Section 7: Promulgated Addenda, Notices, and Other Forms in Texas

When the TAR Release of Earnest Money form is used in a termination situation where the buyer isn't in default, which party often receives 100% of the money?

Buyer

In Texas, what form can the agency disclosure take?

Written and Oral

Ingo has a "Back-Up" contract with Sally, the seller. Ingo really wants the house and has put down $10,000 in earnest money. What happens if the first contract isn't terminated by the date specified in the Addendum for "Back-Up" Contract?

The "Back-Up" contract is terminated and Ingo's earnest money is refunded.

In a short sale, what happens if the lienholder refuses or withdraws their consent prior to closing or funding?

The contract is terminated and the buyer's earnest money is refunded.

According to the Short Sale Addendum, what acts could cause the contract to terminate?

-The seller fails to notify the buyer of the lienholder's consent. -The lien holder refuses or withdraws its consent and agreement prior to closing and funding. -The buyer has the unrestricted right to terminate the contract.

Let's look at the Information About Brokerage Services form. When do you provide it, and to whom? Read each statement below about the Information About Brokerage Services brochure in Texas, and then decide which statements are true

-While Texas law doesn't require that the Information About Brokerage Services brochure be signed, your brokerage may require that customers sign the form -A licensee's name doesn't need to be on the Information About Brokerage Services form.

How many "back-up" offers can be submitted on one Addendum for "Back-Up" Contract form?

1

John, your buyer client, is interested in finding out more information about the subdivision for the property he wants to purchase. John wants the seller to provide the information within five days after the effective date. Referring to the Addendum for Property Subject to Mandatory Membership in an Owners Association, which option should you have John select under section A?

1

Gloria and her client, Estelle, failed to provide the correct TREC-promulgated addendum for coastal property when attempting to sell Estelle's coastal property. What might this oversight result in?

A recession of the contract

What is a short sale in Texas?

A transaction in which the sales proceeds will not be sufficient to pay off the seller's loan obligations, plus closing costs

The seller has accepted a contingency offer, but she's received a second offer that isn't a contingent offer, and she'd like to negotiate this second offer. If the seller wishes to not be legally contracted to sell to both parties, which form should be included with the sales contract?

Addendum for Back-up Contract

The property that is being offered for sale borders and shares a common boundary with the tidally influenced waters of the state. Which form should be included with the sales contract?

Addendum for Coastal Area Property

The property that's being offered for sale is located seaward of the Gulf Intracoastal Waterway. Which form should be included with the sales contract?

Addendum for Property Located Seaward of the Gulf Intracoastal Waterway

Which of the following warns buyers that the state of Texas may have the right to take the property if the land erodes and the property becomes part of the public beach?

Addendum for Property Located Seaward of the Gulf Intracoastal Waterway

Kara is interested in a townhome that is located in a subdivision that has mandatory membership in an association. Which form should be completed?

Addendum for Property Subject to Mandatory Membership in a Property Owners Association

Your buyer clients, Tim and Amy, are excited about moving into an upscale subdivision, but they're concerned about the homeowner association membership fees. To put their minds at ease, you suggest that they request information about the subdivision by completing which addendum?

Addendum for Property Subject to Mandatory Membership in a Property Owners Association

You're working with a buyer who's interested in a property that's located in a subdivision that has mandatory membership fees. What form should you include with the sales contract?

Addendum for Property Subject to Mandatory Membership in an Owners Association

Linda is selling her home, but she wants to retain all or a portion of the property's mineral rights. Which of the following addenda must she include in the TREC One To Four Family Residential Contract (Resale)?

Addendum for Reservation of Oil, Gas, and Other Minerals

Joe, the buyer, wants his offer for the new property to be contingent upon him selling his home, which is currently under contract and scheduled to close. Which form should he include with his offer?

Addendum for Sale of Other Property

The buyer's current home is under contract, but he will be unable to purchase his new home until his current home has sold and the transaction closed. He found a property he likes and wants to make an offer, but would have to make it contingent upon the sale of his current home. In addition to the sales contract, what other form should be included with his offer?

Addendum for Sale of Other Property by Buyer

You represent Sue, who is making an offer on a new home, and she tells you that she must sell her current home before she'll have enough funds to purchase the new home. Besides the TREC One To Four Family Residential Contract (Resale), which form should she complete?

Addendum for Sale of Other Property by Buyer

What does "time is of the essence" mean in the Addendum for Sale of Other Property by Buyer?

Failure to act within the time required constitutes a breach of contract

You represent Kevin, who is buying a home and must complete the Addendum for Sale of Other Property by Buyer. The form includes the following phrase: "Time is of the essence." You correctly advise Kevin that this phrase means ______.

Failure to act within the time required constitutes a breach of contract.

A back-up contract was originally implemented on January 18. Both parties agreed to a 14-day option period in Paragraph 23 of the sales contract. On January 29, the back-up buyer received notice from the seller that the original contract terminated. When does the back-up buyer's option period end?

February 12 at 5 p.m.

How many days does the seller have after the effective date to provide the buyer with the contact information for any known mineral lessees?

Seven

Before signing the Addendum for Property Located Seaward of the Gulf Intracoastal Waterway, which of the following should buyers take into consideration?

Shoreline erosion rates

If a seller wishes to sell their property for less than what's owed to the lienholder, what form should be used?

Short Sale Addendum

When is the Addendum for "Back-Up" Contract used?

When the seller wants to negotiate with a second buyer in the event the first buyer's transaction fails

Which of the following statements about waiving the contingency and the Addendum for Sale of Other Property by Buyer is true?

Buyers can waive the contingency, but they have to notify the seller and make an additional deposit.

What happens if a buyer wants to terminate the contract, but fails to deliver the Notice of Buyer's Termination Contract to the seller prior to the expiration of the option period?

The buyer must close the transaction in accordance with the terms of the contract.

The seller and ______ must approve a short sale.

The seller's lender

Nick is selling his property and wants to reserve a portion of the mineral estate. Which addendum should he complete and attach to the TREC One To Four Family Residential Contract (Resale)?

Addendum for Reservation of Oil, Gas, and Other Minerals

The sellers want to reserve all of their interest in the mineral estate they own. Which form should be included with the sales contract?

Addendum for Reservation of Oil, Gas, and Other Minerals

Condominium Resale Certificate

-No lot and block information -Used for transactions involving condominiums -Must include the operating budget, insurance summary, and balance sheet

Per the Short Sale Addendum, when does the time for giving notice of termination begin if the buyer has the unrestricted right to terminate the contract?

On the effective date of the contract

Which authority requires the specific notices contained in the Addendum for Coastal Area Property and the Addendum for Property Located Seaward of the Gulf Intracoastal Waterway?

Texas Natural Resource Code

Why could using this addendum be advantageous for the back-up buyers?

-The buyers will be in first position should the first contract fall through. -The buyers may continue to look for other properties while the addendum is in place.

Although Cami's client's property is already under contract, the seller continues to receive numerous back-up offers. How many back-up contracts can Cami's client enter into?

Unlimited

When is it appropriate to use the Release of Earnest Money form?

When a contract is terminated

What's included as a mineral right? Question

Oil

When completing the Addendum for Sale of Other Property by Buyer, where should the date indicating when the contingency property must be sold and closed be placed?

Paragraph A

According to the Short Sale Addendum, what is the meaning of a short sale?

The net proceeds at closing will be less than the outstanding balance of the loan.

What's included as a mineral right?

-Oil -Gas -Diamonds

What's a resale certificate?

A document that provides information about the property owners association

Notice of Buyer's Termination of Contract

-Notifies the seller of the termination -Notifies the seller of the reason for termination

When working with a short sale transaction, what should the listing agent do in order to not waste time and effort?

-Obtain lender instructions -Make sure the lender's instructions are followed -Continue to market the property

Which form is required if you're working with a client who's interested in purchasing a unit that includes mandatory membership in the owners association?

Condominium Resale Certificate

If the buyer fails to deliver the Notice of Buyer's Termination of Contract before the deadline, what happens?

The buyer is obligated to fulfill the contract.

What happens if a buyer completes the Addendum for Property Subject to Mandatory Membership in a Property Owners Association and requests the seller to obtain, pay for, and deliver the subdivision information, but doesn't receive it?

The buyer may terminate the contract at any time prior to closing and have their earnest money refunded.

Where can the buyer go to obtain the exact location of the tide line?

General Land Office

Addendum for Property Located Seaward of the Gulf Intracoastal Waterway

-Buyers should determine the rate of shoreline erosion. -Buyers should seek the advice of an attorney. -State law prohibits any obstruction, barrier, restraint, or interference with the use of the public easement.

Subdivision Information, Including Resale Certificate for Property Subject to Mandatory Membership in a Property Owners Association

-Mandatory membership in an HOA -Used for transactions involving townhomes and single-family residences -Must include the restrictions, rules, bylaws, and balance sheet

In order for a short sale to move forward, what must the seller do to ensure a smooth transaction?

-Obtain lienholder consent -Set a date by which the seller will obtain lender approval -Inform the buyer that lender consent has been received -Provide required documentation

Before getting into details about how to complete the TREC Addendum for Reservation of Oil, Gas, and Other Minerals, we need to look at some important terms. Let's start with mineral estate. Identify which characteristics are true of a mineral estate. Select all that apply.

-Part of the bundle of rights -Can be separated from the land and sold -Can be kept when selling a home

What sections of the form must be completed?

-Property address -Seller's name -Reason for termination -Buyer's signature

Why could using this addendum be advantageous for sellers?

-Protects their ability to continue to market the property -Can accept the back-up offer without being committed to selling to two parties -May receive one or more option fees

When representing a buyer in a transaction where the seller has reserved oil, gas, or other mineral rights, what should you advise your client to do before signing the contract?

-Read the contract carefully -Consult an attorney

Release of Earnest Money

-Releases party's liability in regard to the contract -Explains how to distribute earnest money

According to the Addendum for Property Subject to Mandatory Membership in an Owners Association, what's included in the subdivision information?

-Restrictions -Bylaws -Resale certificate

When is it appropriate to use the Addendum for Sale of Other Property by Buyer?

-The buyer must sell and close on another home before purchasing a new one. -The buyer's home is already under contract.

The Consumer Protection Notice Form

-The purpose of the notice is to notify the public about the recovery trust account and to provide contact information for customer complaints and inquiries. -The notice must be prominently displayed in each place of business -Real estate inspectors must also display the Consumer Protection Notice.

Who's responsible for completing the Subdivision Information, Including Resale Certificate for Property Subject to Mandatory Membership in a Property Owners Association?

Association representative

In Texas, when is the licensee required to make the agency disclosure

At first contact with another party to the transaction or another licensee (who represents another party to the transaction).

When should the Notice of Buyer's Termination of Contract be provided to the seller?

Before the expiration of the option period

The seller, Bob Smith, received an offer on his home that was contingent on the buyers selling their home first. While waiting for the buyers, Bob received a back-up offer without a contingency. What can Bob do?

Bob can ask the buyer on the first TREC One To Four Family Residential Contract (Resale) to waive the contingency within an agreed-upon timeframe or terminate the contract.

Per the Addendum for Property Subject to Mandatory Membership in a Property Owners Association form, who pays any deposits for reserves that might be required by the property owners association?

Buyer

By using the TAR Release of Earnest Money form, who is released from liability under the contract?

Buyer Seller Licensees Brokers Title company

You're working with a buyer who decides to terminate the sales contract based on a defect she's unwilling to accept or negotiate. Using your resource, which checkbox should the buyer choose?

Checkbox five allows the buyer to terminate in the event that the seller's disclosure reveals a defect the buyer is unwilling to accept or negotiate.

As the seller, Mona wants to reserve all of her property's mineral estate. With her agent's assistance, she has completed the Addendum for Reservation of Oil, Gas, and Other Minerals. What should she do prior to signing the addendum?

Consult an attorney

If a buyer requests subdivision information using the Addendum for Property Subject to Mandatory Membership in a Property Owners Association form, who pays to obtain the information and have it delivered?

It depends

In instances where the buyer isn't requesting subdivision information, but the title company is, who pays to obtain the information per the Addendum for Property Subject to Mandatory Membership in a Property Owners Association?

It depends

A back-up contract was originally implemented on December 29. Both parties agreed to a 12-day option period in Paragraph 23 of the sales contract. On January 4, the back-up buyer received notice from the seller that the original contract terminated. When does the back-up buyer's option period end?

January 16 at 5 p.m.

Which of the following determines which addendum—the Addendum for Property Located Seaward of the Gulf Intracoastal Waterway or the Addendum for Coastal Area Property—applies to a coastal property?

Location of the property

According to your resources, who's permitted to use the Release of Earnest Money form?

Members of TAR

If more than one loan is used to secure the property, will a new form need to be filled out for each loan?

No

If a buyer has concerns about the condition of any part of the property that the homeowners association is required to repair, what should the buyer do?

Not sign the contract unless the buyer is satisfied that the homeowners association will make the desired repairs

Upon inspection, the buyer decides that she wants to end the contract under Paragraph 23 of the sales contract. Which form should be included with the sales contract?

Notice of Buyer's Termination of Contract

Oliver has elected to exercise his unrestricted right to terminate his sales contract under Paragraph 23 of the contract and has notified the seller of this decision, using the Notice of Buyer's Termination of Contract. He delivered the notice prior to the expiration of the option period. Given this information, which of the following statements is true?

Oliver will have all of his earnest money refunded.

Anne, your buyer client, is placing an offer on a property located in a subdivision. The property has mandatory membership in its homeowners association. Anne has decided to waive her right to receive the subdivision information. Referring to the Addendum for Property Subject to Mandatory Membership in an Owners Association, which option should you have Anne select under Section A?

Option 4 enables the buyer to waive the right to receive the subdivision information.

In which paragraph of the Addendum for Back-up Contract can you find information that explains the amended effective date?

Paragraph B

If the buyer chooses to waive the contingency, what part of the addendum specifies what will happen if the buyer is unable to complete the transaction because the buyer's current property fails to close?

Paragraph D

Where in the Addendum for Sale of Other Property is the "time is of the essence" statement made?

Paragraph E

Which types of forms are the Property Located Seaward of the Gulf Intracoastal Waterway and the Coastal Area Property?

Promulgated Addenda

Cooperating broker signatures

Release of Earnest Money

Principal broker signatures

Release of Earnest Money

Seller Signatures

Release of Earnest Money

Buyer Signatures

Release of Earnest Money and Notice of Buyer's Termination of Contract

If the deadlines for performance aren't met, what could happen to the contract?

Termination Breach

For purposes of performance, what is the effective date of the "Back-Up" contract based upon?

The date the buyer received notice of the termination of the first contract

In situations where a coastline property owner has been forced to remove their home by the state of Texas because the property is now located on public beach property, who or what entity covers the cost of removal?

The property owner is solely responsible for the cost of removal.

Per the Addendum for Sale of Other Property by Buyer, what happens if the seller accepts a written offer to sell the property?

The seller is required to notify the buyer and give the buyer the opportunity to waive the contingency.

If checkbox 2 in Paragraph B is checked and "50%" is placed in the blank, what does this mean?

The seller keeps 50% of the mineral estate that they own as of the closing date.

Your buyer client, Robert, is reviewing the Condominium Resale Certificate and has a question. Robert asks, "What does the checkbox in Paragraph J mean?" You look at the form and notice that the 'does not' box is checked. How do you explain this to Robert?

This notifies buyers if they're responsible for purchasing insurance. This states that the association won't provide insurance coverage. This notifies buyers they will need to purchase insurance coverage.

What's the purpose of the Addendum for Back-Up Contract?

To allow a buyer to place a back-up offer on a property that's already under contract

In Texas, to whom must the licensee disclose the agency relationship?

To any party to the proposed transaction whom the licensee doesn't represent

What is the purpose of the Addendum for Coastal Area Property?

To disclose that owners of coastal property may gain or lose portions of their property because of changes in the boundaries

What is the purpose of the Addendum for Sale of Other Property by Buyer?

To disclose to the seller that the buyer has a contingency to sell their current property

What is the purpose of the Addendum for Property Subject to Mandatory Membership in a Property Owners Association?

To give buyers the opportunity to request subdivision information

What is the purpose of the Addendum for Reservation of Oil, Gas, and Other Minerals?

To give the seller the opportunity to reserve all or a portion of the property's mineral estate

What's the purpose of the Notice of Buyer's Termination Contract?

To notify the seller of the buyer's decision and reason to terminate during the option period