Promulgated Forms
43. Loan origination vs assumption - page 41
Loan Origination- Loan origination is the process by which a borrower applies for a new loan, and a lender processes that application. Origination generally includes all the steps from taking a loan application up to disbursal of funds (or declining the application). For mortgages, there is a specific mortgage origination process. Loan Assumption- A loan assumption occurs when a buyer assumes and agrees to pay the seller's existing mortgage. No new loan is needed because the buyer has enough cash to cover the seller's equity and assume the existing loan. In effect, instead of paying off the old loan, the buyer simply took over the payments and agreed to pay the seller's old loan.
26. Features of the Lead Based Paint disclosure form - page 71
PARAGRAPH A. LEAD WARNING STATEMENT PARAGRAPH B. SELLER'S DISCLOSURE PARAGRAPH C. BUYER'S RIGHTS PARAGRAPH D. BUYER'S ACKNOWLEDGMENT PARAGRAPH E. BROKER'S ACKNOWLEDGMENT PARAGRAPH F. CERTIFICATION OF ACCURACY QUESTION 20
50. Possible responses or actions upon the receipt of an offer - page 27
1. Do nothing - An offeree is under no legal obligation to respond to any offer. Doing nothing is obviously a less than desirable response but is an option nonetheless. 2. Reject - An offer may be rejected without explanation or comment. This is also a less than desirable response because it does not invite further negotiations. A variation is the "reject with invitation to resubmit," where the offeree rejects the offer but provides suggestions to the offeror that might be acceptable to the offeree. 3. Accept - Acceptance of a contract must include full acceptance of the entire offer without change. Any change, no matter how minor, becomes a counteroffer. 4. Counteroffer - A counteroffer is made when a party changes an offer in some way and communicates the change to the other party. The counteroffer is actually a two-step process: the rejection of the original offer coupled with a new offer
21. TREC Form RSC-2 - purpose and use requirements - page 73
A license holder must use TREC Form RSC-2, Disclosure of Relationship with Residential Service Company, to disclose to a party to a real estate transaction in which the license holder represents one or both of the parties any payments received for services provided for or on behalf of a residential service company licensed under Texas Occupations Code Chapter 1303. Be aware that this disclosure applies to the entire brokerage firm. Brokers should advise all license holders in the firm of any compensation being received from a residential service company and the work that is being performed. A broker or sales agent is often paid a fee for providing advertising and other services on behalf of a residential service company that are separate and apart from the typical services they provide as an agent in a real estate transaction. A license holder is not required to use the form if a residential service company is not paying the license holder a fee. However, if the license holder or the sponsoring broker is paid for advertising services unrelated to any one transaction, the license holder must disclose such payments to the client. For example, if a brokerage firm is paid $100 per month for advertising, the agent must disclose that payment in any transactions in which the license holder acted as an agent in the payment period. The disclosure form should not be attached to the contract as an addendum, but the form should be retained in the transaction records maintained by the broker as evidence that the disclosure was provided.
24. Loan assumption - features and requirements - page 42
A loan assumption occurs when a buyer assumes and agrees to pay the seller's existing mortgage Seller's liability. The seller, who is the original borrower on the loan assumed may continue to be liable, along with the buyer. Time to process. Processing loan assumptions is not a core business activity of lenders. The assumption department may be overworked and understaffed, resulting in processing times that can run 75-90 days. When a purchaser assumes an existing mortgage, the original borrower is not necessarily released from on-going liability for repayment. If the seller does not receive a release of liability, the buyer assuming the loan "joins the original borrower" on the note, leaving both with liability for repayment of the loan. If this is the case, the seller could be liable for repayment of the loan if the purchaser defaults. The TREC Promulgated form, Release of Liability on Assumption of FHA, VA or Conventional Loan (TREC No. 12-2) is used to make a contract contingent on the lender releasing the seller upon the assumption by the buyer. When negotiating an assumption, a license holder representing the seller would be wise to suggest that the contract include the release contingency.
4. The purpose and use of Paragraph 6 - page 57
A new survey is to be obtained at Seller's expense Either a new or existing survey can be used. If a new survey is to be obtained, the license holder must be aware of the lead time for ordering one in their market. In most urban areas, a survey can be obtained in a few days. In many rural markets, it might take several weeks. If Seller has an existing survey that is to be used, the survey must be acceptable to the title company and Buyer's lender. If the survey is unacceptable to either the lender or the title company, a new survey will be obtained either at Seller's or Buyer's expense If using Seller's existing survey, one possible issue is that the Seller's survey WAS NOT done for Buyer, and while Buyer may rely on the survey, Buyer did not purchase it, nor did Buyer hire the surveyor. Buyer may have no cause of action against the surveyor in the event the survey is incorrect
6. Stigmatized properties - causes and/or features - page 234
A property where there has been a murder or alleged haunting is stigmatized. A property can be considered stigmatized if it is in the vicinity of the residence of a known sexual offender. Megan's Law is a federal law requiring all states to release information to the public about known convicted sex offenders, when necessary, to protect the public's safety. Megan Kanka was a 7-yearold girl who was murdered on July 29, 1994, in New Jersey. The law was created in response to her death. License holders are not required to disclose the information but should refer buyers to local information sources if buyers ask about this.
39. Accessories in the real estate contract - definition, features, disposition - page 36
Accessories- The following described related accessories, if any: window air conditioning units, 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: (i) garage doors, (ii) entry gates, and (iii) other improvements and accessories. "Controls" includes Seller's transferable rights to the (i) software and applications used to access and control improvements or accessories, and (ii) hardware used solely to control improvements or accessories PARAGRAPH 2.(C) Describes accessories, which, while not necessarily permanently installed or built-in, are commonly conveyed to the buyer in the sale
17. When does an offer become a contract - page 28
An offer becomes a binding contract when all parties sign it, and the acceptance is communicated to the offering party. Communication is also referred to as notification.
53. Common amendments to the original contract - page 14
As a transaction progresses, amendments to the original contract may be needed. Common amendments include: • 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
16. Requirements of a valid contract - page 11
Five essential elements must exist for a contract to be considered valid and enforceable. They are: 1. Competent parties 2. Offer and acceptance (mutual consent) 3. Legal purpose 4. In writing (when required by law) 5. Consideration
32. Requirements of a valid option - page 54
For a valid option to exist, the following are required: 1. The applicable blanks in Paragraphs 5.A. and 5.B. must be filled in. 2. The option fee must be paid within three days after the effective date of the contract. 3. Buyer must deliver the option fee to the escrow agent. The option fee is applied to the sales price at closing.
52. Features of the option fee vs the earnest money deposit - page 54
If Buyer chooses to terminate under the option, they will receive a refund of earnest money, but will not receive a refund of the option fee. 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 option fee- The option fee must be paid within three days after the effective date of the contract. Buyer must deliver the option fee to the escrow agent. The option fee is applied to the sales price at closing
38. The broker's responsibility in handling multiple offers on a single property - page 28
If a broker receives more than one offer, all offers must be presented to the seller unless instructed otherwise by the seller. No offer has a priority of presentation over another. The broker should submit all offers promptly. For example, if a license holder receives an offer at 9 a.m. and presents it to the seller and then receives a second offer at 3 p.m. (before the seller has accepted the first offer), the license holder has the duty to submit the later offer to the seller. In the same example, if the agent representing the second buyer is aware that multiple offers have been received, the listing agent should notify the agent representing the first buyer that multiple offers have been received. The same would be true regardless of the number of offers.
2. TREC contract forms and their uses - page 24
If the license holder properly uses TREC-promulgated forms, the unlawful practice of law issue is more easily avoided. The use of a form by license holders, which was prepared and approved by a licensed Texas attorney for the particular transaction involved or a form prepared by the property owner or prepared by an attorney and required by the property owner, is also authorized. 1. One-to-Four Family Contract (Resale) 2. New Home Contract (Incomplete Construction) 3. New Home Contract (Completed Construction) 4. Unimproved Property Contract 5. Residential Condominium Contract (Resale) 6. Farm and Ranch Contract
11. Closing costs or settlement expenses - page 85
PARAGRAPH 12. SETTLEMENT AND OTHER EXPENSES: Buyer's and Seller's expenses and settlement costs are stated. Even though printed in the form to be paid by one party or the other, they are negotiable PARAGRAPH 12.A(1)(a): Shows the typical seller's expenses at or prior to closing PARAGRAPH 12.A(1)(b): Expenses the seller is willing to pay on the buyer's behalf. Included here would be expenses the buyer is not allowed to pay on certain government loan programs, or simply expenses Seller and Buyer have negotiated that the Seller will pay on behalf of the Buyer. PARAGRAPH 12.A(2) Includes typical buyer expenses. Included here are appraisal fees, loan application fees, and adjusted origination charges (from Buyer's loan estimate). Also included would be PMI, MIP, or VA Funding Fee per the requirement of the lender and any other fee expenses payable by Buyer PARAGRAPH 12.B. If any of these listed expenses exceeds what the party agreed to pay, the contract will terminate, UNLESS the other party agrees to pay the excess.
12. Items typically prorated/ the proration process - page 86
PARAGRAPH 13. PRORATION: Proration is the process of dividing ongoing expenses between the buyer and the seller at closing. Prorations are generally calculated through the day of closing for taxes, maintenance fees, and rents, if any, that the seller pays for on the closing day. Tax prorations may be calculated to take into consideration any change in exemptions that will affect the current year's taxes
42. Mediation vs arbitration or lawsuit - page 87
PARAGRAPH 16. MEDIATION: Buyer and Seller agree to mediate in the event that the parties have a dispute that cannot be settled through informal discussion. The cost of mediation is shared equally between Buyer and Seller. Mediation does not in any way imply a waiver of the right to file a suit if a party is unhappy with the results of mediation MEDIATION: It is the policy of the State of Texas to encourage resolution of disputes through alternative dispute resolution procedures such as mediation. Any dispute between Seller and Buyer related to this contract which is not resolved through informal discussion will be submitted to a mutually acceptable mediation service or provider. The parties to the mediation shall bear the mediation costs equally. This paragraph does not preclude a party from seeking equitable relief from a court of competent jurisdiction. ARBITRATION- a 3rd party person listens to both sides of the situation and makes a decision within the court of law
10. Requirements for buyer approval according to the TREC Third Party Financing Addendum - page 39
PARAGRAPH 2. APPROVAL OF FINANCING: This paragraph gives the buyer a specific number of days in which to obtain credit approval. The number of days allowed for credit approval varies, but sufficient time should be allowed. For the purposes of this addendum, time is of the essence. This means that if the buyer has been given twenty days in which to obtain approval, the approval must be obtained within the allotted twenty days. The days are calendar days, and the counting of days begins on the day following the effective date of the contract
8. Items to be retained by the Seller as specified in the contract - page 36
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. Excluded items are to be "removed prior to delivery of possession."
27. Paragraph 20 - Federal Tax Requirements - page 89
PARAGRAPH 20. FEDERAL TAX REQUIREMENTS: A seller who has no social security card or green card is considered a foreign person. The escrow agent will withhold from the sales proceeds an amount sufficient to comply with applicable tax law and deliver the same to the IRS. The contract says the buyer has an obligation to do this, but in reality, the escrow agent provides this service. Initialed for identification by Buyer and Seller TREC NO. 20-15 Contract
18. Paragraph 23 - use and timing - page 90
PARAGRAPH 23. CONSULT AN ATTORNEY: TREC rules prohibit real estate license holders from giving legal advice. Enter attorney contact information if applicable. Some states require that an attorney represent the parties. In other states (like Texas), representation is optional. If one or both of the parties are being represented by an attorney, the attorney's contact information is generally included in the contract. The execution date follows Paragraph 23. When the last party signs and acceptance has been communicated to the other party's agent, the date of final acceptance is filled in. The broker is responsible for ensuring that the effective date is filled in. All contracts must have an execution date filled in. The contract has many provisions that require compliance "within X days after the effective date of this contract..." Failure to enter an execution date can obviously cause considerable problems when trying to determine if a party is in compliance.
31. Paragraph 3.B. - contents - page 104
PARAGRAPH 3.B. The sum of all financing from all sources. Insert only the amount actually being financed.
35. Earnest Money - definition, purpose, amount - page 53
PARAGRAPH 5. EARNEST MONEY AND TERMINATION OPTION: Earnest money is a "deposit" paid upfront by Buyer to show that he or she is serious in his or her intent. There is no standard for the dollar amount of earnest money, but it is often in the range of 1% of the purchase price. Insert the amount of earnest money and the name and address of the title company. If additional earnest money is required, enter the amount and the number of days
9. Paragraph 5 - features - page 53
PARAGRAPH 5. EARNEST MONEY AND TERMINATION OPTION: Earnest money is a "deposit" paid upfront by Buyer to show that he or she is serious in his or her intent. There is no standard for the dollar amount of earnest money, but it is often in the range of 1% of the purchase price. Insert the amount of earnest money and the name and address of the title company. If additional earnest money is required, enter the amount and the number of days. An option gives Buyer the unrestricted right to terminate the contract within the option period. The termination may be for any reason or no reason at all. If Buyer chooses to terminate within the option period and gives the proper notice of termination, they will receive a refund of their earnest money and have no further obligations under the contract. PARAGRAPH 5.A. The buyer will deliver the earnest money and the option fee to the escrow agent within 3 days after the contract's effective date. The buyer may combine the earnest money and the option fee into a single payment or make two separate payments. If the buyer makes one payment for both, the payment will be applied to the option fee first, and then to the earnest money. The buyer must ensure that the payment is sufficient for both PARAGRAPH 5.B. While no mention is made of inspections in this paragraph, the option period is the time allowed for inspections that Buyer may wan
41. Paragraph 5 - features, numbers of days/time - page 53-54
PARAGRAPH 5. EARNEST MONEY AND TERMINATION OPTION: Earnest money is a "deposit" paid upfront by Buyer to show that he or she is serious in his or her intent. There is no standard for the dollar amount of earnest money, but it is often in the range of 1% of the purchase price. Insert the amount of earnest money and the name and address of the title company. If additional earnest money is required, enter the amount and the number of days. An option gives Buyer the unrestricted right to terminate the contract within the option period. The termination may be for any reason or no reason at all. If Buyer chooses to terminate within the option period and gives the proper notice of termination, they will receive a refund of their earnest money and have no further obligations under the contract. If the last day to deliver the earnest money, Option Fee, or the additional earnest money falls on a Saturday, Sunday, or legal holiday, the time to deliver the earnest money, Option Fee, or the additional earnest money, as applicable, is extended until the end of the next day that is not a Saturday, Sunday, or legal holiday 2.The option fee must be paid within three days after the effective date of the contract. 3. Buyer must deliver the option fee to the escrow agent.
40. Paragraph 5B - features, numbers of days - page 53
PARAGRAPH 5.B. While no mention is made of inspections in this paragraph, the option period is the time allowed for inspections that Buyer may want. Recall that in Paragraph 7.D Buyer is purchasing the property "as is." Because of this, the Buyer is strongly urged to obtain inspections. Based upon the inspection findings, Buyer can simply proceed to closing, attempt to negotiate repairs with the seller, or terminate the contract. If Buyer chooses to terminate under the option, they will receive a refund of earnest money, but will not receive a refund of the option fee. 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 option fee must be paid within three days after the effective date of the contract
54. Number of days for the title company to deliver the title commitment - page 56
PARAGRAPH 6.B. COMMITMENT: The title company has 20 days from the date that they receive the contract to furnish a commitment to the buyer for title insurance. This paragraph also provides for an automatic extension of the delivery period for up to 15 days or 3 days prior to closing if the commitment cannot be delivered within the 20 days allowed.
30. Lender required repairs as addressed in the sales contract - page 64
PARAGRAPH 7.E. LENDER REQUIRED REPAIRS AND TREATMENTS: Lender required repairs, if any, are a negotiated expense item between the parties. If the lender repairs exceed 5% of the sales price, the buyer may terminate the contract and receive a refund of earnest money. Seller must complete all agreed to repairs prior to closing, or the closing date may be extended up to 5 days to complete repairs
34. Addressing environmental concerns - TREC forms - page 65
PARAGRAPH 7.G. ENVIRONMENTAL MATTERS: This is a notice to Buyer that, if Buyer is concerned about environmental matters affecting the property, a TREC Promulgated Environmental Addendum is available. The addendum allows Buyer, at Buyer's expense, to perform environmental assessments on the property.
19. Paragraph 8.A. - disclosure of agency coupled with an interest and family relationships - page 108
PARAGRAPH 8.A. BROKER OR SALES AGENT DISCLOSURE: Paragraph 8.A. states that a license holder with a familial relationship with a party to the transaction must disclose this information to the other parties before entering into a contract.
60. What are good funds? - page 79
PARAGRAPH 9.B.(2) Buyer is to bring "good funds" to closing. Good funds is described as a cashier's check or wire transfer. Title companies may accept a small personal check from a buyer. Check with the title company for their policy.
25. Promulgated loan forms and their use - page 44
PARAGRAPH A. CREDIT DOCUMENTATION PARAGRAPH B. BUYER'S CREDIT APPROVAL PARAGRAPH C. PROMISSORY NOTE: The interest rate is negotiable, and can be paid in three possible repayment plans: PARAGRAPH C.(1) A single payment with interest payable at maturity, monthly or quarterly. This option would be good for a buyer anticipating the receipt of a bonus or other payout in the future PARAGRAPH C.(2) Monthly installments that either include interest or have interest added to them; the most common is monthly installments, including interest. Payments will begin a certain number of days from the date of the note (30 days is most commonly used). Payments will continue for a number of months to fully amortize the loan or may continue for a lesser number of months if the parties agree to a balloon payment. For example, a loan could be amortized over twenty years, with the balance being due in 60 months.
13. Required used of TREC forms and exceptions to required use - page 24
Question 2 A real estate broker, acting only as a principal to a transaction (i.e., as a buyer or seller), When the licensee is acting as a principal and not as an agent if an attorney-prepared form is used (TREC does not have promulgated forms for right of first refusal or lease with the option to purchase, therefore, clients interested in this type of transaction must be referred to an attorney)
28. Broker/seller commission agreements - page 230
Real estate brokerage fees are negotiated between the broker and the client. Fees are not set or recommended by the government or by any local, state, or federal organization. Any attempt to fix brokerage fees is a violation of the Sherman Act and the Clayton Act. License holders should never suggest that the fees that they charge are "customary," "mandatory," or "recommended." Paragraph 8 of the TREC-promulgated contract forms stipulates that broker fees are found in separate written agreements. These fees are most commonly found in the listing agreement between the broker and seller or the buyer representation agreement between the broker and buyer. Fee sharing agreements between brokers may be by a written agreement or through participation in a Multiple Listing Service (MLS). The listing agreement between the broker and seller addresses commissions in two areas. First, the agreement stipulates the fee that the broker will be paid if the property sells during the listing period. Typically, the fee is a percentage of the final sales price. Secondly, the listing agreement specifies how the fee will be split between brokers if another broker sells the property. In many cases, two fees are stipulated. The selling broker may pay one fee to a broker who is a buyer's representative and another fee to a broker who is a sub-agent of the listing broker. TREC-promulgated forms have a Broker Information section on the last page of the contract form. Except for the Farm and Ranch contract, the Broker Information section is not a fee split agreement between brokers. While the Broker Information section lists the fee to be paid to the selling broker, it is merely included as information. The actual fee split agreement is by virtue of membership in the Multiple Listing Service or by a separate agreement between the brokers.
3. TREC rules regarding the buyer's use of inspectors - page 63
Seller is to permit the buyer to perform as many inspections as the buyer deems necessary, provided they are done at reasonable times. The inspector is to be a TREC licensed inspector or another person otherwise allowed by law. This would seem to allow engineers and other professionals to perform inspections even if they are not licensed by TREC. The exception to this is the performance of hydrostatic testing, which must be authorized separately by the seller in writing. This paragraph intends to avoid a situation where a potential buyer hires his brother, uncle, or cousin as an "inspector" who produces a bad report that is used to renegotiate a lower sales price
36. Short sale vs foreclosure vs Deed in lieu of foreclosure - page 208
Short Sale- For example, if Seller's loan balance is $175,000, but the market value is $150,000, Seller is asking the lender to accept $25,000 less than the existing loan balance. Foreclosure- legal enforcement of a lien by a lienor (the lien holder, the party holding the lien), usually because of default by the lienee (the real property owner). this results in a FORCED SALE of the owner's real property Deed in Lieu of Foreclosure- After default, a borrower facing foreclosure voluntarily conveys property to the lender (usually warranty deed)
58. Provisions of an addendum vs the original contract - which prevails - page 15
Sometimes a provision in an addendum contradicts a provision in the main body of the contract. In such a case, the provision in the addendum prevails For example, some contract forms provide that the seller will provide to the buyer a general warranty deed at closing. An attached addendum may provide that the seller will provide to the buyer a special warranty deed at closing. In such a case, the seller will provide the special warranty deed because the addendum requires one.
15. Use of the Third-Party Financing Addendum - page 38
The most common form of mortgage financing is through third-party lenders such as banks, mortgage companies, and other lending institutions. PARAGRAPH 1. TYPE OF FINANCING AND DUTY TO APPLY AND OBTAIN APPROVAL: If the buyer is applying for a loan with conventional, FHA, VA or other forms of financing
22. Fair Housing terminology and prohibited acts - page 231
Steering, also known as channeling, is taking buyers or renters to, or away from, a particular area based on the race, religion, etc. of the buyer or renter and is the most common cause for complaint under the law. Blockbusting is any attempt to induce panic selling in a neighborhood for financial gain. The most common tactic is to imply the entrance into the neighborhood of a new ethnic or racial group and suggest to homeowners that they sell now No one may take any of the following actions based on race, color, national origin, religion, sex, familial status, or handicap in the sale or rental of housing: • Refuse to rent or sell housing • Refuse to negotiate for housing • Make housing unavailable • Set different terms, conditions or privileges for sale or rental of a dwelling • Provide different housing services or facilities • Falsely deny that housing is available for inspection, sale, or rental For profit, persuade owners to sell or rent (blockbusting) • Deny anyone access to or membership in a facility or service (such as a multiple listing service) related to the sale or rental of housing.
7. The unlawful practice of law - specific examples - page 24
TREC can suspend or revoke a license on proof that the license holder drew a deed, note, deed of trust, will, or other written instrument that transferred or affected the title to or an interest in land. Likewise, TREC can suspend or revoke a license if the license holder is found to have advised or counseled a person as to the validity or legal sufficiency of an instrument or as to the validity of title to real estate. License holders should not alter the pre-printed text of a promulgated form, as the alteration would likely amount to the unlawful practice of law. In many cases, license holders have added provisions to Paragraph 11, Special Provisions, that changed the legal effect of the contract. For example, inserting "time is of the essence" in Paragraph 11 changes the legal effect of the contract and could be interpreted as the unlawful practice of law by the license holder. License holders must not insert provisions into the contract that are addressed by using a TREC-promulgated addenda form. If provisions other than business details and factual statements need to be added that are not addressed by a TREC-promulgated addenda form, the parties should be referred to an attorney.
55. IABS - required uses - page 220
Texas law requires all real estate license holders to give the following information about brokerage services to prospective buyers, tenants, sellers and landlords. TYPES OF REAL ESTATE LICENSE HOLDERS: A BROKER, SALES AGENT A BROKER'S MINIMUM DUTIES REQUIRED BY LAW (A client is the person or party that the broker represents): A LICENSE HOLDER CAN REPRESENT A PARTY IN A REAL ESTATE TRANSACTION 1. AS AGENT FOR OWNER (SELLER/LANDLORD) 2. AS AGENT FOR BUYER/TENANT 3. AS AGENT FOR BOTH - INTERMEDIARY 4. AS SUBAGENT TO AVOID DISPUTES, ALL AGREEMENTS BETWEEN YOU AND A BROKER SHOULD BE IN WRITING AND CLEARLY ESTABLISH: LICENSE HOLDER CONTACT INFORMATION
49. Imputed Notice - definition/example - page 25
Texas recognizes the legal doctrine of imputed notice. Under this concept, an offer is presumed to have been delivered to the principal when it is delivered to the agent. A license holder who fails to communicate an offer in a timely manner may be disciplined by TREC. Nonetheless, in most cases, the submission of an offer (or, at least, a communication to the principal that an offer has been received) can be completed within a short period of time ex. In some cases, a buyer's agent might question whether the listing agent presented the offer to the seller. In such a situation, the buyer's agent must be careful not to base such an allegation on mere suspicion and should have a reasonable basis for such an allegation. While it is permissible for a buyer's agent to ask for some sort of verification that the offer has been presented, for example, a written statement signed by the seller that the offer has been presented, neither the listing agent nor seller is obligated to provide such verification. Nonetheless, the listing agent is statutorily and ethically obligated to present all offers in a timely manner.
48. A party used to conceal the identity of a buyer - page 229
The Straw Buyer is a person who is used to buy property in order to conceal the actual owner. The straw buyer does not intend to occupy the property or make payments and often deeds the property to the other individual immediately after closing. The straw buyer is usually compensated for the use of his or her identity.
59. Broker-Lawyer Committee duties and purpose - page 24
The Texas Real Estate Broker-Lawyer Committee was created to draft and revise contract forms capable of standardization for use by real estate license holders. These contract forms expedite real estate transactions and reduce controversies while containing safeguards adequate to protect the interest of the principals to the transaction. The Broker-Lawyer committee has 13 members. Six members are licensed brokers appointed by TREC, and six members are licensed attorneys appointed by the president of the State Bar. One public member is appointed by the governor.
5. The parties to the contract specifically as noted in paragraph 18.A. - page 88
The escrow agent is not a party to the contract, and has no liability for the performance of either party. The title company performs two primary functions: escrow services and title insurance. Escrow services are performed when something of value, such as a deed, money, or written instrument, is put into the custody of a third person to be retained until the occurrence of a contingency or performance of a contract. The title company is the escrow agent, the trusted third party that will receive and hold a deed signed by the seller. They will also have the buyer's earnest money and loan funds released to them by the lender The escrow agent may wait for a buyer's check to clear before delivering the funds to the seller
1. TREC contract forms and their uses - page 35
The title of the form reveals its intended use. The contract form is the One to Four Family Residential Contract (Resale). One to four means that it can be used for single-family properties, duplexes, triplex properties, and four-unit buildings. A building with five or more living units would be considered to be a commercial transaction. It is also used for resales only. A new home contract would be used on new home sales. This form is not to be used for a condominium, but may be used for the sale of a townhouse License holders must have a full understanding of the many promulgated forms and how best to use them to facilitate the wishes of the client License holders must take care to use only the most current version of a contract form. Failure to use the most current version is a violation of the License Act Other states (including Texas) allow license holders to prepare standardized contract forms and addenda for the parties to the transaction. TREC has promulgated forms for: Residential transactions/properties
20. Lead Paint - disclosures, dates, timing, buyer's rights, seller's responsibilities - page 71
This addendum is promulgated by TREC and satisfies the requirement under federal law for disclosure of lead-based paint issues. The addendum should be completed by Seller when the property is listed. PARAGRAPH A. LEAD WARNING STATEMENT: States that if you are about to buy a residential dwelling that was built before 1978, you are being notified with this addendum that the property may present to the buyer exposure to lead found in the paint. PARAGRAPH B. SELLER'S DISCLOSURE: Select the correct box to check that either they do or do not know of lead-based paint or lead-based paint hazards. Likewise, indicate if the seller has provided the buyer with reports, or if the seller has no reports or records pertaining to lead-based paint or leadbased paint hazards. PARAGRAPH C. BUYER'S RIGHTS: Buyer to indicate whether Buyer waives the right to conduct a risk assessment or inspection. Otherwise, the buyer may have the property inspected within 10 days of the effective date of the contract. PARAGRAPH D. BUYER'S ACKNOWLEDGMENT: Buyer will verify in the checkbox that he or she has received copies of all the information mentioned above, and has received a copy of the pamphlet "Protect Your Family From Lead in Your Home." This pamphlet is available in English and Spanish PARAGRAPH E. BROKER'S ACKNOWLEDGMENT: Broker must inform Seller of the seller's need to: (a) provide Buyer with the above-named pamphlet on lead poisoning prevention, (b) complete this addendum, (c) disclose if Seller is aware of lead-based paint and/or lead-based paint in or on the property, (d) deliver all records and reports to Buyer concerning lead-based paint and/ or lead-based paint hazards in the property, (e) give Buyer 10 days to have property inspected by an inspector of Buyer's choice, and (f) keep a copy of this addendum for at least 3 years following the sale of the subject property. Brokers must ensure compliance. PARAGRAPH F. CERTIFICATION OF ACCURACY: Both the Buyer and Seller certify by signing and dating on signature lines, respectively, that they have reviewed the entire addendum, recognize the addendum is required by federal law and to the best of their knowledge is true and accurate. Note that the brokers are also required to sign
44. TREC temporary lease forms - use and limits - page 81
This lease is used when the buyer moves before closing. Allowing the buyer to move in prior to closing carries considerable risk for the seller, and the decision must be made with great care. One significant risk is the possibility of the buyer's credit approval being withdrawn before closing, resulting in a buyer who is unable to close. Note that the rental to be paid is "per day," reflecting the short-term nature of this lease.
56. Purpose of the Notice to Prospective Buyer form - page 56
This notice complies with the provision of the Texas Real Estate License Act that requires that license holders advise buyers to have an abstract examined or obtain title insurance. All of the TREC-promulgated contracts have this notice in Paragraph 6 in the Title Notices section. This form could be used when a TREC contract is not being used, or could be used anytime that the broker wants the buyer to specifically acknowledge receipt of this advice.
33. Offers and the communication of offers - page 25
What constitutes an offer? Under ideal circumstances, an offer on a residential property is presented in writing on the required forms, including addenda. On the other hand, circumstances are not always ideal, and any offer must be presented, even if it is an oral offer. All offers must be presented! This means that an offer must be presented, no matter how low or ridiculous it might be. The agent does not have the authority to dismiss an offer without presenting it unless the party has given the agent instructions in writing to the contrary. An offer can be communicated by: • phone • fax • e-mail • letter • hand delivery
57. Default - definition - page 86
When a party to a contract fails to perform under the contract, they are in default. Failure to perform is also commonly referred to as a "breach of contract." When a party is in default or breach, the other party is known as the "injured party." In responding to the default, the injured party has a number of options available to them. The options are somewhat different depending on whether the buyer or the seller is in default
47. The effective date of the contract - page 91
When the last party signs and acceptance has been communicated to the other party's agent, the date of final acceptance is filled in. The broker is responsible for ensuring that the effective date is filled in. All contracts must have an execution date filled in. The contract has many provisions that require compliance "within X days after the effective date of this contract..." Failure to enter an execution date can obviously cause considerable problems when trying to determine if a party is in compliance.
23. The T-47 affidavit - purpose and use - page 61
When using the seller's existing survey, the seller is given a number of days to deliver the survey and a T-47 affidavit to the Buyer and the title company. The T-47 must be signed in the presence of a notary. If the use of an existing survey is anticipated, listing agents should have the T-47 completed when the listing is taken. The contract states that both the T-47 and the survey must be delivered within the negotiated number of days. The T-47 Residential Real Property Affidavit should be completed AT CLOSING, in most cases.
37. Farm and Ranch Contract - crops, accessories, improvements - definitions - page 122-123
crops- PARAGRAPH 2.D. CROPS: Even though Seller has the right to harvest right up to the delivery of possession, some Sellers may want to have the right to harvest after closing. For example, a cotton crop may not be ready to harvest at the time of closing, and since Seller has a significant investment in the crop, he may want the right to harvest some time after closing. If Buyer gives Seller this right, make sure Buyer is covered by a separate agreement for this operation. Buyer and Seller must agree on how Seller will leave the land, including who will shred the stalks, plow the ground, and other issues. . D. CROPS: Unless otherwise agreed in writing, Seller has the right to harvest all growing crops until delivery of possession of the Property. accessories- PARAGRAPH 2.(C) Describes accessories, which, while not necessarily permanently installed or built-in, are commonly conveyed to Buyer in the sale. Accessories include the typical residential items. Farm and ranch accessories to be conveyed are indicated by checking the appropriate boxes. FARM AND RANCH ACCESSORIES: The following described related accessories: (check boxes of conveyed accessories) portable buildings hunting blinds game feeders livestock feeders and troughs irrigation equipment fuel tanks submersible pumps pressure tanks corrals gates chutes improvements- 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. Included in the improvements are the usual residential improvements and specific farm and ranch improvements. FARM and RANCH IMPROVEMENTS: The following permanently installed and built-in items, if any: windmills, tanks, barns, pens, fences, gates, sheds, outbuildings, and corrals.
45. Assignment and when is it possible/not possible - page 15
possible- The assignment of a contract 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 not possible- Unless otherwise provided in the contract, most contracts are assignable; however, there are some exceptions. Contracts for personal services are not assignable. Therefore, a buyer's representation agreement or listing agreement would not be 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. Unless otherwise prohibited, leases are assignable, and the new lessee is bound to the original terms of the lease.
46. TREC temporary lease forms - use/situations - page 81
question 44 7. USE OF PROPERTY: Tenant may use the Property only for residential purposes. Tenant may not assign this Lease or sublet any part of the Property.
29. Features of lease provisions - right of first refusal, option to buy, lease purchase - page 25
right of first refusal-This provision in a lease gives the tenant the right to purchase the leased property by matching or bettering any offer before the property will be sold to someone else. option to buy- often called a lease option. A lease with an option to purchase gives the tenant occupancy in the present time and the right to purchase at a future date. In an option to purchase, the price is set when the lease agreement is negotiated, which is advantageous to the tenant-buyer lease purchase- A lease with an option to purchase is a unilateral contract in that the tenant is not obligated to purchase the property, but the landlord must sell if the tenant decides to exercise his/her right to purchase. TREC does not have promulgated forms for a right of first refusal or a lease with the option to purchase. TREC specifically prohibits license holders in Texas from writing any lease with an option to purchase or a right of first refusal. If a license holder has a client interested in this type of transaction, the client must be referred to an attorney.
51. Types of contracts and their features - valid, void, voidable, unenforceable - page 11
valid contract is one that meets all of the requirements of law. void contract -is invalid from the beginning and does not affect the parties. A contract to perform an illegal act is a void contract voidable contract- is one that cannot be enforced against one or more of the parties. Most contracts entered into with minors are voidable at the option of the minor. unenforceable contract- is one that cannot be enforced due to some flaw in the contract, passage of time, or other issues that make enforcement impossible. Of course, in the real estate business, we prefer to negotiate valid, enforceable contracts.
14. Types of contracts - valid, void, voidable, executory, executed - page 13
valid- A contract which contains all the essential elements void- void contract is invalid from the beginning and does not affect the parties. A contract to perform an illegal act is a void contract voidable- t is one that cannot be enforced against one or more of the parties. Most contracts entered into with minors are voidable at the option of the minor. executory- defined as a contract that is binding on the parties, with one or more of the parties having contractual duties that have not yet been performed. executed- A contract in which the parties have met all terms of the contract