Promulgated Forms

A buyer wishes to submit a small earnest money check up front ($100), and then deposit $500 after the 10-day option period expires. What should be inserted in paragraph 5 of the TREC One to Four Family Residential Contract?

The answer is $100 in the first blank, $500 in the fourth blank, and 11 in the blank before "days." Paragraph 5 spells out clearly the blanks to be filled in if additional earnest money is necessary.

The buyer wishes to make an offer to buy a house for $240,000, with 70% financed through 30-year fixed-rate mortgage and a 30% cash down payment. How much is the down payment?

The answer is $72,000. Thirty percent of $240,000 is $72,000. Third party financing is any type of new financing that is done by anyone that is a third party. Specifics of that financing are covered in the Third Party Financing Addendum.

A buyer makes an all-cash offer of $168,000. How will paragraphs 3A, 3B, and 3C be filled out?

The answer is 3A is $168,000, 3B is $0, and 3C is $168,000. In an all cash offer, 3A and 3C will be the same amount. 3B will be $0.

According to the Seller Financing Addendum, if the buyer delivers his credit information to the seller timely, 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?

The answer is 7.

Which of the following is a TREC promulgated form?

The answer is Addendum for Sale of Other Property by Buyer. The Addendum for Sale of Other Property by Buyer is a TREC promulgated addendum; the other choices are TREC approved forms.

Which of these is the best way to identify a party in paragraph 1 of the contract?

The answer is James A. Johnson and wife Susan B. Johnson. It is important to list full names of both parties and include their relationship.

What information is NOT required to fill out paragraph 3 of the TREC One to Four Family Residential Contract?

The answer is interest rate. 3A is down payment, 3B is sum of financing, and 3C is sales price.

The main difference between an amendment and an addendum is that an amendment

The answer is is a change to the existing content in the contract. The use of an amendment and an addendum are often confused. An amendment is a change to what is in the original contract; an addendum is material being added to the contract. In either case, the other party must sign off on the change or addition for the contract to remain in full force.

A real estate broker, acting only as a principal to a transaction (i.e., as a buyer or seller),

The answer is is exempt from mandatory use of a TREC promulgated form. Transactions in which the licensee is functioning solely as a principal, not as an agent, are exempt from mandatory use of TREC promulgated forms.

What happens to the earnest money at funding?

The answer is it is applied to the sales price. If the sale closes, the earnest money is applied to the sales price at closing and funding.

Using the One to Four Family Residential Contract, who pays for the title policy?

The answer is it is negotiated between the parties. The contract provides blanks for the parties to negotiate who pays title policy.

Who should choose the title company under paragraph 6 of the TREC One to Four Family Residential Contract?

The answer is it should be negotiated by the parties. Choice of title company and who pays for title insurance is negotiated by the parties. When the parties have come to an agreement on this matter, check the appropriate box in paragraph 6A.

A valid legal contract must have

The answer is legally competent parties. The parties must be of legal age and have enough mental capacity to understand the nature or consequences of their actions in the contract.

How many different notices are in paragraph 6E of the One to Four Family Residential Contract?

The answer is ten. There are ten separate and distinct notices in paragraph 6E of the One to Four Family Residential Contract.

"Time is of the essence" in real estate contracts means

The answer is that parties are held to exact performance of their duties within the time specified in the agreement. Parties are held to exact performance within the time specified when the agreement has incorporated the words "time is of the essence" or when an Option to Purchase or an Option to Terminate is the contract being interpreted.

If a buyer is obtaining a new conventional mortgage, which of the following will be checked in paragraph 3?

The answer is Third Party Financing Addendum. Third party financing is any type of new financing that is done by anyone that is a third party. Specifics of that financing are covered in the Third Party Financing Addendum.

When property owned by a married couple is being sold, what is the BEST way to identify the sellers?

The answer is Thomas Bud Smith and spouse Mary Ann Smith.

The sellers want to sell the refrigerator to the buyers. How should it be noted in the contract?

The answer is Use the Non-Realty Items Addendum. If the seller wishes to sell the refrigerator to the buyer for a nominal fee and have it be part of the total sales price, the Non-Realty Items Addendum should be used.

The buyer wants the free standing bookshelves in the study to be included in the sales price. How should the agent handle it?

The answer is use the Non-Realty Items Addendum. If the seller wishes to sell to the buyer the bookshelves and have those be part of the total sales price, the Non-Realty Items Addendum should be used.

A contract to perform an unlawful act is considered which of the following?

The answer is void. A contract must be for a legal act. No one may enter into a legal contract for an illegal purpose.

Once presented an offer from a prospective buyer, the seller can do any of the following EXCEPT

The answer is accept it after making a counteroffer. A counteroffer is a rejection of the initial offer. The initial offer no longer exists; therefore, it can no longer be accepted.

Under paragraph 2 of the One to Four Family Residential Contract, items such as window air conditioning units, curtains and rods, and door keys are considered

The answer is accessories and are included in the sale unless specifically excluded. Accessories include window air conditioning units, stove, fireplace screens, curtains and rods, blinds, window shades, draperies and rods, door keys, mailbox keys, above ground pool, swimming pool equipment and maintenance accessories, artificial fireplace logs, and controls for: (i) garage doors, (ii) entry gates, and (iii) other improvements and accessories.

What type of committee is the Broker-Lawyer Committee?

The answer is advisory. One of the advisory committees that exists under the statutes of the TRELA is the Broker-Lawyer Committee.

A licensee who completes a contract for the sale of real property is not engaged in the unauthorized practice of law if the licensee uses a form that is

The answer is all of these. Notwithstanding any other law, a license or certificate holder who completes a contract form for the sale, exchange, option, or lease of an interest in real property incidental to acting as a broker is not engaged in the unauthorized or illegal practice of law in this state if the form was (1) adopted by the commission for the type of transaction for which the form is used; (2) prepared by an attorney licensed in this state and approved by the attorney for the type of transaction for which the form is used; or (3) prepared by the property owner or by an attorney and required by the property owner.

A contract is said to be bilateral if

The answer is all parties to the contract exchange binding promises. Bilateral mean that each of the parties agrees to give something (i.e., buyer and seller, seller and listing broker, landlord and tenant).

Why is earnest money necessary to bind the contract in Texas?

The answer is earnest money is not necessary to bind the contract. Earnest money is not necessary to bind the contract. The promise of the purchaser to buy and the promise of the seller to deliver title are adequate consideration to create a legally binding contract.

A contract must meet certain minimum requirements to be considered legally valid. All of the following are essential elements of a valid contract EXCEPT

The answer is earnest money. Many people incorrectly believe that earnest money must be tendered to create a valid contract. Earnest money is not required for a valid contract.

How many exceptions to title are listed under paragraph 6A of the One to Four Family Residential Contract?

The answer is eight. There are eight listed exceptions, which include the standard printed exceptions.

After a real estate sales contract is signed but before title actually passes, the status of the contract is

The answer is executory. A sales contract is bilateral (buyer and seller each have promised something) but remains executory until closing when the title is conveyed to the buyer and the seller receives funds from the sale.

The statute of limitations in Texas is

The answer is four years for a written contract. In Texas, the statute of limitations for filing a legal suit on a written contract is four years. Remember that the statute of frauds requires agreements affecting title to or interest in real estate in Texas to be in writing to be enforceable, so the statute of limitations on a contract for the sale of real estate is four years.

A buyer and seller enter into a contract for the sale of a four-bedroom home. If either party defaults under the contract, the other party has how much time to file a lawsuit for damages?

The answer is four years. In Texas, the statute of limitations for filing a legal suit on a written contract is four years. Remember that the statute of frauds requires agreements affecting title to or interest in real estate in Texas to be in writing to be enforceable, so the statute of limitations on a contract for the sale of real estate is four years.

Under the TREC Third Party Financing Addendum, which of the following is a FALSE statement?

The answer is if the buyer doesn't receive buyer approval, the buyer can terminate anytime before closing. If the buyer doesn't obtain buyer approval, the buyer must notify the seller within a number of days agreed upon in the contract. If buyer does not terminate the contract under this provision, the contract shall no longer be subject to the buyer obtaining buyer approval.

If the sales price is $375,000, earnest money is $5,000 and the amount financed is $300,000, how much is filled in as the cash payable at closing?

The answer is $75,000. The amount financed (3B) is subtracted from total sales price (3C) to figure the amount payable at closing (3A). The earnest money is reflected in 3A.

A buyer and a seller enter into a contract using the Farm and Ranch Contract, which is one of TREC's six promulgated contracts. The effective date of the contract is June 20, and the buyer has 8 days to fulfill a duty under the contract. By when must the buyer complete the duty?

The answer is June 28 at midnight. According to the Farm and Ranch Contract, time is of the essence, so the buyer is held to exact performance (i.e., end of June is not acceptable). The effective date of the contract is not counted in the time frame, so the buyer has June 21, 22, 23, 24, 25, 26, 27, and 28 until midnight to fulfill the duty.

Which law prohibits the seller from requiring the buyer to use the services of a particular title provider?

The answer is RESPA. The Real Estate Settlement Procedures Act (RESPA) prohibits the seller from requiring the buyer to use the services of a particular title provider.

Which of the following is a TREC promulgated contract?

The answer is Residential Condominium Contract. The Residential Condominium Contract is one of six TREC promulgated contracts.

Using the One to Four Family Residential Contract, the sellers must provide which of the following documents along with the existing survey if they wish to rely on an existing survey of the property?

The answer is Residential Real Property Affidavit. If the seller wants to furnish the existing survey, the contract also calls for the seller to furnish the buyer with a Residential Real Property Affidavit.

The date in the upper right corner of the promulgated contract form is the date

The answer is TREC approved and promulgated the form.

Who promulgates contracts for mandatory use by licensees?

The answer is Texas Real Estate Commission. The Broker-Lawyer Committee develops forms and recommends their adoption, but it is TREC that promulgates the forms for mandatory use.

What law specifically prohibits licensees from practicing law?

The answer is Texas Real Estate Licensing Act (TRELA). The TRELA specifically prohibits licensees from practicing law.

Which TREC form should be used if the buyer wishes to include personal property such as a piece of furniture displayed in a home in the purchase price?

The answer is The Non-Realty Items Addendum. Typically, if a buyer wishes to buy personal property and have it built into the total purchase price, the Non-Realty Items Addendum must be used.

A buyer wishes to get a USDA guaranteed loan. Which form should the agent use to address that type of financing?

The answer is Third Party Financing Addendum. The Third Party Financing Addendum details the requirements for a USDA guaranteed loan. There is no such form as the USDA Financing Addendum.

Using the TREC One to Four Family Residential Contract, buyer and seller agree that buyer will purchase seller's property and seller will pay to have the exterior painted at seller's expense. Who may do the painting?

The answer is a professional house painter. Under the TREC contract, repairs and treatments must be performed by persons who are licensed to provide such repairs or treatments or, if no license is required by law, are commercially engaged in the trade of providing such repairs or treatments.

Real estate brokers who are members of the Broker-Lawyer Committee become members by being

The answer is appointed by the Texas Real Estate Commission. The committee is composed of six Real Estate Commission appointees (who are licensed real estate brokers); six lawyers, appointed by the president of the State Bar of Texas; and one public member, appointed by the governor. They serve staggered six-year terms.

A legally enforceable agreement under which two parties promise to do something for each other is classified as a(n)

The answer is bilateral contract. A contract is bilateral if both parties to the agreement promise to do something in exchange for the other's promise to do something.

A seller and buyer have entered into a sales contract, and the seller fails to deliver title to the buyer. This is an example of

The answer is breach of contract. A breach of contract is a violation of any of the terms or conditions of a contract without legal reason.

What information is NOT needed to complete paragraph 23 of the TREC One to Four Family Residential Contract?

The answer is buyer required repairs. Repairs are addressed in paragraph 7. Paragraph 23 is the paragraph that addresses information related to the termination option.

Once a contract has been agreed upon and signed by all parties

The answer is changes must be addressed through the use of an amendment. Once the original contract has been ratified (signed by all parties), any changes need to be addressed in an amendment.

Which of the following is required for a valid contract?

The answer is consideration. Consideration is something of legal value offered by one party and accepted by another as an inducement to perform or to refrain from performing some act. Anything that has been bargained for and exchanged is legally sufficient to satisfy the requirement for consideration.

If the buyer wants to be sure the fireplace screen stays with the property, the buyer's agent should

The answer is do nothing; it is already in the contract.

In which case may the seller terminate the contract and receive the earnest money under the TREC Seller Financing Addendum?

The answer is if the buyer fails to provide credit documentation within the negotiated time period. The only time the seller may receive the earnest money under the Seller Financing Addendum is if the buyer fails to timely provide credit documentation within the negotiated time period. While the seller may terminate based on the buyer's credit, the earnest money is refunded to the buyer. The buyer may not terminate if the seller fails to timely provide notice of approval or non approval of the buyer's credit. If seller fails to timely provide notice, the buyer's creditworthiness is deemed to be approved by the seller.

When should an offer be presented?

The answer is immediately. All offers should be in writing and presented to the property owner as quickly as is reasonably practical. The TREC rules call for immediate presentation.

The down payment in a transaction is indicated

The answer is in paragraph 3A of the contract. 3B is the sum of financing, and 3C is the sales price.

What should a licensee do if the seller wishes to retain an item not specifically listed as an improvement or accessory in paragraph 2 of the TREC One to Four Family Residential Contract?

The answer is list the item as an exclusion in paragraph 2D. Even though some items are not specifically addressed as improvements for accessories, the lists are not exclusive. Therefore, the seller should itemize any items he or she wishes to keep in the exclusions subparagraph.

A seller wishes to keep an item listed as an accessory. How should the TREC One to Four Family Residential Contract be filled out?

The answer is list the item under Exclusions. While one might be tempted to merely cross out the items where it is listed in "Accessories," the appropriate thing to do is to itemize any items that will go with the seller in the exclusions sub paragraph.

The seller wants to keep the built-in, high-end stovetop. How should the seller's agent note that?

The answer is list the stovetop in paragraph 2, Exclusions. Since the stovetop is built in, it is included in the list of improvements in paragraph 2. The sellers should list the stove top as an exclusion in paragraph 2.

Under paragraph 7 of the One to Four Family Residential Contract, who is required to pay for lender required repairs?

The answer is neither buyer nor seller. Paragraph 7E confirms that neither the buyer nor the seller is obligated to do lender required repairs. If there are lender required repairs and neither party agrees to do them, the contract may be terminated by the buyer, and the buyer will receive the earnest money.

Which of the following is legal for the licensee to draw up?

The answer is none of these. The TRELA clearly establishes that it is illegal for the licensee to draw a deed, note, deed of trust, will, or other written instrument that transfers or may transfer an interest in or title to real property. However, the act goes on to give permission for a licensee to complete a contract form that may bind the sale, exchange, option, lease, or rental of any interest in real property as long as the forms used have been prepared by or are required by the property owner or have been provided by the real estate commission, prepared by an attorney licensed by the State of Texas, and approved by that attorney for a particular type of transaction.

A contract may be discharged under substantial performance when

The answer is one party does not complete all the details exactly as the contract requires but has to a large extent performed on the contract, which may be enough to force payment. An example of this is a newly constructed addition to a home that is finished except for polishing the brass door knobs, in which case the contractor may be entitled to the final payment and the contract is discharged.

In Texas, the statute of limitations is two years for

The answer is oral contracts for a lease of less than one year. Under the statute of frauds, leases for one year or less do not have to be in writing. An oral contract for the lease of a property for one year or less has a statute of limitation of two years.

The buyer wishes to obtain an adjustable rate mortgage. How should paragraph 1 of the TREC Third Party Financing Addendum be filled out?

The answer is per annum for the first year of the loan. If the loan is an adjustable rate mortgage that will adjust in one year, it will be "per annum for the first year of the loan." Any adjustment caps or lifetime caps for an adjustable rate mortgage will need to be described in paragraph 11 of the contract.

A buyer wishes to take as much time to apply for financing as possible to get the best interest rate. Under the TREC Third Party Financing Addendum, how soon after the effective date must the buyer apply for financing?

The answer is promptly. Although the time for giving notice that the buyer has failed to obtain financing is negotiated between the parties, the buyer is required to promptly apply for financing.

One party cancelling or terminating a contract as though it had never been made is

The answer is rescission. Rescission returns the parties to their original positions before the contract, so any monies exchanged must be returned. Rescission is normally a contractual remedy for a breach.

Which financing addendum is NOT included in paragraph 3B of the TREC One to Four Family Residential Contract?

The answer is reverse mortgage addendum. Paragraph 3B includes checkboxes that indicate which financing addendum will be used: Third Party Financing Addendum, Loan Assumption Addendum, or Seller Financing Addendum. The Reverse Mortgage Addendum was formerly a TREC form but reverse mortgages are now addressed in the Third Party Financing Addendum.

Under the TREC One to Four Family Residential Contract, who is responsible for ensuring that utilities are turned on for inspections?

The answer is seller at seller's expense. Under the TREC contract, the seller at seller's expense is responsible for making sure that utilities are on for inspections.

Which of the following is not included in paragraph 6 of the TREC One to Four Family Residential Contract?

The answer is seller's contribution to a residential service contract. Whether the seller contributes towards the purchase of a residential service contract is addressed in paragraph 7, the remaining choices are all addressed in paragraph 6.

What information is required in paragraph 12 of the TREC One to Four Family Residential Contract?

The answer is seller's contribution to buyer's expenses. Earnest money is addressed in paragraph five. The addresses of the buyer and the seller for purposes of providing notices are addressed in paragraph 21. Specific repairs required by the buyer are addressed in paragraph seven.

According to the Property Code, which of the following are NOT required to furnish a Seller's Disclosure Notice?

The answer is single-family new residences.

What is the make-up of the Broker-Lawyer Committee?

The answer is six brokers, six lawyers, and one member of the general public. The committee is composed of six Real Estate Commission appointees (who are licensed real estate brokers) and six lawyers, appointed by the president of the State Bar of Texas, and one public member, appointed by the governor. They serve staggered six-year terms.

How many promulgated contracts does TREC issue?

The answer is six. TREC promulgates the following six contracts: Unimproved Property Contract; One to Four Family Residential Contract (Resale); New Home Contract (Incomplete Construction); New Home Contract (Completed Construction); Farm and Ranch Contract; and Residential Condominium Contract.

If a seller gave a letter to the listing agent with instructions not to deliver any offers for less than $250,000 and the listing agent receives an offer for $249,500, should he deliver it?

The answer is the TREC allows the listing agent to reject this offer because the seller has given written approval. The TREC permits licensees to reject an offer if they have instructions in writing from the client, but it might be wise for listing agents to present all offers to limit their liability.

Buyer wants to submit an offer and has already been approved for financing. How should the TREC Third Party Financing Addendum be filled out?

The answer is the addendum is not required since the buyer has already been approved for financing. The form should not be used if the buyer has already been approved for financing and needs no contingency in the contract to obtain financing.

A licensee is representing a buyer in a transaction and creates an addendum for a purpose for which TREC has already promulgated an addendum. Which of the following is TRUE regarding the licensee's actions?

The answer is the agent could face disciplinary actions because TREC has an addendum that would work in this transaction. Licensees are required to use forms promulgated by TREC unless one of the exceptions applies to the transaction.

Under paragraph 5 of the TREC One to Four Family Residential Contract, what happens if the buyer fails to deposit the earnest money?

The answer is the buyer is in default. According to paragraph 5, the buyer is in default of the contract. The seller may exercise remedies under paragraph 15.

Using the TREC One to Four Family Residential Contract, the buyer submits an offer to purchase the seller's property but fails to pay earnest money as required by paragraph 5. The seller accepts the offer in writing by signing the contract and the acceptance is communicated to the buyer. What happens to the contract?

The answer is the buyer is in default. According to paragraph 5, the buyer is in default of the contract. Under paragraph 15, the seller may exercise remedies.

A buyer promises to pay an option fee of $100 within three days of execution under paragraph 23 of the TREC One to Four Family Residential Contract to purchase a 10-day option to terminate. What happens if the buyer fails to pay the fee?

The answer is the buyer will not have the unrestricted right to terminate the contract. Paragraph 23 clearly states that "if Buyer fails to pay the Option Fee to Seller within the time prescribed, this paragraph will not be a part of this contract and Buyer shall not have the unrestricted right to terminate this contract."

A buyer pays an option fee of $25 under paragraph 23 of the TREC One to Four Family Residential Contract to purchase a 10 day option to terminate. What happens if the buyer fails to terminate by the 10th day?

The answer is the buyer will not have the unrestricted right to terminate the contract. The buyer pays for the right to terminate within the stated period. Once the period is expired, the right to terminate is extinguished.

Under the One to Four Family Residential Contract, a buyer wishes to offer to buy the property as is with no repairs. How should the buyer's agent advise the buyers to fill in paragraph 7D?

The answer is the buyers should check the box under 7D(1). If the buyers wish to make an offer with no repairs, the buyers should check the box under 7D(1).

Which of the following is TRUE under the TREC Third Party Financing Addendum?

The answer is the contract terminates if the buyer timely notifies the seller that the buyer was unable to get buyer approval. Under this provision, the contract terminates and the buyer receives the earnest money. If the buyer fails to timely notify the seller, the contract is still binding but no longer subject to a buyer approval contingency.

Who holds the earnest money while a contract is pending under the TREC One to Four Family Residential Contract?

The answer is the escrow officer. Paragraph 5 names the escrow officer and the amount paid by the buyer for earnest money.

Which of the following items of information is not included in paragraph 3 of the TREC One to Four Family Residential Contract?

The answer is the interest rate. If the buyer wishes to finance the sale, the interest rate is usually addressed in the financing addendum. The remaining items are all included in paragraph 3 of the contract forms.

What happens to the option fee if the buyer terminates within the option period under paragraph 23 of the TREC One to Four Residential Contract?

The answer is the option fee is not refunded to the buyer. Paragraph 23 states as follows: If the buyer gives notice of termination within the time prescribed, the option fee will not be refunded; however, any earnest money will be refunded to buyer.

Who signs the Residential Real Property Affidavit?

The answer is the owners of the property. If the seller wants to furnish the existing survey, the contract calls for the seller to also furnish the buyer with a Residential Real Property Affidavit.

Who pays for a residential service contract under the TREC One to Four Family Residential Contract?

The answer is the parties may negotiate who pays. A residential service contract is optional under the TREC contract. The parties may negotiate who pays for the contract.

A buyer and seller enter a contract for the sale of a 3-bedroom residential property. Shortly after the contract is in place, the buyer has an inspection done. As a result of the inspection, the buyer wants the seller to fix the fence and replace the garage door opener. The seller agrees. How should the parties proceed?

The answer is the parties must use an amendment form. If a change is made after all parties have signed off, a separate amendment must be prepared requiring the signature of all parties.

Buyers are buying property from a trustee in bankruptcy sale. How should the seller trustee reply to the buyers' offer where the seller would be required to provide the seller's disclosure notice within five days of execution of the contract under paragraph 7 of the One to Four Family Residential Contract?

The answer is the seller should counter by indicating that he is not required to provide the notice. There are several exceptions to providing the seller's disclosure notice under section 5.008 of the property code, including the sale by a trustee in bankruptcy.

Who should fill out the Seller's Disclosure of Property Condition?

The answer is the seller. The seller should fill out the form, not the seller's agent.

A buyer wishes to cap the interest rate on a loan to finance the purchase of a home at 3%. Where is the interest rate inserted in the TREC One to Four Family Residential Contract?

The answer is there is no blank line for interest rate in the TREC One to Four Family Residential Contract. The TREC One to Four Family Residential Contract has no blank lines to put a cap on interest rate. The agent should include the interest rate using the Third Party Financing Addendum.

The earnest money paragraph addresses all of the following EXCEPT

The answer is title policy company. While the title company and the escrow officer may be the same entity, the title policy company is named in paragraph 6 and the escrow officer in paragraph 5.

Under the TREC One to Four Family Residential Contract, how long does the seller have to complete required repairs?

The answer is until closing. The TREC contract provides that the seller must complete required repairs by closing unless otherwise agreed in writing.

The seller wishes to convey the washer and dryer, but the buyers wish to pay a nominal price for them and the sellers agree. What should the agent do?

The answer is use the Non-Realty Items Addendum. If the seller wishes to sell the appliances to the buyer for a nominal fee and have those be part of the total sales price, the Non-Realty Items Addendum should be used.

The seller wishes to sell to the buyers all of the flower pots on the patio. What should the agent do?

The answer is use the Non-Realty Items Addendum. If the seller wishes to sell to the buyer the flowerpots and have those be part of the total sales price, the Non-Realty Items Addendum should be used.

When a contract contains all of the essential elements that make it legally sufficient or enforceable and is binding in a court of law, it is

The answer is valid. A valid contract meets all of the required essential elements (i.e., offer and acceptance, consideration, legal purpose, consent, and legal capacity).

A couple starts celebrating the sale of their home after their listing agent calls them with the news that they've received an acceptable offer. The listing agent says he is coming over to get their acceptance and signatures. However, by the time the agent arrives the sellers are completely inebriated. The agent has them sign the contract and then takes it to the title company. This contract is

The answer is voidable. If a contract was made under duress, with misrepresentation, under the influence, or with intent to defraud, it is voidable.

Which of the following is an exception to the TREC rules on contract use?

The answer is when the buyer requires another form to be used. According to Section 537.11(a)(3), transactions for which a contract form has been prepared by a principal to the transaction are an exception to the rule that TREC promulgated forms must be used.

When is the effective date entered on the contract form?

The answer is when the last party signs the form and the other party has been notified of the acceptance. The effective date is filled in above the signature lines by the broker after the last party, usually the seller, has signed, and the other party, usually the buyer, has been notified of the acceptance.

Under paragraph 5 of the TREC One to Four Family Residential Contract, where does the buyer deposit the earnest money?

The answer is with the escrow officer. Paragraph 5 requires buyer to deposit the earnest money with the escrow officer who is typically the title company identified in paragraph 6. While a real estate agent may serve as an escrow officer, that is not a requirement of the contract.

Using the TREC One to Four Family Residential Contract, the buyer submits an offer to purchase the seller's property and pays earnest money of $1,000 in paragraph 5. The agent forgets to deposit the earnest money with the escrow officer. The seller accepts the offer in writing by signing the contract and the acceptance is communicated to the buyer. Is there a binding contract?

The answer is yes, because the buyer promised to buy the property and the seller promised to deliver title at closing. Earnest money is not necessary to bind the contract. The promise of the purchaser to buy and the promise of the seller to deliver title are adequate consideration to create a legally binding executory contract.

Using the TREC One to Four Family Residential Contract, the buyer submits an offer to purchase the seller's property and promises to pay earnest money of $500 in paragraph 5. The seller accepts the offer in writing by signing the contract and the acceptance is communicated to the buyer. Is there a binding contract?

The answer is yes, because the buyer promised to purchase the property and the seller promised to give the buyer title at closing. Earnest money is not necessary to bind the contract. The promise of the purchaser to buy and the promise of the seller to deliver title are adequate consideration to create a legally binding executory contract.

Restrictive covenants address all of the following EXCEPT

The answer is zoning. Restrictive covenants are deed restrictions that address such matters as easements, setbacks, fencing, and architectural design in a subdivision or development while zoning ordinances are governmental regulations.