Texas Promulgated Contract Forms: Chapters 1-3
Suppose a buyer was willing to offer a seller $300,000 on a property with a first lien of $215,000 and a second lien of $70,000, with $15,000 as a down payment. What would the licensee put in the sum of the financing paragraph of the One to Four Family Residential Contract (Resale)?
$285,000
Which of the following types of sellers would most likely use a contract prepared by an attorney?
A new home builder
To be an acceptable listing contract, TREC requires that the listing form contains what items?
A provision informing the parties to the contract that commissions are negotiable
What is the difference between a title policy and a title commitment?
A title commitment is issued prior to closing to describe the items on the title policy which will be issued after closing.
How is the effective date of the contract determined?
After both parties have signed/initialed the contract and all parties have been notified of such
Alicia is set to close on her new home in three days, but today she received a phone call from her agent stating that the lender needs to push closing back seven days. What, if any, action needs to be done?
Alicia's agent should submit an "Amendment to Contract" with the new closing date to the seller's agent
What is it called when someone listens to both sides of the situation and makes a decision?
Arbitration
In completing a sales contract, the sale price should equal what?
Both the down payment and the loan amount are added together
What is it called when two or more real estate companies refuse, as a group, to show and sell another real estate companies' listings?
Boycotting
Which group has the task to draft and revise contracts and forms for use by agents?
Broker-Lawyer Committee
Which item cannot be changed or modified by completing the Amendment form?
Brokerage fee (commission)
What form is used when the buyer wants to cancel the contract?
Buyer's termination of contract
Maria, a licensed real estate professional, is working with Juan and Augustina, who are buyers. Juan wants Maria's opinion on whether or not she thinks the title is valid. What should Maria do?
Maria, a licensed real estate professional, is working with Juan and Augustina, who are buyers. Juan wants Maria's opinion on whether or not she thinks the title is valid. What should Maria do?
The contract cannot contain:
Misrepresentation - an error Fraud - intentional misrepresentation Duress - use of force Menace - threat of violence Undue Influence - use of power
What do the letters MUD stand for?
Municipal Utility District
______ is an agreement to all the terms by all the parties of a contract
Mutual Agreement
What is it called when all terms in a contract are agreed to by all the parties of the contract?
Mutual agreement
Which paragraph in the One to Four Family Residential Contract (Resale) is used to put in items that have no other paragraph or addendum that can address them?
Special Provisions
If a party feels they have been wronged, what law sets the length of time they are allowed to bring a civil lawsuit?
Statue of Limitations
What can TREC do if a real estate agent fails to use a required contract form?
Suspend the agent's license
Who promulgates contracts for real estate agents to use?
TREC
All of the following actions would be considered practicing law without a license except which one?
Tell the client known facts about the property that might affect the title
What group administers the Texas Real Estate License Act?
Texas Real Estate Commission
What is the best solution to solve a situation when the seller and buyer agree to alter a binding One to Four Family Residential Contract (Resale)?
The "Amendment" must be completed and signed by both parties
What are the ramifications if an owner does not pay the mandatory Homeowners Association dues?
The association could file a lien and their is the possibility of foreclosure
Which of the following is an exception to an agent using a TREC promulgated form?
The form is prepared and required by the property owner
How can an agent determine the terms of the buyer's loan when completing the Third Party Financing Addendum?
The lender will provide this information after negotiations with the buyer
When are keys to the property given to the new buyer?
Upon closing and funding
What is duress?
Use of force
Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller's VA Entitlement, is used for what type of situation?
When a seller wants to be released from further liability on the VA assumed
At what point does an offer become a contract?
When all parties have signed/initialed the contracts and both parties have been notified
TREC's main purpose is to
protect the public from unscrupulous licensees.
down payment + loan amount =
the sales price!
Fraud in a contract makes it what?
voidable
What are some things you can do to avoid common contract mistakes?
- Keep the contract neat - Fill in all blanks correctly - Use full names for the buyer/seller
Competent Party
- Must be 18 + years of age - Must be mentally competent - Cannot be temporarily incompetent
In what year was the TRELA written?
1939
Which FHA loan is typically the lowest down payment loan for a buyer?
203 (b)
In Texas, both written and oral contracts have a statute of limitations of
4 years
The TREC One to Four Family Residential Contract (Resale) should be used in which of the following transactions?
A duplex
Which of the following statements best defines "promulgated"?
A form that has been made public and its use mandated
To make a valid contract, there must be four elements, including Agreement, Competent Parties and Legal objective. Which one is missing?
Consideration
What are some examples of discharging a contract?
Contract could not be accomplished legally, fraud, or some action of the law
What is the definition of an executory contract?
Contract for deed, lease option, or purchase option longer than 180 days
What does the Four Corners Doctrine direct a judge to look at?
Document as a whole
As part of a loan, a lender may have a clause that keeps another person from assuming the loan. What is this clause called?
Due on sale
T/F: All contracts must be in writing to be enforceable by law
FALSE BUT, a contract for the purchase of real estate must be in writing to be enforceable.
Under the Texas Real Estate License Act (TRELA), a real estate agent will not be in violation of practicing law without a license if they do what?
Fills in the blanks on a standardized contract
When should the Seller Financing Addendum be used?
If the seller is carrying a note for a buyer for all or a portion of the sales price
What is the Seller's Disclosure Notice?
It is a statement of the items and systems a property has and whether those work properly or not
Using the One to Four Family Residential Contract - (Resale), who is required to pay for the title insurance policy?
It is negotiable
There may be some private transfer fees that will continue, assuming they were created on, or before, what date?
January 31st, 2012
Which form addresses a "contract for deed"?
None available
Private transfer fees are considered what?
Not binding or enforceable
What is it called when two or more real estate companies work together to conspire to charge the same commission?
Price fixing
Who authorizes a licensee to strike information from a contract?
Principal to the transaction
What does promulgated mean?
Promulgated means that the form was formally made public or created and mandated by TREC, and is to be used by licensees for the specific purpose intended, unless there is an exception of when you do not have to use the form.
REDLA
Real Estate Dealer's License Act This act was administered by the Secretary of State until 1949 when the Texas Real Estate Commission (TREC) assumed the administrative responsibilities associated with it. In 1949, the REDLA was changed into the Texas Real Estate License Act (TRELA)
What is the main law that governs the real estate industry?
Real Estate License Act
What is probably the best action a seller can take if they want to take a ceiling fan with them prior to closing?
Remove any item prior to any showings
Which of the following forms are NOT promulgated by TREC?
Residential Listing agreement
According to the Loan Assumption Addendum, the seller must respond to the buyer within how many days, or it is assumed that the seller has given approval?
Seven days
If your client is not married, what do you write after their name on the contract?
Single person
Who fills out the Seller's Disclosure Notice?
The seller
An initial counteroffer would be best described as what?
The seller's offer to the buyer
What happens to the penalty funds collected from transfer fee violators?
They are placed in the general revenue fund of the state
What is a court's primary objective when interpreting a contract?
To ascertain and give effect to the intent of the parties
In which of the following situations would a temporary lease be inappropriate?
When the buyer moves in six months prior to the closing date
When can a seller have another party assume their loan?
When the lender allows it
When can an agent use their own forms in a transaction?
When they are buying properties for themselves
Who is responsible for making sure all applicable addenda have been included with the contract?
YOU, the clients agent
Once a contract is signed, how many days are there for automatic rescission?
Zero
What legal status does a void contract have?
a contract that never existed
A statute of limitations
a law that provides the length of time a person is allowed to bring a civil lawsuit, like a personal lawsuit or how long the state has to prosecute someone for committing a crime.
Void translates to...
absence of
Acceptance must be
absolute and must be entered into freely and voluntarily.
What does Ad valorem mean?
according to value
What is misrepresentation?
an error
A court's primary objective when interpreting a contract is to
ascertain and give effect to the intent of the parties as it is expressed in the contract.
What type of contract is it when two parties agree to and then sign it?
executed
What is the purpose of paragraph 6.D, in the One to Four Family Residential Contract (Resale)?
objections
If a buyer fails to provide their financial information to the seller by the deadline specified in the Seller Financing Addendum, how long can the seller wait to terminate the agreement?
seven days
If the seller wants to change one item of an offer...
that would be a rejection of the entire offer.
When there is a dispute in a written contract the judge will use what is called.....
the Four Corners Doctrine.
According to the One to Four Family Residential Contract (Resale), who is to advise the buyer to have an attorney examine the abstract or obtain a title policy?
the agent