Contracts Agency practice test: free Real Estate Salesperson questions

Sample Practice Questions for Contracts Agency

1. Question 1Ref: National Outline — Contracts & Agency, 20%

   A buyer submits an offer on a home with a home-inspection contingency. Before the seller accepts, the buyer learns the seller has already accepted a competing offer. What is the status of the first offer?

   AIt is automatically terminated because of the competing offer.BIt becomes a counteroffer by operation of law.CIt remains a valid, pending offer until revoked or accepted.DIt is void ab initio because the buyer added a contingency.
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   C. It remains a valid, pending offer until revoked or accepted.

   An offer stays open and valid until the offeree rejects it, revokes it, or it expires. A competing offer does not extinguish the first one; only the seller can revoke or accept. The contingency does not void the offer, and a counteroffer requires affirmative action by the offeree.

2. Question 2Ref: National Outline — Contracts & Agency, 20%

   A listing broker represents the seller and procures a ready, willing, and able buyer. The seller then refuses to close. Under an open listing, is the seller obligated to pay a commission?

   AYes, a commission is owed once the broker procures a ready, willing, and able buyer.BNo, because the seller found another buyer through a different channel.CNo, an open listing never results in a commission obligation.DYes, but only if the listing agreement was exclusive right to sell.
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   A. Yes, a commission is owed once the broker procures a ready, willing, and able buyer.

   Under most open listings, a commission is earned when the broker is the procuring cause of a ready, willing, and able buyer, even if the seller later breaches. Option D is incorrect because an open listing is not exclusive. Option C misstates the law — open listings can pay commissions.

3. Question 3Ref: National Outline — Contracts & Agency, 20%

   A real estate agent who holds a valid power of attorney from the buyer signs the purchase contract on the buyer's behalf. Which element of a valid contract is demonstrated by this scenario?

   ALawful considerationBMutual assentCLegal purposeDCompetent parties
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   D. Competent parties

   The agent with a power of attorney acts on behalf of the buyer, demonstrating that the signing party has the legal capacity (competence) to enter the contract. Consideration is the bargained-for exchange, mutual assent is offer and acceptance, and legal purpose relates to lawful subject matter.

4. Question 4Ref: National Outline — Contracts & Agency, 20%

   A seller lists a property with Broker A on an exclusive right to sell. The seller later contacts Broker B about the same property. What type of agency relationship exists between the seller and Broker B?

   ABroker B is the seller's agent under a dual agency arrangement.BBroker B is the seller's agent only if a new listing agreement is signed.CBroker B is automatically appointed as a subagent of Broker A.DBroker B cannot interact with the seller without Broker A's consent.
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   B. Broker B is the seller's agent only if a new listing agreement is signed.

   An exclusive right to sell gives Broker A the right to earn a commission, but it does not prevent the seller from engaging another broker if a separate agreement is signed. No automatic agency arises between the seller and Broker B without a contract. The seller is free to contact other brokers, though Broker A may still earn the commission.

5. Question 5Ref: National Outline — Contracts & Agency, 20%

   A buyer and seller sign a purchase agreement with a financing contingency. The buyer applies for a loan but is denied. The buyer then seeks to rescind the contract. Is the buyer entitled to the return of earnest money?

   AYes, the financing contingency allows the buyer to rescind and recover earnest money.BNo, earnest money is forfeited when the buyer fails to obtain financing.CNo, financing contingencies apply only to FHA loans.DYes, but only if the seller also signed a separate rescission agreement.
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   A. Yes, the financing contingency allows the buyer to rescind and recover earnest money.

   A financing contingency permits the buyer to rescind the contract and receive a return of earnest money if financing is not obtained through no fault of the buyer. The contingency is not limited to FHA loans, and no separate rescission agreement from the seller is required for the contingency to apply.

6. Question 6Ref: National Outline — Contracts & Agency, 20%

   A licensed salesperson is employed by Broker A. The salesperson assists a friend in buying a property without disclosing the employment relationship to the buyer. Which agency duty has been violated?

   AObedienceBLoyaltyCDisclosureDAccounting
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   C. Disclosure

   The disclosure duty requires the licensee to reveal all material facts about the agency relationship. Failing to disclose the employment with Broker A violates the duty to inform the buyer of the agency relationship. Obedience relates to lawful instructions, loyalty to placing the client's interests first, and accounting to proper handling of funds.

7. Question 7Ref: National Outline — Contracts & Agency, 20%

   Under the Statute of Frauds, which real estate contract must be in writing to be enforceable?

   AA listing agreement for a single-family homeBA three-month lease of a commercial storefrontCA contract to mow the lawn of a residential propertyDAn oral agreement to show a property to prospective buyers
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   A. A listing agreement for a single-family home

   Contracts for the sale of real property and listing agreements must generally be in writing under the Statute of Frauds. A three-month lease is typically exempt because it is less than one year. Lawn-mowing and property showings are service contracts, not interest-in-land contracts.

8. Question 8Ref: National Outline — Contracts & Agency, 20%

   A property manager enters into a management agreement with the owner of a 20-unit apartment building. The agreement is for a term of two years. What type of contract is this?

   AUnilateral contractBAleatory contractCAdhesion contractDExpress contract
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   D. Express contract

   The management agreement is an express contract because its terms are explicitly stated in writing or orally. A unilateral contract involves a promise for an act, an aleatory contract depends on a chance event, and an adhesion contract is a take-it-or-leave-it agreement imposed by one party.

9. Question 9Ref: National Outline — Contracts & Agency, 20%

   A listing broker learns that the seller has a termite infestation but instructs the broker not to disclose it. If the broker remains silent, which fiduciary duty to the buyer is primarily at issue?

   AConfidentiality of the seller's informationBObedience to the seller's instructionsCFull disclosure of material factsDReasonable care and skill
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   C. Full disclosure of material facts

   A licensee owes a duty of full disclosure of material facts to all parties. The broker cannot obey the seller's instruction to conceal a material fact because doing so would violate the duty to disclose material facts to the buyer. Confidentiality does not extend to concealing known material defects.

10. Question 10Ref: National Outline — Contracts & Agency, 20%

    A buyer submits a written offer with earnest money. Before the seller accepts, the buyer wants to withdraw the offer. Can the buyer legally revoke the offer?

    AYes, the buyer may revoke the offer at any time before acceptance.BNo, because the earnest money makes the offer irrevocable.CNo, because the buyer signed a binding option agreement.DYes, but only with the seller's written consent.
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    A. Yes, the buyer may revoke the offer at any time before acceptance.

    An offeror generally may revoke an offer at any time before it is accepted by the offeree. The payment of earnest money does not create an option contract; it merely demonstrates the buyer's seriousness. Unless an option contract was separately signed, the buyer can revoke before acceptance.