Law of Promulgated Contracts Unit Quiz Questions
Plans, specifications, change orders, and allowances are part of the ______ and should be referenced in the New Home Contract (Incomplete Construction).
Construction documents
Which contract is used for the purchase of townhomes in Texas?
TREC One To Four Family Residential Contract (Resale)
Which of the following actions is a violation of TREC rules regarding addenda?
Writing something in the Special Provisions of a TREC contract if there is a TREC addendum form that can be used
Abegayle is meeting with her banker to discuss financing 50 acres of unimproved land. Which of the following can she expect?
A larger down payment will be required.
What is the unauthorized practice of law in Texas?
Acting outside the scope of one's license; offering legal advice or drafting legal forms
Desmond has a signed listing agreement with his clients, the Harpers. In exchange for helping the Harpers list, market, and sell their home, the Harpers have agreed to pay Desmond a commission. What type of agreement do Desmond and the Harpers have?
Bilateral
Ramon and Sylvia are buying their first house. Closing is set for April 10. Their lender gets their loan approved in record time, and it turns out they can actually close on April 5. What needs to happen for the closing date to change to April 5?
Both parties must agree to the earlier date and must have met all other terms of the contract.
If any expense exceeds the amount the buyer agreed to pay in the contract, the _________ must go through with the transaction if the seller agrees to pay the difference in cost.
Buyer
Rescission, suit for specific performance, liquidated damages, and acceptance of partial performance are all _______.
Options a wronged party has to remedy a breach of contract
On which entity's website can you reference to find promulgated contract forms?
TREC
If a checkbox isn't properly filled out, what can happen to the transaction?
The transaction can be delayed
Which of the following transactions requires the use of a promulgated form?
When negotiating a contract for the sale of interest in real property
How would a licensee explain seller financing to a buyer?
"Seller financing is when the seller extends credit to the buyer for the purchase of the property. The buyer then pays back the loan with interest, over time."
If the buyer owed taxes for 95 days, the seller owed for 270 days, and annual taxes were $4,000, what would the buyer's prorated tax expense be?
$1,041.20 Step one is to calculate the daily rate, which you find by dividing the annual amount by 365 ($4,000 / 365 = $10.96 daily). Next, the number of days in the proration period (95) is multiplied by the daily rate to get the prorated amount.
Kimmy's buyer clients want the seller to leave behind the workbench that is in the basement—something that was not originally identified as an inclusion in the original Texas sales contract. Which of the following will Kimmy use to indicate the change?
A TREC-promulgated addendum form
Dave is selling his property to Matthew, and they are under contract. Dave's property backs up to beautiful, protected, open space in the foothills. Unfortunately, due to the lack of moisture, it was unseasonably dry and a brush fire started. Dave's property sustained fire damage that affected one-third of the home. Who or what entity is responsible for the repairs to the property?
Dave
Norman buys Connie's Texas home, and in the sales contract, he specifies that the outdoor grill must stay with the home. Connie ends up taking the grill when she moves out. If Norman wants to sue Connie for taking the grill, he must do so within ______.
Four years
Per TAR's Release of Earnest Money form, who's responsible for disbursing the earnest money?
Escrow agent
Jerry and Lewis have entered into a sales contract. They're about three weeks into the transaction, with several terms of the agreement yet to be met. What type of contract do Jerry and Lewis have?
Executory
For which of the following homes should the New Home Contract (Completed Construction) be used?
Harvey is purchasing a home that was recently built.
Hector signs a contract to buy a home belonging to Sadie. Before closing, it's discovered that Hector is only 17 years old. Since he's a minor, he's not considered legally competent to enter into a contract. Which of the following parties is allowed to void the contract?
Hector
Which of these scenarios is an example of the buyer potentially defaulting on a contract?
Failing to return the signed copy of the received seller's disclosure of property condition within the agreed-upon time frame
You're helping your client with a transaction and are careful to include the disposition of crops. That's because the promulgated form you're using for this transaction is ______.
Farm and Ranch
Per the TREC residential One to Four Family (resale) contract, which of the following statements about lender-required repairs is true?
Neither party is obligated to pay for lender-required repairs.
Per the Addendum for "Back-Up" Contract, which of the following statements about a "Back-Up" contract is true?
Neither party is required to perform under the contract until the first contract is terminated.
Rick is representing a business in a sales transaction. Rick owns 3% of the business. Is Rick required to provide a written license holder disclosure notice to the other party in the transaction?
No, because Rick does not own more than 10% of the business.
You have a signed contract in your hand, but it's missing the effective date. Is this a binding contract?
No, the contract isn't binding because the effective date hasn't been filled in.
A seller has signed an Addendum for "Back-Up" Contract and likes the second offer better than the first. May the seller terminate the original offer?
No, the seller may not unilaterally terminate
As much as Angus and his wife, Stella, hated to part with the old upright piano in their basement, they knew it would be expensive to move. So when the buyers presented them with the ______ offering them $100 to include the piano in the sale of the house, Angus and Stella agreed.
Non-Realty Items Addendum
Under a residential service contract, if anything goes wrong with covered appliances or systems due to ___________________ during the year that's covered, the issuer will provide repair or replacement.
Normal wear and tear
What is the key difference between assignment and novation of a contract?
Novation releases the original party from all obligations, while assignment does not.
Which of the following statements regarding sales contracts is true?
Once the sales contract is fully executed by all parties, it can only be altered by using the TREC-promulgated Amendment to the Contract form.
Koby is a Texas seller who has a recent property survey that he would like to provide to the buyer's lender and title company. Koby swears and notarizes a statement about any changes to the property since the existing survey. What document does Koby use to provide his statement?
Residential Real Property Affidavit T-47
Which of the following is the committee that is responsible for drafting and revising contract forms for TREC?
The Broker-Lawyer Committee
Which of the following is a true statement about how Texas contracts must be used?
The Residential Condominium Contract (Resale) can't be used for townhomes.
Jasmine and Roberto just bought their first new home, which was finished just a week before they moved in. Which of the following is a true statement?
The Seller's Disclosure Notice is not required.
Cindy wishes to reserve the mineral rights for the ranch she is selling. Which of the following is true?
The TREC-promulgated Addendum for Reservation of Oil, Gas, and Other Minerals should be used.
If a seller is in breach of contract, which of the following is the possible remedy for the buyer?
The buyer could sue the seller for specific performance.
In Texas, before a contract for the sale of real estate is considered binding and executory, three things must occur. First, the buyer must make a written offer on the property. Second, the seller must accept the offer in writing. What is the third action that must occur?
The buyer must be notified of the seller's written acceptance of the offer.
Which of the following statements about a buyer accepting a property in "as-is" condition is true?
The buyer retains the right to have the property inspected.
Robin, a buyer, has offered to pay an option fee to the seller within three days of the effective date of the contract. Robin put her check for the option fee in the mail and, unfortunately, the seller received it six days after the effective date of the contract. What happens next?
The termination option will not be part of the contract.
When completing promulgated forms, licensees must ensure that the executed date is entered. What happens if it's left blank?
The terms of the contract are difficult to enforce.
The Unimproved Property Contract doesn't include improvements, accessories, or exclusions in the property section. Why is that?
These items don't apply to unimproved land.
What is the purpose of the Credit Documentation paragraph of the Seller Financing Addendum?
This paragraph is the buyer's agreement to deliver documents that show creditworthiness within a certain time period.
What's the purpose of the Special Provisions paragraph of the One To Four Family Residential Contract (Resale)?
To clarify facts found in the contract
What is the purpose of the Addendum for Coastal Area Property?
To disclose that owners of coastal property may gain or lose portions of their property because of changes in the boundaries
What's the purpose of the ESIGN Act?
To identify what can be used as an electronic signature
The purpose of promulgated forms in Texas is ______.
To make contractual terms crystal clear to the parties involved and to protect the parties involved
Sylvan, the seller, and Eric, the buyer, have signed an option agreement, which is an offer to purchase a specific piece of real estate without the obligation to buy it. Until Eric exercises his option to buy, only Sylvan is bound by the option agreement; he may not sell the property to anyone else during the option period. What type of contract is this?
Unilateral
When a buyer assumes the seller's existing loan, what happens if the buyer defaults on mortgage payments after the transaction is completed?
Unless the lender approved a release of liability for the seller, the seller remains liable for the loan.
As a licensee, one way to avoid inadvertently being accused of unauthorized practice of law is to _________________________.
Use standard, fill-in-the-blank contract forms and always include an attorney review clause
Melinda, an attorney for the seller, was extremely satisfied with the purchase offer her client signed. The sales contract contained all of the essential elements. What type of contract is this?
Valid
Under what circumstances would a seller pay rent to the buyer?
When the seller must remain in the property after closing
What is the correct way to use an addendum to a Texas contract?
When you want to make an addition to an existing contract
Melanie is helping her clients, Steve and Monica, who are purchasing a brand new home. Steve and Monica love their home and its half-acre of property, but wish they'd had a chance to pick out the flooring. Who uses orange shag carpeting anymore? What form should Melanie use to write up Steve and Monica's offer?
New Home Contract (Completed Construction)
Blake, a licensee, has copied down the street address of a property from the MLS. Is this a legal description of the property?
No, a street address is not a legal description. He needs the information from a recorded plat or a metes and bounds description of the property.
Which body adopts and enforces rules necessary to administer Texas Real Estate Act (TRELA)?
Texas Real Estate Commission (TREC)
Your client is selling property that includes a mineral estate. He's hoping the property sells quickly because he's interested in buying another piece of land. What form must your client complete if he wants to reserve all or a portion of the mineral estate?
Addendum for Reservation of Oil, Gas, and Other Minerals
You're working with buyers who won't be able to buy the new property unless they can sell and close on their current property. What addendum do you need to help your client complete and attach to the sales contract?
Addendum for Sale of Other Property by Buyer
Where in the Texas sales contract should you indicate that addenda are being attached?
Agreement of parties
The appraisal on Jean's property came in at $22,000 less than the agreed-upon sales price, so the buyer, Thomas, wants to renegotiate the terms. If they can come up with a new price that is satisfactory to both parties, what will they use to document this?
Amendment
According to the Texas rules relating to contract forms, the commission can't ban a licensee's use of a contract form when the form was prepared by a property owner or ______.
An attorney on behalf of a property owner
Ryan is a buyer who would like to make his offer attractive to the seller. Which of the following would show his sincere intention to purchase the property?
An earnest money deposit
Which of the following statements about obtaining a property survey for the title company and lender is true?
An existing survey may be used if it's accompanied by a Residential Real Property T-47 affidavit.
Why is it important to identify the marital status of the parties in a sales contract in Texas?
Because Texas is a community property state
Approval for financing as described in the Third Party Financing Addendum will be deemed to have been obtained when ______ are obtained.
Buyer approval and property approval
If the buyer doesn't object in writing within the time allotted in the Objections paragraph of the TREC One to Four Family Residential Contract (Resale), which of the following is waived?
Buyer's right to object
Which of the following statements about waiving the contingency and the Addendum for Sale of Other Property by Buyer is true?
Buyers can waive the contingency, but they have to notify the seller and make an additional deposit.
You'd like to add your own touches to the TREC forms that are being used in your office. How can you modify the forms?
By adding your broker's business logo
Once there is an accepted sales contract and you've filled in the effective date, what else should you do?
Call the other agent to notify him of the final acceptance
Myron has made an offer on a condominium and is waiting to find out more about the condominium owners association and any associated fees. He wants this information for budgeting purposes. Which promulgated form will the seller provide Myron from the owners association?
Condominium Resale Certificate
The New Home Contract (Completed Construction) doesn't contain ______ in the property section, which is a key difference between this contract and the One to Four Family Residential Contract.
Improvements, accessories, or exclusions
Jonathan is acting as an intermediary in Texas. He has received written consent from the parties involved in the transaction. What additional requirement does Jonathan need to meet?
Information detailing the broker's compensation and the source of that compensation
Megan, a seller, tells the party buying her home that the property will soon be part of the public water system. She makes this claim based on erroneous information supplied to her by the city. The buyer relies upon this information and moves forward with the purchase of the home. This is an example of ______.
Innocent misrepresentation
Which of the following statements about the owner's title insurance policy is true?
It insures the buyer against loss due to title defects under the provisions of the title policy, which are subject to existing exclusions and a list of exceptions.
Edmond, a broker, signs a listing agreement with Julia, who's selling her home. Julia insists that the agreement state that only Christians will be allowed to buy her home. For what reason would this agreement be considered void?
It lacks a lawful objective.
Which of the following is a true statement about the date the buyer takes possession, as specified in the sales contract?
It may occur before or after funding and closing.
Karen, the seller, has sent a counter-offer to Fred, a potential buyer. Before Fred accepts the counter-offer on the Texas property, Karen receives another offer from James that is even better. She wants to accept James's offer. What should Karen do?
Karen must withdraw the counter-offer to Fred before responding to James's offer
If buyers are identified as "Kathleen Leary and Trent Carpenter, as tenants in common," which of the following is true?
Kathleen Leary and Trent Carpenter are unmarried persons buying a property together.
Juan and Natalie are preparing to send written notice that they are not accepting an offer from a potential buyer, but that they'd like the offeror to consider submitting a new offer (the couple even gives the offeror some ideas of how to make the new offer more acceptable). What is the type of the letter they will send?
Letter of non-acceptance
The seller is responsible for which of the following expenses?
Liens
Under the statute of ______, if legal remedy is sought against a person, the pursuer must bring a court action within a specified period of time.
Limitations
What is another term for earnest money that is dispersed to the non-defaulting party when a contract terminates due to default?
Liquidated damages
Which is the correct way to describe a property on the Texas sales contract?
Lot 26 Block 05, Section 16 of Crystal Falls Addition, City of Leander, County of Travis, Texas, known as 1900 High Lonesome Street, Leander, TX 78641
The _______________ method of property description is used for the Farm and Ranch Contract.
Metes and bounds
Samantha, a licensee, helped her client buy his home by assisting with legal advice. Assuming Samantha hasn't violated any laws, we know that Samantha ________.
Must be a lawyer
What does it mean that Peter Hubble is identified as a party to a sales contract as "Peter Hubble, as separate property?"
Peter is married, but his spouse is not joining in the conveyance of the property.
What type of forms are the Condominium Resale Certificate and the Subdivision Information, including Resale Certificate for Property Subject to Membership in a Property Owners Association?
Promulgated resale certificates
Janet has signed an offer to purchase a parcel of unimproved property. In the property condition section of the offer, she stipulated that she accepts the property "as is." Which of the following is true?
She can inspect it and still negotiate repairs and treatments.
Consuela is selling the family farm, but she has a significant investment in the cotton crop she has already planted. Which of the following is a true statement?
She needs the buyer's permission to harvest the crop after closing.
Nancy is meeting with her agent to make an offer on unimproved land, which was previously part of a family farm. She is sinking every penny she has saved into the down payment on the property. Which of the following is a true statement?
She will be responsible for rollback taxes if she changes the use of the land.
Sheila, a buyer, didn't receive seller's disclosure notices until she went in to sign her closing paperwork. If Sheila terminates now, ______.
She will receive her earnest money back
Your client's net proceeds at closing will be inadequate to pay the balance of the seller's mortgage loan. Which form will you help your client complete as part of the sales transaction?
Short Sale Addendum
What does the executed date on a contract have to do with the effective date?
The effective date is one day after the executed date.
What law stipulates the requirements a licensee must follow to keep their license?
The law established by theTexas Real Estate License Act
Jenny is buying a condo. She wants to find out the amount and frequency of regular assessments from the condominium association. Where could she find this information?
The resale certificate
Under the New Home Contract (Incomplete Construction), assessments for rollback taxes are the responsibility of ______.
The seller
When a casualty loss occurs in a condominium unit after an offer to purchase has been made and accepted, which party is responsible for the repairs?
The seller
Jenna, a license holder, is acting on behalf of her spouse, Dan, who's making an offer on a property. Is Jenna required to provide a written license holder disclosure notice to the other party in the transaction?
Yes, because Jenna is acting on behalf of her spouse.
You're helping your clients Mitch and Sheree make an offer on a house, but the seller is in a short sale situation. What's your responsibility to your clients in this situation?
You'll add the Short Sale Addendum to the Contract to Buy and Sell Real Estate and explain how the short sale process works.