legal QUIZ

BY WILL MARTIN, GENERAL COUNSEL

Take our latest quiz on our most popular, weekly Q&As.

1. If the Settlement of a residential real estate sales transaction takes place on a Friday, but the closing attorney is unable to record the deed and deed of trust until Monday, the prorations of real estate taxes and rents must be revised since the Offer to Purchase and Contract provides that Closing is not completed until the deed and deed of trust have been recorded. True or False?

2. If the parties agree that a refrigerator will be included as a part of the sale of real estate, and the buyer discovers during the final walk-through that the refrigerator has stopped working, the buyer may refuse to close unless the seller agrees to repair the refrigerator. True or False?

3. An oral referral agreement between brokerage firms is not enforceable because the law requires contracts for brokerage services to be in writing. True or False?

4. To help ensure that the Due Diligence Fee is timely paid, it is a smart idea for a listing agent to refuse to deliver the signed contract until the buyer pays the Due Diligence Fee. True or False? 5. Letters of intent are not binding. True or False?

6. In an email address or domain name, REALTORS® are not required to capitalize the term REALTOR® or separate the term from their name with punctuation. True or False?

7. If a buyer agent calls a listing agent and explains the terms of an offer that his client intends to make, including the price, due diligence fee, earnest money deposit, and proposed closing date, the listing agent should always present the offer to her client. True or False?

8. If the buyer or the seller informs the other party that they do not intend to perform the contract, the other party still cannot legally terminate the contract until the Settlement Date has passed. True or False?

HOW DID YOU DO? Turn the page to discover the answers.

Answers

1. False. Paragraph 9 of the Contract clearly states that unless the parties agree otherwise, the seller is responsible for prorated taxes on real property, rents, and owner’s association dues through the date of Settlement, not the completion of Closing. (Are the prorations of taxes and rents affected by a delay in Closing? November 7, 2019, Category: Forms/Offer to Purchase and Contract/ Miscellaneous)

2. True, assuming the Offer to Purchase and Contract was used to put the property under contract and that the refrigerator was working when the offer was made. Paragraph 11 provides that the buyer’s obligation to complete the transaction is contingent on the Property being in substantially the same or better condition at closing as on the date of the offer, and according to paragraph 1(c), the “Property” includes personal property listed in paragraph 3. (Is the seller required to convey personal property in substantially the same or better condition? December 12, 2019, Category: Forms/Offer to Purchase and Contract/Inspections/Repairs)

3. False. Oral contracts for broker services between a broker and the broker's client are not enforceable in a court of law and are a violation of Real Estate Commission Rule 58A.0104, but oral contracts between brokerage firms for the payment of referral fees are enforceable. However, failing to reduce a referral agreement to writing is a lousy idea. (The importance of putting your referral agreements in writing January 2, 2020, Category: Forms/Miscellaneous)

4. False. Holding on to the signed contract until the Due Diligence Fee has been delivered doesn’t have any effect on the validity of the contract, which becomes effective when acceptance of the offer has been communicated. In addition, intentionally delaying the delivery of a signed contract may be a violation of the license law, which provides that a broker can be disciplined for “[f]ailing to deliver, within a reasonable time, a completed copy of any purchase agreement or offer to buy and sell real estate to the buyer and to the seller.” (What should a seller do if the buyer delays in delivering the Due Diligence Fee? February 6, 2020, Category: Forms/Offer to Purchase and Contract/Due Diligence)

5. False. Although a letter of intent is generally considered to be a non-binding agreement to enter into a future contract, courts will treat it as a binding contract rather than an “agreement to agree” if it is clear under the circumstances that the parties intended to be bound by its terms. (What should I do with a letter of intent? February 20, 2020, Category: Contract Law)

6. True. Although capitalization and the use of punctuation are generally required, that is not the case when using term REALTOR® in email addresses and domain names. However, all other rules of usage do still apply. (What are the rules about using the term REALTOR® in an email address? February 27, 2020, Category: Miscellaneous/ REALTOR® Marks)

7. True. The REALTOR® Code of Ethics requires REALTORS® to protect and promote the interests of their client, and the Real Estate Commission’s “Study Guide” provides that “[a]n agent has a duty to disclose to his or her principal any information that may…influence the principal’s decisions in the transaction.” Even though a verbal offer to purchase real estate is not enforceable, information about such an offer could influence the seller’s decision-making, so listing agents should always share the details of such offers with their clients. (Are listing agents required to present verbal offers to their clients? March 4, 2020, Category: Agency)

8. False. If, before the Settlement Date, a party repudiates their obligation to perform under the contract, the other party can treat that repudiation as a breach of contract and legally terminate the contract early based on that breach. However, in order for a party’s repudiation to result in a breach of contract, that party must express, through words or conduct, a positive, distinct, unequivocal and absolute refusal or inability to perform. In other words, the party who desires to terminate would need strong evidence that the other party is absolutely refusing to perform their contractual obligations before the contract could be safely terminated prior to the Settlement Date. (If a buyer indicates he won’t close, when can a seller terminate the contract? May 7, 2020, Category: Contract Law)

STUDY HARD. If you’re not doing so already, be sure to read the Q&As that appear in the REALTOR® Rundown every Monday. It’ll help you on the next quiz!

12 INSIGHT • August 2020