Promulgated Contracts Exam
Agent Ted advises his client that the title to the property he is buying is clear — no need to do a further title search. Why is this inappropriate?
It may constitute unauthorized practice of law under TRELA.
Agent Ralph has a buyer client that wants the seller to leave them the refrigerator, built-in microwave, and vent hood. Ralph notes this expectation in the Special Provisions section. What is wrong with this scenario?
It should be written in a Non-Realty Items Addendum, not in the Special Provisions section.
Agent Sarah knows her client wants to make the sales contract contingent on appraisal, so she adds a notation to that effect in the Special Provisions section of the contract. Why is that wrong?
It's a violation to include anything in the Special Provisions section that alters the parties' legal rights, because that could be considered the unauthorized practice of law.
Which of these is an example of a unilateral contract?
Mike signs a listing agreement with Broker Amy, agreeing to pay a 6% commission if she sells his house.
A back-up buyer's contract is executed on September 28 with a four-day option period. On October 4, the seller informed the back-up buyer that the first contract was terminated. When does the back-up buyer's option period end?
October 8, 5 pm
Why are there multiple promulgated contracts for use in Texas?
because different types of properties have different specific contract needs The type of promulgated contract you use for a real estate transaction is primarily based on what kind of property is being sold. There are different contracts for houses, condos, brand new homes, and ranches.
Why does the Option to Terminate require an extra consideration in the form of option money?
because it is another contract within the overall contract
How can a buyer ensure they pay the least possible amount of pre-paid interest to the mortgage company?
close near the end of the month This means that scheduling an appointment to close with the title company late in the month is difficult.
In which type of property does the buyer purchase rights to the unit and an undivided interest in the common areas?
condominium
Because many things in the contract depend on these two items, it is important that the agent finalizing the acceptance of the contract fill in which of the following dates for their broker:
effective and executed date
According to Paragraph 10B, Possessions, what is a seller prohibited from doing after the effective date?
execute a lease without the buyer's permission
According to TRELA, which of these does one NOT need to be a licensed attorney to do?
fill out a TREC promulgated contract
When a property is purchased and then quickly resells at a higher value it is called:
flipping
When would it be appropriate to use the New Home Contract (Incomplete Construction)?
for a client buying a new home that is being built
What is the statute of limitations to claim fraud or misrepresentation against a license holder?
four years from discovery
Emily and Josh signed a real estate contract with each other. The contract is now fully executed. What does that mean that Josh and Emily have done?
fulfilled the material terms of the contract
What does paragraph 7A of the One to Four Family Residential Contract grant every buyer the right to do?
have the property inspected
Seller Xavier's home is in a special statutory tax district. According to the Texas Water Code, what does Xavier have to do before going into contract with a buyer?
have them sign a notice informing them of the extra taxes
What are brokers required to do regarding Consumer Protection Notice TREC No. CN 1-2?
post it in each office
Paragraph 7D(2) of the contract indicates:
repairs that must be completed by the seller before closing
Which of these is something TREC is empowered to do by TRELA?
require license holders to use contract forms for certain transactions According to TRELA, Texas Real Estate Commission has the power to require license holders to use contract forms for certain transactions.
Which of these is NOT something that is appropriate to put in Paragraph 11 (the Special Provisions section) of a TREC promulgated contract?
that the contract is contingent on the inspection The Special Provisions section can be used for relevant business information (such as the names of the parties or the property description) that did not fit in the fields provided.
If the seller is providing an existing survey during a real estate transaction, what must the license holder give to the buyer?
the T-47 Residential Real Property Affidavit
Who pays for an investigation of an environmental, endangered species, or wetlands issue, according to the Environmental Assessment, Threatened or Endangered Species, & Wetlands Addendum?
the buyer
According to the Environmental Assessment, Threatened or Endangered Species, & Wetlands Addendum, what happens if the buyer can provide the seller with a report proving that the use of the property is negatively affected by one of the noted factors (before the agreed-upon deadline)?
the buyer can terminate the contract and get their earnest money back
Paragraph C2 on the Lead Based Paint Disclosure states that:
the buyer has 10 days to have the property inspected for lead-based paint
According to Paragraph 9B, what happens when someone buys a property that currently under a lease?
the buyer must honor the lease, and the seller transfers them the security deposit
Agent Kara's buyer's representation agreement with her client says she will be paid a 3% commission. In the MLS listing of the home her client has chosen to buy, the listing broker offered only 2%. Where does the other 1% of her commission come from?
the buyer pays it The buyer would make up the difference by paying the buyer's agent 1%.
Which of these is NOT true about a Seller's Temporary Residential Lease?
the buyer/landlord has no recourse if the seller/tenant overstays
Which of these is appropriate to put in the Special Provisions section of the One to Four Family Residential Contract?
the names of sellers that wouldn't fit in Paragraph 1 The Special Provisions section of the One to Four Family Residential Contract provides space for the addition of contract terms that are not already included in the sales contract, or for which a TREC promulgated form does not already exist.
Which of these is an example of something that could go in Paragraph 12 of the One to Four Family Residential Contract?
the seller plans to pay some of the buyer's closing costs In paragraph 12B, Settlement and Other Expenses, each party's closing expenses are noted.
A seller is renting back a property from a buyer using the Seller's Temporary Residential Lease. The seller damages the property while they are staying there. Who is responsible for the cost of the repairs?
the seller/tenant
What is special about the earnest money section (paragraph five) and the option money section (paragraph 23) in the TREC promulgated sales contract?
they contain "time is of the essence" language Only the earnest money and option money sections contain "time is of the essence" language in promulgated TREC contracts.
Which is the purpose of the Information About Brokerage Services form?
to inform clients how a license holder can represent a party in a real estate transaction
What is the purpose of the Short Sale Addendum?
to protect a seller who is selling their home for less than they owe their lender i.e. The Short Sale Addendum protects the seller by referring to "net proceeds" and giving them a way to break the contract if the lender doesn't approve the sale.
What is the purpose of the "Listing Broker's fee" section at the bottom of Page 9 of the One to Four Family Residential contract?
to reflect a previously agreed-upon commission
Which is TRUE regarding buyer rebates?
undisclosed buyer rebates are not legal
A contract which courts cannot compel the parties to perform is:
unenforceable
What is the Addendum for Property Located Seaward of the Gulf Intracoastal Waterway for?
warns buyers that if their property become located on the beach area by erosion, they can be required to remove the structure at their own expense
The Seller's Temporary Residential Lease will only be used:
when the seller will remain on the property for no more than 90 days after closing
In TREC promulgated contracts, what does Paragraph 21: Notices provide information about?
where to send official notices about the contract
According to Paragraph 9 of the One to Four Family Residential Contract, how must a buyer pay for the property?
"in good funds acceptable to the escrow agent"
Within how many days after the title company receiving a copy of the contract will the buyer receive the title policy documents?
20 days
Seller Vera agrees to allow another veteran to assume their mortgage loan. To make sure Vera can get their VA entitlement restored, what must be attached to the contract?
Addendum for Release of Liability on an Assumed Loan and/or Restoration of Seller's VA Addendum
A potential buyer's current home is under contract. He has found a home he would like to make an offer on, but does not want to take a chance on being obligated to buy if his current home does not close. What form can help this buyer?
Addendum for Sale of Other Property by Buyer
Which of the following laws protect people based on race only?
Civil Rights Act of 1866
Which of these is NOT a TREC promulgated form?
Condo Addendum
Which of the following is TRUE regarding a contract to transfer real estate which contains no earnest money?
It is valid
A murder/suicide took place in a property. The crime was widely publicized. What is the disclosure requirement for this crime?
It must be disclosed forever.
Mary has a rental property with a two year lease on it. She collected a $500 security deposit at the beginning of the lease. Now she is selling the property. What will happen to the security deposit?
Mary will transfer the security deposit to the buyer at closing.
A seller is planning to convey a refrigerator through the Non-Realty Items Addendum. They financed the applianced purchase, and still have a few payments left. Is this allowed? Why or why not?
No, items conveyed though the Non-Realty Items Addendum must be owned fully by the seller. The seller CANNOT convey items that are not fully paid off. The buyer should not be taking on any payments for the non-realty items.
Which TREC promulgated contract are all the other contracts based on?
One to Four Family Residential Contract
In the Farm and Ranch Contract, where does a legal description and list of improvements staying with the property go?
Paragraph 2
The words "time is of the essence" are in:
Paragraph 23 of the one to four family contract
If a seller wants to reserve part of their mineral rights after selling, where on the Reservation of Oil, Gas and Other Minerals Addendum would they note what percentage they're keeping?
Paragraph B2
Which MUST be disclosed to potential buyers?
Prior flood damage that was repaired by the owner
Rollback taxes are addressed in all of the following EXCEPT:
Residential Service Contract
What is one thing that differentiates TREC from the Broker-Lawyer Committee?
TREC members are only appointed by the governor, Broker-Lawyer Committee members can be appointed by different people.
Agent Alicia is helping her client buy a newly built home. She does not use the New Home Contract (Completed Construction). What is the most likely reason why?
The builder required that she use their contract.
According to the promulgated contracts, rollback taxes assessed because the buyer changed the usage after closing will be settled how?
The buyer will be obligated to pay the rollback taxes.
Paragraph D of the Short Sale Addendum contains a date by which the seller must get approval from their lender for the sale. What happens if the lender does not give approval by the date?
The contract will terminate and the earnest money will be refunded to the buyer.
By what time is the seller required to furnish a new survey?
The seller must furnish the buyer a new survey no later than 3 days prior to closing
If an agent makes a change to Paragraph 6A8 in a TREC promulgated contract, which of these is most likely to be the result?
The title policy will be amended to read "shortage in area" rather than the standard exception.
Buyer Jeremy gave Seller Anthony $800 in earnest money and an additional $200 in option money. During the option period, Jeremy decided to terminate the contract. Anthony gave him back $800. Is this correct? Why or why not?
Yes, because option money is never refundable. Option money is not refundable. Jeremy should only have gotten his $800 in earnest money back.
Which one of these is a bilateral contract?
Zelda agrees to pay Gus $250,000 for ownership of his house. A bilateral contract obligates both parties to fulfill certain terms, where one party promises to do something for another party and that party promises to do something for the first party.
What is an express contract?
a contract that has a very specific offer and acceptance
What is one way that a homebuyer can locate any physical faults that may affect the safety or value of a home before purchasing it?
a home inspection
Per Paragraph 7D, what is it called when a buyer accepts the property, "with any and all defects and without warranty"?
accepting it in "as is" condition
How can an agent change a contract after it has been signed by both parties?
adding an amendment to contract
Which of the following would constitute unauthorized practice of law and/or be a violation of TRELA?
adding or striking things from pre-printed contract forms
Your buyer client has received their inspection report. In it, there are several identified items that they want the seller to fix. Seller has agreed to fix these items before close. What will you need to include in the contract to ensure this agreement is enforced?
amendment An amendment is something that is attached to the contract after it is accepted that changes the contract's requirements.
Which of these is an example of an illegal buyer rebate?
an agent gives their buyer client half of their commission without disclosing it on the settlement statement
To be valid and enforceable, a contract must be in writing, represent a complete agreement, have acceptance communicated, and:
be signed by all parties
How can a license holder ensure that any relevant addenda or notices are officially included in a contract?
by checking the appropriate boxes in Paragraph 22
What does Paragraph A of the Addendum for Back-Up Contract specify a back-up contract holder do when they execute the contract?
deposit the earnest and option money agreed to in the contract
Which of these is a technique license holders can employ to avoid mortgage fraud?
disclose everything to the lender
According to TREC rules, which of these must be delivered to the seller within three days of a contract's effective date?
earnest money
What does the date in the Third Party Financing Addendum provide a deadline to buyers for?
informing a seller they didn't get their financing approved If the buyer fails to notify the seller within the termination time period that they did not receive buyer approval, the buyer forfeits their right to earnest money.
When all parties have agreed to all terms of an offer, have signed the offer, and have initialed any changes that took place during negotiations, what happens to the offer?
it becomes a contract
When a contract has been fully executed, what has happened to it?
it has been terminated
If a seller is still accepting counteroffers, what is true about their property?
it is not yet officially in contract The cancellation of offers and counter offers must take place before the other party accepts the offer. License holders need to make buyers aware that while they are countering, the property is still available and the seller is free to sell it to someone else.
According to the Short Sale Addendum the effective date of the contract is amended to the date the Seller notifies the Buyer that the
lender has approved the short sale
Which of these is NOT something TREC has the power to do?
licensing developers and builders
What are rules about the maximum number of people allowed to live together in a single dwelling called?
occupancy Standards
Which of these materials would be considered part of a property's mineral estate?
oil The mineral estate does NOT include water, sand, caliche, gravel, limestone, or iron.
A buyer needs more option period time. They have asked the seller, who agreed, and signed TREC's Amendment to Contract. What else must they do to make the extension official?
pay an additional option fee
A stand-alone refrigerator would be considered ______ .
personal property that will not transfer BUT If the refrigerator is built-in it is considered real property and will transfer in the sale.
According to the Addendum for Back-Up Contract, if a first contract is terminated and the seller notifies the back-up buyer of the termination, what happens?
that date becomes the effective date of the back-up contract
In TREC promulgated contracts, what does paragraph 6E(8) say about private transfer fees?
that if they exist, the seller must notify the buyer
Who is tasked with drafting and editing Texas's promulgated contracts?
the Broker-Lawyer Committee
Which of these does NOT create housing occupancy standards?
the Federal Housing Administration
Which of the following bodies appoints the public member on the Broker-Lawyer Committee?
the governor
If legal action is required regarding a TREC sales contract, what will the non-prevailing party be responsible for?
the prevailing party's reasonable attorney fees and court costs
Which of these is a possible result of when zoning is changed and a property no longer qualifies for a previous exemption?
the property owner owes charged rollback taxes
Which of these is NOT a place where commission split agreements between cooperating brokers can be determined?
the sales contract
Which of these is NOT true about the residential service contract?
the seller can prevent the buyer from purchasing it It is the buyer's responsibility to review and choose the coverage of the residential service contract.
In loan fraud the lender is usually the
victim
What is TRUE of a unilateral contract?
A unilateral contract is a promise exchanged for performance.
In Paragraph 9 of the One to Four Family (Resale) contract, what must happen "on or before" the specified date?
Closing
If a buyer is using VA financing, what will be part of the contract?
Third Party Financing Addendum for Credit Approval
