ch.5 Promulgated Contract Forms (Real Estate)
Addendum for Back-Up Contract
Form 11-7
Addendum for Coastal Area Property
Form 33-2
Addendum for Property Located Seaward of the Gulf Intracoastal Waterway
Form 34-4
addendum for reservation of oil, gas and other minerals
Form 44-2
According to the Seller Financing Addendum, the interest rate is:
Negotiated between the parties
The earnest money is:
Negotiated between the parties
a
Paragraph 7H of the One-to-Four Family Contract concerns: (a) Residential Service Contracts (b) The sale of personal property (c) Repairs (d) Lead-based paint hazards
Define Unimproved Property Contract
Used for sale of property with no existing structures
a
Which of the following correctly defines a counteroffer? (a) A rejection of the original offer coupled with a new offer. (b) The party to whom the offer is made. (c) The moment when an offer is presumed to have been delivered to the principal when it is delivered by the agent (d) The right to purchase leased property by matching or bettering any offer before the property will be sold to someone else.
c
Which of the following is NOT part of the mineral estate? (a) Oil (b) Gas (c) Limestone (d) Salt
d
Which of the following was added to federal fair housing laws as a protected class in 1974? (a) Race (b) Profession (c) Religion (d) Gender
If a buyer is concerned about the presence of endangered species, toxic substances, or wetlands on a property, the agent should:
add the environmental Assessment Addendum to the contract
Who is responsible for filling in the effective date of the contract?
the broker
If an overage is incurred due to a change order, the excess is paid by:
the buyer
The sales price in 3.C. is always:
the loan amount plus the cash portion 3A+3B the amount borrowed plus the down payment *All of these are correct
How long does a buyer have to object to defects, exceptions, and encumbrances to title disclosed in the survey and title commitment?
the negotiated number of days stated in the contract
Land, improvements, and accessories are collectively referred to as:
the property
If a seller wants to continue to occupy the property for two days after the closing and the buyer agrees:
the sellers temporary residential lease form should be used
At the closing the buyer should bring:
A cashier's check or wire transfer for the amount of closing costs and down payment
The Lead-Based Paint Disclosure
A federal requirement for residential property built prior to 1978
Addendum for Short Sale
45-1
c
The practice of taking buyers or renters to or away from a particular area based on a protected class is known as ______________. (a) Chasing (b) Churning (c) Channeling (d) Chaining
A buyer's agent submits an offer contingent of the sale and funding of the buyer's home and submits an addendum for Sale of Other Property. If the buyer waives the contingency and then fails to close and fund due to non-receipt of proceeds from the sale of her home, all of the following remedies are available to the seller EXCEPT:
filing a lawsuit and seeking assuasive reprisal
T or F: A building or community must not discriminate based on familial status, unless it qualifies as housing for older persons.
True
T or F: If the buyer is allowed to select certain items in the new home that is under construction, the builder (seller) may reject a selection if it adversely affects the market value of the home
True
c
In a Farm and Ranch sale, the buyer receives all of the following items except ____________. (a) Windmills (b) Tanks (c) Trucks (d) Pens
b
In the case study titled "VA Case Study", a 10-day _________ for $200 will be credited to the sale price. (a) fee for earnest money (b) option fee (c) broker fee (d) membership fee
Steve a license holder in Texas is dealing with his current buyer Peggy. She wants to write a contract on a property that is already under contract to another buyer. She wants to ensure that she will have a valid contract in place is the exisiting contract fails. Being the buyers agent Steve will use TREC promulgated form
addendum for Back up contract (11-7)
Han is a license holder in Texas. He is preparing an unimproved property contract. He knows that the Seller is going to reserve all of the minerals in the sale. This can be accomplished b using TREC promulgated form
addendum for reservation of oils, gas, and other minerals TREC NO 44-2
c
A(n) _______________ gives the buyer the unrestricted right to terminate the contract within a specified period. (a) Clause (b) Abstract (c) Option (d) Annexation
Define Farm and Ranch Contract
Contains provisions for surface leases related to a property
Define New Home Contract
Contains provisions for various concerns regarding new construction
addendum for sale of other property by buyer
Form 10-6
Addendum for Property in a Propane Gas System Service Area
Form 47-0
A naturally occurring, colorless and odorless gas produced by the decay of radioactive materials in rocks under the ground
Radon
d
Raul is Moises's father and real estate agent. What must Raul do when filling out the sales contract? (a) Notate the relationship in Paragraph 11 (b) Substitute another agent in his brokerage for his own name (c) Nothing special has to be filled out for familial relationships (d) Disclose this relationship in Paragraph 4
b
In the case study titled "Conventional Case Study" the buyers applied for a 90% conventional loan for 30 years at a fixed rate not to exceed ________. (a) 3% (b) 4.75% (c) 3.75% (d) 5%
d
In the case study titled "FHA Case Study" the exclusions, stated in the listing agreement, included that the seller would _______. (a) retain the built-in ovens (b) retain all the light fixtures, especially the chandelier (c) retain the cabinet in the bathroom (d) retain all the potted plants on the patio
When one party defaults under a contract, the other party is known as the:
Injured Party
_______ occurs when a buyer assumes and agrees to pay the seller's existing mortgage
Loan Assumption
Define Agricultural Use Exemption
Method for evaluating tax burden of properties used for agriculture
Exclusions to the sale must be removed:
Prior to delivery of possession
The TREC-promulgated contract forms:
Are drafted by the Broker-Lawyer Committee
Used to insulate pipes, in chimneys, in roofs, flooring materials and siding
Asbestos
If a home is to be sold, with lender's consent, at a price less than the outstanding balance on a mortgage, the sale is known as a:
Short Sale
Mortgage Fraud Red Flags/ Loan application red flags
Significant or contradictory changes from handwritten to typed application employers address shown as a Post Office Box Commute is significantly unrealistic New house too small to accommodate occupants Borrower is downgrading to smaller or less expensive house Down payment in some form OTHER than cash Significant changes as application process proceeds Lack of accumulation of assets compared to income Accumulation of assets compared to income seems to high Years of schooling not congruent to profession Incomplete or Inconsistent borrower information Unsigned or undated application Same telephone number for borrower and employer
c
Tammy is interested in Jolene's property, but wants to research the zoning laws before purchasing. She has and agreement in which she paid a fee of $10,000 to keep the property available for a preset price for 30 days, during which time Jolene cannot sell the property to another. Tammy, however, can change her mind if she likes. What kind of agreement is this? (a) Bilateral (b) Oral (c) Option (d) Void
A purchase of property seaward of the Gulf Intracoastal Waterway must be given a disclosure notice that:
beach erosion and movement of the vegetation line could cause an owner to lose the property
When should a license holder advise a party to a contract to consult an attorney?
before signing the contract if the client does not understand the effect of signing the sales contract or the terms or conditions in the agreement
Damage or destruction of a property under contract prior to closing:
can result in termination of the contract
In the business of real estate, _______ is defined as something given in exchange for a promise
consideration
The buyer may terminate the contract and receive a refund of earnest money if lender required repairs:
exceeds 5% of the sales price
Define Churning
excess selling/lending activity for the purpose of generating fees and commissions -Lenders encourage refinancing to earn additional fees rather than to help the customer
The sales contract identifies the agency relationships between the broker(s) and parties.
in the broker information section
Define the Foreclosure Rescue Scam
involves a homeowner who is deceived into signing ver a title to the property with the belief that he or she will be able to remain in the house as a renter and eventually buy it back over time. -in this case the terms are impossible to live up to -in other cases the homeowner thinks he is signing documents to bring the mortgage current, but instead actually surrenders his or her ownership
The commission agreement between the broker and the seller is usually found in the:
listing agreement
The State of Texas encourages the parties to resolve all conflicts and disputes through alternative dispute resolution procedures such as:
mediation
1-4 family residential contract Paragraph 4
states that a license holder who has a familial relationship with a party to the transaction must disclose the info to the other party before entering into a contract
According to the TREC contract, accessories include:
stoves
1-4 family residential contract paragraph 3 C
the sales price is the sum of 3A and 3B
1-4 family residential contract paragraph 3B
the sum of all financing from all sources
In the Farm and Ranch contract, the Seller generally has the right to harvest crops:
until delivery of possession
If not using a temporary lease, the buyer is entitled to possession of the property:
upon closing and funding
1-4 family residential contract Paragraph 2 (C)
Describes accessories, which while not necessarily permanently installed or built in, are commonly conveyed to the buyer in the sale
_______ is pumped into walls as a foam, it hardens and insulates
UFFI (Urea Formaldehyde Foam Insulation)
Define a Straw Buyer
a person who is used to buy a property in order to conceal the actual owner -the straw buyer doesn't intend to occupy the property or make payments and often deeds the property to the other individual immediately after closing -straw buyer is usually compensated for the use of their identity to purchase
Being within the extraterritorial jurisdiction of a municipality is an indication the property will
possibly be annexed in the future
__________ occurs when a property is refinanced or resold immediately after purchase for an artificially inflated value.
property flipping
The process of dividing ongoing expenses between the buyer and seller at the closing is called:
prorating
If the sales price is adjusted based upon a survey, either party may terminate the contract if the sales price varies by more than:
10%
The condominium resale certificate must have been prepared within the previous:
3 months
The condominium resale certificate is form
32-4
Addendum for property subject to Mandatory Membership in a Property Owners' Association is form ____
36-8
Define Rollback taxes
A tax assessed when a property no longer has an agricultural exemption
c
According to Paragraph 12 of the One-to-Four Family contract, ______________ is a settlement expense payable by the seller. (a) Prepaid hazard insurance (b) PMI (c) Release of existing lien (d) MIP
c
Bertha, a law school dropout is a licensed real estate agent who wants to make sure that she is providing her buyers with the best representation possible, so she drafts an iron-clad purchase contract for them. Bertha's sponsoring broker is horrified because Bertha is guilty of ___________. (a) Mortgage Fraud (b) Conspiracy (c) Unauthorized Practice of Law (d) Fair Housing Violations
1-4 family residential contract Paragraph 2 (D)
Enter Exclusions to the sale. If an item is to be excluded, give it a name and a location. For example, "Dining room chandelier" would be an adequate name and location
1-4 family residential contract Paragraph 2 (A)
Enter the legal description and address of the property to be conveyed. If it is described in metes and bounds, attach the description to the contract
This optional form is used when personal property is to be included in a sale. Indicate the price agreed to between the parties for the property in paragraph A.
Non-Realty items Addendum
The _______ ensures compliance with TRELA, which requires that license holders advise buyers to have an abstract of title examined or to obtain the insurance.
Notice of Prospective buyer
Define Equity Theft
Occurs when a mortgage industry employee forges a deed transfer or a satisfaction lien, and they obtain new liens on the property. -the home owner doesn't know about it until they receive an eviction notice -A foreclosure rescue scam is also a version of equity theft
The elements of a valid contract are, competent parties, consideration, legal subject matter, in writing, and _______.
Recording
TREC has promulgated forms for:
Residential transactions
1-4 family residential contract Paragraph 3 A
The down payment is always the difference between the sales price and the sum of all financing
b
The five essential elements that must exist for a real estate sales contract to be considered valid and enforceable are: legal purpose, competent parties, mutual assent, consideration and ____________. (a) Signature of witnesses (b) In writing (c) Acknowledgment by a notary (d) Recording in county clerk's office
In a lease with a "right of refusal" provision:
The tenant has the right to match or better any offer the landlord receives to present the property from being sold to someone else
Lando a buyer needs to terminate a contract because of his inability to obtain credit approval. This can be accomplished by using TREC promulgated form
Third Party FinancingAddendum (40-7)
1-4 family residential contract Paragraph 2(B)
This includes the improvements, which are all man made additions to the land, including the house, garage, and other permanently installed and built in items
a
_______________ are implemented when property operating under an exemption has its usage changed. (a) Rollback taxes (b) Agricultural use valuations (c) Exemptions (d) Taxing authorities
Define Chunking
occurs when a fraudster promises to show investors how to get rich by investing in the real estate market -fraudster takes a significant portion of loan amounts as his fee and never leases the property. Investors are left with overpriced, vacant properties causing many to go to foreclosure destroying the investors credit history
The loan amount in Paragraph 3.B. of the sales contract includes:
only the amount borrowed by the buyer
The Notice of Buyers/Mutual Termination of Contract form ( 38-5 ) provides 5 specific reasons to terminate. What are they?
1) the unrestricted right of buyer to terminate the contract under paragraph 23 of contract 2) Buyer cannot obtain Buyer Approval in accordance with 3rd party financing addendum of contract 3) The property doesn't satisfy property approval in accordance with 3rd party financing addendum of contract 4) Buyer elects to terminate under paragraph A of the addendum for Property Subject to Mandatory Membership in a Property Owners' Association 5) Buyer elects to terminate under paragraph 7B(2) of the contract relating to the sellers disclosure notice
b, b, a
Corina is selling her home and would like to purchase another home to move into as soon as her current home sells. When she finds a home she would like to purchase, her buyer's agent submits an offer on her behalf. To make the contract subject to the sale and funding of Corina's current residence, he also submits an Addendum for Sale of Other Property. 1. What will happen if Corina's home does not sell? (a) The seller will have to wait for Corina to come up with the money another way (b) The contract will terminate automatically and the earnest money will be refunded to Corina (c) The contract will terminate automatically and the seller will keep the earnest money (d) The contract may be terminated if both parties sign the Release of Contract within 10 days 2. If the seller receives and accepts an offer during the contingency period, and Corina declines to waive the contingency: (a) She is still under contract to purchase the property (b) The contract will terminate and her earnest money will be refunded (c) The contract will terminate and the seller will keep the earnest money (d) None of these are correct 3. If Corina waives the contingency and then fails to close and fund due to non-receipt of proceeds from the sale of her home, all of the following remedies are available to the seller EXCEPT: (a) Filing a DTPA lawsuit against Corina (b) Seeking specific performance (c) Filing a lawsuit and seeking monetary damages (d) Accepting Corina's earnest money as "liquidated damages" and taking no further action against her
d
If a contract has been entered into with a person who has been judged to be incompetent, that contract is considered ____________ because that person never had the capacity to enter into it. (a) Executed (b) Valid (c) Voidable (d) Void
b
Which statement regarding earnest money is INCORRECT? (a) There is no standard amount prescribed, but is often 1% of the sale price. (b) In Texas, earnest money is set at 6% of the sale price. (c) Earnest money is not a legal requirement of a contract. (d) Earnest money is a deposit paid up front by the Buyer to show seriousness in intent.
c
If a loan applicant intentionally lies on a mortgage loan application, the penalties are a possible prison term and ____________. (a) Treble punitive damages (b) A fine of $25,000 for a first offense and $50,000 for each subsequent offense (c) A fine not to exceed $10,000 (d) Relief, actual damages, attorney fees and costs, punitive dames, and fines not to exceed $100,000
A buyer did not comply with his end of an agreement, by the agreed to deadline, to obtain financing within a six week period and states that he is not even sure he still wants to buy the property. The seller would have the following recourse EXCEPT:
If the buyer cannot obtain financing and still wants to purchase the property, the seller has to accept the 80% down payment as a partial performance errata
c
In order for a buyer to purchase a property using VA Guaranteed financing, the buyer must receive a(n) ___________, which establishes the value of the property. (a) Direct endorsement (b) Adjustable rate (c) Certificate of Reasonable Value (d) Loan commitment letter
b
The Seller's Disclosure Notice should be completed by _______________. (a) The agent (b) The seller (c) The buyer (d) The title company
a
The ______________ has promulgated eight exceptions to title insurance policies. (a) Texas Department of Insurance (b) Texas Real Estate Commission (c) Texas Association of REALTORS (d) Consumer Financial Protection Bureau
If the property is currently under an agricultural exemption, and the use of the property changes, the buyer may be charged a:
rollback tax`
a
Which of the following statements regarding the Addendum for Back-Up Contract is FALSE? (a) An amendment to the first contract automatically constitutes a termination of the first contract (b) The previous contract is known as the "First Contract" (c) The intent of a back-up contract is that it is to be contingent on the failure of an existing contract to close. (d) All of these statements are false
Usual expenses of the seller as stated in the contract include:
release of existing lien
d
According to the Addendum for Back-Up Contract, an amendment to the first contract: (a) Waives all contingencies (b) Gives the seller the right to keep the earnest money (c) Constitutes a termination of contract (d) Does not constitute a termination of the first contract
Luke a buyer wants to make an offer on a property. The contract is subject to the sale of the buyers existing property. This can be accomplished by using a TREC promulgated form
Addendum for sale of other property b Buyer TREC No.10-6
d
Advertising must not contain limitations on the number or age of children unless: (a) The landlord has an active ban on the number of children admitted into the property (b) The apartment complex is already more than 50% occupied by families. (c) The current occupants have voted to exclude children from the property (d) The housing is intended for persons 62 and older or 55 and older.
d, c, c
Linda is the buyer's rep for Guy, who is inheriting some money and wants to buy a home. Guy's offer of $190,000 has been accepted, and the parties have agreed to allow Guy plenty of time to secure financing (20 days) since he has not yet received his inheritance money and his financing pre-approval is based on a sizable down payment (80% of property value). The deadline has passed and Guy has not yet secured financing. He claims he has not even tried yet because there has been a delay in receiving his inheritance, which he claims will be received in about a week. Guy states that he is not sure he still wants to buy the property. 1. Which of the following courses of action are not available to the seller? (a) The seller may terminate the contract and file suit for breach of contract since Guy did not perform his duty and the seller has taken the property off the market for so long. (b) Both parties can agree to terminate the contract. (c) The parties can extend the time allowed to secure financing as long as they complete an amendment. (d) If Guy cannot obtain financing and still wants to purchase the property, the seller has to accept the 80% down payment. 2. If Guy quickly secures financing and learns he can buy a $180,000 property without the inheritance, which of the following is TRUE about renegotiating the sales contract? (a) The seller must either renegotiate or return Guy's earnest money (b) The parties cannot re-negotiate since it is technically still only an offer and not an executory contract (c) The seller is under no obligation to renegotiate the sales price and may still seek remedy against Guy if he does not complete the sale. (d) None of the above are true. 3. What could happen if - a couple of days after the contract was executed - the title company had pointed out that Guy is 17 ½ years of age? (a) The seller would have legal recourse against Guy for impersonating an adult. (b) The seller could back out of the contract. (c) Guy could choose to void the contract. (d) Guy's age does not impact this situation in any way.
a, b, d
Martina is representing Charles, who is making an offer of $460,000 on a home. Martina recommends that Charles offer 1% earnest money to demonstrate his level of commitment to the seller.Charles, however, insists on offering $30,000 in earnest money, but he agrees to go as high as$40,000 if the earnest money ends up being a point of disagreement with the seller. They will use XYZ Title Company, which is located at 123 Main St, Anywhere, TX. 1. In Paragraph 5 of the TREC approved sales contract, what information should be listed in the fields for Charles' initial offer? (a) $30,000 - XYZ Title Company - 123 Main St, Anywhere, TX - 0 - 0 (b) $40,000 - XYZ Title Company, - 123 Main St, Anywhere, TX - 0 - 0 (c) $30,000 - XYZ Title Company, - 123 Main St, Anywhere, TX - 10,000 - 3 (d) $40,000 - XYZ Title Company - 123 Main St, Anywhere, TX - 6,000 - 3 2. Charles wants the seller to pay for the title policy. He prefers to use the seller's existing survey, but he doesn't mind paying for a new one if the existing survey is found to be unacceptable. He wants to receive the survey within 7 days. In Paragraph 6. C, Martina should: (a) Place a checkmark next to (1), write in 7, and place a check next to "Seller's" (b) Place a check checkmark to (1), write in 7, and "Buyers" (c) Place a checkmark next to (2), write in 7 (d) Place a checkmark next to (3), write in 7 3. The property Charles is making an offer on was built in 1970, and there was a signed seller's disclosure in the documents section of the multiple listing service, but there was no Lead- Based Paint Addendum. Martina has not been able to get the signed addendum from the listing agent, and Charles has indicated that he would like to move forward with making an offer. Martina could: (a) Advise Charles that moving forward with an offer before receiving the signed addendum could be very risky (b) Advise Charles of his right to get an inspection and terminate the contract within 14 days if lead-based paint or lead-based paint hazards are present (c) Inform Charles about the risks of moving forward with an offer and make sure he has received the pamphlet and signed the addendum (d) All of the above are actions that Martina can take.
d
Property includes: (a) Land (b) Accessories (c) Improvements (d) All of these are collectively referred to as property
b
Prorations are generally calculated _______________ for taxes, maintenance fees and rents, if any, that the seller pays for on closing day. (a) Through the end of the month (b) Through the day of closing (c) Through the end of the year (d) None of these are correct
The Third Party Financing Addendum cannot be used for:
Seller Financing
If in Paragraph B(2) is checked, and 50% entered in the Addendum for Reservation of Oil, Gas, and Other Minerals:
Seller reserves 50% of whatever mineral estate the seller owns as of the closing data
Reservations of oil, gas, and other minerals will generally be inserted in:
TREC Addenda Form
Seller Rey needs to sell property at a price that is less than her existing mortgage balance. In order to accomplish this, she will need a TREC promulgated form
Short sale addendum (45-1)
This form is completed by the property owners association or the management company representing the association. It details the financial condition of the association and any issues related to the property.
Subdivision Information, Including Resale Certificate For Property Subject To Mandatory Membership In A Property Owners Association (Form 37-5)
b
The party to whom an offer is submitted is known as the _____________. (a) License holder (b) Offeree (c) Buyer (d) Broker