Texas Promulgated Forms
The date in the upper right corner of the promulgated contract form is the date
TREC approved and promulgated the form.
An amendment
changes the contract. An amendment is a change or modification to the existing content of a contract.
rollback tax
tax that can be assessed when the property zoning is changed
Which of these addenda does NOT include "time is of the essence"?
Addendum for Coastal Area Property Include: Addendum for Back-Up Contract Addendum for Sale of Other Property by Buyer Third Party Financing Addendum
promulgated for mandatory use
Addendum for Coastal Area Property Seller Financing Addendum' Addendum for Reservation of Oil, Gas, and Other Minerals Buyer's Temporary Residential Lease Loan Assumption Addendum Addendum for Back-Up Contract Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller's VA Entitlement
Which of the following is NOT listed in paragraph 22 of the TREC Farm and Ranch Contract?
Addendum for Reservation of Oil, Gas, and Other Minerals IN: Addendum for Back-Up Contract Addendum for Coastal Area Property Environmental Assessment, Threatened or Endangered Species, and Wetlands Addendum
Which of the following is NOT a TREC promulgated addendum?
Reverse Mortgage Financing Addendum IS: Seller's Temporary Residential Lease Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller's VA Entitlement Addendum for Back-Up Contract
There are how many promulgated addenda
There are 15 promulgated addenda, but there are also addenda that are approved by TREC and provided for voluntary use.
How are cash reserves from regular condominium assessments for deferred maintenance and capital improvements established by the association addressed in the TREC Residential Condominium Contract?
They are not credited to seller.
If a buyer is obtaining a new conventional mortgage, which of the following will be checked in paragraph 3?
Third Party Financing Addendum. Third party financing is any type of new financing that is done by anyone that is a third party. Specifics of that financing are covered in the Third Party Financing Addendum.
To make a change to a contract
an amendment must be used. In order to make any changes to the contract, a separate written amendment must be completed and signed by all the parties.
The voiding of a contract by a minor is
an example of terminating a contract by operation of law. A contract entered into with a minor is voidable at the option of the minor.
Real estate brokers who are members of the Broker-Lawyer Committee become members by being
appointed by the Texas Real Estate Commission. The committee is composed of six Real Estate Commission appointees (who are licensed real estate brokers); six lawyers, appointed by the president of the State Bar of Texas; and one public member, appointed by the governor. They serve staggered six-year terms.
Which of the following is not included in paragraph 7 of the TREC One to Four Family Residential Contract?
who will pay for the title policy. Title policy information, including who pays for the policy, the name of the company that will issue the policy, whether an existing survey will be provided (and if not, who will pay for a new survey), and objections to the title are all addressed in paragraph 6.
When is the best time to clarify which accessories the sellers wish to take with them in the TREC One to Four Family Residential Contract?
at the listing appointment. It is important to verify that the parties understand what does and does not stay with the property long before closing. The best time to address with the sellers which accessories are included or excluded in the sale is at the listing appointment.
An independent contractor agreement is a
bilateral agreement; it defines the working relationship between sales associate and sponsoring broker.
A legally enforceable agreement under which two parties promise to do something for each other is classified as a(n)
bilateral contract. A contract is bilateral if both parties to the agreement promise to do something in exchange for the other's promise to do something.
The promise given in exchange for a promise in a contract and serves as the contract's
consideration, which is an essential element of a valid contract.
If the buyer wants to be sure the fireplace screen stays with the property, the buyer's agent should
do nothing; it is already in the contract.
Under the TREC Loan Assumption Addendum, which party may terminate if the note holder fails to consent to the loan assumption?
either the buyer or the seller. Either party may terminate, but the buyer gets the earnest money.
When a contract appears to be valid but may be rescinded or disaffirmed by one or both parties based on some legal principle it is
voidable. A contract with a minor, for example, is voidable. However, a voidable contract is considered by the courts to be valid if the party who has the option to disaffirm the agreement does not do so within a period of time.
Which of the following is an exception to the TREC rules on contract use?
when the buyer requires another form to be used. According to Section 537.11(a)(3), transactions for which a contract form has been prepared by a principal to the transaction are an exception to the rule that TREC promulgated forms must be used.
The statute of limitations on a contract for the sale of real estate is
4 years
mandatory use by licensees
TREC that promulgates the forms for mandatory use The Broker-Lawyer Committee develops forms and recommends their adoption
Executory contract
1) an enforceable contract that is in the process of being fulfilled; 2) in Texas, a contract-for-deed, lease-purchase, or lease-option; 3) a contract involving the sale of a residence that will take place more than 180 days after the execution of the contract. A fully executed contract is one in which all parties have fulfilled all promises made in the agreement; closing and funding occur. When the seller has delivered the deed, received the proceeds, and granted possession to the purchaser, a fully executed contract exists.
Which of the following committees is responsible for drafting and revising contract forms?
Broker-Lawyer Committee. The Broker-Lawyer Committee drafts and revises contract forms for use by real estate licensees. The purpose is to expedite real estate transactions and reduce controversies while protecting the interests of the parties involved.
An offer to purchase by a potential buyer is considered accepted when the
buyer is notified that the seller has accepted the offer. In today's electronic world, there may be a question as to when an acceptance, rejection, or counteroffer has been made and accepted. A standard contract may state that electronic transmissions are valid.
Both the Seller Financing Addendum and Loan Assumption Addendum give the seller the option to terminate the contract under which specific condition?
if the seller timely notifies the buyer that the seller has not approved the buyer's creditworthiness. While the seller may terminate based on the buyer's credit, the earnest money is refunded to the buyer.
Which of the following is TRUE under the TREC Third Party Financing Addendum?
the contract terminates if the buyer timely notifies the seller that the buyer was unable to get buyer approval. Under this provision, the contract terminates and the buyer receives the earnest money. If the buyer fails to timely notify the seller, the contract is still binding but no longer subject to a buyer approval contingency.
The sellers want to sell the refrigerator to the buyers. How should it be noted in the contract?
Use the Non-Realty Items Addendum. If the seller wishes to sell the refrigerator to the buyer for a nominal fee and have it be part of the total sales price, the Non-Realty Items Addendum should be used.
If the offer is acceptable to the seller, the offer is signed and dated and returned to the buyer. It is now a contract for sale. If the offer is rejected, the offer is returned to the buyer marked
"rejected." The offer should be returned and marked as rejected by the seller to let the buyer know that the seller did not accept the offer.
The buyer wishes to make an offer to buy a house for $185,000, with 70% financed through a first loan, 10% financed through a second loan, and a 20% cash down payment. How much is the down payment?
$37,000. Twenty percent of $185,000 is $37,000. The first loan will be for $129,500 and The second loan will be for $18,500.
If the sales price is $375,000, earnest money is $5,000 and the amount financed is $300,000, how much is filled in as the cash payable at closing?
$75,000. The amount financed (3B) is subtracted from total sales price (3C) to figure the amount payable at closing (3A). The earnest money is reflected in 3A.
Texas Real Estate Commission exceptions
(1) transactions in which the licensee is functioning solely as a principal, not as an agent; (2) transactions in which an agency of the United States government requires a different form to be used; (3) transactions for which a contract form has been prepared by a principal to the transaction or prepared by an attorney and required by a principal to the transaction; (4) transactions for which no standard contract form has been promulgated by the commission, and the licensee uses a form prepared by an attorney at law licensed by this state and approved by the attorney for the particular kind of transactions involved or prepared by the Texas Real Estate Broker-Lawyer Committee (the committee) and made available for trial use by licensees with the consent of the commission.
If the buyer wishes to make an all cash offer, how should paragraph 3 of the TREC One to Four Family Residential Contract be completed?
3A and 3C will be the same amount. If it is an all cash offer, then the cash payable at closing (3A) and the Sales Price (3C) will be the same. The other answers are wrong.
A buyer makes an all-cash offer of $168,000. How will paragraphs 3A, 3B, and 3C be filled out?
3A is $168,000, 3B is $0, and 3C is $168,000. In an all cash offer, 3A and 3C will be the same amount. 3B will be $0.
Under the contract from Johnson to Swanson, how long does Swanson have to deliver a credit report?
5 days. Buyer shall deliver a credit report to seller within 5 days after the effective date of this contract.
TREC promulgates how many contract forms.
6
What does the statement on page 9 of the TREC Farm and Ranch Contract indicate regarding payment of brokers' fees?
Brokers' fees or the sharing of fees between brokers are not fixed, controlled, recommended, suggested or maintained by the Texas Real Estate Commission.
A buyer wanted to move in early before closing. Which TREC promulgated addendum should be used?
Buyer's Temporary Residential Lease. The Buyer's Temporary Residential Lease is a TREC promulgated addendum. The other addenda listed do not exist.
A married seller wishes to sell her separate property. Which of the following is an appropriate way to identify her in the TREC One to Four Family Residential Contract?
Jane Doe, as separate property. Because Texas is a community property state the marital status of the seller must be included in the names of the parties in paragraph 1. The proper way to identify a married seller who is selling separate property is "Jane Doe, as separate property."
approved by TREC and provided for voluntary use by licensees.
Lead-Based Paint Addendum Non-Realty Items Addendum
Which of these promulgated forms does NOT include "time is of the essence"?
Loan Assumption Addendum Include: The six promulgated contract forms Short Sale Addendum Addendum for Back-Up Contract
Contracts may be discharged (completed) by the following
Performance, which completes the contract terms Partial performance, if agreeable to both parties Substantial performance, depending on circumstances Impossibility of performance (required acts cannot be legally accomplished) Assignment (transfer of rights to assignee or delegation of duties) Novation (substitutes a new contract or party for the original) Breach by one of the parties without legal cause Liquidated damages clause may specify the amount the seller will receive if the buyer defaults Failure to enforce contract within statute of limitations Mutual agreement of parties Operation of law, as when a contract is void from inception Rescission (cancellation) by one or both parties
TREC promulgates the Loan Assumption Addendum. In a transaction where a buyer is assuming a seller's loan
TREC's Loan Assumption Addendum is required. If TREC provides a promulgated addendum that addresses a situation, the addendum must be used.
What law specifically prohibits licensees from practicing law?
Texas Real Estate Licensing Act (TRELA). The TRELA specifically prohibits licensees from practicing law.
Which TREC form should be used if the buyer wishes to include personal property such as a piece of furniture displayed in a home in the purchase price?
The Non-Realty Items Addendum. Typically, if a buyer wishes to buy personal property and have it built into the total purchase price, the Non-Realty Items Addendum must be used.
TREC contract forms
The closing date is in paragraph 9 License holder disclosure is addressed in paragraph 4 The addenda included in the agreement are in paragraph 22 Earnest money is addressed in paragraph 5 The amount of the cash down payment is in paragraph 3 The names of the sellers and buyers, including marital status, are in paragraph 1 The legal description of the property is in paragraph 2 Title policy information is in paragraph 6
Under the contract between Kramer and Sweeney, what happens if the first contract between Kramer and Wright does not terminate by May 20?
The contract between Kramer and Sweeney terminates and the earnest money will be refunded to Sweeney.
The earnest money paragraph addresses all of the following EXCEPT
Title policy company YES: Additional earnest money Escrow officer Date to provide additional earnest money
unilateral contract involves
a promise in exchange for an act.
Under paragraph 2 of the One to Four Family Residential Contract, items such as window air conditioning units, curtains and rods, and door keys are considered
accessories and are included in the sale unless specifically excluded. Accessories include 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, and controls for: (i) garage doors, (ii) entry gates, and (iii) other improvements and accessories.
According to the Texas Real Estate License Act, which of the following requires that a licensee be a practicing attorney?
advising a person regarding the validity of title to real property. TRELA Section 1101.654 states that "The commission shall suspend or revoke the license or certificate of registration of a license or certificate holder who is not a licensed attorney in this state and who, for consideration, a reward, or in a pecuniary benefit, present or anticipated, direct or indirect, or in connection with the person's employment, agency, or fiduciary relationship as a license or certificate holder...advises a person regarding the validity or legal sufficiency of an instrument or the validity of title to real property."
An amendment is completed
after a contract has been executed, but addenda are completed at the same time as the sales contract. Once a contract form has been signed and agreed upon, the proper way to make changes is with the promulgated amendment form. Addenda contain additional information that is part of the original contract/agreement.
Which of the following is TRUE regarding amendments and addenda?
an amendment is completed after a contract has been executed, but addenda are completed at the same time as the sales contract. An amendment is a change or modification to the existing content of a contract, and an addendum contains additional information that is part of the original contract/agreement.
Which of the following is included in paragraph 2 of the TREC One to Four Family Residential Contract?
excluded fixtures and accessories. legal description of the property. The marital status of the parties is addressed in paragraph 1; the name of the parties is addressed in paragraph 1. The property price is addressed in paragraph 3. Down payment & sum of financing are in paragraph 3. Marital status in in paragraph 1.
Once a sales contract is completed with all parties fulfilling their promises, the ownership changing hands, and the seller receiving the sales price amount, the sales contract is a(n)
executed contract. At closing, after the seller has conveyed the property to the buyer and the seller has received the sales price amount, the contract is considered an executed contract.
A real estate broker, acting only as a principal to a transaction (i.e., as a buyer or seller),
exempt from mandatory use of a TREC promulgated form. Transactions in which the licensee is functioning solely as a principal, not as an agent, are exempt from mandatory use of TREC promulgated forms.
The statute of limitations for a written contract for the sale of real estate in Texas is
four years. In Texas, the statute of limitations for filing a legal suit on a written contract is four years. Remember that the statute of frauds requires agreements affecting title to or interest in real estate in Texas to be in writing to be enforceable, so the statute of limitations on a contract for the sale of real estate is four years.
Which of the following is not negotiable in paragraph 23?
how long the buyer has to provide the option fee. The buyer must provide the option fee within three days after the effective date of the contract. The time period is not negotiable.
Under the TREC Loan Assumption Addendum, the seller has the right to terminate under all of the following conditions EXCEPT
if the note holder requires payment of an assumption fee in excess of the negotiated amount. Under the TREC Loan Assumption Addendum, only the buyer may terminate if the assumption fee exceeds the negotiated amount. Paragraph B gives the seller the right to terminate if credit documentation is not delivered within the time frame. The seller must terminate within seven days after expiration of the time for delivery and the seller receives the earnest money. The seller also has the right to terminate if the items are timely delivered, but the seller determines that the buyer's credit is not acceptable. The seller may terminate within seven days after expiration of the time for delivery. In this event, the buyer receives the earnest money. If the seller fails to terminate, he is deemed to have approved the buyer's creditworthiness. Either seller or buyer may terminate if the note holder doesn't consent to the assumption. In this case, the buyer is refunded the earnest money.
Under the TREC Loan Assumption Addendum, the seller has the right to terminate under each of the following conditions EXCEPT
if the property fails a home inspection. The TREC Loan Assumption Addendum does not address property condition. Paragraph B gives the seller the right to terminate if credit documentation is not delivered within the time frame. The seller must terminate within seven days after expiration of the time for delivery and the seller receives the earnest money. The seller also has the right to terminate if the items are timely delivered, but the seller determines that the buyer's credit is not acceptable. The seller may terminate within seven days after expiration of the time for delivery. In this event, the buyer receives the earnest money. If the seller fails to terminate, he is deemed to have approved the buyer's creditworthiness. Either seller or buyer may terminate if the note holder doesn't consent to the assumption. In this case, the buyer is refunded the earnest money.
Property approval, according to paragraph B2 in the Third Party Financing Addendum, includes
lender-required repairs. the appraisal. insurability.
For which of the following actions may the Texas Real Estate Commission NOT suspend a licensee's licensee?
licensee explains to the principals the meaning of the factual statements or business details contained in the contracts. Licensees are free to explain to principals the meaning of factual statements or business details contained in contracts as long as no legal advice is offered or given.
A licensee is purchasing property for himself. A TREC promulgated contract is appropriate for this purchase, but the licensee decides to be creative and draft his own contract from what he has learned in his real estate classes. Which of the following is most likely to be TRUE?
licensee has the right to draft his own contract. TREC promulgated forms are not required in transactions in which the licensee is functioning solely as a principal, not as an agent.
What should a licensee do if the seller wishes to retain an item not specifically listed as an improvement or accessory in paragraph 2 of the TREC One to Four Family Residential Contract?
list the item as an exclusion in paragraph 2D. Even though some items are not specifically addressed as improvements for accessories, the lists are not exclusive. Therefore, the seller should itemize any items he or she wishes to keep in the exclusions subparagraph.
A seller wishes to keep an item listed as an accessory. How should the TREC One to Four Family Residential Contract be filled out?
list the item under Exclusions. While one might be tempted to merely cross out the items where it is listed in "Accessories," the appropriate thing to do is to itemize any items that will go with the seller in the exclusions sub paragraph.
The seller wants to keep the built-in, high-end stovetop. How should the seller's agent note that?
list the stovetop in paragraph 2, Exclusions. Since the stovetop is built in, it is included in the list of improvements in paragraph 2. The sellers should list the stove top as an exclusion in paragraph 2.
A contract that complies with all the basic requirements may still be either void or voidable. To be valid, the contract must have
mutual agreement. A contract must be entered into by consent as a free and voluntary act of each party.
A contract may be discharged under substantial performance when
one party does not complete all the details exactly as the contract requires but has to a large extent performed on the contract, which may be enough to force payment. An example of this is a newly constructed addition to a home that is finished except for polishing the brass door knobs, in which case the contractor may be entitled to the final payment and the contract is discharged.
Which paragraph in the TREC One to Four Family Residential Contract deals with title issues?
paragraph 6. Information required to complete paragraph 6 includes who will pay for the title policy, what company will issue the title policy, whether a new or existing survey will be provided, who will pay for the survey, who will furnish the survey, the number of days to furnish the survey, objections to title, and whether the property is subject to an HOA.
Which paragraph of TREC One to Four Family Residential Contract addresses whether the property is subject to an HOA?
paragraph 6. Paragraph 6 addresses the title policy, survey, and HOA information, among other things. Paragraph 5 addresses earnest money, paragraph 7 addresses the property condition, paragraph 4 addresses a licensee disclosure.
Contracts may be discharged or terminated whenever the parties agree, along with a written acceptance, that the work performed is close enough to completion and that the contract is discharged even if some minor elements remain unperformed. This is called
partial performance. Discharge or termination requires written acceptance by the party for whom the acts have not been done, or to whom money is owed.
Who appoints the lawyers to the Broker-Lawyer Committee?
president of the state bar. According to Section 1101.252, the six lawyers on the Broker-Lawyer Committee are appointed by the president of the state bar.
Under the TREC Third Party Financing Addendum, which of the following is NOT considered by the lender?
property condition. Buyer approval means the terms of the loan described must be available and the lender has determined the buyer's assets, income, and credit history meet the lenders requirements. Full loan approval also takes into consideration the condition and value of the property.
What information is required to fill out paragraph 3 of the TREC One to Four Family Residential Contract?
sales price. Sales price is in 3C.
An agreement entered into involuntarily by a party is
void. This agreement lacks mutual agreement, which means that the parties must enter the contract freely and voluntarily. Without mutual agreement, the agreement is void.
Which of the following is considered a surface material that may be used for developing or removing oil, gas, or other minerals?
sand. The mineral estate does not include water, sand, gravel, limestone, building stone, caliche, surface shale, near-surface lignite, and iron, but does include the reasonable use of these surface materials for mining, drilling, exploring, operating, developing, or removing the oil, gas, and other minerals from the property.
What information is required in paragraph 12 of the TREC One to Four Family Residential Contract?
seller's contribution to buyer's expenses. Earnest money is addressed in paragraph five. The addresses of the buyer and the seller for purposes of providing notices are addressed in paragraph 21. Specific repairs required by the buyer are addressed in paragraph seven.
"Time is of the essence" in real estate contracts means
that parties are held to exact performance of their duties within the time specified in the agreement. Parties are held to exact performance within the time specified when the agreement has incorporated the words "time is of the essence" or when an Option to Purchase or an Option to Terminate is the contract being interpreted.
A real estate broker modifies a 1992 TREC promulgated contract form and updates it to fit a particular transaction. Which of the following could happen?
the broker could have his license suspended or revoked for practicing law. TREC rule 537.11 addresses the use of standardized forms for mandatory use by a licensee when the form fits a particular transaction.
Which of the following is not included in paragraph 2 of the TREC One to Four Family Residential Contract?
the marital status of the parties. The marital status of the parties is part of paragraph 1. Each of the remaining answers is included in paragraph 2.
A buyer and seller enter a contract for the sale of a 3-bedroom residential property. Shortly after the contract is in place, the buyer has an inspection done. As a result of the inspection, the buyer wants the seller to fix the fence and replace the garage door opener. The seller agrees. How should the parties proceed?
the parties must use an amendment form. If a change is made after all parties have signed off, a separate amendment must be prepared requiring the signature of all parties.
Paragraph 2 of the TREC One to Four Family Residential Contract includes all of the following EXCEPT
the sales price. The marital status of the parties is part of paragraph 1. Each of the remaining answers is included in paragraph 2. Property price is in paragraph 3.
Under the TREC Loan Assumption Addendum, what happens if the seller fails to notify the buyer within seven days that the seller has decided that the buyer's credit is not acceptable?
the seller is deemed to have approved the buyer's creditworthiness. The seller has the right to terminate if he determines that the buyer's credit is not acceptable. The seller may terminate within seven days after expiration of the time for delivery. In this event, the buyer receives the earnest money. If seller fails to terminate, he is deemed to have approved the buyer's creditworthiness, but the buyer has no option to terminate.
Which of these promulgated forms includes "time is of the essence"?
the six promulgated contract forms. The six promulgated contract forms and four addenda include time is of the essence: Addendum for Sale of Other Property by Buyer, Addendum for Back-Up Contract, Third Party Financing Addendum, and Short Sale Addendum.
Which of the following is TRUE for the statute of limitations for contracts for the sale of real estate and oral contracts for leases of less than one year?
the statute of limitations is four years for the sale and two years for the lease. In Texas, the statute of limitations for filing a legal suit on a written contract is four years. Remember that the statute of frauds requires agreements affecting title to or interest in real estate in Texas to be in writing to be enforceable, so the statute of limitations on a contract for the sale of real estate is four years. Under the statute of frauds, leases for one year or less do not have to be in writing. An oral contract for the lease of a property for one year or less has a statute of limitation of two years.
The statute of frauds requires agreements affecting
title to or interest in real estate in Texas to be in writing to be enforceable.
In Texas, the statute of limitations for an oral contract for a lease of less than one year is
two years. Under the statute of frauds, leases for one year or less do not have to be in writing. An oral contract for the lease of a property for one year or less has a statute of limitation of two years.
When a contract appears to be valid on the surface but neither party can sue the other to force performance it is
unenforceable. An unenforceable contract is an agreement that had all six elements at the time it became an executory contract but, due to a change in conditions, no longer meets the requirements of law and no longer can be upheld by a court.
A seller accepted money from a buyer for his unrestricted right to cancel the purchase transaction (option to terminate) within ten days of the executed date of the sales contract. This agreement is a(n)
unilateral contract. This is a one-sided agreement with the seller's promise to sell enticing the buyer to buy his property. The buyer is not legally obligated to act but the seller is obligated to keep his promise.
The seller wishes to convey the washer and dryer, but the buyers wish to pay a nominal price for them and the sellers agree. What should the agent do?
use the Non-Realty Items Addendum. If the seller wishes to sell the appliances to the buyer for a nominal fee and have those be part of the total sales price, the Non-Realty Items Addendum should be used.
The buyer wants the free standing bookshelves in the study to be included in the sales price. How should the agent handle it?
use the Non-Realty Items Addendum. If the seller wishes to sell to the buyer the bookshelves and have those be part of the total sales price, the Non-Realty Items Addendum should be used.
The seller wishes to sell to the buyers all of the flower pots on the patio. What should the agent do?
use the Non-Realty Items Addendum. If the seller wishes to sell to the buyer the flowerpots and have those be part of the total sales price, the Non-Realty Items Addendum should be used.