1. A licensee has a listing on a house and lot. A potential buyer makes an offer on that property contingent upon obtaining a conventional loan. The offer is accepted by the seller. At which point should the listing licensee consider her obligation to the seller to have ended
A. when the buyer makes the offer
B. when the seller accepts the offer
C. when the buyer’s financing is approved
D. when the transaction is complete Correct
Explanation
The listing licensee's fiduciary obligations to the seller—loyalty, care, obedience, disclosure, accounting, and confidentiality—persist until the transaction fully closes and title passes. This is because the contract remains contingent on financing approval, and if the loan fails, the broker must assist in finding another buyer, renegotiating, or relisting. Option A is incorrect because merely making an offer creates no binding contract or ongoing duty beyond standard brokerage practices. Option B is wrong because acceptance creates a contract but does not fulfill it; the deal could still collapse due to contingencies. Option C is insufficient because financing approval is only one contingency—others like appraisal, inspection, or title issues could still arise, requiring continued agent involvement until closing.
2. When an agent acts in good faith and follows the principal’s lawful instructions in accordance with a contract, that is an example of
A. care. Correct
B. disclosure.
C. ethics.
D. loyalty.
Explanation
This describes the fiduciary duty of care, which requires the agent to act competently, diligently, and in good faith while adhering to the principal’s lawful instructions as outlined in the contract. This includes exercising the skill, prudence, and diligence expected of a reasonably competent real estate professional. Option B (disclosure) involves revealing material facts. Option C (ethics) is a broader moral standard not specific to fiduciary duties. Option D (loyalty) requires placing the principal’s interests above the agent’s or others’—following instructions is part of care, not loyalty.
3. A seller must close by December 31 to avoid substantial income tax liability. Which of the following contract clauses may be most beneficial to the seller’s situation
A. right of first refusal
B. acceleration
C. subrogation
D. time is of the essence Correct
Explanation
The 'time is of the essence' clause makes the closing date strictly enforceable, allowing the seller to terminate or sue for breach if not met by December 31, ensuring tax benefits. Option A (right of first refusal) gives priority to another buyer, potentially delaying closing. Option B (acceleration) applies to loan defaults, not sale timing. Option C (subrogation) involves substituting one creditor for another—irrelevant to timing.
4. A developer purchases a large tract of agricultural land and records a subdivision plat that restricts the land to single-family residential use only. Is this restriction legal
A. Yes, because the property is agricultural.
B. Yes, because the restriction does not violate public policy. Correct
C. No, because private restrictions cannot be placed upon rural land use.
D. No, because a developer can acquire an injunction against any private deed restriction on urban or rural land.
Explanation
Private restrictive covenants recorded in a plat are legally enforceable if they are reasonable and do not violate public policy (e.g., no racial discrimination). They run with the land and bind future owners. Option A is incorrect—agricultural status does not validate restrictions. Option C is false—private restrictions apply to rural land. Option D misstates law; developers cannot override valid recorded restrictions.
5. Which of the following is a form of multiple ownership in which each owner possesses an undivided proportional interest in the entire property, although the ownership shares need not be equal
A. tenancy by the entirety
B. tenancy at will
C. joint tenancy
D. tenancy in common Correct
Explanation
Tenancy in common allows unequal shares, undivided interest in the whole, no right of survivorship, and individual transfer rights. Option A (tenancy by entirety) requires marriage and survivorship. Option B (tenancy at will) is a leasehold interest. Option C (joint tenancy) requires equal shares and survivorship.