Question 1

Which of the following is NOT an essential element of a valid real estate contract?

Accepted Answer

The essential elements of a valid contract are: competent parties, offer and acceptance, consideration, lawful object, and proper legal form. Notarization is not required for a contract to be valid, though it may be required for recording.

Question 2

A buyer makes an offer on a home. Before the seller responds, the buyer sends a written notice withdrawing the offer. Which of the following is TRUE?

Accepted Answer

An offer may be revoked by the offeror at any time before acceptance is communicated back to the offeror. Once the buyer properly revokes the offer, the seller loses the ability to create a binding contract by attempting to accept. No earnest money is forfeited because no contract was ever formed.

Question 3

A counteroffer by the seller legally acts as:

Accepted Answer

A counteroffer simultaneously rejects the original offer and creates a new offer, reversing the roles — the original buyer becomes the new offeree and the seller becomes the offeror. The original offer is extinguished and cannot be reinstated unless both parties agree to do so expressly.

Question 4

Under the Statute of Frauds, which of the following real estate contracts MUST be in writing to be enforceable?

Accepted Answer

The Statute of Frauds requires certain contracts — including contracts for the sale of real property — to be in writing to be enforceable. Oral agreements to buy or sell real estate are generally not enforceable in court, even if both parties intended to be bound. Many states also require listing agreements to be in writing.

Question 5

An option contract in real estate gives the optionee (buyer) the:

Accepted Answer

An option contract grants the optionee the exclusive right — but not the obligation — to purchase property at a pre-agreed price within a set period. The option holder pays consideration to keep the offer open. If the optionee does not exercise the option before expiration, the option lapses and the consideration is typically forfeited to the seller.

Question 6

When a buyer defaults on a purchase contract, the seller's most common remedy allowing them to keep the earnest money as liquidated damages is:

Accepted Answer

Most purchase contracts include a liquidated damages clause stating that if the buyer defaults, the seller's sole remedy is to retain the earnest money deposit as predetermined damages. Specific performance is a remedy that forces the defaulting party to complete the transaction and is more commonly used when the buyer wants to force a seller to sell.

Question 7

Which type of contract gives one party the right to perform but does not obligate them to do so, while the other party IS obligated if the option is exercised?

Accepted Answer

A unilateral contract contains a promise by one party in exchange for the performance of an act by the other. Option contracts and open listing agreements are common examples in real estate — the seller is bound by the option, but the buyer can choose whether to exercise it. A bilateral contract involves mutual promises from both parties, as in a typical purchase agreement.

Question 8

A purchase contract signed by a minor is generally:

Accepted Answer

Contracts with minors (those under the age of majority, typically 18) are voidable at the option of the minor. The minor may disaffirm (cancel) the contract, but the competent adult party cannot. This protects minors from being bound by agreements they may not fully understand. Contracts with minors are NOT void — they are voidable.

Question 9

A contract in which all terms have been fully performed by both parties is called a(n):

Accepted Answer

An executed contract is one in which all obligations have been fully performed by all parties. A purchase contract is considered executory (pending, partially performed) from signing until closing, and becomes executed when title passes at closing. 'Express' and 'implied' describe how the contract was formed, not its performance status.

Question 10

A buyer's offer is contingent on obtaining financing at a rate no higher than 7% within 30 days. After 30 days, the buyer cannot secure financing at that rate. What happens to the contract?

Accepted Answer

A financing contingency allows the buyer to exit the contract without penalty if they cannot secure financing at the specified terms within the stated timeframe. When the contingency is not satisfied, the buyer is entitled to a return of the earnest money deposit. Contingencies protect buyers (and occasionally sellers) from being forced into transactions under conditions that were not met.

Contracts Practice Questions

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