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AK Real Estate practice questions

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Question 1Agency, Fiduciary Duties, and Representation

A licensee representing a seller is offered a $2,000 bonus by a buyer's lender to get the sale closed quickly. How should the licensee respond under the fiduciary duty of loyalty?

  1. Accept the bonus only if the seller is told after closing
  2. Accept the bonus because it does not come from the seller
  3. Place the seller's interest above the bonus Correct answer.
  4. Split the bonus with the seller and then proceed

Explanation

Loyalty requires the licensee to put the client's interests ahead of the licensee's own interests and ahead of incentives offered by third parties. A payment designed to influence how the licensee handles the transaction creates a conflict with the seller's interest in obtaining the best terms. The licensee may not accept such a payment and continue to act for the seller without full disclosure and consent.

Question 2Agency, Fiduciary Duties, and Representation

Under Alaska law, when must a licensee give a consumer written notice of the agency relationships that are available?

  1. Only after a purchase agreement has been signed
  2. Before providing any brokerage services Correct answer.
  3. Within 10 days after the first showing
  4. Only when the consumer asks about it

Explanation

Alaska requires the written agency disclosure to be delivered at the first substantive contact, before the licensee begins providing brokerage services to the consumer. The purpose is to let the consumer make an informed choice about representation before any confidential information is shared. Waiting for a contract or for the consumer to ask defeats that purpose.

Question 3Agency, Fiduciary Duties, and Representation

A licensee wants to act as a dual agent representing both the buyer and the seller in the same transaction. What does Alaska require?

  1. Nothing extra, because dual agency is automatic when one brokerage handles both sides
  2. Prior approval from the Alaska Real Estate Commission for that transaction
  3. The informed written consent of both the buyer and the seller Correct answer.
  4. Only the seller's permission, because the seller pays the commission

Explanation

Dual agency is permitted only with the informed, written consent of both parties after a full explanation of the risks and limits of the role. Consent from one side alone is insufficient because both parties give up the right to undivided advocacy. The Commission does not approve individual transactions.

Question 4Agency, Fiduciary Duties, and Representation

A buyer agrees to pay her licensee a flat fee directly. What effect does this have on the licensee's agency relationship with the seller?

  1. It creates an implied agency with the seller
  2. It makes the licensee a dual agent
  3. It makes the licensee a subagent of the listing broker
  4. None; the source of the fee does not create agency Correct answer.

Explanation

Agency arises from an agreement or a course of conduct showing representation, not from who pays the fee. A licensee paid by the buyer represents the buyer and does not become the seller's agent merely because funds change hands. The parties' disclosures and agreements control the relationship.

Question 5Agency, Fiduciary Duties, and Representation

A seller's agent learns during the listing that the seller is going through a divorce. The listing expires without a sale. How long does the duty to keep that information confidential continue?

  1. It ends when the listing agreement expires
  2. It ends 90 days after the closing
  3. It ends when the property is sold to a buyer
  4. It continues after the agency relationship ends Correct answer.

Explanation

Confidentiality is one of the fiduciary duties that survives termination of the agency relationship. A former client must be able to trust that information shared during representation will not later be used against them. There is no fixed cutoff tied to expiration or closing.

Question 6Agency, Fiduciary Duties, and Representation

In Alaska, a licensee who assists both parties in a transaction without representing either of them is acting in what capacity?

  1. A designated broker
  2. A subagent
  3. A dual agent
  4. A neutral licensee Correct answer.

Explanation

Alaska recognizes the neutral licensee, who facilitates a transaction for both parties without representing either and must treat both honestly and fairly. Written consent from both parties is required. Because no agency exists, the neutral licensee supplies information rather than advocacy.

Question 7Agency, Fiduciary Duties, and Representation

A licensee receives a $5,000 earnest money deposit from a buyer. What does the fiduciary duty of accounting require the licensee to do with the funds?

  1. Hold the funds in his own personal account until the closing occurs
  2. Deposit the funds in the broker's trust account and keep records Correct answer.
  3. Apply the funds to marketing costs if the transaction stalls
  4. Return the funds to the buyer whenever the buyer asks for them

Explanation

Client and transaction funds must be held in the broker's trust account and accounted for with accurate records under the duty of accounting. Commingling client money with operating funds is prohibited. Disbursement follows the contract terms and any applicable release requirements, not the buyer's request alone.

Question 8Agency, Fiduciary Duties, and Representation

A seller tells her listing licensee, "I'll take $40,000 below asking because I have to move in 30 days." A buyer's agent asks the listing licensee whether the seller is flexible. What should the listing licensee do?

  1. Hint that the seller might negotiate but not state a number
  2. Reveal the bottom line to help generate an offer
  3. Keep it confidential and not disclose the seller's bottom line Correct answer.
  4. Tell the buyer's agent the exact figure only for a written offer

Explanation

The seller's motivation and negotiating floor are confidential information that the listing licensee may not share with the buyer's side. Revealing or hinting at it would weaken the seller's bargaining position in breach of loyalty. The licensee may decline to answer without making any misleading statement.

Question 9Agency, Fiduciary Duties, and Representation

A buyer's agent knows the buyer is preapproved for $600,000, but the buyer has told the seller's side he can spend $450,000. The listing licensee asks the buyer's agent for the preapproval amount. What should the buyer's agent do?

  1. Decline, because the amount is confidential client information Correct answer.
  2. Disclose it once the buyer submits a written offer to the seller
  3. Disclose it, because lenders share preapproval data with all parties
  4. Disclose it if the seller's agent promises not to tell the seller

Explanation

A buyer's financial capacity and preapproval amount are confidential client information that the buyer's agent must not reveal to the other side. Divulging it would undercut the buyer's negotiating position in breach of loyalty and confidentiality. The agent should decline and may explain that the buyer has submitted proof of funds at an appropriate level.

Question 10Agency, Fiduciary Duties, and Representation

A licensee is a dual agent in a transaction. The seller asks the licensee to write an aggressive counteroffer designed to pressure the buyer. How should the dual agent proceed?

  1. Explain the options and present the counteroffer neutrally Correct answer.
  2. Refuse to write any counteroffer while acting as a dual agent
  3. Write it, then tell the buyer the seller is being unreasonable
  4. Write the counteroffer exactly as instructed, because the seller is a client

Explanation

A dual agent must not advocate for one client at the expense of the other, but may still perform services such as preparing and conveying offers and counteroffers. The agent should explain the parties' choices and communicate them accurately and evenhandedly. Pressure tactics that favor one side breach the duty owed to the other.

Question 11Agency, Fiduciary Duties, and Representation

A licensee wants to buy a home that her own client has listed. What must the licensee do to satisfy her fiduciary obligations?

  1. Have a colleague at another brokerage write the offer instead
  2. Nothing special, as long as she pays the asking price
  3. Make full written disclosure of her interest and obtain consent Correct answer.
  4. Resign the listing without telling the client why

Explanation

Buying a client's property is self-dealing that puts the licensee's personal interest in direct conflict with the duty of loyalty. The licensee must disclose the interest in writing and obtain the client's informed consent, and often should step back from negotiations or advise independent advice. Paying full price or using another brokerage does not remove the conflict.

Question 12Agency, Fiduciary Duties, and Representation

A seller's agent receives a full-price offer on Friday and a slightly higher offer on Monday, after the seller has verbally accepted the first. What should the agent do?

  1. Return the second offer unopened to the buyer's agent
  2. Present the second offer to the seller promptly and let the seller decide Correct answer.
  3. Hold the second offer without telling the seller, since the first was accepted
  4. Tell the second buyer the property is already sold

Explanation

The duty to present all offers promptly continues until the transaction is closed. A verbal acceptance is not necessarily binding, and the seller is entitled to decide how to respond to a better offer. The agent may not screen offers or make the decision for the client.

Question 13Agency, Fiduciary Duties, and Representation

A seller instructs his licensee to prepare a listing that omits a known water intrusion problem so the home will show better. How should the licensee respond?

  1. Comply, because the seller controls the marketing of his own property
  2. Refuse, because obedience does not require unlawful acts Correct answer.
  3. Comply only if the buyer does not ask about water problems
  4. Comply, but note the defect in a private file

Explanation

The duty of obedience covers lawful instructions only and never requires a licensee to participate in misrepresentation or concealment of a known material defect. Advertising that omits a known defect with the intent to deceive is a license-law violation and potential fraud. The licensee should decline and explain the disclosure obligation to the seller.

Question 14Agency, Fiduciary Duties, and Representation

A listing broker offers a cooperating licensee a share of the commission. What agency relationship does this create between the cooperating licensee and the seller?

  1. A dual agency, because both brokers are paid from the same fund
  2. A limited agency that lasts until the closing
  3. None, unless the seller separately agrees to that representation Correct answer.
  4. A subagency, because the licensee is paid from the seller's proceeds

Explanation

An offer of compensation is an offer to share a fee; it does not by itself make the cooperating licensee the seller's agent. The cooperating licensee represents whichever party has agreed to that representation, and any relationship with the seller requires the seller's own agreement. Payment from the transaction proceeds is not the test for agency.

Question 15Agency, Fiduciary Duties, and Representation

A licensee showing her own listing to an unrepresented buyer notices a freshly painted patch on the ceiling that she knows covers a recently repaired roof leak. What should she do?

  1. Disclose the leak, because honesty with all parties is required Correct answer.
  2. Say nothing, but suggest the buyer hire a home inspector
  3. Disclose it only if the buyer signs a representation agreement
  4. Say nothing, because the buyer is not her client

Explanation

A licensee owes honesty and fair dealing to every party, and may not conceal known material facts even when the other party is unrepresented. The duty to avoid misrepresentation does not depend on whether a client relationship exists. Suggesting an inspection does not excuse silently covering up a known defect.

Question 16Agency, Fiduciary Duties, and Representation

In Alaska, a neutral licensee is working with both parties to a transaction. Which activity fits that role?

  1. Negotiating on the seller's behalf to get the highest price
  2. Giving both parties factual information about the process Correct answer.
  3. Recommending a specific price the buyer should offer
  4. Advising the buyer to waive the inspection contingency

Explanation

A neutral licensee facilitates the transaction and may supply factual information about the property and the process to both parties. What the neutral licensee may not do is advise, advocate, or negotiate on behalf of either party. Advice of that kind crosses into representation the parties did not authorize.

Question 17Agency, Fiduciary Duties, and Representation

A brokerage represents both the buyer and the seller in the same transaction using two different affiliated licensees, one assigned to each party, with the parties' written consent. What is this arrangement called?

  1. Subagency
  2. A neutral licensee arrangement
  3. Designated agency within the brokerage Correct answer.
  4. A net listing

Explanation

Designated agency assigns separate affiliated licensees to represent each side within one brokerage, so each party has an advocate while the broker supervises both. It is used to reduce the conflicts that arise when a single brokerage handles both sides. It requires disclosure and consent and is distinct from dual agency, neutral facilitation, and subagency.

Question 18Agency, Fiduciary Duties, and Representation

A licensee whose practice is mostly residential agrees to help a client buy a small commercial building. Which action best satisfies the fiduciary duty of care?

  1. Disclose the limits of her experience and seek qualified help Correct answer.
  2. Rely on the client to verify all zoning and environmental issues
  3. Proceed without mentioning her background, since her license is active
  4. Promise the client the building meets all current codes

Explanation

The duty of care requires the skill and competence reasonably expected for the services undertaken. When a licensee lacks expertise in a property type, she must disclose that limitation and obtain qualified assistance rather than proceed as if fully competent. Careless assurances about code compliance compound the problem.

Question 19Agency, Fiduciary Duties, and Representation

A seller's licensee discovers that the buyer making an offer is her own cousin. What does the duty of disclosure require?

  1. Nothing, because family relationships are private matters
  2. Withdraw from the listing immediately without explanation
  3. Nothing, as long as the cousin pays the full asking price
  4. Disclose the relationship so the seller can evaluate the offer Correct answer.

Explanation

Loyalty and full disclosure require the agent to tell the client about any personal relationship that could affect the transaction or the client's confidence in the agent. The seller needs that information to assess the offer and decide whether to continue the representation. A full-price offer does not erase the conflict, and silent withdrawal is not the required remedy.

Question 20Agency, Fiduciary Duties, and Representation

A licensee acts for both the buyer and the seller in the same transaction without ever obtaining written consent, and the buyer later learns the licensee told the seller the buyer's top price. What is the most serious problem with the licensee's conduct?

  1. The licensee breached fiduciary duties by acting without consent and disclosing confidences Correct answer.
  2. The licensee acted as a neutral licensee instead of a dual agent
  3. The licensee charged a commission that was not disclosed to the buyer
  4. The licensee failed to give the buyer a copy of the purchase agreement

Explanation

Acting for both parties without informed written consent, then using one party's confidential price information to benefit the other, is a fundamental breach of loyalty and confidentiality. These breaches expose the licensee to license discipline and civil liability. The disclosure and consent requirements exist precisely to prevent this kind of harm.

Question 21Agency, Fiduciary Duties, and Representation

A seller's licensee knows the seller has decided not to mention a basement that flooded several years ago. A buyer touring the home asks the licensee directly, "Has this basement ever flooded?" How should the licensee answer?

  1. Say "I don't know" to protect the seller's confidential information
  2. Decline to answer and end the showing
  3. Disclose the flooding rather than make a misleading statement Correct answer.
  4. Refer the buyer to the seller and say nothing further

Explanation

Confidentiality does not authorize a licensee to make a false or misleading statement about a known material fact. The licensee must disclose the known condition or respond in a way that does not mislead the buyer. Protecting the seller's preference for silence cannot justify deception of a buyer.

Question 22Agency, Fiduciary Duties, and Representation

A buyer's agent will earn a substantially larger commission if the buyer chooses one of two homes. The buyer asks which home the agent recommends. What is the best course of action?

  1. Disclose the commission difference and recommend based on needs Correct answer.
  2. Recommend the pricier home because it is likely to appreciate more
  3. Recommend the pricier home without discussing the commission
  4. Let the listing agents compete on commission before advising

Explanation

Loyalty and full disclosure require an agent to reveal any personal financial interest that could influence a recommendation. Once the commission differential is disclosed, the agent should advise the buyer based on the buyer's stated needs and budget. Silence about the incentive while recommending the higher-paying home conceals a conflict.

Question 23Agency, Fiduciary Duties, and Representation

A licensee working as a neutral licensee in Alaska is asked by the buyer, "What price should I offer?" What is the best response?

  1. Give a recommended price only if the seller is not present
  2. Explain that a neutral licensee cannot advise on price Correct answer.
  3. Give a recommended price, since the licensee is helping both sides
  4. Suggest a price but label it as the seller's opinion

Explanation

A neutral licensee represents neither party and therefore may not give advice or opinions that take the place of representation. The licensee should explain the neutral role, provide factual information, and suggest that the buyer obtain advice from someone acting on the buyer's behalf. Labeling advice as someone else's opinion does not cure the problem.

Question 24Agency, Fiduciary Duties, and Representation

While chatting at an open house, a listing licensee mentions to a buyer's agent that the seller must close within three weeks or lose a home he is buying. The buyer's agent's own client has offered well below asking. What should the buyer's agent do with that information?

  1. Keep it secret unless the seller agrees to its release in writing
  2. Keep it secret because it was told to her by the other side
  3. Tell other prospective buyers so the market stays informed
  4. Disclose it to her buyer client as relevant information Correct answer.

Explanation

The duty of disclosure runs to the licensee's own client, and material information relevant to the transaction obtained from any source must be shared with that client. The seller's timing pressure is not the buyer's agent's confidence to keep. Sharing it with other buyers, by contrast, would be disloyal to her own client.

Question 25Contracts and Transaction Documents

Which of the following is an essential element of a valid real estate sales contract?

  1. An owner's title insurance policy
  2. Offer and acceptance between the parties Correct answer.
  3. A licensed appraisal of the property
  4. A satisfactory home inspection

Explanation

A valid real estate contract requires mutual assent (offer and acceptance), consideration, competent parties, a lawful purpose, and a writing that satisfies the statute of frauds. Inspections, title insurance, and appraisals are negotiated contingencies or closing costs, not validity requirements.

Question 26Contracts and Transaction Documents

What is the primary purpose of earnest money in a purchase agreement?

  1. To reserve the property for the buyer indefinitely
  2. To cover the seller's title insurance premium
  3. To show the buyer's good-faith intent to perform Correct answer.
  4. To pay the broker's commission at closing

Explanation

Earnest money is a deposit that evidences the buyer's seriousness and gives the seller security against a buyer who defaults without excuse. It is normally credited to the buyer at closing and may be forfeited if the buyer breaches without a contractual excuse.

Question 27Contracts and Transaction Documents

Under an exclusive right to sell listing, the seller agrees that:

  1. the seller may sell the property personally and owe no commission
  2. the broker is paid if anyone, including the seller, procures a buyer Correct answer.
  3. the broker is paid only if the broker personally finds the buyer
  4. the listing may be cancelled by the seller at any time without penalty

Explanation

An exclusive right to sell entitles the broker to a commission no matter who procures the buyer, including the seller acting alone. It is the broadest listing arrangement and differs from an exclusive agency listing, which protects the seller's own procuring cause.

Question 28Contracts and Transaction Documents

Under Alaska agency rules, when should a licensee deliver the agency disclosure to a consumer?

  1. After the licensee has shown the consumer at least one property
  2. Before the consumer reveals confidential information Correct answer.
  3. Only after the consumer signs a written purchase agreement
  4. Only after the consumer specifically asks whether agency applies

Explanation

Agency disclosure must occur at the earliest practicable opportunity, before the consumer shares confidential information with the licensee. Disclosure exists so the consumer knows whom the licensee represents before relying on that licensee.

Question 29Contracts and Transaction Documents

A buyer submits an offer. The seller responds with a signed document that changes the price. What is the effect?

  1. The original offer is rejected and a counteroffer is created Correct answer.
  2. The original offer remains open until the buyer responds
  3. The buyer must accept the new price within 24 hours
  4. The change is an acceptance if the price change is small

Explanation

An acceptance must mirror the offer. A change in price is a material term, so the seller's response operates as a counteroffer, which terminates the buyer's original offer.

Question 30Contracts and Transaction Documents

A purchase agreement includes a home inspection contingency. What does it typically give the buyer?

  1. A guarantee that the seller repairs every defect
  2. The right to cancel or renegotiate within a set period Correct answer.
  3. The right to occupy the home before closing
  4. An extension of the closing date at the buyer's option

Explanation

An inspection contingency gives the buyer a stated period to investigate the property and then elect to proceed, terminate, or request repairs or a price adjustment. It protects the buyer without automatically obligating the seller to make repairs.

Question 31Contracts and Transaction Documents

Which statement correctly distinguishes a promissory note from a deed of trust?

  1. The note is the promise to repay; the deed of trust secures it Correct answer.
  2. The note transfers title; the deed of trust is a receipt
  3. The note secures the property; the deed of trust is the debt
  4. The note is recorded; the deed of trust is not

Explanation

The promissory note contains the borrower's personal promise to repay the loan on stated terms. The deed of trust is the security instrument that conveys a lien interest to a trustee and is the document typically recorded in the land records.

Question 32Contracts and Transaction Documents

A purchase agreement contains no clause restricting assignment. Before closing, the buyer assigns the contract to a third party. What is the likely result?

  1. The original buyer is released from all further obligations
  2. The seller may keep the earnest money and cancel the sale
  3. The assignment is void because contracts for land cannot be assigned
  4. The assignee assumes the duty; the assignor remains liable Correct answer.

Explanation

Contract rights are generally assignable unless the agreement prohibits it or the duties are personal in nature. The assignee steps into the buyer's position, but unless there is a novation the original buyer remains bound.

Question 33Contracts and Transaction Documents

A broker is holding earnest money when both the buyer and the seller demand it. What should the broker do?

  1. Pay the money to the seller because the buyer breached
  2. Hold the funds until there is a written release or a court order Correct answer.
  3. Split the money evenly between the two parties
  4. Return the money to the buyer because the buyer deposited it

Explanation

When entitlement to trust funds is disputed, the broker must not choose sides. The funds stay in the trust account until the parties sign a written release or a court decides the dispute.

Question 34Contracts and Transaction Documents

A liquidated damages clause in a real estate contract is generally enforceable when:

  1. the amount is a reasonable forecast and damages are hard to estimate Correct answer.
  2. the amount equals exactly the broker's commission
  3. the parties agree to it after the default occurs
  4. the clause penalizes the breaching party for any reason

Explanation

A liquidated damages provision is enforceable when actual damages would be difficult to determine and the agreed amount is a reasonable estimate of probable loss at the time of contracting. A clause that functions as a punishment is treated as an unenforceable penalty.

Question 35Contracts and Transaction Documents

A seller emails the buyer an acceptance typed with the seller's name, but no inked signature is used. Can the statute of frauds be satisfied?

  1. No, because email messages never satisfy the statute of frauds
  2. No, because real estate contracts require an ink signature
  3. Yes, if the electronic signature is attributable to the seller Correct answer.
  4. Yes, because any email exchange creates a binding contract

Explanation

Electronic records and electronic signatures are recognized under Alaska's adoption of the Uniform Electronic Transactions Act, so a typed signature attributable to the party to be charged can satisfy the writing requirement. The message must still contain the essential terms and show mutual assent.

Question 36Contracts and Transaction Documents

Which statement about an option to purchase is correct?

  1. The optionor may revoke the option at any time before exercise
  2. The optionee may choose whether to buy during the option period Correct answer.
  3. The optionee must buy the property at the end of the term
  4. The option automatically renews if the optionee does not act

Explanation

An option is a one-way agreement: the optionee holds the right, but not the duty, to purchase within the stated period. The optionor must keep the offer open for the term because the optionee has paid consideration for that right.

Question 37Contracts and Transaction Documents

When does a real estate broker begin to owe fiduciary duties to a buyer?

  1. When a written agency agreement between them takes effect Correct answer.
  2. When the buyer makes an offer on a property
  3. After the broker has shown the buyer three properties
  4. When the seller accepts the buyer's offer

Explanation

Fiduciary duties arise from the agency relationship, which is created by the written agreement between broker and buyer. Showing property or writing an offer as a customer does not by itself create the duties.

Question 38Contracts and Transaction Documents

What is the primary function of a seller's residential property transfer disclosure statement?

  1. To disclose known material defects to the buyer Correct answer.
  2. To substitute for the buyer's own inspection
  3. To guarantee the home is free of defects
  4. To transfer title at closing

Explanation

The disclosure statement requires the seller to reveal known material defects and other specified conditions so the buyer can make an informed decision. It does not warranty the property and does not replace inspections or a deed.

Question 39Contracts and Transaction Documents

What is the effect of a 'time is of the essence' clause in a purchase agreement?

  1. It applies only to the buyer's financing deadline
  2. It makes the stated deadlines material so delay can be a breach Correct answer.
  3. It removes the closing date from the contract entirely
  4. It allows either party to perform within a reasonable time

Explanation

The clause makes the stated dates, including the closing date, material terms. A party who misses a deadline without an extension or waiver commits a breach that may allow the other party to terminate.

Question 40Contracts and Transaction Documents

In a contract for deed, who holds legal title during the payment period?

  1. The lender, until the contract is satisfied
  2. The buyer, because the buyer occupies the property
  3. The seller, until the final payment is received Correct answer.
  4. An escrow agent, until the final payment is made

Explanation

Under a contract for deed the buyer receives possession and equitable title while making payments, but the seller keeps legal title. The deed is delivered only after the final payment, which is the central risk buyers accept in this financing arrangement.

Question 41Contracts and Transaction Documents

A buyer closes on a home and later discovers a leaking roof, even though the contract stated the roof was in good repair. Which doctrine most likely limits a claim based on that contract promise?

  1. The doctrine of part performance
  2. The doctrine of promissory estoppel
  3. The doctrine of merger Correct answer.
  4. The doctrine of anticipatory repudiation

Explanation

Under merger, the deed supersedes the purchase agreement at closing and prior contractual promises generally merge into the deed. Surviving claims usually rest on fraud, mistake, or obligations the contract expressly states will survive closing.

Question 42Contracts and Transaction Documents

A tenant holds a right of first refusal on the leased building. This means the tenant may:

  1. match any bona fide offer the owner receives Correct answer.
  2. compel the owner to sell at a price the tenant sets
  3. buy the property only after the owner's death
  4. block any sale of the property permanently

Explanation

A right of first refusal lets the holder step into the shoes of a third-party buyer by matching that buyer's bona fide offer. The holder cannot force a sale or set the price; the right is triggered only when the owner decides to sell.

Question 43Contracts and Transaction Documents

A buyer with a valid contract to purchase a distinctive home wants the property itself rather than money. Which remedy should the buyer seek?

  1. Specific performance Correct answer.
  2. Rescission of the contract
  3. A lis pendens filing alone
  4. Liquidated damages

Explanation

Because every parcel of real estate is treated as unique, a buyer who wants the property may seek specific performance, a court order compelling the seller to convey. Money damages and rescission are substitutes when the buyer does not want the land.

Question 44Contracts and Transaction Documents

The buyer under a signed purchase agreement dies before closing. What happens to the contract?

  1. The seller may keep the earnest money without proof of loss
  2. The contract is void because capacity is lost
  3. The contract binds the buyer's estate, which may still close Correct answer.
  4. The contract terminates automatically on death

Explanation

Real estate contracts are generally binding on the heirs, estate, and successors of a deceased party. The estate may complete the purchase or be held to the contract's remedies, because capacity is measured when the contract was formed.

Question 45Contracts and Transaction Documents

A seller orally agrees to sell a parcel and later refuses to convey. What must the buyer show to enforce the agreement against the seller?

  1. Proof that the buyer paid a deposit toward the price
  2. Two witnesses who overheard the agreement being made
  3. A writing signed by the seller describing the land and terms Correct answer.
  4. A recorded lis pendens notice filed by the buyer

Explanation

The statute of frauds requires a writing signed by the party to be charged, here the seller, that identifies the land and the essential terms. Oral land sale agreements are generally unenforceable against the seller absent a recognized exception.

Question 46Contracts and Transaction Documents

A seller markets a home 'as-is' but knows the foundation is failing and says nothing. Which statement is most accurate?

  1. The listing broker must repair the defect before closing
  2. The seller may still be liable for the undisclosed known defect Correct answer.
  3. The as-is clause bars any claim the buyer may have
  4. The seller is liable only if the buyer hired no inspector

Explanation

An as-is sale allocates the risk of unknown conditions to the buyer, but it does not authorize concealment of known material defects. A seller who knowingly fails to disclose may face liability for misrepresentation or fraud.

Question 47Contracts and Transaction Documents

Which of these contracts is voidable rather than void?

  1. A contract entered by a buyer who was a minor Correct answer.
  2. A contract that omits a closing date
  3. A contract that describes no property
  4. A contract made for an illegal purpose

Explanation

A contract made by a person lacking capacity, such as a minor, is voidable at that person's election, meaning it can be ratified or disaffirmed. Void contracts, such as those for an unlawful purpose or lacking a subject matter, have no legal effect from the start.

Question 48Contracts and Transaction Documents

Before closing, the seller sends the buyer written notice that she will not convey the property. What may the buyer do?

  1. Nothing until the closing date has passed
  2. Treat the contract as breached and sue immediately Correct answer.
  3. Only recover the earnest money from escrow
  4. Wait for the seller to be sued for possession

Explanation

A clear, unequivocal refusal to perform before the due date is an anticipatory repudiation, which the buyer may treat as a present breach. The buyer may then sue for damages or specific performance without waiting for the closing date.

Question 49Real Estate Financing and Lending

A buyer purchases a $300,000 home with a $60,000 down payment and finances the remainder. What is the loan-to-value ratio?

  1. 80% Correct answer.
  2. 90%
  3. 75%
  4. 20%

Explanation

Loan-to-value is the loan amount divided by the property value: $240,000 / $300,000 = 0.80. Lenders use LTV to gauge risk, and higher ratios usually trigger mortgage insurance or a higher rate.

Question 50Real Estate Financing and Lending

Which loan program is guaranteed by the U.S. Department of Veterans Affairs and commonly allows eligible buyers to finance the full purchase price?

  1. An FHA-insured loan
  2. A VA-guaranteed loan Correct answer.
  3. A USDA Section 502 loan
  4. A conventional conforming loan

Explanation

VA loans carry a guaranty from the Department of Veterans Affairs rather than mortgage insurance, and eligible veterans can typically obtain 100% financing. The VA guaranty reimburses the lender for a portion of any loss.