Free Iowa Contracts Practice Test — LicenseIQ

Question 1

Which statement must every Iowa brokerage agreement conspicuously display?

Accepted Answer

Iowa Code 543B.56A and the rules require the agreement to state, conspicuously, that compensation is negotiable and not set by law.

Question 2

A contract clause stating that 'time is of the essence' means:

Accepted Answer

'Time is of the essence' makes performance by the stated dates essential; missing a deadline can be a breach.

Question 3

A seller refuses to close on a valid contract. Because each parcel of real estate is unique, the buyer may sue to force the sale through:

Accepted Answer

Specific performance compels the breaching party to perform; it is available because land is unique. The buyer could alternatively seek monetary damages.

Question 4

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 5

Which is NOT an essential element of a valid contract?

Accepted Answer

The essential elements are offer and acceptance (mutual consent), consideration, competent parties and legal purpose. Notarization is not required for a contract to be valid.

Question 6

A listing agreement has a 60-day protection period. What must the broker do to enforce it?

Accepted Answer

To enforce a protective clause, the broker must deliver the list of prospects before the agreement expires, by personal or electronic service with acknowledgment or by mail postmarked before expiration.

Question 7

A licensee representing the seller who learns the buyer will pay more than the offer must:

Accepted Answer

Loyalty and disclosure require the seller's agent to share material information that benefits the client. The agent owes the buyer-customer no confidentiality.

Question 8

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 9

Who receives the interest earned on an Iowa broker's common trust account, absent a written agreement of the parties?

Accepted Answer

Iowa Code 543B.46 requires an interest-bearing trust account with interest remitted to the state for the housing trust fund. The broker may never keep it. The parties and broker may agree in writing to direct it elsewhere.

Question 10

A dual agent learns that the buyer will pay up to $20,000 more than the current offer. What may the dual agent do with that information?

Accepted Answer

A dual agent may not disclose one client's confidential information to the other client. Being asked directly does not change that.

Question 11

A salesperson leaves her brokerage and wants to take her five active listings with her. Who owns those listings?

Accepted Answer

Brokerage agreements are the property of the principal broker. They cannot be assigned without the written consent of all original parties, and a departing affiliate cannot take them.

Question 12

Without a lawsuit or written agreement, what is the earliest a broker may release disputed earnest money to the seller?

Accepted Answer

Release to a seller or landlord requires waiting six months from the dispute and giving 30 days' written notice by certified mail. Thirty days is the buyer-side period.

Question 13

A listing agreement in which the broker earns a commission regardless of who sells the property is a(n):

Accepted Answer

In an exclusive right-to-sell listing, the listing broker earns a commission no matter who procures the buyer, even the owner. (Reclassified to section 6 / CORE.)

Question 14

Under Iowa Code 543B.56A, which is a minimum service a broker must agree to provide under every brokerage agreement?

Accepted Answer

The minimum services include presenting offers and counteroffers, helping develop and negotiate offers through closing, answering the client's questions about agreements and contingencies, and giving buyers access to listed properties.

Question 15

A buyer's agent is offered a $500 gift card by a lender if the buyer closes with that lender. What does Iowa law require before the agent accepts?

Accepted Answer

A licensee may not accept transaction-related compensation from anyone other than the client without written notice to all parties. There is no dollar threshold. (Federal RESPA rules may separately prohibit the payment.)

Question 16

For an installment (real estate) contract under Iowa Code 558.70, what added disclosure step applies?

Accepted Answer

For installment contracts the seller recommends an independent inspection in writing and provides the disclosure at least seven days before all parties execute the contract.

Question 17

What is the maximum term of an Iowa residential brokerage agreement?

Accepted Answer

Residential agreements must have a definite expiration date not exceeding one calendar year from the effective date.

Question 18

Under an open listing, the seller owes a commission to:

Accepted Answer

Open listings are non-exclusive; only the procuring broker is paid, and the owner owes nothing for a self-sale.

Question 19

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 20

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 21

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 22

An offer or counteroffer becomes a binding contract when:

Accepted Answer

Acceptance must be unconditional and communicated back to the offeror; any change creates a counteroffer instead.

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

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 25

Under a land contract (contract for deed), during the payment period the buyer holds:

Accepted Answer

In an installment/land contract the buyer has equitable title and possession; the seller keeps legal title until the final payment.

Iowa real estate contracts practice test

1. Which statement must every Iowa brokerage agreement conspicuously display?

2. A contract clause stating that 'time is of the essence' means:

3. A seller refuses to close on a valid contract. Because each parcel of real estate is unique, the buyer may sue to force the sale through:

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

5. Which is NOT an essential element of a valid contract?

6. A listing agreement has a 60-day protection period. What must the broker do to enforce it?

7. A licensee representing the seller who learns the buyer will pay more than the offer must:

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

9. Who receives the interest earned on an Iowa broker's common trust account, absent a written agreement of the parties?

10. A dual agent learns that the buyer will pay up to $20,000 more than the current offer. What may the dual agent do with that information?

11. A salesperson leaves her brokerage and wants to take her five active listings with her. Who owns those listings?

12. Without a lawsuit or written agreement, what is the earliest a broker may release disputed earnest money to the seller?

13. A listing agreement in which the broker earns a commission regardless of who sells the property is a(n):

14. Under Iowa Code 543B.56A, which is a minimum service a broker must agree to provide under every brokerage agreement?

15. A buyer's agent is offered a $500 gift card by a lender if the buyer closes with that lender. What does Iowa law require before the agent accepts?

16. For an installment (real estate) contract under Iowa Code 558.70, what added disclosure step applies?

17. What is the maximum term of an Iowa residential brokerage agreement?

18. Under an open listing, the seller owes a commission to:

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

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

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

22. An offer or counteroffer becomes a binding contract when:

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

25. Under a land contract (contract for deed), during the payment period the buyer holds:

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