Free Minnesota Contracts Practice Test — LicenseIQ

Question 1

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 2

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 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 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 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

For a contract for deed executed after August 1, 1985 with a non-investor seller, how long does a defaulting buyer have to cure after service of a cancellation notice?

Accepted Answer

Section 559.21, subd. 2a sets a 60-day period for contracts executed on or after August 1, 1985; investor sellers must give 90 days, and purchase agreements may be terminated on shorter notice.

Question 7

A buyer offers $300,000. The seller counters at $315,000. The buyer rejects the counter and then tries to accept the original $300,000 offer terms. Is there a contract?

Accepted Answer

A counteroffer is a rejection and a new offer; the original offer cannot be revived by the buyer.

Question 8

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 9

A listing agent receives a second written offer after the seller has accepted the first. Under §82.71, the agent must:

Accepted Answer

Section 82.71, subd. 1 requires all written offers to be promptly submitted in writing to the seller. The agent may not reveal the terms of an offer to other buyers before it is submitted to the seller.

Question 10

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 11

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 12

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 13

Which item must be included in a Minnesota residential listing agreement?

Accepted Answer

Section 82.66, subd. 1(b)(11) requires this notice in residential listings. Automatic renewals are prohibited, and arbitration clauses covering licensee liability are barred by §82.81, subd. 5.

Question 14

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 15

A buyer defaults on a residential purchase agreement and the seller serves a notice under §559.217. Unless the buyer cures or obtains a court order, the agreement is canceled:

Accepted Answer

Section 559.217, subd. 3 cancels the agreement unless, within 15 days after service, the party served cures or obtains a court order suspending cancellation.

Question 16

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 17

A party making an offer to buy is the ____, and the party receiving it is the ____.

Accepted Answer

The offeror makes the offer; the offeree receives it. When a counteroffer is made, the roles swap.

Question 18

A seller rejects an offer. When must the buyer's earnest money be returned?

Accepted Answer

Section 82.75, subd. 5(c) requires return of earnest money not later than the next business day after rejection of the offer.

Question 19

If the agreements are silent, within what time must trust funds be disbursed after a transaction closes or is terminated?

Accepted Answer

Section 82.75, subd. 5(d) requires disbursement within ten business days after the transaction is consummated or terminated if the agreements are silent.

Question 20

A buyer works with a licensee but never signs a buyer's broker agreement. How does the agency form describe the buyer and the licensee?

Accepted Answer

The form explains that a consumer who wants representation must sign a written contract; otherwise, the consumer is a customer and the licensee acts as a facilitator.

Question 21

What is the maximum length of an override (protection) period in a Minnesota residential listing agreement?

Accepted Answer

Section 82.66, subd. 1(c) limits override clauses to six months after expiration. Up to two years is allowed only for sales of a business.

Question 22

A listing agent tells the buyer that the seller will accept the offer only if the buyer uses the agent's preferred lender. This is:

Accepted Answer

Section 82.81, subd. 8 prohibits a licensee from requiring a person to use a particular lender, attorney, closing agent, or title agent in a residential closing.

Question 23

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 24

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 25

For a contract for deed executed on or after August 1, 2024, what attorney fee may a defaulting buyer be required to pay to cure under §559.21, subd. 2a?

Accepted Answer

The 2024 amendment set the attorney fee at $1,000 for contracts executed on or after August 1, 2024; older contracts use the $250/$500 or $125/$250 tiers.

Minnesota real estate contracts practice test

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

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

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

4. 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:

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

6. For a contract for deed executed after August 1, 1985 with a non-investor seller, how long does a defaulting buyer have to cure after service of a cancellation notice?

7. A buyer offers $300,000. The seller counters at $315,000. The buyer rejects the counter and then tries to accept the original $300,000 offer terms. Is there a contract?

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

9. A listing agent receives a second written offer after the seller has accepted the first. Under §82.71, the agent must:

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

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

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

13. Which item must be included in a Minnesota residential listing agreement?

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

15. A buyer defaults on a residential purchase agreement and the seller serves a notice under §559.217. Unless the buyer cures or obtains a court order, the agreement is canceled:

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

17. A party making an offer to buy is the , and the party receiving it is the .

18. A seller rejects an offer. When must the buyer's earnest money be returned?

19. If the agreements are silent, within what time must trust funds be disbursed after a transaction closes or is terminated?

20. A buyer works with a licensee but never signs a buyer's broker agreement. How does the agency form describe the buyer and the licensee?

21. What is the maximum length of an override (protection) period in a Minnesota residential listing agreement?

22. A listing agent tells the buyer that the seller will accept the offer only if the buyer uses the agent's preferred lender. This is:

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

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

25. For a contract for deed executed on or after August 1, 2024, what attorney fee may a defaulting buyer be required to pay to cure under §559.21, subd. 2a?

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