Law of Contracts

A buyer makes an offer on a house. The seller accepts, and the buyer is notified of the acceptance. Both parties sign the sales contract. At this point, the buyer has what type of title to the property? A)Equitable B)Recorded C)Escrow D)Voidable

A

After agreeing on a sales price and signing a contract, the buyer lost his job. The sellers decided they wanted to stay in the house after all, and the parties decided to terminate the contract. This is an example of A)mutual agreement. B)an impossibility of performance. C)assignment. D)illegal termination.

A

All of the following are essential elements of a contract EXCEPT A)a competent grantor. B)offer and acceptance. C)consideration. D)lawful purpose.

A

All of the following remedies are allowed under the provisions of TREC promulgated contracts EXCEPT A)receiving the earnest money and suing for money damages. B)suing for money damages. C)suing for liquidated damages. D)suing for specific performance.

A

Estate for years, estate from period to period, and estate at will are all examples of A)leasehold estates. B)estates at sufferance. C)listing agreements. D)freehold estates.

A

Section 5.008 of the Texas Property Code requires the seller to disclose A)that the family room added to the home in 1996 was completed without a permit. B)that the seller has AIDS. C)that a previous owner of the property committed suicide in the master bedroom. D)all of these.

A

TREC forms may be reproduced in any of the following ways EXCEPT A)copied into word processing software. B)legible photocopies made from copies obtained from the Commission. C)from printed copies obtained from the Commission. D)computer-driven printers following TREC guidelines.

A

The Real Estate Settlement Procedures Act (RESPA) applies to which of the following? A)1-4 residential units B)Loans on properties of more than 25 acres C)Construction loans or other temporary financing D)Loans for business or agricultural purposes

A

The transfer of a party's rights and obligations to a third party is an A)assignment. B)amendment. C)implied contract. D)option.

A

Unlike a sales contract, a listing agreement is A)an employment contract. B)an agreement between a buyer and the buyer's agent. C)oral instead of written. D)not legally enforceable.

A

What is the makeup of the Texas Broker-Lawyer Committee? A)Six brokers, six lawyers, and one public member B)Seven brokers and six lawyers C)Three brokers, three lawyers, and three public members D)Six brokers and six lawyers

A

Which of the following describes judicial foreclosure? A)The property is sold by court order after the mortgagee has given sufficient public notice B)In a court-ordered meeting, the lender accepts the deed to the property from the borrower C)The parties agree to settle the matter through arbitration D)The court awards full legal title to the lender after the court establishes a deadline for the balance of the defaulted debt to be paid in full and the borrower does not meet the deadline

A

Which of the following is NOT an example of an action that might lead to involuntary alienation? A)Property is gifted to another B)Land is needed for public use C)Debt secured by real property is not paid D)A person dies intestate with no heirs

A

Which of the following is TRUE regarding promissory notes? A)It is the borrower's personal promise to repay a debt according to agreed terms B)It is also called a security C)It protects the borrower against a cloud on the title D)It is the seller's personal promise to sell the property to the buyer

A

A contract for the sale of real estate which does not state the consideration to be paid for the property and is not signed by the parties is considered A)executory. B)void. C)enforceable. D)voidable.

B

A house for sale has a huge deck on its west side. The deck is permanently attached to the house and removing it would damage the house and the landscaping. The deck will transfer with the property when it is sold via a A)promissory note. B)conveyance deed. C)bill of sale. D)deed of trust.

B

A seller promises to sell his house and transfer title to the buyer, who promises to pay $250,000 for the house. This is an example of what kind of contract? A)Unilateral contact B)Bilateral contract C)Executed contract D)Universal contract

B

A voidable contract A)has no legal effect. B)may be disaffirmed by one party. C)is oral. D)has not been signed by all parties.

B

All of the following are TREC-promulgated addenda EXCEPT A)Property Located Seaward of the Gulf Intracoastal Waterway. B)Information About Brokerage Services. C)Sale of Other Property by Buyer. D)Release of Liability on Assumption.

B

All of the following are true about estates in real property EXCEPT A)they are created by a deed and a lease. B)leasehold estates are estates of possession. C)they are created by a deed or a bill of sale. D)freehold estates are estates of ownership.

B

An option contract A)makes the seller liable for a commission when the option contract is originated. B)permits the optionee to purchase within a specified time period. C)gives the seller the right to cancel the contract if another buyer brings an offer. D)requires the optionee to complete the purchase.

B

An option-to-purchase contract A)requires option money that is refundable if the buyer does not buy. B)allows the buyer to buy for a fixed price within a specified time period. C)binds the buyer only. D)binds both buyer and seller.

B

Compensation for financial loss of the non-defaulting party is called A)injunctive relief. B)liquidated damages. C)specific performance. D)monetary damages.

B

Substitution of a new contract for an existing contract is A)an assignment. B)novation. C)permitted only if the parties have consulted an attorney. D)not permitted under Texas law.

B

The buyer and the seller have agreed that the seller will remove a huge birdbath in the backyard before the buyer takes possession of the property. This agreement should be A)discussed by the parties at the closing. B)addressed in the sales contract. C)addressed in the inspection report. D)drafted in a letter by the seller and her agent and provided to the buyer.

B

The difference between a TREC-promulgated form and a TREC-approved form is A)promulgated forms are used in commercial transactions. B)promulgated forms must be used, while approved forms may be used. C)both must be used by licensees for all real estate transactions. D)promulgated forms may be used, while approved forms must be used.

B

The law which requires real estate contracts to be in writing to be enforceable is the A)law of descent and distribution. B)statute of frauds. C)statute of limitations. D)parol evidence rule.

B

What happens if a backup offer is made on a property when a kick-out clause is in effect? A)None of these B)The contracted buyers have a specified time to remove the home sale contingency and proceed with the purchase C)If the new offer is better than the existing offer, the seller can choose to accept the new offer D)The existing offer is terminated

B

What law requires certain types of contracts to be in writing to be enforceable? A)The Homestead Act B)Statute of frauds C)Real Estate Settlement Procedures Act D)Parol evidence rule

B

A lender's title insurance policy provides coverage dependent on A)the property's sale price. B)a formula based on the buyer's credit score. C)the amount of the loan. D)state statute.

C

A property owner wants to use water from a river that runs through the property to irrigate a potato field. To do so, the owner is required by state law to submit an application to the Department of Water Resources describing in detail the plan for beneficial use of the water. If the department approves the owner's application, it will issue a permit allowing a limited amount of river water to be diverted onto the property. Based on these facts, it can be assumed that this property owner's state relies on which rule of law? A)Accretion B)Riparian rights C)Doctrine of prior appropriation D)Littoral rights

C

A woman rents space in a commercial building where she operates a bookstore. In the bookstore, she has installed large reading tables fastened to the walls and bookshelves that create aisles from the front of the store to the back. These shelves are bolted to both the ceiling and the floor. Which of the following best characterizes the contents of the bookstore? A)The shelves and tables are trade fixtures and will transfer when the property owner sells the building B)Because the shelves and tables are attached to the building, they are treated the same as other fixtures C)The shelves and tables are trade fixtures and may properly be removed by the woman before her lease expires D)Because the woman is a tenant, the shelves and tables are fixtures and may not be removed except with the building owner's permission

C

All of the following constitute the unauthorized practice of law by a real estate licensee EXCEPT A)giving opinions or counsel regarding the validity or legal sufficiency of an instrument that addresses real property rights. B)drawing a deed, note, deed of trust, will, or other written instrument that transfers an interest in or title to real property. C)completing a contract form binding the sale, exchange, lease, or rental of an interest in real property has been prepared by and required by the property owner. D)giving opinions or counsel regarding the status of title to real estate.

C

Because a homeowner failed to pay the real estate taxes on time, the taxing authority imposed a claim against the homeowner's property. This claim is called A)a deed restriction. B)a reversionary interest. C)a lien. D)an easement.

C

During the option period, a buyer may terminate the contract for A)reasonable cause. B)justifiable reason. C)any reason. D)equitable cause.

C

How many and what parties are involved in a deed of trust? A)Three—the mortgagor, the mortgagee, and the beneficiary B)Two—the trustee and the trustor C)Three—the trustee, the trustor, and the beneficiary D)Two—the mortgagor and the mortgagee

C

Promulgated forms are A)written by TREC and then published by the Broker-Lawyer Committee for mandatory use by license holders. B)written and issued by the Texas legislature for mandatory use by license holders. C)created by the Broker-Lawyer Committee and then published by TREC for mandatory use by license holders. D)written and issued by TREC for required use by license holders.

C

The marital status of the parties to the transaction must be listed in this contract because Texas is a A)title theory state. B)lien theory state. C)community property state. D)partnership state.

C

The purpose of the Real Estate Settlement Procedures Act (RESPA) is to A)make real estate brokers more responsive to buyers' needs. B)help buyers know how much money is required. C)ensure that buyers know all settlement costs that will be charged to them. D)make sure buyers do not borrow more than they can repay.

C

The right of a government body to take ownership of real estate for public use is called A)police power. B)condemnation. C)eminent domain. D)escheat.

C

Which of the following is NOT part of the loan approval process? A)Lender ordering an appraisal of the property B)Lender obtaining a credit report for the applicant C)Lender ordering a home inspection D)Underwriting

C

Which of the following is TRUE about TREC-promulgated contract forms? A)They contain suggested language that a license holder may include when writing an agreement of purchase between a seller and buyer B)They are written and published by the Broker-Lawyer Committee and must be used for those transactions identified by the commission C)They must be used by real estate license holders in all transactions to which the forms are applicable unless one of four exceptions apply D)They must be used by all real estate license holders and Texas attorneys handling real estate transactions

C

Which of the following liens are voluntary? A)Deed of trust liens and IRS tax liens B)Property tax liens and mechanics' liens C)Mortgage liens D)Mechanics' liens and mortgage liens

C

A contingency should contain all of the following elements EXCEPT A)actions necessary to satisfy the contingency. B)how the contingency may be removed. C)time frame in which action must be performed. D)personal reason for requiring the contingency.

D

A lease will be valid if it is between a landlord and which of the following individuals? A)A man who is obviously drunk at the time he signs the lease B)A 16-year-old boy who has already graduated from high school C)A 60-year-old woman who has Alzheimer's disease D)A 44-year-old woman who uses a wheelchair to get around

D

An appurtenant easement like most encumbrances A)terminates with the sale of the property. B)is a right-of-way for a utility company. C)is revocable. D)runs with the land.

D

Contingencies in a contract create A)a void contract. B)an unenforceable contract. C)an invalid contract. D)a voidable contract.

D

If, after the sales contract is signed, the seller decides not to sell, the A)seller may cancel the contract and retain the buyer's earnest money deposit. B)buyer may both get his earnest money back and file for specific performance. C)real estate agent forfeits a right to a commission. D)buyer may institute a suit for specific performance of the contract and/or for money damages.

D

In an amortized loan A)each payment is applied first as a set amount to the principal, the rest to the interest owed. B)the monthly payments change according to changes in interest rates. C)the final payment is much larger than the other payments. D)each payment partially pays off both principal and interest.

D

Making a counteroffer A)is a right given only to buyers. B)necessitates an entirely new contract. C)is a right given only to sellers. D)terminates the original offer.

D

The buyer and the seller have an executory contract for sale of a property. The seller has assured the buyer that the property can be used as home daycare center. The buyer checked zoning and discovered that the special use is no longer lawful in that neighborhood. In this case, the contract is A)void. B)valid. C)unilateral. D)voidable.

D

The policy-making body of the Texas Real Estate Commission is made up of nine members, three of whom are members of the public and six of whom must be active in real estate as full-time A)brokers for 10 years immediately preceding appointment. B)salespersons for five years immediately preceding appointment. C)salespersons for 10 years immediately preceding appointment. D)brokers for five years immediately preceding appointment.

D

The sales contract says the buyer will purchase only if the buyer's current home closes within the next 30 days. This is called a A)warranty. B)consideration. C)reservation. D)contingency.

D

What document addresses additional material to be added to an executory sales contract? A)Amendment B)Agency agreement C)Article D)Addendum

D

Which item does a lender generally require at the closing? A)Credit report B)Application C)Market value appraisal D)Title insurance commitment

D

Which method for providing legal descriptions uses north-south and east-west lines to describe the location of the property? A)Lot-and-block system B)Base line survey system C)Metes-and-bounds method D)Rectangular government survey system

D

Which of the following is a task to be completed by the seller in preparation for closing? A)Obtain a title insurance policy B)All of these C)Review the Good Faith Estimate, if available D)Review the settlement statement if requested

D

Which of the following is an economic characteristic of real estate? A)Immobility B)Uniqueness C)Improvements D)Indestructibility

D

Without a "time is of the essence clause" clause, Texas courts will assume that all contract obligations will be completed in A)statutory time. B)time to meet any closing dates. C)any time periods acceptable to the parties. D)reasonable time.

D