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Contracts

Purchase agreements, listing contracts, and contract law

200 questions10 concepts
Contracts — Study Card
Contracts study card infographic showing key concepts, exam weight (12%), and memory aids
AI-generated study card for Contracts. Covers 12% of the real estate exam.
Difficulty Breakdown
Easy130 (65%)
Medium67 (34%)
Hard3 (2%)
Study Tips for Contracts
  • •Four elements of valid contract: Competent parties, Mutual consent, Legal purpose, Consideration
  • •Statute of Frauds: real estate contracts MUST be in writing
  • •Know void (never valid) vs. voidable (can be canceled by injured party)
  • •Specific performance forces the sale; liquidated damages = keep earnest money

Key Concepts

Purchase Agreement / Sales Contract

A purchase agreement is a legally binding contract between a buyer and seller that outlines the terms and conditions for the sale of real property. It is also commonly called a sales contract, purchase and sale agreement, or earnest money agreement.

Offer and Acceptance

Offer and acceptance is the process by which one party proposes specific terms for a contract and the other party agrees to those exact terms, creating mutual assent. This mutual agreement, also called a meeting of the minds, is an essential element of every valid contract.

Counteroffer

A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.

Consideration

Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.

Earnest Money Deposit

Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.

Contingencies

Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.

Inspection Contingency

An inspection contingency gives the buyer the right to have the property professionally inspected within a specified time frame and to negotiate repairs or cancel the contract based on the findings.

Financing Contingency

A financing contingency makes the purchase contract conditional upon the buyer obtaining mortgage approval within a specified time period. If the buyer cannot secure financing, they can cancel the contract and receive their earnest money back.

Appraisal Contingency

An appraisal contingency allows the buyer to cancel or renegotiate the contract if the property's appraised value comes in lower than the agreed-upon purchase price. This contingency protects buyers from overpaying.

Contract Termination

Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.

Practice Questions

Earnest money in Kansas must be:

EASY

Kansas requires disclosure of:

MEDIUM

Vermont closings typically involve:

MEDIUM

Pennsylvania's Real Estate Recovery Fund provides:

MEDIUM

Earnest money (down payment) in NY is typically held by:

MEDIUM

Oregon carbon monoxide alarm requirements:

MEDIUM

Earnest money in Oregon must be:

EASY

Earnest money in Nevada must be:

EASY

In Texas, which organization creates the promulgated contract forms that licensees must use?

EASY

Earnest money in Vermont must be:

EASY

Florida's inspection period allows the buyer to:

EASY

Texas requires mediation before litigation when:

MEDIUM

A Texas buyer discovers significant foundation issues during inspection. They may:

MEDIUM

In Texas, when does a real estate contract become binding?

MEDIUM

The effective date of a Florida real estate contract is:

MEDIUM

The FAR/BAR residential contract requires earnest money held by:

EASY

A Florida 'as-is' contract means:

MEDIUM

In Florida, the inspection period is typically:

EASY

Earnest money in Alabama must be:

EASY

Oregon REALTORS provides:

EASY

+ 175 more questions

Contract Types(1)

A bilateral contract is one in which:

MEDIUM

Earnest Money(1)

Earnest money in a real estate transaction serves to:

EASY

Offer Acceptance(1)

An offer to purchase real estate is terminated by all of the following EXCEPT:

MEDIUM

Statute Of Frauds(1)

The statute of frauds requires that:

MEDIUM

Validity(1)

Which of the following is NOT a requirement for a valid real estate contract?

MEDIUM

Contracts: What You Need to Know

Contracts is one of the highest-weighted exam topics and covers the legal framework for real estate agreements. Since nearly every real estate transaction involves multiple contracts, this is both an exam essential and a practical necessity for your career.

Start with the four elements required for a valid contract: competent parties (legal age, sound mind), mutual consent (offer and acceptance), legal purpose, and consideration (something of value). The Statute of Frauds requires real estate contracts to be in writing to be enforceable — this is one of the most frequently tested concepts. Know the difference between valid, void, voidable, and unenforceable contracts.

Master the key contract types: purchase agreements (bilateral, executory contracts), listing agreements (exclusive right to sell, exclusive agency, open listing), option contracts (unilateral contracts giving the right but not obligation to buy), and lease agreements. Understand contingencies (financing, inspection, appraisal) and how they create conditions that must be met. For breach remedies, know specific performance (forcing the sale), liquidated damages (keeping the earnest money), rescission (canceling the contract), and monetary damages.

Frequently Asked Questions

Other Exam Topics

Buyer Representation Agreement

8% of exam

Property Ownership

10% of exam

Land Use Controls and Regulations

8% of exam

Valuation and Market Analysis

10% of exam

Financing

12% of exam

Laws of Agency

12% of exam

Mandated Disclosures

6% of exam

Transfer of Title

8% of exam

Practice of Real Estate

10% of exam

Real Estate Math

12% of exam

Contracts Study Guide•All Practice Questions•Mock Exams•Exam Podcasts

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