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Texas National Exam Test Prep > Real Estate Contracts > Flashcards

Real Estate Contracts Flashcards

1
Q

True or False: Contracts can be Express or Implied.

A

True

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2
Q

What is an Express contract?

A

Written or Stated

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3
Q

What type of contract is made by actions or evidence and is neither written nor discussed just simply performed?

A

Implied Contract

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4
Q

Contracts can also be _______ or ________.

A

Unilateral or Bilateral

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5
Q

What type of contract binds only one party?

A

Unilateral Contract

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6
Q

What type of contract allows the right to purchase property within a definite time period at a definite price where There is NO obligation to the purchaser TO BUY, but the seller is obligated to sell?

A

Option Contact

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7
Q

When an option is exercised, the unilateral contract becomes ___________.

A

Bilateral

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8
Q

“What is the process for a buyer to extend their option?”

A

The buyer would need to pay an added fee

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9
Q

What is an exchange of promises which binds both parties in a contract?

A

Bilateral Contract

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10
Q

What must a contract have to be valid and enforceable?

A

(COLIC)
Competent Parties
Offer and Acceptance
Legal Purpose
In Writing
Consideration

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11
Q

Explain Competent.

A

sane, sober, and consenting adults

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12
Q

Legal purpose is also called

A

the “Legality” of the object

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13
Q

What states that All real estate contracts should be In Writing in order to be enforceable by law?

A

Statute of Frauds

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14
Q

What is something of value (a payment or a promise) should be given in exchange for what is being offered?

A

Consideration

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15
Q

True or false: This is considered earnest money

A

False it is not considered earnest money

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16
Q

Without a contract being in writing, the contract would be ________ but NOT __________.

A

Valid; enforceable

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17
Q

What is an executed contract?

A

a contract that has been performed fully – there is nothing left to do – a contract that is closed and funded

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18
Q

What is a contract that is signed but has not yet been carried out?

A

Executory Contract

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19
Q

True or false: A Valid Contract does NOT have to be in writng

A

True

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20
Q

The _________ or ___________Contract has no binding effect on the parties who made it

A

Void ; Invalid

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21
Q

If your client is documented insane and signs a contract it is considered?

A

Void

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22
Q

When there is a contract, one party has the right to withdraw or rescind, such as a minor, someone who signed under duress it is considered?

A

Voidable

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23
Q

What contract violates the Statute of Frauds and will NOT be enforced by the courts (verbal real estate agreement)?

A

Unenforceable Contract

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24
Q

What are the different ways a contract may be Terminated?

A

bankruptcy or foreclosure, new laws making it illegal, or destruction of the property

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25
Q

If one of the parties to a contract dies, the contract will be binding on the ________.

A

Heirs

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26
Q

What refers to when the parties to a contract agree to cancel the contract, resulting in its termination?

A

Mutual Recission

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27
Q

What is the non-performance of a duty under a contract?

A

Default

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28
Q

When one of the parties to the contract is in default, is the agreement considered?

A

breached

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29
Q

What monetary damages are set out in the contract, and is it NOT necessary to go to court?

A

Liquidated Damages

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30
Q

What are Punitive Damages?

A

Damages that punish the defaulting party in addition to the actual damages are awarded through the courts when the action is especially harmful.

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31
Q

What are Compensatory Damages?

A

set to cover the actual injury or economic loss.

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32
Q

What are the Seller’s options if the buyer defaults ?

A
  • Accept Damages
  • Suit for Specific Performance
  • Sue for Money Damages
  • Decide on Mutual Rescission
33
Q

If a seller decides to keep the buyer’s deposit if they default in their contract, then the seller has?

A

Accepted Damages

34
Q

What does it mean when the seller holds the other party to their duties by asking the courts to force the buyer to buy the property?

A

Suit for Specific Performance

35
Q

True or False: The seller can seek damages for money that are both actual/compensatory and punitive.

A

True

36
Q

What releases a buyer from all obligations under a contract?

A

Mutual Rescission

37
Q

What are the Buyer’s options if the seller defaults?

A

-Decide on Mutual Rescission
-Suit for Specific Performance
-Sue for Money Damages

38
Q

What states that all contracts that relate to the transfer of any interest in real estate must be in writing to be Enforceable?

A

Statute of Frauds

39
Q

A verbal agreement is _________ and ___________ be enforced by the courts.

A

voluntary; Will Not

40
Q

What are the only exceptions to the Statute of Frauds Law, which requires contracts to be in writing to be enforcable?

A

A lease for one year or less is the exception

41
Q

A clause in a contract that allows each party to hold the other to strict performance by the date specified is called?

A

Time is of the Essence

42
Q

In a contract with a time is of the essence clause, if one party cannot perform exactly on time, the contract becomes __________ at the option of the other party

A

Voidable

43
Q

True or false: the Time is of the Essence clause is NOT a requirement of a valid contract. It is a choice.

A

true

44
Q

What is the difference between an Assignment and Novation?

A

Assignment- A new party will step in and replace the existing party. The agreement does NOT change
Novation- new contract is substituted or an existing contract

45
Q

What is open negotiations between the buyer and the seller?

A

An Offer

46
Q

What might also an offer be called?

A

a purchase agreement

47
Q

What are 3 key things to know about an offer ?

A
  • it can be withdrawn at any time
  • All offers must be presented
  • accepted, rejected, or countered
48
Q

What is a rejection of the offer and the presentation of a new offer?

A

Counteroffer

49
Q

What is the primary purpose of a counter offer?

A

Continue negotiations and work towards an agreement

50
Q

What is not necessary in a sales contract, is the consideration and the amount of money is determined by the parties’ agreement?

A

Earnest Money

51
Q

If a buyer defaults earnest money will be the ____________ ______________

A

Liquidated Damages

52
Q

What is A condition in a contract that has not yet been met, and if it can’t be met, the contract will be terminated?

A

A Contingency

53
Q

True or False: If the parties agree to cancel or a contingency cannot be met, the Cancellation (or Mutual Rescission) should be done by written agreement.

A

True

54
Q

The offer becomes a contract when it is ___________ by both parties and ______________ is communicated.

A

Accepted, Acceptance

55
Q

What is A major advantage to the owners of investment properties?

A

ability to depreciate their investment on their income tax return

56
Q

_________ can never be depreciated on income-producing property. Only ___________ can be depreciated.

A

Land, Improvements

57
Q

Which method of depreciation allows for equal amounts of depreciation every year during the economic life, which is set by the IRS?

A

Straight-Line Method

58
Q

What is the period of profitable use during which improvements contribute to value or are being depreciated?

A

Economic Life

59
Q

What does 1031 Tax Deferred Exchanges mean?

A

An investor can trade a business or investment property for one or more other investment properties

60
Q

Additional capital or property included in a transaction to even out the exchange is called the ___________.

A

Boot

61
Q

True or False: The boot is fully taxable at the time of the 1031.

A

True

62
Q

What is considered the single biggest incentive to investing in real estate?

A

Th 1031 exchange

63
Q

What are 3 key things to know about the 1031 exchange?

A
  • investor must own a property for 1 year before 1031
    -taxes on capital gains are deferred
    -only thing taxed is the boot
64
Q

An individual can have a tax-free capital gain on the sale of real property up to ___________ and __________ for a couple if the property was the individual’s principal residence for at least two of the last five years. A taxpayer can do this an ___________ number of times.

A

$250,000, $500,000, Unlimited

65
Q

How can an owner of a single-family home depreciate their property?

A

if it is used as a rental property

66
Q

WHat are two different types of seller financing?

A

Installment Sale and an Installment Contract

67
Q

When a seller saves on capital gains tax by spreading the gain over a period of more than one tax year and allows the Title to transfer to the buyer at closing this is what type of seller financing?

A

Installment Sale

68
Q

What type of contract is also considered a “contract for Deed” ?

A

Installment Contract

69
Q

When would an Installment contract be used ?

A

when a seller is working with a buyer who typically cannot qualify for traditional financing

70
Q

True or False: In an installment contract the buyer will not receive the title until the final loan payment is made

A

True

71
Q

WHat does the IRS regulate?

A

regulates accounting for all industries in the US, including real estate

72
Q

Your client is an investor who would like to have the right to purchase a commercial tract for $5 million within the next 6 months. What type of contract should he enter into with the seller?

A

An Option Contract

73
Q

A seller comes into the office to sign a contract. The seller is stumbling and smells of alcohol. How do you proceed?

A

Send the seller home in a cab and tell then to return at another time

74
Q

A signed sales contract that has not yet gone to closing is:

A

Executory

75
Q

An underage college student signs a lease, then discloses his age to the landlord. What is true?

A

The Contract is Voidable at the minor’s option

76
Q

A buyer and seller have negotiated a contract on the seller’s property with a closing set for June 14th; time is of the essence. On June 12th, the listing agent calls the buyer’s agent and tells him the seller cannot close on the 14th. The seller can close on the 16th. At this time, what is true?

A

The Contract is Voidable by the buyer

77
Q

When does an offer become a contract?

A

When it is accepted and Acceptance is communicated

78
Q
A

Texas National Exam Test Prep (5 decks)

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