Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What is required for a real estate contract to be binding?

1. An oral agreement

2. Written verification

3. A down payment

4. Consideration

The correct answer is: Consideration

For a real estate contract to be binding, consideration is essential. Consideration refers to something of value that is exchanged between the parties involved in the contract. This could be in the form of money, services, or any other assets that provide value. In the context of real estate, the buyer typically provides monetary consideration (such as earnest money) in exchange for the seller's promise to transfer ownership of the property. Without consideration, a contract may be deemed unenforceable because it lacks the mutual exchange that validates the agreement. While some other elements like a written document may seem necessary for clarity or legal reasons, the very essence of a contract requires an exchange—consideration—making it a foundational element for binding agreements in real estate.