Real Estate Contracts and Agency Practice Test

25 practice questions

Choose an answer, then check it under Show answer.

1. Question 1 of 25Medium

   Tessa signs a 120-day exclusive-right-to-sell agreement with broker Cole. The agreement says Cole earns the commission when he produces a ready, willing, and able buyer on the seller's terms during the listing term. On day 70, Cole introduces Evan, who meets those conditions. On day 90, Tessa ends the agreement without cause; on day 105, she sells directly to Evan. When did Cole earn the commission?

   1. AA. Only if Tessa voluntarily reinstates the listing
   2. BB. When the original 120-day term naturally expires
   3. CC. Only when Tessa completes a sale through Cole
   4. DD. When Cole introduced Evan during the agency term
   Show answer to question 1

   Answer: D. When Cole introduced Evan during the agency term

   The agreement made production of a ready, willing, and able buyer on the seller's terms the commission-earning event. Because Cole satisfied that condition on day 70, Tessa's later unilateral termination and direct sale did not erase the commission already earned.

   Why the other options are wrong

   • AReinstating the listing is unnecessary because Cole satisfied the stated earning condition before termination.
   • BCole earned the commission on day 70 and did not need to wait for the listing term to expire.
   • CThe agreement does not require the later conveyance to be handled by Cole once its stated earning condition has occurred.

2. Question 2 of 25Easy

   What kind of agreement is generally covered by the real estate statute of frauds?

   1. AA. An oral promise to paint a fence next month
   2. BB. A receipt for a fully refundable holding deposit
   3. CC. A contract transferring an interest in real estate
   4. DD. A casual statement that a home may be listed soon
   Show answer to question 2

   Answer: C. A contract transferring an interest in real estate

   Contracts for the sale or transfer of an interest in real estate generally must be evidenced by a writing signed by the party to be charged. Short oral service promises and preliminary discussions do not themselves transfer a real estate interest.

   Why the other options are wrong

   • AA promise to paint a fence is a service agreement, not a transfer of an interest in real estate.
   • BA receipt alone does not necessarily contain the essential terms of a real estate contract or the required signature.
   • DA casual statement about a possible future listing is not a completed agreement transferring real estate.

3. Question 3 of 25Medium

   How does a standard installment land contract primarily differ from a transaction involving a seller-financed purchase money mortgage?

   1. AA. The installment contract must be secured by an institutional mortgage lender, whereas a purchase money mortgage is strictly private financing.
   2. BB. The seller defers delivery of the deed to the buyer under an installment contract, whereas the seller delivers the deed at closing and takes back a mortgage in the mortgage transaction.
   3. CC. The buyer takes physical possession of the property under a purchase money mortgage, but the seller retains possession under an installment contract.
   4. DD. The purchase money mortgage requires periodic interest payments, whereas an installment contract prohibits the charging of interest on principal balances.
   Show answer to question 3

   Answer: B. The seller defers delivery of the deed to the buyer under an installment contract, whereas the seller delivers the deed at closing and takes back a mortgage in the mortgage transaction.

   With seller-financed purchase money mortgage financing, the seller delivers a deed to the buyer at closing and receives a promissory note secured by a mortgage. Under a standard installment land contract, the seller retains legal title until the required payments are completed and then delivers the deed. The central distinction is immediate versus deferred deed delivery.

   Why the other options are wrong

   • AThis confuses seller financing with institutional lending: neither an installment land contract nor a seller-financed purchase money mortgage requires an institutional lender.
   • CThis confuses possession with legal title: buyers ordinarily receive possession under either arrangement, even though the installment contract seller retains legal title.
   • DThis incorrectly treats interest as prohibited under an installment land contract. Both arrangements may charge interest, so interest is not the primary distinction.

4. Question 4 of 25Medium

   A buyer's written offer states: 'Acceptance is effective only if the seller's signed acceptance reaches the designated email system of the buyer's agent, who is authorized to receive acceptance, by 5:00 PM on Friday, June 12. Otherwise, this offer expires.' The seller signs at 4:55 PM Friday. The listing agent emails the signed acceptance at 4:58 PM, but a server delay prevents it from reaching the designated email system until 5:10 PM. Is a binding contract formed?

   1. AA. Yes, because the seller signed before 5:00 PM.
   2. BB. No, because the signed acceptance did not reach the designated email system by the offer's deadline.
   3. CC. No, because a real estate offer cannot be accepted by email.
   4. DD. Yes, because the buyer did not revoke the offer before 5:00 PM.
   Show answer to question 4

   Answer: B. No, because the signed acceptance did not reach the designated email system by the offer's deadline.

   No. The offer expressly requires the seller's signed acceptance to reach the designated email system by 5:00 PM. It reached that system at 5:10 PM, so the offer expired without a binding contract. Signing or sending before the deadline does not satisfy this offer's receipt requirement. Personal receipt by the buyer is unnecessary because the buyer's agent is authorized to receive acceptance.

   Why the other options are wrong

   • AThe offer expressly requires receipt in the designated email system by 5:00 PM. The seller's signature alone does not satisfy that condition.
   • CEmail is not inherently an invalid method of acceptance. Here, the problem is failure to satisfy the offer's express receipt deadline, not use of email.
   • DThe offer expires under its own terms without timely receipt of acceptance. The buyer does not need to revoke it.

5. Question 5 of 25Medium

   Rosa leases retail space from Malik for three years. With Malik's permission, she assigns the remaining term to Theo, who agrees to pay rent. Six months later, Theo defaults. Which statement correctly describes Rosa's liability to Malik?

   1. AA. Rosa is released from liability because Malik consented to the assignment.
   2. BB. Rosa remains liable only for rent that became due before the assignment.
   3. CC. Rosa remains liable on the original lease because an assignment transfers her rights but does not itself release her duties.
   4. DD. Rosa is released from liability because Theo agreed to pay the rent.
   Show answer to question 5

   Answer: C. Rosa remains liable on the original lease because an assignment transfers her rights but does not itself release her duties.

   An assignment transfers the tenant's remaining leasehold interest to the assignee but does not, by itself, release the original tenant from obligations under the lease. Rosa therefore remains liable on the original lease. A release or novation may be established by an express agreement or inferred from the circumstances, but consent to assignment and acceptance of rent alone do not establish either. Theo also has obligations as the assignee.

   Why the other options are wrong

   • AMalik's consent permits the assignment but does not, by itself, release Rosa from her lease obligations.
   • BRosa's contractual liability continues after the assignment unless she is released. It is not limited to rent due before the assignment.
   • DTheo's agreement to pay rent does not, by itself, release Rosa from her obligations to Malik.

6. Question 6 of 25Easy

   In a real estate contract, consideration is defined as:

   1. AA. A written document
   2. BB. A promise to perform an illegal act
   3. CC. The purchase price only
   4. DD. Something of legal value exchanged between parties
   Show answer to question 6

   Answer: D. Something of legal value exchanged between parties

   Consideration is the bargained-for exchange of something of legal value between the parties, such as money, property or a promise to act or not act. It does not have to be cash.

   Why the other options are wrong

   • AA written document is a form of evidence, not the consideration itself.
   • BA promise to perform an illegal act is void and cannot serve as consideration.
   • CConsideration can include non-monetary items, not just the purchase price.

7. Question 7 of 25Medium

   A buyer arrives two days after the contract's closing date and tenders the full price. The contract has no time-is-of-the-essence clause, and the seller identifies no harm from the delay. The seller declares a material breach and keeps the entire deposit. What is the best analysis?

   1. AA. The delay is material because the closing date is an express contract term.
   2. BB. The brief delay is generally nonmaterial on the facts stated.
   3. CC. The seller may retain the deposit as liquidated damages based on the missed closing date.
   4. DD. The buyer's late tender entitles the buyer to recover the deposit and withdraw from the contract.
   Show answer to question 7

   Answer: B. The brief delay is generally nonmaterial on the facts stated.

   Time is not ordinarily of the essence in a real estate contract unless the agreement or surrounding circumstances make it so. A two-day delay with full tender and no identified harm is generally minor rather than material. The seller therefore cannot automatically rescind or retain the deposit solely because of that delay.

   Why the other options are wrong

   • AAn express closing date does not, by itself, make a delay material. The agreement or surrounding circumstances may make timely performance essential.
   • CA missed closing date alone does not establish a right to liquidated damages. Retaining the deposit requires a valid contractual or legal basis.
   • DThe buyer's late tender does not create a right to withdraw and recover the deposit. A nonmaterial delay generally leaves the parties' contractual obligations in place.

8. Question 8 of 25Medium

   Buyer Jane offers $300,000 to seller Bill for his condo. Bill counters at $315,000. Jane rejects the counteroffer. Later, without any further offer or agreement by Jane, Bill communicates to Jane that he accepts her original $300,000 offer. Has Bill's attempted acceptance created a valid contract?

   1. AA. No, because acceptance was not communicated.
   2. BB. Yes, because Bill's acceptance of the original offer is effective before revocation.
   3. CC. No, because the counteroffer rejected the original offer.
   4. DD. Yes, if Bill signs the original offer document and delivers it to Jane.
   Show answer to question 8

   Answer: C. No, because the counteroffer rejected the original offer.

   Bill's counteroffer rejected and terminated Jane's original offer and created a new offer. Jane's rejection of the counteroffer did not revive her original offer. Bill therefore could not create a contract by attempting to accept that terminated offer.

   Why the other options are wrong

   • ABill communicated his attempted acceptance. The problem is that Jane's original offer had already been terminated by his counteroffer.
   • BBill's counteroffer terminated Jane's original offer, so Jane did not need to revoke it. Bill could not accept it afterward.
   • DBill's signature and delivery alone cannot revive Jane's terminated offer. The same document could support a new agreement, but that would require renewed assent by Jane.

9. Question 9 of 25Easy

   A buyer and seller sign a purchase agreement with an enforceable liquidated damages clause stating that the earnest money deposit will be the seller's sole remedy if the buyer defaults. The buyer later defaults, and the seller accepts the forfeited earnest money under that clause. Which of the following is true?

   1. AA. The seller cannot seek additional damages beyond the earnest money
   2. BB. The seller can keep the earnest money and also claim actual damages
   3. CC. The seller can also sue for specific performance
   4. DD. The seller must return the earnest money because liquidated damages are illegal
   Show answer to question 9

   Answer: A. The seller cannot seek additional damages beyond the earnest money

   Because the enforceable clause makes forfeiture of the earnest money the seller's sole remedy for this default, the seller cannot recover additional damages or obtain specific performance. Liquidated damages are agreed damages for a specified breach. Enforceability depends on applicable law, including rules concerning difficulty of assessing loss, reasonableness of the amount, and unenforceable penalties.

   Why the other options are wrong

   • BThe enforceable clause makes the earnest money the seller's exclusive remedy for this default, so the seller cannot also recover actual damages.
   • CThe enforceable clause makes forfeiture of the earnest money the seller's sole remedy for this default, excluding specific performance.
   • DLiquidated damages are not inherently illegal, and the question expressly states that this clause is enforceable.

10. Question 10 of 25Medium

    A buyer enters into a valid contract to purchase a home. Two weeks before closing, the buyer purchases a homeowner insurance policy on the property. Does the buyer have an insurable interest in the property?

    1. AA. Yes, because the purchase contract gives the buyer an insurable financial interest
    2. BB. No, because the seller retains legal title until the deed is delivered
    3. CC. No, because the buyer's ownership interest has not been recorded
    4. DD. Yes, because purchasing insurance establishes an insurable interest
    Show answer to question 10

    Answer: A. Yes, because the purchase contract gives the buyer an insurable financial interest

    A buyer under an enforceable purchase contract generally has an equitable interest in the property that supports an insurable interest before closing. Legal title, recording, and physical possession are not prerequisites. The insurable interest arises from the buyer's financial stake, not from purchasing insurance. Whether the buyer or seller bears a preclosing casualty loss is a separate question governed by the contract and applicable law.

    Why the other options are wrong

    • BThe seller's retention of legal title does not prevent the buyer from having an insurable interest. The enforceable purchase contract gives the buyer a financial stake before the deed is delivered.
    • CRecording is not required to establish an insurable interest. The buyer's enforceable purchase contract creates a financial stake before closing.
    • DPurchasing insurance does not create an insurable interest. The buyer's insurable interest arises from the financial stake created by the enforceable purchase contract.

11. Question 11 of 25Medium

    A buyer submits a written offer to purchase a property. The offer states that acceptance becomes effective only when the buyer receives written notice of acceptance. The listing broker represents only the seller and is authorized to receive notices concerning the offer on the seller's behalf. The seller signs the purchase agreement at 10:00 AM on Tuesday but leaves the document with the listing broker. At 11:30 AM that same morning, before receiving any notice of acceptance, the buyer delivers a written revocation of the offer to the listing broker. At 1:00 PM, the listing broker delivers the signed agreement to the buyer. What is the legal status of the contract?

    1. AA. A valid contract was formed at 10:00 AM because the seller's signature finalized the agreement.
    2. BB. A valid contract was formed at 10:00 AM because leaving the signed agreement with the listing broker constituted notice to the buyer.
    3. CC. A valid contract was formed at 1:00 PM because the buyer's revocation was ineffective unless delivered directly to the seller.
    4. DD. No contract was formed because the revocation was communicated before acceptance was communicated to the buyer.
    Show answer to question 11

    Answer: D. No contract was formed because the revocation was communicated before acceptance was communicated to the buyer.

    The offer expressly requires the buyer to receive written notice before acceptance becomes effective. The buyer's revocation reached the seller's authorized agent before the buyer received that notice. The revocation therefore terminated the offer, and the later delivery of the signed agreement did not form a contract.

    Why the other options are wrong

    • AThe seller's signature alone did not satisfy the offer's express requirement that the buyer receive written notice of acceptance.
    • BThe listing broker represents only the seller. Leaving the signed agreement with that broker did not constitute notice to the buyer.
    • CThe listing broker was authorized to receive notices on the seller's behalf. Delivery of the revocation to that broker was effective without direct delivery to the seller.

12. Question 12 of 25Medium

    A buyer and seller agree to write a purchase contract stating a sale price of $400,000 to present to the mortgage lender, while secretly signing an unrecorded side agreement reducing the actual price to $350,000 to artificially inflate the loan amount. If the buyer subsequently refuses to honor the side agreement and the seller files a lawsuit to enforce it, how will a court most likely rule?

    1. AA. The court will reform both agreements into a single valid contract reflecting the true intent of the parties.
    2. BB. The court will refuse to enforce the agreement because it was entered into for an unlawful fraudulent purpose.
    3. CC. The court will require the lender to evaluate the transaction before determining contract enforceability.
    4. DD. The court will enforce the side agreement because mutual assent between the parties was established.
    Show answer to question 12

    Answer: B. The court will refuse to enforce the agreement because it was entered into for an unlawful fraudulent purpose.

    Courts will not enforce agreements designed to perpetrate fraud or deceive third parties, such as lenders and taxing authorities. Because the contract was created for an illegal objective, the court leaves the parties as it finds them and will refuse to aid either wrongdoer.

    Why the other options are wrong

    • AThis confuses reformation with curing illegality. Reformation can correct a writing that fails to reflect an agreement, but it cannot make this deliberate scheme to defraud the lender enforceable.
    • CThis incorrectly treats lender review as a prerequisite to deciding enforceability. The court can refuse enforcement based on the agreement’s fraudulent purpose without requiring a lender evaluation.
    • DThis mistakes mutual assent for sufficient grounds for enforcement. Even an agreement both parties knowingly accept is unenforceable when its purpose is to defraud the lender.

13. Question 13 of 25Medium

    Under the general common-law rule, an owner's property is under court-appointed guardianship because the owner has been adjudicated mentally incompetent. The owner personally executes a contract to sell that property. This contract is:

    1. AA. voidable by the appointed legal guardian only
    2. BB. valid if the buyer had no knowledge of the court ruling
    3. CC. unenforceable until the court reviews the sale price
    4. DD. void from the time of execution
    Show answer to question 13

    Answer: D. void from the time of execution

    Under the general common-law rule, a person whose property is under guardianship because of adjudicated mental incapacity lacks capacity to contract concerning that property. A sale contract personally executed by that owner is therefore void from execution. Without such an adjudication and guardianship, mental illness alone does not establish contractual incapacity; voidability depends on the applicable incapacity test and circumstances.

    Why the other options are wrong

    • AThe owner's contract is void, not merely voidable at the guardian's election.
    • BThe buyer's lack of knowledge does not supply the owner's missing contractual capacity.
    • CJudicial review of the sale price does not itself validate a contract personally executed by an owner who lacks contractual capacity.

14. Question 14 of 25Easy

    A property owner grants a tenant a right of first refusal on any sale of the property. The owner receives a bona fide offer from a third party and decides to accept it. Which statement is true?

    1. AA. The right of first refusal gives the tenant an immediate option to buy at a set price.
    2. BB. The owner can sell to the third party without notifying the tenant.
    3. CC. The tenant must be given the opportunity to purchase the property on the same terms as the third-party offer.
    4. DD. The tenant can purchase the property at a price 10% below the third-party offer.
    Show answer to question 14

    Answer: C. The tenant must be given the opportunity to purchase the property on the same terms as the third-party offer.

    A right of first refusal generally gives the tenant the opportunity to purchase on the terms of a bona fide offer that the owner is willing to accept. The owner must honor that right before selling to the third-party. The agreement governs the required notice and the deadline for exercising the right.

    Why the other options are wrong

    • AThe grant does not give the tenant an immediately exercisable right to buy at a set price. The tenant's purchase right becomes exercisable when the right of first refusal is triggered under the agreement.
    • BThe owner must notify the tenant and give them the opportunity to match.
    • DThe tenant must match the offer, not receive a discount.

15. Question 15 of 25Medium

    Dana signs a statement that she may sell her lot to Luis for $90,000 if she feels like it. Luis promises to deliver $5,000 as earnest money, but Dana makes no commitment to a closing date or to complete the sale. How should the agreement be classified under basic contract principles?

    1. AA. A binding bilateral contract exists because the buyer promised earnest money, both parties signed the same page, and the property was identified.
    2. BB. A binding option exists because Luis's earnest-money promise purchases the right to buy at the stated price.
    3. CC. A binding unilateral contract exists because only Luis has made a definite promise to perform.
    4. DD. No binding bilateral contract exists because the seller's unrestricted discretion makes the promised sale illusory.
    Show answer to question 15

    Answer: D. No binding bilateral contract exists because the seller's unrestricted discretion makes the promised sale illusory.

    A bilateral contract requires definite, mutual obligations. Dana retains unrestricted discretion and makes no commitment to sell, so her promise is illusory and mutuality is lacking. Earnest money or a stated price does not by itself create an option when the seller has not promised to keep the offer open.

    Why the other options are wrong

    • AA signature, identified property, and promised earnest money do not cure the seller's lack of a binding commitment.
    • BAn option requires an enforceable promise to keep an offer open; Dana has made no such promise.
    • CA unilateral contract involves a promise inviting acceptance by performance, not merely an arrangement in which only one party makes a definite promise.

16. Question 16 of 25Medium

    A seller accepts an offer contingent on the buyer selling their current home. The contract includes a 72-hour kick-out clause. After receiving another acceptable offer, the seller gives the first buyer the notice required by the clause. What must the first buyer generally do within the notice period to keep the contract in effect?

    1. AA. Agree to match the second offer's price and other terms.
    2. BB. Waive the inspection and financing contingencies while retaining the home-sale contingency.
    3. CC. Remove the home-sale contingency and satisfy any other requirements specified in the kick-out clause.
    4. DD. Obtain an extension of the purchase closing date while retaining the home-sale contingency.
    Show answer to question 16

    Answer: C. Remove the home-sale contingency and satisfy any other requirements specified in the kick-out clause.

    A kick-out clause generally allows a seller to continue marketing property under a contract containing a home-sale contingency. After the seller gives the required notice of another acceptable offer, the first buyer has the specified period, here 72 hours, to remove the home-sale contingency and satisfy any other requirements stated in the clause. If the buyer does not comply, termination is governed by the contract's terms. Notice procedures, any required evidence of financial ability, and termination mechanisms depend on the contract language.

    Why the other options are wrong

    • AA kick-out clause generally requires removal of the home-sale contingency, not matching a competing offer's price and terms.
    • BWaiving inspection and financing contingencies does not remove the home-sale contingency addressed by the kick-out clause.
    • DExtending the closing date does not satisfy the requirement to remove the home-sale contingency within the notice period.

17. Question 17 of 25Easy

    In a typical residential real estate transaction, the listing agent's primary client is:

    1. AA. The lender
    2. BB. The buyer
    3. CC. The seller
    4. DD. Both the buyer and seller
    Show answer to question 17

    Answer: C. The seller

    The listing agent is hired by and represents the seller as a client, owing fiduciary duties to the seller.

    Why the other options are wrong

    • AThe lender is not a client of the listing agent.
    • BIn the seller agency relationship described, the listing agent represents the seller, not the buyer. The buyer may have a separate buyer's agent or be unrepresented.
    • DDual agency represents both, but typical listing is single agency.

18. Question 18 of 25Medium

    A listing broker lists a property for $300,000 at a 6% commission. A cooperating broker brings a buyer and the sale closes at $290,000. The commission split between listing and cooperating broker is 50/50. What is the cooperating broker's commission?

    1. AA. $18,000
    2. BB. $9,000
    3. CC. $17,400
    4. DD. $8,700
    Show answer to question 18

    Answer: D. $8,700

    The commission is based on the actual sale price of $290,000, not the list price. 6% of $290,000 is $17,400. A 50/50 split gives the cooperating broker $8,700. Using the list price ($300,000) would yield $18,000, and half of that is $9,000, which is incorrect.

    Why the other options are wrong

    • A$18,000 is the commission if calculated on the list price, ignoring the actual sale price.
    • B$9,000 results from using the list price ($300,000) as the base for the commission calculation, then splitting.
    • C$17,400 is the total commission before the split, not the cooperating broker's share.

19. Question 19 of 25Medium

    A buyer verbally agrees to buy a farm from a seller. The buyer pays a portion of the purchase price, takes physical possession, and erects a permanent barn with the seller's consent. If the seller later refuses to deliver a deed citing the lack of a written contract, how will a court most likely rule?

    1. AA. The agreement is voidable solely at the option of the seller.
    2. BB. The agreement may be enforced in equity under the doctrine of part performance.
    3. CC. The contract is completely void because the Statute of Frauds permits no exceptions.
    4. DD. The seller is required only to refund the deposit and may retain the barn.
    Show answer to question 19

    Answer: B. The agreement may be enforced in equity under the doctrine of part performance.

    Part performance is a generally recognized equitable exception to the Statute of Frauds for land-sale agreements. Partial payment, possession, and construction of a permanent barn with the seller's consent strongly support equitable enforcement, typically through specific performance requiring the seller to convey title. Recognition of the doctrine, its requirements, and available remedies vary by jurisdiction; enforcement is not automatic.

    Why the other options are wrong

    • AFailure to satisfy the Statute of Frauds generally concerns enforceability, not a unilateral right of the seller to void the agreement. Part performance may permit equitable enforcement.
    • CThe Statute of Frauds generally makes an unwritten land-sale agreement unenforceable, not void. Equitable exceptions, including part performance where recognized, may permit enforcement.
    • DA refund is not necessarily the buyer's only remedy. Part performance may support specific performance requiring conveyance of the farm, including the permanent barn.

20. Question 20 of 25Medium

    A buyer mails an offer to the seller on Monday. The offer authorizes acceptance by mail and does not require receipt of the acceptance. Assume the common-law mailbox rule applies. The seller receives the offer on Wednesday and properly mails a signed, unconditional acceptance on Thursday. On Friday, before the acceptance letter arrives, the buyer calls the seller and revokes the offer. Which of the following is correct?

    1. AA. A contract was formed on Thursday when the seller mailed the acceptance.
    2. BB. No contract exists because the revocation was communicated by telephone, which is a valid method.
    3. CC. No contract exists because the buyer revoked before receiving the acceptance.
    4. DD. A contract exists only if the buyer receives the acceptance before the revocation is effective.
    Show answer to question 20

    Answer: A. A contract was formed on Thursday when the seller mailed the acceptance.

    Under the common-law mailbox rule, an acceptance properly dispatched by an authorized medium is generally effective when sent, unless the offer requires receipt. Here, the offer authorizes acceptance by mail and does not require receipt, so a contract was formed when the seller properly mailed the acceptance on Thursday. The buyer's attempted revocation on Friday was too late.

    Why the other options are wrong

    • BWhile telephone revocation can be valid, it came after the acceptance was properly mailed, so it was too late.
    • CThe revocation was ineffective because the contract was already formed when the acceptance was properly mailed.
    • DUnder the stated assumptions, acceptance was effective upon proper mailing, not receipt. The buyer's attempted revocation on Friday was too late.

21. Question 21 of 25Easy

    A seller's agent receives a buyer's $2,000 earnest-money deposit, places it in the broker's trust account, gives a receipt, and records every disbursement. Which fiduciary duty is the agent primarily performing?

    1. AA. Accounting by safeguarding and reporting entrusted funds
    2. BB. Confidentiality by protecting the seller's confidential information
    3. CC. Loyalty by advancing the seller's lawful interests
    4. DD. Obedience by following the seller's lawful instructions
    Show answer to question 21

    Answer: A. Accounting by safeguarding and reporting entrusted funds

    Accounting requires an agent to safeguard, receipt, and accurately report money entrusted to the brokerage. The trust-account deposit, written receipt, and disbursement records directly show that duty.

    Why the other options are wrong

    • BConfidentiality protects confidential client information; safeguarding and recording entrusted funds illustrates accounting instead.
    • CLoyalty concerns advancing the client's lawful interests; safeguarding deposits and documenting disbursements specifically illustrates accounting.
    • DObedience concerns following the client's lawful instructions; the actions described illustrate handling and documenting entrusted funds, not compliance with instructions.

22. Question 22 of 25Easy

    In a jurisdiction that permits disclosed dual-agency, a licensee represents both seller Luis and buyer Aisha in the same transaction. Both clients give the required informed consent before Aisha makes an offer. After consent, what may the licensee properly do?

    1. AA. Treat the dual-agency consent as authorization to share the clients' confidential negotiating limits
    2. BB. Use Luis's confidential minimum price to recommend Aisha's offer amount without revealing the source
    3. CC. Give Luis priority in negotiations because his listing agreement was signed first
    4. DD. Keep Luis's minimum acceptable price confidential while dealing honestly with both clients
    Show answer to question 22

    Answer: D. Keep Luis's minimum acceptable price confidential while dealing honestly with both clients

    Where permitted, informed consent authorizes dual-agency, but consent alone does not waive either client's confidentiality. The licensee must deal honestly with both clients, make legally required disclosures, and avoid favoring either client. Luis's confidential minimum acceptable price must not be disclosed without his authorization.

    Why the other options are wrong

    • AConsent to dual-agency alone does not authorize disclosure of either client's confidential negotiating limits.
    • BUsing Luis's confidential minimum to shape Aisha's offer would use one client's confidential information to benefit the other, even if the source is not revealed.
    • CAn earlier listing agreement does not give the seller priority. A dual agent must not favor either client.

23. Question 23 of 25Easy

    Priya's purchase contract is contingent on her obtaining a 30-year mortgage at no more than 6.5% by May 20. She applies promptly, provides all requested documents, and receives a written denial on May 18. She does not waive the contingency. What is her likely contract position?

    1. AA. She may terminate under the financing contingency and seek return of her earnest money
    2. BB. She must close because applying for the loan waived the financing contingency
    3. CC. She must buy at 6.5% even though no lender offered her that rate
    4. DD. She may terminate only if the lender denied her after the May 20 deadline had already passed
    Show answer to question 23

    Answer: A. She may terminate under the financing contingency and seek return of her earnest money

    A financing contingency protects a buyer who cannot obtain the specified financing despite good-faith effort, subject to the contract's notice requirements. Priya's written denial before the deadline supports termination and return of earnest money if she gives any required notice.

    Why the other options are wrong

    • BApplying for financing is good-faith performance and does not waive the financing contingency.
    • CThe clause gives a termination right when financing is unavailable; it does not force a purchase at the maximum rate.
    • DPriya need not wait for a denial after May 20. Her termination right depends on the financing contingency's terms, including any required notice and deadlines.

24. Question 24 of 25Easy

    Jules signs a written 18-month lease for a small retail shop. It identifies the premises, states a start date, and sets monthly rent at $2,800. Which statement about this lease is generally correct?

    1. AA. An 18-month lease generally must be in writing to be enforceable.
    2. BB. A lease transfers ownership of the premises to the tenant immediately.
    3. CC. A landlord may change the rent whenever market conditions increase.
    4. DD. A commercial lease becomes valid only after the tenant opens for business.
    Show answer to question 24

    Answer: A. An 18-month lease generally must be in writing to be enforceable.

    A lease is a contract, and an 18-month term generally falls within the Statute of Frauds because it cannot be performed within one year. A writing signed by the party to be charged provides the evidence needed for enforcement.

    Why the other options are wrong

    • BA lease transfers a possessory interest for a limited term, not ownership of the property.
    • CThe lease controls the rent, and a landlord cannot unilaterally change it during the stated term without contractual authority.
    • DOpening for business is not required to form a lease when the parties have reached an enforceable agreement.

25. Question 25 of 25Easy

    While touring a home, a buyer's agent notices severe water staining on the basement ceiling directly below a first-floor bathroom. The listing disclosure statement indicates no known plumbing issues. To satisfy the fiduciary duty of reasonable care and diligence, what action should the buyer's agent take?

    1. AA. Rely on the disclosure statement unless the seller reports an active leak.
    2. BB. Estimate repair costs from the staining alone and advise the buyer to budget that amount.
    3. CC. Wait until the final walkthrough to determine whether the staining has worsened.
    4. DD. Point out the staining to the buyer and recommend evaluation by a qualified home inspector or plumber.
    Show answer to question 25

    Answer: D. Point out the staining to the buyer and recommend evaluation by a qualified home inspector or plumber.

    Reasonable care and diligence include alerting the buyer to an observed red flag and recommending appropriate expert evaluation. The staining warrants investigation despite the disclosure statement, but it does not establish the cause or prove concealment. Agents should recognize the limits of their competence rather than offer unsupported conclusions. Documenting the recommendation is prudent, but a written recommendation is not a universal national requirement.

    Why the other options are wrong

    • AThe observed staining warrants investigation even if the seller reports no known plumbing issues. Relying solely on the disclosure ignores a visible warning sign.
    • BStaining alone does not establish the cause, scope, or cost of repairs. An unsupported estimate is not a substitute for appropriate expert evaluation.
    • CWaiting until the final walkthrough delays investigation and could leave the buyer without adequate time to evaluate the condition before proceeding.

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