Session 5: Real Estate Contracts & Advertising Regulations Flashcards
(120 cards)
1
Q
Real Estate Contracts
A
A real estate contract is a legally enforceable agreement between competent parties who agree to perform or refrain from performing certain acts for consideration
2
Q
Competent parties
A
Must be viewed by law as being capable of making a binding promise
3
Q
What makes you a competent party?
A
Over 16
legally emancipated by the court
4
Q
Meeting of the minds
A
There must be an offer by the offeror and acceptance by the offeree.
5
Q
Does the acceptance need to be a mirror image of the offer?
A
Yes
6
Q
What if a client wants to change an offer?
A
Write a counteroffer
7
Q
Words that end in “or” describe which party
A
The giving party
8
Q
Words that end in “ee” describe which party
A
The accepting/receiving party
9
Q
Consideration
A
Something of legal value that two parties agree to
10
Q
Would property transferred as a gift be a consideration? What is this called?
A
Yes - love and affection
11
Q
Bilateral Contract
A
Both parties agree to do something
12
Q
What is an example of a bilateral contract?
A
Residential re-sale contract
13
Q
Unilateral Contract
A
Only one party is bound by the agreement
14
Q
What is an example of a unilateral contract?
A
Option contract
15
Q
If there is a contract dispute between the boiler-plate language or the written word in a contract, which one takes precedence?
A
Written word
16
Q
Express contract
A
Can be in writing or verbal
17
Q
Is a verbal contract legally enforceable?
A
No, only written contracts
18
Q
Which verbal express contracts are legally enforceable?
A
Leases of a year or less
Broker to broker agreements
19
Q
Implied Contracts
A
Created by the parties ACTIONS and are not expressed
20
Q
Whose actions does it take to create an implied contract?
A
Both parties
21
Q
Statute of Frauds
A
All real estate contracts need to be in writing to be enforceable
22
Q
Executory Contract
A
Promises have been made but have not been fulfilled yet
23
Q
What is an example of an executory contract?
A
When a buyer prepares an offer and the seller accepts the offer
24
Q
Executed Contract
A
A contract that has been completed. Close of escrow.
25
When does an executory contract become an executed contract?
after the closing of escrow
26
Counteroffer
A new offer that negates the original offer
27
Does a counter negate the original offer?
Yes
28
What is a valid contract?
Contains all required elements and is binding on all parties.
29
What is a voidable contract?
Can be rescinded by one of the parties but is not in and of itself void
30
Is a contract with a minor voidable?
Yes
31
Is a contract under duress or coercion voidable?
Yes
32
Is a contract under fraud voidable?
Yes
33
Is a contract for a property in AZ without ingress and egress voidable?
Yes
34
Void
Has no legal or binding effect because it is missing one or more of the requirements for a valid contract
35
Unenforceable
The contract appears to be valid but is not legally enforceable by either party
36
Is a contract expressed verbally enforceable by either party?
No
37
Option Contract
Only one party is required to perform to the terms of the contract
38
If Joe gives Sally the option to buy his house in the future does Sally have to buy it?
No
39
If Joe gives Sally the option to buy his house in the future does Joe have to sell his house when the time comes?
Yes
40
Right of first refusal
The right of a person to have the first opportunity to either purchase or lease real property
41
Does the holder of a right of first refusal have the right to buy the property at any time?
No, they have to wait until the seller actually offers the property for sale or entertains an offer to purchase from a third party
42
Escalation Clause
Raises an offer to make sure the buyer is the highest bidder
43
Equitable title
When an offer is accepted by the seller, the buyer is entitled to the equity on the property
44
Legal title
Once the deed is delivered and accepted by the county recorder
45
Is the equitable title negotiable?
Yes
46
Trust account
a neutral account where a broker, attorney or property manager will hold money that belongs to others
47
Commingling
Mixing trust money with operating funds
48
Conversion
Spending trust money
49
Which is legal? Commingling or Conversion?
Neither, both are illegal
50
Addendum
An additional term or agreement that is added to the existing contract and needs to be dated and signed by all parties to the contract
51
Amendment
Changes existing terms that are already agreed to by the parties and needs to be dated and signed by all parties to the contract
52
Compensation Sharing
The broker must disclose to all parties in a transaction, in writing before closing, the name of each employing broker who represents a party to the transaction and who will receive compensation from the transaction
53
Do you have to disclose a referral fee on a transaction?
No
54
Property Negotiations
Negotiations shall be conducted exclusively through the principal's broker or the broker's representative
55
Can the principal wave the right for negotiations by the broker?
Yes as long as it's in writing
56
What happens if the principal can't locate a licensed representative of the broker for 24hrs during negotiations?
They can negotiate directly with the seller and without the broker
57
Does death cancel a purchase contract?
No
58
What would be a termination of contract due to impossibility of performance?
Bankruptcy or loss of financing
59
Can someone put in multiple offers?
Yes but they need to disclose using a multiple offer contract
60
Can a transaction coordinator live out of state?
Yes, but they need to have an in-state license.
61
Can a transaction coordinator work for multiple brokers?
No, they can only work for one brokerage.
62
Mutual rescission
the court finds both parties wrong & restores contract to original state
63
Specific Performance remedy
Court forces parts of the contract to be performed
64
Compensatory Damages
Court orders payment
65
Punitive Damages
Highest level of remedy
66
Liquidated damages
Earnest money
67
Arbitration
Non-judicial submission of a controversy to selected third parties for their determination in a manner provided by agreement or by law
68
Is arbitration binding?
Yes
69
Mediation
An alternative process of dispute resolution in which an independent third party works with two disputing parties to help them resolve their differences
70
is mediation binding?
No
71
Assignment
transferring legal rights from one party to another
72
Are contracts usually assignable?
Yes unless they say otherwise
73
Binder
Good faith agreement between the parties that includes all the terms that keep the agreement together until the final longer version of the contract is drafted
74
What other name is used for a binder?
Letter of intent
75
Nominee
a party who will be added to an existing contract or someone who is going to act on behalf of a party
76
Why would you use a nominee
Husband and wife are moving to new state but one has not arrived yet
77
Novation
The substitution of a new obligation for an old one or obligating a new party to an agreement and releasing the old party
78
In a novation are both parties on the hook?
No, it takes the first off the hook.
79
In assignment are both parties on the hook?
Yes
80
How long does the brokerage have to keep signed copies?
5 years
81
Contingency
a condition that must be met before entering into the terms of the contract
82
When do SPUDS need to be delivered?
3 days
83
When do home warranty claims need to be delivered?
5 days
84
Article 26 (XXVI)
Brokers can draft contracts, but can't charge for this service
85
How long do brokers have to keep rejected offers?
1 year
86
How many square feet are in an acre
43,560 sqft
87
In the typical real estate transaction, before a sales contract has been signed by the offeree, the earnest money belongs to the
Offeror
88
A clause in a sales contract that requires punctual performances is described as
Time is of the essence
89
A vendee is best described as one who
Buys or offers to buy
90
Under the statutes of fraud, all contracts for the sales of real estate must be
a. originated by a broker
b. on preprinted forms
c. in writing to be enforceable
d. accompanied by earnest money deposits
in writing to be enforceable
91
Mr. Sherwood received a net of $86,250 for the sale of his lot after the broker deducted 7% commission. What was the gross sales price of the lot?
100%-7% = 93%
| 86250 / 0.93 = $92,742
92
Buyer James and seller Lyndsie have agreed to mutual assent, this becomes indicated by
a. acknowledgemetn
b. recording
c. close of escrow
d. offer and acceptance
Offer and acceptance
93
The seller has died before the real estate transaction closed. The contract is considered to be
a. void
b. voidable
c. enforceable
d. executory
Enforceable
94
Kelly approaches Tom and says "I would like to buy your house and close escrow on May 18." Tom says "sure", and they agree on a price of $125,000. What kind of contract do they have?
a. unenforceable
b. void
c. expressed
d. there is no contract
Unenforceable
95
Which of the following is an essential requirement for a valid contract?
a. legal description
b. competent parties
c. time is of the essence
d. recording
Competent parties
96
When buying a home, the amount of the buyer's earnest money is determined by
The buyer and seller
97
Home sold for $125,000 which was 90% of the list price. What was the list price?
125000 / 0.9 = $138,889
98
In the typical purchase of a home, the offeror would most likely be the
a. trustee
b. mortgagee
c. lessee
d. mortgagor
Mortgagor
99
The transfer of rights under a contract without the release from obligation by the transferor is known as
Assignment
100
Which party would a unilateral contract be enforceable against?
a. optionee
b. optionor
c. lessor
d. trustee
Optionor, the one who gave the option
101
Based on the validity of a contract, which of the following agreements would be considered voidable?
a. signed by an attorney in fact
b. an oral agreement
c. a contract with a minor
d. an agreement for sale
A contract with a minor
102
When both parties to a purchase contract decide to mutually cancel, this is called
Rescission
103
A contract that has been agreed to by the actions of the parties is called
Implied
104
The purchase contract states that John will purchase the property if John's wife agrees to the sale by July 18. The wife's approval is a
Contingency
105
Angela was the salesperson for the buyer and earned $4,650 which represented 40% of her broker's commission. The total commission rate on the sale was 6%. What did the house sell for?
4650 / 0.4 = 11625
| 11625 / 0.06 = $193,750
106
The failure to meet an obligation in a real estate contract is best defined as
Breach
107
Rhonda has a very high interest in purchasing Olivia's home. Olivia has communicated to Rhonda that if she ever considers putting it on the market for sale that she will offer it to her first. This is an example of
Right of first refusal
108
The buyer and seller have a disagreement based on the terms of the contract. Rather than going to court, they agree to let a 3rd party make a binding decision after hearing all the facts. This is called
Arbitration
109
What law gives real estate licensees in AZ the right to draft contracts without charging for those services?
Article 26
110
In AZ the designated broker must review all contracts in how many days?
10 business days
111
In AZ, how many years are transaction records kept from completion of the transaction?
5 years
112
In Az, rejected offers are kept for how many years?
1 year
113
All of the following should be included in a purchase contract except:
a. Starting date
b. Closing date
c. Seller's signature
d. Commission split
Commission split
The commission goes into the employment agreement
114
A buyer purchases a property and at closing discovers that there is no access (no ingress or egress) to the property, what kind of contract do they have?
a. Voidable
b. Void
c. Enforceable
d. Unenforceable
Voidable
115
What is another name for a mortgagor?
Debtor
116
Marsha and Tim were recently married and they decided to purchase their first home. Tim is 21 and Marsha is 17. What is the status of the purchase contract?
Valid, because the minor is emancipated by marriage
117
A licensee who advertises property that is the subject of another person's real estate employment agreement shall display
The name of the listing broker
118
A real estate licensee must make an agency disclosure to prospective purchasers or tenants
a. before they are shown any properties
b. at an open house
c. at the close of escrow
d. before any purchase offers or leases are prepared
before any purchase offers of leases are prepared
119
Tom was a real estate agent in CA before moving to AZ. He decided not to obtain a real estate license in AZ. Lisa, his friend, asked Tom if he would help her write a contract on a house and offered him $500. Tom took the $500. What is this a violation of?
Article 26
120
Joyce wrote an offer to purchase Marty's home and he accepted the offer. However, Joyce was informed that she does not qualify for a loan. Based on the lender's decision both Marty and Joyce cancel the contract. This is known as
Recission
