: Elements of a Valid Contract

Question 1

A stated (written or oral) agreement between two or more parties that’s expressed out loud or on paper

Answer 1

express contract

Question 2

A contract based on the actions or behaviors of the parties, not on words, and implied by actions

Answer 2

implied contract

Question 3

A contract that involves the parties exchanging promises to perform specific actions and that is two-sided, with both sides having certain obligations

Answer 3

bilateral contract

Question 4

A contract in which consideration (such as a promise) is given only by one party, and the other party is under no contractual obligation to perform or comply with the contract terms

Answer 4

unilateral contract

Question 5

A contract that meets all the criteria for validity, including compliance with local laws, and may be held up in a court of law.

Answer 5

enforceable contract

Question 6

A contract that cannot be enforced in a court of law and that may be missing one or more elements for validity, or it may appear to be valid, but not comply with local laws, such as the state’s statute of frauds

Answer 6

unenforceable contract

Question 7

There are five additional essential elements to a valid real estate contract including it being in writing. These are:

Answer 7

There are five additional essential elements to a valid real estate contract. These are:

Legally competent parties
Offer and acceptance
Consent
Legal purpose
Consideration

Question 8

The giving of something of value, which can include the agreement to not do something. Consideration is a required element of a binding contract.

Ex. Carly is a buyer and Wade is a seller. Carly gives Wade earnest money and a promise to purchase his property. This is her__________. Wade’s consideration to Carly is his agreement to sell his property.

Answer 8

consideration

Question 9

what act gives electronic signatures, records, and contracts the same legal recognition as paper documents and handwritten signatures. The National Conference of Commissioners on Uniform State Laws (NCCUSL) created the UETA to standardize state laws on electronic transactions and provide clear rules for their use.

Answer 9

The Uniform Electronic Transactions Act (UETA

Question 10

The discharging (ending) of a contract through the full completion of all terms

Answer 10

performance of a contract

Question 11

When a new party to a contract agrees to satisfy the former party’s obligations. Unless there is a novation (a new contract) the original parties remain liable for the contract terms.

Ex. Ty decided to take an African Safari in the middle of his transaction. His brother agreed to have the contract assigned to him. However, Ty remains responsible unless a new contract is drawn up, naming his brother as the contracted party.

Answer 11

assignment (contracts)

Question 12

The substitution of a new contract for a prior contract, or a new party for an old party

Answer 12

novation

Question 13

To take back, remove or annul

Answer 13

rescission

Question 14

A lease that ends on a specific date, like December 31

Answer 14

Estate for years

Question 15

A lease that ends on December 31, but will be automatically renewed for another year

Answer 15

Periodic estate

Question 16

A lease without an established time period

Answer 16

Estate at will

Question 17

A holdover tenant (someone who didn’t leave when the lease expired) has this kind of possession

Answer 17

Estate at sufferance

Question 18

The contract that allows a tenant to live on the property

Answer 18

lease

Question 19

A right of possession for a limited period of time

Answer 19

Leasehold estate

Question 20

Illegal eviction in which the landlord has taken matters into his own hands and evicts the tenant without using legal procedures.

Answer 20

Self-help eviction

Question 21

An agreement for a new occupant to live in the premises and pay rent to the former tenant, who pays the landlord.
Requires landlord’s written permission; doesn’t relieve the former tenant from liability.

Answer 21

Sublease

Question 22

A situation in which the tenant is prohibited from quiet enjoyment of the premises and vacates.
In such cases, the tenant is evicted for all practical purposes because enjoyment of the premises is not available.

Answer 22

Constructive eviction

Question 23

A tenant’s right to enjoy the property without being dispossessed or trespassed upon.

Answer 23

Quiet enjoyment

Question 24

Because leases are contracts, the same laws governing other contracts apply to creating a valid lease. These include:

Answer 24

Offer
Acceptance
Legal capacity
Legal purpose
Consideration
Mutual assent

Question 25

Because leases are contracts, the same laws governing other contracts apply to creating a valid lease. true or false

Answer 25

true

Question 26

Leases establish the covenants (or promises) between the parties. Leases must include the following contractual provisions:

Answer 26

The capacity to contract A description of the premises. A clear statement of the “term” or length of the lease. . Specification of rent and how it is to be paid (consideration). the right of first refusal Improvements are not required. Contracts must be signed by all parties. Long-term leases must be in writing. Use provisions must be included.

Question 27

What does “capacity to contract” in a lease refer to?

Answer 27

The legal requirement that anyone who signs a lease must be competent enough to do so (e.g., sane and of legal age)

Question 28

Some residential lease agreements give tenants the option to purchase the property before that leased property can be sold to someone else. This is known as _______.

Answer 28

Right of first refusal

Question 29

What are the three primary types of commercial property leases?

Answer 29

gross, net, and percentage

Question 30

The landlord pays all expenses related to the property.

Answer 30

Gross lease

Question 31

The tenant pays some or all expenses separately.

Answer 31

net lease

Question 32

The tenant pays a base rent plus a percentage of its gross sales.

Answer 32

percentage lease

Question 33

With which type of lease will you hear the term "natural break-even point"?

Answer 33

Percentage lease

Question 34

, a percentage lease is more commonly used in retail properties, such as shopping centers and malls. What's a typical lease for a multi-tenant industrial building?

Answer 34

modified gross

Question 35

This option is often used by prospective purchasers who can’t purchase immediately but intend to soon, and would like to buy the property they're renting.

Answer 35

Lease with option to buy

Question 36

With this option, the holder can decide when and whether to exercise the right to the property.

Answer 36

Lease with option to buy

Question 37

With this option, the holder must wait until an event occurs (another offer is made on the property by a third party) and then must decide whether to exercise the option, or let the property go.

Answer 37

Right of first refusal

Question 38

In an option contract, only the seller is bound by the contract until the buyer decides to buy, making it a one-sided (_________) contract.

Answer 38

unilateral

Question 39

Common Uses of Option Contracts include what

Answer 39

Lease Option: A renter (lessee) has the right to buy the home at the end of the lease. This gives them time to save money or get financing. Investment & Development: Investors buy an option on land in a good location. They find investors or developers who will pay more, then buy the land and sell it at a profit. Due Diligence: Buyers use option contracts to check if the property suits their needs before committing to a full purchase.

Question 40

Can you define an option contract?

Answer 40

An offer to purchase a specific piece of real estate but without the obligation to buy it

Question 41

a option contract must contain all the terms and provisions required by law for a valid contract which are what

Answer 41

To be enforceable, there must be consideration It must state how long the option period It must comply with the statute of frauds, which means it must be: Written Signed by the optionor must clearly state any other terms or conditions that apply to the optionee's exercise of the option to purchase the property.

Question 42

A distressed property is property that’s in

Answer 42

foreclosure, is a short sale, or has been repossessed by the bank and is now a real estate owned (REO) property.

Question 43

_______ land is land that has no structures built upon it, but may have essential services available.

Answer 43

vacant

Question 44

_________ land is raw land—land that’s not been developed and is missing essential services that would expand its use beyond natural beauty and livestock grazing.

Answer 44

unimproved land

Question 45

Keira calls her favorite title representative and orders a trio for the property. What three items will she receive?

Answer 45

Property profile deed Assessor map

Question 46

What are three reasons someone might ask whether the owners have recently refinanced?

Answer 46

To determine the seller’s total loan balance To find out the appraised value To see if funds were used for property improvements

Question 47

what are the five characteristics unique to the real estate market.

Answer 47

Immobility Uniqueness Indestructibility slow to respond to supply changes Highly Influenced by Governmental Policy

Question 48

what is the order of importance for comparable properties

Answer 48

location, sales date size number of bedroom/baths

Question 49

a hot market is also known as a sellers market a cold market is also known as a what

Answer 49

buyers market

Question 50

Which of these describes the method for determining the indicated value of a subject property when a licensee performs a market analysis?

Answer 50

Sales price of comparable ± adjustments

Question 51

when comparing a subject property to a comparable what property are additions and subtractions done to

Answer 51

the comparable

Question 52

Four significant factors influence value. These are easy to remember because their initials spell DUST:

Answer 52

Demand Utility Scarcity Transferability

Question 53

To be able to make valid computations of adjustments, the elements of comparison must be applied in this order:

Answer 53

Financing terms and cash equivalency: Conditions of sale Market conditions Location Physical characteristics

Question 54

The cost approach is best and most often used in non-income-producing, unique properties, or special-purpose properties, such as in these circumstances:

Answer 54

-New construction of both residential and commercial property (that don't have comparable sales data available) -Unique properties, such as highly energy-efficient houses, residential acreage with excess land, historic houses, and high-dollar houses with many amenities -Special-purpose commercial uses, such as hospitals, some manufacturing plants, hotels, schools, houses of worship, and other single-purpose properties

Question 55

Reflects the cost to build a functionally equivalent improvement

Answer 55

Replacement cost

Question 56

Cost to build an exact replica of the subject with the same materials and deficiencies

Answer 56

Reproduction cost

Question 57

a metric used to quickly estimate the value of a rental property by dividing its sale price by its annual gross rental income. A lower GRM generally suggests a more attractive investment opportunity, as it indicates a lower price relative to the rental income.

Answer 57

gross rent multiplier

Question 58

The economic principle of ______ says that when there are two houses in the same neighborhood with the same size, appeal, and utility, the lower-priced one will tend to sell first.

Answer 58

substitution