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SC Real Estate practice questions

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Question 1Agency and Non-Agency Relationships

In South Carolina, the Working with Real Estate Agents brochure must be given to a prospective buyer or seller at which point?

  1. When the sales contract has been signed by both parties and delivered
  2. Only after a written agency agreement has been signed by the client
  3. Whenever the consumer asks for a copy of the brokerage's written office policy
  4. At first substantive contact with the licensee Correct answer.

Explanation

South Carolina requires the Commission-approved Working with Real Estate Agents brochure to be delivered at first substantive contact, before the consumer shares financial information or motivation. The disclosure lets the consumer choose among agency, designated agency, dual agency, and transaction brokerage before any relationship forms.

Question 2Agency and Non-Agency Relationships

Which fiduciary duty requires a seller's agent to place the seller's interests ahead of the agent's own interests?

  1. Reasonable care and diligence
  2. Loyalty Correct answer.
  3. Accounting for funds
  4. Confidentiality of the seller's motivation

Explanation

Loyalty obligates the agent to put the client's interests above the agent's own and above those of the other party in the transaction. Care, accounting, and confidentiality are separate fiduciary duties that do not carry the 'interests above all others' standard.

Question 3Agency and Non-Agency Relationships

A licensee wishes to represent both the buyer and the seller in the same transaction. In South Carolina, this disclosed dual agency requires:

  1. approval by the broker-in-charge after the closing has occurred
  2. verbal permission from both parties before the closing
  3. a reduction of the total commission charged to the seller
  4. the written consent of both the buyer and the seller Correct answer.

Explanation

Disclosed dual agency is lawful in South Carolina only when both the buyer and the seller consent in writing after being informed of the conflicts it creates. Verbal permission or approval obtained after the fact does not satisfy the requirement.

Question 4Agency and Non-Agency Relationships

A South Carolina transaction broker is a licensee who:

  1. works only on commercial leases and never on residential sales
  2. represents both parties and is treated as a disclosed dual agent
  3. assists the parties without representing either one as an agent Correct answer.
  4. represents the seller exclusively and owes full loyalty to the seller

Explanation

Transaction brokerage is a non-agency role in which the licensee facilitates the deal and owes honesty and fair dealing but advocates for neither side. It is not dual agency, and the role must be disclosed in writing.

Question 5Agency and Non-Agency Relationships

A buyer deals with the listing agent but has signed no agency agreement with anyone. That buyer is best described as:

  1. a client of the listing agent
  2. a subagent of the listing broker
  3. a dual client of the brokerage
  4. a customer of the listing agent Correct answer.

Explanation

A party who is not represented by the licensee is a customer, owed honesty, fair dealing, and disclosure of known material facts but not loyalty or advocacy. Clients are the parties with whom a written agency relationship exists.

Question 6Agency and Non-Agency Relationships

What minimum level of duty does a seller's agent owe to an unrepresented buyer?

  1. Confidentiality concerning the buyer's financial qualifications
  2. Obedience to any lawful instruction the buyer gives the agent
  3. Honesty and fair dealing in all communications Correct answer.
  4. Complete loyalty and full advocacy of the buyer's interests

Explanation

To an unrepresented buyer the seller's agent owes honesty and fair dealing, including disclosure of known material facts, but not loyalty, confidentiality about the buyer's finances, or obedience. Those fiduciary duties run only to the seller client.

Question 7Agency and Non-Agency Relationships

A seller signs an exclusive agency listing and then dies before the listing period ends. The agency relationship:

  1. terminates automatically by operation of law Correct answer.
  2. passes automatically to the seller's heirs
  3. continues in effect until the stated expiration date
  4. continues, but only for offers already in hand

Explanation

Agency is a personal relationship, so the death of the principal terminates it by operation of law even if the listing term has not run. The agent may then look to the estate for compensation already earned.

Question 8Agency and Non-Agency Relationships

In South Carolina, an agency relationship between a licensee and a client is normally created by:

  1. publication of the listing in the multiple listing service
  2. the parties' conduct alone, with no documentation of any kind
  3. an oral understanding between the licensee and the client that is later performed
  4. a written agency agreement the client signs Correct answer.

Explanation

South Carolina requires the agency relationship to be documented in a written agreement signed by the client, with a copy provided to the client. Oral understandings and conduct alone do not create a licensee's agency.

Question 9Agency and Non-Agency Relationships

Which of these facts about a seller would be treated as confidential information during a seller's agency?

  1. The asking price printed in the MLS listing
  2. The number of bedrooms and bathrooms in the home
  3. The seller would accept less than list price Correct answer.
  4. The year the house was built and the size of the lot

Explanation

Confidential information includes the client's motivation and any willingness to accept less than the asking price. Physical facts about the property, the published list price, and public records data are not confidences.

Question 10Agency and Non-Agency Relationships

Which statement describes designated agency within a South Carolina brokerage firm?

  1. Both the buyer and the seller become clients of the broker-in-charge personally
  2. The designated agents owe no fiduciary duties to the parties they serve
  3. One licensee in the firm acts for the buyer, another for the seller Correct answer.
  4. The firm is barred from representing both sides of a single transaction

Explanation

In designated agency the broker-in-charge assigns one licensee to represent the seller and another licensee to represent the buyer, so each designated agent serves one client and confidences are not shared between them. This permits both sides to be represented within a single firm.

Question 11Agency and Non-Agency Relationships

A buyer's agent in South Carolina may lawfully be compensated by:

  1. the buyer, the seller, or both, as the parties agree Correct answer.
  2. the buyer only, under all circumstances
  3. the lender, as part of the loan closing costs
  4. the seller only, through the listing agreement

Explanation

Compensation may come from either party or both so long as the arrangement is agreed and disclosed. A buyer's agent is commonly paid from the seller's proceeds through a cooperating compensation offer, but the buyer may pay or supplement that amount.

Question 12Agency and Non-Agency Relationships

After a buyer agency agreement ends, the former buyer's agent:

  1. owes no further duties of any kind to the former client
  2. must still keep the buyer's confidences secret Correct answer.
  3. may share the buyer's top price with the seller
  4. may sell the buyer's financial data to other licensees

Explanation

The duty of confidentiality survives termination, so the former agent may not use or reveal the ex-client's confidences. Other duties such as advocacy may end, but confidentiality continues.

Question 13Agency and Non-Agency Relationships

A licensee whose seller-client wants a fast sale offers to buy the home personally. Before contracting, the licensee must:

  1. have the broker-in-charge sign the purchase contract instead of the licensee
  2. disclose the licensee's principal status and obtain consent Correct answer.
  3. keep the licensee's offer confidential from other prospective buyers
  4. wait until the listing agreement expires before submitting the offer

Explanation

A licensee who wants to buy a client's property must disclose principal status and obtain informed consent, because self-dealing without disclosure breaches loyalty. Shifting the signature to another person does not cure the conflict.

Question 14Agency and Non-Agency Relationships

A listing broker offers compensation in the MLS to a cooperating broker who represents the buyer. That cooperating broker:

  1. owes the fiduciary duty of loyalty to the seller
  2. must pass the entire commission through to the buyer
  3. stays the buyer's agent and is paid from the seller's proceeds Correct answer.
  4. becomes a subagent of the seller by accepting the offer

Explanation

A cooperating broker who works with the buyer owes agency to the buyer, and the seller's offer of compensation is a payment arrangement rather than a transfer of loyalty. Accepting it does not convert the broker into the seller's subagent.

Question 15Agency and Non-Agency Relationships

Why may a broker-in-charge face liability when a salesperson at the firm makes a negligent misrepresentation?

  1. The broker must supervise licensees and is liable for acts within the brokerage Correct answer.
  2. Licensees are independent contractors, so the broker is never liable for their acts
  3. The Real Estate Commission assumes the liability and later bills the brokerage
  4. Liability shifts to the buyer unless the buyer sues within thirty days of closing

Explanation

A broker-in-charge must supervise the firm's licensees, and the brokerage can be liable for negligent acts committed within the scope of the brokerage relationship. Independent-contractor status does not eliminate that supervisory responsibility.

Question 16Agency and Non-Agency Relationships

A seller's agent personally observes a leaking roof that the seller never mentioned. To comply with South Carolina practice, the agent should:

  1. withdraw the listing immediately without explanation
  2. say nothing, because the agent's duty of loyalty runs to the seller
  3. mention it only to a buyer who asks about the roof
  4. disclose the material defect to prospective buyers Correct answer.

Explanation

A licensee may not conceal known material adverse facts about the property, and honesty and fair dealing require disclosure even though the agent represents the seller. Loyalty to the seller does not authorize deception of buyers.

Question 17Agency and Non-Agency Relationships

Which statement about a disclosed dual agent is correct?

  1. The dual agent may not reveal one party's confidences to the other Correct answer.
  2. The dual agent may tell the buyer the seller's bottom-line price
  3. The dual agent is excused from keeping any records of the transaction
  4. The dual agent owes undivided loyalty to the seller

Explanation

A dual agent must remain neutral, which means it may not pass one client's confidences to the other and cannot advocate for one side over the other. Confidentiality of each party's price limits and motivation survives dual agency.

Question 18Agency and Non-Agency Relationships

Under an exclusive agency listing in South Carolina, the seller:

  1. owes a commission only if the broker procures the buyer Correct answer.
  2. may cancel the listing at any moment with no notice or writing
  3. may not sell the property without the broker's permission
  4. owes a commission no matter who procures the buyer

Explanation

In an exclusive agency listing the seller keeps the right to sell the property personally without paying the broker, but owes the commission if the broker produces the buyer. Only an exclusive right to sell guarantees a commission regardless of who finds the buyer.

Question 19Agency and Non-Agency Relationships

An agency relationship that the principal cannot revoke because the agent holds a financial interest in the property is called:

  1. an agency coupled with an interest Correct answer.
  2. an agency by estoppel
  3. a gratuitous agency
  4. an implied agency

Explanation

An agency coupled with an interest arises when the agent holds an interest in the subject property, making the agency irrevocable while that interest lasts. Ordinary agencies may be revoked by the principal at any time.

Question 20Agency and Non-Agency Relationships

A brokerage's unlicensed assistant routinely quotes prices and negotiates counteroffers while the broker watches and says nothing. A court is most likely to find:

  1. subagency running from the assistant to the listing broker
  2. agency by estoppel or ratification binding the brokerage Correct answer.
  3. no agency of any kind, since the assistant holds no license
  4. a gratuitous agency that creates no duties for the broker

Explanation

When a principal allows another person to appear to have authority and a third party reasonably relies on that appearance, agency by estoppel or ratification can bind the brokerage. Licensing status affects regulation of the individual but does not determine whether the firm is bound.

Question 21Agency and Non-Agency Relationships

A seller's agent learns the seller is behind on the mortgage and also that the foundation is cracked. The agent should:

  1. disclose both facts to every prospective buyer who tours the home
  2. keep both facts private because each one is the seller's confidence
  3. disclose the mortgage trouble but keep the foundation defect private
  4. disclose the cracked foundation, but not the mortgage trouble Correct answer.

Explanation

Confidentiality protects the client's motivation and financial position, while the duty of honesty requires disclosure of known material physical defects. The agent must separate the two duties rather than trade one for the other.

Question 22Agency and Non-Agency Relationships

A buyer at the listing agent's open house asks that agent to represent her in buying that same listed home. The agent may:

  1. represent the buyer without telling the seller, since the seller already agreed to the listing
  2. act only as a disclosed dual agent, with written consent from both parties Correct answer.
  3. represent the buyer immediately, since the buyer asked for it
  4. represent both parties as a transaction broker without any written disclosure

Explanation

The listing agent already represents the seller, so representing that same buyer in the transaction is dual agency, permissible only after disclosure and with written consent from both parties. A written agreement with the buyer alone does not cure the conflict.

Question 23Agency and Non-Agency Relationships

A broker produces a ready, willing, and able buyer on the listing terms; the seller then revokes the listing before contracting. The broker is generally:

  1. entitled to the commission as procuring cause Correct answer.
  2. entitled to nothing, because the sale never closed
  3. entitled to half of the agreed commission only
  4. barred from any claim because the principal may always revoke

Explanation

A broker who procures a ready, willing, and able buyer on the listing terms has earned the commission, and the seller's revocation does not defeat that claim. The procuring cause doctrine protects compensation already earned even though no closing occurred.

Question 24Agency and Non-Agency Relationships

A seller's agent receives a buyer's earnest money check at the time of contract. The agent must:

  1. account for the funds as the contract directs Correct answer.
  2. hold the check in the agent's personal account until closing
  3. return the check to the buyer until the loan is approved
  4. apply the funds to the agent's marketing costs for the listing

Explanation

Trust funds such as earnest money must be handled exactly as the contract directs, kept in the proper trust account, and accounted for to the parties. Commingling with personal funds or spending them on business expenses is prohibited.

Question 25Contracts

A buyer and seller orally agree on price and terms for a South Carolina lot, and the buyer pays $500 toward the price. What is required for the sale contract to be enforceable in court?

  1. Recording of the agreement in the county where the lot sits
  2. An oral agreement confirmed by two disinterested witnesses
  3. A writing signed by the party to be charged Correct answer.
  4. A written agreement notarized by a South Carolina notary

Explanation

South Carolina's statute of frauds requires every contract for the sale of land to be in writing and signed by the party against whom enforcement is sought. Witnesses, notarization, and recording are not elements of validity between the parties. Recording affects priority against third parties, not enforceability of the contract itself.

Question 26Contracts

After a buyer submits a written offer at the listed price, the seller writes in a higher price, initials the change, and signs the document. What is the legal effect?

  1. An unenforceable attempt to accept with a material alteration
  2. A counteroffer that terminates the buyer's original offer Correct answer.
  3. An acceptance that binds the buyer at the listed price
  4. A binding contract at the seller's higher price

Explanation

An acceptance must match the offer exactly; a material change in price operates as a counteroffer rather than an acceptance. A counteroffer terminates the original offer, so the original price can no longer be accepted unless the seller revives it. The counteroffer itself becomes enforceable only if the buyer accepts it.

Question 27Contracts

A buyer gives a $5,000 earnest money check with an offer on a South Carolina home. How should the check be handled?

  1. Held by the buyer until the closing date
  2. Deposited promptly into a broker's trust or escrow account Correct answer.
  3. Mailed to the seller's attorney for safekeeping
  4. Deposited into the listing broker's general business account

Explanation

Earnest money is trust funds belonging to the transaction, not to the brokerage firm. The broker must deposit it promptly into a designated trust or escrow account and account for it at closing or termination. Commingling client funds with business operating funds is prohibited.

Question 28Contracts

Under South Carolina license law, when must a licensee give a consumer the written agency disclosure?

  1. When the listing agreement expires
  2. At the first substantive contact with the consumer Correct answer.
  3. At the closing table
  4. Only if the consumer asks for it

Explanation

South Carolina requires licensees to provide the brokerage relationship disclosure at the first substantive contact so the consumer understands who the licensee represents. Delaying the disclosure until closing or until asked defeats its purpose. The disclosure is required to be in writing in the prescribed form.

Question 29Contracts

In South Carolina, who must supervise the closing of a residential real estate sale?

  1. A licensed South Carolina attorney Correct answer.
  2. A notary public of the county
  3. A certified residential appraiser
  4. A licensed South Carolina broker

Explanation

South Carolina treats the preparation of closing documents and the resolution of title and closing issues as the practice of law. The state's Supreme Court has held that closings must be supervised by a licensed South Carolina attorney. A notary may witness signatures but does not provide the required legal supervision.

Question 30Contracts

A contract includes a mortgage contingency stating the buyer must obtain a 6 percent loan within 30 days. The buyer applies promptly but is denied. What is the buyer's usual position?

  1. The buyer is in breach and forfeits the deposit
  2. The contract automatically extends until the buyer qualifies
  3. The buyer must close using seller financing instead
  4. The buyer may terminate and recover the deposit if the buyer acted in good faith Correct answer.

Explanation

A financing contingency is a condition precedent to the buyer's duty to close. If the condition fails through no fault of the buyer, the buyer may terminate and recover the earnest money. A buyer who fails to apply or who sabotages financing loses that protection.

Question 31Contracts

Which of the following supplies consideration for a real estate contract, making it binding on the parties?

  1. Recording the contract with the county
  2. A recital in the contract that the terms are fair
  3. Hand delivery of the offer to the seller
  4. An exchange of mutual promises between the parties Correct answer.

Explanation

Consideration is a bargained-for exchange of something of value, and mutual promises to perform are sufficient. The promise to sell supports the promise to buy and vice versa. Fairness recitals, delivery methods, and recording do not create consideration.

Question 32Contracts

A seller mails a revocation of her offer on Monday; the buyer receives it Tuesday morning and signs an acceptance Tuesday afternoon. What is the result?

  1. A contract, because the acceptance was signed before closing
  2. No contract, because the revocation was effective when received Correct answer.
  3. No contract, because an offer cannot be revoked once made
  4. A contract, because revocations are effective when mailed

Explanation

An offer may be revoked at any time before acceptance, and a revocation is effective when the offeree receives it. Once the buyer learned of the revocation on Tuesday morning, the offer was gone and could not be accepted that afternoon. Only an option contract would have made the offer irrevocable.

Question 33Contracts

A buyer pays $2,000 for a 60-day option to purchase a South Carolina duplex. After 20 days the seller wants to sell to someone else. Which statement is correct?

  1. The seller may revoke but must return double the option fee
  2. The seller must honor the option because the buyer paid for an irrevocable right to buy during the term Correct answer.
  3. The option is void unless the buyer also deposits earnest money
  4. The seller may revoke because no sale contract has yet been formed

Explanation

An option is itself a contract in which the option fee is consideration for keeping the seller's offer open for the stated period. During that term the seller cannot revoke, and the buyer may choose whether to exercise. Earnest money is a separate matter and is not required to validate the option.

Question 34Contracts

A buyer signs a sale contract, then assigns it to a third party. The seller later learns the assignee cannot close. Who is liable to the seller?

  1. No one, because the assignment canceled the contract
  2. The broker, because the broker prepared the assignment
  3. Only the assignee, because assignment transfers all duties
  4. The original buyer, because assignment does not release the assignor unless the seller agrees to a novation Correct answer.

Explanation

An assignment transfers the assignor's rights but does not by itself relieve the assignor of the contractual duties. The assignor remains liable unless the seller agrees to substitute the assignee, which is a novation. A broker who merely documents the assignment assumes no liability for performance.

Question 35Contracts

A seller refuses to convey a South Carolina homesite after signing a valid contract at market price. The buyer wants the land itself, not money. Which remedy fits?

  1. Rescission of the contract
  2. A suit to quiet title
  3. Ejectment against the seller
  4. Specific performance, because land is unique Correct answer.

Explanation

Because each parcel of land is treated as unique, money damages are usually inadequate, so a buyer may sue for specific performance to compel the conveyance. Rescission would undo the deal rather than deliver the property. Quiet title and ejectment address possession and title claims, not enforcement of a purchase contract.

Question 36Contracts

A contract states that if the buyer defaults, the seller keeps the $8,000 earnest money as agreed damages, which is roughly 2 percent of the price. How would a South Carolina court likely treat this provision?

  1. As enforceable only if the seller also sues for the balance of the price
  2. As void, because damages may not be set in advance
  3. As an unenforceable penalty, because sellers must always prove actual loss
  4. As enforceable liquidated damages if the amount is a reasonable forecast of loss Correct answer.

Explanation

Parties may agree in advance on the amount of damages, and courts enforce the clause as liquidated damages when the sum is a reasonable projection of anticipated loss and not a penalty. A modest earnest money deposit forfeited on buyer default is commonly upheld. If the amount is grossly disproportionate, a court may treat it as an unenforceable penalty.

Question 37Contracts

Which transfer is exempt from the South Carolina Residential Property Condition Disclosure Act?

  1. A used single-family home sold by an owner-occupant
  2. A newly built home that has never been occupied Correct answer.
  3. A condominium unit sold by its owner
  4. A triplex sold by an investor

Explanation

The Act applies to transfers of existing residential property of one to four dwelling units. It expressly exempts the first sale of new construction that has never been occupied, along with transfers such as foreclosure sales and certain fiduciary or co-owner conveyances. Used homes, small multifamily buildings, and condominium units within the Act's scope require the disclosure statement.

Question 38Contracts

In South Carolina, a licensee who represents both the buyer and the seller in the same transaction must do which of the following?

  1. Obtain the consent of the seller only
  2. Resign from the transaction and refer both parties elsewhere
  3. Obtain advance approval from the Real Estate Commission
  4. Obtain the written consent of both parties and treat them impartially Correct answer.

Explanation

South Carolina permits dual agency when both parties give informed written consent. The licensee must remain neutral, may not advocate for one side over the other, and may not disclose one party's confidential information to the other. Commission approval is not part of the process.

Question 39Contracts

Which use of a South Carolina broker's trust account is permitted?

  1. Holding a buyer's earnest money until closing or a written release Correct answer.
  2. Earning interest that the broker keeps as a personal fee
  3. Holding the broker's own investment funds alongside client deposits
  4. Paying the firm's advertising invoices when the account balance is low

Explanation

A trust account exists to safeguard funds belonging to others, such as earnest money held pending closing or a written release. The broker may not commingle personal or business funds with client money or use client deposits to pay firm expenses. Records of all trust account activity must be maintained.

Question 40Contracts

A buyer's broker and a listing broker both claim the commission after a sale closes. What fact most directly determines which broker is entitled to compensation?

  1. Which broker has held a license longer
  2. Which broker was the procuring cause of the sale Correct answer.
  3. Which broker the buyer preferred to work with
  4. Which broker's office is closest to the property

Explanation

Commission entitlement generally turns on procuring cause, meaning the broker whose efforts set in motion the chain of events that produced the sale. The broker who originates the transaction and brings the parties together is favored over one who merely completes it. License tenure, personal preference, and office location are irrelevant to that determination.

Question 41Contracts

A contract states that time is of the essence and sets a May 1 closing. The buyer does not close on May 1 and offers no excuse. What is the effect?

  1. The buyer is in breach and the seller may pursue contractual remedies Correct answer.
  2. The closing date is merely a target, so no breach occurs
  3. The contract automatically extends for thirty days
  4. The seller must return the earnest money in all events

Explanation

When a contract makes time of the essence, the stated dates are strictly enforceable and failure to perform on time is a breach. Without such language, courts may allow a reasonable additional period. The seller's remedies may include keeping the deposit if the contract so provides.

Question 42Contracts

Buyer and seller both demand the earnest money held by the broker, and each blames the other for the failed sale. What should the broker do?

  1. Split the funds equally between the parties
  2. Give the money to the seller, since the seller still holds title
  3. Give the money to the buyer, since the buyer originally paid it
  4. Keep the funds in trust until the parties agree in writing or a court orders disbursement Correct answer.

Explanation

When entitlement to earnest money is disputed, the broker must not choose sides. The funds stay in trust until the parties sign a written release or a court or arbitrator directs disbursement, and the broker may file an interpleader action. Paying either party without authority exposes the broker to liability.

Question 43Contracts

A contract gives the buyer a 10-day due diligence period to inspect and terminate for any reason. On day 8 the buyer sends written notice of termination. What follows?

  1. The termination is ineffective without the seller's consent
  2. The sale must close anyway because the seller did nothing wrong
  3. The buyer forfeits the deposit for terminating without cause
  4. The buyer is entitled to a refund of the earnest money under the contract's option to terminate Correct answer.

Explanation

A due diligence period is a contractual option allowing the buyer to terminate for any reason or no reason within the stated time. A timely written notice ends the contract and triggers return of the earnest money. The seller's conduct is irrelevant to a right that does not require cause.

Question 44Contracts

After closing, a buyer discovers the house has 100 fewer square feet than the contract stated, though the deed correctly describes the lot. The buyer sues on the contract's square footage statement. Which doctrine most likely bars that claim?

  1. Equitable conversion
  2. Novation
  3. Merger, because contract terms are merged into the deed at closing Correct answer.
  4. Rescission

Explanation

At closing, the deed supersedes the executory sale contract as to title, possession, and description of the property, so the buyer's remedy is generally limited to deed covenants or a fraud claim. This is the doctrine of merger. Contract provisions that are intended to survive closing, such as escrow or repair agreements, are not extinguished.

Question 45Contracts

A written sale contract states that it is the complete agreement. The buyer seeks to introduce an earlier oral promise that the seller would leave the refrigerator. Which rule applies?

  1. Prior oral promises always override the terms of a written contract
  2. The parol evidence rule generally bars prior oral terms that contradict or add to an integrated writing Correct answer.
  3. The written contract is void whenever any prior oral discussion occurred
  4. Only a notarized writing can exclude oral testimony from evidence

Explanation

When the parties adopt a writing as the final and complete expression of their agreement, the parol evidence rule excludes earlier or contemporaneous oral statements that vary or supplement it. Exceptions exist for fraud, mistake, ambiguity, and terms that would naturally be separate. Notarization is not what makes the rule apply.

Question 46Contracts

A seller orally agrees to sell a lot, and the buyer pays the full price, takes possession, and builds a garage. The seller then refuses to convey. What is the buyer's strongest argument?

  1. Recording the oral agreement makes it enforceable against the seller
  2. Part performance through payment, possession, and improvements takes the agreement out of the statute of frauds Correct answer.
  3. The broker's testimony about the oral terms satisfies the statute of frauds
  4. The statute of frauds never applies to agreements about land

Explanation

Courts may enforce an oral land agreement when the buyer's acts are unequivocally referable to it, typically payment of the price combined with possession and valuable improvements. This part performance doctrine is an equitable exception to the writing requirement. Broker testimony or recording does not supply the missing signed writing.

Question 47Contracts

A South Carolina licensee is helping parties complete a standard sale contract form. Which activity is proper for the licensee?

  1. Advising the buyer on which title theory best protects the buyer
  2. Adding a customized indemnity clause that the parties request
  3. Filling in the blanks on a promulgated form and explaining its provisions Correct answer.
  4. Drafting a special warranty deed for the seller

Explanation

Licensees may complete blanks on promulgated contract forms and explain what the printed provisions say. They may not give legal advice about the parties' rights or draft legal instruments, because those acts constitute the unauthorized practice of law. Custom clauses and deeds must come from the parties' attorney.

Question 48Contracts

Two weeks before closing, the seller tells the buyer in writing that she will not sell under any circumstances. What may the buyer do?

  1. Treat the statement as an anticipatory breach and sue for damages or specific performance without waiting for the closing date Correct answer.
  2. Nothing until the closing date has passed
  3. Only demand return of the earnest money
  4. Rescind the contract and pay the seller's costs

Explanation

A clear, unequivocal repudiation before the performance date is an anticipatory breach that lets the injured party sue immediately. The buyer need not tender performance or wait for the closing date to ripen the claim. Available remedies include damages and, for land, specific performance.

Question 49Real Estate Finance

Under the Homeowners Protection Act, a borrower with a conventional loan secured by a principal residence may request cancellation of private mortgage insurance once the unpaid principal balance falls to what percentage of the property's original value?

  1. 75%
  2. 80% Correct answer.
  3. 85%
  4. 90%

Explanation

The Homeowners Protection Act permits a borrower to request PMI cancellation when the loan balance reaches 80% of the home's original value, provided the loan is current and other conditions are met. Automatic termination occurs later, at 78% of original value, based on the amortization schedule.

Question 50Real Estate Finance

Under RESPA, the maximum cushion a lender may maintain in a borrower's escrow account for taxes and insurance is:

  1. one-sixth of the estimated total annual disbursements Correct answer.
  2. one-half of the estimated total annual disbursements
  3. three months of estimated disbursements
  4. one month of estimated disbursements

Explanation

RESPA limits the lender's escrow cushion to one-sixth of the estimated total annual disbursements, roughly a two-month reserve. Amounts collected beyond that limit constitute an overage that must be handled under escrow accounting rules.