Unit 11: Real Estate Contracts

A legally enforceable agreement under which two parties agree to do something for each other is called:

A) an escrow agreement.

B) a valid contract.

C) a legal promise.

D) an option agreement.

B) a valid contract.

A buyer approaches a seller and says, “I’d like to buy your house.” The seller says, “Sure,” and they agree on a price. What kind of contract is this?

A) Implied

B) Void

C) Unenforceable

D) None of these

C) Unenforceable

A contract is said to be bilateral if:

A) one of the parties is a minor.

B) the contract has yet to be fully performed.

C) only one party to the agreement is bound to act.

D) all parties to the contract are bound to act.

D) all parties to the contract are bound to act.

During the period of time after a real estate sales contract is signed but before title actually passes, the status of the contract is:

A) voidable.

B) unilateral.

C) implied.

D) executory.

D) executory.

A man and a woman sign a contract under which the man will convey his property to the woman. The man changes his mind, and the woman sues for specific performance. What is the woman seeking in this lawsuit?

A) Conveyance of the property

B) Money damages

C) New contract

D) Deficiency judgment

A) Conveyance of the property

In a standard sales contract, several words were crossed out and others were inserted. To eliminate future controversy as to whether the changes were made before or after the contract was signed, the usual procedure is to:

A) write a letter to each party listing the changes.

B) have each party write a letter to the other approving the changes.

C) redraw the entire contract.

D) have both parties initial or sign in the margin, along with date, near each change.

D) have both parties initial or sign in the margin, along with date, near each change.

A buyer makes an offer on a seller’s house, and the seller accepts. Both parties sign the sales contract. At this point, the buyer has what type of title to the property?

A) Voidable

B) Equitable

C) Escrow

D) Contract

B) Equitable

The sales contract says a man will purchase only if his wife approves the sale by the following Saturday. His wife’s approval is a:

A) reservation.

B) warranty.

C) consideration.

D) contingency.

D) contingency.

Which of these statements is TRUE with respect to an earnest money deposit?

A) It is generally provided with the closing or settlement instructions.

B) It is evidence of the buyer’s intention to carry out the terms of the contract in good faith.

C) It may never exceed $25,000.

D) It is always required if the contract provides that “time is of the essence.”

B) It is evidence of the buyer’s intention to carry out the terms of the contract in good faith.

A man and a woman enter into a real estate sales contract. Under the contract’s terms, the man will pay the woman $500 a month for 10 years. The woman will continue to hold legal title to the property. The man will live on the property and pay all real estate taxes, insurance premiums, and regular upkeep costs. What kind of contract do these two people have?

A) Land or installment contract

B) Option contract

C) Contract for mortgage

D) Unilateral contract

A) Land or installment contract

Under the statute of frauds, all contracts for the sale of real estate must be:

A) originated by a real estate broker.

B) on preprinted forms.

C) in writing to be enforceable.

D) accompanied by earnest money deposits.

C) in writing to be enforceable.

A buyer makes an offer in writing to purchase a house for $220,000, including its draperies, with the offer set to expire on Saturday at noon. The seller replies in writing on Thursday, accepting the $220,000 offer, but excluding the draperies. On Friday while the buyer considers this counteroffer, the seller decides to accept the original offer, draperies included, and states that in writing. At this point, which of these statements is TRUE?

A) The buyer is legally bound to buy the house; although the buyer has the right to insist that the draperies be included.

B) The buyer must buy the house and is not entitled to the draperies.

C) The buyer is not bound to buy.

D) The buyer must buy the house but may deduct the value of the draperies from the $220,000.

C) The buyer is not bound to buy.

A broker has found a buyer for a seller’s home. The buyer has indicated in writing his willingness to buy the property for $1,000 less than the asking price and has deposited $5,000 in earnest money with the broker. The seller is out of town for the weekend, and the broker has been unable to inform him of the signed document. At this point, the buyer has signed:

A) a voidable contract.

B) an executory agreement.

C) an implied contract.

D) an offer.

D) an offer.

A buyer and a seller agree to the purchase of a house for $200,000. The contract states that closing will occur on April 30, 2014, and contains a clause stating that “time is of the essence.” Which of these statements is TRUE?

A) If the specified April 30, 2014, closing date passes and no closing takes place, the contract may have been breached.

B) The closing must occur within three business days of execution of the contract.

C) A “time is of the essence” clause is not binding on either party.

D) The closing date cannot be stated as a particular calendar date.

A) If the specified April 30, 2014, closing date passes and no closing takes place, the contract may have been breached.

A buyer signs a contract allowing her to purchase the property for $230,000 anytime in the next three months. The buyer pays the owner $5,000 at the time the contract is signed. Which of these BEST describes this contract?

A) Contingency

B) Option

C) Installment

D) Sales

B) Option

In preparing a sales contract, an Illinois licensee may:

A) fill in factual and business details in the blank spaces of a customary preprinted form.

B) draft riders to alter a preprinted contract to fit the transaction.

C) fill out and sign an offer to purchase for the customer.

D) advise a buyer or a seller of the legal significance of certain parts of the contract.

A) fill in factual and business details in the blank spaces of a customary preprinted form.

On Tuesday, a sponsoring broker received $1,750 in earnest money from a buyer. The seller accepted the offer on Thursday. Where and when must the sponsoring broker deposit the buyer’s money?

A) In the sponsoring broker’s personal checking account by Wednesday

B) In a special trust account no later than midnight on Thursday

C) In a special non-interest-bearing trust account by the end of business on Friday

D) In a special non-interest-bearing trust account by Wednesday

C) In a special non-interest-bearing trust account by the end of business on Friday

An Illinois broker does NOT need written consent of both parties to a transaction to:

A) charge a fee for her services.

B) disburse interest accrued on an earnest money account.

C) fill in the blanks on a sales offer as directed by the buyer.

D) make changes in the terms of a signed sales contract.

A) charge a fee for her services.

The unauthorized practice of law was dealt with in which Illinois Supreme Court case?

A) Illinois State Bar Association v. Illinois Board of REALTORS

B) Attorney Registration and Disciplinary Commission v. Illinois State Department of Professional Regulation

C) Quinlan Associates, Inc. v. Illinois Real Estate Commission

D) Chicago Bar Association, et al. v. Quinlan and Tyson, Inc.

D) Chicago Bar Association, et al. v. Quinlan and Tyson, Inc.

Which provision could legally be placed in an Illinois installment contract?

A) “Seller will retain legal title.”

B) “Buyer may not record this contract.”

C) “Recording does not constitute notice.”

D) “Buyer will forfeit $1,000 for recording."

A) “Seller will retain legal title.”