Law of Contracts - Practice EXAM 2025 |
ACTUAL REAL EXAM ACCURATE
QUESTIONS AND ANSWERS WITH
RATIONALES |
VERIFIED AND LATEST UPDATED
| GUARANTEED PASS
Question: A seller decides to stop allowing showings and is ready to compare the five written
offers he has received. If the agent receives two more last-minute offers, one written and
one verbal, which of the offers should the agent present to the seller?
A. Only the written offers
B. Only the verbal offer if it’s higher than the written ones
C. Only the original five offers
D. All offers, including the last-minute written and
verbal Correct Answer: D
Rationale: The agent is obligated to present all offers to the seller, regardless of timing or
format, so the seller can make a fully informed decision.
2.
Question: In a multiple-offer situation, what should an agent do to protect the seller’s best
interests?
A. Only negotiate with the highest bidder
B. Inform all offerees it's a multiple-offer situation so they can make their highest and
best offers
C. Reject all lower offers immediately
D. Keep the existence of multiple offers confidential
Correct Answer: B
Rationale: Informing all buyers of the multiple-offer scenario promotes fairness and encourages
them to submit their most competitive offer, benefiting the seller.
3.
Question: How can an agent help a seller evaluate multiple offers effectively?
A. Ask the seller to review all offers without assistance
B. Recommend accepting the highest offer without analysis
C. Prepare net sheets comparing all offers to determine bottom line
D. Ignore any offers that seem too low
, Correct Answer: C
Rationale: Net sheets help sellers see the actual financial outcomes of each offer, including closing
costs and contingencies, facilitating informed decision-making.
4.
Question: What options does a seller have when responding to multiple offers?
A. Accept only one and discard the rest
B. Accept, reject, counteroffer, or do nothing
C. Accept all offers
D. Reject all offers and start over
Correct Answer: B
Rationale: Sellers can legally accept, reject, counteroffer, or ignore any offer. They are not
obligated to respond to all or any.
5.
Question: The closing date specified in a contract is usually a(n) date.
A. Fixed
B. On or before
C. Negotiable
D. Tentative
Correct Answer: B
Rationale: Contracts typically allow closings to happen “on or before” the specified date to
provide flexibility in scheduling.
6.
Question: A(n) to a contract adds or further details the rights and responsibilities
of the parties.
A. Contingency
B. Amendment
C. Addendum
D. Clause
Correct Answer: C
Rationale: An addendum supplements the contract with additional terms or clarifications without
altering the existing text.
7.
Question: The Lead-Based Paint Disclosure is required for:
A. All homes
B. Residential property built before 1978
,C. Commercial property only
D. Only homes being leased
Correct Answer: B
Rationale: Federal law mandates this disclosure for residential properties built before 1978 due
to health risks from lead paint.
8.
Question: If a buyer’s financing addendum makes the contract contingent on full financing but
the lender approves $10,000 less, which of the following is NOT an option for the buyer?
A. Proceed with more cash
B. Renegotiate the price
C. Terminate and forfeit earnest money
D. Terminate within contingency timeframe
Correct Answer: C
Rationale: If the buyer terminates within the financing contingency timeframe, they are
entitled to a refund of their earnest money.
9.
Question: What should a listing agent do if financing issues arise for the buyer?
A. Cancel the contract immediately
B. Inform the seller of buyer options and approaching deadlines
C. Wait for the buyer to initiate contact
D. Re-list the property right away
Correct Answer: B
Rationale: The listing agent must fulfill fiduciary duties by keeping their client informed of
critical developments and options.
10.
Question: If buyer and seller agree to lower the sales price due to financing issues, what must
be submitted?
A. A financing letter
B. A new contract
C. An amendment reflecting the new price
D. A contingency removal form
Correct Answer: C
Rationale: Price changes require a formal amendment to the contract to be valid and
enforceable.
Question: Texas Veterans Housing Assistance Program loans can be:
A. Used only for refinancing
B. Used only for new purchases
, C. Used only by retired military
D. All are correct
Correct Answer:
D
Rationale: These loans can be used for a variety of purposes including purchasing, building, or
refinancing a home, and are available to eligible Texas veterans.
12.
Question: The least common form of mortgage financing is:
A. Conventional loans
B. FHA loans
C. VA loans
D. Seller financing
Correct Answer:
D
Rationale: Seller financing is uncommon because it involves the seller acting as the lender,
which carries more risk and is used in fewer transactions.
13.
Question: The is the percentage of the lesser of the appraised value or sales
price that the lender will loan.
A. Interest rate
B. Debt-to-income ratio
C. Loan-to-value ratio
D. Equity factor
Correct Answer: C
Rationale: The loan-to-value (LTV) ratio is a standard metric used by lenders to assess risk by
comparing the loan amount to the property’s value or price.
14.
Question: If the loan factor is $5.53 on a $200,000 loan, taxes are $2,400/year and insurance is
$1,800/year, what is the monthly PITI payment?
A. $1,200
B. $1,328
C. $1,456
D. $1,600
Correct Answer: C
Rationale:
Principal & Interest: $5.53 × 200 = $1,106
Taxes: $2,400 ÷ 12 = $200
Insurance: $1,800 ÷ 12 = $150
Total PITI = $1,106 + $200 + $150 = $1,456
ACTUAL REAL EXAM ACCURATE
QUESTIONS AND ANSWERS WITH
RATIONALES |
VERIFIED AND LATEST UPDATED
| GUARANTEED PASS
Question: A seller decides to stop allowing showings and is ready to compare the five written
offers he has received. If the agent receives two more last-minute offers, one written and
one verbal, which of the offers should the agent present to the seller?
A. Only the written offers
B. Only the verbal offer if it’s higher than the written ones
C. Only the original five offers
D. All offers, including the last-minute written and
verbal Correct Answer: D
Rationale: The agent is obligated to present all offers to the seller, regardless of timing or
format, so the seller can make a fully informed decision.
2.
Question: In a multiple-offer situation, what should an agent do to protect the seller’s best
interests?
A. Only negotiate with the highest bidder
B. Inform all offerees it's a multiple-offer situation so they can make their highest and
best offers
C. Reject all lower offers immediately
D. Keep the existence of multiple offers confidential
Correct Answer: B
Rationale: Informing all buyers of the multiple-offer scenario promotes fairness and encourages
them to submit their most competitive offer, benefiting the seller.
3.
Question: How can an agent help a seller evaluate multiple offers effectively?
A. Ask the seller to review all offers without assistance
B. Recommend accepting the highest offer without analysis
C. Prepare net sheets comparing all offers to determine bottom line
D. Ignore any offers that seem too low
, Correct Answer: C
Rationale: Net sheets help sellers see the actual financial outcomes of each offer, including closing
costs and contingencies, facilitating informed decision-making.
4.
Question: What options does a seller have when responding to multiple offers?
A. Accept only one and discard the rest
B. Accept, reject, counteroffer, or do nothing
C. Accept all offers
D. Reject all offers and start over
Correct Answer: B
Rationale: Sellers can legally accept, reject, counteroffer, or ignore any offer. They are not
obligated to respond to all or any.
5.
Question: The closing date specified in a contract is usually a(n) date.
A. Fixed
B. On or before
C. Negotiable
D. Tentative
Correct Answer: B
Rationale: Contracts typically allow closings to happen “on or before” the specified date to
provide flexibility in scheduling.
6.
Question: A(n) to a contract adds or further details the rights and responsibilities
of the parties.
A. Contingency
B. Amendment
C. Addendum
D. Clause
Correct Answer: C
Rationale: An addendum supplements the contract with additional terms or clarifications without
altering the existing text.
7.
Question: The Lead-Based Paint Disclosure is required for:
A. All homes
B. Residential property built before 1978
,C. Commercial property only
D. Only homes being leased
Correct Answer: B
Rationale: Federal law mandates this disclosure for residential properties built before 1978 due
to health risks from lead paint.
8.
Question: If a buyer’s financing addendum makes the contract contingent on full financing but
the lender approves $10,000 less, which of the following is NOT an option for the buyer?
A. Proceed with more cash
B. Renegotiate the price
C. Terminate and forfeit earnest money
D. Terminate within contingency timeframe
Correct Answer: C
Rationale: If the buyer terminates within the financing contingency timeframe, they are
entitled to a refund of their earnest money.
9.
Question: What should a listing agent do if financing issues arise for the buyer?
A. Cancel the contract immediately
B. Inform the seller of buyer options and approaching deadlines
C. Wait for the buyer to initiate contact
D. Re-list the property right away
Correct Answer: B
Rationale: The listing agent must fulfill fiduciary duties by keeping their client informed of
critical developments and options.
10.
Question: If buyer and seller agree to lower the sales price due to financing issues, what must
be submitted?
A. A financing letter
B. A new contract
C. An amendment reflecting the new price
D. A contingency removal form
Correct Answer: C
Rationale: Price changes require a formal amendment to the contract to be valid and
enforceable.
Question: Texas Veterans Housing Assistance Program loans can be:
A. Used only for refinancing
B. Used only for new purchases
, C. Used only by retired military
D. All are correct
Correct Answer:
D
Rationale: These loans can be used for a variety of purposes including purchasing, building, or
refinancing a home, and are available to eligible Texas veterans.
12.
Question: The least common form of mortgage financing is:
A. Conventional loans
B. FHA loans
C. VA loans
D. Seller financing
Correct Answer:
D
Rationale: Seller financing is uncommon because it involves the seller acting as the lender,
which carries more risk and is used in fewer transactions.
13.
Question: The is the percentage of the lesser of the appraised value or sales
price that the lender will loan.
A. Interest rate
B. Debt-to-income ratio
C. Loan-to-value ratio
D. Equity factor
Correct Answer: C
Rationale: The loan-to-value (LTV) ratio is a standard metric used by lenders to assess risk by
comparing the loan amount to the property’s value or price.
14.
Question: If the loan factor is $5.53 on a $200,000 loan, taxes are $2,400/year and insurance is
$1,800/year, what is the monthly PITI payment?
A. $1,200
B. $1,328
C. $1,456
D. $1,600
Correct Answer: C
Rationale:
Principal & Interest: $5.53 × 200 = $1,106
Taxes: $2,400 ÷ 12 = $200
Insurance: $1,800 ÷ 12 = $150
Total PITI = $1,106 + $200 + $150 = $1,456
