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Questions and Answers
What is one of the responsibilities of an escrow holder in a real property sale?
In a real property sale escrow, what do buyers and sellers typically agree to prorate?
Which type of property transactions must comply with the Real Estate Settlement Procedures Act (RESPA)?
What is one of the essential elements of every valid contract?
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What is the maximum fee or charge a lender may legally impose for the preparation and submission of a Uniform Settlement Statement?
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Which action could lead to the cancellation of an escrow in a real property sale?
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In a real estate transaction, what is considered adequate capacity of parties?
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Which of the following is NOT an essential element of a valid contract?
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What is another term for 'earnest money deposit' in a real estate transaction?
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What is an earnest money deposit in a real estate transaction typically used for?
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When delivering offers to purchase real property, what should a salesperson do if additional offers come in after the initial one was presented to the owner?
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In a real estate transaction, why is it important for a salesperson to inform the seller about the form of deposit received?
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What is the primary purpose of RESPA?
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Why do parties often use an escrow when selling a trust deed?
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What type of fraud is committed by an agent who promises but does not advertise a property as agreed?
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In which way could an agency relationship NOT be created?
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When the broker cashed the buyer's deposit check and refused to return it, what term describes this situation?
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What is the purpose of putting earnest money in escrow?
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Study Notes
Responsibilities of Escrow Holder
- Acts as a neutral third party in real property transactions.
- Safeguards funds, documents, and instructions until all conditions of the sale are met.
Proration Agreements in Real Property Sales
- Buyers and sellers typically agree to prorate property taxes, insurance, and other costs associated with the property.
Compliance with RESPA
- Residential property transactions involving federally related mortgage loans must comply with the Real Estate Settlement Procedures Act (RESPA).
Essential Elements of a Valid Contract
- Mutual assent is crucial; this signifies that both parties must agree to the contract terms.
Maximum Fees for Uniform Settlement Statement
- The maximum fee a lender may impose for preparing and submitting a Uniform Settlement Statement is limited to $0, as it is prohibited under RESPA.
Causes for Escrow Cancellation
- Failure of the buyer to obtain financing or if either party fails to meet contractual obligations can lead to the cancellation of an escrow.
Adequate Capacity of Parties
- Parties involved in a real estate transaction must be of legal age and sound mind to enter into a binding contract.
Non-Essential Element of a Valid Contract
- Consideration is critical; however, minor details or formalities might not be deemed essential.
Alternative Term for Earnest Money Deposit
- "Good faith deposit" is another term commonly used to describe an earnest money deposit.
Purpose of Earnest Money Deposit
- Earnest money is typically used to demonstrate buyer’s commitment to purchasing the property and to secure the transaction.
Handling Additional Offers on Property
- A salesperson should present all offers to the owner in a timely manner, regardless of when they are received.
Importance of Deposit Form Disclosure
- Informing the seller about the type of deposit received ensures transparency and allows the seller to understand the buyer's financial commitment.
Primary Purpose of RESPA
- RESPA aims to protect consumers in the real estate transaction process and ensures transparency of settlement costs.
Use of Escrow in Selling a Trust Deed
- Parties use escrow to ensure that all conditions are met before the transfer of funds and documents occurs, protecting both buyers and sellers.
Type of Fraud by Agent
- Misrepresentation fraud occurs if an agent fails to advertise a property according to their commitments or agreed terms.
Agency Relationship Creation
- An agency relationship cannot be created merely by verbal promises without any written agreement or consistent actions.
Buyer’s Deposit Check Situation
- The situation where a broker cashes the buyer's deposit check and refuses to return it exemplifies wrongful retention or conversion.
Purpose of Putting Earnest Money in Escrow
- The earnest money placed in escrow serves to demonstrate good faith and secure the transaction while protecting all parties' interests.
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Description
Test your knowledge on the essential elements of a valid contract. Find out which elements are necessary for a contract to be considered legally binding.
