1251 Law Of Contracts
In paragraph 3 of the residential contract, ______________________ must always equal _______
3A + 3B / 3C
When a seller and a buyer wish to convey personal property, this is done with
A bill of sale
Voidable contract
A formal agreement between two parties that may be rendered unenforceable for a number of legal reasons
_____ is a condensed history of the title to the property.
Abstract of Title
What is something added to an offer?
Addenda. (There are many TREC approved addenda required for certain situations on a contract. Third-Party Financing Addendum, Lead Based-Paint Addendum, etc)
An agency relationship which is created after the fact when the principal agrees to be bound by the actions of another person who was acting without authority.
Agency by ratification
Sources of forms available for use by the REALTOR® include which of the following? A. The Texas Real Estate Commission B. The Texas Association of REALTORS® C. Lawyers D. All of the above
All of the above
Which of the following would be an example of an amendment in the TREC contract? A. Inspection and repairs B. Change of assigning fees C. Closing dates D. All of the above
All of the above
A way for the buyer to transfer obligations to another is called ______________________.
Assignment
Which of the following does NOT terminate a contract? A. Assignment B. Mutual consent C. Completion of purpose D. Default
Assignment
Which business organizations can own property and transact business in its name?
Associations
When are repairs most often negotiated?
At the end of the option period
If the owner of a home is already under contract to sell the property, and a second offer is made and accepted, this second offer becomes what type of contract?
Back-up Contract
Buyer's agency agreements can be created in which of the following ways? A. Expressed oral agreement B. Implied agency C. Both A & B D. None of the above
Both A & B (Buyer's agency can be created in four ways: expressed written, expressed oral, implied, and agency by ratification.)
When an offer becomes a contract, which step is NOT required? A. Signatures of buyer and seller are required. B. Both agents must meet to review the contract. C. Notice must be delivered to all parties. D. All changes to offer must be initialed
Both agents must meet to review the contract (If the agents meet, it should be prior to the presentation of the offer. This will give the buyer's agent the chance to present his offer, present his buyers, and explain any unusual or out of the ordinary requests in the contract)
What is a failure to perform or a refusal to honor a promise?
Breach
To be valid, a listing agreement must have a termination date. The length of a listing term is often decided by the market conditions and the ___________ policy.
Broker's
_____ is the past series of transactions affecting title to a specific piece of land.
Chain of Title
Which federal law prohibits lenders from discriminating where they make loans? A. Equal Credit Opportunity Act B. Community Reinvestment Act C. Law Credit Reporting Act D. Cure Rights Act
Community Reinvestment Act
This includes everything a couple acquires after marriage through labor.
Community property
A list of lenders and their loan rates to consumers is called
Computerized Loan Origination (CLO.)
Who does the Texas Real Estate Commission protect?
Consumers
RESPA requires that
Consumers receive disclosures at various times in a transaction and outlaws kick-backs that increase the cost of settlement services.
A condition that must be met to close a real estate transaction
Contingency
A(n) _____________ is a legally binding agreement between parties, to do or not do something.
Contract
What is the transfer of property from one person to another and the document and/or instrument by which this is affected called?
Conveyance
A form of ownership where the owner receives shares
Cooperativres
The act which was designed to enhance consumer protection by reducing fraud and encouraging states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators is known as the _______________.
DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT
_____ is the way that real estate is conveyed in Texas.
Deed
Deeds can be divided into three major categories. Which of the following is NOT correct? A. Warranty deeds B. Deeds without warranty C. Quitclaim deeds D. Deeds with mortgages
Deeds with mortgages
The seller of real property in Texas and a real estate broker must disclose any known _________ to the prospective buyer.
Defect in the Property
During the closing process, the underwriter is responsible for
Disbursing funds as the transaction dictates as well as maintaining the account into which the earnest money is deposited.
___________ is the use of force or pressure by one party to make the other party agree to the contract.
Duress
Performance on the contract is often calculated from the __________________of the contract.
Effective Date
_____ is the right of the government to take private land for public use
Eminent Domain
A burden, obstruction, or impediment on the property
Encumbrance
This is a burden, obstruction, or impediment on property that can lessen its value or make it less marketable
Encumbrance
________ is the type of title that refers to the right of one person to obtain full ownership of the property.
Equitable Title
Who is charged with the responsibility of properly recording documents in the county courthouse?
Escrow agents
This lease has a defined specific beginning and ending date.
Estate for Years
What is the degree, nature, quantity, and extent of interest that a person has in real estate called?
Estate in Land
The ___________________________ is the most widely used residential listing in Texas.
Exclusive Right to Sell
The type of listing where the owner agrees to list the property with only one broker; however, the owner reserves the right to sell the property himself.
Exclusive agency listing
The listing that affords the broker the most protection
Exclusive right-to-sell
The state of the contract between the execution date and the closing.
Executory Contract
The primary purpose of _______________________ is to provide financial assistance to low and moderate-income home buyers by promoting mortgage credit.
FNLMC (Freddie Mac)
The ___________________ Act gives the individual the right to inspect his/her file, correct any errors, and make explanatory statements to supplement the file surrounding his/her credit.
Fair Credit Reporting
A leasehold estate is one where the duration of ownership is indeterminate, which could be for a lifetime of an individual, or an unlimited duration. (T/F)
False
A sale and settlement contingency means that the buyers are going to assist their children in the sale of their property. (T/F)
False
An FHA loan is an option for purchasers who are behind in making their mortgage payments.(T/F)
False
Credit unions are part of the secondary market.(T/F)
False
Eminent domain, taxation, escheat, police powers are corporate entity powers. (T/F)
False
Escheat refers to a government's legal authority to force a private landowner to sell their real property for public use. (T/F)
False
If the seller breaches the listing, the seller will NOT be liable to the broker for the commission. If the broker breaches the listing, the seller may use any remedy allowed by law.(T/F)
False
Leasehold estates include homesteads, community property rights, and water rights. (T/F)
False
The Community Reinvestment Act requires lenders, mortgage brokers, or servicers of home loans to provide borrowers with pertinent and timely disclosures regarding the nature and costs of the real estate settlement process. (T/F)
False
The addendum that refers to the loan that a buyer takes out to purchase a home, either through conventional loans, an FHA loan, or other type, is known as the Loan Assumption Addendum.(T/F)
False
The appraisal for the loan is conducted by an appraiser chosen by the buyer or the seller.(T/F)
False
The main purpose of RESPA is to provide credit scoring to prospective borrowers.(T/F)
False
The open listing is where the owner agrees to list the property with only one broker; however, the owner does reserve the right to sell the property themselves.(T/F)
False
The verification of deposit gives the buyer the unrestricted right to terminate the contract for any reason. (T/F)
False
The government has the right to tax real property but NOT personal property (T/F)
False (The government has the right to tax both)
The Real Estate License Act came out of a law passed by the Texas Legislature in 1965 (T/F)
False (The law was passed in 1939.)
The listing agent should fill out the "Seller's Disclosure Notice" for the seller prior to putting the property on the market(T/F)
False. (The seller must be responsible for filling out the Seller Disclosure)
________________ is the shareholder-owned corporation that was federally chartered by Congress in 1988, which seeks to establish a secondary mortgage market for farmers, ranchers, and rural homeowners.
Farmer Mac
The system which strives to provide its members (members include thrift institutions, commercial banks, credit unions, insurance companies, and certified community development financial institutions) with a source of funding for mortgages and asset-liability management is known as the ___________________________________.
Federal Home Loan Bank (FHLB)
_____ is the process by which a lender exercises their power of sale because a mortgage is in default.
Forclosure
The conveyance of real estate is covered by real estate contracts
Freehold estates
The One to Four Family Residential Contract (Resale) states the seller will deliver the buyer a ____________ deed.
General Warranty
_____ is the type of deed that conveys clear title back to the Spanish land grants
General warranty deed
Police power, taxation, eminent domain, and escheat are four examples of:
Governmental Powers
An instrument conveying real property (the deed) may not be recorded unless it is signed and acknowledged or sworn to by the
Grantor
This protects qualifying real estate property from forced sale by general creditors.
Homestead
Which statement is true? A. In a lease, the lessor will lease from the lessee. B. In a lease, the lessee will lease from the lessor. C. In a lease, the landlord will lease from the lessor. D. In a lease, the tenant will lease from the lessee
In a lease, the lessee will lease from the lessor.
The seller's evidence of title is the ________.
Insurance Policy
A valid contract:
Is enforceable in a court of law
What is the purpose of the Contingency Contract, created under the "Sale of Other Property" Addendum?
It makes the contract contingent upon the buyers receiving funds from their home sale before they can close on the home they wish to purchase
Allows the seller to continue to market the property and upon receiving an offer from another buyer will give notice to buyer 1 to remove the contingency
Kick-out Clause
This is also called a non-freehold estate:
Leasehold estate
By law, the ________________________ must have a termination date. The agreement cannot automatically renew.
Listing Agreement
Situs
Location of the property
. "Land" is composed of three parts. Which one is NOT one of these parts? A. Surface B. Man-made structures C. Subsurface D. Air space
Man-made structures
If the legal description in a contract is inadequate, the contract is __________________.
NOT enforceable
It is ___________ to seek specific performance AND collect earnest money at the same time.
NOT possible
What kind of listing is created when the owner wishes to receive a set amount of money from the sale of the property?
Net Listing
A listing where the owner wants to receive a set amount.
Net listing
Are licensed real estate agents legally authorized to draft a document that affects the interest in a property?
No
Must contracts have monetary consideration?
No
A possessory right or interest in land or property.
Non-freehold
A(n) ________ is a communication that gives the listener the power to conclude a contract. Once the ______________ is made, the initial off er is dead and cannot be revived without consent from the buyer.
Offer / Counteroffer
Will a lender accept an existing survey?
Only when the seller provides the existing survey and signs an affidavit saying that no improvements have been made on the property.
A listing where the owner employs as many brokers as they wish, as well as retain the right to sell the property themselves.
Open listing
The process by which the seller of the house lends the buyer the money to purchase the house, instead of the buyer going through a bank, is known as ________________________.
Owner Seller Financing
This type of lease provides that if a tenant achieves a certain amount of gross sales in a given year, a percentage of such gross sales will be paid to the landlord as additional rent.
Percentage Lease
A contract form that has been prepared by a(n) ______________or prepared by a(n) __________, and required by a principal are all exceptions from using the promulgated forms by TREC.
Principal / Attorney
_____ is the way to confirm the validity of a will.
Probate
The _______________________ is the contractual agreement to repay the debt.
Promissory Note
Dividing expenses between the buyer and the seller in proportionate shares is called
Proration
The Consumer Financial Protection Bureau administers and enforces the
Real Estate Settlement Procedures Act
The land and all structures man-made
Real estate
What are a property owner's rights? "The bundle of rights"
Right to control The right of exclusion The right of enjoyment
The two types of Home Sale Contingencies, in which a transaction is dependent or contingent upon the sale of the buyer's home, are the
Sale and Settlement Contingency and the Settlement Contingency.
The collateral or property given, deposited, or pledged to ensure the fulfillment of an obligation or payment of debt is called
Security
It is the Seller's responsibility to disclose the condition of his property to the buyer. You as the agent should not even attempt to fill out the ____________for the seller.
Seller Disclosure Notice
The Third-Party Financing Addendum is used for all the following types of financing EXCEPT: A. Seller Financing B. FHA Financing C. VA Financing D. Conventional Financing
Seller Financing
Sale of a property where the lender agrees to settle for less than the amount owed on the property is called:
Short sale
All of the following are elements of a valid contract EXCEPT: A. Offer and acceptance B. Legal subject matter C. Source of financing D. Competent parties
Source of financing
Only factual statements should be used in the ___________________ paragraph of the contract
Special Provisions
Which deed has language that speaks to the warranty being limited to the grantor and not extended to previous owners? A. Special warranty deed B. General warranty deed C. Deed of trust D. Quitclaim claim deed
Special warranty deed
_____ is a type of deed that is provided in a foreclosure sale.
Special warranty deed
The right of the buyer or the seller to pursue the other party to complete a contract is called:
Specific Performance
Law handed down by the legislature
Statutory law
For the title company to accept an existing survey, the seller must provide both the current survey and a(n) ______________.
T-47
The rule for the Seller's Disclosure came out of the _____________________.
Texas Property Code
Sources of forms used by real estate agents in Texas include _________, _________, and lawyers.
Texas Real Estate Commission (promulgated contracts) / The Texas Association of Realtors
The lease agreement must contain all the following EXCEPT: A. The amount of the security deposit B. A description of the landlord's maintenance responsibilities C. Any late charge or fee charged for any service or facility D. The landlord's home telephone number
The landlord's home telephone number
What is specific performance?
The right of either party to enforce the term of the contract against the defaulting party
Surface water rights
The riparian doctrine and the prior appropriation doctrine are two legal doctrines of this.
Seller pays the buyer his prorated share of taxes while the seller has owned the home. What happens to the taxes at the closing?
The seller pays, and the buyer gets credit for the amount of taxes due at the time of the closing.
If the taxes are not paid at or prior to closing for the current year, the ________________ will be responsible for paying them.
Title company
A contingency is a provision that a certain act or event will happen for a contract to be binding.(T/F)
True
A financing contingency protects the buyer as it allows him/her time to apply for and obtain financing with the purchase of a property. He/she can also back out of the contract and reclaim his/her earnest money in the event he/she is unable to secure financing from a bank.(T/F)
True
A quitclaim deed only transfers whatever ownership interest a grantor has in a property, but makes no guarantees about the extent of the grantor's interest in such property, if any (T/F)
True
Acceptance of a contract must be made without duress, undue influence, or misrepresentation. (T/F)
True
An estate in land has been defined as the degree, nature, quantity , and extent of interest that a person has in real property. (T/F)
True
An individual who owns mineral rights has the right to enter land that is occupied by another and remove the minerals. (T/F)
True
Buyer's agency agreements can be created in the following three ways: expressed oral agreement, implied act, and agency by ratification.(T/F)
True
By signing the contract, both parties agree to mediation if there is a dispute over the executed contracts.(T/F)
True
By signing the listing agreement, the seller is not giving the listing broker or listing agent any authority to sign any documents on their behalf.(T/F)
True
FNMA (Fannie Mae) sets the guidelines for conforming loans.(T/F)
True
Fixed-rate mortgages, adjustable-rate mortgages, balloon mortgages, and hybrid loans are all considered conventional loans.(T/F)
True
If a person dies intestate without a will or heirs, their real and personal property is subject to escheat.(T/F)
True
If the seller and the listing broker agree to intermediary, the listing broker may also represent a buyer in the transaction.(T/F)
True
Listing contracts must include the verbiage that "commissions are negotiable."(T/F)
True
Minors, those who are mentally infirm, and those under the influence are not considered competent parties. (T/F)
True
NOT attending the home inspection is one of the most common mistakes made by both buyers and sellers. (T/F)
True
One of the most common contingencies in real estate contracts is a mortgager contingency.(T/F)
True
Property is normally delivered to the buyer upon closing and funding. (T/F)
True
The Community Reinvestment Act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods.(T/F)
True
The Joint Broker-Lawyer Committee drafts and revises the contracts used by real estate agents in Texas(T/F)
True
The Loan Estimate and the Closing Disclosure came out of the Dodd-Frank Act. (T/F)
True
The Real Estate Settlement Procedures Act was put in place to ensure that consumers would be provided with more helpful information about the cost of the mortgage settlement.(T/F)
True
The Third-Party Financing Addendum is used when a buyer wants to obtain FHA or VA financing.(T/F)
True
The listing agreement states that all commissions are always negotiable and are not fixed or set by TREC or any organization.(T/F)
True
The security for a mortgage loan is the property pledged as collateral for the loan.(T/F)
True
The verification of deposit is the document prepared by an individual's bank stating that he or she has a certain amount of funds in reserve in the bank, such as in a checking or savings account.(T/F)
True
There is no "set" or "standard" commission fee in real estate. If commissions are fixed, this violates the Sherman Anti-Trust Act. (T/F)
True
Texas regulates environmental issues through the Texas Commission on Environmental Quality(T/F)
True (People often confuse this with the Texas Water Board.)
The termination option in paragraph 23 gives the buyer the unrestricted right to terminate the contract for any reason within a certain time- period. (T/F)
True (This is usually a 7-10 day time frame. This is for any reason, not just an inspection.)
Paragraph 23 of the contract is called the Option paragraph. In essence, this paragraph gives the buyer the unrestricted right to terminate the contract for any reason within a certain time frame (T/F)
True. (Usually, this time frame is seven or ten days)
In the event of a foreclosure, in which the borrower would default on his/her loan payments, the ______________ carries the responsibility of handling the foreclosure proceedings in a deed of trust.
Trustee
Which party is NOT involved on the deed of trust? A. Mortgagor B. Mortgagee C. Trustor D. Trustee
Trustor
An act or practice which, to a consumer's detriment, takes advantage of the lack of knowledge, ability, experience, or capacity to a grossly unfair degree is called a(n)
Unconscionable action
Approval of the loan, the property, and the Closing Disclosure is the responsibility of the
Underwriter
_______________________ are unlikely to make the contract close sooner and may cause enforcement of the contract to be jeopardized.
Unrealistic Time Periods
________ is the time a life estate terminates.
Upon the death of an individual
Which of the following practices could be considered practicing law by a real estate broker for the sale or lease of real property? A. Use of a form prepared by the broker's company B. Use of a form prepared by an attorney C. Use of a form prepared by the property owner D. Use of a form promulgated by TREC
Use of a form prepared by the broker's company
_____________ is the conveyance of title that must be done using a deed through sale or gift.
Voluntary Alienation
This required any person claiming a riparian water right to file a claim for the right by 1969 with the Texas Water Commission
Water Rights Adjudication Act
Which is a form of voluntary alienation? A. Escheat B. Will C. Adverse possession D. Eminent domain
Will
Do lenders require an appraisal on new residential loans? (Y/N)
Yes
Does an offer have to be in writing to be enforceable? (Y/N)
Yes
Is a residential promulgated contract a bilateral contract? (Y/N)
Yes
Is the ability of the buyer to obtain financing for the property a contingency on a contract? (Y/N)
Yes
Who pays for the title policy is a negotiable item in the contract. (Y/N)
Yes
Can a seller accept another offer on his property if he has accepted a contingency contract from buyer #1?
Yes, Only with notice to the buyer to remove the contingency within a certain time-frame
To finalize the contract, it must be
initialed and signed by both parties and delivered to all parties.
