Texas Law of Contracts

Utilizing the 30-day proration method, the seller has an outstanding loan of $54,600 at 8% with $440 monthly payment of principal and interest. If the interest is paid in arrears and closing was on May 18th, what would be the loan payoff at closing?

$54,600 x 0.08 = $4,368, $4,368 ÷ 12 = $364, $364 ÷ 30 = $12.13, $12.13 x 18 = $218.34, $218.34 + $54,600 = $54,818.

In Texas, urban homesteads may not be more than:

10 acres

Lenders may have the right to file foreclosure actions in as little as ___________ after the missed payment date.

120 days

_________________________ can be described as a "wraparound mortgage" in that the seller may be carrying equity in the property over and above an underlying 1st mortgage still in their name.

AITD & Contract for deed

What would a lender use to require a borrower to repay all or part of an outstanding loan on a given date.?

Acceleration clause

What is the document that makes changes to the ratified contract?

Amendment

In November, Mr. Morton (seller) was notified by the Nguyens (buyers) that they were exercising their statutory right to cancel and rescind the contract for deed since they didn't receive a(n) _______________.

Annual statement

A lease is what type of contract?

Bilateral

Bill owned a small tract of land in the country. Over the years a family moved a trailer on to the property and started a family. Bill was aware of this action but never took any action. What might happen to Bill's property?

Bill may lose his property due to Adverse Possession.

Who are the essential parties involved in an estate in trust?

Trustor, trustee, beneficiary

An owner transfers title to a property to a buyer in exchange for a consideration. This is an example of

Voluntary alientation

The ________________ defines state water as "the water of ordinary flow, underflow, and tides of every flowing river, natural stream, and lake..."

Water code

HMDA laws apply to what type of institutions?

Depository institutions and nondepository mortgage lending institutions

What do mortgages employ to prevent the transfer of mortgages?

Due-on-sale and due-on encumbrance clauses

During a loan interview, a lender always asks borrowers what church they attend. What law, if any, does this action violate?

ECOA - equal credit opp act

What is the final resolution of property that has been abandoned?

Escheat to a government entity

Which offer should be the best one made by the buyer?

First one

The type of statutory deed that contains the most complete protection for the grantee is a

Full covenant and warranty deed

The provision of a mortgage that pledges the mortgagor's rights is called what?

Granting clause

The two main types of foreclosure options for lenders in Texas are __________________________.

Judicial foreclosure and non-judicial foreclosure

What is the one exception to the Statute of Frauds?

Leases for one year or less

What is prohibited from being entered into the Special Provisions paragraph?

Licensees are prohibited from including legal rights and remedies into the Special Provisions section of a One to Four Family Residential Contract.

Default of a real estate contract is also called:

Material breach of contract

Choose the example of the correct name of the party:

Mrs.Gray is not a legal name. Be sure to use the full legal name of the party (whether seller or buyer). In the example above, the seller should be listed as "Julia Ann Gray, a single person."

The contract you will probably use most often is the

ONE TO FOUR FAMILY RESIDENTIAL CONTRACT.

Which situation is not covered in the Intracoastal Addendum?

Only temp structures can be built on the beach

What type of listing authorizes a broker to represent an owner or landlord?

Owner listing

What statement is used to identify when a sales contract is in the closing process?

Pending

In a breach of contract the non-defaulting party is:

Release from any further obligations of the agreement

The "________________" allows landowners to pump as much water from below their ground's surface, regardless of whether or not it may deplete their neighbor's own groundwater supply.

Rule of recapture

The ___________ shall provide the purchaser with an annual statement in January of each year for the term of the executory contract.

Seller

What is another term for consideration?

Something of value

Which property right includes water rights?

Surface rights

Described by the state as "the primary source of water for south central Texas and therefore vital to the residents, industry, and ecology of the region, the State's economy, and the public welfare" is known as:

The Edwards aquifier

Which statement is TRUE regarding the Torrens System of title recording?

The TITLE certificate is the property title

THIRD PARTY FINANCING ADDENDUM

addresses conventional, Texas Veterans, FHA insured, VA guaranteed financing, and USDA Guaranteed Financing

Once an addendum is accepted,

it becomes a part of the whole agreement or document.

The principal characteristic of a short sale is:

when the selling price is less than the property loan and closing costs.

In what year did Texas Legislature want to freeze each landowner's water use and rights with an overall annual usage cap?

1993

What clause usually contains the wording preventing a loan from being assumed?

Alienation clause; Most lenders write the alienation clause, also called the due on sale clause, in a way that prevents the assumption of a loan. Sometimes a lender will allow a loan to be assumed, but only if the original borrower remains responsible for the loan if the buyer defaults.

Seller financing contracts used for home sales include:

All inclusive deeds of trust & contracts for deed (also described as "land contracts")

What type of contingency protects the buyer by ensuring that the property is valued at the sell price?

Appraised contingency

What is the latest date that a settlement agent is allowed to provide the seller with the Closing Disclosure?

At consumnation of the contraction for the seller. For the buyer, it's 3 B days before

The Third Party Financing Addendum for Credit Approval is used when:

Conventional, FHA, or VA

A Judicial Foreclosure typically goes through the __________ while a Non-Judicial Foreclosure action is held _______________.

Court system; outside the court system

Which of the following is NOT a material defect?

Cracked window; A material defect is any defect in a property that may affect a buyer's decision to purchase it or affect the property's value, such as termites, cracks in structural components, etc. A cracked window is not sufficient to be a material fact.

The primary security instruments used by lenders and secured by properties include a ______________. There is not usually a right of redemption allowed and deficiency judgments may be allowed should the lender lose more money that the current value of the subject property that was foreclosed upon.

Deed of trust & mortgage

Which of the following types of financing is not mentioned in paragraph 3?

Gifts; Paragraph 3 of TREC's One to Four Family Residential Contract (Resale) form identifies the type of financing the buyer will use as either; third party financing, assumption, or seller financing.

If a closing is set for August 15th and the buyer prepays interest for August, the first full payment would be:

October 1st - Interest is always paid in arrears, so if a loan is disbursed at closing on the 15th of August and the borrower has prepaid for that portion of the month, the borrower will not owe interest until the beginning of the month following the month after closing (October).

In what sale contract paragraph do you indicate an attached addendum?

Paragraph 22 of the One to Four Family Residential Contract (Resale) Form (20-14) indicates which addenda are attached.

What do we call the right of a person to have the first opportunity to purchase or lease a property?

Right of first refusal is the right of a person to have the first opportunity to purchase or lease a property, but only once the seller actually offers the property for sale or has an offer on the property from a third party

Which authority regulates Involuntary Title Transfers?

State law

In the special warranty deed, the grantor warrants that he will

defend the title against defects arising under and through him, but no others.

The FARM AND RANCH CONTRACT

designed to be used for anything from the country getaway place or the small farm to the large working farm or ranch. It covers barns, outbuildings, and farm homes. Coastal area addenda are required for properties along the Gulf Coast of Texas. Damage that occurs as a result of a storm may erode the beach more than any property owner could have imagined. These addenda serve as a warning about shifting boundaries due to erosion and flooding.

SELLER FINANCING ADDENDUM

for seller financing when the seller owns the property "free and clear" and does not require the entire amount of the sales price in cash.

cloud on title

is any document, claim, unreleased lien, or encumbrance that might invalidate or impair a title to real property or make the title doubtful

Who is an investor that lends money secured by a mortgage on real estate?

mortgage lender

The CONDO RESALE CERTIFICATE

must be requested in writing with information for delivery and solely prepared by the condominium association.

A cooperative is a:

non-profit company

A real estate transaction checklist is

not a set of step-by-step instructions.

What type of mortgage clause enables the mortgagee to order a public sale without court decree?

power of sale

ADDENDUM FOR RESERVATION OF OIL, GAS AND OTHER MINERALS

used if the seller reserves all, or a portion of the mineral estate, including oil, gas, and other minerals in, or under the property, and any royalty under existing leases. It also addresses certain surface rights such as production and drilling rights, easements, lease payments and other benefits.

TRID requires the lender to provide a Loan Estimate within how long of the borrower submitting a loan application?

3 Days

Which contract for the sale of goods must be written to be legally enforceable?

>$500

What occurs when a option to buy is exercised?

A bilateral sale contract is created and both parties are bound to perform.

What do we call the right of a person to have the first opportunity to purchase or lease a property?

A right of first refusal is the right of a person to have the first opportunity to purchase or lease a property, but only once the seller actually offers the property for sale or has an offer on the property from a third party

What is another term used to described a discharge contract?

Cancelled

What is another term used to described a discharge contract?

Cancelled; The discharge of a contract may occur due to partial performance, sufficient performance, or defective performance by the parties. The discharge of a contract is also called cancellation and termination.

A study drafted by the EPA acknowledged that low level electromagnetic fields may increase the risk of:

Cancer

The term "covered multi-family dwellings" means:

a building with an elevator and 4 or more dwelling units.

The eight covenants common in most leases are;

capacity to contract, demising clause, description of the premises, clear statement of term, specification of rent, in writing, signatures, and delivery. An alienation clause is found in a mortgage contract, not a lease contract.

ADDENDUM FOR SALE OF OTHER PROPERTY BY BUYER

creates a contingency contract based on the sale of the buyer's current house. Contingencies are intended to protect buyers from contractual obligations they cannot fulfill.