1. Which is NOT an essential element of a valid contract?
Answer & explanation
Answer: C. 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.
2. A contract clause stating that 'time is of the essence' means:
Answer & explanation
Answer: D. 'Time is of the essence' makes performance by the stated dates essential; missing a deadline can be a breach.
3. 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?
Answer & explanation
Answer: B. A counteroffer is a rejection and a new offer; the original offer cannot be revived by the buyer.
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?
Answer & explanation
Answer: B. 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.
5. Under Rule 1260-02-.33, a licensee may offer a gift to induce a listing only if the offer is
Answer & explanation
Answer: C. Rule 1260-02-.33 permits gifts and prizes when sponsored and approved by the firm and made in a writing signed by the licensee that discloses the pertinent details. It sets no dollar cap and does not require TREC approval.
6. A contract signed by a 17-year-old buyer is generally:
Answer & explanation
Answer: B. Contracts with minors are voidable at the minor's option; the adult party remains bound. A contract with someone adjudged insane is void.
7. In Tennessee, until a licensee enters into a specific written agency agreement with a party, the licensee is considered
Answer & explanation
Answer: A. Section 62-13-401 states that until a licensee enters into a specific written agreement establishing agency, the licensee is a facilitator and not an agent or advocate of any party. Agency cannot be implied.
8. When a seller changes a term of the buyer's offer and returns it, this creates a:
Answer & explanation
Answer: C. Altering any term rejects the original offer and creates a counteroffer, which the buyer may accept or reject.
9. Under the URLTA, after a landlord gives written notice of nonpayment of rent, the tenant has how long to pay before the rental agreement terminates?
Answer & explanation
Answer: B. Section 66-28-505(a)(2) gives the tenant 14 days after receiving notice to remedy a remediable breach such as nonpayment. Seven days applies to a repeat breach within six months.
10. Under an open listing, the seller owes a commission to:
Answer & explanation
Answer: C. Open listings are non-exclusive; only the procuring broker is paid, and the owner owes nothing for a self-sale.
11. A party making an offer to buy is the ____, and the party receiving it is the ____.
Answer & explanation
Answer: D. The offeror makes the offer; the offeree receives it. When a counteroffer is made, the roles swap.
12. An offer or counteroffer becomes a binding contract when:
Answer & explanation
Answer: A. Acceptance must be unconditional and communicated back to the offeror; any change creates a counteroffer instead.
13. Under the statute of frauds, a real estate sales contract must be:
Answer & explanation
Answer: C. The statute of frauds requires real estate sales contracts to be in writing and signed to be enforceable.
14. In an option to purchase, the seller who grants the option is the ____ and the option holder is the ____.
Answer & explanation
Answer: B. The seller (optionor) gives the option; the buyer (optionee) holds it. Only the optionor is bound during the option period, making it unilateral.
15. 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) ____.
Answer & explanation
Answer: C. An addendum ADDs new terms; an amendment changes existing terms. Both require agreement of both parties.
16. Under §66-5-212, a seller must disclose, in the contract or a separate writing, a known
Answer & explanation
Answer: C. Section 66-5-212 requires disclosure of known sinkholes, exterior injection wells, percolation test results and foundation moves. The other facts are protected from disclosure liability by §66-5-207.
17. A licensee persuades a buyer to break a signed contract so the licensee can sell the buyer a different home and earn a larger commission. This is
Answer & explanation
Answer: B. Section 62-13-312(b)(10) lists inducing any party to a contract, sale or lease to break it for the purpose of substitution, where motivated by the licensee's personal gain, as a ground for discipline.
18. A seller never delivered a disclosure statement, and the buyer wants to cancel the signed contract solely for that reason. Under §66-5-203, the buyer
Answer & explanation
Answer: B. Section 66-5-203(b) provides that the purchaser cannot terminate the contract because of the failure to deliver the statement, though other legal or equitable remedies are preserved.
19. Which is the most common and desirable way a real estate sales contract terminates?
Answer & explanation
Answer: C. Contracts ideally end by performance. They can also end by mutual agreement, impossibility, operation of law, or breach.
20. A financing contingency in a purchase agreement protects the:
Answer & explanation
Answer: C. A financing (mortgage) contingency lets the buyer cancel without penalty if unable to secure the specified loan by the deadline.
21. 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:
Answer & explanation
Answer: D. Specific performance compels the breaching party to perform; it is available because land is unique. The buyer could alternatively seek monetary damages.
22. A licensee wants to write an offer for her sister on a property listed by her firm. Under §62-13-403(7), she must
Answer & explanation
Answer: C. Section 62-13-403(7)(A) prohibits acting on behalf of the licensee's immediate family, or an entity in which the licensee has a personal interest, without prior disclosure and the timely written consent of all parties.
23. When entering into an exclusive buyer representation agreement, the licensee must advise the buyer and confirm in writing that the buyer
Answer & explanation
Answer: B. Rule 1260-02-.36 requires the licensee to advise and confirm in writing that the buyer should schedule viewings through the licensee, should promptly tell other licensees of the representation, and whether a commission is owed if the buyer buys without the licensee.
24. A seller signs a limited-service listing waiving the agent's duty to receive and forward offers. The listing agent must also
Answer & explanation
Answer: B. Section 62-13-404(3)(B) requires the consumer's agent to advise the consumer in writing that the consumer may not expect or seek assistance from other licensees for the waived duties.
25. Which detail must a written gift or prize offer disclose?
Answer & explanation
Answer: D. Rule 1260-02-.33 requires disclosure of accurate specifications, fair market value, time and place of delivery, and any requirements the consumer must meet. The firm's cost and commission rate are not required.
Sources
Source verification pending. Confirm current requirements with your state regulator.