Free California Contracts Practice Test — LicenseIQ

Question 1

An estate's accepted offer of $400,000 is presented for court confirmation. What is the minimum first overbid?

Accepted Answer

Probate Code §10311: 10% of the first $10,000 = $1,000; 5% of the remaining $390,000 = $19,500; $400,000 + $1,000 + $19,500 = $420,500.

Question 2

In an option to purchase, the seller who grants the option is the ____ and the option holder is the ____.

Accepted Answer

The seller (optionor) gives the option; the buyer (optionee) holds it. Only the optionor is bound during the option period, making it unilateral.

Question 3

When a seller changes a term of the buyer's offer and returns it, this creates a:

Accepted Answer

Altering any term rejects the original offer and creates a counteroffer, which the buyer may accept or reject.

Question 4

After the buyer and seller sign a sales contract but before closing, the contract is:

Accepted Answer

A contract is executory while obligations remain to be performed; it becomes executed when fully performed (at closing).

Question 5

An individual buyer signs a buyer-broker agreement that runs six months and renews automatically. What is its legal status?

Accepted Answer

Section 1670.50(d) limits the term to three months for buyers who are not entities, prohibits automatic renewals, and declares a violating agreement void and unenforceable.

Question 6

For which buyer does the three-month maximum term in Civil Code §1670.50 NOT apply?

Accepted Answer

The three-month cap does not apply to agreements between a broker and a corporation, limited liability company, or partnership. Individual buyers, including investors, are covered.

Question 7

A listing expired in March 2026 without a sale. How long must the broker keep the listing agreement?

Accepted Answer

Section 10148 requires records to be kept three years from closing, or from the date of the listing if the transaction does not close.

Question 8

A buyer pays $10,000 for a 12-month option to buy a house for $250,000. During the option period:

Accepted Answer

The option binds only the optionor. The optionee may exercise or let it lapse (forfeiting the option money).

Question 9

A seller hands the TDS to the buyer in person two days after the buyer's offer was accepted. How long does the buyer have to terminate?

Accepted Answer

If the TDS is delivered after the offer is executed, §1102.3 gives the buyer three days after in-person delivery, or five days after delivery by mail, to terminate by written notice.

Question 10

A broker collects a commission under an exclusive right-to-sell listing that says it lasts 'until the property is sold.' Which statute did the broker violate?

Accepted Answer

Claiming or collecting compensation under an exclusive agreement that lacks a definite, specified termination date is grounds for discipline under §10176(f).

Question 11

The federal law that prohibits price fixing, group boycotts, market allocation and tie-in agreements is the:

Accepted Answer

The Sherman Antitrust Act of 1890 prohibits conspiracies in restraint of trade, including these practices.

Question 12

A contract that has all legal elements but where one party may cancel is:

Accepted Answer

A voidable contract is valid but one party may rescind it (e.g., a minor, or a party induced by misrepresentation or duress). A void contract lacks an essential element and has no legal effect.

Question 13

A contract signed by a 17-year-old buyer is generally:

Accepted Answer

Contracts with minors are voidable at the minor's option; the adult party remains bound. A contract with someone adjudged insane is void.

Question 14

A financing contingency in a purchase agreement protects the:

Accepted Answer

A financing (mortgage) contingency lets the buyer cancel without penalty if unable to secure the specified loan by the deadline.

Question 15

A seller says, 'I will pay any broker a 5% commission if they bring me a buyer.' This promise creates a(n):

Accepted Answer

In a unilateral contract only one party is bound (to pay if the act is performed); the other party has no obligation to act. Most real estate contracts are bilateral.

Question 16

Under the statute of frauds, a real estate sales contract must be:

Accepted Answer

The statute of frauds requires real estate sales contracts to be in writing and signed to be enforceable.

Question 17

Under Civil Code §1670.50, when must a buyer-broker representation agreement be signed?

Accepted Answer

Effective January 1, 2025, the agreement must be executed as soon as practicable and no later than when the buyer signs an offer.

Question 18

A contract that is missing an essential element, such as consideration, is:

Accepted Answer

Missing an essential element makes a contract void from the start. A voidable contract appears valid but may be canceled by one party.

Question 19

Which event terminates a listing agreement by operation (force) of law?

Accepted Answer

Agency ends by performance, expiration, mutual agreement, or situationally by force of law (bankruptcy, condemnation), death or incapacity, destruction of the property, or breach.

Question 20

A sales contract provides that if the buyer defaults, the seller keeps the earnest money as the full measure of damages. This is a:

Accepted Answer

Liquidated damages are a sum agreed in advance as compensation for breach - often the earnest money deposit.

Question 21

The TDS was delivered by mail after the purchase contract was signed. How long does the buyer have to terminate?

Accepted Answer

Section 1102.3 allows termination within five days after delivery by deposit in the mail, compared with three days for personal delivery.

Question 22

A mortgage lender offers a salesperson $200 for every client referred. Under RESPA this is:

Accepted Answer

RESPA prohibits kickbacks and unearned referral fees between settlement service providers and real estate licensees, even if disclosed.

Question 23

A buyer contracts to buy a home for $300,000, but it appraises at $290,000. The lender offers 75% LTV. What is the maximum loan?

Accepted Answer

LTV is applied to the LESSER of price or appraised value: $290,000 x 0.75 = $217,500. Using the $300,000 price ($225,000) is the common mistake.

Question 24

The Notice of Special Tax is delivered to the buyer in person after the purchase contract is signed. The buyer may terminate within:

Accepted Answer

Under Gov. Code §53341.5, the buyer may terminate within 3 days after in-person delivery or 5 days after delivery by mail, by written notice.

Question 25

A buyer instructs in writing that his deposit check be held uncashed until his offer is accepted. The offer is accepted. Absent other authorization, what must the broker do?

Accepted Answer

Reg. 2832(d) allows holding a check uncashed before acceptance on the buyer's written instruction. After acceptance, it must be deposited within three business days unless the seller authorizes in writing that it be held longer.

California real estate contracts practice test

1. An estate's accepted offer of $400,000 is presented for court confirmation. What is the minimum first overbid?

2. In an option to purchase, the seller who grants the option is the and the option holder is the .

3. When a seller changes a term of the buyer's offer and returns it, this creates a:

4. After the buyer and seller sign a sales contract but before closing, the contract is:

5. An individual buyer signs a buyer-broker agreement that runs six months and renews automatically. What is its legal status?

6. For which buyer does the three-month maximum term in Civil Code §1670.50 NOT apply?

7. A listing expired in March 2026 without a sale. How long must the broker keep the listing agreement?

8. A buyer pays $10,000 for a 12-month option to buy a house for $250,000. During the option period:

9. A seller hands the TDS to the buyer in person two days after the buyer's offer was accepted. How long does the buyer have to terminate?

10. A broker collects a commission under an exclusive right-to-sell listing that says it lasts 'until the property is sold.' Which statute did the broker violate?

11. The federal law that prohibits price fixing, group boycotts, market allocation and tie-in agreements is the:

12. A contract that has all legal elements but where one party may cancel is:

13. A contract signed by a 17-year-old buyer is generally:

14. A financing contingency in a purchase agreement protects the:

15. A seller says, 'I will pay any broker a 5% commission if they bring me a buyer.' This promise creates a(n):

16. Under the statute of frauds, a real estate sales contract must be:

17. Under Civil Code §1670.50, when must a buyer-broker representation agreement be signed?

18. A contract that is missing an essential element, such as consideration, is:

19. Which event terminates a listing agreement by operation (force) of law?

20. A sales contract provides that if the buyer defaults, the seller keeps the earnest money as the full measure of damages. This is a:

21. The TDS was delivered by mail after the purchase contract was signed. How long does the buyer have to terminate?

22. A mortgage lender offers a salesperson $200 for every client referred. Under RESPA this is:

23. A buyer contracts to buy a home for $300,000, but it appraises at $290,000. The lender offers 75% LTV. What is the maximum loan?

24. The Notice of Special Tax is delivered to the buyer in person after the purchase contract is signed. The buyer may terminate within:

25. A buyer instructs in writing that his deposit check be held uncashed until his offer is accepted. The offer is accepted. Absent other authorization, what must the broker do?

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