Texas Real Estate - Contract Law Review

TREC

Main focus is to protect the public, therefore the rules & regs are construed liberally, with a view toward their purpose.

Site Built

Majority of homes in US are site built. Constructed by a crew that takes delivery of component parts to be assembled on the job site. All components needed to build a home.

RESPA

Mandates disclosures for mortgage escrow accounts at closing and annually.

Manufactured Homes

Manufactured home dealers and salespeople in Texas are licensed by the TX Dept. of Housing and Community Affairs TDHCA

Complaints

Many of the complaints against license holders and subsequent investigations by the Commission could be avoided if the license holder had a thorough understanding of the rules related to contracts and promulgated forms.

Net Lease

" A net lease is one in which, in addition to rent, the tenant pays expenses such as taxes, insurance and maintenance. A net lease shifts the risk of cost increases from the landlord to the tenant.

Annual Escrow Account

" A servicer must submit to the borrower an annual statement for each escrow account within 30 days of the completion of the computation year. The servicer must conduct an escrow account analysis before submitting an _____________statement to the borrower."

Fee Sharing Agreement

" Brokers working with non-MLS brokers should contact the listing broker and enter into a fee sharing agreement prior to showing the property to the potential buyer."

Commission

" Only a broker may earn a commission and only a broker may sue to collect a commission. The broker may sue a seller who has defaulted on a listing agreement, or a buyer who has defaulted on a buyer's representation agreement. If a broker seeks to enforce payment of a commission, the following requirements must be satisfied: • The broker must have an employment agreement with a promise to pay a commission, signed by the party to be charged. (Usually, the seller) • The broker must hold a valid real estate license. • The broker must be the procuring cause of the sale. • The broker must provide a ready, willing and qualified buyer who agrees to the sale terms required by the seller. The buyer may not be under duress. • The license holder must have informed the purchaser, in writing, to have the abstract examined by an attorney or the buyer should be furnished with a title policy."

Open Listing

" The open listing gives the seller the right to list the property with multiple competing brokers and to sell the property personally without liability for payment of a commission. Some sellers believe that an open listing best serves their interests - that listing with several brokers produces more prospects than does a single listing company. The open listing has resulted in many lawsuits between brokers, each claiming commission. These actions are known as procuring cause lawsuits."

Written Notice of Compensation to Broker

" When representing a buyer, fee arrangements must be clearly understood between seller, buyer and agents. Clarity in compensation is one of the many good reasons to insist upon a written buyer representation agreement."

Lease Option

" residential real estate, options are used on a short-term basis. • In some states, short-term options are used to hold a property while the potential buyer is having inspections performed. • In residential leasing, a tenant may have the option to purchase the property during the lease term"

RESPA Reg X Section 10 Limits on Escrow Accounts

" sets limits on the amounts that a lender may require a borrower to put into an escrow account for purposes of paying taxes, hazard insurance and other charges related to the property. RESPA does not require lenders to impose an escrow account on borrowers; however, certain government loan programs or lenders may require escrow accounts as a condition of the loan. The lender must perform an escrow account analysis once during the year and notify borrowers of any shortage. Any excess of $50 or more must be returned to the borrower."

TRE Broker-Lawyer Powers & Duties

"(a) In addition to other delegated powers and duties, the committee shall draft and revise contract forms that are capable of being standardized to expedite real estate transactions and minimize controversy. (b) The contract forms must contain safeguards adequate to protect the principals in the transaction."

Waiver NOT Effective

"(b) A waiver under Subsection (a) is not effective if the consumer's legal counsel was directly or indirectly identified, suggested, or selected by a defendant or an agent of the defendant. (c) A waiver under this section must be: (1) conspicuous and in bold-face type of at least 10 points in size; (2) identified by the heading "Waiver of Consumer Rights," or words of similar meaning (3) in substantially the following form: "I waive my rights under the Deceptive Trade Practices-Consumer Protection Act, Section 17.41 et seq., Business & Commerce Code, a law that gives consumers special rights and protections. After consultation with an attorney of my own selection, I voluntarily consent to this waiver.""

Four Categories of Unlawful Trade Practices

"1. Misleading or deceptive conduct employed by any person that was relied upon by the consumer to the consumer's detriment 2. Breach of express or implied warranties 3. Violations of the Texas Insurance Code (Chapter 541) 4. An unconscionable Action or course of action by any person. Under DTPA intent is irrelevant. "Intention may be inferred from objective manifestations that indicate that the person acted intentionally or from facts showing that a defendant acted with flagrant disregard of prudent and fair business practices to the extent that the defendant should be treated as having acted intentionally.""

Arrangement does not violate Section 8 of RESPA and Regulation X if:

"1. The referring party must give the CBA disclosure to the consumer at or prior to the time of referral or with the Loan Estimate, which includes: • the nature of the relationship (explaining the ownership and financial interest) between the provider and the lender. • the estimated charge or range of charges generally made by such provider. 2. The lender does not require the use of such a provider, with the following exceptions: the bank may require a buyer, borrower, or seller to pay for the services of an attorney, credit reporting agency, or real estate appraiser chosen by the bank to represent its interest. 3. The lender receives only a return on ownership or franchise interest or payment otherwise permitted by RESPA."

Equitable Estates

"A freehold owner will often grant certain rights in his estate to others. These rights or privileges create an interest that is less than ownership or possession, but nonetheless exists, and as such is called an equitable estate. The most common of these are liens and easements. A lien is a claim against property to secure payment for a debt. A lien is an encumbrance. A lien can be created by agreement of the parties (voluntary) as in a mortgage lien, or through the operation of law (involuntary or statutory) as in judgment liens. A mortgage becomes a lien when it is recorded. The mortgage, which is a security, represents the lender's interest in the property. Another type of equitable estate is created when an easement exists. An easement gives one the right to use or pass over another's property for a specific purpose. There are two categories of easements:"

Reasonable Accommodation

"A landlord must make reasonable accommodation in rules, policies, practices or services if necessary for the disabled person to use the housing. • A building with a "no pets" policy must allow a visually impaired tenant to keep a guide dog. • An apartment complex that offers tenants ample, unassigned parking must honor a request from a mobility-impaired tenant for a reserved space near her apartment if necessary to assure that she can have access to her apartment. Housing need not be made available to a person who is a direct threat to the health or safety of others or who currently uses illegal drugs. If an individual feels he or she has been discriminated against, the individual may file a complaint with the Texas Workforce Commission Civil Rights Division, HUD, the courts, or with the U.S. Attorney General. The complaint must be filed within two years of the alleged act. Burden of proof of discrimination lies with the person filing the complaint. Remedies include actual damages and punitive damages. Because violation of the law is considered a civil offense, there are no criminal penalties for violations of fair housing laws. Placing the equal housing sign in the office window, signing the Voluntary Affirmative Marketing Agreement, (VAMA), having and adhering to standard office procedures for working with customers, and holding regular meetings on fair housing practices are required to demonstrate compliance."

Liens

"A lien is a right given by law to certain creditors to have debts paid out of the property of a defaulting debtor, usually by means of a court sale. A lien holder does not own the property that is encumbered. Rather, the holder has an interest that, in some cases, may result in the foreclosure of the property. Common examples of liens include: • Mortgages and Trust Deeds • Tax Liens • Judgments • Mechanics and materialman's (M&M) liens Liens may also be categorized as voluntary or involuntary, and as statutory or equitable. A voluntary lien is one that is freely given, usually as collateral for a loan. A mortgage lien is a common example of a voluntary lien. An involuntary lien is one that is placed on the property against the wishes of the property owner. Common examples of involuntary liens include judgment and tax liens. Because it is created by law, a tax lien would also be categorized as a statutory lien. Equitable liens arise out of common law. A judgment for unpaid debts would be an example of an involuntary equitable lien against real estate."

Partnership

"A partnership must have one or more general partners. A general partner may take part in the day-to-day management of the business, and has full personal liability for partnership-related issues including everything from financial obligations to personal injury lawsuits. The unlimited liability of the general partnership is a serious concern for anybody who might want to invest in a real estate venture. The limited partnership addresses that concern.

Potentially Responsible Parties

"A potentially responsible party (PRP) is a possible polluter who may be held liable under CERCLA for the contamination of a property or resource. The potentially responsible parties include: • The current owner or operator of the site • The owner or operator of a site at the time that disposal of a hazardous substance, pollutant or contaminant occurred • A person who arranged for the disposal of a hazardous substance, pollutant or contaminant at a site • A person who transported a hazardous substance, pollutant or contaminant to a site, who also has selected that site for the disposal of the hazardous substances, pollutants or contaminants. Note that a lender who forecloses a property or who becomes involved in the day-to-day financial management of a business that is in delinquency on a loan, could possibly become a responsible party."

Notice Regarding Coastal Area Property

"A seller of coastal property abutting tidally influenced water must provide the Notice Regarding Coastal Area Property. This notice informs buyers that owners may gain or lose portions of the land due to the actions of water. A seller who sells property located seaward of the Gulf Intracoastal Waterway must disclose that structures must not be erected seaward of the vegetation line. If a structure is erected seaward of that line, or becomes seaward as a result of natural causes, the structure would be subject to a lawsuit by the State of Texas for removal."

Right of First Refusal

"A tenant has a right to match or better any offer the landlord may received on the property before the property can be sold to anyone else. A right of first refusal is not a lease-purchase agreement or a lease with an option to buy, because the leased property is not currently for sale."

Offer and Acceptance - Mutual Consent

"A valid contract must be based upon the consent of the parties. The contract must therefore reflect the intent and wishes of the parties. Mutual consent is often referred to as a "meeting of the minds." For a contract to exist, there must have been a meeting of the minds (offer and acceptance) between the parties. The determination of mutual consent is usually a question of fact and is completed by the process of offer and acceptance. Circumstances sometimes arise that result in a failure to have a meeting of the minds or mutual assent. Consider the buyer who is about to be defrauded by a seller who is attempting to sell a property that he does not own. The buyer's intent is to purchase real estate, and the seller's intent is fraud. In such a case, there never was a meeting of the minds, and the contract is void. Another example of a failure to have mutual consent could come through a mutual mistake. If the seller and buyer negotiate a sale, and it is discovered that they were talking about different tracts of land, there is no meeting of the minds due to the mutual mistake. Note that the mistake must be mutual between the buyer and seller. For example, a buyer cannot terminate a contract on the grounds that he or she really made a "mistake" in signing it in the first place."

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. Steering can be blatant or quite subtle. Directing buyers or renters to a particular neighborhood, or to a particular building within an apartment complex based upon a protected class would be an example of steering. Grouping families with children in one building in an apartment complex would also constitute steering, and could subject the landlord and property manager to liability under fair housing laws."

Assignment

"An _____ 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. Unless otherwise provided in the contract, all contracts are assignable with 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 _____ (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."

Producing Cause

"Any consumer can bring an action against a provider of services when the consumer can prove that the servicer was the _______________ ____________ of any of the following: • use or employment by any person of a false, misleading or deceptive act or practice that is specifically identified in the act. • breach of an express or implied warranty. • any unconscionable action or course of action by any person. • the use or employment by any person of an act or practice in violation of the Texas Insurance Code. Producing cause requires proof that the act or omission was a significant factor in bringing about injury."

Timeshare

"As the concept was brought to the Americas, developers saw the potential profitability of selling weeklong intervals of time. Most of the intervals are on a weekly basis (1/52 of a year). Depending on the legal form of the timeshare, owners may take title to a time interval, or may simply acquire the right to use the unit for a specific time interval. Timeshares are often used for resort or vacation properties, and are prevalent in Florida, Mexico and the Caribbean. Note that the physical appearance of a complex does not determine the type of ownership. A complex that appears to be a traditional garden apartment may be a cooperative, condominium or timeshare."

Seller's Disclosure of Property Condition

"Contrary to popular belief, Section 5.008 did not expand the list of items that a seller must disclose to a potential buyer. The assumption in the past was that all of the items in the disclosure form were required. The form provides an easy way to comply with the requirement to disclose.

DTPA

"DTPA is part of the Texas Business and Commerce Code, Title 2. Competition and Trade Practices, and applies to trade and commerce in the state of Texas. Trade and commerce include: • advertising • selling • leasing • distributing good or services that affects the people of the state of Texas. Under DTPA, a consumer is an individual or business who has purchased or leased or sought to purchase or lease goods or serves, and the goods or services that were acquired are the basis of the complaint. Money does not have to change hands in order for consumer status to be established, and there does not have to be a written purchase agreement for DTPA to apply."

Broker-Lawyer Committee

"Drafts and revises contract forms for use in real estate transactions in the state of Texas. To address the problem of the unlawful practice of law, the Texas Real Estate Commission (TREC) established the Broker-Lawyer Committee to write residential contract forms that, with few exceptions, are mandatory for license holders. These forms are known as promulgated forms"

Mold

"Due to the prevalence of mold, and the growing number of cases of dangerous levels of mold exposure, many states have begun to legislate mold standards. These standards provide guidelines for permissible levels of indoor mold and how to remediate mold if it is found in dangerous levels in a residence or building. Texas passed the Texas Mold Assessment and Remediation Rules (TMARR) on January 1, 2005, launching its Mold Mission Program. TMARR is administered by the Texas Department of State Health Services (DSHS), and sets rules and regulations for the inspection, assessment and remediation of mold. TMARR requires that all persons who conduct assessment and remediation of mold be properly trained and licensed by the state. Under the rules, a person is not required to be licensed to perform mold remediation in an area in which the mold contamination affects a total surface area of less than 25 contiguous square feet. Also, an owner, or a managing agent or employee of an owner, is not required to be licensed to perform mold assessment or mold remediation on a residential property which is owned by that person, and which has fewer than 10 residential dwelling units. This exemption applies regardless of the total surface area within the residential property that is affected by mold growth. An insurer may not use an underwriting guideline regarding a residential property insurance policy based upon previous mold damage or a prior mold damage claim filed either by the applicant or on the covered property if: • It is inspected by an independent mold assessor or adjuster, who is licensed to perform mold assessment who provides to the property owner written certification on a Certificate of Mold Damage Remediation (MDR-1) that based on the mold assessment inspection, the property does not contain evidence of mold damage.

Elements of a Valid and Enforceable Contract

"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"

Promulgated Forms

"Forms published by TREC that are mandatory for license holders to use in real estate transactions in the state of Texas. The term promulgated means "to make known by open declaration; publish." These contract forms expedite real estate transactions and reduce controversies to a minimum while containing safeguards to adequately protect the interest of the principals to the transaction. If the license holder uses TREC-promulgated forms properly, the unlawful practice of law issue is more easily avoided."

Requirements for New Buildings

"In buildings that are ready for first occupancy after March 13, 1991, and have an elevator and four or more units: • Public and common areas must be accessible to persons with disabilities. • Doors and hallways must be wide enough for wheelchairs. All units must have: • An accessible route into and through the unit. • Accessible light switches, electrical outlets, thermostats and other environmental controls. • Reinforced bathroom walls to allow later installation of grab bars. • Kitchens and bathrooms that can be used by people in wheelchairs. If a building with four or more units has no elevator and will be ready for first occupancy after March 13, 1991, these standards apply to ground-floor units. These requirements for new buildings do not replace any more stringent standards in state or local law"

Valid, Void, Voidable & Unenforceable Contracts

"In most states, including Texas, an individual under the age of eighteen is considered a minor. Contracts executed by minors are generally voidable at the option of the minor, but may be enforced by the minor against the adult party. Therefore, anyone who contracts with a minor does so with the possibility that the minor may choose to void the contract. Assuming they took no action to void the agreement, the contract generally becomes valid and binding when the contract closes or when the minor achieves legal age.

Fair Housing Act

"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 • Deny availability of a dwelling • Set different terms, conditions or privileges for rental of a dwelling • Provide different housing services or facilities • Falsely 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"

Environmental Site Assessment ESA

"Phase 1 ESA 1. Site inspection 2. Review of regulatory records 3. Interviews with former or current owners and area locals who may have information about the history of the property A Phase I ESA does not assess for mold, asbestos or radon. If it is determined that the property is contaminated, a Phase II ESA should be performed."

Exceptions to unlawful practice

"Properly completing a form promulgated by the Commission is acceptable and does not constitute the unlawful practice of law. • An attorney-prepared form is acceptable. • A form required by the owner or an attorney is acceptable."

Homestead

"Protection of a creditor's interests in a debtor's property. Exists through the US. Primary residence of an individual and in some cases the personal property of an individual will be exempt from the claims of certain creditors. Embodied in the Constitution of the State of Texas and therefore can only be changed by the voters in a constitutional amendment. There is no upper limit on the value of a Texas homestead. Homestead is limited to no more than 10 contiguous acres. A rural homestead can consist of up to 100 non-contiguous acres for a single individual or 200 non-contiguous acres for a married couple. Homestead protection is automatic and cannot e waived by the homeowner. In the case of a married couple, the signature of both spouses is required to sell or encumber the homestead. Therefore, Texas license holders must be aware of possible community property rights and homestead rights when obtaining the signatures of sellers on a listing agreement or contract. The law prevents the forced sale of the homestead for payment of all debts, with five exceptions: 1. Non-payment of property taxes 2. Non-payment of mortgage lien 3. Non-payment of mechanic's and materialman's lien 4. Non-payment of property owner association fees or dues 5. Non-payment of a home equity loan"

Exclusive Right to Sale

"Real estate brokers recommend this listing which grants an exclusive right to sell the property during the listing term. A commission is paid even if the property is sold by the owner. Most brokers prefer the exclusive right to sell listing agreement, as it affords the broker the greatest degree of protection in earning a commission during the listing term."

Environmental Protection Legislation

"The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) was passed by Congress in 1980. CERCLA was designed to clean up sites contaminated with hazardous substances, pollutants or contaminants. CERCLA gives the authority to recover natural resource damages caused by releases of hazardous substances. Authority for cleanup under the Act is granted to: • Federal natural resource agencies • States' natural resource agencies • Native American tribes Primary responsibility for cleanup is given to the U.S. Environmental Protection Agency (EPA). The EPA may identify parties responsible for hazardous substances released to the environment and compel those parties to clean up the sites, or it may cleanup itself and recover the costs from responsible parties. Responsible parties could include buyers, sellers, or any party who contributed to the pollution."

RESPA

"The Real Estate Settlement Procedures Act (RESPA) first passed in 1974. It applies to transactions with loans on residential property (1-4 units). RESPA requires certain disclosures that spell out the costs associated with the transaction, outline lender servicing and escrow practices, and describe business relationships between settlement service providers. 1. help consumers become better shoppers for settlement services 2. eliminate kickbacks and referral fees that unnecessarily increase the cost of certain settlement services."

Junk Fax Prevention Act

"The Telephone Consumer Protection Act (TCPA), restricts the use of the facsimile machine to deliver unsolicited advertisements. Specifically, the TCPA prohibits the use of "any telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine," applying only to those facsimile messages that constitute "unsolicited advertisements." The statutory prohibition applies to such advertisements sent both to residential and business facsimile numbers. In 2005, the Junk Fax Prevention Act amended the TCPA to permit the sending of unsolicited facsimile advertisements to individuals and businesses with which the sender has an established business relationship (EBR) and to provide a process by which any sender must cease sending such advertisements upon the request of the recipient. On April 5, 2006, the Commission adopted rules to implement the Junk Fax Prevention Act. Among other things, the rule requires the sender of fax advertisements to provide notice and contact information on the fax that allows recipients to opt out of future fax transmissions from the sender and requires senders to honor opt out requests within the shortest reasonable period of time, not to exceed 30 days."

American Disabilities Act

"The _____ is an expansive law that affects almost all public accommodations, including retail stores, real estate offices, concert venues, government buildings, professional offices, restaurants, bars and hotels, just to name a few. Both a tenant in a commercial space and the landlord are potentially liable for violations of the _____. When readily achievable, the _____ requires the removal of architectural and communication barriers. Ramp installations, curb cuts in sidewalks, repositioned shelves and telephones, flashing alarm lights, marked elevator control buttons, wider doors, elimination of turnstiles, alternate paths for travel, and levered door handles for easy access are also required. Single-family homes, private clubs, historic buildings, and religious organizations are exempt from the _______."

Private Control of Land Use

"The most common private controls of land use are deed covenants, conditions and restrictions (CC&Rs) and property owner association (POA) regulations. The style and appearance requirements of improvements are set by covenants (garages facing the rear of the property, etc.). CC&Rs are found in a recorded document called a Declaration of Restrictions, and are imposed by the grantor, who is usually the developer of the subdivision. Violation can result in civil court action brought by other property owners who are bound by the same deed restrictions. The court will issue an injunction to enforce the restrictions. In some cases, both deed restrictions and zoning can exist. If this is true, whichever is the most restrictive or limiting must be obeyed. Deed restrictions are usually permanent and in most cases do not expire. They control present and future owners and tenant"

Real Estate Licensing Laws

"The purpose of state licensing laws and regulations is to protect the public against unscrupulous real estate practitioners. In all states, it is unlawful for anyone to engage in the business of real estate brokerage without first obtaining a real estate license. All states require mandatory training and the passage of an exam for licensure, and each state has its own distinct requirements for obtaining a real estate license. Some states publish contract forms and addenda that are required in certain types of transactions when handled by a license holder. In other states, an attorney may be necessary for every real estate transaction. A license to practice real estate is valid only in the state in which it was issued. If a license holder wishes to practice in another state, he or she must obtain a license from that state. Some states have reciprocity, meaning they will issue a license to the holder of a license in a reciprocal state with just an application and the payment of a fee. Certain states (like Texas) do not reciprocate with other states at all."

Exclusive Agency

"The seller agrees to list the property with only one broker during the listing term, with the provision that the seller can sell the property himself or herself, without payment of a commission."

Seller's Disclosure of Property Condition Exceptions

"There are some exceptions to the requirement for completion of a Seller's Disclosure of Property Condition, including sales: • pursuant to a court order or foreclosure sale • by a bankruptcy trustee • to a lienholder by the owner of a property • by a mortgagee (lender) who has acquired the property through a foreclosure or a deed in lieu of foreclosure • by a fiduciary (e.g. an executor, trustee or guardian) in the course of administration of a decedent's estate, guardianship, conservatorship or trust • from one co-owner to one or more other co-owners • to a spouse or to a person in the lineal line of consanguinity (e.g. parents, grandparents, children) of one or more of the transfers • between spouses resulting from a divorce decree or a property settlement agreement incident to a divorce decree • to or from any governmental entity • of a new residence which has not previously been occupied for residential purposes • where the value of the dwelling does not exceed five percent of the value of the property. It is important to note that the eleven exceptions listed above only apply to completing the seller's disclosure form. All sellers, including those listed above, have an obligation to disclose any known material defects to a buyer."

Houston Opportunities for Families

"Unless a building or community qualifies as housing for older persons, it may not discriminate based on familial status. That is, it may not discriminate against families in which one or more children under 18 live with: • A parent • A person who has legal custody of the child or children or • The designee of the parent or legal custodian, with the parent or custodian's written permission. Familial status protection also applies to pregnant women and anyone securing legal custody of a child under 18. Housing for older persons is exempt from the prohibition against familial status discrimination if: • HUD has determined that it is specifically designed for and occupied by elderly persons under a federal, state or local government program or • It is occupied solely by persons who are 62 or older • It houses at least one person who is 55 or older in at least 80 percent of the occupied units, and adheres to a policy that demonstrates an intent to house persons who are 55 or older."

Net Listing

"While net listings are legal in Texas, TREC has recognized the potential for abuse in net listings and has passed two specific rules regarding this type of listing. "

Reproduced Forms

"may be reproduced only from the following sources: (1) numbered copies obtained from the Commission, whether in a printed format or electronically reproduced from the files available on the Commission's website; (2) printed copies made from copies obtained from the commission; (3) legible photocopies made from such copies; or (4) computer-driven printers following these guidelines: (A) The computer file or program containing the form text must not allow the end user direct access to the text of the form and may only permit the user to insert language in blanks in the forms. Blanks may be scalable to accommodate the inserted language. The Commission may approve the use of a computer file or program that permits a principal of a license holder to strike through language of the form text. The program must be: (i) limited to use only by a principal of a transaction; and (ii) in a format and authenticated in manner acceptable to the Commission. (B) Typefaces or fonts must appear to be identical to those used by the Commission in printed copies of the particular form. (C) The text and order of the text must be identical to that used by the Commission in printed copies of the particular form. (D) The name and address of the person or firm responsible for developing the software program must be legibly printed below the border at the bottom of each page in no less than six point type and in no larger than 10 point type. (p) Forms approved or promulgated by the Commission must be reproduced on the same size of paper used by the commission with the following changes or additions only: (1) The business name or logo of a broker, organization or printer may appear at the top of a form outside the border. (2) The broker's name may be inserted in any blank provided for that purpose."

Easements can be terminated:

"• Merger - If the two properties become one, the easement is terminated. • Release - A written agreement can release the servient estate from the easement against it. For example, a property owner might want to negotiate the termination of an easement. If the parties are willing, a release may be recorded terminating the easement. • Abandonment - In the event that an easement is no longer necessary, and the dominant estate shows by its actions its intention to abandon the easement, it can be terminated. • Death - If an easement was a personally held right to come onto a property for a specific reason (sometimes called a license), death of the holder will terminate the easement. An example would be the right to hunt on a property, given by the owner to a friend."

Licensed Holder MAY NOT

(1) practice law; (2) offer, give or attempt to give legal advice, directly or indirectly; (3) give advice or opinions as to the legal effect of any contracts or other such instruments which may affect the title to real estate; (4) give opinions concerning the status or validity of title to real estate; or (5) attempt to prevent or in any manner whatsoever discourage any principal to a real estate transaction from employing a lawyer.

Waivers: Public Policy

(a) Any waiver by a consumer of the provisions of this subchapter is contrary to public policy and is unenforceable and void; provided, however, that a waiver is valid and enforceable if: (1) the waiver is in writing and is signed by the consumer; (2) the consumer is not in a significantly disparate bargaining position; and (3) the consumer is represented by legal counsel in seeking or acquiring the goods or services. (d) The waiver required by Subsection (c) may be modified to waive only specified rights under this subchapter. (e) The fact that a consumer has signed a waiver under this section is not a defense to an action brought by the attorney general under Section 17.47

TRE Broker-Lawyer Com Terms

(a) Committee members serve staggered six-year terms, with the terms of two commission appointees and two State Bar of Texas appointees expiring every two years and the term of the public member expiring every six years. (b)A committee member shall hold office until the member's successor is appointed. (c) If a vacancy occurs during a member's term, the entity making the original appointment shall appoint a person to fill the unexpired term.

TRELA actual language

(a) In this section, "party" has the meaning assigned by Section 1101.551. (b) This section prevails over any other law, including common law. (c) This section does not diminish a broker's responsibility for the acts or omissions of a sales agent associated with or acting for the broker. (d) A party is not liable for a misrepresentation or a concealment of a material fact made by a license holder in a real estate transaction unless the party: (1) knew of the falsity of the misrepresentation or concealment; and (2) failed to disclose the party's knowledge of the falsity of the misrepresentation or concealment. (e) A license holder is not liable for a misrepresentation or a concealment of a material fact made by a party to a real estate transaction unless the license holder: (1) knew of the falsity of the misrepresentation or concealment; and (2) failed to disclose the license holder's knowledge of the falsity of the misrepresentation or concealment. f) A party or a license holder is not liable for a misrepresentation or a concealment of a material fact made by a subagent in a real estate transaction unless the party or license holder: (1) knew of the falsity of the misrepresentation or concealment; and (2) failed to disclose the party's or license holder's knowledge of the falsity of the misrepresentation or concealment.

Binding Contract

(n) A license holder shall advise the principals that the instrument they are about to execute is binding on them. Once all the terms of an offer have been agreed to and signed by the parties, and the acceptance communicated to the offeror, the contract becomes binding on the parties. The contract is known as an executory contract from the effective date through the closing.

Buyer Agency Agreement

May be created orally or in writing, preferred in writing. All intermediary consent must be in writing. Written provisions almost always prevail.

Situs

May change over time as society changes and different lifestyles prevail.

Discount Point

1% of the loan amount, an up-front payment of interest paid by borrowers to reduce the interest rate on the loan. The lower the interest rate offered the borrower, the higher the charge for discount points. Higher rate may result in reduced fees because it will be sold to investors at a premium.

Exempt from RESPA

1. Loans secured by parcels of 25 acres or more, whether or not the property is improved. 2. Loan for which the primary purpose is business, commercial or agricultural. 3. Temporary loans, such as construction loans. Bridge or swing loans. 4. Secured by vacant or unimproved property when none of the proceeds will be used for a manufactured home or to construct a structure within 2 years. 5 For assumption for existing mortgages in which the lender has not right to approve subsequent persons as borrowers.

RESPA Reg X Section 8

1. Prohibition against kickbacks and unearned fees. 2. No referral fees. 3. No split of charges except for actual services performed 4. Thing of value defined in Regulation X 5. Agreement or Understanding as Defined Regulation X

TEXAS DEPARTMENT OF INSURANCE REGULATIONS REGARDING MOLD:

1. Testing mold is not necessary to determine if it should be removed. If mold is visible, it should be removed. 2. Removal is called remediation. 3. Both mold assessors and mold remediators must be licensed. 4. Testing after remediation is not required. 5. Property owners can assess and remediate their own properties without a license. 6. If you hire a mold remediator, he must give you a Certificate of Mold Remediation no later than 10 days after work is complete. The certificate verifies that the mold has been removed and certifies with a reasonable certainty that the underlying cause of the mold has been corrected. 7. Receiving a Certificate of Mold Remediation is an advantage for a homeowner because it prevents an insurer from making an underwriting decision on the property based on previous mold damage or claims. 8. When selling a home, the law requires that the buyer be provided with copies of all Cert of Mold Remediation received within the past five years.

Fannie Mae

1. addresses imbalances of mortgage credit among regions of the United States by making funds available to capital-deficient areas of the country. 2. allows lenders to originate mortgages for sale, rather than for portfolio investment. 3. standardizes mortgage loans, thereby attracting investors

Factory Built

1940 Factory built and delivered to the job site as one or more complete units. Trailers, mobile homes, manufactured homes and modular homes

Right of Redemption

2 year Right of Redemption for homestead property sold at a tax auction in Texas. 2 years to pay the purchaser all expenses and a penalty and regain the land. If the land is not homesteaded the right of redemption is only for 6 months.

Fixture or Personal

3 tests - (1) Intention of parties - items relationship to the article, the purpose and use for which article was attached. (2) Method of attachment - if it would damage the property to be removed then the item is usually judged a fixture. Ie cemented down, wired into system, plumbing, doors, windows etc. (3) Adaptation to the property - how the item fits the property. ie custom measured and installed fireplace screen.

Education Requirements

60 hrs principles, 30 agency, 30 contracts, 30 finance, 30 promulgated contract forms.

Community Property

9 States including Texas recognize. Statutory estate - all property acquired after a marriage is jointly owned by the husband and wife and cannot be conveyed or sold without the signature of both parties. Concept of Spanish Law

Broker Educational Requirements

900 hrs, 270 must be in qualifying real estate courses. Must be actively licensed as a sales agent for 4 of the preceding five years.

Title Insurance

A ____________ policy is a contract between the title company and the insured. The title insurance company agrees to compensate or reimburse the insured against losses sustained as a result of defects in title, other than those exceptions listed in the policy.

Net Listing

A broker should take net listings only when the principal insists upon a net listing and when the principal appears to be familiar with current market values of real property. When a broker accepts a listing, the broker enters into a fiduciary relationship with the broker's principal, whereby the broker is obligated to make diligent efforts to obtain he best price possible for the principal. The use of a net listing places an upper limit on the principal's expectancy and places the broker's interest above the principal's interest with reference to obtaining the best possible price. Net listings should be qualified so as to assure the principal of not less than his or her desired price and to limit the broker to a specified maximum commission.

Property Tax Consultant

A broker who is not a registered property tax consultant may legally perform property tax consulting services for single family residences. Free or for fee. Appraisal Review Board Arbitrator - 30 hr class, $500 fee.

Contingency Appraisal

A buyer who is paying cash for a property may want to insert an appraisal contingency in the contract that would allow for the termination of the contract and a refund of the earnest money if the property fails to appraise for the sales price.

Amendment

A change in the contract. The Amendment can be used for many purposes. If signed by both parties, it becomes a change to the existing contract and must to be submitted to the title company.

Encumbrances

A claim, lien, charge, or liability attached to and binding real property is an encumbrance. Encumbrances place limitations on property owners. Some common examples of encumbrances are liens, easements, encroachments, restrictions, and leases. Property rights of the owner are diminished by an encumbrance. Some encumbrances are desirable, as they afford the services people need (i.e., utility easements), while others are negative as they limit the ability to freely use property, such as easements for ingress and egress onto other property. Some are freely given, such as mortgage liens, and some are taken, or come with the property, such as deed restrictions. In any case, almost all properties have some encumbrances against them. The legal method of removing an encumbrance is to obtain a release.

Closing

A closing is a meeting for completing a transaction, especially one at which contracts are signed, transferring ownership of real estate. It is the process of formulating, executing, and delivering all documents required by a permanent investor, the disbursement of the mortgage funds, and providing for the protection of the investor's security.

Contingency

A contingency is a provision in a contract that requires that a certain act or event happens in order for the contract to be binding on the party.

Legal Purpose

A contract for an illegal purpose is void, and the law treats the contract as if it were never created. An example of a void contract would be one to have somebody killed or to deliver illegal drugs.

Ambiguous

A contract may be considered _____ if one or more of its terms can be interpreted in two or more different ways.

Executory Contract

A contract that is binding on the parties, with one or more of the parties having contractual duties that have not yet been performed.

Corporate Ownership

A corporation is regarded under the law as a distinct legal entity with the right to own real estate and other assets. Even though a corporation may have many stock holders, when the corporation is the sole owner of a parcel of land, the ownership is considered to be an estate in severalty.

DTPA

A court of law cannot suspend or revoke an agent's license under a DTPA violation. There are some provisions in the Texas Real Estate License Act that work hand in hand with DTPA violations. Therefore, TREC could suspend or revoke an agent's license if the license holder is found guilty of:

Lease Option

A lease option allows a tenant to buy the property at a preset price and terms for a given period of time. This can also be called a lease with an option to buy. At the time the lease is negotiated, a purchase price is also negotiated. The tenant has the right to purchase the property at the preset price during the term of the lease. While the tenant is not obligated to buy, the landlord is obligated to sell. Clients who wish to enter into a lease-purchase agreement should be referred to an attorney. License holders in Texas are specifically prohibited from writing this type of agreement for their clients. In Texas, there are no standard TREC forms for option agreements. In order to avoid the unlawful practice of law by license holders, option agreements should be prepared by an attorney.

Periodic tenancy or periodic estate

A lease that renews itself automatically for like periods of time. Requires notice to terminate. Also survives death of either party and the sale of the property but since it is easily terminated by notice this is not usually a problem.

Lawyer Services

A license holder may not employ, directly or indirectly, a lawyer nor pay for the services of a lawyer to represent any principal to a real estate transaction in which the license holder is acting as an agent. The license holder may employ and pay for the services of a lawyer to represent only the license holder in a real estate transaction, including preparation of the contract, agreement, or other legal instruments to be executed by the principals to the transactions.

Licensed Holder MAY NOT

A license holder must not prepare any document that conveys or affects any interest in real property. This would include deeds, wills, deeds of trust, option agreements and lease-purchase agreements. License holders may not give advice regarding the sufficiency of title, including deeds, title reports, title commitments and surveys.

Unlawful Practice of Law

A license holder must not prepare any document that conveys or affects any interest in real property. This would include deeds, wills, deeds of trust, option agreements and lease-purchase agreements. License holders may not give advice regarding the sufficiency of title, including deeds, title reports, title commitments and surveys.

Lien

A lien is a claim against property to secure payment for a debt. A lien is an encumbrance. A lien can be created by agreement of the parties (voluntary) as in a mortgage lien, or through the operation of law (involuntary or statutory) as in judgment liens.

Limited Partnership

A limited partnership includes two distinct classes of partners: General Partner & Limited Partner

Mortgage Company

A major difference between mortgage companies and regulated lenders is that mortgage companies rely on commercial banks that grant a warehouse line of credit to them. The loans are short term, collateralized by the mortgage notes they fund, and are normally repaid through the sale of these notes to the secondary market.

Wraparound Mortgage

A method of financing which preserves the low, existing interest rate on the original note. The wraparound is seller financing, in which a new loan takes a secondary lien position and the original mortgage is not repaid

Title Theory State

A mortgage is an actual transfer of ownership from the borrower to the lender. Title remains with the lender until the loan is repaid. The lender transfers title back to the borrower when the loan is repaid.

Partnership

A partnership is more easily created than a corporation, and can be created with a simple written or oral agreement.

Disabilities

A person is considered disabled if he or she has a condition that substantially limits at least one major life activity, has a record of such a disability, or is regarded as having such a disability. Buyers and renters are considered disabled if they have a physical or mental disability including: • Hearing • Mobility and visual impairments • Chronic alcoholism • Chronic mental illness • AIDS and AIDS-Related Complex • Mental disability A landlord may not refuse to allow a tenant to make reasonable modifications to a dwelling or common use areas, at the expense of the tenant, if necessary for the disabled person to use the housing. Where reasonable, the landlord may permit changes only if the tenant agrees to restore the property to its original condition upon moving out. Advertising can describe the expected behavior of a tenant, and "nonsmoking" and "sober" tenants does not violate the act.

Valid, Void, Voidable & Unenforceable Contracts

A person who enters into a contract under the influence of drugs or alcohol could be considered mentally impaired. In most cases, a person seeking to void a contract on such a basis must show that the other contracting party used the drugs or alcohol as an inducement to sign. It would seem that providing clients with alcohol prior to writing a contact could be a very risky marketing strategy."

Inspection

A process of looking at and examining accessible items, parts, systems, or components and the reporting of observed deficiencies.

Liability for Misrepresentation

A provision of Senate Bill 489 clarified a number of issues regarding misrepresentation on the part of a principal, an agent and a subagent. The general idea is that neither the principal, agent nor subagent is liable for the misrepresentations of the other if they were unaware of the misrepresentation and had no reason to know of the falsity of the information. The text in the box below is the actual language from the License Act:

Net Listing

A real estate license holder is obligated to advise a property owner as to the license holder's opinion of the market value of a property when negotiating a listing or offering to purchase the property for the license holder's own account as a result of contact made while acting as a real estate agent.

Correspondent Lender

A relatively recent classification of a mortgage loan originator is the correspondent lender. Like a mortgage banker, a correspondent lender is someone who processes, underwrites, closes and funds his or her own files in his or her name. Once the loan is closed, the loan is then sold to another lender with which the correspondent lender has a business relationship.

Borrowers Inquiry

A servicer must respond to a borrower's qualified written inquiry and take appropriate action within established time frames after receipt of the inquiry. Generally, the servicer must provide written acknowledgment within 20 business days and take certain specified actions within 60 business days of receipt of such inquiry.

Sole Proprietorship

A sole proprietorship is a venture that is owned by one individual. The primary benefit of a sole proprietorship is that the owner has total control of the business. The potential downside of this form of ownership is that the owner also has full liability for the financial and personal obligations of the business. A sole proprietorship can have employees, but must have only one owner. In most states, it is the easiest form of business organization, and generally requires no formal process or filing to be created.

Timeshare

A timeshare features part ownership of a property coupled with the right to its exclusive use for a specified number of days per year, without the responsibility of full ownership. Timeshares are often referred to as interval ownership. In most states, timeshare owners own the property as tenants in common.

Testamentary Trust

A trust that is created by will and is effective upon the death of the decedent. The deceased (trustor) conveys property to the trustee who will manage for benefit of the beneficiaries. A testamentary trust is especially important when the deceased wishes to provide for minor children or any beneficiary who might be deemed incapable of managing is or her own financial affairs.

Buyer Agency Agreement Benefits

Access to market data, Investment Analysis, Assistance in culling unsuitable properties, Assistance in Obtaining Financing, Assistance with negotiations, Assistance in preparing offers and negotiations, Assistance in preparing offers & negotiating strategies, Assistance with surveys, inspections, repairs.

Intentionally

Acting with awareness or flagrant disregard of prudent and fair business practices

Eviction

Action of forcible detainer (in Texas). Most common default is failure to pay rent.

Ethical and Legal Concerns

Additionally, license holders who are REALTORS® must adhere to the Code of Professional Ethics and Standards of Practice, discussed elsewhere in this book.

Ethical and Legal Concerns

Adherence to these standards and a proactive risk management program will go a long way toward avoiding costly litigation and will build "clients for life".

Unauthorized Practices of Law

Advises a person regarding the validity or legal sufficiency of an instrument or the validity of title to real property. Licensee completes a contract acting as a broker is not

Mortgage Rates

Affected by events in the global financial market.

Remainderman

After life estate the Remainderman gets a Fee Simple Ownership.

Broker's place of business

All Brokers must maintain a fixed place of business in the state.

Commissions

All commissions are negotiable between the broker and his or her client, and are not set by any Board of REALTORS® or between competitors, or by TREC. The elements of an anti-trust violation are:1 • An agreement • between competitors • imposes a restraint, and • restraint is unreasonable.

Oral Negotiations

All oral negotiations are voluntary and do not become binding until committed to writing.

Promissory Note

Also know as a real estate lien note, unconditional promise to repay. Note is not generally recorded.

Appurtenance

An _____ is a right or privilege or improvement that belongs to and passes with land, but is not necessarily a part of the land. When a property is sold, _____ are assumed to pass to the buyer. Examples of _____ include: • Easements • Leases that are binding on a new owner when the property is sold • Fixtures • Buildings and other improvements

Addenda

An action requested or further describes the right and duties of the parties. An addendum to a contract is an attachment that adds or further describes the rights and duties of the parties. Many contingencies are added to the contract as an addendum. Common addenda: • Financing addendum • Lead-based paint • Seller Financing • Flood hazard • Mineral reservations • Property owners association information

Honest Dealing

An agent may not deceive, defraud, or otherwise deal with a customer in a dishonest manner.

Option

An agreement between a buyer and seller or landlord and tenant. A seller, in exchange for some form of consideration (an option fee) gives the buyer the right to purchase the property at some preset price and terms for a period of time.

Contract

An agreement between two or more parties to do something or to refrain from doing something

Contract

An agreement between two or more parties to do something or to refrain from doing something.

Lease

An agreement that transfers the right to possess a property for a period of time.

Contract

An agreement to do something or to refrain from doing something. Contracts may be oral or written. RE contracts must generally be in writing to conform with Statute of Frauds

Assignment of Lease

An assignment of a lease occurs when a tenant's rights and liabilities are transferred to another. In most cases, the landlord reserves the right to approve the new tenant. When the assignment is complete, the original tenant is no longer obligated under the lease.

Easement in Gross

An easement that belongs to a person or corporation and does not belong to the land. Example utility easement

Easement Appurtenant

An easement that is a right for the benefits of a piece of land. Runs with the land and passes to new owners. Ingress or egress of one's property.

Escape Clause

An escape clause provides that, if the seller receives another acceptable offer, the first buyer has a short period of time in which to waive the contingency and proceed with the transaction. Common time frames in an escape clause are 24, 48 or 72 hours.

General Presumption

An individual signing a contract has read it and understands it.

Asbestos

An insulating material used on pipes, chimneys and in roof, siding and flooring - the dust is extremely hazardous. ACM's _____contain materials are firable - they crumble easily releasing hazardous dust into the air.

Open-end Mortgage

An open-end mortgage permits additional borrowing on the same note and mortgage. This is a Home Equity Line of Credit or HELOC. The minimum withdrawal on this line of credit is $4,000.00 in Texas.

Real Estate Licensing Laws & Rules

An understanding of state licensing law and regulation is essential. Real estate license holders must have a good understanding of various aspects of the law. While the license holder must be knowledgeable in all these area, the unlicensed practice of law is forbidden. The advice of a competent attorney should be sought when issues arise in transaction.

Emblements

Annual crops that are considered personal property even though they are attached to the land and may be harvested by the owner of the crop. Tenant will be allows to harvest even if he or she loses pocession of the property prior to harvest.

Building Codes

Another example of police power. Bldg codes apply to all types of commercial and residential bldgs.

Price Fixing

Any attempt by a group of brokers or between a group of brokerage firms to set the commission rates in their area would be considered illegal. The federal laws that have the greatest impact in this area are the Sherman Anti-Trust Act and the Clayton Act. The Sherman Anti-Trust Act is very specific concerning this violation.

Improvements

Any mad-mad additions to the land that are permanent, and is considered to become part of the land. Bldgs, landscaping, fences, patios, decks, roads, curbs, etc. Improvements are included in the sale.

Penalties for Section 8

Any person or persons who violate the provisions of this section shall be fined not more than $10,000 or imprisoned for not more than one year, or both.

RESPA

Applicable to all "federally-related residential mortgage loans."

Corporate Ownership

As a legal entity, the traditional corporation is subject to income taxation. As a result, the stock holders of the corporation are subject to "double taxation." A typical corporation pays income taxes on profits. After the income tax has been paid at the corporate level, the shareholder may receive a distribution of the corporation's income in the form of a dividend. The dividend paid to the shareholder then becomes the personal income tax obligation of the shareholder.

CERCLA

As a rule, buyers and sellers of residential properties are not subject to the same federal environmental regulations as are found in commercial transactions. Purchasers of commercial properties face substantial liability for environmental contamination under the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). CERCLA is most commonly referred to as the "Superfund Act." Liability for cleanup and remediation of environmental hazards may fall on the owner or purchaser of a commercial property, even if he or she was in no way involved in the original contamination. Costly fines and cleanup costs may be avoided if the purchaser or owner can demonstrate that he or she performed due diligence in the purchase of the property that included research to determine the likelihood of the parcel containing toxic materials. License holders who engage in commercial transactions should ensure that they have competence in environmental issues.

Community Property

Assets purchased with community funds in a marriage. Spouses agree to convert separate property to community property. Property that cannot be identified as separate.

Bundle of Rights

Associated with ownership - include rights to such things as the right to possess or occupy and use the property, the right to exclude others, the right to sell, lease, mortgage, give away or abandon, the right to pass property to heirs or refuse to do any of these things.

Exceptions not requiring a License

Attorney's licensed in TX may represent clients in RE transactions without a license. Out-of-state attorneys must have a real estate license. Auctioneers may call an auction without the need for a real estate license so long as no other real estate services are being provided. Salespeople representing a new home builder are exempt, Sale of property by owner, oil and gas transactions are exempt in 9A., sale of property in a foreclosure sale by a trustee under a deed of trust is exempt in 9D.

License - Must have

Attorney's licensed in other states, but practicing real estate in Texas, business entities through which licensed individuals operate their brokerages, and individuals or entities who control the collection of rent from residents of a single-family residential property must be licensed.

Pur Autre Vie

Based on the life of another. At the end of the if estate, the property ownership goes back to the original grantor who held the reversionary interest, or to a third party who is called a remainderman.

Fannie Mae

Began in 1938. In 1968, Fannie Mae became a privately-owned and managed corporation. At that time, the U.S. Congress re-chartered Fannie Mae as a government-sponsored enterprise (GSE), mandating that it operate with private capital on a self-sustaining basis to enhance the flow of funds through the secondary market to home buyers. Fannie Mae is the largest investor in home mortgages today. Has provided more than 63 million homeowners with more than $6.3 trillion. Holds one out of every 5 mortgages.

Common Law

Bod of law developed in England and based upon "common sense" and local custom. Common law expanded over the years as a result of prior court decisions. Under common law, a court looks to the findings of prior courts when rendering a decision. The concept of common law was brought to the American colonies by English settlers.

Appraisal

Borrower makes loan application, he or she normally pays for an ________ during the process.

Bilateral Contract

Both parties are obligated to perform. A contract of sale between a buyer and seller is a bilateral contract because both parties have duties to perform. The seller's primary duty is to show up at closing and sign a deed conveying ownership to the buyer. The buyer's primary duty is to show up at closing and pay the agreed consideration (sales price).

Package Mortgage

Both real and personal property. Vacation homes fully furnished.

Terminate Agent relationship

Broker wishes to terminate a sales agent's sponsorship, it must be done in writing, and the license must be returned to the TREC immediately.

Manufactured Homes

Built in a factory according to federal build code HUD (US Dept of Housing & Urban Development) HUD went into effect 1976. Since inception, homes built to the code are referred to as manufactured homes verses mobile homes or trailers.

Manufactured Homes

Built on a frame that includes axles and towing components. Towed in one or more units.

Contingency Financial

Buyer make a reasonable effort to obtain approval of financing. Contingencies should be specific and measurable. A party can always waive a contingency to proceed with closing the contract.

Seller Default

Buyer may have several options: Specific performance, Monetary Damages, Refund of earns money. The buyer's acceptance of an earnest money refund terminates the contract, releasing both parties from any further obligation under the contract. Because this is a refund of the buyer's earnest money, this cannot be considered liquidated damages.

Endangered Species

Buyers and investors interested in farm and ranch real estate should be aware of the varied species that may reside on their land. Several species of flora and fauna are classified as endangered in the state of Texas. For more information on endangered species in Texas, visit the Texas Parks and Wildlife Department online at www.tpwd.texas.gov

Pre-Approval Letter

Buyers who finance a portion of their purchase should obtain a _______________ from their lender of choice prior to beginning the search for a home.

Disclosure of Lead Based Paint

By federal law, all sellers of homes built prior to 1978 must provide the buyer with a disclosure of lead-based paint and lead-based paint hazards. Some states require the completion of a state-mandated seller's disclosure of property condition. In all transactions, sellers must disclose to a buyer any material defect in the property.

Easement

Can be created by Grant, specifically given by one party to another. Reservation - the seller is granting property to a buyer, reserves an easement on another's property, in the deed. • Grant - the easement is specifically given by one party to the other. "A" sold lot "B" and granted the easement in the deed. • Reservation - the seller, in granting property to a buyer, reserves an easement in the deed. "B" sold lot "A" and reserved the right to cross over "A" in the deed. • Implied grant - in selling lot "B", "A" did not actually grant the easement in writing, but implied in word or action that access to property "B" would be by easement. • Prescription - continuous use of the land over a period of time without the permission of the owner establishes the right to use the land. (An encroachment is the unauthorized intrusion of another's property onto an adjoining property. An encroachment that is allowed to remain can eventually acquire the right to be there.) description may also be called limitation. • Necessity - the courts may award an easement to a property owner who has no legal access to his or her land. (Usually in the case of "landlocked" property.) • Condemnation - The government, under its power of eminent domain, takes an easement.

Federal Reserve

Central Banking System of the US. Responsibilities: keep healthy through proper application of monetary policy. Actions taken by the Federal Reserve have a fairly immediate effect on short-term rates, but their impact on mortgage rates is generally less direct.

Common Amendments

Changes to closing date, changes to sales price, down payment and/or amount financed, repairs that the seller agrees to perform, removal or waiver of contingencies.

Licensing Requirements

Citizen of US or lawful admitted alien, be at least 18 years old, legal resident of TX at the time of application, good moral character, meet education requirements, submit app. With or without a sponsoring broker, show competency by passing the state test, submit fingerprints to TREC using the TREC form,.

Commission Rates

Commission rates and any other means by which brokers are compensated by sellers and buyers are always negotiable between the parties. Any attempt by a group of brokers to set the commission rates in their area or between a group of brokerage firms would be considered illegal price fixing. As mentioned in Chapter 2, the federal laws that have the greatest impact in this area are the Sherman Anti-Trust Act and the Clayton Act. The Sherman Anti-Trust Act is very specific concerning this violation.

TRE Broker-Lawyer Committee

Committee consists of 13 members appointed as follows: (1) six members appointed by the commission; (2) six members of the State Bar of Texas appointed by the president of the state bar; and (3) one public member appointed by the governor. (b) Appointments to the committee shall be made without regard to the

Mutual Consent

Completed by the process of offer and acceptance.

Defeasible Fee

Conditional, defeasible or determinable fee, is ownership that could be voided if a condition is not met or if a requirement is violated. In this case title would revert or go back to the former owner or his or her heirs or grantor. Also called qualified fee.

Confidential Status

Confidential Information remains confidential forever, subject to limitations by law.

Sale and Leaseback

Considerable capital could be tied up in real estate, for this reason the business will sell the property to an investor. They then lease back the property, usually on a long-term lease. The sale and leaseback then frees up the investor's capital.

Mortgage package

Consists of 2 documents, mortgage & promissory note.

Lead

Contaminant found in paint, pipes and soil - hazardous when eaten or inhaled. use the Lead Paint Disclosure for all properties built before 1978. The seller is responsible for providing the Lead Paint Disclosure. The disclosure allows buyers to waive their right to a lead inspection. Older homes may have lead plumbing. Lead is hazardous when eaten or when inhaled in dust particles. There is no duty to remediate lead.

Express Contract

Contract arises through the negotiation of an agreed price and terms between the parties. Lawn guy wanting to mow your lawn

Contract for Deed

Contract for deed is also known as a land contract, installment contract, cash for deed and real estate contract.

Contract for Deed

Contract for deed transactions are inexpensive, quick, and easy because a lender is not involved, and because title does not transfer, the deal is closed quickly, often without the benefit of the services of a title company or title insurance

Equitable Estates

Contracts can create an equitable estate. For example, a prospective buyer with a signed purchase contract, prior to closing on the property has an equitable interest in the property. Another contract that creates an equitable interest is an option contract. An option gives a buyer the right to purchase a property within a preset time period at a preset price. The buyer is under no obligation to purchase, but if the buyer decides to buy, the seller must sell to him. During the term of the option, the seller cannot sell to another. Because this agreement can only be enforced against the seller we say that an option contract lacks mutuality. It is a unilateral contract.

Valid, Void, Voidable & Unenforceable Contracts

Contracts with a person who lacks mental capacity can be either void or voidable. If the person has been judged to be incompetent, the contract is void because the person never had the capacity to enter into the contract. When the courts have determined that an individual is incompetent, a guardian will be appointed to handle the affairs of that individual. When such a judgment has not been made, however, and the contracting party is attempting to prove insanity, mental infirmity, senility or mental retardation, the contract could become voidable at the option of the infirmed party, his or her agent or guardian.

Termination Date (Buyer/Tenant Rep Agmt)

Could be as short as one day or for only one or specifically selected properties.

Designated Drill Site

Could be used if there is no present lease in place and the seller owns the Mineral Estate. Waiver promises seller will not drill on property as described, but allows him to join a pool and enjoy royalties. This protects the buyer from any production on the property. This waiver will survive closing, so it becomes a restriction on the property in the deed.

Surface Waiver

Could be used if there is no present lease in place and the seller owns the Mineral Estate. Waiver promises seller will not drill on property as described, but allows him to join a pool and enjoy royalties. This protects the buyer from any production on the property. This waiver will survive closing, so it becomes a restriction on the property in the deed.

Blanket Mortgage

Covers more than 1 piece of property. Ie builder with a new subdivision.

Texas A&M Real Estate Center

Created in 1970's, the center's purpose is to collect and compile data about real estate in Texas. A portion of each license holder's annual recertification fee goes to REC to fund its operation.

Form of Real Estate Ownership

Created when RE is purchased and determined by the manner in which the property is deeded. The number of individuals taking title and the legal entity, whether individual, corporation, or trust for example, affect the form of ownership, as does the marital status of the purchaser

DTPA

DTPA - Deceptive Trade Practices Act Texas law that applies to trade and commerce that was passed in 1973. Part of the Texas Business and Commerce Code, it allows an aggrieved consumer to sue a seller of goods for damages. The act by the seller of the goods has to be deceptive or unfair for the consumer to successfully sue for monetary damages.

DTPA

DTPA provides for the plaintiff to recover economic damages "compensatory damages" for repair, replacement, physical pain, mental anguish, loss of consortium, disfigurement, physical impairment, or loss of companionship and society. If the practice/conduct was found to be committed knowingly, the plaintiff may additionally recover up to three times the amount of economic damage. Similar recovery if the conduct was found to be committed intentionally.

Estate for Years

Definite beginning date and end date. Does not have to be for years. (day, week, month, years) the key is the reset time period. This lease survives the death of the landlord or the tenant. It also survives the sale of the property. Notice to terminate is not required, as the lease has a termination date.

Joint Tenancy

Derived from English common law, which regards the marriage of two people as creating a single entity.

RESPA Section 8

Discourages the use of kickbacks

Disputes

Disputes between brokers and sales agents must be solved through mediation, arbitration or the courts.

Proration

Division of taxes for the year between buyer and seller.

Dominant Estate

Dominates another piece of land for access. Land that is landlocked and requires access would be the dominant estate. In many cases, the dominant estate is landlocked without an easement. In other words there would be no way to legally access the property.

Unauthorized Practices of Law

Drafts an instrument, other than forms described by Section 1101.155, that transfers or otherwise affects an interest in real property.

Real Estate Recovery Trust Account

Each applicant for licensure pays $10 towards the Trust Account. If balance drops below $1 million at any time during the year TREC can assess each license holder $10 or pro rata share, whichever is lower, to bring the balance back to $1.7 million. If balance is above minimum, TREC invests money to offset future claims. TREC invests in Treasury Bills and Notes. If amount of account exceeds $3.5 million, the excess goes into the state's general fund.

Scarcity

Economic characteristic of land stating that a short supply where demand is great will cause and increase in value - usually based on geography. Supply and demand. Ie limited number of lots on a golf course, property in cities.

Modification

Economic characteristic of land stating that improvements made by man will alter the value of the land and surrounding properties. On the land or off. Transportation systems, airports, railroad. Example agricultural land in Florida had enormous increase after Disney World was constructed.

Fixity

Economic characteristic of land stating that land, buildings and improvements are considered fixed investment - not liquid assets. They take a long period of time to pay for themselves. May take bldg owner 20 years to recover investment. Also used to refer to the fact that land cannot be moved.

EMFs

Electro Magnetic Fields - high tension power lines - must be disclosed by prospective buyers. Know their location and disclose

Listing Agreement

Employment agreement between seller and buyer. Creates an agency relationship between the sell and the broker.

Lease Termination

End of term, Discharged by mutual agreement (must be signed by both parties, Concept of constructive eviction (landlord does something or fails to perform some obligation under the lease that renders the premises uninhabitable (leaking roof, sewer problems).

Contingency Environmental

Environmental hazards also include the possibility of other toxic substances, the presence of endangered species and the possibility of wetlands on the property.

Ethical and Legal Concerns

Ethical behavior on the part of a license holder goes far beyond ensuring a solid defense against claims arising from lawsuits under the License holders must ensure that they comply with ALL of the provisions of the Texas Real Estate License Act.

Action by Forcible Detainer

Eviction. It is a legal process that allows the landlord to recover possession of a property when a tenant defaults on a lease. The most common default is the failure to pay rent.

Title

Evidence of a person's rights in real estate.

Types of Listing Agreements

Exclusive Right to Sale, Exclusive Agency, Open Listing, Net Listing

Exclusive Agency

Exclusive agency agreements are often used with builders who list their properties with a broker, primarily to expose their properties through the multiple listing service. Builders still maintain the right to sell the property themselves without paying the broker a fee. The broker is only entitled to a fee if the buyer comes from the efforts of the broker or cooperating broker.

Secondary Market

Exists for the purchase and sale of existing mortgages to investors. It is designed to provide greater liquidity to the residential real estate market by providing for a steady supply of funds from investors. Secondary market investors do not lend money; they purchase mortgage notes as investments to earn a return. The return is called a yield and it represents the money earned on an investment.

Air Rights

Extend above the surface without limitations. _____can be leased sold or mortgaged. Walkways and bldgs. that extend over public streets involve the lease or conveyance of _____. Outdoor advertising and cell tower leases prohibit any activity that would block the view of the billboard or transmissions from the cell tower.

Assumable Loan

FHA & VA's are _________ _____with no change in interest rate, subject to credit approval. Substantially less expensive to assume a loan.

Government Loans

FHA, VA & USDA. FHA & USDA fully insured, VA partially insured.

FHA

Federal Housing Administration established in 1934.

Fee Simple Absolute

Fee Simple is considered to be the best type of ownership, as it places the least number of limitations on the owner. It is said to be indefeasible meaning it cannot be defeated unless someone has a greater legal claim. Fee Simple ownership is always an estate of inheritance. Owner's interest extends from the surface to the center of the earth unless a mineral interest has ben transferred to another

Advertising

Finance and fair-housing regulations are all concerns when ____________ real estate. _____ that indicates a limitation or preference based on race, color, national origin, religion, sex, familial status or handicap is prohibited. This prohibition against discriminatory _____ applies to single-family and owner-occupied housing that is otherwise exempt from the Fair Housing Act. Brokers should be careful about loosely worded ads that would indicate a preference based upon a protected class. Likewise, graphics used in _____ should reflect the diversity of the local population. A good practice in _____ is to ensure that the advertisement describes the property as opposed to describing the occupant or owner. License holders should pay special attention to the following problem areas in _____: • Use of Racial and Ethnic Terms • Religious Preference • Gender Preference • Handicapped Persons • Familial Status

Reserve Requirements

Financial institutions, whether or not they are members of the Federal Reserve System, must set aside a percentage of deposits as reserves. Raising reserve requirements reduces the availability of funds for lending, thereby slowing the economy. Lowering reserve requirements increases the availability of funds for lending, thereby accelerating economic activity.

TAR Form 1048

For REALTORS, the TAR Form 1408 provides a much better picture of the property's condition and may do more than the TREC form in reducing the liability of the seller and agent in the transaction.

Corporate Ownership

For the individuals involved in the corporation, their evidence of ownership is shares of stock. As shareholders, they elect a board of directors to oversee the affairs of the corporation. When corporate property is to be sold or otherwise transferred, a corporate resolution passed by the board will be required. Corporate ownership is popular because shareholder liability is limited to their investment in shares. Personal assets of shareholders are never at risk.

Foreign Broker

Foreign broker or broker from another state may collect a commission from a Texas broker, as long as the broker does not negotiate in Texas. A commission may be paid in the form of cash or a gift (example $1,000 watch).

Fannie Mae

Formerly known as the Federal National Mortgage Association (FNMA) plays a vital role in financing mortgages and increasing home ownership opportunities in the United States. Fannie Mae began in 1938 as an agency of the federal government and was created to bring stability to the U.S. housing market.

Freddie Mac

Freddie Mac is a government-sponsored enterprise (GSE), established as the Federal Home Loan Mortgage Corporation (FHLMC) in 1970 for the purpose of purchasing mortgages in the secondary market. Freddie Mac is a stockholder-owned corporation chartered by Congress to increase the supply of funds that mortgage lenders, such as commercial banks, mortgage bankers, savings institutions and credit unions, can make available to homeowners and multi-family investors. Most of its listed stock is owned mainly by savings associations.

Ginnie Mae

GNMA - Government National Mortgage Association established in 1968 to promote home ownership. It's a wholly owned government association that operates the mortgage-backed securities program designed to facilitate the flow of capital into the housing industry.

Accession

Gaining title to improvements as a result of the annexation of fixtures. Example: Fixtures left by tenant or previous owner.

Option Agreement

Gives a potential buyer or tenant the right to purchase or lease a property. Elements include: Term, Price, Conditions. Provides time to conduct due diligence (commercial or residential) prior to buying.

Condemnation

Government has the right to take private land for public use action called condemnation.

Taxation

Government retains the right to tax real property. Those who had land had wealth. Property taxes are know as ad valorem

Collateral Dependent Loans

Hard Money Loans - specific type of asset-based financing in which a borrower receives funds secured by the value of a parcel of real estate

Sub-Prime Loans

Have risk-based pricing. The rates are not published on these loans. Borrowers are rated A-F with a prime borrower having an A rating. A minus to F-rated borrowers will pay 1 to 5 % higher than those with good credit. These are non-conforming loans.

Joint Tenancy

Heirs and devisees have no claim on the property because joint tenancy is not an estate of inheritance. The final survivor becomes an owner in severalty.

Reverse Annuity Mortgage

Homeowners who are least 62 years of age can borrow against the equity in their property, using a reverse annuity mortgage. The loan becomes due upon the sale of the property or the death of the owner. The borrower can NEVER be forced to sell the home. This is considered the most expensive home equity loan because the debt continues to accrue or grow with interest, and heirs will inherit the property with a lien on it.

Agents Duties to Customers

Honest Dealing — An agent may not deceive, defraud, or otherwise deal with a customer in a dishonest manner. Reasonable Care and Skill in Performance — This means that an agent will be held to the standards of knowledge, expertise, and ethics that are spelled out in the Texas Real Estate License Act. Disclosure of all Material Facts — The license holder must disclose all facts that he or she knows of or should reasonably be expected to know that materially affect the value of or desirability of the property. This includes disclosure of agency, property condition, and environmental hazards.

Budget Mortgage

House payment includes PITI principle, interest, taxes, insurance.

Branch office

If a broker has more than one place of business, a branch office license is required for each location. It is not necessary to have a licensed broker at each location.

Environmental Site Assessment ESA

If a buyer has concerns about possible contamination of a potential property, may opt to have an ESA performed on the property to determine if it is environmentally challenged. Carried out by a qualified environmental professional. It can protect the buyer from purchasing contaminated property that might be harmful to his or her health or the health of animals kept on the property.

Shared Appreciation Mortgage

If a lender collects principal and interest and shares in the profits when the property is sold.

Ethical and Legal Concerns

If a license holder has any doubt about the legality or the ethics of a decision or request from another agent or party to a transaction, he or she should immediately contact the sponsoring broker.

Escheat

If a person dies intestate (without a will) and without heirs, the government will take title to his real property under the right of escheat. If property is abandoned, escheat will also be the solution.

Closing Date Amendment

If closing date is extended due to repairs or lender an a Closing Date Amendment is required.

Severance

If personal property is being transferred along with real property a bill of sale is generally used to accomplish the transfer, which would normally accompany the deed.

Charge by POA, Mortgage or deed of trust, Judgement, tax, or special assessment

If someone claims interest in the purchaser's property after issuing a title insurance policy, a title company will defend the title under these circumstances.

Disclosure

If the buyer is interested in a property that is owned by the listing broker, agent, parent, child or spouse of the broker or agent, that relationship must also be disclosed. Likewise, if the buyer is an agent, parent, or child of the agent, that relationship must be disclosed as well

Variance

If the intended use of a property would be in violation of current zoning, the owners must request a variance - permission to violate the rules.

Controlled Business Arrangement (CBA)

If the lender has either an affiliate relationship or a direct or beneficial ownership interest of more than 1 percent in a provider of settlement services and the lender directly or indirectly refers business to the provider, it is a controlled business arrangement.

Regulation X

Implements RESPA, ensures that consumers throughout the nation are provided with more helpful information about the cost of the mortgage settlement and protected from unnecessarily high settlement charges caused by certain abusive practices.

Form of Real Estate Ownership

In Texas RE can be held in 3 different ways; Estate in severalty; Co-ownership, Trust.

Lease Purchase Agreement

In Texas, TREC has no standard promulgated contract forms for lease purchase agreements. Texas license holders who have buyers and sellers who wish to enter into this type of agreement should refer them to an attorney. License holders should never write language that "merges" a TREC-promulgated contract with a lease form that attempts to create a lease purchase agreement.

Lease

In Texas, a lease for a period of more than one year must be in writing to comply with the Statue of Frauds.

Seller's Disclosure of Property Condition

In Texas, most sellers prepare a Seller's Disclosure of Property Condition, and the seller is responsible for its accuracy. The agent's role is to encourage honesty and full disclosure. While it is a broker's responsibility to discover and disclose that there may be problems on a property, that responsibility is limited to areas accessible for visual inspection. Errors & Omissions insurance can protect a broker if the seller misrepresents property condition, the broker is unaware of the misrepresentation, and could not have detected it by visual inspection.

Subsurface Estate

In areas with high level oil and gas activity the parcel of land is often divided into fractional interests spread across a large number of owners. The determination of ownership, rights and interest is complex and purchasers should consult the advice of an oil and gas attorney.

Rules Against Perpetuities

In many cases trusts have been created that seek to perpetuate the ownership of real estate in a family bloodline. Any attempt to do so would be a violation of the Rule Against Perpetuities, which is a law designed to ensure that real estate be freely transferable. Wealthy landed interests have historically tried to "keep the land in the family." The Rule Against Perpetuities reflects the broader societal interest in avoiding the creation of a "landed class" and ensuring that real estate is widely available.

Reservation

In many transactions, the seller retains a mineral interest in the property being sold with a reservation in the deed. For example, a seller may convey a tract of land to another "subject to a reservation of one-half of the oil, gas and other minerals in and under the property." Some states place restrictions on the term of a mineral reservation, and require that the property be drilled or explored within a certain period of time. If the mineral owner fails to comply, the mineral interest may revert back to the owner of the surface.

Corporate Ownership

In most states, corporations are created with a filing with the Office of the Secretary of State or similar agency. The corporate entity is comprised of three components: • shareholders (stockholders) who are the owners of the corporation • a board of directors elected by the shareholders who represent the interests of the shareholders • corporate officers who are responsible for the overall management of the operation of the business.

Contract for conveyance

In order to comply with the Statute of Frauds, contracts for the conveyance of an interest in real estate or leases for a term of more than one year must be in writing.

Commissions

In the Texas residential real estate business, commissions are commonly paid by sellers to the listing broker. The listing broker agrees in the listing agreement, to split the fee with a cooperating broker.

Condominiums

In the conveyance, the unit is generally described by a unit number along with a number that identifies the building in which the unit is located. While most condominiums are residential projects, commercial projects are not uncommon with individuals owning units in which a business is operated.

Percentage Lease

In the retail environment, a percentage lease obligates the tenant to pay a base rent and a percentage of the gross sales. The percentage may vary, depending on the level of sales, and will be calculated on the basis of breakpoints in the lease. The percentage rent provides an incentive to the landlord to build foot traffic in the center with promotions, events and superior maintenance.

Either the buyer or seller's agent

In the transaction process a contract can be delivered to the title company _________.

Surface Rights

Include the rights to deed oil, gas and other minerals.

Subsurface Rights

Include the rights to oil, gas and other minerals, and are commonly conveyed through a lease, mineral deed or by reservation.

Real Estate

Includes all that is encompassed in land, with the addition of all man-made additions to the land (improvements) such as roads, houses and commercial buildings.

Physical Characteristics of Land

Indestructibility or durability, Immobility, Nonhomogeneity

Time is of the Essence

Inserted in a contract means that all provisions must be completed as stipulated or failure to do so constitutes a material break of the contract.

Co-ownership

Involves ownership of real estate by two or more unmarried owners. May be held 2 different way. Tenancy in Common of Joint Tenancy

Real Property

Is a more broad term that goes beyond the physical RE and includes the rights that a person has in the land. These rights are often referred to as the "bundle of rights"

Tenancy at sufferance

Is an interest in leased property created when the holdover tenant is occupying the lease property against the owner's will. The holdover tenant is not paying rent. The only thing that differentiates him from a trespasser, is his or her former right to occupy the property. A landlord has the right to evict. This process would occur under Forcible Entry and Detainer statutes. If holdover tenant pays rent and it is accepted by the landlord, then the interest becomes a holdover tenancy, which is sometimes considered periodic estate.

Title Examination

Is research that is done by an examiner or abstractor.

TREC Powers

Issue sales agent & broker licenses, Enact rules and regulations...and advise, Probation and request additional education, Subpoena books, records and witnesses, license holders, file suit with the Attorney General, File an action against a license holder on its on motion, Assess administrative penalties of up to $5,000/day against offending licensed and unlicensed individuals.

Feudal System

King owned all the land and individuals who occupied were tenants of the king.

Characteristics of Real Property

Land can be described in many ways, including natural characteristics such as appearance, location and scenic value. Land can also be described in terms of utility and suitability for a specific use. Land and real property must also be describable in a manner that distinguishes it from personal property. Determining whether property in question is real or personal has a profound impact on every aspect of a transaction.

Land

Land, RE & Real property are terms that are so often used interchangeably by that most people do not realize they are different.

Lessor

Landlord or owner.

Mold

Landlords who do not take measures to remediate ________ from their property once it has been reported by a tenant following the guidelines above, may be liable for personal injuries (health problems resulting from mold exposure) and property damages."

Source of Law

Laws and legal customs in the US and derived from 2 sources. Common Law & Statutory Law

Lease Discharge

Lease may be discharged by: destruction of the property, condemnation, bankruptcy of the landlord, loss of access to the property, foreclosure.

Seller Financing

Leased common form of mortgage financing. Protects the buyer because the title is transferred at closing.

Common Lease Provisions

Leased premises, Business activity, Prohibited activities, Signage, Insurance, Business interruption, Parking, Escalation Clauses, Common area use & maintenance, Cooperative marketing, Assignment & sublet, Tenant & landlord obligations, Tenant improvements, Maintenance.

Consumer Protection Law

License holders must stay abreast of changes and tends in consumer protection laws that address the disclosure of material defects in a property.

Contract Law

License holders must understand contract law in order to assist in the creation of a valid and enforceable contract, and must understand different forms of property ownership. In some states, license holders cannot complete contract forms for their buyers and sellers. Other states (including Texas) allow license holders to complete certain contract forms.

Form of Real Estate Ownership

License holders should be familiar with different forms of ownership, so that they know what signatures to get on agency forms and contracts. The form of ownership has important legal and tax ramifications, and license holders should always avoid giving advice regarding how to take ownership. Advise the purchaser with questions regarding the pros and cons of various methods of taking ownership to get the advice of an attorney, tax advisor, or both.

Manufactured Homes

Licensed real estate brokers and sales agents are NOT required to obtain a TDHCA license when involved in a transaction involving a manufactured home.

Encumbrance

Limitations on ownership rights. A lien is an encumbrance.

Balloon Note

Loan is partially amortized loan with a final payment substantially larger than the others. The benefit of this type of loan is a lower interest rate. The main disadvantage is the high cost of refinancing.

Portfolio Loans

Loans that cannot be sold on the secondary market and held by the lender in their investment portfolio.

Situs

Location preference from an economic standpoint can cause increase value, location, location , location

Fair Housing Act

Mortgage Lending No one may take any of the following actions based on race, color, national origin, religion, sex, familial status or handicap • Refuse to make a mortgage loan • Refuse to provide information regarding loans • Impose different terms or conditions on a loan, such as different interest rates, points, or fees • Discriminate in appraising property • Refuse to purchase a loan or • Set different terms or conditions for purchasing a loan It is illegal for anyone to threaten, coerce, intimidate or interfere with anyone exercising a fair housing right or assisting others who exercise that right.

Loan Originator

Mortgage banker, mortgage broker or correspondent lender

Shopping for Your Home Loan: HUD's Settlement Cost Booklet

Mortgage loan originators must provide the applicant with a copy either at time of written application is submitted or no later than 3 business days after the application is received. "A mortgage loan originator that receives an application for a federally-related mortgage loan is required to disclose to the borrower at the time of application, or within three business days after its submission:" "• Whether the servicing of the loan may be assigned, sold, or transferred. • A written acknowledgment that the applicant has read and understood the disclosure, evidenced by the signature of the applicant. The disclosure may be sent by hand delivery, or, if the applicant agrees, by fax, e-mail or other electronic means."

T-47 Affidavit

Must be signed in the presence of a notary and accompany Seller's survey. Seller notes nay changes to the footprint of the improvements to the property since the survey date.

Law of Contracts

Must use forms adopted by the commission for the type of transaction for which the form is used, prepared by an attorney licensed in the state and approved by the attorney for the type of transaction for which the form is used; or prepared by the property owner or by an attorney and required by the property owner.

Contingency Inspection

NOT IN TEXAS, contract to be subject to satisfactory inspections.

Physical Characteristics of Land

Nohomogeniety, immobility, indestructibility or durability

Sales Agent

Not considered licensed and therefore may not engage in the business until his or her license is received in the sponsoring broker's office.

Dodd Frank Wall Street Reform and Consumer Protection Act

November 1, 2013, the final rule mandates the use of two disclosures, the three-page Loan Estimate and the Closing Disclosure Form.

Implied Contract

Obligation arose through the behavior of the parties. Ordering at a restaurant.

Mutual Consent

Often referred to as a "meeting of the minds"

Conservatorship Fannie & Freddie

On September 7, 2008, the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac in conservatorship. This step was taken because a default by either of the two firms, which had been battered by the downturn in housing and credit markets, could have caused severe disruptions in global financial markets, made home mortgages more difficult and expensive to obtain, and had negative repercussions throughout the economy.

Statutory Law

One a statute has been enacted, its enforcement is generally assigned to an agency of the government. The agency will interpret and enforce the statue.

Cooperative Sale

One broker lists the property and a different broker sells it.

Primary Monetary Policy Tools

Open Market Operations, The Discount Rate, Reserve Requirements.

Words & Phrases Misinterpreted

Original, Finest Quality, Top Grade, The sellers have to sell, You automatically get this by buying in this area, No problem, This is a small repair, This is not a big problem, Looks good to me, I can take care of everything for you, don't worry. Any of the above words and phrases can be misinterpreted and result in a lawsuit under the DTPA.

Life Tenant

Owner of a life estate. He or she has all the rights and privileges, duties and responsibilities of a fee simple owner, except the ability to will the estate to his heirs. A life tenant can sell (ownership for the duration of his or her life), but is unlikely to find a buyer will to purchase under those terms. The buyer's ownership would end with the death of the original life tenant, without refund of purchase price. The lease of a life estate is also possible, but the lease would be terminated by the death of the original life tenant.

Landlord

Owner of the property being leased.

Cooperatives

Owners within a cooperative do not actually own a specific unit. The entire cooperative complex is owned by a corporation. Those who wish to live in the cooperative buy shares in the corporation, and receive a proprietary lease on the unit. When listing and selling cooperatives, a real estate license is often not required because the sale of a cooperative is the sale of stock rather than real property.

Tenancy by Entirety

Ownership by a husband and wife or known as joint tenancy created between two married individuals. Not recognized in Texas. In states where this is allowed it takes both signatures to dispose or convey and is not subject to the claims of a creditor, unless the creditor is the creditor of both parties.

Estate in severalty

Ownership by one person, one corporation, one partnership

Tenancy in Common

Ownership by two or more parties in undivided interest. Because these interests are undivided, all co-owners share right of possession of the property. In the event the deed does not make the type of joint ownership clear, Texas courts will always assume the owners are tenants in common. It is an estate of inheritance and title passes at probate. Their interest will pass to their heirs or to beneficiaries named in a will upon death. With Tenancy in Common the owners shares may be equal or unequal, may acquire interest at same time or different times, may acquire their interest from the same source or different source, may dispose of their interest without affecting the interest of the other tenants in common, may mortgage or lease their respective interests without affect the interest of the other tenants in common, are responsible for the property in proportion to the ownership interest the hold. It is an estate of inheritance and title passes at probate. Their interest will pass to their heirs or to beneficiaries named in a will upon death/

Joint Tenancy

Ownership by two or more parties without rights of survivorship TTIP - Time- ownership at the same time, Title - must acquire their interest from same source, Interest - must be equal shares, Possession - possession of the property must be shared equally. Upon the death, property passes to surviving co-owners immediately in equal shares upon the death of any owner thus avoiding probate.

Life Estate

Ownership for the duration of someone's life. Based on the life of the tenant. It may also be based on the life of another which is referred to as a life estate pur autre vie.

Seller's Disclosure of Property Condition

Paragraph 7.B. of the One-to-Four Family Contract (Resale) provides for three possibilities related to the seller's disclosure In Paragraph 7.B.(1) Buyer acknowledges receipt of the disclosure. In Paragraph 7.B.(2), Buyer has not received the notice, and Seller is given a certain number of days to provide it to Buyer. Note that selecting 7.B.(2) makes the contract voluntary on the part of Buyer for a period of time. If Seller fails to deliver the notice to Buyer, Buyer may terminate the contract at any point prior to closing, receiving a full refund of earnest money and being released from any further obligation under the contract. If Seller does deliver the notice, Buyer may terminate the contract within 7 days of receipt of the notice. If 7.B.(3) is selected, Seller is not required to deliver the notice

Default

Party to a contract fails to perform under the contract. The other party is known as the injured Party.

Kickbacks

Payments in excess of the reasonable value of goods provided or services rendered.

Fair Housing Act

Penalties for violation of the act are up to $75,000 for the first violation, and up to $150,000 for subsequent violations. Farming Herbicides and Pesticides are another source of groundwater contamination. Recommend water testing.

Lis Pendens

Pending lawsuits affecting the property.

Title Companies

Perform two primary services: title insurance and escrow.

Lessee

Person acquire the use (the tenant).

Trade Fixture

Personal property installed on leased property for the purpose of the tenants occupation or profession. Ie barber chairs, examining tables, grocers' refrigerator. When the lease is about to expire a tenant may remove. Removal must be done prior to lease expiration. Tenant must repair any damage. If not removed prior to lease expiration, they become the property of the landlord through accession.

Fixture

Personal property that has been installed or attached to become real property

Environmental Site Assessment ESA

Phase II ESA is more in depth than a Phase I. During a Phase II ESA, samples of soil, surface water and groundwater are collected from areas flagged during the Phase I assessment and tested for contamination. A Phase II will determine the specific cause of the contamination of the soil, surface water and/or groundwater, often by hazardous chemicals, metals or petroleum products, and the assessment will recommend remediation to clean the property of hazardous materials.

Environmental Site Assessment ESA

Phase III ESA is the clean-up phase, also called the remediation phase. There are many remediation techniques that may be exercised depending on the type and extent of contamination. Some of the techniques include: soil excavation, soil washing, air stripping, pump and treat, and chemical oxidation.

Nonhomogeniety

Physical characteristic of land stating no two pieces are exactly alike. Even 2 identical lots in a subdivision at least differ in their position on the earth. Each parcel of land is unique.

Immobility

Physical characteristic of land stating that land cannot be moved - an owner must go to the land.

Indestructibility

Physical characteristic of land stating that land will always be there - it is durable/cannot be destroyed. Remains no matter what happens to it. May go under water, become a crater or be added to. In any case the land will still be there, it is permanent.

Earnest Money

Placed in escrow to show that the buyer is serious in intent to purchase property. Serves as a source for the payment of liquidated damages to the seller in the event of default by the buyer.

Joint Tenancy

Poor mans's will. When tenant dies, the decedent's share passes to the surviving joint tenant. A will is not required for this to happen.

Modular Homes

Primarily built off site in a factory. Constructed in two or more units and shipped to the site on a flat bed trailer for assembly. Usually indistinguishable from site built homes. Built to comply with LOCAL BLDG Code. Built in the factory to local zoning codes and assembled on site.

Prior Appropriation

Prior Appropriation is a theory of water law based on the idea that "first in time is first in right." The first landowner to claim riparian rights has the exclusive right to take all the water for specific beneficial uses. Subsequent owners of nearby properties cannot claim water rights. Water rights acquired under this theory are referred to as appropriative rights.

Buyer's Broker Disclosure

Prior to discussing the needs and wants of the buyer, the buyer should be provided with any required agency disclosures.

Allodial System

Private ownership of land by individuals. In the 13th century the king decided individuals could own the land. All land in the US is owned under the Allodial System.

Hypothecation

Process of securing the repayment of a loan with real estate

Additional RESPA Provisions

Prohibit a seller from requiring a purchaser to buy title insurance from a specific title company in any transaction as a condition of the sale. 2. Sets limits on the amounts that a lender may require a borrower to put into an escrow account for purposes of paying taxes, hazard insurance and other charges related to the property. 3. Does not require lenders to impose an escrow account on borrowers; however, certain government loan programs or lenders may require escrow accounts as a condition of the loan.

RESPA

Prohibits abusive practices such as undisclosed referral fees and kickbacks.

Separate Property

Property owned by a married person that is not community property. Acquired before marriage or inherited property or property purchased with inherited funds. An income from separate property is considered community property. An increase in value is not community property. The proceeds of a sale are separate property.

Trust

Property placed in a trust, with ownership conveyed to a trustee for the benefit of others.

Ad Valorem

Property taxes according to assessed value. Taxes create the highest priority lien against property. Unpaid taxes are an automatic lien and at foreclosure will be paid first. If not paid land may be seized or sold.

Assessed Value

Property value for tax purposes. Tax rate multiplied by assessed value will equal the tax payment due. Rates can be by hundreds or thousands called mills. $2.50 for every $100 or 25 mills for every $1000.

TREC Promulgated farm and ranch contract

Provides that, when a property is sold, the seller has the right to harvest crops up to the delivery of possession of the property to the buyer. This provision can be modified by an agreement of the parties.

Addenda

Provision in the addendum prevails a provision in the main body of the contract.

Severance

Real property becomes personal property when it is severed from the land - uninstalled, unattached such as carpeting, ceiling fans, window coverings & appliances. Unless specifically extended, fixtures are generally considered to be part of the real property and are transferred to the new owner.

Encumbrances

Real property is subject to many other potential encumbrances, including: • covenants, conditions and restrictions (CC&Rs), which are the "deed restrictions" that control the use of property and architectural style. • private deed restrictions, which are limitations placed in a deed when property is conveyed to a new owner. As a rule, these deed restrictions apply to all future owners. • easements for ingress/egress and utilities.

TREC

Refrains from becoming involved in disputes between brokers and sales agents.

Buyer's Broker Disclosure

Regardless of representation, all buyers should be provided with an oral or written disclosure of representation at first contact. That disclosure is normally done orally when the buyer first calls or visits the office. Whatever the method of contact (personal visit, phone, fax or email), the notice of representation should be given.

Contract Rent

Rental income stipulated in by parties is the lease.

RESPA

Requires mortgage loan originators and servicers of residential loans to provide borrowers with timely disclosures of the nature and costs of the real estate settlement process.

RESPA

Requires mortgage loan originators to provide detailed disclosures regarding the transfer, sale, or assignment of mortgage service rights.

RESPA rule

Residential closings must be performed using the standard Closing Disclosure form (takes place of the HUD-1 Closing Statement)

Broker responsibilities

Responsible for all the professional acts of an associated sales agent.

Release of Lien

Returned to borrower when not has been repaid. Release of Lien should be recorded in the public records.

TREC acts towards license holders

Revoke or suspend license, place a license holder on probations, assess an administrative penalty, require additional education.

CERLA SAVE HARBOR

Safe harbor rules stipulate the circumstances in which an individual or entity may be exempt from liability for the cleanup of a polluted site. Homeowners are generally exempt under the Act, under the following conditions: • They were unaware of the presence of pollutants when purchasing the property • They are not classified as a responsible party • They cooperate with the EPA or other agency in the cleanup of the property Safe harbor rules applying to commercial transactions are considerably more complex. Real estate professionals should be well-versed in the procedures for a purchaser to be granted safe harbor status in the purchase or lease of a property.

Unilateral Contract

Said to lack mutuality. Only one party is obligated to perform ie One-year Purchase Option - does not have to buy, but if he wants to buy the seller has to sell.

Terminate Broker relationship

Sales agent must notify the broker in writing.

Economic Characteristics of Land

Scarcity, modification, fixity and situs

Title Commitment

Schedule A - basic information on the proportion, Schedule B - exceptions from coverage, ie easements, setbacks, etc, Schedule C commitment lists exceptions to title.

Buyer Default

Seller may have several options: Specific performance: Injured party seeks court order to have buyer perform under the terms of the contract. This is the only remedy that would probably result in the full execution (closing) of the transaction. Monetary Damages: In addition to specific performance, the injured party may "seek such other relief as may be provided by law. Liquidated Damages: the seller can choose to accept the buyer's earnest money as liquidated damages, releasing all parties from any further obligation under the contract. The primary difference between monetary and liquidated damages is that monetary damages are awarded by the court, and liquidated damages are stipulated in the contract.

Contingency Sale of Other Property

Sellers are wary of accepting a sale of other property contingency because of the obvious risk of taking the house off the market for a buyer who is not prepared to close. This type of contingency is most acceptable to a seller when it includes an escape clause.

Contract for Deed

Selling and financing property on a contract for deed is still legal in Texas. Since the 1999 legislative session, the state has enacted laws that provide protection for buyers. There are no TREC-promulgated forms for selling property on a contract for deed. License holders should refer buyers and sellers to an attorney when the parties want to sell on this form of contract.

Servicing

Sending monthly payments, collecting monthly payments and following up on delinquencies.

Buffer Zone

Setback, area of land separating one land use from another, such as residential from commercial. Located between incompatible uses.

Deed of Trust

Signed to convey the property in trust to a trustee. The trustee is to release the mortgage when the note has been repaid or foreclose in the event of default. Foreclosure is faster when a deed of trust is used know as a non-judicial foreclosure. The lender has authority to foreclose without the authorization of the court.

Accretion

Soil is deposited on land as a result of the action of water, causing a change in land boundaries - the soil is called alluvion

Do-not-call policy, canspam, fax policy

Solicitations or advertisements communicated by phone, fax or e-mail are now governed by several federal and state statutes. Brokers, especially brokers who make cold calls or send out advertisements by fax or e-mail, need to be aware of these statutes and may need to seek additional education.

Consideration

Something of value given to exchange for a promise. There is no requirement that the consideration be in the form of money. Consideration in a contract could be nothing more than a promise made by one party in exchange for a promise made by the other. In the typical real estate contract, the seller agrees to convey the property to the buyer, and the buyer agrees to pay the negotiated sales price. Therefore, the purchase or sales price of the property is the consideration for the contract. As a rule, an earnest money deposit will be collected from the buyer when entering into a contract. The earnest money should not be confused with consideration. Note that earnest money is not one of the requirements of a valid contract.

Collateral

Something of value that can be pledged.

Joint Venture

Sometimes a group of individuals will join together for a single business venture. They will combine their funds and talents to carry out one project and when the project or venture is complete, they will dissolve as a group. This form of partnership is known as a joint venture. Joint venture partners often consist of a developer who provides development expertise and a lender that provides the funding for the project.

Four Corner Rules

State that the terms for performance under a contract may be determined by a reading of the entire contract.

Dower and Curtesy

Still exist in some states. Generally, they are being phased out or abolished in most cases. The basis of these is English law. Where they exist, they are statutory, and therefore automatic. Dower is the interest a wife has in the property of her husband. During his lifetime, dower rights are inchoate or incomplete. They are more along the line of expectations. They become complete at his death. Curtesy is the interest a husband has in the property of his wife. Curtesy rights follow the same rules as dower rights

Sublet

Subletting is the transfer of some or all of the tenant's rights and/or leased space to another with liability remaining with the lessee. So, the sublessee pays rent to the lessee, who in turn, pays the landlord. For example, a tenant may have a lease covering 15,000 square feet of office space. When they find that they no longer need all of the space, they might sublet 5,000 square feet to a new tenant. The key distinction between assignment and subletting is that assignment releases the original tenant from further obligations under the lease. Subletting does not.

Subsurface Rights

Subsurface is the dominant estate in Texas. The surface owner cannot deny access to the subsurface owner.

Sales Price

Sum of the down payment and the amount financed.

Duty to Respond and Disclose

Supervising brokers, perhaps more so than other license holders, have a duty to respond to parties in a transaction, to provide disclosure of important information to their principal, and to act honestly and fairly with third parties. A sponsoring broker must promptly respond to a sponsored sales agent, the principal and other license holders involved in a transaction, TREC Rules §535.2(j). Promptness will be judged on the nature of the request, the time of day and the type of transaction. A supervising broker should be reasonably available to supervised sales agents to provide needed advice and counsel. Another obligation is to disclose important information to the principal, which includes disclosure of 2 types of information: • all known information that would affect the principal's decision on any offer, and • all significant information relating to the transaction, TREC Rules §535.156(a) & (c). However, if a principal directs in writing NOT to be submitted offers after it has entered a contract, then that information need not be submitted. This direction could be included in a listing agreement or in a contemporaneous or later document. The disclosure can be made through the supervised sales agent. In dealings with third parties (not clients), all license holders must be honest and fair and not provide inaccurate information to those third parties §535.156(b) & (d). Being responsible for the supervised sales agent, the supervising broker should be available during all normal business hours of the organization to provide experienced, informed advice and counsel to assist the sales agents and the organization's clients. The supervising broker should monitor transactions handled by sales agents to insure proper disclosure is being made. The scope of required disclosure is broad (and possibly subject to dispute, particularly if a transaction goes poorly), so close supervision and counseling of sales agents is appropriate. Sales agents should be reminded about their obligation to be honest and fair to third parties, which is part of their responsibility as licensed professionals.

Exclusive Agency

TAR® does not have an exclusive agency listing agreement in full, and such an agreement is not preferred by most brokers. Instead, TAR® makes an addendum available that, when completed and attached to an exclusive right to sell agreement, makes that agreement exclusive agency

Option to Purchase

TREC does not have a form, client should contact an attorney. Another possibility, is a lease with an option to purchase. Commonly known as a lease-purchase agreement, it 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.

First right of refusal

TREC does not have a form, client should contact an attorney. Some residential leases contain a right of first refusal, giving the tenant the right to purchase the leased property by matching or bettering any offer before the property will be sold to someone else.

Sale of Cooperatives Co-ops

TREC does not have any promulgated contract forms for the sale of cooperatives (co-ops), and has no forms for any type of commercial transactions.

Possession

TREC promulgated contracts stipulate that ________ be delivered to the buyer upon closing and funding.

Texas Real Estate License Act

TRELA

Constructive Eviction

Tenant must prove: Tenant vacated the property in a timely manner, the failure or event cited was material enough to render the premises unusable or uninhabitable, failure or event was the fault of the landlord and not some third party.

TREC

Texas Real Estate Commission - Created 1949 -

Home Inspectors

Texas is one of the few states that requires _________________ be licensed.

Appointment Statement (Buyer/Tenant Rep Agmt)

The 'appointment' statement affords the agent the same benefits as relayed in the listing agreement, loyalty to the broker, but one should note that the BRA is unique in the sense that a buyer can actually enter into the same type of agreement with multiple brokers, so long as the 'market areas' do not overlap.

Interstate Land Sales Full Disclosure Act

The Act was primarily designed to protect consumers from developers who sold properties in remote areas with promises of clubhouses, golf courses and other facilities. Many of these properties were sold "site unseen." When the purchaser finally visited the property, the reality was often very different from the promises made in the promotional materials. In many cases, the developer filed bankruptcy and never built or completed the promised amenities."

TRE Broker-Lawyer Committee

The Broker-Lawyer Committee writes the contract forms, which are then approved by the Commission. • The Commission promulgates the forms for use by Texas license holders.

Anti-Spam

The CAN-SPAM Act of 2003 is a commonly used name for the "Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003." The law took effect on January 1, 2004. When sending out e-mails with advertisements, license holders must comply with the Federal CANSPAM Statute governing e-mail solicitations. The statute applies to any email that contains advertising. The statute prohibits: • The falsification of routing or sending information in any e-mail; and • Any false, misleading or deceptive statements in the subject line. The CAN-SPAM statute provides that the sender's message must contain clear and conspicuous notice that the message is an advertisement or solicitation. It also requires the sender's message to include a valid, physical postal address and requires that e-mails containing advertisements must contain unsubscribe features. The statute requires that it be honored in 10 days, and also requires that the unsubscribe feature remain active for 30 days after the message is sent. Each separate email in violation of the CAN-SPAM Act is subject to penalties of up to $16,000.

Civil Rights Act of 1968

The Civil Rights Act of 1968 had a major impact in the real estate community. While there are some exceptions to this law, real estate license holders must always comply.

Dodd-Frank Walk Street Reform & Consumer Protection Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) was signed into law in July 2010. The purpose of the law is to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end ''too big to fail,'' to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes. The Dodd-Frank Act makes sweeping changes to the financial regulatory system in response to the financial crisis in 2008. The law is complex, in part requiring the creation of new agencies, the consolidation of existing agencies, and mandating financial regulatory agencies to adopt new rules pursuant to stated time lines to implement the various and far-reaching requirements of the law. While the Dodd-Frank Act targets financial regulatory reform, it will have an impact on the real estate industry, primarily because mortgage lending is a significant part of most real estate ransactions. In addition, certain provisions in the Dodd-Frank Act establish new requirements for appraiser independence. Much of the impact on the real estate industry is unknown at this time as the rules required to be adopted under the law to flesh out its requirements have not yet been proposed.

Monetary Policy

The Fed's monetary policy actions affect prices, employment, and economic growth by influencing the availability and cost of money and credit in the economy. This in turn affects the willingness of consumers and businesses to spend money on goods and services.

Open Market Operations

The Fed's most flexible and often-used tool of monetary policy is open market operations for buying or selling government securities.

Interstate Land Sales Full Disclosure Act

The Interstate Land Sales Full Disclosure Act was passed by Congress in 1968. The Act was passed to protect consumers from fraud in the sale or lease of land. The Act requires developers to register subdivisions of lots or condominium units sold in interstate commerce. Filings were previously administered by the U.S. Department of Housing and Urban Development (HUD). The Act is currently administered by the Consumer Financial Protection Bureau (CFPB). Developers are required to provide each purchaser with a disclosure document (Property Report). The Property Report contains information about the subdivision and is required to be delivered to a purchaser before the signing of a purchase agreement. The purchase agreement gives the purchaser a seven-day period in which the purchase can be canceled.

Consumer Financial Protection Bureau CFPB

The Real Estate Settlement Procedures Act (RESPA) is administered and enforced by the _______________________________. Persons who believe a settlement service provider has violated RESPA in an area in which the ________ has enforcement authority may wish to file a complaint.

RESPA Reg X Section 9 Title Companies

The Real Estate Settlement Procedures Act's (RESPA) and Regulation X, prohibits, either directly or indirectly, a seller from requiring a purchaser to buy title insurance from a specific title company in any transaction as a condition of the sale.

Anti-Trust/Unfair Competition

The Sherman Anti-Trust Act and the Clayton Anti-Trust Act are federal laws that have a significant impact on the real estate industry. The purpose of the acts is to prevent any combination in restraint of trade. For real estate professionals, the biggest impact of these laws is in the area of commissions. Commission rates must always be a matter of negotiation between the broker and the client. Any hint that there is a "standard" or "going rate" for commissions in a given market area could be evidence of violation and restraint of trade. Any attempt to boycott a discount real estate broker is a violation. License holders who refuse to show or sell the listings of a discount broker are participating in an illegal boycott. Any attempt to limit a discount broker's access to the Multiple Listing Service or to trade association membership is a violation.

Defenses

The State of Texas requires that most sellers of residential property provide a Seller's Disclosure of Condition of Property to a potential buyer. This applies to most residential property owners whether the property is listed with a broker or sold as a For Sale By Owner (FSBO).

Form OP-H

The TREC form OP-H is sufficient for most properties and meets the minimum requirements of the law.

Title Commitment

The _____________ must be delivered by the title company within 20 days of its receipt of the contract.

Comparative Market Analysis (CMA)

The agent uses sale information from the MLS data to show a seller the market value of the property. If possible, the agent should use data from sales that have closed within the last six months. The more recent the sales data, the better. The agent will also show properties currently listed on the CMA that are similar to the subject property. The listing agent will show expired properties like the subject property on the CMA as well, if such data is available. A rule of thumb is: three (3) each of recently sold, recently listed and recently expired properties

Buyer/Tenant Representation Agreement

The agreement that buyers sign allowing a broker to represent them is called a Buyer/Tenant Representation Agreement. Like the listing agreement with a seller, this should be in writing. Elements of a buyer representation file should include: • General characteristics of the property search (market area) • Buyer's and broker's obligations • Term of the agreement • Broker's duties to clients and customers • Compensation agreement • Consent for broker to represent other buyers • Fair-Housing language • Signatures of the parties • Intermediary consent

Adjustments

The amount of any deposit made by the consumer that has been disbursed to the seller prior to closing.

Seller Credit

The amount paid into a trust account by the consumer pursuant to a contract of sale.

Illegal Boycott

The anti-trust laws prohibit any attempt to fix prices, limit competition by assigning market areas, or boycotting of discount brokers. An illegal boycott is an agreement among two or more competitors not to do business with another competitor for the purpose of inducing the other competitor to change its business practices. An example of a group boycott in real estate brokerage is an agreement among brokerage firms to not show a certain brokerage firm's listings.

Laws Affecting Real Estate

The authority that local government has to pass and enforce building and zoning codes has a profound impact on the type of and location of development within a municipality. The authority granted to counties, municipalities, school districts and special taxing districts impacts real estate development and property values.

Statutory Law

The body of laws and regulations enacted by federal and state legislatures. Much of what was one embodied in common law is now codified in statues passed at the state and federal level.

Lien Theory State

The borrower retains ownership of the property, subject to the lien that secures repayment of the loan.

Promissory Note

The borrower's unconditional promise to repay.

Mortgagor

The borrower.

Competing Clients (Buyer/Tenant Rep Agmt)

The broker is working with multiple clients. In this paragraph, the buyer is giving the broker permission to show properties that the buyer has an interest in to other potential buyers. In other words, properties are not "placed on hold" for the client.

Avulsion

The change in the direction of a river or stream often resulting in a change of land boundaries

Condominiums

The condominium complex is commonly managed by a professional on-site manager, who may be employed by a homeowner's association or who may be employed by a management company hired by the association. A condominium project will have a property manager whose primary duty is to maintain and enhance the value of the units. This differs from the usual primary role of a property manager whose main responsibility is to generate income.

Closing

The consummation of a contractual real estate transaction in which all appropriate documents are signed and the proceeds of the loan are disbursed by the lender.

Contingency Title

The contract should include a title contingency. As a rule, title examination will be done by a title company or abstract company and the buyer should examine any title report or title commitment issued by the title company prior to closing.

Trust

The creation of and operation of a trust has significant legal and tax ramifications. Because of these complexities, the advice of competent legal and tax professionals should be obtained.

Designated Officer/Manager

The designated officer of a licensed real estate corporation, or the designated manager of a licensed Real Estate Limited Liability Company must be licensed as a broker.

Underwriting

The detailed process of evaluating a borrower's loan application to determine the risk involved for the lender

Discount Rate

The discount rate is the interest rate the Federal Reserve charges eligible financial institutions to borrow funds on a short-term basis. A higher discount rate can indicate a more restrictive policy, while a lower rate may be used to signal a more expansive policy.

Multiple Listing Services (MLS)

The exclusive right to sell and exclusive agency listing agreements usually call for the broker to place the listing into one or more multiple listing services (MLS). In the multiple listing service, listings of member firms are shared with each other. This increases the inventory of properties for sale among member brokers. The shared information is also used by agents to prepare a Comparative Market Analysis (CMA).

Fee Split

The fee split is negotiable between the seller and the listing broker. Clearly, the fee should be generous enough to encourage buyer agents to show the property. The fee split arrangement for buyers agents is often different from what is offered to subagents. If sub agency is not allowed by the listing broker, the sub agency commission split is set at 0%. The fee paid to a buyers agent varies, and is often one-half of the total fee paid to the listing broker. Fee-splitting arrangements are often established by virtue of membership in the local Multiple Listing Service (MLS). By posting the listing in MLS, the listing broker is offering to split the fee according to the terms of the listing agreement and the brokers' membership agreement. While the Broker Information section of TREC-promulgated contracts contains information regarding a fee split, it is not a fee-splitting agreement with the listing broker, because brokers are not parties to the contract. The exception to this rule is the TREC promulgated Farm and Ranch Contract, which does contain a fee-splitting agreement. In any event, all parties and agents need to be aware of representation, and which party is responsible for the payment of a fee.

Federal Fair Housing Laws

The first federal fair housing law was the Civil Rights Act of 1866, which prohibits discrimination in housing based on race or color. It is a very broad law and is still in effect today. In 1968, in the case of Jones v. Alfred H. Mayer Company, the U.S. Supreme Court ruled that the 1866 law prohibits discrimination of Jones v. Alfred H. Mayer Company, the U.S. Supreme Court ruled that the 1866 law prohibits discrimination on the basis of race or color, without exception. While there are some exceptions to the application of subsequent fair housing laws (1968 law), the Act of 1866 provides for no exceptions whatsoever. Lawsuits under this act are filed directly in federal court. The next major legislation affecting housing is the Federal Fair Housing Law, officially called Title VIII of the Civil Rights Act of 1968. It prohibits discrimination on the basis of race, religion and national origin. Gender was added as a protected class in 1974, followed by physical handicap and familial status in 1988. Discrimination is prohibited in the sale or rental of housing and vacant land offered for residential construction or use. Age is not a protected category under this law.

General Partner

The general partner is responsible for day-to-day operations of the business and has full liability. At least one general partner is required in a limited partnership. The general partner is most often the "promoter" who brought the limited partners into the venture.

Competent parties

The general rule of law is that all parties to a contract have read it and understand it. This is true even if they are illiterate or not knowledgeable in the subject of the contract. Certain persons do not have full contractual capacity, including minors, individuals who have had guardians appointed, and those under the influence of drugs or alcohol.

Gross Lease

The gross lease is perhaps the simplest of all leases. In a gross lease, the landlord pays costs regularly incurred in ownership, such as taxes, insurance, utilities, and maintenance. The tenant pays only rent. This type of lease is riskier for the landlord because of the possibility of rising costs during the lease term.

Source of Law

The growing influence of the federal government in the RE industry often results in a confusing overlap of jurisdiction. As a rule, the US Constitution is dominant over a state constitution if a federal issue exists in a case.

Estate

The interest or nature of interest, a person has in real property

Encroachments

The intrusion of one's property onto another's property

Foreclosure

The legal procedure whereby the secured property may be sold to satisfy the unpaid promissory note.

Mortgagee

The lender. The lender considers the mortgage an investment in an annuity.

Added Provisions

The license holder is engaging in the unlawful practice of law. The license holder is not qualified to craft such provisions, the result being that there is often considerable dispute over their meaning. These disputes often result in litigation.

Disclosure of all Material Facts

The license holder must disclose all facts that he or she knows of or should reasonably be expected to know that materially affect the value of or desirability of the property. This includes disclosure of agency, property condition, and environmental hazards.

Limited Partners

The limited partner's liability is limited to the amount he or she invested in the partnership. The limited partner has no involvement in the day-to-day operation of the business. The limited partners are the investors in the venture.

Employment Contract

The listing agreement or buyer representation agreement is an employment contract.

Freddie Mac Loan

The loan originator must comply with the seller/servicer requirements, and the loan must be written on Freddie Mac uniform documents. Fannie Mae and Freddie Mac have jointly developed a series of documents to standardize mortgage loan purchases, and loans prepared on these documents have become known as "conforming loans."

Primary Mortgage Market

The market in which borrowers and mortgage lenders come together to create and negotiate terms of a mortgage transaction

Zoning

The most common example of police power. Changing the zoning of a property to a lower value use is called downzoning. The gov has no obligation to compensate an owner for this, even though the property may decrease in value as a result. The government will not reimburse the owner for any loss of value, however, due to the fact that they have not "taken" the land. Zoning can result in non-conforming use of land (apartments bldg and zoned changed to R-1 single residential housing)

Surface Rights

The owner of surface rights has the ability to develop (improve) the surface, and to use resources extracted from or near the surface including stone, gravel, water, and limestone.

Annexation

The process of attaching personal property so that it becomes real property thus crating a fixture

Procuring Cause of Sale

The procuring cause of sale is the individual who, through a series of uninterrupted activities or actions, brought about the completion of a contract. The rule is that the broker must perform within the time specified in the contract. It should be added that the commission does not rest on the amount of work completed by a competing broker. Rather, it is a question of who has performed the agency — to find a ready, willing and able buyer. The determination of procuring cause is quite difficult and is dependent on the court's interpretation of the circumstances of the transaction and the actions of the parties involved.

Municipal Improvement District

The property owner will receive a tax bill similar to a special assessment, until the improvement is paid for, the improvement district designation is removed. In other words, this can be a temporary or permanent tax.

Cumulative Remedies

The provisions of this subchapter are not exclusive. The remedies provided in this subchapter are in addition to any other procedures or remedies provided for in any other law; provided, however, that no recovery shall be permitted under both this subchapter and another law of both damages and penalties for the same act or practice. A violation of a provision of law other than this subchapter is not in and of itself a violation of this subchapter. An act or practice that is a violation of a provision of law other than this subchapter may be made the basis of an action under this subchapter if the act or practice is proscribed by a provision of this subchapter or is declared by such other law to be actionable under this subchapter. The provisions of this subchapter do not in any way preclude other political subdivisions of this state from dealing with deceptive trade practices

Back Ratio

The ratio of the borrower's total recurring monthly debts, including such obligations as the house payment, payments on all installment debts, monthly payments on all junior liens, alimony, car lease payments and other recurring payment obligations. (36%)

Economic Rent

The rent the property could currently command on the open market.

Yield

The return that an investor receives over the life of the loan.

Police Power

The right of government to regulate and control the way land is used. The most common example is zoning. Other examples wetlands, environmental & health & fire. Can have a huge impact on value of property.

Eminent Domain

The right of the government to take private land for public use. The action of taking the land is Condemnation. Land must be taken for the good of all. Schools, parks etc. Owner is compensated for the land taken and any loss in value of remaining property.

Seller's Disclosure of Property Condition

The seller should prepare the disclosure when the listing is taken. The seller should be the only one completing this form or any part of it. Most MLS systems allow for the upload of relevant documents as part of the listing data. The Seller's Disclosure Notice should be uploaded for easy access by other members. Many agents leave a number of printed copies of the disclosure in the property for agents to refer to when showing. Some sellers mistakenly believe that a seller's disclosure is not required when the property is an investment or when the seller has never occupied the property. The seller's disclosure is required whether or not the seller has ever occupied the property.

Capital

The sum of assets

Lease Purchase Agreement

The tenant agrees to purchase the property at some agreed-to time and terms. Although not required, in some cases a part of the buyer/tenant's rent payments are applied to the down payment or purchase price. The lease purchase agreement is advantageous to the seller who may be trying to sell a property in a down market. The risk to both parties is that the loan may not be attainable. Buyer has the option to buy, but is not obligated.

Contingent

The term subject to is synonymous

Timeshare

The timeshare concept was imported from Europe, where shared ownership of vacation properties was common. In its earliest implementation, four owners owned the right to use the property for a specific season of the year. The seasons were rotated so all owners had the right to prime seasons at some time.

Trustee

The trustee has the ability to enter into contracts and borrow money secured by the assets of the trust. All actions of the trustee must exhibit good faith and sound judgment.

Subsurface Rights

There are limitations placed upon subsurface rights. The subsurface owner may not extract minerals that are too close to the surface as to deplete the surface estate. Common examples would be strip mining for coal or iron ore.

Real Estate Contract Guidelines and Statute of Frauds

These agreements must follow real estate Sales Contract, List Agreements, Management Agreements, Buyer Representation Agreements, Lease and Lease Purchase Agreements, Options, Right of First Refusal, Cancellation and Rescission Agreements.

Addendum - Lead Based Paint

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.

Reasonable Care and Skill in Performance

This means that an agent will be held to the standards of knowledge, expertise, and ethics that are spelled out in the Texas Real Estate License Act.

Seller's Disclosure of Property Condition

This variant of the seller's disclosure (Form No. OP-H) is published by the Texas Real Estate Commission to meet the requirements of Section 5.008 of the code. Most REALTORS® use the TAR® form. Those who are not REALTORS®, and unrepresented sellers (FSBOs) will use the TREC form.

Procedural Rule 53

Title companies may not pay for or subsidize advertising or promotional materials or activities of a license holder. The rule does not prohibit a title company from producing or distributing promotional and educational materials about title insurance, loans and mortgages, laws and legislation. Violators are subject to civil penalty not more than $10,000 per act of violation.

Owner's Policy

Title company will issue a _________ usually paid for by the seller for the benefit of the buyer, up to the purchase price, and is in effect so long as the purchaser or the purchaser's heirs own the property.

Commission

To collect a commission, brokers must prove that they were employed to sell the property. Even though the broker may have been influential in executing the sale, one is not entitled to a commission unless one was employed. All listing and buyer representation agreements must be in writing to be enforceable.

Syndicate

Tow or more parties together to create and operate a real estate investment

Townhouses

Townhouses are generally attached units that share one or more common walls with other units (party walls). A major distinction between townhouses and condominiums is that the owner of a townhome owns the land under which the unit is located. A typical townhome includes a small front and back yard area along with a parking area for one or more vehicles. The legal description of a townhome is usually in the form of a lot and block description, much like in a subdivision of single-family detached homes.

New Mortgage Loan

Transactions financed with a ______________ will require considerably more time to close.

Inter Vivos Trust

Trust created during the lifetime of the trustor. Like testamentary trust, the inter vivos trust may be created to care for a relative or loved one, and may include specific instructions as to medical care and other issues that may be dealt with by the beneficiaries.

Trustee

Trustor or Trustee, handles ownership for a beneficiary. In most cases is not personally liable for the liabilities of the trust. The real-estate placed in trust is subject to the liabilities and obligations of the trust.

Promulgated Lease Forms

Two forms 1. Buyer's Temporary Residential Lease - for use when the buyer occupies the property for no more than 90 days prior to closing. 2. Seller's Temporary Residential Lease - for use when the seller occupies the property for no more than 90 days after closing.

Participation Loan

Two or more lenders own a share. This allows the lenders to share or distribute the risk.

Executive Right

Typically, the executive right is the power to lease the minerals. Many times, it is severed when the mineral estate is sold to multiple parties. For example, if a person sells half of the mineral estate to another, the seller may decide to retain the power to lease the entire mineral estate at his discretion. Under this example, the other mineral-interest owners would not be able to participate in the decision to lease the minerals.

S Corporation

Under certain circumstances, a corporation may be chartered as an S Corporation (formerly known as a Sub-chapter S Corporation). S corporations make it possible for small (under 100 shareholders) corporations to avoid double taxation. S Corp income is distributed directly to the shareholders. From the perspective of the shareholder, the income is taxed much like a partnership or sole proprietorship.

Do Not Call

Under its authority from the Telephone Consumer Protection Act (TCPA), the Federal Communications Commission (FCC) established, together with the Federal Trade Commission (FTC), the National Do Not Call Registry. The registry is nationwide in scope, applies to all telemarketers (with the exception of certain non-profit organizations), and covers both interstate and intrastate telemarketing calls. Commercial telemarketers are not allowed to call a consumer if their number is on the registry, subject to certain exceptions. As a result, consumers can, if they choose, reduce the number of unwanted phone calls to their homes. Telephone numbers placed on the National Do Not Call Registry remain on it permanently. More than 157 million phone numbers are on the National Do Not Call Registry. Telephone numbers on the registry will only be removed when they are disconnected and reassigned, or when the consumer chooses to remove a number from the Registry. License holders who make cold calls must comply with the requirements of the National Do Not Call rules. Specifically, before making a cold call, telemarketers must verify whether the number is on the National Do Not Call Registry. License holders may not make cold calls to numbers in the Registry. The brokerage needs to update any download of the registry at least every 31 days. A license holder may call a person whose number is on the Do Not Call Registry if the broker has an established business relationship (EBR) with the person. An EBR exists with someone who was party to a transaction with the brokerage firm in the last 18 months, or with someone who made an inquiry with the broker's firm within the last three months. Additionally, a license holder may call if a consumer grants prior written permission. The rules require that a brokerage firm that makes cold calls must maintain an internal do-not-call list. Requests to be placed in the internal list must be honored indefinitely. The internal list applies to all license holders and employees in the company. The company should maintain a central list into which each caller may input names and check before making calls. If a name is on the internal list, the number may not be called, even if the number is not on the National Do Not Call Registry. The FTC fines telemarketers up to $16,000 for each call to a member of the do not call list.

Net Listing

Under such listings, the seller establishes a minimum acceptable net price. The real estate broker's commission is the difference between the minimum net established by the seller and the price that the buyer is willing to pay. Because of potential ethical and legal issues, net listings are outlawed in many states. In states where the practice is still legal, net listings are discouraged and subject to great scrutiny.

Agency Law

Understanding the relationship between the parties to a transaction, sales agents, brokers and others is vitally important. The level of service provided to a buyer, seller, landlord or tenant is determined by the presence of or lack of an agency agreement with the broker.

Mortgage Company

Unlike regulated depository institutions, mortgage companies have not historically been a major concern of the government because they do not hold depositors' funds. For the most part, mortgage companies are not licensed or regulated as banks and saving associations are by federal and state agencies. The money that mortgage companies use to make loans comes from the sale of bonds, which is considered a business transaction, not a savings account deposit procedure.

UFFI

Urea formaldehyde foam insulation - moisture causes the release of hazardous gas

Front Ratio

Used to qualify a borrower for a loan based upon the proposed house payment and his or her combined gross monthly income (28% of income)

Closing Procedures

Vary depending upon the laws and customs in different states

Riparian Rights

Water Rights - the rights that an owner has to use water from a river or a stream on or next to a property.

Improvements

When a deed is prepared, it is understood that the improvements do not have to be listed to be transferred to the new owner.

Holdover Tenant

When a lease agreement comes to the end of the lease period, it is discharged, and is terminated. A tenant who fails to move out when the lease expires, is known (among other things) as a holdover tenant. "Holding over" creates tenancy at sufferance if the holdover is not paying rent. A holdover tenancy is created if the holdover tenant is paying rent that is accepted by the landlord.

Novation

When a new contract is submitted for an existing one. The new agreement may include new parties, which becomes a novation of the parties. The parties must be capable of performing under the contract. A novation may occur when a contract that has been marked up with many changes is replaced with a clean copy.

Seller's Disclosure of Property Condition

When a property is listed, the seller generally prepares a Seller's Disclosure of Property Condition. The two most common disclosure forms include one from the Texas Real Estate Commission, and another for REALTORS® through the Texas Association of REALTORS® (TAR®). Most residential agents use the longer and more complete TAR® form. The purpose of the Seller's Disclosure Notice is to have the owner of the property disclose all facts and defects concerning the property. This is a good tool to use as a defense in a DTPA lawsuit. It should be filled out by the seller, not the seller's agent.

Damages

When a real estate license holder is sued, it tends to be due to an action under the DTPA. A lawsuit brought about under DTPA has the potential for treble damages if the trier of fact, whether judge or jury, believes that the agent knowingly or intentionally meant to deceive the consumer. Intentionally means with actual awareness, or flagrant disregard of prudent and fair business practices. Knowingly means with actual awareness of a falsity, deception, or unfairness of an act. If an agent deliberately made a false statement about the condition of the property, or intentionally did not disclose a known defect, the agent could be liable for three times the economic damages under DTPA. The plaintiff can also sue for mental anguish.

Fixtures to Lease Property

When a tenant adds fixtures to leased property, the fixtures generally become property of the landlord. Trade fixtures are the exception to this rule

Consult a Lawyer

When a transaction involves unusual matters that should be reviewed by legal counsel before an instrument is executed, or if the instrument must be acknowledged and filed of record, the license holder shall advise the principals that each should consult a lawyer of the principal's choice before executing the instrument.

Freehold Estates

When an individual owns real property he is said to have a freehold estate in that property. Ownership in property includes rights or privileges. Freehold estate is an indeterminate length.

Predatory Lending

When an unscrupulous lender takes advantage of a consumer's lack of knowledge regarding lending practices.

Statutory Law

When considering statutory law, the statute itself is important, but the interpretation of the statue by the responsible agency determines how it will be implemented.

Filling in a Form

When filling in a form authorized for use by this section, the license holder may only fill in the blanks provided and may not add to or strike matter from such form, except that a license holder shall add factual statements and business details desired by the principals and shall strike only such matter as is desired by the principals and as is necessary to conform the instrument to the intent of the parties.

Manufactured Homes

When initially sold, it is regarded as personal property such as a car. In Texas a filing my be required with the state or county to establish its status as real property. The distinction is important as real property will qualify for financing terms that are more favorable .

REALTORS

When leasing residential properties, license holders who are REALTORS® generally use forms available from the Texas Association of REALTORS.® Those who are not REALTORS® must use forms from other sources.

Severalty

When property has only one sole owner/ Severed or set apart from all others. Advantage: total control of the property. Disadvantage: total responsibility. A corporation can be a owner in severalty because under law it is a single legal entity. If only one signature is required on a deed conveying full ownership of the property to another, the sell owns an estate in severalty.

Total Closing Costs

When the increase in ________________ exceeds the legal limits, it must be disclosed.

Survive Closing

When the sale finally closes, the contract is fully executed. However, according to the TREC-promulgated contract forms, all representations made by seller and buyer "survive closing," which means that both parties remain liable beyond closing for their representations made in the contract.

Mineral Estate in a Life Estate

When the seller dies, the minerals convey to the buyer.

Notice of Transfer

When the servicing of a federally related mortgage loan is assigned, sold, or transferred, the transferor servicer (present servicer) must provide a disclosure not less than 15 days before the effective date of the transfer. The same notice from the transferee servicer (new servicer) must be provided not more than 15 days after the effective date of the transfer. Both notices may be combined into one notice delivered to the borrower not less than 15 days before the effective date of the transfer.

Situs

Which economic characteristic of land describes location preference from an economic point of view, not a geographic viewpoint. Both natural and man-made factors will have an impact on preferences. Climate, views, recreation, schools, jobs, transportation.

Finance Regulations

While most license holders are not Residential Mortgage Loan Originators (RMLO's) , certain real estate advertising practices are subject to finance disclosure laws.

Termination

Written notice must be delivered by seller by 5:00 pm on the last day of the option period. Notice to the seller's agent is considered the same as a notice sent directly to the seller. The buyer's agent needs to make sure they deliver the option fee to the listing company or the seller within 3 days of the effective date of the contract.

Appraisers

_____ also have access to MLS for their use in preparing appraisal reports.

Auctioneers

_____ may call an auction without the need for a real estate license so long as no other real estate services are being provided. Rule of thumb: if related to the transaction "after the gavel has dropped" he or she must have a license.

Contract for Deed

a contract between buyer and seller. In the contract, the buyer agrees to make regular payments to the seller. The seller retains legal title to the property, known as title retention, and the buyer acquires equitable title or equitable interest in the property. In the contract, the seller promises to convey legal title to the buyer when all payments have been made.

Tenancy at will or estate at will.

a leasehold in which a tenant occupies real estate with the permission of the owner for an uncertain or unspecified length of time; this is a very loose agreement. Little or no notice may be required depending on the lease agreement, and either party can terminate at any time, but usually a specific notice period is set. This is the only lease that is easily terminated by the death of the landlord, or sale of the property. All other leases would remain in effect and binding on the new owner.

Contingency

a provision in a contract that requires that a certain act or event happen in order for the contract to be binding on the party. Must be specific, who must complete action, and when it will be completed.

Real Estate Recovery Trust Account

administered by the TREC

Easement by Commendation

allowed under the right of eminent domain. Right of way, power lines, railroads.

Consumer

an individual, corporation, partnership, or government source who seeks to acquire or purchase the goods or services.

Authority of Legislative Bodies

and the rights of individuals are enumerated in federal and state constitutions. While RE has historically been the concern of state and local government, federal courts and statues have eroded the authority in recent years. RE today is seen as involving interstate commerce, thereby raising issues of federal law and jurisdiction

Mediation

any disputes arising under the contract that cannot be resolved through informal means will be submitted to mediation prior to resorting to arbitration or litigation.

Goods

are defined as tangible chattels (real property is tangible when purchased or leased. Under DTPA, the sale of a house is considered a good).

Net leases

are often characterized as net (N), double net (NN) and triple net (NNN). The single net lease (N) is one in which the tenant pays rent and property taxes. The landlord is responsible for all other costs associated with the property. The double net lease (NN) is one in which the tenant pays rent, property taxes and property insurance. The landlord is responsible for repairs and maintenance of the building. A triple net lease (NNN) is one in which the tenant is responsible for rent and all fixed and variable expenses related to a property (property taxes, property insurance, maintenance). In most cases, the landlord is still responsible for structural repairs. The advantage of a triple net lease to a tenant is that the rent is usually lower that it would be under a gross, single net or double net lease. The primary disadvantage to the tenant is that expenses are more variable and harder to anticipate and control. Because of all these variances, these terms are not strict legal lease definitions, and the lease should be read carefully by a competent advisor. The lease terms are determined by the wording of the lease not by what it is called."

Mortgage Loans

by definition are secured loans.

BRA paragraphs 5, 6, 7

by explaining these three paragraphs effectively, the agent fulfills both compliance requirements and practical buyer/broker mutual benefits.

Listing Agreement prgh 11, 12, 13

by explaining these three paragraphs effectively, the agent fulfills both compliance requirements and practical buyer/broker mutual benefits.

Fair Housing Act

covers the sale and rental of most housing. In some circumstances, the 1968 Act exempts owner-occupied buildings with no more than four units, single-family housing sold or rented without the use of a broker, and housing operated by organizations and private clubs that limit occupancy to members

Statutory Estate

created by statute or law. : Community property, Homestead, Dower and curtesy, Tenancy by the Entirety

Inspection

does not address cosmetic issues that are not related to structural performance, operability or water penetration.

Texas Free Enterprise and Antitrust Act

enforced by the Texas Attorney General, state law that applies to unfair competition.

Condominiums

established under laws referred to as Horizontal Property Acts. All residents are required to observe the HOA. Each unit is separate legal ownership, and each resident arranges his or her own financing. Property taxes are assessed separately. Taxes are based on the assessed value of the unit, which is based on market value. In most states, the common areas of the complex are not taxed separately from the units.

Mills

figure representing the amount per $1,000 of the assessed value of property

Lender's Policy

for the protection of the lender, and covers up to the loan amount. The lenders policy was formerly know as a mortgagee policy.

Leasehold Estates

gives one possession and use of a property without ownership. During the life of a lease, the owner of the freehold estate is held to have a revisionary interest in the property. That means possession will revert or come back to him at the end of the lease. 4 types. Estate for Years, Periodic tenancy or periodic estate, tenancy at sufferance, tenancy at will or estate at will.

Agents Disclosure

holder's fiduciary obligation to disclose to the license holder's principals all pertinent facts which are within the knowledge of the license holder, including such facts which might affect the status of or title to real estate.

Minerals in Steps

ie., buyer gains so much of the minerals in a period of time. For example, the buyer is granted 10% of all the estate each year for ten years.

Real Estate Recovery Trust Account

if judgment against a licensed holder is uncollectible, the individual may apply to the RTA for payment. Payments can be made only at the direction of the courts, $50K is max per transaction and $100K is the max on behalf of any one license holder, Max payment amounts are set by the legislature, not by TREC. If license is revoked or suspended, it cannot be reissued until the amount has been repaid, with interest.

Securities License

if selling property that qualifies as securities, such as limited partnerships, RE Investment Trusts and shares in a brokerage firm.

Radon

is a naturally occurring, colorless and odorless gas produced by the decay of radioactive materials in rocks under the ground. Radon enters homes through the foundations. HUD does not require radon testing for FHA loans. Mitigation is the term used to describe methods used to lower levels of radon in homes and other buildings. naturally occurring colorless and odorless gas produced by the decay of radioactive materials in rocks under the ground

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 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, "While values are still high." The perpetrators of blockbusting often bought properties at below market prices from concerned sellers, only to sell them later at above market prices to minority buyers. Blockbusting is also known as panic peddling.

Land

is defined as the surface of the earth extending downward to the center of the earth and upward above the surface to infinity. This definition also includes natural things such as trees, crops and water.

Puffing

is not misrepresentation. Puffing is marketing. Puffing uses adjectives and opinions rather than details or facts (The most beautiful landscaping). Exaggerated puffing can lead to misrepresentation. (Best water in the world). License holders should take care to not overstate the positive features of a property that could lead to a claim of misrepresentation.

Letter of Intent

lays out terms of an agreement.

Use of Contracts

license holder may not add to a promulgated contract form factual statements or business details for which a contract addendum, lease or other form has been promulgated by the commission for mandatory use. (h) This section does not prevent the license holder from explaining to the principals the meaning of the factual statements and business details contained in an instrument so long as the license holder does not offer or give legal advice.

Sales Agent

license holder with no sponsor broker is inactive, and may not receive commissions of any kind and may not practice real estate brokerage.

Agent License

may only be issued under the sponsorship of a licensed broker.

Services

means work, labor, or repair of goods. Brokerage is a service.

Mortgage Company

must prove reasonable net worth, experienced personnel & adequate office facilities available to the general public. Approval must be obtained by each agency HUD/FHA, VA, Fannie Mae, Freddy Mac and Ginnie Mae in order to do business with that agency.

Sales Agent

must receive all compensation through his or her sponsoring broker.

Non-resident Brokers

must work through resident brokers.

Conventional Loans

not assumable

Inverse Condemnation

occurs when the landowner sues the government, to force the government to buy his land.

Underground Storage Fuel Tanks

old, rusty or leaking containers can cause groundwater contamination. Sometimes found on both commercial and residential properties, these are commonly called USTs. Recommend water testing.

FHA

part of the Dept of Housing & Urban Development (HUD)

Sales Agent

prohibited from splitting fees with anyone, except through the sponsoring broker.

FHA

provides mortgage insurance on single-family, multifamily and manufactured homes throughout the US.

License - Must have

real estate agent, attorney participating in a commission split, an auctioneer selling real property for compensation, an apartment locator, or if you sell, exchange, purchase, rent, lease, offer, negotiate, list, appraise, auction, buy options, aid, locate, procure or assist in procuring properties, you should have a license.

Defining the Market Area (Buyer/Tenant Rep Agmt)

requires the agent and buyer to be clear on the market area or areas in which this agreement applies, especially if the client is also being represented by another broker in another market area.

Littoral Rights

rights to use water from a lake, ocean or sea on or next to property. The water may be used for domestic purposes and may not be contaminated. The flow of the water may not be interrupted. The right to use water is a valuable asset and in many states, it is not an automatic right. These rights do not allow a claim of ownership of the water, and the state may refuse to grant water rights if there is a scarcity or shortage of water. For non-navigable waters, landowners may own to the middle of the body of water. For navigable waters, landowners own to the vegetation line. In Texas, most surface water is owned by the state.

Landfills or Waste Disposal Sites

that are improperly constructed can lead to groundwater contamination. Know locations, and disclose. Recommend water testing.

Loan Factors

the availability of funds, terms at which loans are offered are affected by government spending, borrowing, and the overall state of the economy. Federal Reserve coupled with the fiscal policies of Congress impact both the primary and secondary mortgage markets.

Commercial Leasing

the manner in which rent is paid determines the type of lease.

Alluvion

the soil added to the land by the accretion

Personal Property

things of a temporary or movable nature. Also known as personality or chattel

Class A Misdemeanor

to engage in real estate profession without first obtaining a license according to the Texas Penal Code. Punishable by a fine of up to $4,000 and or up to one year in county jail. May also face civil suit for damages filed by injured party.

DO NOT have to use promulgated forms

transactions in which the license holder 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; or (4) transactions for which no standard contract form has been promulgated by the Commission, and the license holder 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 license holders with the consent of the Commission.

Reliction

water recedes and dry land appears

Short Sale

when a seller is unable to sell his or her property at or above what the seller owes the lender. The seller requires the lienholder's consent to sell and requires the lender to accept the seller's net proceeds as full satisfaction of the mortgage loan. The lender is also to give the seller executed release of lien against property in recordable format.

Requirements of a Valid Lease

• Competent Parties (lessor and lessee) • Let and take agreement • Adequate Consideration (rent) • Legal purpose • Description of the property (street address is sufficient)

Requirements of a Valid Lease greater than 1 year

• Execution (signed by the parties) • Term of the lease (duration - 6 months, 1 year, 5 years, etc.) • Delivery • In writing if the lease is for more than one year (Statute of Frauds).

Promulgated Sales Contract Forms for Residential Properties

• One-to-Four Family Residential Contract (Resale) • New Home Contract (Incomplete Construction) • New Home Contract (Completed Construction) • Unimproved Property Contract • Residential Condominium Contract (Resale) • Farm and Ranch

Promulgated Addendums

• Third Party Financing Addendum • Addendum for Sale of Other Property by Buyer • Addendum for Back-up Contract • Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller's VA Entitlement • Seller Financing Addendum • Environmental Assessment, Threatened or Endangered Species, and Wetlands Addendum • Addendum for Coastal Area Property • Addendum for Property Located Seaward of the Gulf Intracoastal Waterway • Addendum for Property Subject to Mandatory Membership in an Owners' Association • Amendment to Contract • Loan Assumption Addendum • Addendum for Reservation of Oil, Gas and Other Minerals • Short Sale Addendum • Lead-Based Paint Addendum • Non-Realty Items Addendum • Notice to Prospective Buyer • Seller's Disclosure of Property Condition • Texas Real Estate Consumer Notice Concerning Hazards or Deficiencies • Information About Brokerage Services • Disclosure of Relationship with Residential Service Company • Condominium Resale Certificate • Subdivision information, Including Resale Certificate for Property Subject to Membership in a Property Owners' Association • Notice of Buyer's Termination of Contract