Legal Quiz

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

BY WILL MARTIN, GENERAL COUNSEL

1. Under the Offer to Purchase and Contract (Form 2-T), if a party fails to perform a contractual obligation prior to closing, that obligation remains binding on them after closing. True or False?

2. If the parties have signed an Offer to Purchase and Contract, but the Settlement Date has been left blank, the contract is not enforceable under any circumstances. True or False?

3. If an offer made on Form 2-T includes an Additional Earnest Money Deposit, but there is no Initial Earnest Money Deposit, it is a valid offer. True or False?

4. It is a violation of the real estate license law for a broker to sell their own property to a buyer if the buyer isn’t represented by another broker. True or False?

5. A broker may present offers on the same property on behalf of multiple buyers whom the broker represents under the Exclusive Buyer Agency Agreement (Form 201). True or False?

6. A landowner may be held liable if they change the flow of surface water across their property and it causes damage to others. True or False?

7. The Offer to Purchase and Contract—Vacant Lot/Land (Form 12-T) may not be used if the buyer is interested in subdividing the property after the buyer closes on it. True or False?

8. A listing agent could be disciplined for failing to disclose the existence of multiple appraisals of the property that have been below the contract price. True or False?

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

Legal QUIZ Answers

1: False, unless the parties agree in writing that the obligation remains binding after closing or the obligation is, by its nature, one that must be performed after closing. See paragraphs 4(h) and 18 of Form 2-T. Virtually all obligations imposed on the parties by Form 2-T may be performed prior to closing. Those obligations do NOT survive closing unless the parties agree otherwise. (Which contractual obligations survive closing? January 21, 2021, Category: Forms/Offer to Purchase and Contract/Miscellaneous)

2: False. As a general proposition, the parties to a contract must agree on all essential terms to make it legally binding. However, when the parties have clearly intended to enter into a contract but have not agreed on an essential term, a term which is reasonable may be supplied by a court in order to “save” the parties’ bargain. Regardless of whether the contract is enforceable, an agent’s failure to ensure that it contains all essential terms could subject them to discipline by the Real Estate Commission or by their association of REALTORS® for violating the Code of Ethics. (Is there a binding contract if the Settlement Date is left blank? February 4, 2021, Category: Contract Law)

3: True. An EMD is not required for a contract using Form 2-T to be binding. Should a buyer choose to offer an EMD, he or she is free to choose whether that deposit will be paid “up front” as an Initial EMD, or on some other, specified date as an Additional EMD, or both. The parentheses around the word “Additional” are intended to suggest that, in some cases, the “Additional” EMD is, in fact, the only EMD referenced in the contract. (Can an offer include an additional earnest money deposit but no initial earnest money deposit? February 11, 2021, Category: Forms/Offer to Purchase and Contract/Contract Formation)

4: False. Real Estate Commission Rule 58A.0104(o) prohibits brokers selling their own property from representing the buyer, but there is nothing in the Rule that would prohibit the broker/seller from working directly with an unrepresented buyer on the broker’s own behalf, provided that the buyer clearly understands that the broker is representing the broker’s own interests and not those of the buyer. (Can a broker sell their own property to an unrepresented buyer using the standard forms? February 25, 2021, Category: Forms/Miscellaneous)

5: True. In signing Form 201, a buyer specifically consents in paragraph 5 to the firm’s representation of others who may be interested in purchasing the same property. The broker must disclose the situation to all the buyers, advise them that the broker will not give any of them specific advice on what terms to include in their offers, and provide each of them the same information about the property. The broker should also understand that while the risks in representing more than one buyer on the same property can be managed, there is still risk in doing so. (Three Buyers, One House, and One REALTOR® March 11, 2021)

6: True. A landowner is legally permitted to make a reasonable use of his or her land, even if the use alters the flow of surface water and causes some harm to others. However, the landowner may incur liability when the interference with the flow of surface waters is unreasonable and causes substantial damage. Reasonableness is a question of fact to be determined in each case by weighing the extent and character of the harm to the affected landowner against the benefit to the landowner who has altered the flow of the surface water. (Do I have to disclose that my seller’s neighbor is mad at him? March 18, 2021, Category: Disclosure)

7: False. The note at the top of Form 12-T states: “This contract is intended for unimproved real property that Buyer will purchase only for personal use and does not have immediate plans to subdivide.” The note was included because there is a statute that imposes criminal penalties for transferring lots in an unapproved subdivision. However, if the buyer intends to seek approval of a subdivision of the property after he completes the purchase, the statute would not apply, and Form 12-T could be used to put the property under contract. The buyer should be advised that subdivision approval is not assured and to consult with an attorney about the likelihood of that approval. (Can a buyer who intends to subdivide a listed property use Form 12-T to make an offer? April 15, 2021, Category: Miscellaneous/Other Laws & Rules)

8: True. A property’s value will fluctuate over time with market conditions, and one person’s opinion of the value of the property on a particular day normally is not considered a material fact that must be disclosed. However, depending on the particular circumstances, the existence of multiple low appraisals could be considered by the Real Estate Commission to be a material fact, which would trigger the duty to disclose. (Does a listing agent have to disclose prior low appraisals? April 22, 2021, Category: Disclosure)

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!