Champions Promulgated Contract Forms Test
Use of third-party financing addendum
Allows the buyer to terminate the transaction if the property doesn't meet the lender's underwriting requirements. It is divided into two broad categories: government loans and conventional loans.
Void Contract
An agreement that is invalid from the beginning and does not affect the parties
Voidable Contract
An agreement that may be terminated by one of the parties
Valid Contract
An agreement that meets the requirements of law.
IABS
An information document that Texas law requires all real estate license holders to give the following information about brokerage services to prospective buyers, tenants, sellers and landlords
Stigmatized properties
Any property where there has been a murder, alleged haunting, or in the vicinity of the residence of a known sexual offender
Farm and Ranch Contract Crops
Buyer and Seller must agree as to how Seller will leave the land, including who will shred the stalks, plow the ground, and other issues.
Addressing environmental concerns - TREC forms
Buyer is advised the presence of wetlands, asbestos, wastes, and other environmental hazards, or the presence of an endangered species. If the buyer is concerned about these matters, then an addendum promulgated by TREC should be used.
PARAGRAPH 8.A
is closure of agency coupled with an interest and family relationships - TX law requires a RE broker or sales agent who is a party to a transaction or acting on behalf of a spouse, parent, child, business entity in which the broker or sales agent owns more than 10%, or if acting as a trustee to a trust, or beneficiary, to notify the other party in writing before entering into a contract of sale.
Farm and Ranch Contract Accessories
not necessarily permanently installed or built-in items but conveyed at sale. Residential items that are checked off to be given to the buyer in sale. portable buildings hunting blinds game feeders livestock feeders and troughs irrigation equipment fuel tanks submersible pumps pressure tanks corrals gates chutes
Mediation-Arbitration Difference
parties first attempt to settle their dispute through mediation, if no settlement is reached the dispute will be arbitrated. In arbitration. the private judge is in control of the process and the outcome, whereas in mediation, the disputing parties maintain control.
Lease purchase
rent-to-own agreement is a lease containing purchase conditions that enable the tenant to buy the property before the contract expires
Provisions of an addendum vs the original contract - which prevails
the contract of an addendum
Right of First Refusal
the contractual right given to an interested party that allows them to be the first buyer to submit an offer on a specified property
Arbitration
the use of an arbitrator to settle a dispute.the private judge is in control of the process and the outcome
Requirements of a valid contract-
Consideration, Offer and Acceptance, Legal Purpose, In writing, Competent parties
The unlawful practice of law
License holders should not alter the pre-printed text of a promulgated form. Specific examples - agents add provisions to contracts other than business details: Example: Inserting terms into a contract when a TREC promulgated form is available. Adding terms into a contract that are not addressed by a TREC promulgated form.
Default
Non-performance of a duty under a contract.
New Home Contract (Incomplete Construction)
The contract is used for the sale of new homes when construction has not yet been completed by the builder and when the closing will occur after construction has been completed.
"Effective date" of a contract
The date of final acceptance. buyers send an offer. If sellers accept the offer, they must communicate their acceptance of the contract to the buyers. The date the communication occurs is the date the broker fills in as the ___________________.
New Home Contract (Completed Construction)
This contract form is used for new homes where the construction has been completed by the builder and no one has previously lived in the home.
Purpose of the Notice to Prospective Buyer -form
This notice acknowledges that the buyer has been advised by a license holder to have abstract covering the property examined by an attorney Orto obtain a Title insurance policy. It also gives statutory notices if the property is in a Utility district.
Option to Buy
gives the tenant possession of the property and also the right to buy at a set price within a designated time.
Broker Lawyer Committee
has 13 members and was created to draft and revise contract forms capable of standardization for use by real estate license holders
Closing Costs or settlement expenses
if any of these listed expenses exceed what the party agreed to pay, the contract will terminate, UNLESS the other party agrees to pay the excess
Fully Executed
A contract is fully executed when all parties have performed.
The broker's responsibility in handling multiple offers on a single property
All offers must be presented
What are good funds?
Cashier's check or wire transfer, or certified check
TREC temporary lease forms
Forms used for a lease of 90 days or less. One for the buyer and one for the seller.
Paragraph 20 - Federal Tax Requirements
If seller is a "foreign person" or if seller fails to deliver an affidavit or a certificate of non-foreign status to Buyer, then buyer shall withhold from the sales proceeds an amount sufficient to comply with applicable tax law and deliver the same to the IRS together with appropriate tax forms.
Lead Paint - disclosures, dates, timing, buyer's rights, seller's responsibilities
If the property was built prior to 1978, the required Lead-Based Paint Addendum must accompany the contract. The seller must disclose this info, the buyer has the right to decline inspection.
Deed in lieu of foreclosure
The borrower simply transfers the property back to the lender and the lender cancels the debt.
The parties to the contract specifically as noted in paragraph 18.A
The escrow agent is not a party to this contract and does not have liability for the performance or non-performance of any part of this contract, or liable for any interest or loss on any earnest money cause by the failure of any financial institution.
One to Four Family Residential Contract (Resale)
The promulgated contract used by real estate licensees for the sale of residential property. It's used when purchasing residential real estate, but variations of forms are available for other types of real property.
Paragraph 3.B
The sum of all financing from all sources. Insert only the amount actually being financed.
How do you conceal the identity of a buyer?
When a contract is assigned
Loan assumption
When a new buyer takes over the seller's existing mortgage loan.
Earnest Money
a deposit that shows the buyer is serious about purchasing and fulfilling the contract. A buyer's evidence of good faith, submitted with an offer to purchase. The buyer is required to deposit this with the escrow agent within 3 days after the effective date of the contract.
Items to be retained by the seller as specified in the contract
any items retained should be written in Paragraph 2D. EXCLUSIONS.
Loan origination
the process of creating a new loan agreement between a borrower and a lender
Common amendments to the original contract -
• Changes to the closing date • Changes to the sales price, down payment and/or amount financed • Repairs that the seller agrees to perform • Removal or waiver of contingencies
Features of the Lead Based Paint disclosure form
Seller's disclosure of the presence of this, records and reports available to seller, the buyer's rights to waive the inspection or get an inspection, and buyer's acknowledgement.
Features of the option fee vs the earnest money deposit
"Option money is used to create an option period. Earnest money is a deposit that shows the buyer is serious about purchasing and fulfilling the contract."
Number of days for the title company to deliver the title commitment-
20 days from the date that they receive the contract. This paragraph also provides for an automatic extension of the delivery period for up to 15 days or 3 days prior to closing if it cannot be delivered within the 20 days allowed.
Farm and Ranch Contract
A TREC promulgated contract for use where the land being sold is greater than 10 acres and includes land, improvements, accessories and crops. Contains provisions for surface leases related to a property
Residential Condominium (Resale)
A TREC promulgated contract for use where the seller does not own fee simple title to the land beneath the unit.
Promulgated Loan Forms
A Third Party Addendum to state what type of financing the buyer will use. Conventional or govt loan. If loan approval is not done, then contract will terminate and earnest money will be refunded to buyer.
Executory Contract
A contract that has been signed by the parties, but not yet carried out. (It's the sales contract before closing or contract for deed)
Offers and the communication of offers
A properly completed form with a price less than, equal to, or more than the seller's asking price and signed by the buyer. Can be communicated by phone, fax, email, letter, hand delivery.
Requirements of a valid option
A unilateral contract where one party has the option to buy property at a preset price within a negotiated time period. The option fee is the consideration paid to Seller for taking the property off the market for a period of time while Buyer decides whether or not he or she wants to finalize the purchase of the property The offer made by a promisor. The acceptance of a promisee. Consideration (this is the exchange of something of value for something else of value) Mutuality of parties. Legal capacity for parties to enter into the contract. Legally acceptable terms.
When is it not possible to assign a contract?
Contracts for personal services are not assignable. Mortgages generally have a clause that prohibits assignment (assumption) without prior approval. Purchase contracts are not assignable if they are contingent upon the buyer obtaining credit or some other contingency that makes assignment impossible. Leases are assignable.
Proration
Dividing property taxes, hazard insurance and other expenses or income between the buyer and seller, as of date of settlement.
Possible responses or actions upon the receipt of an offer
Do nothing, accept, decline, counter
PARAGRAPH 5 features
Earnest Money and Option periods. The option period is the time allowed for inspections that Buyer may want. The buyer is required to deposit the earnest money with the escrow agent within 3 calendar days after the effective date of the contract.
Paragraph 23- use and timing
Option period with a negotiable length of time. The buyer can walk away for any reason within this time.
Fair Housing and Prohibited Acts
Prohibits Discrimination based on race, color, religion, national origin, Sex (added in 1974), familial status, and disability. Prohibits steering, and blockbusting.
Assignment
Substitution of a new party into an existing agreement. transfers all of the rights related to the contract to another party known as an assignee. The assignee assumes primary liability for performance under the contracts, and the assignor, unless released, remains secondarily liable.
Farm and Ranch Contract Improvements
The following permanently installed and built-in items, if any: windmills, tanks, barns, pens, fences, gates, sheds, outbuildings, and corrals.
The purpose and use of Paragraph 6-
The owner's Title policy being paid for by buyer or seller. The Title company has 20 days from when they receive the contract to furnish a commitment to buyer for Title Insurance. Objections, who will furnish the survey, the intended use of the property (residential use) and any membership in property associations.
Paragraph 5B - features, numbers of days
The receipt of which seller acknowledges, and buyer's agreement to pay the Option Fee within the time required, seller grants the right to the buyer the right to terminate this contract by given notice to seller within ____ days after the effective date.
foreclosure
The seizure of property from borrowers who are unable to repay their loans
Accessories in the real estate contract - definition, features, disposition
These things do not have to be permanently installed. All the items listed under this are conveyed to buyer as part of the property under the contract. If any: window AC unit, 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, security systems that are not fixtures, and controls for: (garage doors, entry gates, and other improvements and accessories)
Lender required repairs as addressed in the sales contract
Unless otherwise agreed in writing, neither party is obligated to pay for lender required repairs, which includes treatment for wood destroying insects. If the parties do not agree to pay, the contract is terminated and the buyer will be refunded the EMD. If the lender required repairs or treatments exceeds 5% of the sales price, the buyer may terminate contract and refunded EMD.
Unimproved Property Contract
Used for the sale of properties with no existing structure. This contract has no improvements, or accessories. No seller disclosure.
Short Sale
Used when the seller is unable to sell the property at or above what he/she owes the lender. The lender accepts insufficient proceeds to pay off the loan and releases the lien.
When does an offer become a contract?
When it is accepted and the acceptance is communicated.
Loan Assumption
When the buyer assumes and agrees to pay the seller's existing mortgage. A addendum is required to be filled out.
The T-47 affidavit
a document from a notary who saw the owner of the property sign this document. The owner is making a sworn statement. When using the seller's existing survey, the seller is given a number of days to deliver the survey and a _________________ to the Buyer and the title company.
Unenforceable Contract
a written or oral agreement that will not be enforced by courts
Requirements for buyer approval according to the TREC Third Party Financing Addendum
allows the buyer to terminate the transaction if the property doesn't meet the lender's underwriting requirements.
Paragraph 5 - features, numbers of days/time
delivery of earnest money and option fee; Termination option. Within 3 days the buyer must deliver the earnest money and option fee to title escrow.
Broker/seller commission agreements
fees are not set. They are found in a listing agreement. Fee sharing btw brokers will be sometimes found in MLS. A percentage of the final sales price.
TREC Form RSC‐2
this disclosure form is required to be provided if a license holder receives any form of compensation from a residential service company. That compensation can not be contingent upon a party to the real estate transaction purchasing a contract or services from the residential service company. The compensation is the fee for the services that Listing Broker or Other Broker, either directly or through an agent, provides to the company.
Imputed Notice
under this concept, an offer is presumed to have been delivered to the principal when it is delivered to the agent
Required use of TREC forms and exceptions to required use
when the licensee is acting as a principal and not as an agent. One of the exceptions for when a licensee must use a TREC-promulgated contract form is in transactions in which the licensee is functioning solely as a principal, not as an agent.