Statute of Frauds - Answer-requires real estate contracts to be in writing to be enforceable
5 elements of a valid contract - Answer-offer, acceptance, consideration, capacity, lawful purpose.
Capacity - competent and of age
Severability - Answer-clause providing that, in the event that one ...
CE Shop Real Estate Exam Questions
and Answers
Statute of Frauds - Answer-requires real estate contracts to be in writing to be
enforceable
5 elements of a valid contract - Answer-offer, acceptance, consideration, capacity,
lawful purpose.
Capacity - competent and of age
Severability - Answer-clause providing that, in the event that one or more provisions of
the agreement are declared unenforceable, the balance of the agreement remains in
force
Acceptance vs Binding Acceptance - Answer-Acceptance --signed
Binding acceptance - Signed and delivered (physically or electronically)
Must happen within the dates on contract. If no dates then a "reasonable time"
Unilateral Rescission - Answer-Legal action taken to repeal a contract by one party
when the other party has breached a contract
Specific performance suit - Answer-seeks to force performance.
Release of contract - Answer-when one party agrees in writing that the other party is no
longer bound by the contract
Assignment - Answer-original person is still liable
Novation - Answer-One agreement is substituted for another
UETA - Answer-Uniform Electronic Transactions Act
State laws supersede this.
Makes digital signatures as valid as "wet"
Optionee - Answer-person holding the option
Optioner - Answer-Person selling the option
Time is of the essence clause - Answer-both parties agree to perform within the time
limits of the contract
Choice of Law clause - Answer-any dispute will be handled in accordance with the law
in a particular jursidiction
,Indemnification - Answer-one or both parties commit to compensate the other for any
harm/lass/liability arising from the contract.
Contingency - Answer-conditions that must be met before the agreement of sale is
complete and enforceable
Adendum - Answer-"Ad"dition
Amendment - Answer-Modification
Other names/forms for a sales contract - Answer-Offer to Purchase
Sales Agreement
Contract of purchase or sale
Purchase agreement
Earnest money agreement
Agreement of sale
Backup contract - Answer-a contract to buy real estate that becomes effective if a prior
contract fails to be consummated. Should recommend that client gets legal advice
before doing this
Escalator offer - Answer-buyer offers to top any existing offer by a certain amount up to
a specified cap
offer presentation - Answer-all offers even after one is accepted.
loan points - Answer-aka loan origination fees - compensation for processing (1-3%)
typically can't be more than 3%.
Discount point - Answer-permanently reduce interest rate
Buydown - Answer-interest prepayment at closing to temporarily reduce interest rate
(usually for 1-3 years). EG 3-2-1 buydown
LTV (loan to value) - Answer-value = lower of sale price or appraised price
APR - Answer-interest AND fees
PMI - Answer-loans with LTV > 80 (so they no longer conform to Fannie Mae/mac. Must
be terminated at 78%. Borrower can request removal at < 80%
PITI - Answer-Principal, interest, tax accrual, insurance accrual
Financing instruments (signed when you get a mortgage) - Answer-Promissory Note
Security Instrument
, Promissory Note - Answer-promise to pay
negotiable instrument - can be transferred to another holder (bank, etc)
Security Instrument - Answer-Pledges the house as collateral (can be deed of trust or
mortgage/lien)
Equitable Title - Answer-in Deed of trust, borrower has equitable title -- possessory
rights and right to legal title when loan paid off
Title theory states - Answer-Use Deed of Trust
Power of Sale clause - Answer-in title theory states (Deed of Trust) giving bank
nonjudicial foreclosure right.
When mortgage paid off (Title theory - Answer-Title theory states
"release of deed of trust"
issues a reconveyance deed
mark the promissory note "Paid" and return it to the borrower.
Reconveyance Deed - Answer-Title theory (deed of trust) when loan is paid off bank
issues Release of Deed of Trust and issues a Reconveyance Deed, and mark the
promissory not "Paid" and return it to the borrower.
lien theory state - what happens when paid off - Answer-Satisfaction of Release of
mortgage
Mark promissory note paid and return to the borrower.
Security Instrument Clauses - Answer-Defeasance Clause - must release title on payoff
Acceleration clause-all due upon default
Due on Sale -
pre-payment penalty clause
Defeasance Clause - Answer-Security Instrument Clause that requires lender or trustee
to release title on payoff
"Defeats" the original agreement.
Defeasance - act that renders something null and void
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