a minor

12

What is mutual assent?

Refers to the making and acceptance of an offer

13

What is a meeting of the minds?

The parties must reach an agreement on all terms in the contract

14

What is consideration?

Whatever is given in exchange for something else

15

What are the two types of consideration?

Valuable consideration
Good consideration

16

What is valuable consideration?

The money or a promise of something that can be measured in terms of money

17

What is good consideration?

A promise that cannot be measured in terms of money, such as love and affection

18

What is a formal contract?

A written contract

19

What is a parol (informal) contract?

An oral agreement

20

What is a bilateral contract?

Obligates both parties to perform in accordance with the terms of the contract (ex. a sale contract - both the seller and the buyer are obligated to perform)

21

What is a unilateral contract?

Obligates only one party to an agreement (ex. listing agreement)

22

What is an executory contract?

A contract that has been formed between parties, but something remains to be done by one or both parties to fulfill the conditions of the contract

23

An offer is terminated when any of the following happens:

Counteroffer
Offer is accepted and signed by both parties
Rejection
Withdrawal by offeror
Time for an offer has passed and offer is dead
Death or insanity of either party
Destruction of the property

24

What is a counteroffer?

Indicates a willingness to contract, but on terms or conditions different from those contained in the original offer; the original offer is dead forever and cannot be later accepted

25

What is acceptance?

An offer essential to the creation of a contract; must comply strictly with the terms of the offer

26

What is withdrawal by offeror?

An offeror may withdraw (or revoke) the offer at any time until notice of the offeree's acceptance is received by the offeror

27

A contract is terminated when any of the following happens?

Performance (contract is completed)
Mutual rescission (both parties agree to cancel the contract)
Impossibility of performance (an earthquake hits the property and both parties agree to rescind the contract)
Operation of law (bankruptcy of either party or eminent domain of the property)
Breach (one or the other or both of the parties have broker the promises made)

28

What is mutual rescission?

An agreement between the contracting parties to terminate their respective duties under the contract; both parties must mutually agree to discontinue the contract

29

What is a breach of contract?

When one of the parties fails to perform and the law does not recognize the reason for failure to perform as valid

30

What are the four legal remedies for breach of contract?

Specific performance
Liquidated damages
Rescission
Compensatory damages

31

What is specific performance?

If awards of money damages do not afford sufficient relief, the wronged party may sue for specific performances to have the courts force the other party to perform as the contract specifically states
This action is termed a relief in equity because such judgments are awarded in a court of equity

32

What are liquidated damages?

An amount of money stipulated by the parties in the contract (usually the earnest money deposit) to be paid in the case of default by the buyer

33

What is rescission?

To cancel or annul the contract

34

What are compensatory damages?

An amount of money equal to the extent of loss suffered

35

What is assignment?

A transfer of rights and duties under a contract; except where the terms and conditions of the contract provide otherwise, or where specifically prohibited by law, a contract is assignable (transferable)

36

What is novation?

The substitution of a new party for the original one; the effect is to discharge the original party from the obligation

37

In Florida, a listing contract may be:

Written
Oral
Implied

38

Written listing contracts must include:

A definite expiration date
Identification of the property
Price and terms
Fee or commission
Signature(s) of the owner(s)

39

What are the types of listings?

Open listings
Exclusive-agency listings
Exclusive-right-of-sale listings

40

What is an open listing?

A seller gives an open listing to any number of brokers who can work simultaneously to sell the owner's property; the seller reserves the right to sell the property and to list it with other brokers

41

What is an exclusive-agency listing?

A seller gives an exclusive-agency listing to one broker who handles the transaction; the seller reserves the right to sell the property without paying a commission, unless the buyer was introduced to the property by the broker or others acting under the broker

42

What is an exclusive-right-of-sale listing?

The seller gives the listing to a selected broker, who then becomes the exclusive real estate agent of the owner for the sale of the property during the time the listing contract is in effect

43

What is a buyer brokerage agreement?

An employment contract with the buyer

44

What is an option contract?

An agreement to keep open for a specified period of time an offer to sell or lease real property

45

What is a unilateral (option) contract?

In an option contract, the owner (optionor) is bound to perform the terms of the option if required to do so by the optionee
The optionee, however, may elect to walk away from the deal because the option contract grants the optionee a right, not an obligation to buy the property

46

What is consideration?

The optionee pays a fee (valuable consideration) for the right to purchase the property within a specific period of time

47

What information is required in an option contract?

All of the terms and provisions required for a valid contract
Must clearly specify the length of time the option is effective, the names of the contracting parties, the price of the property, a complete legal description, and the terms of the fee paid

48

What is a material defects disclosure?

Sellers of residential real property must disclose material defects concerning the property

49

What are the requirements for a radon gas disclosure?

Consists only of what radon is; it does not require testing to disclose radon gas levels before a sale or lease

50

What are the enacted mandatory disclosure laws?

Material defects disclosure
Radon gas disclosure
Lead-based paint disclosure
Energy efficiency brochure
Homeowners' association disclosure
Property tax disclosure
Building code violation disclosure

51

What are the requirements for lead-based paint disclosures?

Prospective buyers of homes built prior to 1978 are required to sign a Lead Disclosure form before signing the sale contract
Sellers are required to disclose the presence of any known lead-based paint in the home, and buyers and renters must be given an EPA pamphlet regarding lead-based paint

52

What is the energy efficiency brochure?

The Florida Building Energy-Efficiency Rating Act requires that buyers, before signing the sale contract, receive an information brochure notifying the purchaser of the option for an energy-efficiency rating on the building
The brochure contains a notice to residential purchasers that the energy-efficiency rating may qualify the purchaser for an energy-efficient mortgage from a lending institution

53

What is the homeowners' association disclosure?

Florida law requires sellers of property subject to a mandatory homeowners' association to provide buyers with a disclosure summary regarding the association, the existence of restrictive covenants, and any assessments that the association imposes

54

What is the property tax disclosure?

Prospective buyers of residential property must be presented a disclosure summary concerning ad valorem taxes before or at the time of execution of the contract for sale
The purpose is to caution prospective buyers that they cannot rely on the amount of the seller's property taxes as an indication of the taxes purchasers will be required to pay in the year following purchase of the property

55

If a seller has been cited for a building code violation and is the subject of a pending enforcement proceeding must disclose in writing to the buyer the following information prior to the title closing:

The existence and nature of the violation and proceedings
A copy of the pleadings, notice, and other applicable documents received by the seller
Notice that the buyer will be responsible for compliance with the applicable code and with the orders issued in the county court proceeding

56

Failure to comply with the statute of frauds:

Would have to do with whether a contract is in writing

57

Which contract does not come under the jurisdiction of the statute of frauds?

Lease agreements for less than one year

58

A valid real estate sale contract is one that:

Contains all of the essential elements and is in writing

59

Canceling a daughter's property indebtedness in a contract due to love and affection is an example of:

Good consideration

60

When a contract has been formed but an undertaking remains to be performed by one or both parties, it is an example of an:

Executory contract

61

What statement is false regarding counteroffers?

The offeror and offeree remain the same even though the terms are modifed

62

What statements are true regarding counteroffers?

The original offer is terminated by the counteroffer
The original offeree becomes the offeror
A contract is created when the new offeree accepts the counteroffer and communicates the acceptance to the new offeror

63

Rebecca gave an exclusive-right-of-sale listing to Broker Sammis of Sammis Realty to find a buyer for her residential lot. While Rebecca was vacationing with her family, Buyer Ken signed an offer to purchase Rebecca's lot at the full price and terms of the listing agreement.

The exclusive-right-of-sale listing does not give Broker Sammis the authority to accept the offer on Rebecca's behalf

64

Tim and Ellen enter into a written agreement. Tim will mow Ellen's lawn every week during the mowing season and every third week during the winter. In the middle of the summer, Tim has back surgery. Tim hands over his lawn maintenance contracts to Harry who assumes the responsibility for all of Tim's customers for the remainder of the contract period. Which term describes this situation?

Assignment

65

Which applies to exclusive-right-of-sale listings?

The broker is due a commission regardless of who finds the buyer
The listing may be submitted to the MLS by the listing broker
The seller must consent to the terms of the listing agreement

66

Which disclosure regarding radon is required when purchasing or leasing real property in Florida?

A disclosure statement in the contract explaining radon gas

67

Joshua (aged 15) entered into a contract with Ken who is of legal age to contract.

Joshua may choose to divest himself of his obligations under the contract

68

Normally, a sale contract involving real property contains a provision that in case of breach by the buyer, the earnest money deposit will be regarded as:

Liquidated damages to the seller

69

The most advantageous type of listing from the broker's point of view is an:

Exclusive-right-of-sale listing

70

What statement is false concerning Florida's building code violation disclosure?

The seller is responsible for the costs associated with the code violation

71

What statements are true concerning Florida's building code violation disclosure?

The seller must inform the code enforcement agency regarding the name and address of the buyer within five days of the title closing
Copies of the pleadings and other documents concerning the code violation must be given to the buyer
The disclosure requires a statement that the buyer is responsible for compliance with the building code

72

Kathy and Bob have decided to make a written offer to purchase a quaint little home built in the 1950s. Which task is not required prior to signing the sale contract?

Kathy and Bob must have the home inspected for lead-based paint

73

What conditions will terminate a listing agreement?

Fulfillment of the purpose of the listing (the property sold)
Expiration of the time as stated in the agreement (too late)
Renunciation by the broker (i quit)
Revocation by the seller (you're fired)
Transfer of title by operation of law (seller is bankrupt)
Mutual consent (let's quit, this was a bad idea)
Death or incapacity of either the seller or the broker
Destruction of the property or a change in use by outside forces (the property has been zoned commercial now)
Bankruptcy of the seller
Operation of law (foreclosure)