Law of Contracts

What is the broadest interest in a property, one where the owner can sell the property or will the property at their death?

Fee Simple

The statute of frauds is designed to prevent injury from which of the following things?

Fraud

Federal law requires that buyers of property built before 1978 be advised there may be lead in the home and given an opportunity for inspections. What is an acceptable way to do this?

Have the parties complete the Lead Based Paint Addendum and make it part of the contract

What is the proper use for the TREC promulgated amendment?

Make a change to a term that was originally agreed to in the signed contract

If an agent writes in special provisions "This contract is contingent for the property appraising for the sales price, the agent...."?

May be guilty of practicing law without a license

Which practice will likely result in a license suspension or other disciplinary action?

Merging a client's money with the broker's money

In which type of listing agreement is the brokers commission determined by the difference between the sellers expected sale price and the actual sales price?

Net listing

Which of the following is the promise to pay on a mortgage loan?

Note

What happen to a lease when lessor dies?

Nothing

Don is selling his home. His mortgage was paid in full years ago. If he can find a buyer that is willing to put up a down payment of 10% in cash. Don is willing to become the lender and finance the other 90%. When Don's agent prepares an offer, what form will he need to use to spell out the financing details?

Seller Financing Addendum

Which one of the following should not be listed in paragraph 22 of the contract and isn't a part of the contract?

Seller's disclosure

What does "conveyance" mean in the real estate industry?

Selling an interest in real estate

A contract entered into based on a misrepresentation is...

Voidable by the aggrieved party

Which of the following is an example of substantial performance?

When a party has performed the bulk of a contracts terms, but does not carry them out according to the contract's stipulations

Breach of contract

When an owner or tenant does not fulfill the terms of a lease

When MUST licensees use a promulgated form?

When there is a TREC mandated form available and the owner has not required another form to be used

If an owner has an oil lease on her land, does the oil company have the right to come on her land to explore and produce oil?

Yes, surface rights to use the property to explore and produce is implied in the lease

Which of the following statements are TRUE? RESPA requirements say that...

(All of the above) The loan estimate must be delivered within three days of the application, the closing disclosure must be delivered three days before closing, the requirements for disclosures are for consumer protection

What is parol evidence?

A common law rule that prevents a consumer from using things outside of the written contract to make a claim. Verbal promises not in the contract will not be upheld by the court. There could be a possible claim if fraud could be proven.

Which of the following is an example of an implied contract?

A person going to the doctor

Which one of the following documents is the most important in a real estate transaction?

A sale contract

What does "time is of the essence" mean?

A very specific time not to be exceeded

Which contract outlines the responsibilities of the seller and broker in a real estate transaction?

Listing agreement

Liens can be on a property because of which of the following?

Loans against the property

When a license holder does not adhere to the Texas Real Estate Commission License Act, they are guilty of...

Violation

TREC has an addenda that can be used to modify TREC contract forms. Which contracts can be modified by addenda?

Addenda can be used with all six of the TREC promulgated contracts

Which one of the following items is NOT one of the three stages a contract goes through?

Adherence to the Statute of Frauds

What is the method of gaining legal title to real property by the actual, open, hostile and continuous possession of it to the exclusion of its true owner?

Adverse possession

Which of the following statements is TRUE when a Texas form is promulgated by the Real Estate Commission?

Agents are required to use them

The Dodd-Frank Act is a federal act that was...

All of the above. A consumer proaction act that issued final rules in 2013, an act that amended several existing regulations, to issue new disclosure rules for the real estate settlement protection act and truth in lending

It is not authorized practice of law if the form is...

All of the above. Adopted by the commission for the type of transaction for which the form is used, prepared by an attorney licensed in this state and approved by the attorney for the type of transaction for which the form is used, prepared by the property owner or by an attorney and required by the property owner

The statute of frauds require all real estate contracts to be in writing to be enforceable. That includes...

All of the above. Listing agreement, buyers representation agreement, sales contracts and commission agreements

Governmental land use controls include

All of the above. Zoning and building codes, sub-division regulations, environmental protection laws

What does it mean to be legally competent?

All parties must be at least 18 years of age and of sound mind

Loan approval consists of two approvals. What are they?

Approval of the buyer and approval of the property

Which of the following terms refers to an exact amount of a particular parcel of land?

Legal description

A husband owned his property before marrying his spouse. They have both been living in the property for the past year. You are listing the property. Who will need to sign the listing agreement?

Both the husband and wife

If someone wants to materially alter an existing development or construct a new building, then he or she must obtain a...

Building permit

Which of the following is an example of a contract made under duress?

Buyer B explains to Seller A that he must accept this offer or he will damage Seller A's reputation

Who is responsible for delivering the option money check to the seller or the seller's agent within three days after the effective date of the contract?

Buyer's sales agent

What are the five elements of a legally valid contract?

Legally competent parties, mutual assent, lawful objective, consideration and adherence to the statute of frauds

Holdover tenancy

Condition of a tenant who fails to leave the premises after the lease has expired

An owner owns the interior of a property and an interest in the common area is a...

Condominium

After closing takes place, the title company will record the Deed by sending it to _______ along with the recording fee?

County Clerk's Office

A _____ is written instrument used to legally transfer a _____ from one person to another by voluntary conveyance

Deed/title

Which of the following BEST describes a clause in a sales contract which provides that the contract can be terminated unless the buyer is able to obtain a new first mortgage?

Defeasance clause

If a lender has a foreclose on a property and does not get enough money to satisfy their loan, the lender might seek a...

Deficiency judgement

What does the title company do with the earnest money check?

Deposit it into an escrow account

What can be used for liquidated damages according to the Texas sales contract?

Earnest money

Which one of the following requirements is NOT an essential element of a valid contract?

Earnest money

Barbara lives close to the ocean. Every time there is another storm it seems like more of her property is washed away. This is called:

Erosion

Estate for years

Estate for a definite term

Estate at will

Estate that does not have a specific time or period limit

What is the difference between FHA, VA, and Conventional loans?

FHA is insured by the government and VA is guaranteed by the government, and conventional loans have no government guarantee or insurance

The commission may prohibit a license holder from using for the sale a contract form that is prepared by the owner, true or false?

False

Encumbrances include which of the following things?

Liens, judgements, easements

Real Estate Liens

If it is not repaid, the debt is recovered by foreclosure and sale of the real estate

As a general rule, an oral sales contract involving the sale of real estate..

Is unenforceable

Why is a legal property description necessary?

It allows the courts to identify the property with reasonable certainty

Deed of Trust

It is a three party instrument: the borrower, the lender, and the trustee

Promissory Note

It is the promise to pay

The buyer and the seller closed on a property on April 20th. Taxes for the current year will not be paid until November. The title company will debit the seller for taxes from ______ and credit the buyer.

January 1st through April 20th

Community Property

Joint tenancy between husband and wife, with each owning half interest

Title companies charge a fee for checking the public records to see if there are any what on the property?

Judgements, encumbrances including liens, and bankruptcies or other law suits

Proper notice

Notification of intent to vacate, given at a predetermined period in advance

The person extending the contract is known as the....

Offeror

Which contract will an agent use if he or she wants to help a client make an offer on a single family home?

One to Four Family Residential Contract (resale)

Usually trade fixtures such as shelving, racks, and cash registers that the tenant installs in a commercial lease become or email...

Personal property owned by the tenant

The seller listed his home on a Thursday. He was out of town until Sunday and by then his listing agent had received 3 offers. One offer came in on Friday and two of them on Saturday. His agent presented them all 3 to him at the same time Sunday. What should the seller do?

Pick any of the offers to counter being sure only have one counter offer in play at a time

An injured party may seek remedy for a breach of contract for all of the following except?

Potential performance

If a borrower goes to a savings and loan to apply for a new FHA loan, the savings and loan part of a group called the...

Primary mortgage market

Joint Tenancy

Property is owned by two or more persons at the same time in equal shares

Sole Ownership

Property is owned entirely by one person

Tenants in Common

Provides for multiple percentages of ownership interest and inheritance rights for grantees' heirs

Which law requires a lender to give a buyer a "good faith estimate" of closing costs?

RESPA

Which law requires a lender to provide a borrower with estimates of closing costs?

RESPA

Land and everything growing on it or attached to it including sheds, buildings, trees, and crops are identified as...

Real estate and real property

The license act says that _______ must only fill in the blanks on the promulgated form?

Real estate license holders

If an owner is interested in selling his or her property to free up capital, which lease might he or she consider?

Sale-leaseback

Fannie Mae and Freddie Mac are part of a group called the?

Secondary mortgage market

Which of the following statements about TREC contracts is NOT true?

TREC contracts must identify comparable parties

What does the TRELA say will happen if a licensee drafts a contract for misted of using the TREC promulgated form available?

The Commission shall suspend or revoke the license of a licensee, who is not an attorney,for drafting an instrument

Which federal law created a system where many lenders are required to order appraisals through a third party appraisal company?

The Dodd-Frank Act

Paragraph 5

The amount of earnest money and name and address of the person holding it

Paragraph 3

The amount of the buyer's down payment, the amount financed, and the total sale price of the property

Which duties are licensees permitted by law to perform?

Use promulgated forms

Who must approve a judicial foreclosure?

The court

Paragraph 7

The date by which the seller must make property condition disclosures and the types of repairs required

What is the option fee?

The deposit the optionee must make to have a lease-out-option

Why is it important to a lender to be in first lien position?

The first lien holder gets paid first in the event of foreclosure

Who owns the groundwater under a piece of land?

The land owner

Which of the following statements is TRUE if a licensee is acting solely as a principal and selling her home?

The licensee can use the promulgated form, but it is not required

Paragraph 1

The names of the parties to the contract: the buyers and the sellers

Which document used during the financing of a home contained the words "I promise to pay.."?

The note

Paragraph 2

The property address, lot and block from the legal description, and any exclusions

Owner (seller) Financing

The seller becomes the lender

What does it mean when a party discharges a contract?

The terms of the contract have been fulfilled or cancelled

If air rights or sub-surface rights are not specifically addressed, when a seller sells a property, everything the seller owns automatically...

Transfers to the buyer

An oral contract to purchase real estate is...

Unenforceable

Mortgage

it is a two party document: the borrower and the lender