If a Buyer wants the Seller to pay some or all of their closing costs, it should be added to the contract in:
A) Paragraph #11 (Special Provisions)
B) Paragraph #12 – Seller participation in the Buyer’s costs
C) Third Part financing Addendum
D) All of the above
B) Paragraph #12- Seller participation in the Buyer’s costs
If a Buyer chooses not to be represented by an agent, the Buyer must be made aware that any information they share can be communicated to the Seller.
A) True
B) False
A) True
The sales price is determined in paragraph 3 by adding the down payment (3A) and the loan amount (3B).
A) True
B) False
A) True
The Seller contracts to furnish the buyer an existing survey, but neglects to furnish an “affidavit’ with the time specified. The lender requests a new survey be furnished. Who pays for the new survey?
A) Whoever is stated in the contract if the existing survey is rejected
B) The title company can approve the existing survey and override the lender
C) The buyer
D) The seller
D) The seller
The Third Party Financing Condition Addendum is not used with:
A) Conventional financing
B) Seller financing
C) FHA Financing
D) VA Financing
B) Seller financing
On the Seller’s default, what should happen to the earnest money?
A) It belongs to the Broker
B) It should be returned to the Buyer
C) It should be retained by the Seller
D) The title company should keep it
B) It should be returned to the Buyer
If the contract includes an option period for the buyer and the buyer does not tender the option fee to the Seller within the time limit (currently with 3 days from effective date of the contract) the Buyer no longer has an unrestricted right to terminate under the option.
A) True
B) False
A) True
Fraud is:
A) A crime
B) A civil law violation
C) Both a & b
D) Only b
C) Both a & b
When a “fixture” in a property does not remain for the buyer, how do we inform the buyer of that fact and make sure the item does not convey with the property?
A) List the item as not included in the listing Agreement
B) List the item on the “Seller’s Disclosure Notice”
C) List the item on the “Residential Contract”
D) List the item on the “Amendment” form
C) List the item on the “Residential Contract”
Paragraph 23 “termination option” of the TREC 1-4 Family Residential Contract:
A) Binds the seller to complete the repairs needed
B) Requires option money that is refundable if the buyer does not buy
C) Requires a fee for a specified period of time
D) Allows the buyer to get his option fee back if he is disqualified for the loan
C) Requires a fee for a specified period of time
A suit for specific performance is:
A) To force the buyer not to default on the contract
B) To force the seller not to default on the contract
C) To force either the buyer or the seller to perform on the terms of the contract
D) Is a lawsuit against the inspection company
C) To force either the buyer or the seller to perform on the terms of the contract
How does the Texas Real Estate License Act define the first face-to-face meeting with required agency disclosure?
A) When a licensee first meets a prospect
B) When a prospect is ready to sign an agreement
C) Only when a specific property is being shown
D) When a substantive dialogue about a specific real property occurs
D) When a substantive dialogue about a specific real property occurs
Brokers fees are included in the 1-4 Family Residential Contract (resale) between the Buyer and the Seller.
A) True
B) False
B) False
Standard forms of TREC must be used unless:
A) A broker or salesperson wishes to use a different form
B) A principal in the transaction requests a different form to be used
C) The listing broker disagrees with certain language in the contract
D) A lender requires a different form to be used
Wrong A) A broker or salesperson wishes to use a different form
wrong D) A lender requires a different form to be used
According to the TREC 1-4 Residential Contract (Resale), who is responsible for paying the owner policy of title insurance fee?
A) The buyer
B) The seller
C) The title company named in the contract
D) The party stipulated in the contract
D) The party stipulated in the contract
The Information About Brokerage Services (IBS) states the broker may represent the:
A) Owner
B) Buyer
C) Both owner and buyer as intermediary
D) All of the above
Wrong C) Both owner and buyer as intermediary
What is the status of a contract if the seller does not make the buyer aware of a property being located with a municipal utility district?
A) Voidable by the buyer
B) Void
C) Voidable by the seller
D) Voidable by the buyer or the seller
A) Voidable by the buyer
A contract is described as an agreement between two or more parties to do or not do something.
A) True
B) False
A) True
Any changes to the original contract once it is finalized and receipted must be done:
A) At the title company on the original contract
B) On an amendment
C) On the 3rd Party Financing Addendum
D) On a real estate change form
B) On an amendment
A TREC promulgated (declaration)Farm and Ranch contract can include:
A) Buildings
B) Crops
C) Equipment
D) All of the above
D) All of the above
What must a Buyer’s Representation Agreement have?
A) Fair Housing disclosure
B) An attachment from a mortgage company regarding buyer’s qualifications for a loan
C) A termination date
D) none of the above
C) A termination date
Who is designated as responsible for promptly sending a copy of the contract to any attorneys that are named in the contract?
A) The title company
B) The lender
C) The broker
D) The buyer
C) The broker
According to the Real Estate License Act of Texas, which one of the following actions is a fair and impartial act for an Intermediary?
A) Appointing associated licensees to work with the parties
B) Appointing subagents to work with the parties
C) Agreeing to represent only the owner
D) Agreeing to represent only the buyer
A) Appointing associated licensees to work with the parties
When electing to use the option paragraph of the contract, the buyer may, within the time specified in the paragraph, do any of the following EXCEPT:
A) Complete the repairs himself before the end of the option period
B) Terminate the contract
C) Do nothing and proceed to closing
D) Amend the contract waiving the right to terminate
A) Complete the repairs himself before the end of the option period
A Buyer/Tenant Representation Agreement is only available through the Texas Real Estate Commission (TREC)
A) True
B) False
B) False
The financing paragraph will be used to indicate:
A) Third party financing
B) Assumption
C) Seller financing
D) Any of the above
D) Any of the above
Time is of the essence means that certain items in the contract must be performed:
A) As specified in the contract
B) As verbally agreed between buyer and seller
C) As verbally agreed between the sales agents representing buyers and sellers
D) None of the above
A) As specified in the contract
The Seller as well as the Buyer has the unrestricted right to terminate the contract under the option period.
A) True
B) False
B) False
A voluntary dispute resolution is called litigation
A) True
B) False
B) False
Steering is illegal and is described as channeling a minority to or away from an area to change the character of the neighborhood.
A) True
B) False
A) True
Federal Fair Housing Laws forbids discriminatory practices by parties including:
A) Owners of properties
B) Lenders
C) Real estate brokers
D) All of the above
D) All of the above
Intermediary requires:
A) Disclosure of who represents whom in a transaction
B) Written agreement by both seller and buyer
C) involvement of only one company
D) All of the above
D) All of the above
Use of the TREC promulgated (declaration)One to Four Family Residential Contract (resale) is allowed on the sale of a residential condominium.
A) True
B) False
B) False
If there is an existing survey on the property, what does the seller take to the title company and the lender?
A) The existing survey
B) The existing survey and a notarized affidavit stating if there have been any changes in the survey since the time the existing survey was completed
C) A copy of the deed and the existing survey
D) The seller’s appraisal and a copy of the survey
B) The existing survey and a notarized affidavit stating if there have been any changes in the survey since the time the existing survey was completed
When earnest money is deposited with an escrow agent, the escrow agent
A) Is not responsible for the performance of any signatory
B) Has the right to secure written release of all signatories
C) Is not liable for interest on the money
D) All of the above
D) All of the above
There are no TREC promulgated(declaration) contracts for new construction. All builders use their own contracts.
A) True
B) False
B) False
In the event of buyer’s default, the seller may:
A) Terminate the contract
B) Receive the earnest money as liquidated damages
C) Enforce specific performance
D) Any one of the above
D) Any one of the above
The Texas Real Estate Commission (TREC) promulgates an addendum to be used in a short sale. This Short Sale Addendum is to be signed by:
A) Listing agent
B) Buyers’ agent
C) Lien holder
D) Buyer and seller
D) Buyer and seller
If a Seller is to remain in the property after closing:
A) This information should be written in Paragraph #11, Special Provisions
B) The listing agent should not get involved
C) This can be verbally agreed between buyer and seller and shouldn’t be a problem
D) A Seller’s Temporary Lease Form promulgated by TREC should be completed and signed by buyer and seller and attached to the contract.
D) A Seller’s Temporary Lease Form promulgated by TREC should be completed and signed by buyer and seller and attached to the contract.
In a real estate transaction, a street address is considered sufficient to described the property being conveyed.
A) True
B) False
B) False
In Texas, dual agency has been replaced with Intermediary
A) True
B) False
A) True
The Buyer’s Agency Agreement allows an agent to show the same properties to competing clients
A) True
B) False
Next question
A) True
Your buyers have signed a contract to buy a new home. The contract is subject to the sale of their present home. This is called a:
A) Chattel
B) Contingency
C) Cooperation
D) Coinsurance
B) Contingency
If an Agent receives confidential information from a Client while the agency agreement is in force, that agent may:
A) Share that information once the agreement expires
B) Share that information if the Client authorizes the agent to share it
C) Never share the information with another client
D) share the information, but only to another agent
B) Share that information if the Client authorizes the agent to share it
If a buyer and/or seller agree to mediate, they are giving up their right to pursue relief through the courts.
A) True
B) False
B) False
The TREC promulgated 1-4 Family Residential Contract (resale) states that if the cost of lender required repairs and treatment exceed _% of the sales price, buyer may terminate the contract and the earnest money will be refunded to the buyer.
A) 7%
B) 1%
C) 5%
D) 20%
C) 5%
In Paragraph 3B of the sales contract, the “sum of all financing”
A) Includes the earnest money deposited at the time the contract is executed
B) Includes the closing costs
C) Excludes any loan funding fee or mortgage insurance premium
D) All of the above
C) Excludes any loan funding fee or mortgage insurance premium
If a property has a “Sale of Other Property” contingency contract on it, Seller:
A) Cannot accept another offer
B) Must take the property of the market
C) Can ask the original buyer to remove the contingency if the Seller has accepted another offer as a back -up
D) None of the above
C) Can ask the original buyer to remove the contingency if the Seller has accepted another offer as a back -up
Per Paragraph #16 of the Residential Contract (Mediation), If a buyer and/or seller agrees to mediate, they are giving up their right to pursue relief through the courts.
A) True
B) False
B) False
The Condominium Resale Certificate called for in paragraph 2 of the TREC Residential Condominium Contract (Resale) must have been prepared no more than _ before the date it is delivered to the buyer.
A) 7 days
B) 20 Days
C) 6 months
D) 3 months
D) 3 months
If a property was built before 1978, what specific addendum is required?
A) Walk Through and Acceptance addendum
B) Addendum for asbestos inspection
C) Disclosure of Lead-Base Paint Addendum
D) Addendum for Inspection with Right to Terminate
C) Disclosure of Lead-Base Paint Addendum
If the Buyer does not give notice to the Seller that he/she cannot obtain credit approval with the number of days stated in the contract, the contract will no longer be subject to the buyer’s credit approval.
A) True
B) False
A) True
Within __ days after the title company receives a copy of the contract, Seller shall furnish to Buyer a Commitment for title insurance.
A) 10
B) 5
C) 20
D) 30
C) 20
Earnest money:
A) Constitutes the consideration
B) Is used to make the offer more enticing to the seller
C) Is required in the contract
D) Always equals 1% of the sales price.
B) Is used to make the offer more enticing to the seller
The TREC promulgated Seller Financing Addendum states that if the buyer does not furnish the required qualifying documentation with the time limit allowed, Seller may terminate the contract and keep the earnest money.
A) True
B) False
A) True
Failure on the part of the broker/sales associate to advise the purchaser in writing to have an abstract of title examined by an attorney or obtain a title insurance policy:
A) Is not a violation of the Texas Real Estate License Act
B) Is the normal practice in Texas
C) May be cause to have the agent’s license suspended or revoked, and precludes receiving any commissions or agreed fees associated with the sale.
D) Is the correct action as this is clearly a legal matter.
C) May be cause to have the agent’s license suspended or revoked, and precludes receiving any commissions or agreed fees associated with the sale.
An addendum has been provided by TREC for voluntary use to provide for transfer of personal property (Non-Realty Items)
A) True
B) False
A) True
The Residential Condominium Contract allows a limit to the amount a Buyer will pay for Association transfer fees.
A) True
B) False
A) True
Once a contract is finalized and receipted it:
A) Cannot be changed
B) Can be amended only one time
C) Can be amended multiple times if all parties agree
D) Can only be amended by the buyer
Can be amended multiple times if all parties agree
In Paragraph #14 of the Residential Contract (casualty loss), If a seller cannot complete the repairs within the time limit, the buyer has the option of:
A) Terminating the contract
B) Extending the closing
C) Accepting the property in the damaged condition with an assignment of insurance proceeds
D) Any of the above
D) Any of the above
If a buyer decides to terminate a contract, the seller must agree to the termination.
A) True
B) False
A) The Broker representing the seller and buyer
A) A promise in exchange for a promise
The option paragraph of the contract creates an executed contract.
A) True
B) False
A unilateral contract only binds one party to perform.
A) True
B) False
The Non-Realty Items addendum form for transfer of personal property can include the following EXCEPT
A) An agreed dollar amount between buyer and seller for the conveyance
B) A place to list the personal property to be conveyed
C) A representation by Seller that the items are owned free and clear of encumbrances
D) A warranty and guarantee from the seller that the items are in working condition
D) A warranty and guarantee from the seller that the items are in working condition
A survey is required on all Condominium Contracts.
A) True
B) False
If a Seller counters a Buyer’s offer, it is considered a rejection.
A) True
B) False
A Back-Up contract to an existing contract can be terminated at any time under the termination option paragraph:
A) Only if option money has been submitted to the seller at the time the Back-up contract is signed and agreed by all parties
B) It has not moved to primary position, at which time the number of days in paragraph 23 (Option paragraph) dictates the ‘time is of the essence” period
C) The Back-Up Addendum form is attached to the contract
D) All of the above
Why do lender required repairs take priority?
A) Because lender repairs are the most serious repairs needed
B) Because the buyer cannot get the loan without these being done
C) Because FNMA sets the standards for what repairs are most important
D) Because the seller and the lender work together to determine the priority of repairs
B) Because the buyer cannot get the loan without these being done
A Condominium Contract can include a description of the parking assigned to the Unit.
A) True
B) False
FHA loans are government insured. VA loans are guaranteed by the government.
A) True
B) False
Implied agency is created by the actions of the agent.
A) True
B) False
Federal Fair Housing Laws forbid discrimination based only on race.
A) True
B) False
A) When the last person signs and initials all changes
Your buyers are considering consulting their attorney while you are preparing the offer. You should:
A) Try to get them to sign the offer and call their attorney later
B) Offer to deliver the contract to their attorney
C) Advise them there is no need to consult an attorney since all real estate transactions are routine
D) None of the above
B) Offer to deliver the contract to their attorney
The “Special Provisions” paragraph (#11) of the Residential Contract is for:
A) Naming all the additional personal items the buyer would like to have
B) Excluding any other provisions of a contract that are not mutually agreed upon
C) Inserting factual statements and business details where no addendum is required
D) Name the parties involved in the transaction
C) Inserting factual statements and business details where no addendum is required
In the 1-4 Family Residential Contract, any party to the contract wrongfully fails to sign a release acceptable to the escrow agent within 7 days of receipt of the request will be liable to the other party for liquidated damages in the amount of all the below EXCEPT:
A) The earnest money
B) All costs of suit
C) Three times the amount of the earnest money
D) Any expenses the title company incurred related to holding the earnest money
D) Any expenses the title company incurred related to holding the earnest money
If a bonus is offered by an owner or an owner’s agent, Buyer’s broker:
A) May retain the additional compensation
B) Is always obligated to share the bonus with the buyer
C) Is required by law to refuse the additional compensation
D) Can only accept the bonus if it is a part of a standard commission
A) May retain the additional compensation
You can give legal advice to a buyer or seller if you understand all the facts:
A) True
B) False
If Paragraph 4(B) is checked under the Financing Paragraph, the following are true EXCEPT:
A) The contract is not subject to financing approval
B) the contract is not an FHA or VA contract
C) The third Party Financing Addendum is not used
D) The Buyer has the right to terminate and have earnest money refunded if they cannot obtain a loan
D) The Buyer has the right to terminate and have earnest money refunded if they cannot obtain a loan
A) Not be shown any of the broker’s listings
The clause in a contract stating that “time is of the essence” would indicate:
A) The contract must be finalized immediately
B) The contract must include the time of day the contract was executed
C) Strict performance of a certain act within the time stated in the contract
D) Monetary penalties will be incurred if the provisions are not met by certain times
C) Strict performance of a certain act within the time stated in the contract
An expressed agency cannot be orally agreed but must be in writing.
A) True
B) False
The Texas Association of Realtors (TAR) Residential Buyer/Tenant Representation Agreement allows all the following EXCEPT:
A) The Broker can show the same properties to more than one prospective buyer
B) Confidential information acquired by the agent can be shared with the seller if the buyer client gives permission
C) The term of the agreement can automatically renew
D) The broker can seek a commission from the Buyer is the Seller or seller’s agent does not agree to pay.
C) The term of the agreement can automatically renew
Federal Fair Housing Laws forbid discrimination based only on race.
A) True
B) False
It is considered illegal for a contract to include any discriminatory provisions.
A) True
B) False
An agent must provide the Information About Brokerage Services (IBS) notice at the time of the first substantive dialogue with the party to the transaction for all of the following EXCEPT:
A) selling or leasing a commercial property
B) Functioning as a tenant representative
C) Leasing a residential property for a term of two years
D) Leasing a residential property for a term of six months – Answer given
D) Leasing a residential property for a term of six months
Promulgated contract form exam questions and answers
Promulgated contract form exam questions
Promulgated contract form exam answers
promulgated contract forms quizlet
promulgated contract forms practice test
promulgated contract forms – champions quizlet
promulgated contract forms – champions exam quizlet
by default, trec promulgated contract forms convey
Void Contract
A
Has no legal effect and can’t be enforced as terms do not create legal rights or call fro illegal acts
2
Q
Voidable Contract
A
One or more of the parties has authority to rescind the contract (incompetent, fraud, duress)
3
Q
Mutual Agreement
A
Offer and acceptance
4
Q
Mirror Image Rule
A
Offer must be accepted without modifications
5
Q
Parol Evidence
A
When parties agree in writing, all prior oral and written agreements integrated into one and prevents a party to add to the written terms of the contract
6
Q
Electronic Signature
A
An electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record
7
Q
Laches
A
Use it or lose it rule. Too bad, you are out of time. That door is now locked. Unreasonable delay, neglect
8
Q
Executory Contracts
A
In the works
9
Q
Option Money
A
Must be given to the seller or seller’s agent and NEVER to the title company
10
Q
Contract Lawsuit Statute of Limitations
A
15 years
11
Q
Time is of the essence addenda
A
Sale or Other Property by Buyer
Back-up Contract
Third Party Financing
Short Sale
12
Q
Four Corners Rule
A
If a contract appears to be complete, no outside evidence can be used to challenge it
13
Q
Nominal Damages
A
Token damages when breach occurred – not money loss
14
Q
Liquidated damages
A
Specific damages
15
Q
Specific Performance
A
Performance of a contractual duty, as ordered in cases where damages would not be adequate remedy
16
Q
Restitution
A
Putting non breaching party back in position before breach
17
Q
Assignment
A
Famous people purchasing property may have the original contract in the name of an unknown buyer and then at closing, the contract is assigned to the real purchaser
18
Q
Assignment
A
Transfer of rights
19
Q
Delegation
A
Transfer of duties
20
Q
Statutes of Limitations in Texas
A
Assault and battery: 2 years
Contract: 4 years
False imprisonment: 2 years
Fraud: 4 years
Legal malpractice: 2 years
Libel: 1 year
Medical malpractice: 2 years
Personal injury: 2 years
Product liability: 2 years or 15 years
Property damage: 2 years
Slander: 1 year
Trespass: 2 years
Wrongful death: 2 years
21
Q
MUD
A
Municipal Utility District provides water, sewage, drainage etc.
22
Q
Reasons for Termination
A
Fully executed contract is best way
23
Q
Life of a Real Estate Transaction
A
Buyer orders home inspection
Repairs
Loan Application and Appraisal
Survey
Insurance
Home Warranty
Final Walk-through
24
Q
Who approves and promulgates Texas RE forms
A
TREC
25
Q
How many promulgated forms does TREC have
A
The Real Estate Commission has approved and promulgated 6 contract forms for licensee’s use. They include a One to Four Family Residential Contract, Two New Home Contracts, a Farm and Ranch Contract, a Condo Contract and an Unimproved Property Contract
26
Q
Texas Veterans Loan
A
Can borrow u p to $150,000 to purchase land at competitive interest rates. 5% down for tracts one acre of more
27
Q
MIP (Mortgage Insurance Premium)
A
FHA
28
Q
Lender Paid PMI
A
Built into interest rate. Often monthly payment is less
29
Q
Mortgage Premiums for FHA
A
Two mortgage insurance premiums are required on all FHA loans. The upfront premium is a % of the loan amount – currently 1.75%
The 2nd is the annual premium (paid monthly) based on LTV
30
Q
FHA 203K
A
Based on current appraised value for repairs up to $35,000 nonstructural repairs (painting, replacing cabinets or fixtures)
31
Q
Max FHA loan size
A
$625,500
32
Q
Reverse Mortgage Age
A
62 and no escrow account and the mortgage isn’t due until last borrower dies, sells or fails to live in the home for longer than 12 months
33
Q
Texas Veterans Land Board
A
Competitive interest rates
Up to $417,000
Those with 30% or greater service connected disability get additional 1/2% discount and Funding Fee is waived
0 down
No PMI
34
Q
The date in the right side top of the contract is the date that
A
TREC approved and promulgated the form
35
Q
How many versions of the Third Party Financing Addendum
A
8
36
Q
The sales contract describes the property as
A
Land, Improvements and Accessories
37
Q
If parties decide to add items that stay that are not in the contract, they should use
A
Non-Realty Items Addendum
38
Q
On FHA loans being made currently, the MIP the borrower pays monthly will terminate when
A
Never until loan is paid off
39
Q
The money to originate an FHA, VA, TVLB loan comes from the
A
The lender
40
Q
A veteran may be able to get his VA entitlement restored by
A
Sending an application to the VA
41
Q
According to the Loan Assumption Addendum, if the buyer does not deliver the credit information within the required time, the seller has how many days to terminate after expiration for the time of delivery?
A
7
42
Q
According to the Seller’s Financing Addendum, if the buyer delivers his credit information to the seller in a timely fashion, and the seller determines it is unacceptable, how many days after the date for the expiration of the time for delivery does the seller have to terminate?
A
7
43
Q
Property approval, according to paragraph 4, includes which of the following things?
A
The appraisal
Lender-required repairs
Insurability
44
Q
The amount listed as the principal amount of the loan(s) in the addendum(s) should match the amount in Paragraph 3B of the contract
A
True
45
Q
The buyer’s notice of failure to receive buyer approval from the lender, written on a napkin and given to the seller before the deadline, is sufficient to terminate the contract and receive a return of the earnest money
A
True
46
Q
Who do you deliver earnest money to
A
Listing Agent
47
Q
Paragraph 23
A
Paragraph 23 says the money must be delivered to the seller within three days after the effective date. Notice the last line of the paragraph says, “time is of the essence”. Time is of the essence means that five minutes after that 5PM deadline on that third day is too late. For example, if the effective date is the second day of the month, the option money must be delivered to the seller (or his or her agent) by 5PM on the 5th.
48
Q
Who is responsible for Title Insurance Policy cost
A
The parties negotiate who will pay for the Owner’s Title Policy and which Title Company will be used. The Title Policy is a contract between the title company and the buyer. It is important the decision of which title company to use be left to the decision of the parties.
49
Q
Who pays for Restrictive Covenants
A
According to paragraph 6B of the TREC contract the Title Company will send a commitment for title insurance, within 20 days after they receive the contract, to the buyer at the address listed in Paragraph 21 of the contract. The buyer will also receive a copy of the restrictive covenants, at the buyer’s expense, that are in place for the real estate. The restrictions dictate how the buyer can and cannot use the property. Restrictive covenants are an exclusion to the title policy.
50
Q
Restrictive Covenants
Study These Flashcards
A
The buyer will receive a copy of the restrictive covenants and other deed restrictions that are in place for the real estate. The restrictions dictate how the buyer can and cannot use the property. Restrictive covenants usually apply to a group of homes or lots, or property that’s part of a specific development or subdivision. They are normally put in place by the original developer and are different for every area of homes
51
Q
Reservations
Study These Flashcards
A
oil, gas, or other minerals, water, timber, or other interests is
made in accordance with an attached addendum
52
Q
Who picks Title Company
Study These Flashcards
A
if a seller wants to avoid a possible violation of RESPA, the seller should not insist on a particular title company for the transaction unless the seller is paying for both the owner policy and the lender policy of title insurance.
53
Q
Who picks Title Company
Study These Flashcards
A
if a seller wants to avoid a possible violation of RESPA, the seller should not insist on a particular title company for the transaction unless the seller is paying for both the owner policy and the lender policy of title insurance.
54
Q
RESPA issues with choosing a Title Company
Study These Flashcards
A
It’s the agents who care. If you are a seller’s agent and there is even the slightest possibility that trying to force the buyer to use a certain title company could cause your seller to be in violation of RESPA, it would be a very serious situation. Let the parties decide the title company.
55
Q
When does buyer pay seller option fee (usually $100-200)
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A
Within 3 day after date of contract and will not be credited to sales price at closing and not refundable
56
Q
Stand By Fees
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A
Charged by water district to unimproved property
57
Q
Who pays for Title Insurance
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A
Although it is customary for the seller to pay for the title policy, this is not required, and paragraph 6 provides the opportunity to check the buyer as the paying party. The title company has 20 days to produce the commitment with an automatic 15 day extension if needed.
Buyer pays for copies of restrictive covenants
58
Q
Increase Value Endorsement
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A
The title policy does NOT guarantee that no one will ever attack your title. They do guarantee that if anyone does attack your title, they will defend you and if they lose, you are insured up to a certain amount. The amount is usually what you paid for the property when you bought it. That was probably enough when you bought it. This is to increase value of property to what it is now.
59
Q
Title Insurance Policies
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A
T-1 for Seller and t-2 for buyer. 4 year statute of limitations
60
Q
T-47 from Tex Dept of Insurance
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A
Residential Real Property Affidavit – notarized document telling buyer of your home what you know about the home’s boundaries. I never added a fence or extension to house or moved a fence. Should be completed before you list your home for sale
61
Q
Survey cost in Austin
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A
$400-$550
62
Q
Sellers Disclosure Notice
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A
Buyer can terminate for any reason within 7 days of Notice and receive earnest money
63
Q
Lead based paint disclosure
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A
Remember, you risk a $10,000 penalty and up to three times the damages to someone injured each time you violate the federal lead-based-paint disclosure requirement.
64
Q
When a contract is in writing, the parties have agreed to everything, all signatures and initials are in place and the acceptance has been communicated to the other party or their agent you can fill in the
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A
Effective date
65
Q
Amendment to change exceptions in the title is paid by
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A
Negotiated party
66
Q
Deed Restriction
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A
Dictate how the buyer can and cannot use the property
67
Q
Good Funds
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A
Wire transfer, cashier’s check, certified check
68
Q
Prepaid Interest
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A
Discount points
69
Q
Buy Down
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A
Mortgage subsidy made to the homebuyer on behalf of the seller.
70
Q
Commitment Fee
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A
a banking term used to describe a fee charged by a lender to a borrower to compensate the lender for its commitment to lend
71
Q
Liquidate Damages
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A
Estimated guess of actual damages
72
Q
Arbitration
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A
Agreement in a dispute will be resolved on friendly basis. 3rd party (Judge) would make decision.
73
Q
Escrow
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A
legal document that outlines the terms and conditions between parties involved in an escrow arrangement. An escrow, third party, agent would then follow the instructions outlined in the agreement
74
Q
Antitrust Violations
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A
Protect trade and commerce from abusive practices
75
Q
The closing will be on or before such and such date or…
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A
or within 7 days after objections made under Paragraph 6D have been cured or waived, whichever date is later (Closing Date).
76
Q
ABCs of Title Commitment
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A
Schedule A – Actual facts (names, legal, price, lender)
Schedule B – Buyer Notice of things not covered by title policy
Schedule C – Clear in order to close must be resolved
Schedule D – Disclosure of all parties who will share any part of the title insurance premium
77
Q
The buyer made an objection to something on the survey and the seller cured the objection. The parties will be able to close but it will be four days after the on or before date. Do they parties need an amendment?
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A
No, they have 7 days to close after the objection is cured
78
Q
The parties were to close on May 15th. The title company got the closing disclosure to the buyer on the 14th but they have to wait the three days and will close on the 17th. Do the parties need an amendment to the contract?
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A
Yes
79
Q
If the buyer is concerned about the exclusion in the title insurance for the standard printed exception as to discrepancies, conflicts, shortages in area or boundary lines, encroachments or protrusions, or overlapping improvements, is there anything he or she can do about it?
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A
Yes, the buyer can get an endorsement to change it to only shortages in area*
80
Q
203K
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A
FHA Renovation Loan
81
Q
Do the requirements of the Texas Property Code relating to security issues apply to a property under a Temporary Lease Agreement of under 90 days?
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A
No
82
Q
Most amortization schedules are based on 360 days
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A
Statutory year
83
Q
5 Texas Constitutional Rules for Property Tax
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A
Taxation must be equal and uniform
Taxation must be on its current market value
All property is taxable unless Federal or State law exempts it
Property owners have a right to reasonable notice of increases in appraised value
Each property must have one appraised value
84
Q
3 main parts to property tax system in Texas
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A
Appraisal district in county sets value yearly – CAD district
Appraisal Review Board settles disagreements
Local taxing units decide how much money they will need
85
Q
Property Tax bills go out when
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A
October 1st. Have until Jan 31st to pay their taxes. Feb 1st penalty and interest charges, legal action
86
Q
What is a form on interest that a lender collects up front?
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A
Discount points
87
Q
How long does a broker have to keep escrow account records
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A
4 years
88
Q
If a buyer has an escrow account on his new loan, how many months will they be debited at closing?
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A
14 months
89
Q
Any party who fails or refuses to sign a release acceptable to the escrow agent within how many days will be liable to other party for damages
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A
7
90
Q
Written demand for earnest money
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A
Within 15 days
91
Q
Buyer Broker Contract
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A
Exclusive – you can’t buy a property without owing a commission to that agent even if that agent didn’t write your offer
An agreement that you will be paid
92
Q
Which paragraph is used to add factual statements or business details as desired by the principals to conform to the negotiations?
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A
Paragraph 11, Special Provisions, can only be used to add factual statements or business details as desired by the principals to conform to the negotiations. Factual statements and business details are clarifications of something in the contract. They are true, factual, and simply expand on a subject elsewhere in the contract, not a new negotiation.
93
Q
The seller may not accept a second offer unless the back-up addendum is part of the second offer
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A
True
94
Q
Real Estate Developers
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A
Not regulated
95
Q
Homeowners Association
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A
Not regulated
96
Q
Mortgage Brokers
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A
Texas Department of Savings an Mortgage Lending
97
Q
Property Tax Consultants
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A
Texas Department of Licensing and Regulation
98
Q
Title Insurance Companies
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A
Texas Department of Insurance
99
Q
Auctioneers
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A
Texas Department of Licensing and Regulation
100
Q
Writ of Execution
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A
Order of the court to any constable in the state of Texas ordering him to execute on any non-exempt assets. … A judgment creditor has the right, as a matter of law, to have a writ of execution issued unless and until the defendant files a proper supersedes bond.
101
Q
Abstract of Judgment
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A
Court document that renders judgment and summarizes damages, attorney’s fees and court costs
102
Q
Max payment for a claim
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A
$50,000 for single transaction and $100,000 for all claims against a single license holder
103
Q
IABS (Information about Brokerage Services)
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A
Cannot be a link in an email signature
Can be an attachment in an email
Can be in the body of the email, personal delivery, 1st class mail or overnight carrier
Can be link in body of email
Link is required on my website
104
Q
To terminate a contract during option period
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A
The Notice of Termination is the proper way to give the required notices of termination. Only the buyer has to sign this document. Since the buyer has been given these rights in the contract, it is not necessary to get the sellers approval.
105
Q
If an agent is selling a new home and the builder has her own contract form, how can the agent ascertain that the buyer receives the required notice that he or she should have the abstract examined by an attorney or obtain a policy of title insurance?
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A
Use TREC form OP-C, Notice to Prospective Buyer
106
Q
A transaction is contingent upon the sale of another property and the seller notifies the buyer that he has accepted another offer. What must this buyer do?
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A
Waive contingency on or before the date agreed to in the Sale of Other Property Addendum
107
Q
A back-up contact was executed on July 1st. The buyer is willing to be in back-up position until July 16th and see if the first contact will terminate. What are the back-up buyer’s responsibilities while in back-up position?
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A
Pay earnest money and option money agreed to in back-up contract
108
Q
Fraud for Profit
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A
Insiders
109
Q
Fraud for Property
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A
Borrow inflates information
110
Q
Occupancy Fraud
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A
Borrow states the home will be primary or secondary residence but is an investment property which have higher interest rates
111
Q
Appraisal Fraus
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A
Inflated appraisal value
112
Q
Income Fraud
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A
Overstated income
113
Q
Equity Skimming
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A
Multiple parties starting with appraiser inflating price, a phony buyer secures loan to hide ID of fraud organizers and then sign property over to organizers in quit claim deed and they rent the property until it goes into foreclosure
114
Q
Straw buyer
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A
Phony
115
Q
Civil Rights Acts
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A
Protects Race
116
Q
Fair Housing Act
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A
Protects color, sex, familial status and not age
117
Q
Fair Housing Act
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A
Protects color, sex, familial status and not age
118
Q
Well publicized events that make the property notorious like murder/suicide
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A
Must be disclosed
119
Q
The seller has agreed to repair the front porch but he needs more time to finish. What is the maximum number of days the closing date can be delayed for repairs?
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A
5 days
120
Q
The seller does not have a current survey of the property. How many days before the closing date must a new survey at the seller’s expense be provided?
Madison is writing up a contract on a townhouse unit for which the buyer will have fee simple ownership and pay a monthly HOA for the upkeep on common areas. Which promulgated contract should she use?
a) Residential Condominium Contract
b) Unimproved Property Contract
c) One to Four Family Residential Contract
d) Residential Townhome Contract
c) One to Four Family Residential Contract
TREC has promulgated forms for most _.
a) Lease purchase transactions
b) Cooperatives
c) Commercial leases
d) Residential transactions
d) Residential transactions
TREC promulgated contracts allow they buyer to have the property inspected:
a) By anyone personally selected by the buyer
b) By inspectors licensed by TREC or otherwise permitted by law
c) No more than three times
d) At any time by any person selected by the buyer’s agent
b) By inspectors licensed by TREC or otherwise permitted by law
Buyer Sarah is purchasing a residential property. She plans to live in the home and operate a daycare business out of it. Having mentioned this to her agent, the agent should:
a) Write a paragraph describing the business in Paragraph 11, Special Provisions
b) Disclose the daycare using a TREC Special Use addendum
c) Specify the use as a daycare in Paragraph: Objections
d) Not mention the daycare because the future use of a property is not an issue
c) Specify the use a daycare in Paragraph 6: Objections
The title company is:
a). A party to the contract
b) Not a party to the contract
c) Liable for the performance of the parties
d) Responsible for arranging financing for the buyer
b) Not a party to the contract
A(n) property is one where a particular event has affected the desirability of said property.
a) Stigmatized
b) Undesirable
c) Unsellable
d) Forecloased
a) Stigmatized
A license holder might be guilty of the unlawful practice of law if he or she:
a) Writes a will for a client
b) Advises a buyer regarding title issues
c) Drafts lengthy and complex provision in special provisions
d) Performs any of these actions could result in a real estate license being suspended or revoked by TREC
d) Performs any of these actions could result in a real estate license being suspended or revoked by TREC
When a seller wishes to retain certain fixtures or accessories, these items are called _.
a) Personal property
b) Reservations
c) Exceptions
d) Exclusions
d) Exclusions
What is TRUE of the paragraph regarding Earnest Money in the 1-4 Family Residential Contract?
a) Earnest money is required to make the contract valid
b) Time is not of the essence for this paragraph
c) Time is of the essence of this paragraph
d) The paragraph states the standard dollar amount of earnest money is required for a valid contract.
c) Time is of the essence for this paragraph.
According to the TREC Third Party Financing Addendum, buyer approval is obtained when the terms of the loan described are available, and the buyer has satisfied all of the lender’s requirements related to the buyer’s _.
a) Credit history and employment record
b) Income and credit history
c) Assets and income
d) Assets, income and credit history
d) Assets, income and credit history
Settlement and other expenses include:
a) Releases of existing liens
b) Appraisal fees
c) Loan application fees
d) All of these are included in settlement and expenses
d) All of these are included in settlement and expenses
The process of dividing ongoing expenses such as taxes and POA fees between the buyer and seller at closing is called __.
a) Assessment
b) Proration
c) Collections
d) Accounting
b) Proration
An exception to a license holder using a TREC-promulgated contract form would be if:
a) The broker does not want to use the forms
b) The license holder prepared his or her own form
c) The sale is for vacant lot in a subdivision
d) An attorney-prepared form is used
d) An attorney-prepared form is used
During the time between execution and closing/funding, a contract is a(n):
a) Tentative contract
b) Voidable contract
c) Executory contract
d) Fully executed contract
c) Executory contract
The Third Party Financing Addendum would NOT be used for _.
a) VA loans
b) FHA loans
c) Conventional loans
d) Seller financing
b) FHA loans
_ is not a requirement of a valid contract.
a) Earnest money
b) Legal subject matter
c) Mutual assent
d) Competent parties
a) Earnest money
The Smith’s property is on the market, and their agent has received a full price offer from the Johnsons. The agent has presented the offer to Mr. and Mrs. Smith, who have accepted the offer by signing it. When is this contract valid?
a) Immediately
b) After all of the parties have a written copy
c) When the Johnsons have received communication of the acceptance
d) At closing
c) When the Johnsons have received communication of the acceptance
When should a license holder advise a client to consult an attorney?
a) At first contact with the client
b) before signing the contract if the client does not understand the effect of signing the sales contract or the terms or conditions in the agreement
c) After the contract has been signed by all parties
d) a license holder should never advise a client to consult an attorney
b) before signing the contract if the client does not understand the effect of signing the sales contract or the terms or conditions in the agreement
According to Paragraph 8.A. in the TREC 1-4 Family Residential Resale Contract, agency coupled with an interest must be disclosed. An agent must also disclose if they are acting on behalf _.
a) Spouse, sibling, or child
b) Spouse, parent, o in-law
c) Paren, child or sibling
d) Spouse, parent or child
d) Spouse, parent or child
Federal law provides that when selling a home built before 1978:
a) All lead-based paint must be removed
b) The buyer must be provided with the pamphlet “Protect Your Family From Lead in Your Home
c) The buyer must have lead testing performed prior to closing
d) The seller must complete a Lead-Based Paint Disclosure only if there is a concern that property might be contaminated
b) The buyer must be provided with the pamphlet “Protect Your Family From Lead in Your Home
If a license holder is receiving compensation from a residential service company, the compensation must be:
a) Reported to TREC
b) Disclosed to the parties using the appropriate TREC form
c) Kept quiet
d) Reported to the attorney general for action
b) Disclosed to the parties using the appropriate TREC form
Another name for blockbusting is _.
a) Panic peddling
b) Steering
c) Chunking
d) Puffing
a) Panic peddling
In connection with a residential sale in Texas, a T-47 Department of Insurance of affidavit will be used when the:
a) Lender requires the buyer to purchase a new survey on the property
b) Seller is providing an existing survey
c) Title company is requiring a new survey
d) Seller has agreed to pay for a new survey
b) Seller is providing an existing survey
Which of the following statements regarding loan assumptions is CORRECT?
a) The original borrower on a note is not necessarily released from ongoing liability for repayment on a mortgage when a purchaser assumes the mortgage
b) The seller has no liability when his or her loan is assumed
c) Loan assumptions take less time to process because there is less paperwork for the lenders
d) Fees on a loan assumption are generally much higher than that of a new loan
a) The original borrower on a note is not necessarily released from ongoing liability for repayment on a mortgage when a purchaser assumes the mortgage
Jen and Ric are purchasing their first home together, but cannot quality for traditional financing. The seller of the property agrees to help them out by financing the purchase of the home. Which promulgated form would Jen and Ric’s agent use for this transaction?
a) Third Party Financing Addendum
b) Loan Assumption Addendum
c) Seller Financing Addendum
d) Non-Realty Items Addendum
c) Seller Financing Addendum
The lead-baed paint disclosure:
a) Requires the buyer to have a lead inspection within 10 days
b) Allows the buyer to waive the right to lead inspection
c) Requires the seller to remediate the presence of any lead found in an inspection
d) Is required for all properties built before 1988
b) Allows the buyer to waive the right to a lead inspection
If a seller has no green card or Social Security Number, the escrow agent will:
a) Refuse the transaction
b) Withhold 20% of the price from a foreign seller of the U.S. property
c) Withhold an amount that complies with tax laws and deliver it to the IRS
d) Not do anything
c) Withhold an amount that complies with tax laws and deliver it to the IRS
The commission agreement between the broker and the seller is usually found in the _.
a) Sales contract
b) Listing agreement
c) Buyer representation agreement
d) IABS
b) Listing agreement
In a lease with a “right of first refusal” provision:
a) The price is sent when the lease agreement is negotiated
b) The tenant has promised to buy the property
c) The TREC promulgated form must be used
d) The tenant has the right to match or better any offer the landlord receives to prevent the property from being sold to someone else
d) The tenant has the right to match or better any offer the landlord receives to prevent the property from being sold to someone else
The buyer may terminate the contract and receive a refund or earnest money if lender-required repairs:
a) Exceed 1% of the sales price
b) Exceed 5% of the sales price
c) Exceed 3% of the sales price
d) Exceed $10,000
b) Exceed 5% of the sales price
The loan amount in Paragraph 3B of the sales contract includes:
a) The amount of the mortgage insurance
b) The loan plus origination fees
c) Only the amount borrowed by the borrower
d) The loan amount minus the earnest money
c) Only the amount borrowed by the buyer
For a valid option to exist:
a) The option fee must be paid to the escrow agent
b) All of the banks in the Termination Paragraph must be filled in
c) The fee must be paid within three days of the effective date of the contract
d) All of these are required for a valid option to exist
d) All of these are required for a valid option to exist
An offer can be communicated by __.
a) Phone
b) Hand delivery
c) E-mail
d) An offer may be communicated by any of these methods
d) An offer may be communicated by any of these methods
If a buyer is concerned about the presence of endangered species, toxic, substances, or wetlands on a property, the agent should:
a) Attach the Environmental Assessment Addendum to the contract
b) Avoid the property at all costs
c) Write in Paragraph 11, Special Provisions, that the contrast is subject to an environmental review
d) Explain to the buyer that the environmental issues are rarely a problem
a) Attach the Environmental Assessment Addendum to the contract
The earnest money is:
a) Always 5% of the purchase price
b) Set by the TREC
c) Negotiated between the parties
d) Always equal to the option fee
c) Negotiated between the parties
If a home is to be sold, with the lender’s consent, at a price less than the outstanding balance on a mortgage, the sale is known as a(n)__.
a) Deed in lieu of foreclosure
b) Foreclosure
c) Short sale
d) Distress sale
c) Short sale
According to the Farm and Ranch Contract, windmills, tanks, fences, gates and sheds are considered _.
a) Crops
b) Accessories
c) Improvements
d) Reservations
c) Improvements
A broker has received 3 offers on a hot new listing. He must:
a) Present the lowest offer first to make the other offers look more attractive
b) Present the best offer first
c) Present only the offers that he feels are in the seller’s best interest
d) Present al offers in no required order
d) Present al offers in no required order
Accessories are commonly conveyed to the _ in the sale.
a) Buyer
b) Seller
c) Escrow agent
d) Selling broker
a) Buyer
How long is the option period in Paragraph 5B of the TREC One to Four Family Residential contract?
a) 7 days
b) 10 days
c) The negotiated number of days as specified in the contract
d) 15 days
c) The negotiated number of days as specified in the contract
A buyer has negotiated a contract with a seller allowing for a 10-day termination option period. On the 7th day he received an inspection report, and decided to terminate based on the results of the inspection. How long does he have to provide the seller with the notice to terminate?
a) Until midnight of the final day of his option period
b) until 6pm of the final day of the option period
c) Until 5pm of the final day of the option period
d) Until 10pm of the final day of the option period
c) Until 5pm of the final day of the option period
The state of Texas encourages the parties to resolve all conflicts and disputes through alternative dispute resolution procedures such as _.
a) Suing for monetary damages
b) Going to court
c) Mediation
d) Termination of the contract
c) Mediation
_ occurs when a buyer assumes and agrees to pay the seller’s existing mortgage.
a) Loan assumption
b) Conventional financing
c) 100% financing
d) Commercial financing
a) Loan assumption
The Buyer and Seller Temporary Residential Lease forms are good for any period up to _.
a) 14 days
b) 30 days
c) 60 days
d) 90 days
d) 90 days
Which type of contract is NOT assignable?
a) Buyer’s Representation Agreement
b) Purchase Contract with no contingencies
c) Lease
d) None of these contracts are assignable
a) Buyer’s Representation Agreement
A buyer has made a full price offer on a property and has asked for permission to move in 30 days before closing. The seller has accepted the price and terms and communicated that acceptance to the buyer. How should the buyer’s agent handle the buyer’s occupancy before closing?
a) The buyer’s agent should use the TREC Buyer’s Temporary Lease Addendum
b) The buyer’s agent should enter the terms of the lease in Paragraph 11 (Special Provisions) of the contract.
c) The buyer’s agent should use the TREC Seller’s Temporary Lease Addendum
d) The agent should use the Texas REALTORS residential lease agreement
a) The buyer’s agent should use the TREC Buyer’s Temporary Lease Addendum
Who is responsible for filling in the effective date of a contract after the last party signs?
a) The selling agent
b) The listing agent
c) The last party to sign
d) The broker
d) The broker
A _ is a person who is used to buy property in order to conceal the identity of the actual owner.
a) Scarecrow
b) Straw Buyer
c) Wickerman
d) Stool Pigeon
b) Straw Buyer
An offer is presumed to have been delivered to the principal when it is delivered to the agent under the legal doctrine of _.
a) Laches
b) Novation
c) Imputed Notice
d) Implied Agency
c) Imputed Notice
The Smiths have received an offer on their home. What course of action can the Smiths take in regard to the offer on their home?
a) Accept
b) Reject
c) Counteroffer
d) All of these are courses of action the Smiths can take
d) All of these are courses of action the Smiths can take
What is the difference between a void contract and a voidable contract?
a) A void contract is invalid from the beginning, and a voidable contract is one that meets all the requirements of the law
b) A void contract is entered into with a minor, and a voidable contract is one created to perform an illegal act
c) A void contract is invalid from the beginning, and a voidable contract is one that cannot be forced against one or more of the parties.
d) A void contract is a bilateral contract, and a voidable contract is a unilateral contract
c) A void contract is invalid from the beginning, and a voidable contract is one that cannot be forced against one or more of the parties.
A buyer terminates the contract within the option period, how many days does the seller have to refund the option fee?
a) The option fee is never refunded to the buyer
b) The seller has 7 days
c) The seller has 5 days
d) The seller has 3 days
a) The option fee is never refunded to the buyer
What are some common amendments that might be made to the original contract?
a) Repairs that the seller agrees to perform
b) Changes to the closing date
c) Changes to the sales price, down payment and/or amount financed
d) All of these are correct
d) All of these are correct
According to TREC contract forms, how many days does the title company have to provide the title commitment to the buyer?
a) 5 days after the effective date of the contract
b) 20 days after the effective date of the contract
c) 5 days after the title company receives the contract
d) 20 days after the title company receives the contract
b) 20 days after the effective date of the contract
Texas law requires all real estate license holders to give the _ to prospective buyers, tenants, sellers, and landlords.
a) Information About Brokerage Services
b) Short Sale Addendum
c) Addendum for “Back-Up Contract”
d) Lead-Based Pain Addendum
a) Information About Brokerage Services
The Notice to Prospective Buyer form:
a) Advises buyers to have an abstract examined or obtain title insurance
b) Informs buyers they must have TREC-licensed inspectors inspect the property
c) Notifies buyers that the lever of water impoundments that adjoin the property may fluctuate
d) Informs buyers that the property is located in a public improvement district (PID)
a) Advises buyers to have an abstract examined or obtain title insurance
When a party to a contract fails to perform under the contract, he/she is in _.
a) Escrow
b) Mediation
c) Default
d) Arbitration
c) Default
If a provision in an addendum contradicts a provision in the main body of the contract:
a) the provision in the addendum prevails
b) The provision in the contract prevails
c) An attorney must be consulted
d) TREC must get involved in the transaction
d) TREC must get involved in the transaction
Which statement regarding the Broker-Lawyer Committee is CORRECT?
a) The Broker-Lawyer Committee was created enforce the Texas Real Estate License Act
b) All of the members Broker-Lawyer Committee must be licensed real estate brokers
c) The Broker-Lawyer Committee was created to draft and revise standardized contract forms for use by real estate license holders
d) The Broker-Lawyer Committee’s primary duty is to protect the interests of the Texas real estate license holders
c) The Broker-Lawyer Committee was created to draft and revise standardized contract forms for use by real estate license holders
Which of the following falls under the category of “good funds”?
a) Cash on hand
b) Personal checks
c) Debit card payments
d) Wire transfers
d) Wire transfers
Valid Contract
Is one thst meets all of the requirements of law
Void Contract
Is invalid from the beginning and does not affect the parties
Voidable Contract
Is one that cannot be enforced against one or more of the parties. Example would be contracts entered into with minors
Unforceable Contract
Is one that cannot be enforced due to some flaw in the contract, passage of time, or other issues that make enforcement impossible
What are the five essential elements of a valid and enforceable contract?
- Competent parties 2. Offer and acceptance (mutual consent) 3. Legal purpose 4. In writing 5. Consideration
COLIC
What are the 3 phases of a contract?
- Executed – signing and communication establish the effective date
- Executory period – 45 to 60 days from effective date to closing
- Fully executed – closing – a contract is “fully” executed when all parties have performed
What are some common amendments?
Changes to the closing date; changes to the sales price, down payment and/or amount financed; repairs that the seller agrees to perform; removal or waiver of contingencies
addendum
An attachment that adds or further describes the rights and duties of the parties
Sometimes a provision in an addendum contradicts a provision in the main body of the contract. In such a case, the provision in the addendum prevails. (True or false?)
True
Texas Real Estate Broker-Lawyer Committee
Created to draft and revise contract forms capable of standardization for use by real estate license holders. Has 13 members. 6 members are licensed brokers appointed by TREC, and 6 members are licensed attorneys appointed by the president of the State Bar. 1 public member is appointed by the governor.
TREC has promulgated forms for most residential properties, including:
- One-to-four family contract (resale) 2. New home contract (incomplete construction) 3. New home contract (completed construction) 4. Unimproved Property contract 5. Residential Condominium Contract (Resale) 6. Farm and Ranch Contract
right of first refusal
Gives the tenant the right to purchase the leased property by matching or bettering any offer before the property will be sold to someone else
An offer can be communicated by
Phone, fax, email, letter or hand delivery
Imputed Notice
under this concept, an offer is presumed to have been delivered to the principal when it is delivered to the agent
The person to whom an offer is made has several options when responding to the offer, which include:
- Do nothing 2. Reject 3. Accept 4. Counteroffer
Multiple Offers
If a broker receives more than one offer, all offers must be presented to the seller unless instructed otherwise by seller. No offer has a priority of presentation over another. The broker should submit all offers promptly
When does the offer become a contract?
An offer becomes a binding contract when all parties sign it, and the acceptance is communicated to the offering party . Communication is also referred to as notification
In a one- to-four family residential contract the heading of the contract contains:
- The date the contract form was approved by the commission. License holders must take care to use only the most current version of a contract form. Failure to use the most current version is a violation of the License Act.
- The title of the form reveals its intended use. The contract form is the One-to-four family residential contract (resale). One to four means that it can be used for single family properties, duplexes, triplex properties and four-unit buildings. A building with 5 or more living units would be considered to be a commercial transaction. It is also used for resales only. A new home contract would be used on new home sales. This form is not to be used for condominium, but may be used for the sale of a townhouse
1-4 family residential contract PARAGRAPH 2(C)
Describes accessories, which, while not necessarily permanently installed, or built-in, are commonly conveyed to the buyer in the sale. Examples would include: window air conditioning units, stove, fireplace screens, curtains and rods, blinds, windows shades, draperies and rods, door keys, mailbox keys, above ground pool, swimming pool equipment and maintenance accessories, artificial fireplace logs
1-4 family residential contract PARAGRAPH 2(D)
Enter exclusions to the sale. If an item is to be excluded, give it a name and a location. For example, “dining room chandelier” would be an adequate name and location. Excluded items are to be “removed priory to delivery of possession.”
1-4 family residential contract PARAGRAPH 4
LICENSE HOLDER DISCLOSURE – states that a license holder who has a familial relationship with a party to the transaction must disclose this information to the other parties before entering into a contract
1-4 family residential contract PARAGRAPH 24
Consult an attorney – TREC rules prohibit real estate license holders from giving legal advice. Enter attorney contact information if applicable. The broker is responsible for ensuring that the effective date is filled in. All contracts must have an execution date filled in. The contract has many provisions that require compliance “within X days after the effective date of this contract…” Failure to enter an execution date can obviously cause considerable problems when trying to determine if a party is in compliance
Loan Assumption
Occurs when a buyer assumes and agrees to pay the sellers existing mortgage
What are some concerns regarding assumptions?
- Seller’s liability. The seller, who is the original borrower on the loan assumed may continue to be liable, along with the buyer.
When would you use seller financing addendum?
When the credit score is not good, so you will be charged higher interest rate
third party financing
Is divided into two broad categories: government loans and conventional loans
Government loans
Are insured or guaranteed by the US government and are made by lenders. Are often either FHA or VA lons
Conventional Loan
Is best described as any loan that is not a government loan
Third Party Financing Addendum PARAGRAPH 2
APPROVAL OF FINANCING – this paragraph gives the buyer a specific number of days in which to obtain credit approval. The number of days allowed for credit approval varies but sufficient time should be allowed. For the purposes of this addendum, time is of the essence. This means that if the buyer has been given twenty days in which to obtain approval, the approval must be obtained within the allotted twenty days
1-4 family residential contract PARAGRAPH 5
EARNEST MONEY- is a “deposit” paid upfront by Buyer to show that he or she is serious in his or her intent. There is no standard for the dollar amount of earnest money, but it is often in the range of 1% of the purchase price. Time is of the essence for this paragraph. Not required to be a part of the contract. It is a choice. Earnest money is negotiated.
1-4 family residential contract PARAGRAPH 6(B)
COMMITMENT- the title company has 20 days from the date that they receive the contract to furnish a commitment to the buyer for title insurance. This paragraph also provides for an automatic extension of the delivery period for up to 15 days or 3 days prior to closing if the commitment cannot be delivered within the 20 days allowed
1-4 family residential contract PARAGRAPH 6(D)
OBJECTIONS – Buyer may object to any matters that might prohibit a certain use or activity of the property, such as the installation of a satellite dish, operating a business out of the home, or parking of an RV within view of the street. Whatever the intended use of the property, it must be listed here. If the buyer is using the property for a residence only, many license holders insert the words “residential use” in this paragraph
T-47 Residential Real Property Affidavit
Used when using existing survey. The seller is given a number of days to deliver the survey and affidavit to the buyer and the title company. The affidavit must be signed in the presence of a notary. If the use of an existing survey is anticipated, listing agents should have the affidavit completed when the listing is taken. The contract states that both the affidavit and survey must be delivered within the negotiated number of days
Notice to Prospective Buyer
This notice complies with the provision of the Texas Real Estate License Act that requires that license holders advice buyers to have an abstract examined or obtain title insurance. All of the TREC promulgated contracts have this notice in paragraph 6 in the title notice section. This form could be used when TREC contract is not being used or could be used anytime that the broker wants the buyer to acknowledge receipt of this advice
1-4 family residential contract PARAGRAPH 7(A)
ACCESS, INSPECTIONS, AND UTILITIES – Seller permits Buyer access to the property at reasonable times for inspections. Seller will turn on utilities and leave utilities on during the time covered by this contract. The inspector is to be a TREC licensed inspector or another person otherwise allowed by law. This would seem to allow engineers and other professionals to perform inspections even if they are not licensed by TREC
1-4 family residential contract PARAGRAPH 7(E)
LENDER REQUIRED REPAIRS AND TREATMENTS – Lender required repairs, if any, are a negotiated expense item between the parties. If the lender repairs exceed 5% of the sales price, the buyer may terminate the contract and receive a refund of earnest money. Seller must complete all agreed to repairs prior to closing, or the closing date may be extended up to 5 days to complete repairs
Good funds
Is described as a cashiers check or wire transfer
1-4 family residential contract PARAGRAPH 9.2.(B)
Buyer is to bring “good funds” to closing. Good funds is described as a cashiers check or wire transfer. Title companies may accept a small personal check from a buyer. Check with the title company for their policy.
Disclosure of Relationship with Residential Service Company
Residential Service Companies are commonly referred to as home warranty companies. Buyers always have the right to purchase a home warranty, and Seller often contributes to some or all of the cost. If a residential service company pays a broker any compensation, the compensation must be paid in exchange for services actually rendered by the broker to the company. The compensation must be an amount that does not exceed the reasonable value of the services.
The disclosure form should not be attached to the contract as an addendum, but the form should be retained in the transaction records maintained by the broker as evidence that the disclosure was provided
Buyer’s Temporary Residential Lease
Allows the buyer to move in before closing. Good for 90 days
Seller’s Temporary Residential Lease
Allows seller to stay at house after closing. Good for 90 days.
1-4 family residential contract PARAGRAPH 12
SETTLEMENT AND OTHER EXPENSES- buyers and sellers expenses and settlement costs are stated. Even though printed in the form to be paid by one party or the other, they are negotiable.
Addendum for sellers disclosure of lead-based paint and lead-based paint hazards PARAGRAPH A
LEAD WARNING STATEMENT- states that if you are about to buy a residential dwelling that was built before 1978, you are being notified with this addendum that the property may present to the buyer exposure to lead found in paint
Addendum for sellers disclosure of lead-based paint and lead-based paint hazards PARAGRAPH B
SELLER’S DISCLOSURE – select the correct box to check that either they do or do not know of lead-based paint or lead-based paint hazards. Likewise, indicate if the seller has provided the buyer with reports, or if the seller had no reports or records pertaining to lead-based paint or lead-based paint hazards
Addendum for sellers disclosure of lead-based paint and lead-based paint hazards PARAGRAPH C
BUYER’S RIGHTS – buyer to indicate whether buyer waives the right to conduct a risk assessment or inspection. Otherwise, the buyer may have the property inspected within 10 days of the effective date of the contract
Addendum for sellers disclosure of lead-based paint and lead-based paint hazards PARAGRAPH D
BUYER’S ACKNOWLEDGEMENT- buyer will verify in the checkbox that he or she has received copies of all the information mentioned above, and has received a copy of the pamphlet “Protect Your Family From Lead in Your Home.” This pamphlet is avail email in English and Spanish
1-4 family residential contract PARAGRAPH 13
PRORATION – is the process of dividing ongoing expenses between the buyer and the seller at closing. Prorations are generally calculated through the day of closing for taxes, maintenance fees and rents, if any, that the seller pays for on the closing day. Tax prorations may be calculated to take into consideration any change in exemptions that will affect the current year’s taxes
1-4 family residential contract PARAGRAPH 15
DEFAULT- When a party to a contract fails to perform under the contract. Failure to perform is also commonly referred to as “breach of contract.” When a party is in default or breach, the other party is known as the “injured party.” In responding to default, the injured party has a number of options available to them. The options are somewhat different depending on whether the buyer or the seller is in default.
1-4 family residential contract PARAGRAPH 16
MEDIATION- buyer and seller agree to mediate in the event that the parties have a dispute that cannot be settled through informal discussion. The cost of mediation is shared equally between Buyer and Seller. Mediation does not in any way imply a waiver of the right to file a suit if a party is unhappy with the results of mediation
1-4 family residential contract PARAGRAPH 18(A)
ESCROW- the escrow agent is not a party to the contract, and has no liability for the performance of either party. The title company performs two primary functions: escrow services and title insurance. Escrow services are performed when something of value, such as a deed, money, or written instrument, is put into the custody of a third person to be retained until the occurrence of a contingency or performance of a contract. The title company is the escrow agent, the trusted third party that will receive and hold a deed signed by the seller. They will also have the buyers earnest money and loan funds released to them by the lender
1-4 family residential contract PARAGRAPH 18(B)
EXPENSES – earnest money is applied first to the cash down payment and then to Buyer’s expenses. Any excess is refunded to Buyer. If closing fails to occur, the escrow agent will require a signed release of all escrow funds from all parties. The title company has the right to deduct from the earnest money the amount of unpaid expenses incurred on behalf of the party receiving the earnest money
1-4 family residential contract PARAGRAPH 20
FEDERAL TAX REQUIREMENTS- a seller who has no social security card or green card is considered a foreign person. The escrow agent will withhold from the sales proceeds an amount sufficient to comply with applicable tax law and deliver the same to the IRS. The contract says the buyer has an obligation to do this, but in reality, the escrow agent provides this service
1-4 family residential contract PARAGRAPH 23
TERMINATION OPTION – while no mention is made of inspections in this paragraph, the option period is the time allowed for inspections that Buyer may want. For a valid option to exist, the following are required:
- All of the blanks must be filled in
- The option fee must be paid within 3 days after the effective date of the contract
- Buyer must pay the option fee directly to Seller or the listing broker
Please note, any notices under this paragraph are required to be provided by 5pm on the specified date. Also, option fee is not refunded and number of days could be negotiated.
1-4 family residential contract PARAGRAPH 24
CONSULT AN ATTORNEY – TREC rules prohibit real estate license holders from giving legal advice. Enter attorney contact information if applicable.
The broker is responsible for ensuring that the effective date is filled in. All contracts must have an execution date filled in. The contract has many provisions that require compliance “within X days after the effective date of this contract…” failure to enter an execution date can obviously cause considerable problems when trying to determine if a party is in compliance
Default
When a party to a contract fails to perform under the contract.
Straw Buyer
Is a person who is used to buy property in order to conceal the actual owner
Where are broker’s fees found?
Found in listing agreement
Blockbusting
Is any attempt to induce panic selling in a neighborhood for financial gain
Stigmatized
A property where there has been a murder or alleged haunting
Short Sale Addendum
This document is used when Seller is unable to sell property at or above what Seller owes the lender. The seller is requesting that the lender “short” themselves on what is owed.
Information About Brokerage Services (IABS) Form
Texas law requires all real estate license holders to give the following information about brokerage services to prospective buyers, tenants, sellers and landlords.
Residential Condominium Contract PARAGRAPH 3.B.
The sum of all financing from all sources. Insert only the amount actually being financed
Farm and Ranch Contract PARAGRAPH 2(A)
Enter the legal description and address of the property to be conveyed. If the property is described by metes and bounds, attach the description to the contract
Farm and Ranch Contract PARAGRAPH 2(B)
This includes the improvements, which are all man-made additions to the land, including the house, garage, and other permanently installed and built-in items. Included in the improvements are the usual residential improvements and specific farm and ranch improvements. Examples would include: windmills, tanks, barns, pens, fences, gates, sheds, and etc.
Farm and Ranch Contract PARAGRAPH 2(C)
Describes accessories, which, while not necessarily permanently installed or built-in, are commonly conveyed to Buyer in the sale. Accessories include the typical residential items. Examples would include: hunting blinds, game feeders, livestock feeders, fuel tanks, irrigation equipment, pressure tanks, corrals, gates, chutes, etc. Farm and ranch accessories to be conveyed are indicated by checking the appropriate boxes.
Farm and Ranch Contract PARAGRAPH 13
Prorations and rollback taxes.
13(A) Prorations – taxes for the current year, interest, maintenance fees, assessments, dues and rents will be prorated through the Closing Date.
13(B) Rollback taxes – if this sale or Buyer’s use of the Property after closing results in the assessment of additional taxes, penalties or interest (Assessments) for periods prior to closing, the Assessments will be the obligation of Buyer. If Assessments are imposed because of Seller’s use or change in use of the Property prior to closing, the Assessments will be the obligation of Seller. Obligations imposed by this paragraph will survive closing.
Unimproved Property Contract PARAGRAPH 6.E.(6)
PROPERTY LOCATED IN A CERTIFICATED SERVICE AREA OF A UTILITY SERVICE PROVIDER- Utility Service Providers are businesses licensed by the Texas Commission on Environmental Quality. They are not taxing authorities like utility districts, but do charge for water and sewer services, primarily in rural areas. They have been assigned an exclusive service area (territory) by the State of Texas. If property is located in a Certificated Service Area of a Utility Service Provider, a disclosure to Buyers that there may be a charge for turning on or connecting water and sewer services is required by the Texas Water Code. Buyer should also verify that utility service is currently available at the property.
Environmental Assessment, Threatened or Endangered Species and Wetlands Addendum PARAGRAPH A
ENVIRONMENTAL ASSESSMENT- this box is checked if Buyer wishes to obtain an environmental assessment. The addendum states the buyer “may obtain” the assessment. An example of an environmental assessment would be a site assessment to determine the likelihood of toxic substances on the site
Environmental Assessment, Threatened or Endangered Species and Wetlands Addendum PARAGRAPH B
This box is checked if Buyer is concerned that there may be threatened or endangered species or their habitat on the site. The penalties for taking (Example: killing, capturing, disturbing) an endangered plant or animal, or destroying its habitat are substantial
Unimproved Property Contract PARAGRAPH 6.E.(7)
PUBLIC IMPROVEMENT DISTRICTS – a Public Improvement District (PID) is a special taxing entity established by area property owners to enhance a neighborhood or commercial district. The creation of a PID requires a vote of at least 51% of the property owners affected by the new tax. Some local jurisdictions have set a threshold for approval in excess of 51%. If the property is situated in a PID, notice must be provided to Buyer informing him or her of the tax.