Free Massachusetts Contracts Practice Test — LicenseIQ

Question 1

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 2

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 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

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 5

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 6

A property manager authorized to collect rents, sign leases, hire contractors and run the owner's buildings on an ongoing basis is typically a:

Accepted Answer

A general agent handles a range of matters in a continuing relationship (typical of property management). A listing agent is a special (limited) agent for one transaction.

Question 7

A listing agent receives a second offer an hour after presenting the first. The seller has given no special instructions. The agent must

Accepted Answer

254 CMR 3.00(11) requires offers to be conveyed forthwith to the owner. The agent may not decide on her own which offers to present.

Question 8

Adding a new financing contingency to an existing sales contract is done by a(n) ____, while changing the existing closing date is done by a(n) ____.

Accepted Answer

An addendum ADDs new terms; an amendment changes existing terms. Both require agreement of both parties.

Question 9

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 10

A lender offers a 95% LTV loan. The buyer has $18,000 for the down payment. What is the maximum purchase price?

Accepted Answer

At 95% LTV the down payment is 5% of price. Price = $18,000 / 0.05 = $360,000; loan = $342,000.

Question 11

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 12

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 13

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 14

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 15

A zero-down-payment government loan program aimed at low- and moderate-income buyers in eligible rural areas is offered through the:

Accepted Answer

USDA Rural Development loans serve eligible rural buyers who meet income limits, often with no down payment.

Question 16

For a pre-1978 home, which sequencing is correct in a Massachusetts residential sale?

Accepted Answer

Section 87YY½ ties the home inspection brochure to the first written purchase contract (the offer); c.111 §197A requires lead notification before the P&S is signed.

Question 17

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 18

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 19

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 20

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 21

A seller consented in the listing agreement, in advance, to possible dual agency. A buyer client of the same agent now wants to buy the listing. What else is required?

Accepted Answer

254 CMR 3.00(13)(b) says advance consent must be followed by written notice of the dual agency before a residential purchase and sale agreement is signed.

Question 22

A salesperson leaves Firm A for Firm B after a sale she negotiated at Firm A goes under agreement. At closing, the commission is paid to

Accepted Answer

Board guidance says commissions go to the broker whose agency was the procuring cause; that broker then pays the former licensee under their contract.

Question 23

A buyer never meets the licensee in person and wants to sign a buyer agency agreement electronically. When must the disclosure be provided?

Accepted Answer

The current Board form says that when there is no in-person meeting, the disclosure must be provided electronically or otherwise before the licensee enters a contract with the consumer.

Question 24

A broker tells a seller not to accept an offer from a buyer who is an active-duty service member. Under c.151B, this involves which protected class?

Accepted Answer

Chapter 151B §4(6) and (7) protect veteran status and membership in the armed services in housing.

Question 25

A seller instructs the listing agent not to present offers below $700,000. Under Board guidance, the agent

Accepted Answer

Board guidance says sellers may set parameters for which offers are presented, and the Board recommends getting the instructions in writing. Without instructions, all offers are presented.

Massachusetts real estate contracts practice test

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

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

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

4. 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?

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

6. A property manager authorized to collect rents, sign leases, hire contractors and run the owner's buildings on an ongoing basis is typically a:

7. A listing agent receives a second offer an hour after presenting the first. The seller has given no special instructions. The agent must

8. Adding a new financing contingency to an existing sales contract is done by a(n) , while changing the existing closing date is done by a(n) .

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

10. A lender offers a 95% LTV loan. The buyer has $18,000 for the down payment. What is the maximum purchase price?

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

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

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

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

15. A zero-down-payment government loan program aimed at low- and moderate-income buyers in eligible rural areas is offered through the:

16. For a pre-1978 home, which sequencing is correct in a Massachusetts residential sale?

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

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

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

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

21. A seller consented in the listing agreement, in advance, to possible dual agency. A buyer client of the same agent now wants to buy the listing. What else is required?

22. A salesperson leaves Firm A for Firm B after a sale she negotiated at Firm A goes under agreement. At closing, the commission is paid to

23. A buyer never meets the licensee in person and wants to sign a buyer agency agreement electronically. When must the disclosure be provided?

24. A broker tells a seller not to accept an offer from a buyer who is an active-duty service member. Under c.151B, this involves which protected class?

25. A seller instructs the listing agent not to present offers below $700,000. Under Board guidance, the agent

Sources

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