Real Estate Principles
Chapter 8 Quiz
1. A broker acting in good faith received misinformation provided by the seller, and passed it on to
the buyer, who agreed to purchase the property. When the buyer found out, he rescinded the
contract. In this situation:
A. the broker is entitled to collect his commission from the seller, and the seller must reimburse
him for losses caused by a lawsuit by the buyer
B. the broker is entitled to collect his commission from the buyer
C. the buyer and seller each owe the broker one-half of his commission
D. the broker is not entitled to a commission
2. A land contract was recorded by the seller. The buyer defaulted on payments. If a quitclaim
deed were to be used in order to clear the cloud off the title, it would be executed by the:
A. buyer
B. seller
C. buyer and seller both
D. lender
3. In order to be enforceable, an exclusive listing:
A. must be signed by the broker
B. must be signed by the seller
C. must be signed by broker and seller
D. must be signed by broker, buyer, and seller
4. Which of the following statements regarding options is not correct?
A. Option rights do not give the optionee an interest in the property
B. The option is binding on the optionee
C. An option requires some payment of consideration, not just a recital of consideration
D. An option agreement may be recorded
5. How is the maximum commission rate a broker may charge established?
A. It is set by the local multiple listing service
B. It is mandated by the state Real Estate Law
C. It must be within limits prescribed by real estate professional associations' ethical codes
D. It is set by agreement between principal and broker
6. A real estate financing device that transfers equitable title to a buyer while allowing the seller to
retain legal title is a:
A. promissory note
B. land contract
C. grant deed
D. deed of trust
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7. A buyer who purchases a property through a land contract would immediately receive:
A. title
B. possession
C. a grant deed
D. a conditional fee estate
8. A seller listed his property with a broker, and specified in the listing: "Seller not to receive more
than 20% cash downpayment." The broker presented an offer to pay all cash for the property.
The broker is entitled to:
A. a full commission
B. half his commission
C. only his selling expenses
D. no commission
9. A buyer had just taken possession of a property when an earthquake destroyed the house.
Under the Uniform Vendor and Purchaser Risk Act, the buyer is:
A. able to avoid closing the transaction
B. not able to avoid closing the transaction
C. covered by the seller's hazard insurance
D. able to subtract the cost of the destroyed improvements from the agreed-upon sale price
10. On March 1, Craig paid $100 for a 60-day option to purchase a property. The option stated,
"Upon exercise of option, optionee is to purchase within 30 days." On March 15, he sold and
assigned the option to Sharon for $10,000. On April 20, Sharon informed the seller that she
intended to purchase the property on May 15. What is the status of the option?
A. Valid, since an option may be assigned, but Sharon will need to purchase the property
before April 30
B. Valid, since Sharon will purchase within 30 days after the exercise of the option
C. Invalid, since an option may not be assigned
D. Invalid, since the purchase date will be after the option has expired
11. A tenant may abandon a lease if she is constructively evicted by the landlord's actions. Which
of the following examples would not be constructive eviction?
A. The landlord cuts off the electricity to the tenant's unit
B. The landlord does not respond within a reasonable time after notice of broken plumbing
C. Noise and dust from construction work on the building make a unit unfit for occupancy
D. The landlord fails to repair excessive wear and tear caused by the tenant
12. What is a sublease?
A. An assignment of a lease
B. Transfer of possession for less than the remainder of the lease term
C. Transfer of possession for the entire remainder of the lease term
D. The surrender of a lease and substitution of a new lease
13. In a valid assignment of a lease, the assignee becomes the new:
A. landlord
B. lessor
C. sublessee
D. tenant
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14. If a seller uses an open listing, she may employ several brokers:
A. who will share the commission if anyone, including the seller, sells the property
B. who will share the commission if one of the brokers sells the property
C. only one of whom (the procuring cause) will receive the commission
D. whom she must pay a higher commission rate than if an exclusive listing were used
15. A buyer under a land contract will acquire:
A. the right of possession
B. the right to transfer or will the property
C. equitable title
D. All of the above
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Answer Key with Explanations
1. A
Explanation: Because he found a ready, willing, and able buyer, the broker is entitled to collect a
commission. This is a situation where the seller essentially prevented the sale from going forward
because of her bad faith, much as if she’d changed her mind about the transaction.
2. A
Explanation: A quitclaim deed signed by the buyer in which he releases his interest in the
property would be recorded in order to clear the cloud from the title to the property.
3. B
Explanation: A listing agreement must be signed by the seller. The broker is not required to sign,
although he almost always does.
4. B
Explanation: The optionee is not bound to purchase the property. The option remains open for the
benefit of the optionee, but the optionee does not have to exercise the option. Some
consideration is required for an option. An option is only a contract that keeps an offer open, and
does not give the optionee any sort of interest in the property even during the option period.
5. D
Explanation: There are no legal limits on commission rates. They are determined by agreement
between the broker and the principal.
6. B
Explanation: A land contract (which may also be known as a conditional or installment sales
contract) will transfer only equitable title to a buyer while allowing the seller to retain legal title.
7. B
Explanation: A buyer (or vendee) under a land contract would immediately take possession. The
buyer would have equitable title until the contract was fully paid off, at which point the buyer
would receive legal title.
8. D
Explanation: The offer presented by the broker did not meet the conditions specified by the seller,
even though most sellers would be pleased to accept it. Because there was no buyer presenting
an offer that met the seller's terms, there is no need for the seller to pay a commission.
9. B
Explanation: The Uniform Vendor and Purchaser Risk Act states that the seller bears the risk of
loss up until the moment that possession is transferred to the buyer.
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10. B
Explanation: The assignment of the option is valid. Sharon's proposed purchase is also valid,
since it complies with the clause requiring purchase within 30 days of exercising the option, and
she exercised the option within the stated option period.
11. D
Explanation: If the tenant is the cause of damage to the property, the landlord's failure to perform
repair work does not constitute constructive eviction.
12. B
Explanation: A sublease is the transfer of possession to a subtenant for only part of the remainder
of a lease term. The original tenant will remain primarily responsible to the landlord.
13. D
Explanation: In an assignment, the assignee is the new tenant, and takes on primary
responsibility for payment of the rent.
14. C
Explanation: Under an open or non-exclusive listing, the seller signs listing agreements with
multiple brokers, but only the one who is the procuring cause of the sale will receive a
commission.
15. D
Explanation: A land contract buyer (or vendee) will take possession immediately, and receives
equitable title to the property. The vendee may sell or will his interest in the property.
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