Question 1

Money paid by the purchaser at the time the contract is signed is called earnest money.

Accepted Answer

Earnest money is a deposit made by the purchaser when the contract is signed as a show of good faith and commitment to the purchase.

Question 2

Cash equivalents are certified funds, cashier's check, or treasurer's check.

Accepted Answer

This statement is true. Cash equivalents are highly liquid assets that are readily convertible into cash and include items like certified funds, cashier's checks, or treasurer's checks.

Question 3

The date the purchaser takes possession of the property is known as the closing date of the contract.

Accepted Answer

The closing date of the contract is when the sale is finalized, the deeds are transferred, and the buyer becomes the legal owner of the property, not necessarily when they take possession.

Question 4

The closing costs of the sale are always paid by the purchaser.

Accepted Answer

Closing costs can be paid by either the buyer or the seller, and sometimes they are split between both parties. The allocation of these costs is often a matter of negotiation in the sales contract.

Question 5

The date on which the parties agree to perform all their promises under the contract is known as the closing date.

Accepted Answer

The closing date is the date on which the parties agree to perform all their promises under the contract.

Question 6

The seller should be identified in a contract in exactly the way the seller holds title to the real property.

Accepted Answer

It is important to correctly identify the seller in a contract by using the exact way they hold title to the real property to avoid any confusion or disputes.

Question 7

A personal check is deemed a cash equivalent under a contract.

Accepted Answer

A personal check is not considered a cash equivalent under a contract because it is not immediately available as cash and requires processing time to clear and be converted into actual funds.

Question 8

Marketable title and insurable title are the same thing.

Accepted Answer

Marketable title refers to a title that is free from any legal disputes or defects, while insurable title refers to a title that can be insured against any claims or defects. While both titles are related to the ownership of a property, they refer to slightly different aspects of the title.

Question 9

It is not necessary for a contract to state consideration flowing from one party to another.

Accepted Answer

Consideration is a necessary element of a contract and must be explicitly stated in the contract. It is the exchange of something of value between parties, and without it, the contract is not enforceable.

Question 10

The contract should state the purchase price of the property.

Accepted Answer

The purchase price of the property should be stated in the contract to avoid confusion or disputes later on.

Question 11

Title that a prudent purchaser with full knowledge of all the facts would accept is known as insurable title.

Accepted Answer

An insurable title is one that a title insurance company is willing to insure, despite potential defects, whereas a prudent purchaser would seek a marketable title, which is free from significant defects.

Question 12

It is not necessary for a contract to state the purchase price of the property.

Accepted Answer

The purchase price of the property is a crucial element of a contract and must be stated clearly in order for the contract to be enforceable.

Question 13

Title that a prudent purchaser with full knowledge of all the facts would accept is known as marketable title.

Accepted Answer

A marketable title is a title that a prudent purchaser with full knowledge of all the facts would accept as good and would not hesitate to buy. It is free from all reasonable doubt as to its validity and is supported by evidence of ownership that can be readily and quickly traced.

Question 14

Property taxes for the current year are generally prorated under a contract.

Accepted Answer

Property taxes are typically prorated under a contract, meaning that each party pays a portion of the taxes based on the amount of time they owned or occupied the property during the year. This allows for a fair distribution of tax responsibility.

Question 15

The closing costs of the sale are always paid by the seller.

Accepted Answer

Closing costs can be paid by either the buyer, the seller, or both, depending on the terms negotiated in the sale agreement.

Question 16

Absent a provision to the contrary in the contract, the risk of loss for destruction to the property passes to the purchaser at the time the contract is signed.

Accepted Answer

This is known as the "risk of loss" rule, which means that once the contract is signed, the buyer is responsible for any damage or destruction that may occur to the property. However, some contracts may include a provision that shifts the risk of loss to one of the parties.

Question 17

A purchaser usually takes possession of the property at the time the contract is signed.

Accepted Answer

Typically, a purchaser takes possession of the property at the time of closing, which occurs after the contract is signed.

Question 18

A purchaser usually takes possession of the property at the time of the closing of the contract.

Accepted Answer

The purchaser generally takes possession of the property at the time of closing, unless otherwise specified in the contract.

Question 19

Earnest money under a contract is always the down payment of the purchase price.

Accepted Answer

Earnest money is a deposit made by the buyer to show their intention to go through with the purchase. It is not always the same as the down payment, although it may be applied to it in some cases. The amount of earnest money is usually negotiable and varies depending on the terms of the contract.

Question 20

All of the promises, conditions, and covenants contained in a contract are merged into the deed of conveyance at time of closing and do not survive the closing of the sale.

Accepted Answer

At closing, the deed of conveyance supersedes all prior agreements and becomes the sole governing document for the property transfer.

Quiz 7: Preparation and Review of a Real Estate Contract