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NV Real Estate practice questions

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Question 1Nevada Real Estate Division, Commission, and Licensing Law

The Nevada Real Estate Division is organized within which department of state government?

  1. The Department of Business and Industry Correct answer.
  2. The Office of the Secretary of State and its licensing boards
  3. The Department of Motor Vehicles
  4. The Department of Taxation

Explanation

NRS 645 places the Real Estate Division inside the Department of Business and Industry, whose Director appoints the Administrator who runs the Division. The Real Estate Commission is a separate body whose members are appointed by the Governor.

Question 2Nevada Real Estate Division, Commission, and Licensing Law

Members of the Nevada Real Estate Commission are appointed by:

  1. The Governor Correct answer.
  2. The Administrator of the Division
  3. A majority vote of the state's licensed brokers
  4. The Director of the Department of Business and Industry

Explanation

Commissioners are gubernatorial appointees, which keeps the policy and disciplinary body independent of the Division's staff. The Director of the Department appoints the Administrator, not the Commissioners.

Question 3Nevada Real Estate Division, Commission, and Licensing Law

What is the minimum age at which a person may hold a Nevada real estate salesperson license?

  1. 17
  2. 19
  3. 18 Correct answer.
  4. 16

Explanation

An applicant for a salesperson license must be at least 18 years of age at the time of application. Age is verified along with the other statutory qualifications such as education and honesty.

Question 4Nevada Real Estate Division, Commission, and Licensing Law

A Nevada real estate salesperson license authorizes the holder to:

  1. Operate an independent brokerage after one year of experience
  2. Act only while associated with a licensed broker Correct answer.
  3. Negotiate transactions without any supervising licensee
  4. Collect commissions directly from clients

Explanation

A salesperson license is a subordinate license; the salesperson may perform brokerage activities only while associated with and supervised by a licensed broker. Independent brokerage requires a broker license.

Question 5Nevada Real Estate Division, Commission, and Licensing Law

A salesperson earns a commission on a completed sale. From whom may the salesperson lawfully be paid?

  1. An escrow officer who disburses funds
  2. The broker the salesperson is associated with Correct answer.
  3. The buyer directly at closing
  4. The listing client, if the client agrees

Explanation

Commissions earned by a salesperson are paid to the associated broker, who then pays the salesperson under their agreement. This rule prevents unlicensed or unsupervised splitting of real estate compensation.

Question 6Nevada Real Estate Division, Commission, and Licensing Law

Under Nevada law, a person who for compensation lists or sells real property owned by another must:

  1. Post a surety bond with the State Treasurer
  2. Obtain a city business license only
  3. Hold an active real estate license Correct answer.
  4. Register with the county recorder

Explanation

NRS 645 requires a license for any person who, for compensation, engages in real estate brokerage for another. Acting without a license is unlawful and subject to enforcement action by the Division.

Question 7Nevada Real Estate Division, Commission, and Licensing Law

The Nevada Real Estate Commission has five members. How is that membership divided?

  1. Two licensees and three members of the public
  2. Five licensees, all of them brokers
  3. Three licensees and two public members Correct answer.
  4. Four licensees and one public member

Explanation

The Commission is composed of five gubernatorial appointees: three licensed real estate practitioners and two representatives of the general public. The public seats ensure consumer perspective in licensing and disciplinary decisions.

Question 8Nevada Real Estate Division, Commission, and Licensing Law

Which statement correctly describes the discipline roles of the Real Estate Administrator and the Commission?

  1. The Director of the Department hears all license revocation cases
  2. The Governor decides all disciplinary cases on appeal from the Division
  3. The Commission conducts investigations while the Administrator imposes all discipline
  4. The Administrator prosecutes complaints; the Commission decides them. Correct answer.

Explanation

The Division, through the Administrator, screens and prosecutes disciplinary complaints, while the Commission sits as the adjudicative body that holds the hearing and orders any discipline. This separation mirrors standard administrative practice.

Question 9Nevada Real Estate Division, Commission, and Licensing Law

A salesperson plans to advertise a property she has listed. What must the advertisement do?

  1. Include the licensed name of her broker Correct answer.
  2. Avoid mentioning that a broker is involved
  3. Use any trade name she registers with the Division
  4. Show only her personal name and telephone number

Explanation

Advertising by a licensee must identify the broker with whom the licensee is associated, and the broker is responsible for approving the advertising. This ensures the public knows which brokerage stands behind the promotion.

Question 10Nevada Real Estate Division, Commission, and Licensing Law

A Nevada broker receives a buyer's earnest money deposit on a sale. How must the broker handle the funds?

  1. Deposit them into the broker's general business operating account
  2. Turn them over to the seller immediately upon receipt
  3. Hold them personally until the transaction closes
  4. Keep them in a trust account separate from the broker's own funds Correct answer.

Explanation

Money held for clients must be placed in a designated trust account and may not be commingled with the broker's personal or business funds. The broker acts as a fiduciary until the funds are disbursed as the transaction directs.

Question 11Nevada Real Estate Division, Commission, and Licensing Law

Which is required of a licensed Nevada real estate broker?

  1. An office located in another state if most clients live there
  2. A surety bond equal to one year of earned commissions
  3. A separate trust account for each individual client
  4. A definite place of business in Nevada Correct answer.

Explanation

A broker must maintain a definite place of business in this State, and the broker's license must be kept posted there so the public and the Division can identify the office. Records and trust accounts are tied to that office.

Question 12Nevada Real Estate Division, Commission, and Licensing Law

After a hearing on a formal complaint, which body may suspend or revoke a Nevada real estate license?

  1. The Real Estate Administrator
  2. The district court where the licensee works
  3. A hearing officer acting alone
  4. The Real Estate Commission Correct answer.

Explanation

The Commission is the body vested with authority to impose discipline, including suspension and revocation, after notice and hearing. The Administrator brings the complaint but does not decide the outcome.

Question 13Nevada Real Estate Division, Commission, and Licensing Law

A licensee asks an unlicensed friend to hold open houses and discuss listing terms with buyers. What is the licensee's legal position?

  1. It is prohibited because it aids unlicensed activity Correct answer.
  2. It is permissible because the friend receives no pay
  3. It is permissible for open houses but not negotiations
  4. It is permissible if the broker gives written consent

Explanation

A licensee may not aid or assist an unlicensed person in performing acts that require a license, and doing so is a ground for discipline. Compensation is not the test; discussing listing terms and showing property for another is brokerage activity.

Question 14Nevada Real Estate Division, Commission, and Licensing Law

How many hours of approved pre-licensing education must a Nevada salesperson applicant complete before a license is issued?

  1. 45 hours
  2. 90 hours Correct answer.
  3. 30 hours
  4. 60 hours

Explanation

Nevada requires 90 clock hours of approved pre-licensing instruction covering the prescribed subjects before a salesperson license is issued. An applicant for a broker license builds on that foundation with additional broker-level coursework.

Question 15Nevada Real Estate Division, Commission, and Licensing Law

To qualify for a Nevada real estate broker license, an applicant generally must have:

  1. Five years of experience as a licensed salesperson
  2. A four-year college degree in business
  3. Two years of experience as a licensed salesperson Correct answer.
  4. Ten closed transactions as a principal

Explanation

The broker applicant must show at least two years of active experience as a licensed salesperson, or equivalent experience acceptable to the Commission, along with the required broker education and examination. Transactions as a principal do not substitute for licensed experience.

Question 16Nevada Real Estate Division, Commission, and Licensing Law

A licensed salesperson wants to move to a different brokerage. When may she begin working under the new broker?

  1. Immediately, after a verbal agreement with the new broker
  2. Whenever the former broker signs a release of commissions
  3. Once she mails the Division a change-of-address postcard
  4. Once the Division has transferred her license to the new broker Correct answer.

Explanation

A salesperson license is issued to and held by the broker with whom the salesperson is associated, so the licensee may act for a new broker only after the Division has issued or transferred the license reflecting that association. Until then, activity for the new firm is unlicensed.

Question 17Nevada Real Estate Division, Commission, and Licensing Law

The Real Estate Education, Research and Recovery Fund exists primarily to:

  1. Pay the operating costs of the Division's licensing staff
  2. Provide retirement benefits for licensed brokers
  3. Underwrite commission disputes between competing brokers
  4. Pay certain court judgments obtained against licensees Correct answer.

Explanation

The fund may pay a person who has obtained a judgment against a licensee for conduct such as fraud or misrepresentation in a real estate transaction when the licensee cannot pay. A licensee whose conduct draws on the fund must later reimburse it.

Question 18Nevada Real Estate Division, Commission, and Licensing Law

Which statement about the position of Real Estate Administrator is correct?

  1. Selected by the Commission from among its licensed members
  2. Appointed by the Director of the Department of Business and Industry Correct answer.
  3. Appointed by the Governor and confirmed by the Senate for a four-year term
  4. Elected by the state's licensed brokers in a general election each four years

Explanation

The Administrator is appointed by the Director of the Department of Business and Industry and serves at the head of the Division's staff. Commissioners, by contrast, are appointed by the Governor.

Question 19Nevada Real Estate Division, Commission, and Licensing Law

A corporation wishes to be licensed as a real estate broker in Nevada. What does the law require?

  1. Every corporate officer must hold a salesperson license
  2. It must operate without any licensed individual in charge
  3. It must license every shareholder individually as a broker
  4. It must designate a licensed broker to act for it Correct answer.

Explanation

A business entity that provides brokerage services must hold a broker license and designate an individual licensed broker as its representative. The entity's authority depends on that designated broker remaining licensed and associated with the firm.

Question 20Nevada Real Estate Division, Commission, and Licensing Law

Following a hearing, which action falls within the Commission's disciplinary authority?

  1. Award the complaining consumer punitive damages
  2. Impose a fine and require additional education Correct answer.
  3. Order the licensee to serve jail time for a first violation
  4. Place a lien on the licensee's personal residence

Explanation

The Commission may revoke or suspend a license, impose administrative fines, order education or other conditions, and reprimand the licensee. Criminal sentences and money damages are for courts, not the licensing agency.

Question 21Agency Relationships and Fiduciary Duties

A listing agent tells a prospective buyer that the seller "would probably take $20,000 less" than the listed price. Which fiduciary duty has the agent breached?

  1. Accounting
  2. Reasonable skill and care
  3. Obedience
  4. Confidentiality Correct answer.

Explanation

An agent must not reveal information the client expects to be kept private, especially facts that would weaken the client's negotiating position, such as a willingness to accept less than the asking price. This duty of confidentiality is a core fiduciary obligation in Nevada.

Question 22Agency Relationships and Fiduciary Duties

In Nevada, how is an agency relationship between a real estate broker and a client established?

  1. In writing, through a brokerage agreement signed by the client Correct answer.
  2. By recording a notice of representation with the county recorder
  3. Orally, if the licensee confirms it in a letter within ten days
  4. By the broker's conduct in showing the client properties

Explanation

Nevada law requires the agency relationship to be documented in a written brokerage agreement between the broker and the client. The agreement also sets out the term, the duties owed, and the compensation to be paid.

Question 23Agency Relationships and Fiduciary Duties

A licensee wants to represent both the buyer and the seller in the same transaction. Under Nevada law, this dual agency is permitted only when:

  1. the commission is split equally between the parties and both brokers agree in writing
  2. the designated broker approves the arrangement in writing before showings begin
  3. all parties give written consent after disclosure of dual agency's effects Correct answer.
  4. the seller agrees and the buyer is told at closing

Explanation

Dual agency in Nevada requires the informed written consent of every party after the effects of dual agency have been disclosed. Without that consent, the licensee may not act for both sides.

Question 24Agency Relationships and Fiduciary Duties

A licensee has signed a brokerage agreement to represent a buyer. To whom does the licensee owe fiduciary duties in that transaction?

  1. The buyer, who is the licensee's client Correct answer.
  2. Both buyer and seller, regardless of what the agreement says
  3. The lender financing the purchase
  4. The seller, because the seller typically funds the commission

Explanation

Fiduciary duties run to the client, the party who signed the brokerage agreement. The seller and lender may be owed honesty and fair dealing, but they are not the licensee's principal.

Question 25Agency Relationships and Fiduciary Duties

While showing a listing, the seller's agent sees a large water stain on a ceiling that the seller never mentioned. What should the agent do?

  1. Wait until a buyer asks a direct question about the ceiling
  2. Advise the buyer to ask the seller directly about the stain
  3. Say nothing, because buyers are expected to inspect the property
  4. Disclose the known defect to prospective buyers Correct answer.

Explanation

Nevada licensees owe a duty to disclose known facts that materially affect the value or desirability of the property to the parties in the transaction. A significant, visible defect discovered by the agent cannot be concealed or left for the buyer to stumble upon.

Question 26Agency Relationships and Fiduciary Duties

A seller's agent receives three offers on the same day. What does the agent's duty require?

  1. Let the designated broker decide which offer to present
  2. Hold the lower offers until the highest one is accepted
  3. Present only the highest offer to avoid confusing the seller
  4. Present all offers to the seller promptly Correct answer.

Explanation

An agent owes the client the duty to present all offers and counteroffers promptly and objectively. Selectively withholding offers deprives the seller of information needed to make an informed decision.

Question 27Agency Relationships and Fiduciary Duties

A buyer's agent receives a $10,000 earnest money check payable to the listing brokerage. What should the agent do?

  1. Hold the check in the agent's transaction file until closing
  2. Deliver it promptly to the listing brokerage for deposit Correct answer.
  3. Cash it and keep the currency in the brokerage safe
  4. Deposit it into the agent's personal business account for safekeeping

Explanation

Earnest money is handled as the purchase agreement directs, which is normally deposit by the listing brokerage. The agent's duty to account for funds requires prompt transmittal and no commingling.

Question 28Agency Relationships and Fiduciary Duties

A licensee's client accepts an offer on a home, and the licensee personally wants to buy the property. What must the licensee do?

  1. Wait until the listing agreement expires, then submit a personal offer
  2. Buy it quietly through a relative before the sale closes
  3. Disclose the interest in writing and obtain the client's consent Correct answer.
  4. Buy it quietly before the sale closes to save the client the trouble

Explanation

A licensee may not acquire an interest in the client's property without full written disclosure and the client's informed consent. Purchasing secretly, directly or through a straw party, breaches the duty of loyalty.

Question 29Agency Relationships and Fiduciary Duties

A licensee representing the seller is working with an unrepresented buyer. What does the licensee owe that buyer?

  1. Full fiduciary duties identical to those owed the seller
  2. Only a duty to keep the buyer's financial information secret
  3. No duties of any kind, because no brokerage agreement was signed
  4. Honesty, disclosure of material facts, and reasonable skill and care Correct answer.

Explanation

An unrepresented party is a customer rather than a client, so the licensee does not owe fiduciary duties such as loyalty and full confidentiality. The licensee still owes honesty, good faith, disclosure of known material facts, and reasonable skill and care.

Question 30Agency Relationships and Fiduciary Duties

A licensee expects a bonus from a lender for referring a buyer client. What must the licensee do?

  1. Keep it confidential because a lender bonus is not part of the transaction
  2. Disclose it to the buyer in writing before the referral is made Correct answer.
  3. Donate the bonus to a charity so no conflict exists
  4. Report it only to the designated broker

Explanation

Compensation from a third party creates a conflict of interest that must be disclosed to the client in writing before the client acts. Undisclosed referral fees breach the duties of loyalty and honesty.

Question 31Agency Relationships and Fiduciary Duties

A seller instructs the listing agent not to show the home on Sundays. A buyer's agent requests a Sunday showing. How should the listing agent respond?

  1. Schedule the showing because it may produce an offer
  2. Refuse to speak with the buyer's agent about the property
  3. Follow the lawful instruction and offer alternative times Correct answer.
  4. Schedule it first and explain the situation to the seller afterward

Explanation

A client's lawful instructions about marketing and access must be followed, and the agent should communicate the restriction professionally while offering alternatives. Disobeying a lawful instruction breaches the duty of obedience.

Question 32Agency Relationships and Fiduciary Duties

Which of the following events terminates an agency relationship by operation of law?

  1. The property is destroyed by fire Correct answer.
  2. The agent takes a new listing in the same neighborhood
  3. The seller leaves the country for a one-month vacation
  4. The buyer decides to change lenders mid-transaction

Explanation

Destruction of the subject matter of the agency makes performance impossible and terminates the relationship by operation of law. Other events, such as expiration of the term or mutual agreement, terminate it by the acts of the parties.

Question 33Agency Relationships and Fiduciary Duties

Months after a listing expires, the former seller's agent is asked by a new buyer whether the seller was "desperate to move." What is the agent's obligation?

  1. The agent may answer if the new buyer promises to keep the statement private
  2. The agent may answer once the seller has physically moved out of the home
  3. The duty of confidentiality ended with the listing, so the agent may answer
  4. The confidentiality duty survives termination, so the agent must not reveal it Correct answer.

Explanation

The duty to protect a former client's confidential information continues after the brokerage relationship ends. Information about the seller's motivation or urgency may still harm the former client's position if revealed.

Question 34Agency Relationships and Fiduciary Duties

A licensee acting as a dual agent learns that the seller would accept less than the asking price. What may the dual agent do with that information?

  1. Hint at it so the buyer submits a lower offer
  2. Share it with the buyer if the buyer agrees to keep it secret
  3. Not disclose the seller's confidential information to the buyer Correct answer.
  4. Tell the buyer so both sides can reach an agreement more quickly

Explanation

A dual agent must not disclose confidential information of one party to the other and may not advocate for either side. The agent facilitates the transaction without using one party's private information against them.

Question 35Agency Relationships and Fiduciary Duties

A salesperson licensed with a brokerage signs a buyer brokerage agreement on the company's behalf. Legally, who is the buyer's agent?

  1. The salesperson personally, with no involvement of the brokerage
  2. The brokerage, with the salesperson acting on its behalf Correct answer.
  3. The buyer's lender, which funds the transaction
  4. The salesperson and the designated broker jointly as individuals

Explanation

Licensed salespersons act under the brokerage, and the agency relationship and commission rights belong to the brokerage. The salesperson performs the services as the brokerage's representative.

Question 36Agency Relationships and Fiduciary Duties

A licensee hosting an open house for a seller begins giving an unrepresented buyer advice on pricing strategy. What is the best practice under Nevada agency law?

  1. Continue advising the buyer, since the advice helps the transaction close
  2. Clarify in writing that the licensee represents the seller, not the buyer Correct answer.
  3. Treat the buyer as a client automatically because advice was given
  4. Stop speaking to the buyer entirely to avoid creating any duty

Explanation

A licensee should make the representation status clear in writing so no party misunderstands whose interests the licensee serves. Providing substantial advice without clarification risks creating confusion about agency and breaches the disclosure obligation.

Question 37Agency Relationships and Fiduciary Duties

An agent lists a home based solely on the seller's statement of square footage and never checks the county records. The buyer later learns the home is smaller than advertised. Which duty is most directly implicated?

  1. Loyalty
  2. Accounting
  3. Reasonable skill and care Correct answer.
  4. Confidentiality

Explanation

An agent must exercise the competence and diligence that a reasonably prudent licensee would use, which includes verifying material facts such as square footage. Failing to check readily available records falls below that standard.

Question 38Agency Relationships and Fiduciary Duties

The spouse of a licensee owns the title company that will handle the client's closing. What must the licensee do?

  1. Use another title company automatically to avoid the conflict
  2. Disclose the relationship to the client in writing Correct answer.
  3. Say nothing, because title companies are separately regulated
  4. Tell only the designated broker about the relationship

Explanation

A personal or family interest in a service provider is a conflict of interest that must be disclosed to the client in writing so the client can decide whether to proceed. Silence deprives the client of information needed to give informed consent.

Question 39Agency Relationships and Fiduciary Duties

Which of the following is most likely to be treated as confidential information an agent may not reveal?

  1. The property's zoning designation
  2. The list price printed in the multiple listing service
  3. The seller's willingness to accept a lower price to close quickly Correct answer.
  4. The number of bedrooms recorded in the county assessor's public file

Explanation

Confidential information includes facts the client has not consented to disclose that could harm the client's negotiating position. A seller's private willingness to discount is exactly that kind of information.

Question 40Agency Relationships and Fiduciary Duties

A buyer's agent learns that a similar nearby home recently sold for far less than the asking price of the home her client wants. What should she do?

  1. Tell the listing agent instead of telling her own client
  2. Wait for the client to ask for comparable sales data
  3. Share the comparable sale information with her client Correct answer.
  4. Keep the information to herself so her client's offer stays strong

Explanation

An agent owes the client full disclosure of information relevant to the transaction, including facts that affect value and negotiating position. Withholding useful market data to keep the client's offer strong serves the agent's goals, not the client's.

Question 41Real Estate Contracts and Contract Law

Under Nevada's statute of frauds, which agreement must be evidenced by a writing signed by the party to be charged?

  1. An agreement to sell a vacant lot Correct answer.
  2. A month-to-month oral lease of a furnished room
  3. A one-day contract to clean a vacant house
  4. A purchase of office furniture for the brokerage

Explanation

NRS 111.010 requires every contract for the sale of land, and every conveyance of an interest in land, to be in writing and signed by the party to be charged. Short service contracts, purchases of personal property, and short oral leases do not fall within that requirement.

Question 42Real Estate Contracts and Contract Law

A buyer emails a written offer. The seller signs it and places it in a desk drawer without notifying the buyer. Is a contract formed?

  1. No, because the offer was automatically revoked.
  2. Yes, because the seller signed the offer.
  3. Yes, because the seller intended to accept.
  4. No, because acceptance was never communicated. Correct answer.

Explanation

Acceptance of an offer is effective only when it is communicated to the offeror or the offeror's authorized agent. A silent signing that never reaches the buyer creates no contract, regardless of the seller's private intent.

Question 43Real Estate Contracts and Contract Law

A seller receives a buyer's offer, crosses out the closing date, initials the change, and returns the document. This response is:

  1. An option to buy at the new date.
  2. An acceptance with a harmless edit.
  3. A revocation of the buyer's offer.
  4. A counteroffer that ends the original offer. Correct answer.

Explanation

At common law a purported acceptance that changes any term is a counteroffer, and a counteroffer operates as a rejection that terminates the original offer. The buyer is then free to accept, reject, or counter again.

Question 44Real Estate Contracts and Contract Law

A real estate contract that has been fully performed by both parties is described as:

  1. Executory.
  2. Executed. Correct answer.
  3. Voidable.
  4. Void.

Explanation

An executed contract is one in which all duties have been performed. A contract with duties still outstanding is executory, and a void or voidable contract is a separate question about validity, not performance status.

Question 45Real Estate Contracts and Contract Law

Nevada's Seller's Real Property Disclosure Form is required when reselling:

  1. A raw acreage parcel.
  2. A never-occupied new build.
  3. A retail shopping center.
  4. An existing one-to-four-unit home. Correct answer.

Explanation

NRS 113.130 requires a seller of existing residential property containing no more than four units to deliver a completed disclosure form covering known defects and conditions. New construction never occupied, unimproved land, and commercial property are outside the form's scope.

Question 46Real Estate Contracts and Contract Law

A buyer's offer states that it expires at 5:00 p.m. Friday. The seller signs and delivers acceptance at 5:30 p.m. Friday. The result is:

  1. No contract, because the offer had lapsed. Correct answer.
  2. A binding contract, because the seller signed.
  3. A voidable contract at the buyer's option.
  4. A contract only if the buyer re-signs.

Explanation

When an offer states a deadline, the offer lapses automatically at that time and cannot be accepted afterward. The seller's late response functions at most as a new counteroffer that the buyer may accept or ignore.

Question 47Real Estate Contracts and Contract Law

A purchase agreement contains a loan contingency that requires the buyer to apply for financing within ten days. The buyer never applies and the loan is later denied. Which statement is best?

  1. The seller must refund the deposit and cannot claim breach.
  2. The buyer is excused because the loan was denied.
  3. The contingency is unenforceable as illusory.
  4. The buyer may be in breach for failing to try. Correct answer.

Explanation

A financing contingency carries an implied duty to make reasonable, good-faith efforts to obtain the loan. A buyer who never applies cannot hide behind the contingency, which is a condition the buyer was obligated to pursue.

Question 48Real Estate Contracts and Contract Law

A clause stating that time is of the essence in a purchase agreement means:

  1. Dates in the contract are estimates only.
  2. Only the closing date is legally binding.
  3. The contract is void if any date is missed.
  4. Performance by the stated dates is required. Correct answer.

Explanation

A time-is-of-the-essence clause makes the scheduled dates material terms, so a party who performs late is in breach and the other party may pursue remedies. Without the clause, courts often treat dates with more flexibility.

Question 49Real Estate Contracts and Contract Law

A contract allows the seller to keep the buyer's $10,000 deposit as liquidated damages if the buyer defaults. A court will enforce that clause if the amount is:

  1. A reasonable forecast of hard-to-estimate loss. Correct answer.
  2. Exactly equal to the seller's actual damages.
  3. Initialed by the buyer at signing.
  4. Deposited with the escrow company.

Explanation

A liquidated damages provision is enforceable when actual damages would be difficult to estimate and the stated sum is a reasonable projection of probable loss. An amount designed to punish the breaching party is an unenforceable penalty.

Question 50Real Estate Contracts and Contract Law

Which arrangement releases the original party from liability and substitutes a new party?

  1. An assignment of the contract.
  2. A sublease of the property.
  3. A delegation of duties.
  4. A novation. Correct answer.

Explanation

A novation requires the consent of all parties and replaces the original obligation with a new one, discharging the original party. Assignment and delegation transfer rights or duties but normally leave the original party on the hook.