Law of contracts

The four major types of listing agreements are, exclusive agency, net listing, exclusive right to sell and

open listing

Which of the following are NOT part of the primary mortgage market? a. Commercial banks b. Credit unions c. Fannie Mae d. FHA and VA lenders

Fannie Mae

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

Lender ordering a home inspection

The __________ is the percentage of the lesser of the appraised value or sales price that the lender will loan.

Loan-to-value ratio

A property title free of defects is said to be a. valid. b. legally sufficient. c. marketable .d. binding.

Marketable

A __________ is a pledge of real estate as security for the repayment of a debt.

Mortgage

At closing, taxes and other expenses are divided between the seller and the buyer through amortization. underwriting. proration. probate.

amortization

A(n) ___________ is an area of land separating one land use from another.

buffer zone

The closing date specified in a contract is usually a(n) "__________" date.

on or before

When an individual owns real property, he or she is said to have a(n) _______ in that property.

Freehold Estate

Under the DTPA, _____ are defined as tangible chattels

Goods

A seller decides to stop allowing showings on his home and is ready to compare the five written offers he has received. If his agent receives two more last minute offers, one written and one verbal, how can the agent help the seller evaluate offers?

He can prepare net sheets on the offers being considered so the seller can compare all of the details and better determine the bottom line for each offer.

An agent submitted an offer for his buyer with an attached Third Party Financing Addendum that makes the contract contingent on obtaining financing for full asking price. If the offer is accepted, but the buyer learns that the lender will finance $10,000 less than she needs, she has the following options available except:

She can terminate the contract, but she will forfeit her earnest money.

If a person has been judged to be incompetent, a contract is _________ because the person never had the capacity to enter into a contract in the first place.

Void

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

an employment contract

A seller disclose notice is NOT required..

at a foreclosure sale

The section of a purchase contract that provides for the buyer to forfeit any earnest money if the buyer is in default and fails to complete the purchase is called the provision for punitive damages. hypothecation. liquidated damages. subordination.

liquidated damages

A ___________ is an employment agreement between the seller and the broker.

listing agreement

All of the following are not an essential element of a valid contract EXCEPT a. notarization. b. offer and acceptance. c. consideration d. legal purpose

notarization

In a _______ lease, the tenant's rent is based, in whole or in part, on the receipts of his or her business.

percentage lease

If the loan factor is $5.53 on a $200,000 loan, taxes are $2,400/year and insurance is $1,800/year, what is the monthly PITI payment?

$1,456

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

1-4 residential units

Which of the following is a physical characteristic of land? Improvements Indestructibility Area preference Scarcity

Indestructibility

The type of law that deals with the relationship between the parties to a transaction, sales agents and brokers is:

Agency Law

The five essential elements of a valid and enforceable contract are, Consideration, Offer and Acceptance, Legal purpose, In writing and _________.

Competent parties

If a seller's agent notices that his sellers failed to disclose and then cover up a roof leak, he/she should:

Discuss his observations with the seller, inform them of the potential liability issues, encourage them to be honest, ask that they disclose the ceiling stain, and suggest that they look into the issue since it may not have been reported by the tenants.

The TREC residential contract forms are

Drafted by the Broker Lawyer Committee

The French term ___________ means a life estate that is based on the life of another.

Pur autre vie

Real estate that is advertised with a financing option that requires only a 5% down payment with no further detail is likely a violation of a. the Real Estate Settlement Procedures Act. b. the Equal Credit Opportunity Act. c. Regulation Z. d. the Secure and Fair Enforcement for Mortgage Licensing Act.

Regulation Z

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. Riparian rights b. Littoral rights c. Accretion d. Doctrine of prior appropriation

Riparian rights

A seller decides to stop allowing showings on his home and is ready to compare the five written offers he has received. If his agent receives two more last minute offers, one written and one verbal, what should the agent do to look out for his customer's best interest?

The agent should make sure that all offerees know that this is a multiple offer situation, so they can all make their highest and best offers.

Which of the following is the BEST way to list the buyers in the sales contract? T. J. Miller and wife Jodi Thomas James Miller and Jodi Ann Miller Thomas James Miller and wife Jodi Ann Miller Thomas James and Jodi Ann Miller

Thomas James Miller and wife Jodi Ann Miller

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

Title Insurance Commitment

Fee simple ownership, shared walls, and a fractional interest in common areas are all characteristics of single-family home ownership. cooperative ownership. time-share ownership. town-house ownership.

Town-House Ownership

A(n) _________ is an entity created for the benefit of another.

Trust

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 voidable. void. executory. enforceable.

Void

an option contract is

a bilateral contract

A seller who receives multiple offers on a property and wishes to make one offer a contract and a second offer a backup offer should use an amendment form. an addendum form. a contingency form. an inspection form.

a contingency form

"I, property owner, grant, bargain, and sell . . ." is an example of a habendum clause. passing title. a granting clause. a covenant of seisin.

a granting clause

Which of the following is NOT included in the description of the land A sewer system The earths surface extending downward towards the center of the earth Trees and water on the earths surface Formations such as hills and plateaus

A Sewer system

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? Universal contract Bilateral contract Unilateral contact Executed contract

Bilateral Contract

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 brokers for ten years immediately preceding appointment. brokers for five years immediately preceding appointment. salespersons for ten years immediately preceding appointment. salespersons for five years immediately preceding appointment.

Brokers for 10 years immediately preceding appointment

Randy and Kim divided their 30-acre property into three 10-acre parcels (lots A, B, and C). A and C can only access the public road through B. The buyers of A and C will probably be granted what type of easement by court action? a. Easement by necessity b. Easement in gross c. Easement by prescription d. Easement by condemnation

Easement by necessity

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

If the new offer is better than the existing offer, the seller can choose to accept the new offer.

Any man-made addition to land that is permanent, and is considered to become part of the land is known as a(n)

Improvement

Which of the following is an economic characteristic of real estate? Immobility Indestructibility Uniqueness Improvements

Improvements

Which of the following is FALSE regarding community property? It consists of real and personal property acquired by either spouse during the marriage. Its conveyance requires the signature of both spouses. The spouses can will their half of the property to whomever they desire. It can be mortgaged or conveyed by one spouse without the consent of the other.

It consists of real and personal property acquired by either spouse during the marriage

Which of the following is TRUE regarding manufactured housing in Texas? It can be considered real property if the owner chooses to treat it as such and files the proper paperwork. It is always considered personal property. It is always considered real property. It is considered real property if it is permanently affixed to the land.

It is considered real property if it is permanent affixed to the land

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

Leasehold estates

Which type of lease, generally used for retail businesses, bases its rent on a minimum fixed rental fee plus a portion of the gross income generated by the tenant's business? Percentage lease Net lease Gross lease Variable lease

Percentage Lease

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

Promise is gifted to another

An agent submitted an offer for hes buyer with an attached Third Party Financing Addendum that makes the contract contingent on obtaining financing for full asking price. If the offer is accepted, but the buyer learns that the lender will finance $10,000 less than she needs, what should the listing agent do to make sure she is fulfilling her fiduciary responsibilities to her client?

She should keep the buyer informed of her options as well as the approaching deadline(s).

An agent submitted an offer for his buyer with an attached Third Party Financing Addendum that makes the contract contingent on obtaining financing for full asking price. The offer is accepted, but the buyer learns that the lender will finance $10,000 less than she needs. What additional amendments, contingencies, or addenda may be used if the buyer and the seller decide to proceed with the sale at a lower sales price?

The buyer's agent must submit an amendment that reflects the new, lower sales price.

A buyer purchased a home for cash 30 years ago. Today the buyer receives monthly checks from a mortgage lender that supplement her retirement income. The buyer MOST likely has obtained a. a reverse mortgage. a purchase-money mortgage. an adjustable-rate mortgage. an overriding deed of trust.

a reverse mortgage

Contingencies in a contract create an invalid contract. a void contract. an unenforceable contract. a voidable contract

a voidable contract

A seller decides to stop allowing showings on his home and is ready to compare the five written offers he has received. If his agent receives two more last minute offers, one written and one verbal, what options does the seller have when responding to the offers?

accept, reject, counter offer, or do nothing

A homeowner acquired ownership of land that was deposited by a river running through his property by a. accretion. b. reliction. c. succession. d. avulsion

accretion

A(n) __________ to a contract is an attachment that adds or further describes the rights and duties of the parties.

addendum

What document addresses additional material to be added to an executory sales contract? a. Addendum b. Amendment c. Article Agency agreement

addendum

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: discussed by the parties at the closing. drafted in a letter by the seller and her agent and provided to the buyer. addressed in the inspection report. addressed in the sales contract.

addressed in the sales contract

A woman bought acreage in a distant county, never went to see the acreage, and did not use the grounds. A man moved his mobile home onto the land, had a water well drilled, and lived there for 22 years. The man may become the owner of the land if he has complied with the state law regarding adverse possession. requirements for a valid conveyance. prescriptive easement. voluntary alienation.

adverse possession

A written history of all instruments and happenings that may affect title is called:

an abstract of title

Suit for specific performance is an action one party can take in the event of breach of contract by the other party. rescission of the contract by the other party. commingling of funds by the broker. all of these.

breach of contract by the other party

Prior to closing, severe damage to or destruction of a property under contract:

can result in termination of the contract

The sales contract says the buyer will purchase only if the buyer's current home closeswithin the next 30 days. This is called a reservation. warranty. contingency. consideration.

contingency

A(n) _________ is an agreement between two or more parties to do something or to refrain from doing something.

contract

A(n) __________ is a type of seller financing wherein the owner retains title to the property while the purchaser takes possession of the premises and pays on the principal.

contract for deed

A seller will convey a fee simple absolute estate and all current appurtenant rights to her real property to a buyer. The seller should use a a. bill of sale. b. deed of trust. c. non-recourse loan. d. conveyance deed.

conveyance deed

All of the following are an example of a breach of contract EXCEPT a brokerage has signed a buyer agency agreement but the buyer purchases a property through his cousin, who is also a licensee. a tenant pays $400 to her landlord in March instead of her full rent of $550 because she lost her job. despite his best efforts, a licensee is unable to find a ready, willing, and able buyer for a seller. a seller doesn't provide the title to the property to the buyers.

despite his best efforts, a licensee is unable to find a ready, willing and able buyer for a seller

Common areas of concern in sales contract include all of the following EXCEPT disposition of real and personal property. resolution of title defects. electronic signatures. an incomplete legal description.

disposition of real and personal property

The Broker-Lawyer Committee drafts and publishes forms for mandatory use by licensees. publishes but does not draft forms for mandatory use by licensees. drafts but does not publish forms for mandatory use by licensees. only revises forms that are already in use by licensees.

drafts but does NOT publish forms for mandatory use by licensees

Mortgage liens, mechanics' liens, and tax liens are all examples of appurtenant easements. encumbrances. deed restriction. encroachments.

encumbrances

If a seller will continue to occupy the property for one month after the closing, the buyer and seller should:

enter into a seller's temporary residential lease

During the period after a real estate sales contract is signed, but before title actually passes, the status of the contract is voidable. unilateral. executory implied

executory

The Special Provisions paragraph can be used by the licensee to indicate that the seller will remain on the property for one week beyond the closing date. provide factual statements about the transaction. define legal rights of the buyer. provide a timeframe for an offer response

indicate that the seller will remain on the property for one week beyond the closing date

An abstract of title a. is the record of a property's ownership. b. includes liens but does not include encumbrances. c. includes encumbrances but does not include liens. d. is a summary of what the title search found in the public record.

is a summary of what the title search found in the public record

Which of the following is FALSE regarding the sales contract? It includes a legal description of the property. It includes the sales price agreed upon by the parties. It includes the terms of the sale. It establishes the legal rights and obligations of the buyer, but not the seller.

it establishes the legal rights and obligations of the buyer, not the seller

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

it is the borrower's personal promise to repay a debt according to agreed terms

A seller choosing to receive a buyer's earnest money after the buyer defaults on a contract is an example of:

liquidated damages

A property is sold at a foreclosure auction and the outstanding mortgage debt is paid. Two contractors have mechanics' liens against the property and it's possible there isn't enough money left over to satisfy both. What determines which contractor is paid? Recording and the date the work was completed The amount owed to each contractor; the higher the amount, the more likely that contractor will receive payment Public records and the date the work began Lien theory

recording and the date the work was completed

A married couple purchases a home with only a 5% down payment. It is likely that their lender will not require them to pay private mortgage insurance because the house is only worth $105,000. require them to pay private mortgage insurance on 20% of the loan amount. require them to pay private mortgage insurance on 40% of the loan amount. take out a life insurance policy on them for 20% of the loan amount.

require them to pay private mortgage insurance on 40% of the loan amount

The seller's disclosure is a. required of all real estate transactions in the state of Texas .b. required of all residential real estate transactions in the state of Texas. c. not required for transactions pursuant to court order or foreclosure sale. d. not required of residential real estate investors.

required of all residential real estate transactions in the state of Texas

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

review the settlement statement if requested

The least common form of mortgage financing is

seller financing

Information needed for a listing agreement generally includes size, type, age, and construction of the house, and required disclosures regarding property conditions. names and relationship of the owners, dimensions of the lot, and property tax statements for the past four years. number and color of rooms and their sizes, dimensions of the lot, and the street address. names, ages, and relationship of the owners, dimensions of the lot, and neighborhood amenities.

size, type, age, and construction of the house, and required disclosures regarding property conditions

__________ is the body of laws and regulations enacted by federal and state legislative bodies.

statutory law

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

terminates the original offer

Regarding lead-based paint, federal law requires that sellers test for its presence before listing the property if the property was built before 1978. that buyers with children under 10 test for lead-based paint in any home they intend to purchase. disclosure of known lead-based paint hazards be given for any property built after 1978. that sellers and landlords disclose known lead-based paint hazards for any property built before 1978.

that sellers and landlords disclose known lead-based paint hazards for any property built before 1978

A seller decides to stop allowing showings on his home and is ready to compare the five written offers he has received. If his agent receives two more last minute offers, one written and one verbal, which of the offers should the agent present to the seller?

the agent should present all offers

Financing information in a sales offer will typically include all of the following EXCEPT earnest money deposits. the appraised price. the purchase price. how the purchaser intends to pay for the property.

the appraised price

Which of the following describes judicial foreclosure? The property is sold by court order after the mortgagee has given sufficient public notice. 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. In a court-ordered meeting, the lender accepts the deed to the property from the borrower. The parties agree to settle the matter through arbitration.

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

Evidence of title, a payoff statement, and an affidavit of title (if required) are usually provided to the escrow agent before closing by which party? The buyer provides all three items. The seller provides the evidence of title and an affidavit of title, but the buyer provides the payoff statement. The seller provides all three items. The abstractor provides all three items

the seller provides all three items

In a residential lease with a "right of first refusal" provision:

the tenant has the right to match or better any offer the land lord receives to prevent the property from being sold to someone else

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

they are created by a deed and a lease

How many and what parties are involved in a deed of trust? Two—the trustee and the trustor. Two—the mortgagor and the mortgagee. Three—the mortgagor, the mortgagee, and the beneficiary. Three—the trustee, the trustor, and the beneficiary.

three- the mortgagor, the mortgagee, and the beneficiary

Which of the following is NOT a legal requirement of a will? a. The testator must create the will voluntarily. b. The testator must have legal capacity. c. To convey title to real estate, it must be executed and prepared according to the laws of the state in which the real estate is located. d. It must be created by an attorney.

to convey title to real estate, it must be executed and prepared according to the laws of the state in which the real estate in located

All of the following are an exception to TREC requirements regarding the use of promulgated forms EXCEPT transactions in which the licensee is functioning solely as a principal, not as an agent. transactions in which the principal broker is representing a seller or buyer. transactions in which an agency of the U.S. government requires a different form to be used. transactions for which a contract form has been prepared by the seller or prepared by an attorney and required by a principal to the transaction.

transactions in which an agency of the US government requires a different form to be used

If property violates zoning, the owners must request a ______________, which is permission to violate the rules.

variance