Law of Contracts
After a tenants moves out of their unit, the landlord has HOW MANY days to mail them their security deposit as per WHAT code?
30 days as per the Texas Property Code
In Texas, the statute of limitations for specific performance of a contract for the conveyance of real property is:
4 years
WHAT specifies that the buyer will make payments to the seller and defines the terms of the property's seller becoming the lender?
A Seller Financing Addendum
A general inspector will inspect WHAT but not WHAT?
A general inspector will inspect accessible systems but not anything buried or hidden.
A sale contract must include the minimum requirements for a valid contract as well as:
A legal property description
Assignment is described by which of the following:.
A party to a contract wants to withdraw without terminating the contract. They transfer their rights and duties to a third party.
A buyer decides to terminate the contract during his option period. He will submit the Termination of Contract notice to the seller and will be entitled to:
A refund of earnest money
A home mortgage is an example of:
A specific and voluntary lien. A mortgage lien is a specific lien because it attaches only to the property used as security.
Which of the following contracts has no legal effect?
A void contract
Though a title is not an actual document, it still signifies the:
Actual ownership of a property
When is a contract no longer executory?
After closing
Which of the following represents a contract that would be considered both executory and voidable?
Al and Sue entered into a contract when Sue was intoxicated. The contract will close in two weeks.
Which of the following statements is TRUE regarding encumbrances?
All liens are encumbrances.
leasehold estate
An interest a tenant holds in a rental property. The tenant has possession of the property for a limited period of time but does not have ownership.
What is a method of withdrawing from a contract without actually canceling it?
Assignment
Which of the following statements regarding mineral rights and surface rights is TRUE?
Between mineral estates and surface estates, mineral estate rights are dominant
What are the three parties to the deed of trust?
Borrower, lender and trustee
All of the following statements apply to express offer and acceptance EXCEPT:
Both parties agree to the offer but there will always be more price negotiations before the sale officially closes.
Six brokers, six lawyers, and one public member would complete the:
Broker-Lawyer committee
The buyer and seller closed on a property on June 17th. The tax bills will not come in until November. Who will receive and pay the taxes when the tax bill arrives?
Buyer
If TREC promulgates a form, agents must use that TREC form. Which of the following is NOT one of the many TREC-promulgated forms?
Buyer/Tenant Representation Agreement
When is the best time for your buyer-client to get quotes on insurance policies?
By the end of the option period
If a license holder put the client's earnest money into his/her own personal checking account he or she is guilty of:
Commingling
According to the TREC contracts, the title company (on behalf of the seller) will send what to the buyer within 20 days after they receive the signed contract?
Commitment for title insurance
To be enforceable in court, a sales contract must have:
Competent parties
What is essential for creating an express agency relationship?
Consent of both parties
A buyer's offer is returned with two changes made. The proposed contract is now a(n):
Counteroffer
When the buyer's agent receives a copy of the title commitment it is a good idea to check all of the following EXCEPT:
Credit scores
Condominium owners:
DO own the interior of a residential unit
Liens, easements, deed restrictions, and encroachments are all ways that WHAT can affect the use of real property?
Encumbrances
WHAT loan programs are great for first-time homebuyers because they offer loan programs that focus on low down payments?
Federal Housing Administration and Veterans Administration
Real estate sales agents may:
Fill in promulgated forms
Aviv and Gregory are friends who are also parties to a real estate sale. They agree over a sale price verbally because they trust each other. As per the Statute of Frauds, which of the following is TRUE regarding the enforceability of their contract?
For their contract to be enforceable, it must be in writing AND signed by the party being charged.
Which instrument of conveyance provides the owner with the greatest protection?
General warranty deed
Geri is about to sign a buyer/tenant representation agreement with a client. Which of the following is FALSE about Geri and Geri's agreement?
Geri's client can be a party to as many buyer/tenant representation agreements as they like.
Helder is a buyer who wants to breach his contract and back out of his sale contract. But he also doesn't want to lose money. Which of the following is most TRUE of Helder's situation?
Helder will forfeit his earnest money if he backs out.
There are a few special scenarios in which license holders are NOT required to use promulgated contracts. All of the following qualify as these special scenarios (and are therefore exempt from the need to use promulgated forms) EXCEPT:
If the contract is prepared by the license holder and all involved parties consent to use the contract.
It is possible for two people to accidentally create a contract by their actions. What kind of contract is this?
Implied contract
A buyer who needs to ensure they are able to sell their old home before committing to the purchase of a new home should:
Include the promulgated addendum with the contract
As a general rule, an oral sales contract involving the sale of real estate:
Is unenforceable
Which is NOT a benefit of recording the deed?
It provides proof that the mortgage was paid.
Jack and Jill own a property as tenants in common. Jack dies. What happens to Jack's interest in the estate?
Jack's interest will go to Jack's heirs.
Jeremy would like to move out of his parents house and rent an apartment. He is 17 years old and has sufficient savings to finance an apartment. Which of the following is TRUE?
Jeremy would NOT be considered a competent party to a lease because he is not at least 18 years old.
Four investors agree to co-ownership of an investment property. They have arranged the ownership structure so that if one of them dies, the decedent's ownership stake passes to the remaining investors. What form of co-ownership do the investors have?
Joint tenancy
Which of the following would not normally appear on the closing disclosure?
Moving costs
Which type of power of attorney is used for specific transactions?
Nondurable
Wes and Neil entered into an oral contract to sell a ranch. Neil agreed to pay $850,000 for the ranch. A week before the sale was to close, Neil changed his mind and rescinded the offer. What legal recourse does Wes have?
None, because the contract was not written.
Which of the following statements regarding agency agreements is TRUE?
Oral agreements are held to the same standards of agency relationships as written ones.
What does RESPA stand for?
Real Estate Settlement Procedures Act
An orange tree (which is not moveable and is something growing on the land in question) would be considered:
Real Property
Which of the following regarding personal and real property is TRUE?
Real property is land plus improvements on the land, so a house is an example of real property.
Jeffery is a seller who knows he needs to disclose a few concerning facts about his property. He should utilize a:
Seller's Disclosure Notice
Which of the following is TRUE about business entities that can hold real estate investments?
Sole proprietorships, partnerships, corporations, and S corps are ALL entities that CAN hold real estate investments.
Which legal concept places a limit on the amount of time that an individual has to take legal action against another individual in order to recover any losses or damages?
Statute of Limitations
A seller advertises a home's mortgage payments with the best possible terms. This violates:
TILA
Which of the following pieces of legislation do NOT affect the mortgage lending business?
TRELA
Protecting consumers of real estate services, enforcing the laws the legislature passed in the License Act, and ensuring the availability of capable and honest real estate service providers are all responsibilities of the:
Texas Real Estate Commission
The Texas State Legislature passed which of the following acts:
Texas Real Estate License Act
The legislation code that governs real estate licensing today and the activities of licensed agents in Texas is the:
Texas Real Estate License Act
Bianca, a buyer, defaults on her real estate contract so the seller, Simone, decides to forfeit the contract. What can Simone now do?
Texas contracts say the seller may accept the earnest money as liquidated damages, releasing everyone from the contract.
Which entity drafts and edits contract forms?
The Broker-Lawyer Committee
Who creates the various types of contracts, addenda, notices, and consumer disclosures (all of which are promulgated)?
The Broker-Lawyer Committee
The contract used for resale homes, NOT new constructions, is known as the:
The One to Four Family Residential Contract (Resale) is the contract used for resale homes
Which of the following regarding fiduciary duties and transactions with multiple principals is TRUE:
The agent owes fiduciary duties to only the principal they are representing.
foreclosure
The forced sale of a mortgaged property at a public auction
Audrey, a lessor, owns an apartment building. Unfortunately, she passes away unexpectedly. What happens to the leases of the 34 tenants in her building?
The leases remain in force.
How do lenders recover their money when borrowers do not pay their mortgage?
The lender can foreclose, take title to the property and resale it to recover as much money as possible.
Which of the following statements is TRUE if a license holder is acting solely as a principal and selling her own home?
The license holder can use the promulgated form, but it is not required.
A license holder may have his or her license suspended or revoked for all of the following EXCEPT:
The license holder fails to perform an unlawful act requested by a client
Which of the following is NOT a right that comes with the power of attorney?
The right to make personal investments with the principal's funds
What does it mean when a contract has lawful objective?
The subject of the contract adheres to all the necessary laws and regulations.
What does it mean when a party discharges a contract?
The terms and conditions of the contract have been fulfilled or cancelled.
A valid contract must be absent of duress. What is duress?
The unlawful effort (such as the making of threats of physical violence or other pressures) to coerce a party to perform an act.
What is one limiting factor put on urban homesteads and rural homesteads?
There are limitations on size.
Eduardo made several changes to his contract. WHAT are these changes called and WHO must receive a copy of them?
These changes are amendments and the title company must receive a copy of them.
What does the title company do with the earnest money check?
They deposit it into an escrow account.
Where do FHA and VA get money to loan?
They don't loan money
In which ownership structure does a group of people own a property together, with each receiving individual rights of possession during specific time periods?
Time-share
Who is responsible for writing commission checks to the brokers?
Title company
When a breach of contract occurs, the injured party has the right to force performance or sue for monetary damages, which include all of the following EXCEPT ______.
Transitional
Which one of the following is NOT a type of acceptance?
Uniform
What is a unilateral contract?
a contract in which one party (the offeror) makes a promise in exchange for a reciprocal act on the part of the second party (the offeree
What is an estate for years?
a leased possession of property for a certain, specific period of time
What is an exclusive right to sell listing?
a listing agreement that gives the broker the right to the commission no matter who sells the property
Which of the following is an example of an implied contract?
a person going to the doctor
Who is allowed to require that a promulgated form is used?
a property owner OR a government agency
A short sale is:
a real estate transaction in which the property is sold for less than the existing mortgage balance
A seller's homeowner's insurance policy is cancelled at the time of closing. They will receive WHAT after closing for the part of their premium that was paid in advance?
a refund check
In regard to contracts, which of the following BEST describes a performance agreement?
a requirement that the contracting parties either perform certain actions or uphold certain contractual promises
What is the statute of frauds?
a state law that requires certain types of contracts to be set out in writing and signed by all the parties bound by the contract
Requirements of a triple-net lease:
a tenant to pay rent, property taxes, insurance, and maintenance expenses
A sale and leaseback agreement is:
a way for landowners to free up capital while maintaining the same overhead expenses
What are addenda?
additional forms that need to be added to a contract in order to cover special circumstances related to the sale
Which of the following statements is TRUE regarding encumbrances?
all liens are encumbrances
For an amendment to a contract to be valid, who must sign the amendment?
all parties involved
A seller should counter, accept, and respond to offers on their property:
as they see fit because they are not required to respond
When a couple buys a coastal area property, they are cautioned that they may lose part of their land every year due to storms and the constant waves hitting the soil. The loss is called:
avulsion
Kirpa and Tim are a married couple. Tim separately owns a property that both him and Kirpa live on for many years. Who will likely need to sign the deed at closing to sever homestead rights?
both Kirpa and Tim
TREC promulgated contracts have built-in contingencies. Most of them allow the:
buyer to legally terminate the contract
Who is responsible for encouraging and setting up the appointment for a final walkthrough inspection with the buyer?
buyer's broker
Which of the following BEST describes joint tenancy?
co-ownership in which the parties have the right of survivorship; when one dies, the others receive that person's portion of the estate
What makes a contract legally binding, is defined as "something of value exchanged by the parties as evidence of agreement to the terms of a contract," and applies the legal philosophy that a person CANNOT do something of value without receiving something in turn?
consideration
novation
creating a new contract to replace an old contract and relieve the original party from liability
Lynn leases an apartment. She invites her mother and her friend, Gaby, over for dinner. Of the parties present, Lynn is responsible for:
damages caused by all parties present (Lynn, Lynn's mother, and Gaby)
With net leases, each added "net" requires a tenant to pay for an additional expense that may have otherwise fallen on the landlord. All of the following are expenses that could be paid under a net lease EXCEPT:
debt interest
When a buyer applies for a loan, the lender will consider factors such as credit, income, and what else?
debts
If a party fails to comply with the conditions of an agreement, they have done what in regard to the contract:
defaulted
An unenforceable contract is one that has (or had) the potential of being a valid contract, but its enforcement is (or was) barred by some attribute of the contract or a technicality of law. Which of the following is NOT a law that could make a contract unenforceable?
doctrine of ratification
If a buyer wants to show good faith, they can do it through presenting the seller with:
earnest money
What type of funds MUST be deposited by the second working day after the effective date of the contract?
earnest money
The government of Pleasantville is seizing land in order to widen several major streets in the city. They take the land without the property owners' consent. This is an example of:
eminent domain
Yamina is taking out a VA loan. She will NOT be permitted to pay:
escrow fees
A contract in which all material terms have been fulfilled by all parties is said to be:
executed
The Texas Deceptive Trade Practices Act (DTPA) protects consumers against:
false and misleading statements or deceptive practices, unconscionable (inexcusable, unforgivable) actions, and breaches of warranty
When using the contract forms promulgated by TREC, agents may only:
fill in the appropriate blanks in the form or add their business details
An intentional omission is:
fraud
A homeowner who has given notice of title by recording their property deed is protected against:
future claims of interest in their property
You are overseeing the sale of a property. Due to the location of the buyer and the seller, the contracts must be signed electronically. You feel:
good about the sale because electronic signatures are equally as valid as ink signatures
The leasing of bare, undeveloped land is carried out through a:
ground lease
The stipulations that there must be an offer and acceptance, that a contract must not contain any form of fraud, misrepresentation, or duress, and that there cannot be mistakes in the terms and conditions of a contract are all:
hallmarks of voidable contractshallmarks of mutual consent
Substantial performance
hen a party performs the majority of the contract's requirements, but does not perform according to the contract's stipulations
One of the most common examples of a judicial foreclosure is a:
homeowners association foreclosure
Majority laws protect minors from entering into agreements that they may not have the experience or knowledge to understand. This means that:
if anyone under the age of 18 enters into a contract, the contract is considered voidable at the option of the minor but NOT the other party
A title premium is only charged once, is paid at closing, and is paid:
in full upfront
Which type of lease allows for a periodic rent increases relative to some economic indicator?
index lease
Implied contracts
inferred from the actions of various parties, but are not necessarily written or spoken
What gives the buyer the right to get a home inspected and negotiate further if there are repair issues?
inspection contingency
TREC is the governing body for all of the following real estate professionals in the state of Texas EXCEPT:
insurance brokers
The statute of frauds requires contracts to be in writing in certain, specific scenarios. All of the following scenarios ALWAYS require written contracts EXCEPT scenarios that:
involve terms that extend for LESS than a period of one year
What does the Environmental Assessment, Threatened or Endangered Species, and Wetlands Addendum do?
it makes the contract contingent on the buyer obtaining certain acceptable environment inspections
What is a statutory law?
laws formally created by legislatures
Oprah lives in an apartment building. She is renting her unit from landlord Eric. Which BEST describes the ownership interest of Oprah?
leasehold estate
Promissory estoppel
legal doctrine that forces a party to keep a promise and prevents a party from backing out of an agreement
Promissory estoppel is a(n):
legal doctrine that forces a party to keep a promise and prevents a party from backing out of an agreement
The Seller Financing Addendum allows the seller to become the:
lender
What is a net listing?
listing agreement in which the broker's commission is determined by the difference between the seller's expected sale price and the actual sale price
Earnest money
money the buyer offers to deposit towards the purchase price of the property in order to show their serious intentions to the seller
Which of the following is an example of a lien?
mortgage
Commercial properties most commonly utilize which type of lease?
net lease
A quitclaim deed carries:
no covenants, guarantees, or warranties
When there is a breach of contract, the non-breaching party has the right to do all of the following EXCEPT:
nothing (the non-breaching party has no right to take any action)
Which of the following creates mutual consent?
offer and acceptance
When dealing with contracts, which of the following best describes assignment?
one party to a contract relinquishes the responsibilities and benefits of a contract to another party who takes their place
WHAT must be delivered to the seller or the seller's agent within three days after the effective date of the contract?
option fee
Offeror
person proposing the contract
License suspension or revocation, fines, and further education requirements are all:
possible penalties TREC may impose for violating the License Act
In a real estate transaction, the seller knows they must provide a commitment for title insurance. The buyer and the seller know they can back out of the contract if the other party does not fulfill their obligations by the closing date. What outlines these rights and obligations?
pre-ordained contingencies in the One to Four Family Residential Contract
Savings and loan associations, commercial banks, and savings banks are all:
primary lenders
ONLY a broker can enter into an agency relationship with a(n):
principal (who may be a seller, buyer, landlord, or tenant)
When it comes to explaining contracts, agents should NOT:
provide legal advice
The Non-Realty Items Addendum is used to provide the parties to a contract a place to negotiate and agree to non-real estate items that may be:
purchased separately from the property
For Sale by Owner properties are exempt from Fair Housing discrimination laws under certain circumstances EXCEPT:
race, color, or national origin
When a party performs their obligation to a contract that they could have rescinded (i.e. if they entered into a contract underage or incapacitated but later chose to perform their obligation to the contract), this is known as a:
ratified contract
Land and everything growing on it or attached to it including, sheds, buildings, trees, and crops are identified as:
real estate and real property
The surface of land, all things below the surface of the land, and things growing on the land are all considered:
real property
A buyer and seller are parties to a sales contract. The buyer makes several payments before the seller rescinds the contract. The seller must:
return all payments they have received from the buyer
What are riparian rights?
rights that govern the use of flowing water, such as rivers, streams, and creeks that pass through or border a property
riparian rights
rights that govern the use of flowing water, such as rivers, streams, and creeks that pass through or border a property
Fannie Mae and Freddie Mac participate in which of the following?
secondary mortgage market
Real estate loans are bought and sold on the:
secondary mortgage market
WHAT enables the lender to seize the property if the borrower defaults on making payments?
security interest
Seller's Disclosure Notice
serves to allow sellers to disclose all items the Texas Property Code requires to be disclosed
The statute of frauds is a state law that requires certain types of contracts to be:
set out in writing and signed by all the parties bound by the contract
The Fair Housing Act protects everyone on the basis of race, sex, color, national origin, familial status, religion, or disability. The National Association of REALTORS® goes further and also protects on the basis of:
sexual orientation
The One to Four Contract would be used in the sale of a:
single family home
An agent's priority when making a transaction checklist is to make sure it aligns with their:
sponsoring broker's agency policies
The SAFE Mortgage Licensing Act requires a WHAT of MLOs?
state (Texas) and national mortgage license
The requirement for certain contracts be in writing and signed by all of the parties to the contract is included in the:
statute of frauds
Emanuel is selling his home. When his listing agent presents offers to him, Emanuel cannot:
sue the agent if the offer is far below the asking price
What results in a court order that requires one party to carry out the promises stipulated in the contract?
suing for specific performance
Sellers utilizing the Seller Financing Addendum and acting as a lender should:
take the precautions a lender does when an institutional loan is made, such as asking for a buyer's credit report
Which of the following about tax lien priority is TRUE?
tax liens take priority over non-tax liens
If the court issues a protective order due to domestic violence or abuse, the Texas Property Code gives a tenant the right to:
terminate their lease
A breach of contract occurs when:
terms or conditions of a contract are violated and a party does not perform
Sharkari owes $23,000 on a first lien mortgage and $13,000 on a second lien recorded just a few weeks ago. Her property goes into foreclosure. Which sum will be paid off first?
the $23,000 because it was recorded first
A financing contingency clause requires that:
the buyer get approved for a loan before being able to complete the purchase of a home
The Addendum for Sale of Other Property by Buyer is the form to use if:
the buyer is unable to buy a new property unless their existing property is sold and closed
In the event that the buyer cannot secure financing, a financing contingency allows:
the buyer to back out of the home purchase and reclaim their earnest money
Real Property
the land plus improvements on the land (including what's growing on the land)
What is option money or the option fee?
the money a buyer pays a seller for unrestricted rights to terminate the sales contract within a specified amount of days after the effective date
In the real estate industry, the license holder generally has special agency with the principal. A special agent has:
the most limited authority of any type of agent
Who owns the water beneath a property?
the owners of the land above it
What is eminent domain?
the power of the state to seize a citizen's private property or rights in a property WITH compensation but without the consent of the owner
What might express agency look like?
the principal appointing the broker, and then the broker accepting that appointment either in writing or orally
Regarding buyer and seller credits and debits, a seller is charged for taxes from January 1st through closing. WHO pays for the actual day of closing?
the seller
During a contract for deed:
the seller holds the legal title to the property and the buyer is entitled to possession and equitable title to the property
Jose needs third-party financing, so he knows he will need to fill out the Third Party Financing Addendum. Jose's agent knows this addendum will address:
the six types of third-party financing
Clarence is an agent and writes "time is of the essence" 6 times in a contract, including it in various clauses, to ensure a deadline is met. He believes this to be especially important, as he is working with a particularly slow client. Which of the following is TRUE about Clarence?
the way Clarence utilized "time is of the essence" would be considered unauthorized practice of law
A license holder cannot legally do anything regarding real estate for a commission or a fee if:
their license is suspended
A license holder can have their license suspended or revoked if:
they failed to use a contract form required by TREC
Deeds, marriages and divorces, liens, and owners of record are a few of the things an examiner at a title company will look at to issue a:
title commitment
An offer that does not describe the method and terms of financing but does state the price is:
valid
A seller's inability to provide good title or a buyer's inability to obtain financing are both:
valid reasons for canceling a contract
In which type of lease does the base rent change?
variable
What is implied agency?
when a party assumes consent to the relationship based solely upon inferences formed by the actions, conduct, and words of either or both parties.
Adverse possession is:
when a person develops legitimate ownership interests in another person's property through an openly hostile and continuous occupation of the land
When does assignment occur?
when one or more of the parties involved in a contract want to withdraw from it without actually terminating the contract
