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Real Estate · 8 Essential Terms
Contract vocabulary for the salesperson exam: consideration, the statute of frauds, earnest money, contingencies, specific performance, breach, addenda, and equitable title.
License law is state-specific and manuals are revised. Confirm every item against the candidate handbook for the state where you will test.
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Something of value each side bargains for. A promise, an act, or a forbearance can be consideration. Earnest money is not the only form it can take.
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Every term, definition, memory hook, and exam trap is written out here so you can review the whole set or print it.
Something of value each side bargains for. A promise, an act, or a forbearance can be consideration. Earnest money is not the only form it can take.
Mnemonic. Consideration is the bargained-for reason each side is bound.
Exam trap. The trap is believing a contract is invalid because there is no earnest-money check. Earnest money supports good faith; the promises can be the consideration.
The rule that certain contracts, including most contracts for the sale of real estate, must be in a signed writing to be enforceable in court.
Mnemonic. If it conveys land, the exam wants a signed writing.
Exam trap. An oral agreement to sell a house is the classic unenforceable contract, even when both people later agree they shook hands. Partial-performance exceptions are narrow and state-specific.
A deposit the buyer puts up with an offer to show good faith. It is not the consideration by itself, and it is not the broker's money.
Mnemonic. Earnest money is skin in the game, held in trust, not a fee the firm has earned.
Exam trap. Depositing it in the operating account is commingling. Who is entitled to it after a default follows the contract, not the agent's preference.
A condition that must be met, or waived, before the contract moves on. Financing, inspection, and sale of the buyer's home are common examples.
Mnemonic. A contingency is a door the contract agreed to keep open for a defined time.
Exam trap. Missing the contingency deadline can waive the protection or breach the contract, depending on the clause. The trap is a buyer who assumes every inspection objection cancels the deal automatically.
A court remedy that orders a party to do what the contract promised. It is used for land because each parcel is treated as unique.
Mnemonic. Specific performance makes the reluctant party complete the sale, because money is a poor substitute for this parcel.
Exam trap. The trap is answering that the only remedy for a seller's refusal to convey is earnest money. The buyer may seek to force the conveyance where the contract and the court allow it.
Failure, without a legal excuse, to perform a duty the contract requires. The other party may have remedies such as damages, specific performance, or cancellation, as the contract and state law allow.
Mnemonic. A breach is a broken promise with no excuse the law accepts.
Exam trap. Missing a date is not automatically a breach if the contract makes time not of the essence, and it may be a serious breach if the contract says the opposite. Read the time clause.
A document added to a contract, and signed with it or later, that adds or modifies terms. Once accepted, it is part of the contract.
Mnemonic. An addendum is a signed addition. A handwritten note nobody accepted is not.
Exam trap. The later signed addendum controls when it conflicts with the printed form. Initials and dates matter. An unsigned sticky note does not change the price.
The buyer's interest in the property after a binding contract and before the deed is delivered. Legal title remains with the seller until closing transfers it.
Mnemonic. Equitable title is the buyer's contract interest. Legal title is the deed interest.
Exam trap. The buyer does not gain legal title when the contract is signed, and the seller is not free to sell the same property to someone else as if no contract existed.