1. T or F: In an “all cash” transaction the buyer would have no right to cancel the contract based on a low appraisal.

False: We know that the appraisal contingency appears in the financing section of the contract and the contract clearly states that if this is an all cash transaction then the Financing section should be skipped. However, in the Due Diligence portion of the contract the buyer is given ten days to conduct all investigations to determine the value and condition of the property and, in so many words, cancel if the buyer doesn’t like what he discovers.

2. T or F: According to the pre-printed portion of the AAR Residential Purchase Contract the seller is not responsible for personal property included in the sale being in working order at closing even if it was in working condition at the time of acceptance of the contract.

False: The Seller Warranties section (5a) makes the seller responsible for making sure that, at the earlier of possession or close of escrow, all warranted items are in working order and that even the “personal property included in the sale will be in substantially the same condition as on the date of contract acceptance”.

3. T or F: A notice from the buyer to terminate the contract due to a breach by the seller becomes effective immediately upon delivery of said notice to escrow.

True: This may seem a little confusing because of the 3 day Cure Period required by the contract. However, the contract states that there is no breach until the Cure Period notice is delivered and the time expires.

4. T or F: It is not necessary to attach the LSR to the offer if the buyer has not already had some communication with the lender.

False: The contract states that the LSR is attached. To not attach it is to have an incomplete contract. If you don’t have one at least state somewhere that you don’t have it yet but you will have it within X number of days or whatever but don’t ignore it. Additionally, the buyer can certainly fill out the top half of the LSR which doesn’t require any lender participation at all.

5. T or F: If during the inspection period the buyer discovers that a warranted item is not in working condition, the buyer must address it in the BINSR or the seller warranty for that item is waived.

True: Section 6k of the contract covers this issue. Per the contract the buyer must notify the seller if, during the inspection period, the buyer discovers a problem with a warranted item. This notice does not, however, give the seller the right to refuse do repair a warranted item.

6. T or F: It is appropriate for the buyer to request a credit for repairs in the BINSR without giving the seller the opportunity to make said repairs.

False: To request the credit without asking for repairs is to renegotiate the price and terms of the purchase contract, which is not the function of the BINSR. The buyer could, however make the request for repairs in the BINSR and include a statement that the buyer would accept a credit in lieu of said repairs.

7. T or F: Close of escrow is March 10. The buyer is allowed to move into the property on March 4. On March 6 the air conditioner compressor stops working and needs to be replaced. The seller is required by the seller warranties section of the contract to make repairs.

False: The seller warranties section of the contract states that the seller warranties last only to the earlier of possession or close of escrow. Consequently the seller warranties in this case expired on March 4, the date of possession.

8. At 2:30 P. M. on Friday the buyer delivers a 3 day Cure Period Notice to the seller. The seller would have until when to cure the con-compliance?

A. 11:59 P.M. Wednesday
B. 2:30 P.M. Wednesday
C. 11:59 P.M. Monday
D. 2:30 P.M. Monday

Answer: C. The contract states that all references to days shall be construed as calendar day (section 8h). Section 8i defines a day as a full day, not a 24 hour period measured from the moment of the notice.

9. A buyer’s agent faxes a purchase offer to a listing agent which includes a provision that the buyer’s agent is to receive 1% more than the co-broke compensation offered by the listing agent in MLS. The listing agent should:

A. Present the offer and tell the seller that the commission change is not the seller’s problem; it is between the listing agent and the buyer’s agent.
B. Refuse to present the offer
C. Tell the seller that it will cost the seller 1% more in commission than the seller had planned on paying to accept this offer
D. Agree to take the extra 1% off the “listing side” of the commission

Answer: A The contract states that compensation due the broker(s) is by a separate written agreement which for all intents and purposes is this question would be the listing. The seller has no obligation to pay the buyer’s agent anything at all, let alone more than the co-broke. The only one the seller owes a commission to is the listing agent. The co-broke does not involve any obligation of the seller. Additionally, the Rules of the RE Commissioner state that licensees may not allow disputes amongst themselves do jeopardize a principals position. Further, the purchase contract is not the place to negotiate a co-broke and it is a violation of the Code of Ethics to do so.