Day 5 RE NJ Exam Studying

What are the 5 required elements of a listing agreement?

Names/addresses of seller and broker, property description, terms of sale, duration of employment, commission amount.

What is an exclusive agency listing?

One broker has exclusive right to sell, but seller retains right to sell themselves without paying commission.

What is an exclusive right to sell listing?

One broker has exclusive right to sell AND broker gets commission no matter who sells it, even if seller finds their own buyer.

What is an open listing?

Multiple brokers can list simultaneously. Only the broker who produces the buyer gets commission. Seller can sell themselves without commission.

Why do brokers prefer exclusive right to sell listings?

Because it guarantees commission. Broker is assured payment for effort, incentivizing aggressive marketing.

What must a purchase/offer agreement include?

Definite terms (price, property description, closing date), contingencies, specific period offer is valid, must be communicated to offeree.

When does an offer become a binding contract?

When the offeree accepts all terms exactly as stated by the offeror.

Can an offer be withdrawn?

Yes, anytime before acceptance. Once accepted, it becomes binding and cannot be withdrawn.

What happens to the original offer when a counteroffer is made?

The original offer is cancelled. The counteroffer is a new offer that the original offeror can accept, reject, or counter.

What is a contingency in a purchase contract?

A condition that must be satisfied for the contract to be binding. If the condition fails, the contract is void.

What is a financing contingency?

"Contingent upon buyer obtaining financing." If buyer cannot get a mortgage, the condition fails and buyer can walk away without penalty.

What is an inspection contingency?

"Contingent upon buyer having home inspection." If inspection reveals issues, buyer can renegotiate, request repairs, or walk away.

What does "time is of the essence" mean in a contract?

The dates stated in the contract are mandatory and cannot be extended. Must close on exact date or risk breach of contract.

What must a lease agreement include?

Specific realty being used, definite period of tenancy, consideration (rent amount), rights and obligations of landlord and tenant.

What is a lease-to-purchase (rent-to-own) agreement?

A lease combined with an option to purchase the property within a specified time period (usually 3 years or less) at a pre-agreed price.

What is an option in real estate?

A unilateral contract giving one party the right to purchase or lease a property at specified terms within a specified time period, for consideration.

In an option, who controls whether to buy or lease: the optionor or optionee?

The optionee (buyer/renter) controls. They can choose to exercise (buy) or not exercise (walk away and lose option fee).

What is a first right of refusal?

A right to have first opportunity to purchase/lease a property when the owner has a bona-fide offer from a third party.

How does first right of refusal differ from an option?

Option: buyer decides anytime during the period. First right of refusal: triggered only when owner has a real third-party offer.

What is breach of contract?

When a party fails to perform according to the contract terms without legal cause or excuse.

What is rescission as a remedy for breach?

Voiding the contract and going back to status quo (as if nothing happened). Buyer gets earnest money back, both parties released.

What is compensatory damages in a breach?

Monetary damages equal to the loss of bargain (difference between contract price and market value at time of breach).

How is compensatory damages calculated when seller breaches?

Market Value at time of breach - Contract Price = Damages. Buyer gets the difference.

How is compensatory damages calculated when buyer breaches?

Contract Price - Market Value at time of breach = Damages. Seller gets the difference.

What is specific performance as a remedy?

Court order forcing the contract to be performed exactly as written. Seller forced to sell, or buyer forced to buy.

What is forfeiture of earnest money deposit?

Seller keeps the earnest money (down payment) as compensation when buyer breaches without valid reason.

What is liquidated damages in a contract?

A pre-agreed amount in the contract that represents damages if the other party breaches, saving need for lawsuit.

What is an acceleration clause?

Upon default (especially non-payment), the lender can call the entire loan balance due immediately.

What is an alienation clause (due-on-sale clause)?

Upon sale/transfer of property, the entire mortgage balance must be paid in full. Prevents assumption of mortgage.

What is a defeasance clause?

Automatically releases the lender's mortgage lien once the mortgage has been fully paid off.

What is a subordination clause?

Lender agrees to allow a subsequently acquired mortgage to have priority over the existing mortgage.

Why would a developer request a subordination clause?

To allow construction lender to have first position (priority) ahead of the original land mortgage, enabling construction financing.

Can a buyer rescind a contract after inspection finds major defects?

Yes, if there is an inspection contingency. Buyer can rescind, renegotiate, request repairs, or walk away.

What makes a listing agreement unenforceable?

Missing any of the 5 required elements: names/addresses, property description, terms, duration, or commission.

In an exclusive agency listing, what right does the seller retain?

Right to sell the property themselves without paying commission to the broker.

In an exclusive right to sell listing, can the seller sell it themselves without paying commission?

No. Broker gets commission no matter who sells the property, even if the seller finds their own buyer.