Georgia Real Estate Salesperson Practice Exam

Which of the following would be considered an executory contract?

1. A listing agreement

2. A sale contract before closing

3. A completed sale

4. A verbal agreement

The correct answer is: A sale contract before closing

An executory contract refers to an agreement in which one or both parties still have obligations to fulfill. In the context of real estate, a sale contract before closing is the most suitable example because it signifies that the buyer has agreed to purchase the property, and the seller has agreed to sell it; however, the transaction has not yet fully completed. Both parties are still responsible for certain tasks, such as the buyer securing financing or the seller completing any pending repairs, before the actual transfer of property ownership takes place. In contrast, a listing agreement does establish certain obligations between the seller and the agent, but it pertains more to the representation in selling the property rather than the actual sale itself. A completed sale signifies that the contract has been fully executed and both parties have fulfilled their obligations, making it no longer executory. A verbal agreement lacks the formalities required for enforceability in real estate transactions and typically does not fulfill the necessary criteria to be classified as an executory contract in this context. Thus, the sale contract before closing stands out as the proper example of an executory contract.