California Real Estate Broker Exam — All Questions

An in-home caregiver persuades a frail, dependent client to sign a sale contract on terms far below market value. The resulting contract is most likely:

• a.Valid, since the client signed it voluntarily
• b.Void, because a caregiver may never buy property
• c.Voidable by the client for undue influence✓
• d.Unenforceable only if the price was fraudulent

Undue influence arises when someone in a position of trust or dominance overcomes the free will of a dependent person, and the resulting contract is voidable by the influenced party. The client had legal capacity, so the agreement is not void; capacity and free assent are separate requirements. Nothing makes a caregiver categorically unable to buy, though the relationship shifts the burden of showing the bargain was fair. Calling the signature voluntary misses the point, since dependence rather than force is what taints assent. A below-market price by itself is not fraud, so limiting relief to fraudulent pricing looks at the wrong defect.

An affiliated licensee tells a buyer a roof is five years old, having never checked, and it turns out to be fifteen. The licensee did not know the truth. This is:

• a.Actual fraud, because the statement was false
• b.Negligent misrepresentation of a material fact✓
• c.Puffing, since roof age is only an opinion
• d.A latent defect that only the seller must disclose

Stating a specific fact without knowing whether it is true, and being wrong, is negligent misrepresentation; the licensee had a duty either to verify the age or to say it was unverified. Actual fraud requires knowledge of the falsity or a reckless disregard for the truth intended to deceive, which these facts do not show. Roof age is a verifiable fact, not an opinion, so puffing does not apply; puffing covers non-factual sales talk. A latent defect is a hidden physical problem the seller knows of, whereas the issue here is the licensee's own unverified statement, and the supervising broker shares that exposure.

A party waits so long to sue on a properly formed written contract that the applicable limitations period has run out. The contract is now best described as:

• a.Valid but unenforceable now that the limitations period ran✓
• b.Void, treated as though it had never been formed at all
• c.Voidable at the defending party's later election
• d.Still fully enforceable in any civil lawsuit filed later

Once the limitations period runs, the contract remains valid but a court will not enforce it if the defending party raises the defense. That is the textbook meaning of unenforceable. Void would mean the agreement never had legal effect, which is untrue of a properly formed contract. Voidable means a party may elect to cancel because of a formation defect such as minority, duress, or undue influence, not because time passed. Saying it stays fully enforceable ignores the defense entirely. Limitations periods are set by each state, so brokers track claim deadlines through counsel rather than assuming any single national figure.

A signed purchase agreement obligates the seller to convey the property and the buyer to pay the price. In contract classification, this agreement is:

• a.Bilateral, since each party gives a promise✓
• b.Unilateral, because performance occurs at closing
• c.An implied contract created by the parties' conduct
• d.Unilateral, since only the buyer promises to pay

A purchase agreement is bilateral: a promise is exchanged for a promise, the seller promising to convey and the buyer promising to pay. A unilateral contract is a promise exchanged for an act, such as an option, where only the optionor is bound until the other side performs. Saying only the buyer promises misreads the seller's obligation, and the fact that performance happens later at closing affects whether the contract is executory, not whether it is bilateral. An implied contract arises from conduct rather than words, but here the parties wrote and signed express promises.

A purchase contract has been signed by both parties, but closing has not occurred and neither side has yet fully performed. The contract is properly called:

• a.Executed, because both parties have signed it
• b.Void until the deed is actually delivered
• c.Executory, because performance is still owed✓
• d.Unilateral, since only the buyer still performs

A contract that is signed but not yet fully performed is executory, because performance remains owed on both sides. It becomes executed when both parties have completely performed, which in a sale generally happens at closing when the deed and the funds change hands. Signatures alone do not make a contract executed, a confusion caused by the everyday phrase executed a document. The agreement is not void before the deed is delivered; it binds both parties immediately. And it remains bilateral, since each party made a promise the other can enforce.

A tenant whose written lease expired keeps paying monthly rent and the landlord keeps accepting it, with nothing said. The continuing arrangement is best classified as:

• a.An implied contract created by the parties' conduct✓
• b.An express contract renewed by the parties on the original written terms
• c.A void arrangement with no legal effect
• d.An option the tenant may exercise later to renew the expired lease

Continuing to pay and accept rent after a written lease ends creates an implied contract, one formed by conduct rather than by spoken or written words; most states treat it as a periodic tenancy on the prior terms. It is not an express renewal, because neither party stated or wrote new terms. It is certainly not void, since both sides are giving and receiving value the law recognizes. And it is not an option, which would require a separate right supported by consideration. Managers should paper holdovers promptly to avoid later arguments about what the implied terms actually are.

A buyer's written offer says it remains open until Friday. On Wednesday, before the seller accepts, the buyer notifies the seller in writing that the offer is withdrawn. The result is:

• a.The offer stays open because Friday has not arrived
• b.The seller may still accept it before Friday ends
• c.The buyer owes the seller damages for withdrawing
• d.The offer is revoked and cannot be accepted✓

An offer may be revoked at any time before acceptance is communicated, even when it states a date it will remain open, unless the offeree paid consideration to hold it open, which would make it an option. Because the buyer communicated the withdrawal on Wednesday, nothing was left for the seller to accept on Thursday or Friday. The stated deadline caps how long the offer can survive; it does not obligate the offeror to leave it open. And a buyer who lawfully revokes owes no damages, because no contract ever came into existence.

An offer states that it expires at 5 p.m. Tuesday. The seller signs it at 9 a.m. Wednesday and returns it. The buyer no longer wants the property. What exists?

• a.An enforceable option supported by the offer
• b.A binding contract, since the seller signed
• c.A valid contract if the buyer takes possession
• d.A counteroffer the buyer may accept or reject✓

An offer terminates automatically when its stated time expires, so nothing remained for the seller to accept. The seller's late signature operates as a new offer, which the buyer is free to accept or reject. No binding contract arises merely because the seller signed, and taking possession would not resurrect an offer that had already lapsed. Nor is this an option, since an option requires separate consideration to hold the terms open for a period. Brokers should track offer expirations closely, because a lapsed offer bearing a signature invites disputes about whether a deal exists.

A buyer submits a written offer and dies that evening. The next morning the seller signs the offer, not knowing of the death. What is the status of the agreement?

• a.Binding on the buyer's estate exactly as signed
• b.No contract, since death terminated the offer first✓
• c.Voidable only by the estate's representative
• d.Valid, because the seller signed in good faith

Death or legal incapacity of the offeror terminates the offer by operation of law, even when the offeree has not learned of it. Because the acceptance came after the death, no contract formed and the estate is not bound. The seller's good faith and lack of knowledge do not change the rule, since the power of acceptance simply no longer existed. Nor is this a voidable contract the personal representative might affirm, because there is no contract to affirm. Contrast the situation after a contract has been formed: death then does not cancel it, and the estate must perform.

A seller signs a buyer's offer but locks it in a desk drawer and tells no one. Two days later the buyer withdraws the offer in writing. Which statement is correct?

• a.A contract formed the instant the seller signed the offer
• b.No contract formed without communicated acceptance✓
• c.The buyer's withdrawal is a breach of the agreement
• d.The seller may enforce the contract after telling the buyer

Acceptance is effective only when it is communicated to the offeror in a manner the offer permits. A signature kept secret in a drawer forms nothing, so the buyer's withdrawal before any communication was valid and no contract exists. Signing alone does not create the agreement, which is why the buyer's withdrawal cannot be a breach. Telling the buyer afterward comes too late, since the offer was already revoked. This is why offices require prompt delivery of signed documents and keep time-stamped records showing exactly when an acceptance was transmitted to the other side.

A buyer's written offer sets out price and terms but names no expiration date or time. The seller asks the listing broker how long she has to accept it.

• a.It is void, because an offer must always state a deadline
• b.It expires automatically at the close of the next business day
• c.It stays open for a reasonable time under the circumstances✓
• d.It stays open until the buyer cancels it in writing

An offer that names no deadline does not last forever. The power of acceptance ends after a reasonable time, measured by the type of property, market conditions, and how the parties have been communicating, and it ends sooner if the buyer revokes or the seller rejects. Silence about timing does not make the offer void, since a time for acceptance is not an essential term of the agreement. Waiting for a written cancellation misreads the rule, because an offer can lapse on its own and a revocation only has to be communicated. Nothing fixes the cutoff at the next business day. Brokers avoid the whole argument by having every offer state an expiration date and time.

A seller rejects a buyer's offer outright, then reconsiders an hour later and signs the same offer form. The buyer refuses to proceed. What is the legal position?

• a.The seller's signature revived the original offer
• b.The buyer is bound because nothing changed
• c.The contract is voidable at the seller's option
• d.Rejection ended the offer, so the signing is a new offer✓

A communicated rejection terminates the offer immediately, and the offeree cannot revive it by signing later. The seller's signature amounts to a new offer back to the buyer, who is free to walk away. The signature therefore revived nothing, and the buyer is not bound merely because the printed terms are unchanged. Describing the result as voidable at the seller's option is backwards, since there is no contract for the seller to cancel. This trap appears often in fast-moving multiple-offer situations, so brokers should document exactly when a rejection was communicated and by whom.

A seller sends signed counteroffers to two different buyers at the same time, neither containing a first-acceptance clause. Both buyers accept and deliver. The seller's exposure is:

• a.The seller may pick whichever buyer offers more
• b.Only the first counteroffer sent is enforceable
• c.Neither contract binds, since both cannot close
• d.Two binding contracts on the same property✓

Sending two signed counteroffers without a clause making acceptance subject to the seller's further approval, or limiting the deal to the first buyer who accepts, can bind the seller to two contracts on one property. That is the real exposure, and the seller will breach one of them. The order in which they were transmitted does not automatically make only the earlier one enforceable. The practical impossibility of closing both does not void either. And the seller cannot simply take the higher price once both have accepted. Brokers train agents to counter one buyer at a time.

A seller already has an accepted contract and wants to sign a second buyer's offer as a backup. What is the correct way for the broker to handle that second offer?

• a.Sign it outright, which creates a second binding sale
• b.Accept it in a backup position behind the first contract✓
• c.Hold it unsigned and unanswered until closing occurs
• d.Return it, since a seller may hold only one offer at a time

A backup offer should be accepted expressly in a backup position, contingent on termination of the primary contract, so the priority between the two is documented. Signing it outright creates a second binding contract on one property and near-certain liability. Holding it unsigned and unanswered fails the duty to present offers and leaves the seller unprotected if the first deal collapses. Backup offers are common and not prohibited, and no rule limits a seller to a single offer on the table. Putting the backup position in writing is what protects both the seller and the broker.

After a seller accepts a contract, a cooperating agent delivers a higher offer to the listing broker before closing. What should the listing broker do with that offer?

• a.Refuse it, because the property is under contract
• b.Present it to the seller and explain the existing contract✓
• c.Hold it until the first contract falls through
• d.Advise the seller to cancel and take the higher price

The broker's duty is to present all offers to the seller promptly until closing, unless the seller has given written instructions otherwise. The seller, not the broker, decides what to do with a later offer. Refusing it or holding it back substitutes the broker's judgment for the client's and invites a claim. Advising the seller to cancel and take the money swings too far the other way, since encouraging a breach of the existing contract can expose the seller and the firm to liability. Present the offer, explain that a binding contract exists, and recommend legal advice.

A buyer and seller sign a purchase agreement, but the buyer never delivers the earnest money the contract calls for. What is the effect on the contract's validity?

• a.No contract exists, since earnest money is consideration
• b.The contract is void until the deposit is received
• c.The contract is valid; the failure is a breach✓
• d.The contract becomes voidable by the buyer alone

Earnest money is customary evidence of a buyer's good faith, but it is not an element of a valid contract; the parties' mutual promises supply the consideration. The agreement therefore stands, and failing to deliver the promised deposit is a breach the seller may act on under the contract's default provisions. The contract is not void for want of a deposit, and treating it as voidable by the buyer would reward the party who failed to perform. Brokers should confirm deposits actually arrive, because a missing deposit is an early signal of a buyer who may not close.

A transaction closes normally with no disputes. What determines how the earnest money the broker has been holding in trust is finally applied at settlement?

• a.The seller, since the deposit secured performance
• b.The listing broker, who earned the commission first
• c.The escrow officer, applying whatever local custom requires
• d.The purchase contract's terms, credited as it directs✓

The purchase contract controls the deposit. It typically directs that the earnest money be credited to the buyer at closing, and it also governs disposition if the transaction fails, so the broker follows those written terms rather than anyone's preference. The listing broker has no claim to the deposit as commission, which is paid under the listing agreement out of the seller's proceeds. Local custom cannot override written contract terms. And the seller is not entitled to the funds simply because the deposit secured the buyer's performance. Trust funds move only as the contract or a court directs.

An option agreement recites payment of $10 as the only consideration for a six-month option on a $400,000 property. A court will most likely find that there is:

• a.No contract at all, because a court will find $10 grossly inadequate for a six-month option on a $400,000 property
• b.An unenforceable promise lacking mutual assent
• c.A revocable gift the owner may withdraw at will
• d.Valid consideration, since courts test presence not adequacy✓

Courts ask whether consideration exists, not whether it is adequate, because parties are free to strike their own bargain. A recited $10 supports an option, and the option binds the owner so long as the money was actually paid. Calling $10 grossly inadequate confuses adequacy with presence. It is not a gift, because something of value was exchanged for the promise to hold the property open. Mutual assent is present as well, so the promise does not fail for that reason. The practical caution is that recited but unpaid consideration can be attacked, so confirm the money changed hands.

An owner grants a buyer a paid 90-day option to purchase. Before the option is exercised, which statement correctly describes the two parties' obligations?

• a.Both the owner and the buyer must complete the sale
• b.The buyer must buy, but the owner may withdraw
• c.Neither party is bound until closing takes place
• d.The owner is bound; the buyer need not buy✓

An option is unilateral until it is exercised: the optionor is bound to keep the offer open for the stated term, while the optionee has purchased the right, not the duty, to buy. The owner therefore cannot sell elsewhere or withdraw, and the buyer may simply let the option lapse. Saying both must complete the sale describes an ordinary bilateral purchase contract, not an option. Reversing the roles, with the buyer bound and the owner free, states the rule exactly backwards. And it is wrong that neither is bound, because the paid consideration binds the owner immediately.

A tenant holds a right of first refusal rather than an option on the leased building. What practical difference does that create for the tenant's ability to buy?

• a.The tenant may buy at any time at a set price
• b.The tenant needs no consideration to enforce it
• c.The tenant alone decides whether the owner may ever sell
• d.The tenant may buy only after the owner gets an offer✓

A right of first refusal is passive: it gives the holder a chance to buy only when the owner decides to sell and receives a bona fide offer, usually on those same terms. An option is active, letting the holder buy at a preset price whenever the holder chooses during the term, which is why buying at any time at a set price describes the option instead. Both rights generally require consideration to be enforceable, so needing none is wrong. And a right of first refusal does not let the tenant block a sale; it only routes the sale through the tenant first.

An owner whose building is subject to a tenant's right of first refusal receives a bona fide $600,000 offer from a third party and wants to accept it. The owner must first:

• a.Give the tenant the chance to match it✓
• b.Sell to the third party at the offered price
• c.Ask the tenant to bid higher than the offer
• d.Wait to sell until the lease term ends

Because the owner has received a bona fide offer and is willing to accept it, the tenant's right is triggered: the owner must give the holder an opportunity to buy on those same terms, normally within a notice period set by the agreement. Selling straight to the third party breaches the right and exposes the owner to suit. Asking the tenant to bid higher misstates the mechanism, which is matching the offer rather than outbidding it. And the right operates whenever a sale is proposed, not only after the lease ends. Brokers should check leases and title for these rights before marketing.

A buyer purchases under an installment land contract, taking possession and paying the seller monthly. Until the final payment is made, how is title to the property held?

• a.The buyer holds legal title, seller holds a lien
• b.Title stays in escrow with no record owner at all
• c.A neutral trustee holds legal title for both parties until the last installment
• d.The seller keeps legal title; the buyer holds equitable title✓

Under an installment land contract, also called a contract for deed, the seller retains legal title as security while the buyer takes possession and holds equitable title, receiving the deed only after the final payment. Reversing that, with the buyer holding legal title and the seller a lien, describes an ordinary purchase-money mortgage instead. No trustee is involved; a trustee holding title for the parties is the deed of trust arrangement. And title does not sit ownerless in escrow, since the seller remains the record owner throughout. Buyers under these contracts should record their interest to protect it.

A buyer under a contract for deed defaults after several years of payments. Which remedy concept does the seller typically pursue, and why has it become contested?

• a.Judicial foreclosure, the only remedy ever available
• b.Forfeiture, which courts increasingly limit✓
• c.Rescission, which restores the parties to the start
• d.Specific performance to compel the payments

Contracts for deed traditionally allow the seller to declare a forfeiture, keeping both the payments and the property, which is what made them attractive to sellers. Courts and legislatures increasingly restrict that remedy, often requiring foreclosure-like procedures once a buyer has built substantial equity, so the outcome is contested and varies by jurisdiction. Saying judicial foreclosure is the only remedy ever available overstates the trend. Rescission would return the payments, which is not what the defaulted-on seller wants. Compelling payment is theoretically possible but rarely practical. Brokers should route these transactions to counsel.

Immediately after both parties sign a purchase contract, but well before closing, what interest does the buyer hold in the property being sold?

• a.Legal title, subject only to the seller's lien
• b.No interest at all in the property until the deed is delivered and recorded
• c.Equitable title under the doctrine of equitable conversion✓
• d.A leasehold interest during the escrow period

On signing, the doctrine of equitable conversion gives the buyer equitable title: the right to obtain legal title by performing, an interest the buyer can protect and that passes to the buyer's heirs if the buyer dies. Legal title stays with the seller until the deed is delivered, so crediting the buyer with legal title is wrong. The buyer holds far more than nothing before closing, which is why a seller cannot simply sell the property to someone else. And the buyer has no leasehold, since occupancy before closing exists only under a separate written agreement.

A house under contract is destroyed by fire two weeks before the scheduled closing. What most directly determines which party bears that loss?

• a.The buyer always bears it, holding equitable title
• b.The seller always bears it, holding legal title
• c.The risk-of-loss clause the contract contains✓
• d.The lender bears it under its hazard insurance policy

The contract governs first. Well-drafted purchase agreements contain a casualty or risk-of-loss provision stating who bears the loss, whether the buyer may cancel, and how insurance proceeds are applied. Only when the contract is silent do state doctrines fill the gap, and those doctrines differ, some placing the risk on the buyer who holds equitable title and others on the seller who holds legal title and possession, so neither always rule is correct. The lender's hazard policy protects the lender's collateral rather than the parties' bargain. Brokers should read the casualty clause before advising anyone.

A buyer with a financing contingency applies promptly, supplies every document requested, and is still denied a loan. The buyer timely notifies the seller. What follows?

• a.The seller may still sue for specific performance
• b.The buyer forfeits the deposit for not closing
• c.The buyer may cancel and recover the deposit paid✓
• d.The buyer must instead pay cash to close the sale

A financing contingency protects a buyer who applies in good faith and cooperates but still cannot obtain the loan; on timely written notice, the buyer may cancel and the earnest money is returned as the contract directs. Forfeiture would apply only if the buyer failed to pursue financing diligently or missed the notice deadline. The seller cannot compel performance where a stated condition of the contract genuinely failed. And nothing requires the buyer to substitute cash, since the contingency defines the financing the buyer had to obtain. Brokers should keep application dates and denial letters in the file.

A contract price is $520,000 and the appraisal comes in at $495,000. The lender will finance 80% of appraised value, and the buyer had planned to put $104,000 down. The extra cash needed is:

• a.$5,000
• b.$20,000✓
• c.$25,000
• d.$124,000

Take it in steps. The lender funds 80% of the lower appraised value: 0.80 x $495,000 = $396,000. The buyer still owes the contract price, so total cash due is $520,000 - $396,000 = $124,000. The buyer planned $104,000, so the additional cash is $124,000 - $104,000 = $20,000. Check it another way: the loan shrinks by 80% of the $25,000 appraisal gap, and 0.80 x $25,000 = $20,000, the same figure. Treating the full $25,000 gap as the shortfall ignores the 80% ratio, $5,000 comes from applying 20% to the gap, and $124,000 is total cash rather than the extra amount.

A contract gives the buyer ten days to inspect and provides that failure to deliver written objection within that period waives the contingency. The buyer objects on day twelve. Most likely:

• a.The objection is timely
• b.The seller must repair the defects
• c.The buyer may cancel and recover the deposit anyway
• d.The contingency was waived by the deadline✓

Contracts commonly make a contingency self-executing: if the buyer does not deliver a written objection or notice within the stated period, the contingency is waived and the buyer must proceed. Objecting two days late does not revive it, and the difficulty of scheduling inspections is not a legal excuse. The seller has no repair obligation, because the contingency that would have supported a repair request is gone. And the buyer cannot cancel and recover the deposit on inspection grounds after waiver. Brokers calendar every contingency deadline and confirm delivery of objection or removal notices in writing.

A seller accepts an offer contingent on the buyer selling a current home, with a kick-out clause. A second buyer then submits a strong offer. What may the seller now do?

• a.Accept both offers and close with whichever performs
• b.Cancel the first contract immediately, since the kick-out clause makes it terminable at will
• c.Notify the first buyer, who must remove the contingency or release✓
• d.Do nothing until the first buyer's own home has actually sold and closed

A kick-out clause lets the seller keep marketing and, when a better offer arrives, give the first buyer notice; that buyer then has a stated time to remove the home-sale contingency and proceed, or to release the contract. The seller cannot simply cancel without giving the notice, because the first contract is binding. Accepting both offers outright would create two contracts on one property. Doing nothing wastes the very protection the seller bargained for. The broker must deliver the notice exactly as the contract specifies, since a defective notice leaves the seller bound to the first buyer.

A condominium buyer's contract allows cancellation within a set review period after the association documents are delivered. The buyer reads them and dislikes a pet restriction. The buyer may:

• a.Cancel only if the restriction was never disclosed
• b.Cancel any time before the closing date arrives
• c.Demand the rules be amended
• d.Cancel within the review period stated✓

An association document review contingency gives the buyer a defined window after delivery of the governing documents to read them and cancel on the grounds the contract allows, including restrictions the buyer finds unacceptable. Whether the restriction was disclosed earlier is beside the point, since the review period exists precisely so the buyer can study the documents. The buyer cannot force the association to amend rules that bind every owner. And the right is not open-ended until closing; it expires when the review period ends. Many states add a statutory, non-waivable cancellation right running from delivery of the documents, so brokers confirm both the contract's clock and the state's.

A buyer offers $400,000 with an escalation clause beating any bona fide competing offer by $3,000, capped at $425,000. A verified competing offer of $424,000 arrives. The buyer's price becomes:

• a.$425,000✓
• b.$427,000
• c.$403,000
• d.$424,000

Apply the clause step by step. The escalation beats the verified competing offer by $3,000: $424,000 + $3,000 = $427,000. The clause caps the price at $425,000, and a cap controls whenever the escalated figure exceeds it, so the buyer's price is $425,000. Check: $425,000 sits above the competing $424,000 and below the uncapped $427,000, which is exactly what a cap is designed to do. The $427,000 figure ignores the cap, $424,000 merely matches instead of beating the competing offer, and $403,000 comes from escalating over the buyer's own $400,000 rather than over the competing offer.

A listing broker receives an offer containing an escalation clause. What is the principal risk the broker must manage before advising the seller to accept that offer?

• a.Escalation clauses are illegal under federal law
• b.Proving the competing offer is bona fide and verifiable✓
• c.The clause silently converts the offer into a binding option
• d.The seller must accept the highest offer received

The clause only works if the competing offer that triggers it is genuine, so the broker's main task is confirming that offer is bona fide and can be documented in whatever manner the contract requires. Escalating a price against an unverifiable or manufactured offer invites fraud claims against the seller and the firm. Escalation clauses are not illegal under federal law, and they do not turn an offer into an option, which would require consideration to hold terms open. No rule compels a seller to take the highest number; sellers weigh terms, financing, and certainty of closing.

A seller lists a home as is and knows the foundation has a serious hidden crack. May the seller stay silent about the crack because of the as-is language?

• a.Only if the buyer specifically asks about the foundation
• b.Yes, as-is language shifts every risk to the buyer entirely
• c.Yes, provided the buyer was given an inspection period
• d.No; known material defects must still be disclosed✓

An as-is clause tells the buyer the seller will not make repairs; it is not a license to conceal. Known material defects, especially latent ones the buyer cannot see, must still be disclosed, and both the seller and the licensee can face misrepresentation or fraud claims for hiding them. Saying as-is shifts every risk overstates what the clause does. Giving the buyer an inspection period does not cure nondisclosure of a hidden defect an inspection might never reveal. And the duty to disclose a known material defect does not wait for the buyer to ask the right question.

A buyer assigns a purchase contract to an investor, and the seller has not released the buyer. If the investor fails to close, who may the seller hold liable?

• a.Only the investor, as the current contract party
• b.Neither, because assignment discharged the contract
• c.Both, since the assigning buyer remains secondarily liable✓
• d.Only the buyer, since the assignment was invalid

An assignment transfers the assignor's rights and delegates the duties, but the assignor stays secondarily liable unless the other party grants a release, which would make the arrangement a novation. Because the seller never released the buyer, the seller may look to the investor and to the original buyer. Blaming only the investor ignores that continuing liability. Assignment does not discharge the contract, so it is wrong that no one is answerable. And the assignment was not invalid merely because it occurred; it is effective unless the contract forbids it. Assigning away rights is not assigning away risk.

A purchase contract states that it may not be assigned without the seller's written consent. The buyer assigns it anyway to a business partner. The seller's position is that:

• a.The assignment is valid because contracts are assignable
• b.The seller may treat the assignment as a breach✓
• c.The seller must accept the partner as the new buyer
• d.The original buyer is fully released from it

A non-assignment clause is enforceable, so assigning in violation of it is a breach and the seller may pursue contract remedies or refuse to recognize the assignee. The general principle that contracts are assignable yields to an express prohibition the parties negotiated. Nothing obliges the seller to accept a substitute buyer, because the seller bargained for this buyer's performance and creditworthiness. And the original buyer is certainly not released, since release requires the seller's agreement through a novation. Brokers should read the assignment language before telling an investor client that a contract can be flipped.

A seller breaches and refuses to convey. The buyer no longer wants the property but has provable out-of-pocket losses. Which remedy best matches what this buyer wants?

• a.Specific performance compelling the seller to convey
• b.Reformation of the contract's written terms
• c.Compensatory damages for the losses actually proven✓
• d.Forfeiture of the seller's earnest money deposit

Compensatory damages put the injured party where performance would have left them, covering provable out-of-pocket losses, which fits a buyer who has moved on from the property. Specific performance would force the conveyance, the opposite of this buyer's goal. Reformation only corrects a writing that fails to reflect what the parties actually agreed, and no drafting error appears here. Deposit forfeiture runs against a defaulting buyer, not a defaulting seller, so there is no seller deposit to keep. Because electing one remedy can bar inconsistent ones, a client should choose deliberately and with counsel.

A purchase contract fixes liquidated damages at $150,000 on a $400,000 sale, though a seller's actual loss from a buyer breach would plainly be far smaller. A court will likely:

• a.Strike it down as an unenforceable penalty✓
• b.Enforce the sum, since both parties freely agreed
• c.Enforce it only if the seller actually resold lower
• d.Convert the clause into a valid option agreement

Liquidated damages must be a reasonable pre-estimate, made at signing, of the harm a breach would cause. Here the sum is 37.5% of the price, because $150,000 / $400,000 = 0.375, far beyond any plausible estimate of a seller's loss, so a court treats it as a penalty and refuses to enforce it, leaving the seller to prove actual damages. Free agreement does not rescue a penalty clause. Whether the seller later resold for less goes to actual damages, not to the clause's validity when written. And nothing turns a damages clause into an option.

A signed contract mistakenly states the wrong lot number, though both parties clearly intended the same parcel. Which remedy corrects the document to match the true agreement?

• a.Reformation, correcting the writing itself✓
• b.Rescission, unwinding the entire agreement
• c.Novation, substituting a brand new contract
• d.Specific performance of the wrong lot

Reformation is the equitable remedy that corrects a written document so it expresses what both parties actually agreed, which is exactly the fix for a scrivener's error in a lot number. Rescission would cancel a deal both parties still want. Novation substitutes a new contract or a new party and is unnecessary when the underlying bargain is sound and only the paperwork is wrong. And specific performance of the mistaken description would enforce the error rather than repair it. Brokers reduce this risk by checking legal descriptions against the title work before the parties sign anything.

A buyer and seller both want out of a contract that is going badly, and neither wants to sue. Which document best ends the deal and settles the earnest money?

• a.A unilateral notice of termination from the buyer
• b.An addendum extending the closing date again
• c.A demand for specific performance by the seller
• d.A mutual release signed by both, directing the deposit✓

A mutual release, often titled a cancellation and release, is a signed agreement in which both parties end the contract, give up claims against each other, and instruct the broker how to disburse the earnest money. That is precisely what these parties want. A one-sided notice does not bind the other party and leaves the deposit in limbo. An addendum extending the closing date continues the transaction instead of ending it. And a demand for specific performance is litigation, the very outcome both sides are trying to avoid. Brokers should never disburse a deposit without written instructions.

At trial a buyer offers testimony about an oral promise made before signing that contradicts the final written contract. The court will most likely do what with it?

• a.Admit it, since oral evidence is always allowed
• b.Admit it to show the parties' true intentions
• c.Exclude it under the parol evidence rule✓
• d.Admit it only if the seller agrees to its use

The parol evidence rule bars prior or contemporaneous oral statements offered to contradict or vary the terms of a final, integrated written contract, so this testimony is excluded. Oral evidence is not always admissible, which is the entire point of the rule. Courts do not admit it merely to show intent when the writing appears complete, though narrow exceptions exist for fraud, ambiguity, or a later modification. And admissibility never depends on the opposing party consenting. This is why brokers insist that every promise a client is relying on be written into the contract itself.

A signed purchase contract declares that it is the entire agreement and supersedes all prior discussions. For these parties, that integration clause means that:

• a.The buyer's right to inspect the property is waived once the contract is signed
• b.Prior side promises not written in it drop out✓
• c.The contract may now be enforced orally
• d.Later written amendments to the agreement are barred by the clause

An integration or merger clause declares the signed document to be the complete agreement, so earlier promises, side deals, and negotiations that were never written into it fall away and generally cannot be enforced. It does not waive inspection rights, which come from the contract's own contingency provisions. It does not make anything enforceable orally, since it does the opposite by elevating the writing. And it does not bar later amendments, which the parties remain free to make in a signed writing. Agents must learn that a verbal side promise dies at signing unless it appears in the contract.

Both parties have already signed a purchase contract. They now agree to change the closing date. Which instrument correctly records that change to the existing agreement?

• a.A new listing agreement with the brokerage
• b.An addendum attached at the original signing
• c.A contingency removal form from the buyer
• d.An amendment signed by both of the parties✓

Changes to the terms of an already signed contract are made by amendment, executed by both parties. An addendum adds terms and is normally attached and made part of the agreement when it is first written, at or before signing, so it is not the tool for a later change. A contingency removal form waives or satisfies a condition and cannot move a closing date. And a listing agreement is the seller's contract with the brokerage, unrelated to modifying a purchase agreement. The vocabulary matters in file review, because a change documented on the wrong form invites disputes.

A buyer is satisfied with the inspection results and wants the seller to know that this contingency no longer applies. Which document should the buyer deliver?

• a.A contingency removal form for that item✓
• b.A rider adding new terms to the contract
• c.An amendment changing the purchase price
• d.A mutual release ending the transaction

A contingency removal form, sometimes called a notice of satisfaction or waiver, tells the seller that a specified condition has been met or waived, which is exactly what the buyer wants to communicate about the inspection. An amendment changes agreed terms such as price, which is not happening here. A rider adds new terms rather than clearing an existing condition. And a mutual release would end the transaction, the opposite result. Delivering the right form on time matters because contracts treat an unremoved contingency either as waived or as a ground to cancel, depending on the wording.

An affiliated licensee resigns and joins a competing firm while several listings she took still have months left to run. What becomes of those listing agreements?

• a.They follow the licensee to her new brokerage automatically
• b.They stay with her former firm, which reassigns servicing of them✓
• c.They terminate at once, freeing each seller to relist anywhere
• d.They convert to open listings until each seller signs a new one

The listing is a contract between the seller and the brokerage, so the firm keeps it when the individual who took it departs, and the broker assigns another licensee to service the property. Moving a listing to the new firm takes both the releasing broker's agreement and the client's, which is why departures are negotiated rather than assumed. A resignation does not terminate the seller's contract, so the seller is not free to relist elsewhere while the term runs. Nor does the agreement quietly become an open listing, because changing the type of listing requires a new agreement the seller signs. A written departure policy stating what an agent may take avoids most of these fights.

A seller revokes an exclusive right-to-sell listing halfway through the term, with no cause and while the broker is actively marketing. The seller's position is that:

• a.The agency ends, yet the seller may be liable for damages✓
• b.The revocation is ineffective and the listing stands
• c.The seller owes the full commission automatically
• d.Only the broker may terminate an exclusive listing

Agency is a personal relationship, so a principal always has the power to revoke it and the agency does end. But power is not the same as right: revoking without cause during the term can breach the listing contract and expose the seller to damages, often measured by the broker's proven expenses or lost commission. So the revocation is not ineffective and the listing does not simply continue. Whether the full commission is owed depends on the contract's wording and on proof, not on any automatic rule. And either party, not only the broker, can terminate.

A listing expires. Two weeks later the seller sells directly to a buyer the listing broker had introduced and named in writing. Which clause may still entitle the broker to a commission?

• a.The liquidated damages clause in the listing
• b.The broker protection carryover clause✓
• c.The contract's time is of the essence clause
• d.The alienation clause in the seller's mortgage

A broker protection clause, also called a safety or carryover clause, entitles the broker to a commission if the owner sells within a stated period after expiration to a buyer the broker introduced and, typically, identified in writing before the listing ended. A liquidated damages clause caps recovery when a purchase contract is breached. Time is of the essence makes contract deadlines strict. And an alienation clause is a loan provision letting a lender call the balance on transfer, which has nothing to do with commissions. Brokers must deliver the protected-buyer list on time or lose the protection.

Two cooperating agents each showed the same buyer the property, and both now claim the selling commission. Which concept determines which of them is entitled to be paid?

• a.The doctrine of equitable conversion at closing
• b.Procuring cause, an unbroken chain of events✓
• c.The parol evidence rule applied at arbitration
• d.The statute of frauds writing requirement

Procuring cause asks who started an uninterrupted chain of events that led to the sale, and it decides which cooperating broker earns the selling side, usually through arbitration rather than a courtroom. Equitable conversion concerns the buyer's equitable title after a contract is signed. The statute of frauds requires certain contracts to be in writing to be enforceable. And the parol evidence rule limits evidence of prior oral statements. None of those allocate a commission between competing brokers. Firms reduce these disputes by documenting first substantive contact, showings, and continuous involvement with the buyer.

A buyer signs an agreement letting the buyer work with several brokerages and pay only the firm that finds the home actually purchased. That agreement is:

• a.An exclusive right-to-represent agreement
• b.A non-exclusive buyer representation agreement✓
• c.An exclusive agency listing on the buyer's home
• d.An option contract supported by the retainer paid

An agreement that lets a buyer work with several firms and pay only the one producing the purchased property is non-exclusive, the buyer-side analogue of an open listing. An exclusive right-to-represent agreement pays the named brokerage no matter who finds the property. An exclusive agency listing concerns selling the buyer's own home, a different transaction entirely. And this is not an option, though many buyer agreements do include a retainer, which is a fee for services rather than consideration creating a right to buy. Note also that who pays a broker does not by itself establish who is represented.

During file review a broker finds a contract whose addendum sets a different closing date than the contract body, and one page is unsigned. The broker should:

• a.Close the file, since the parties signed elsewhere
• b.Have the parties resolve and initial the conflict promptly✓
• c.Direct the agent to pick the later of the two dates
• d.Void the contract and require an entirely fresh offer

An unsigned page and two conflicting closing dates make the file ambiguous, and ambiguity is what produces litigation later. The broker's job in file review is to have the parties resolve the conflict and initial or amend the correct document promptly, while everyone still agrees on what was intended. Closing the file because other pages were signed leaves the defect sitting there. Letting the agent choose which date governs substitutes a licensee's guess for the parties' actual agreement. And declaring the contract void exceeds the broker's authority and could needlessly cost the client the transaction.

A tenant signs an agreement that obligates the tenant to buy the property at the end of the lease term, rather than merely giving the tenant a choice. This is:

• a.A lease-purchase agreement✓
• b.A lease with an option to purchase
• c.An installment land contract
• d.A right of first refusal lease

A lease-purchase obligates the tenant to buy at the end of the term; the sale is already agreed, with the lease bridging the gap until closing. A lease with an option to purchase gives the tenant a choice exercisable during the option period, and the tenant may simply walk away. An installment land contract is a financed sale with possession and equitable title, not a lease. And a right of first refusal only lets the holder match an offer the owner receives. Brokers should be precise here, because obligating a client to buy is very different from giving a choice.