Real Estate Contracts Overview

Questions and Answers

What type of contract is a real estate option contract?

Unilateral Contract (correct)

Written Contract

Verbal Agreement

Bilateral Contract

During an appraisal of a residential property, an appraiser estimates the cost of rebuilding the subject property so that it is identical to its current size and condition. This is an example of what type of appraisal principle?

Change

Contribution

Substitution (correct)

Anticipation

According to the statute of frauds, in order for a real estate sales contract to be enforceable in court, they must be?

in writing

Which of the following terms identifies an element that is essential to creating a valid real estate sales contract?

All of the Above Signup and view all the answers

Define appraised value.

An evaluation of a property's value based on a given point in time performed by a professional appraiser during the mortgage origination process. Signup and view all the answers

What does the 'time is of the essence' clause in a real estate sales contract mean?

Both parties to the contract must perform within the time specified. Signup and view all the answers

As used in property management, the term 'constructive eviction' is best understood to mean?

A tenant has left a property after a landlord has allowed it to become uninhabitable. Signup and view all the answers

The mortgage creates a property lien as security for the note, which gives the details of both the amount of the debt and the terms of repayment. This statement best describes the relationship between a property mortgage and a promissory note.

True Signup and view all the answers

An example of a property suffering from external (economic) obsolescence is?

A car dealership located downwind from a new hog farm. Signup and view all the answers

What type of ownership interest applies to parties who own real property as tenants in common?

The ownership interests may be conveyed separately. Signup and view all the answers

Define reverse annuity.

A loan that provides a series of small monthly payments to the owner rather than a single large payment that must be paid back in installments. Signup and view all the answers

How much of the payment will represent principal if a buyer arranges for a $90,000 mortgage loan with an annual interest rate of 8% and a fixed monthly payment of $745?

$145 Signup and view all the answers

The provisions of the Americans with Disabilities Act (ADA) apply to owners of what types of properties?

All of the Above Signup and view all the answers

Access ramps to government buildings, grab bars in public rest rooms, and a row of pay phones with several placed lower are examples of compliance with what federal law?

Americans with Disabilities Act (ADA) Signup and view all the answers

Puffing is an exaggeration of good points. An example is?

The best view of the mountains in town. Signup and view all the answers

What are the maximum amounts of any profit that would be exempt from capital gains tax?

$250,000 for single filers and $500,000 for married filing joint. Signup and view all the answers

Under federal Fair Housing Act requirements, a property manager of a residential multi-unit property may legally refuse to approve renting a unit in a property exclusively occupied by persons over 65 to?

A single parent with an infant child. Signup and view all the answers

What type of expenses will a firm most likely be responsible for paying for a newly licensed salesperson who has contracted to work for a broker of the firm?

Office space rent and telephone. Signup and view all the answers

What best defines a material defect?

A defect that would affect a buyer's decision to purchase or affect the property's value. Signup and view all the answers

The Truth in Lending Act, also known as the Consumer Credit Protection Act of 1968 and Regulation Z, is a part of which federal laws?

Federal Reserve. Signup and view all the answers

When a deed or lien is placed in public records in order to make them available to anyone searching, this is known as?

Constructive notice of transfer. Signup and view all the answers

A buyer-broker agreement is most likely to create what type of agency relationship?

Buyer's agency. Signup and view all the answers

According to the Truth in Lending Act (Regulation Z), an advertisement for real estate financing must include specific disclosures for?

Finance cost and charges. Signup and view all the answers

Study Notes

Unilateral Contract

A real estate option contract is a type of unilateral contract where only one party makes a promise that is binding.

Substitution

The appraisal principle of substitution estimates rebuilding costs to create a property identical in size and condition during residential property appraisals.

Written Requirement

Sales contracts for real estate must be in writing to be enforceable in court, as per the statute of frauds.

Legal Purpose

A valid real estate sales contract requires the element of legal purpose, ensuring that the contract's intention is lawful.

Appraised Value

Appraised value is the evaluated value of a property at a specific point in time, determined by a professional appraiser during mortgage origination.

Time is of the Essence

A contract including "time is of the essence" mandates that both parties perform within the specified timeframe, reinforcing urgency.

Constructive Eviction

Constructive eviction refers to a tenant leaving a property after the landlord has neglected repairs, making it uninhabitable.

Mortgage and Promissory Note Relationship

A mortgage creates a property lien as security for the promissory note, detailing the debt amount and repayment terms.

External Economic Obsolescence

An example of external economic obsolescence is a car dealership affected by a new hog farm located downwind.

Tenants in Common

Ownership interests as tenants in common allow for separate conveyance of shares among owners.

Reverse Annuity

A reverse annuity provides homeowners with small monthly payments instead of a lump-sum payment, without any existing liens on the property.

Mortgage Payment Breakdown

In a $90,000 mortgage at an 8% annual interest rate with a $745 monthly payment, $145 of the payment represents principal after accounting for interest.

Americans with Disabilities Act (ADA) Applicability

The ADA provisions apply to various properties including multiplex theaters and apartment buildings, ensuring accessibility.

ADA Compliance Examples

Compliance examples for the ADA include access ramps for government buildings and lower pay phones for public use.

Puffing in Real Estate

Puffing refers to exaggerations in property marketing; an example would be claiming to have the best view of the mountains in town.

Capital Gains Tax Exemptions

Profit exemptions from capital gains tax are capped at $250,000 for single filers and $500,000 for married couples filing jointly.

Fair Housing Act Considerations

Under the Fair Housing Act, property managers cannot lawfully deny a single parent with an infant access to a unit in an age-restricted community.

New Licensee Expenses

Newly licensed salespersons typically bear costs for office space rent and telephone expenses under their contract with brokers.

Material Defect Definition

A material defect is defined as a flaw significant enough to impact a buyer's purchasing decision or affect property value.

Truth in Lending Act

The Truth in Lending Act, also known as the Consumer Credit Protection Act, is part of federal laws overseen by the Federal Reserve.

Constructive Notice of Transfer

Constructive notice of transfer occurs when a deed or lien is recorded in public records, making it accessible for public searches.

Buyer's Agency Relationship

A buyer-broker agreement establishes a buyer’s agency, where the broker represents the buyer in real estate transactions.

Advertising Disclosures

The Truth in Lending Act (Regulation Z) mandates particular disclosures regarding finance costs and charges in real estate financing advertisements.

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Description

This quiz covers essential topics related to real estate contracts, including unilateral contracts, the appraisal principle of substitution, and the legal requirements necessary for enforceability. Test your understanding of key concepts that impact the real estate transaction process.