Law of Contracts
What is the minimum age for lease participants? a. 18 b. 21 c. 16 d. 25
a. The minimum age for lease participants is 18 years old
What is the very best proof of ownership property? a. General warranty deed b. Deed of trust c. Note d. Quit claim deed
a. The most common type of deed is a general warranty deed which shows that the grantor transferred clear title to the current owner. A quitclaim deed also proves the existence of land ownership, but the current owner may only possess a limited form of ownership in the property. When an individual uses a quitclaim deed to transfer the property, the new owner only receives whatever interest the prior owner had in the property.
What is the very best proof of ownership of property? a. General warranty deed b. Deed of trust c. Note d. Quit claim deed
a. The most common type of deed is a general warranty deed, which shows the grantor transferred clear title to the current owner. A quitclaim deed also proves the existence of land ownership, but the current owner may only possess a limited form of ownership in the property. When an individual uses a quitclaim deed to transfer property, the new owner only receives whatever interest the prior owner had in the property.
What does the title company do after the buyer completes the loan application for his financing? a. They cannot do anything until the buyer gets loan approval b. They gather items for closing like the survey, insurance policies, tax information and payoffs on any seller loans c. They prepare closing documents and wait for lender approval d. Nothing
b. During the time that a buyer's loan is in processing, the title company is accumulating all of the things they will need for closing: - Tax information - Payoffs on any loans the seller has against the property - Obtaining a survey - Etc.
Who holds the legal title to a property during a contract for deed? a. The seller b. The buyer c. The tenant d. The bank
a. A contract for deed is an agreement between a buyer and a seller that allows the buyer to purchase a property over a period of time. Once the buyer has paid the seller the remainder of the balance, the seller must transfer the title to the property to the buyer.
A licensed salesperson acts as the principal's agent on behalf of the __________. a. Broker b. Principal c. Customer d. State
a. A licensed salesperson functions as the general agent of their supervising broker and acts as the principal's agent on behalf of the broker. In everyday language, most people refer to the salesperson as an agent.
A contract entered into based on a misrepresentation is _____________. a. Voidable by the aggrieved party b. Void between the parties c. Voidable by either party d. A valid enforceable contract
a. A voidable contract has all of the essential elements of a legally enforceable contract, but one or more of the parties has the authority to rescind the contract. Usually, in a voidable contract, one party is either mentally incompetent or a minor or the contract involves fraud or duress
John is under contract for a property out in the country. He has a 10-day option period. He wants to get an inspection on the septic tank and when he tried to schedule it he found it was going to take them 3 weeks to get out there. How can John's agent assist him? a. Prepare an Amendment of Contract changing the number of option days. Get it signed by John and deliver it and a check for the additional option fee to the seller's agent for signature b. Just change the option days on the original contract form and get both parties to initial c. Just call the seller's agent and keep them informed d. Have John write a letter asking the seller for more option time
a. An Amendment changes or makes modifications to an agreed upon contract. All parties must sign amendments. After a contract has been fully accepted and agreed upon, the original document should never be changed
What is essential for creating an agency relationship? a. Consent of both parties b. Consent of the agent c. Consent of the client d. Consent of the Comission
a. Both parties must consent to enter into an agency relationship
What can a party do if they want to withdraw from a contract without terminating the agreement? a. Transfer their rights and duties to a third party b. Rescind the contract c. Void the contract d. Fulfill the terms of the contract
a. If a party wants to withdraw from a contract without actually cancelling the contract, they have two options: 1. Assignment. - allows the party to transfer their rights/obligations to a third party 2. Novation - allows the party to create a new contract and replace the existing contract
It is possible for two people to accidently create a contract by their actions. What kind of contract is this? a. Implied contract b. Express contract c. Agency contract d. Personal contract
a. Implied contracts are inferred from the actions of various parties but are not necessarily written or spoken. Even though these contracts are established by the parties' conduct rather than a written document or an explicit discussion, they can have all of the legally binding power of more explicit contracts
The listing agreement between the broker and the seller creates which type of agency? a. Special b. General c. Implied d. None of the above
a. In the real estate industry, the licensee generally has a relationship of special agency with the principal
To what does "bounds" refer? a. The direction of the boundaries that encompass a property b. The distance measurements used in the legal description c. The perimeter of a property d. The latitude and longitude system of mapping
a. Metes refers to. the distance measurements used in the description and bounds refers to the directions of the boundaries that enclose the parcel of real estate
Which type of agency agreement involves the principal appointing the agent and agent accepting? a. Express b. Implied c. Ratified d. General
a. Most agency relationships are formed by express agreement where a principal appoint an agent and the agent accepts.
Contracts for the sale of real estate are covered by the Statute of Frauds. What is required in order for the contract to be enforceable by a court of law? a. The contract must be in writing and signed by the party to be charged b. There must be no fraud involved c. There must be money involved d. The contract must be reviewed by both parties' attorneys
a. Real estate contracts must be in writing and signed by all contracting parties
What is the makeup of the Broker-Lawyer Committee? a. Six brokers, six lawyers and one public member b. 13 brokers c. 12 lawyers and one public member d. Six brokers and seven lawyers
a. The Broker-Lawyer Committee is comprised of 13 members: - 6 brokers - 6 lawyers - 1 public member The 13th member is a public member meaning not a lawyer, broker or real estate licensee
When can earnest money be deposited? a. Once the offer has been accepted and notification has been given b. Once the offer has been made c. At any time d. Earnest money can never be deposited
a. The earnest money can be deposited once the offer has been accepted and notification has been given
The term "condemnation" is used to describe the formal act of the exercise of the ________. a. Power of eminent domain to transfer title to the property from its private owner to the government for public use b. Police power to transfer title to the property by escheat c. The power of the city to raise the taxes d. The power of the state to use descent and distribution
a. The term "condemnation" is used to describe the formal act of the exercise of the power of eminent domain to transfer title to the property from its private owner to the government
Which of the following is the MOST essential element for an enforceable real estate purchase contract? a. Contract is in writing b. Contract was witnessed c. Date of contract was included d. Time of closing was included
a. To be enforceable, a real estate contract must be in writing
Under the Uniform Commercial Code, all sales over what amount must be in writing? a. $500 b. $1,000 c. $2,000 d. $5,000
a. The Uniform Commercial Code as adopted in the United States requires a written contract for tangible product sales in excess of $500 and real estate contracts are required to be written. If the contract is not required by law to be written, an oral contract is valid and therefore legally binding.
A verbal contract is also known as a(n) ___________. a. Oral contract b. Written contract c. Implied contract d. Oral and written contract
a. >> d. Oftentimes, oral contracts are called verbal contracts in everyday speech. The term "verbal" simply means "IN WORDS". This would make all contracts verbal contracts, regardless of whether they are written or spoken
What is the difference between an implied contract and an express contract? a. In an implied contract, the parties explicitly state the terms and conditions of their agreement, whereas in an express contract, they do not b. In an express contract, the parties explicitly state the terms and conditions of the agreement, whereas in an implied contract, they do not c. In an implied contract, there is no consideration whereas in an express contract, there is d. In an express contract, there is no consideration whereas in an implied contract, there is
b. In an express contract, the parties explicitly state the terms and conditions of the agreement whereas in an implied contract, they do not
Which of the following statements is TRUE about agency agreements? a. Oral agreements are not held to the same rules of agency relationships as written ones b. Oral agreements are held to the same rules of agency relationships as written ones c. An agency agreement must be in writing to be valid d. An oral agreement is the safest way to outline the expectations and obligations of the parties involved
b. Oral agreements are held to the same rules of agency relationships as written ones. However, written agreements are generally considered the safest way to outline the expectations and obligations of the parties involved
Which of the following is NOT a right that comes with the power of attorney? a. The right to buy/sell real estate b. The right to make personal investments with the principal's funds c. The right to manage the principal's properties d. The right to conduct the principal's baking transactions
b. The power of attorney may give the attorney-in-fact the power to: - Buy/sell real estate - Manage the principal's properties - Conduct the principal's banking transactions - Invest the principal's money - Make legal claims - Conduct litigation - Give gifts on the principal's behalf
The recorded plat system is also known as _____________. a. Metes and bounds b. The lot-block-tract system c. The government survey d. The US public lands survey
b. The recorded plat system of land description is also known as the: - Lot-block-tract system - Reordered survey - Recorded map method It uses the metes and bounds method of land description to locate the borders of each parcel
If a homeowner sells his home, he is said to be separated from his home by ___________. a. Involuntary alienation b. Voluntary alienation c. Deed d. Trust
b. Voluntary alienation of property happens when the current owner gives up title to the property by deed, will or descent. Descent is the way property is disposed of if the owner dies without a will. Voluntary alienation may also occur by dedication or will.
Who is responsible for encouraging and setting up the appointment for a final walk through inspection for the buyer? a. Seller b. Buyer c. Buyer's sales agent d. Buyer's broker
b. --> c. The buyer's agent schedules the final walk through inspection with the buyer
Which law requires a lender to give a buyer a "good faith estimate" of closing costs? a. The Fair Housing Act b. TIL c. RESPA d. Doctrine of Estimates
b. --> c. One important part of RESPA is that it requires lenders to provide a "good faith estimate" of the likely closing costs that will be required on a mortgage loan
Actual ownership of a property is called a. Deed b. Mortgage c. Title d. Trust
c.
What are the five elements of a legally valid contract? a. Legally competent parties, mutual assent, lawful consideration, down payment and adherence to the statute of frauds b. Legally competent parties, mutual assent, lawful objective, down payment and adherence to the statute of frauds c. Legally competent parties, mutual assent, lawful objective, consideration and adherence to the statute of frauds d. Legally competent parties, lawful objective, consideration, down payment and adherence to statute of frauds
c. The five elements of a legally valid contract are: 1. Legally competent parties 2. Mutual assent 3. Lawful objective 4. Consideration 5. Adherence to the statute of frauds
Which entity drafts and edits contract forms? a. The Texas Real Estate Commission b. The Texas Association of REALTORS c. The Broker-Lawyer Committee d. The Texas Property Code
c. A sub-committee of TREC is the Broker-Lawyer Committee which drafts and edits TREC forms. TREC approves and promulgates the forms
Which one of the following is NOT a type of acceptance? a. Express b. Implied c. Uniform d. Conditional
c. Acceptance shows that the parties agree to the contract and are willing and able to perform the contract. There are three types of offers and acceptance: express, implied and conditional
After closing takes place, the title company will record the Deed by sending it to the ________ along with the recording fee. a. State Capital b. City Offices c. County Clerk's Office d. School District Office
c. After closing takes place, the title company will record the deed by sending it to the county clerk's office along with the recording fee
When does contract performance occur? a. The parties default on the terms of their agreement b. The parties rescind their agreement c. The parties carry out the terms of their agreement d. The parties void their agreement
c. Contract performance occurs when both parties have carried out the terms of the agreement
If two 21-year-old parties have an accepted offer for a meth lab, will it be a valid contract? Why? a. No, because the parties are not of legal age b. Yes c. No, because the contract does not have a legal object d. Yes, because it meets the essential elements
c. Lawful objective means the contract cannot call for any illegal activities. When a contract contains lawful objective, it takes all necessary laws and statutes into consideration
Under which type of lease will the tenant pay a base rent amount and a percentage of their business profits to the landlord? a. Gross lease b. Ground lease c. Percentage lease d. Variable lease
c. Percentage leases are usually used for commercial lease agreements. In this type of lese, the tenant pays a base rent amount and a percentage of their business profits to the landlord
Another name for personal property is ___________. a. Characteristics b. Cooperatives c. Chattel d. Conveyance
c. Personal property includes objects that can be moved such as couches, tables and clothing. Personal property is sometimes also called "personalty" or "chattels"
A sale contract must include the minimum requirements for a valid contract as well as _________. a. An income statement b. An appraisal c. A legal property description d. A comparative market analysis
c. Real estate contracts must have a legal property description because courts will use this information to determine whether the subject property can be identified with reasonable certainty
The printed matter in a sales contract usually includes some mention or reference to all these elements EXCEPT: a. Evidence of title b. Assessment or liens c. Proration of taxes d. Amount of discount points
d. A sales contract usually does not mention discount points
What licensing is required for mortgage lenders in Texas? a. State mortgage license b. National mortgage license c. No mortgage license d. Both a Texas and national mortgage license
d. Both a Texas and a national mortgage license is required for mortgage lenders in Texas
Which of the following grounds may a licensee have their license suspended/revoked? a. The licensee has failed to make a good check issued to the commission b. The licensee acts negligently or incompetently c. The licensee makes a false promise that is likely to influence a person to enter into an agreement d. all of the above
d. Grounds for licenses suspension or revocation include failing to make a good check issued to the commission, acting negligently or incompetently and making a false promise that is likely to influence a person to enter into an agreement
Frank is writing an offer on a property that was built in 1969. Is there anything special Frank needs to attach to the contract? a. Yes, the TREC approved Lead Based Paint Addendum b. Yes, the TAR provided Lead Based Paint Addendum c. Yes, the Lead Based Paint Addendum created for his Broker by an attorney d. Any of the above are acceptable
d. If the property was built before 1978, a Lead Based Paint Addendum should be attached to the contract. That addendum informs the buyer that they can take up to 10 days to inspect the property for lead
It is not the unauthorized practice of law if the form is ____________. a. Adopted by the commission for the type of transaction for which the form is used b. Prepared by an attorney licensed in this state and approved by the attorney for the type of transaction for which the form is used c. Prepared by the property owner or by an attorney and required by the property owner d. All of the above
d. Real estate licensees are able to complete (fill in the blanks of) real estate contracts promulgated by TREC, but they are not able to create and draw up contracts that transfer real property ownership or provide legal advice to clients
Which of the following statements about TREC contracts is NOT true? a. There are difference TREC contracts for difference purposes. 6 b. TREC contracts must be in writing c. TREC contracts must identify the subject property d. TREC contracts must identify comparable properties
d. TREC contracts don't have to identify comparable properties
Which of the following TREC forms create a contingency? a. The Short Sale Addendum b. The Sale of Other Property Addendum c. The Back-Up Addendum d. All of the above three addenda create contingencies
d. The Short Sale Addendum, Sale of Other Property Addendum and the Back-Up Addendum create contingencies
The Statute of Frauds is a law that ____________. a. Holds people responsible if they do not disclose things about the property b. Makes a contract void c. Makes a contract unenforceable d. Says real estate contracts must be in writing and signed by the person to be charged to be enforceable
d. The Statute of Frauds is a law that says real estate contracts must be in writing and signed by the person to be charged to be enforceable
The Statute of Frauds is a law that _____________. a. Holds people responsible if they do not disclose things about the property b. Makes a contract void c. Makes a contract unenforceable d. Says real estate contracts must be in writing and signed by the person to be charged to be enforceable
d. The Statute of Frauds states that real estate contracts must be in writing and signed by the person to be charged to be enforceable
Who is responsible for writing commission checks to the brokers? a. Seller b. Buyer c. Buyer's agent d. Title company
d. The title company pays all the bills including the funds to the seller and the commission checks to the brokers.
Which of the following statements is TRUE if a licensee's license is suspended? a. The licensee cannot take listings b. The licensee cannot represent buyers c. The licensee cannot get paid d. The licensee cannot legally do anything regarding real estate for a commission or a fee
d. When the Commission suspends an agent's license, this means that for a period of time, the license is ineffective
Don owned a separate property when he married Barbara. They moved into Don's home and lived there for five years. Now they are selling the property and the title company wants Barbara to sign the deed. Barbara does not have ownership interest. Why must she sign the deed? a. The title company is in error b. Barbara has homestead rights that must be terminated c. The title company wants to be sure Barbara's rights are taken care of d. Texas is a community property state
d. >> b. When a married couple both occupy a property that is separate property, the non-owner acquires homestead rights. Chances are the non-owner will be required to sign the deed at closing to sever the homestead rights. Signing the listing agreement acknowledges consent of both parties
If the buyer wants to make the contract contingent upon their ability to have environmental inspections of the property, the correct way to do that is ______________. a. Write the contingency in special provisions b. Have a verbal agreement with the seller c. Attach the Environmental Assessment, Threatened or Endangered Species and Wetlands Addendum to the offer d. The contract gives the buyer permission. No contingency is needed.
c. The Environmental Assessment Addendum, Threatened or Endangered Species and Wetlands Addendum say that with a certain number of days the buyer may terminate the contract by furnishing the seller with a copy of the report that adversely affects the use of the property and a notice of termination of the contract
Which practice will likely result in a license suspension or other disciplinary action? a. Representing two clients at the same time b. Depositing earnest money in to an escrow account c. Mixing a client's money with the broker's money d. Designating a salesperson to represent a client
c. The commission may suspend or revoke a license issued or take other disciplinary action authorized if the license holder, while acting as a broker or salesperson fails within a reasonable time to properly account for or remit money that is received by the license holder and that belongs to another person or commingles money that belongs to another person with the license holder's own money
The document the borrower signs that is a promise to pay is called the _________. a. Mortgage b. Deed of trust c. Note d. Conveyance
c. The document the borrower signs that is a promise to pay is called the note
The document the borrower signs that is a promise to pay is called the ______________. a. Mortgage b. Deed of trust c. Note d. Conveyance
c. The promissory note is simply the promise to pay. It tells how much to pay, when to pay and where to pay in addition to the interest rate being paid. The note is not a recorded document
Bob bought a home while he was single. He lived there two years before he met and married Susan. The property is Bob's separate property. Susan and Bob have lived in the property, in Texas, for several more years. Now they are selling the property. Who will probably be required to sign the deed at closing? a. Only Bob b. Only Mary c. Both Bob and Mary d. Neither
c. When a married couple both occupy a property that is separate property, the non-owner acquires homestead rights. Chances are the non-owner will be required to sign the deed at closing to sever the homestead rights. Signing the listing agreement acknowledges consent of both parties.
If the sales contract says the purchaser will get possession at closing and funding, when will the purchaser get the keys? a. Before the walk through inspection b. At closing c. At funding d. Two days after funding
c. When a sales contract indicates that possession will be at closing and funding, that is when the buyer gets the keys and can begin to move in. When it funds, it is fully executed.
Actual ownership of a property is called ______. a. Deed b. Mortgage c. Title d. Trust
c. Title to real estate means the right to or ownership of land. It represents the owner's bundle of legal rights
What is parol evidence? a. Information outside of the written contract b. Proof of the parties' written agreement c. Proof of an express contract d. Proof of a void contract
c. --> a. Parol literally means "word of mouth" Parol evidence then, is any evidence a party seeks to place before the court that is outside the "four corners" of the written contract
Four men want to buy a property together as an investment property and set it up so if one of them dies, their portion automatically goes to the other three. What type of ownership do they want? a. Community property b. Joint tenancy c. Tenants in common d. Sole ownership
c. --> b. When one joint tenant dies, their interest automatically vests in the surviving joint tenant(s) by operation of law
If a buyer has given the seller earnest money, they will not receive a credit until ______________. a. The seller deposits the earnest money b. The closing of the sale c. The offer has been accepted d. The contract has been signed
c. >> b. If a buyer has given the seller earnest money, they will not receive a credit until the closing of the sale