Missed and Guessed Q's from Law of Promulgated Contracts

What happens when a buyer who has paid the seller an option fee terminates the contract during the option period?

The seller keeps the option fee, and the buyer gets the earnest money back.

Which of the following Texas promulgated forms is most like the TREC New Home Contract (Completed Construction)?

New Home Contract (Incomplete Construction)

The seller, Bob Smith, received an offer on his home that was contingent on the buyers selling their home first. While waiting for the buyers, Bob received a back-up offer without a contingency. What can Bob do?

Bob can ask the buyer on the first TREC One To Four Family Residential Contract (Resale) to waive the contingency within an agreed-upon timeframe or terminate the contract.

In a condominium transaction, which of the following is true?

The buyer pays for a portion of the transfer fees up to a specific amount, and the seller pays the remainder.

The Lees and the Wongs are closing on a transaction. However, the Wongs, who are selling, must delay closing by two days. In order to do this, what must happen?

The parties must agree to and sign an Amendment to Contract form, changing the closing date.

According to the Unimproved Property Contract, who's responsible for paying rollback taxes, if applicable?

The person who changes the use of the land

In situations where a coastline property owner has been forced to remove their home by the state of Texas because the property is now located on public beach property, who or what entity covers the cost of removal?

The property owner is solely responsible for the cost of removal.

If a Texas buyer wants to enter into an option contract with the seller, how many days from the effective date of the sales contract does the buyer have to pay the seller the option fee?

Three days The buyer must pay the seller within three days of the effective date of the sales contract by 5 p.m. local time that day, according to the terms of the TREC residential resale contract.

What is the purpose of the Addendum for Property Subject to Mandatory Membership in a Property Owners Association?

To give buyers the opportunity to request subdivision information

What's the purpose of the Non-Realty Items Addendum?

To identify personal items of the seller's that are to remain with the property

What options does the Addendum for the Release of Liability on Assumed Loan and/or Restoration of Seller's VA Entitlement give the seller if the restoration of VA entitlement is not approved by closing?

To terminate the contract or not delay the closing If the seller's VA entitlement is not restored by closing, the seller may choose to terminate the contract or proceed to the closing without approval.

Carole and Frank Bellacera are purchasing a two-story house with five bedrooms for $350,000. To whom should they write out their earnest money check of $10,000?

To the All American Escrow Company

What type of form has been prepared by the Broker-Lawyer Committee, approved by TREC, and made available on a voluntary basis?

Trial use

What information is required to complete the Promissory Note paragraph in the Seller Financing Addendum to the sales contract?

The terms for repayment of the loan

If a checkbox isn't properly filled out, what can happen to the transaction?

The transaction can be delayed

Jamie's new home has multiple defects. He has tried repeatedly to resolve the issues with the contractor, to no avail. According to the New Home (Incomplete Construction) Contract, Jamie must provide notice to the contractor by certified mail, return receipt requested no later than ________days before the date he intends to file suit to recover damages.

60

Before the title company will issue an insurance policy to a Texas buyer, which of the following must the seller furnish to the buyer?

A commitment The seller must authorize the title company to deliver the title commitment and exception documents to the buyer before the title company will issue an insurance policy to the buyer.

You're helping your buyer client complete a Buyer's Temporary Residential Lease form for a transaction. Closing is set for January 5. Which of the following lease terms falls outside the maximum term allowed under the provisions of the Buyer's Temporary Residential Lease?

A lease beginning October 2

The addenda that are part of the TREC One To Four Family Residential Contract (Resale) are listed in the ______ paragraph 22.

Agreement of Parties

Sharon bought a condo and the first thing that happened was a repair issue. Her residential service contract covered it, though, except for a small deductible. What was likely repaired?

Air conditioner

Donald is a seller of a new construction property. Which of the following must he disclose to prospective buyers?

All known defects and issues that would impact a buyer's decision to buy This one is tricky. No Seller's Disclosure Notice is required for new homes, but the seller is still required to disclose any issue with the property that would affect the buyer's use of it.

Casey signed a contract form offering a purchase price of $309,000 on a home, and gave his agent a $5,000 earnest money deposit. The owner is out of town and her agent can't reach her. At this point what does Casey have?

An offer

Any parties who prevail in a legal proceeding regarding the TREC One To Four Family Residential Contract (Resale) are entitled to recover their ______ as well as the costs of the legal proceeding.

Attorney's fees

Bobbie is a licensee preparing the contract for her buyer client, who's purchasing a new home that's not yet complete. It will be complete at the time of closing. Which of the following is a true statement?

Bobbie should not use the New Home Contract (Completed Construction).

Where is the version number located on a TREC-promulgated form?

Bottom right corner of every page

In the TREC One To Four Family Residential Contract (Resale), paragraph G, titled ______, alerts buyers that wetlands, toxic substances, or the presence of a threatened or endangered species may affect the buyer's intended use of the property.

Environmental Matters

An offer to purchase is executed on February 10. There's a 10-day deadline by which the sellers must remove their hunting blind and camper from the property. In order to avoid a breach of contract, what is the last day the sellers can do this?

February 20 The timing for contingencies starts one day after it's executed, which would be February 11, so the sellers have until 11:59 p.m. on February 20.

Which of the following describes how to list a nonprofit as a party on a TREC-promulgated form?

NAME, NAME, and NAME, trustees for and on behalf of nonprofit NAME

If Alex, a seller, approves of the buyer's credit documentation, which the buyer delivered on time according to the terms of their Seller Financing Addendum, what must Alex do to show his approval of the seller financing?

Nothing; the buyer's credit is deemed approved if the seller does not terminate the contract within seven days of the date of delivery of the credit documentation.

Per the Addendum for "Back-Up" Contract, when does the time for giving notice of termination begin if the buyer has the unrestricted right to terminate the contract?

On the effective date of the "Back-Up" contract

Per the Short Sale Addendum, when does the time for giving notice of termination begin if the buyer has the unrestricted right to terminate the contract?

On the effective date of the contract

How many "back-up" offers can be submitted on one Addendum for "Back-Up" Contract form?

One A seller can entertain multiple back-up offers, but the Addendum for Back-up Contract form itself can only be used for one back-up offer at a time.

Buyers of newly constructed homes must follow the procedures established in Chapter 27 of the Texas Property Code in order to do what?

Recover damages for construction defects.

Sellers who choose the __________________ option allow the purchaser to make payments on the property and often require a credit report, employment verification, and other financial information, just like a traditional lender.

Seller financing

The Environmental Assessment, Threatened or Endangered Species, and Wetlands addendum specifies which type of assessment the buyer wants performed and what else?

The amount of time the buyer has to terminate the contract if the report(s) find conditions that will adversely affect how the property can be used.

The Federal Trade Commission requires that certain information be provided to consumers who purchase new homes that are incomplete. What is it?

Information on the R-value of installed insulation

You've helped your buyer prepare a temporary residential lease and have just learned that the lease must be extended beyond 90 days. What should you do?

Consult your broker.

Zelda is a Texas licensee working with a buyer and she's explaining the Addendum for the Release of Liability on Assumed Loan and/or Restoration of Seller's VA Entitlement. Which of the following explanations accurately describes what restoration of seller's VA entitlement means?

"A VA entitlement is a financial guaranty from the government to repay a portion of a VA loan in the event of default. Because the VA entitlement is a specific amount, the parties may apply to have the VA entitlement restored once the loan is assumed."

Margo received a copy of the seller's disclosure notice, but she wasn't happy with what she read. She decided to terminate the agreement three days after she received the notice. Which of the following reasons should Margo check on the Notice of Buyer's Termination Contract for terminating the contract?

"Buyer elects to terminate under Paragraph 7B(2) of the contract relating to the Seller's Disclosure Notice."

Chip is your developer client who's about to sell several lots in his new subdivision. He asks you what his disclosure requirements are. How do you answer him?

"You must disclose all known defects and issues that would impact a buyer's decision to buy."

How many days does the Texas seller have to deliver a "commitment for title insurance" to the buyer under the terms of the TREC One To Four Family Residential Contract (Resale)?

20

When his contract to buy a hip downtown penthouse condo fell through, buyer Kevin submitted a request to the escrow agent to release the earnest money to him. If seller Anita doesn't feel Kevin's request is warranted, she has ______ days to formally object.

15 Anita has 15 days to object to Kevin's request to return his earnest money; otherwise, the money will automatically be dispersed to Kevin.

When a sales contract doesn't cover the terms needed by the parties, which of the following actions is a licensee allowed to take?

Add a standard addendum using standard language.

Your client Samantha is selling coastal area property. Which of the following forms must she complete as part of the TREC One To Four Family Residential Contract (Resale)?

Addendum for Coastal Area Property Sellers of property located in the coastal area of Texas are required to complete the Addendum for Coastal Area Property. Failure to provide this notice to the buyer is grounds for the buyer to terminate the sales contract, which is a deceptive act.

Your buyer clients Nina and Peter are interested in purchasing a ranch. As their agent, what should you tell them about this type of transaction?

Additional considerations may apply, including equipment, surface leases, and royalties.

Marcus, a buyer, learns that he can't close by the contracted date, but can close a week later. As his agent, you prepare a(n) ______.

Amendment to Contract

The parties are moving the closing date back by four days, so instead of occurring on March 24, the closing will occur on March 28. What form must be completed and signed?

Amendment to Contract

In paragraph 3 of the TREC One to Four Family Residential Sales Contract (Resale), the______ plus the sum of all financing will equal the sales price offered.

Cash down payment

If the seller fails to provide the required Seller's Disclosure Notice, the buyer may terminate the contract and have the earnest money refunded up to________.

Closing

The property section of the One to Four Family Residential Contract references the land's lot and block description. On the Residential Condominium Contract (Resale), what's referenced instead of lot and block?

Condominium unit, building, and condominium project name Read the question! None of the other answer choices even make sense for a condominium.

Plans, specifications, change orders, and allowances are part of the ______ and should be referenced in the New Home Contract (Incomplete Construction).

Construction documents

Through which promulgated form are consumers notified that they can submit a complaint to TREC against a license holder?

Consumer Protection Notice

Which type of document is provided to the consumer to notify them that a recovery fund is available, should they be unable to collect a judgment against a licensee?

Consumer disclosure

You're posting a new listing on the MLS and ask your seller what type of buyer financing the seller prefers. You'd most likely hear "__________."

Conventional or cash only, because I don't want to pay higher fees

What type of contract do you have once the seller has accepted the buyer's offer in writing and the buyer has been notified of the acceptance?

Enforceable

In addition to using an amendment form to note and date each change to the original contract, what else should an agent do?

Have all parties sign the amendment.

Maura is representing three buyer clients and there is only room enough in the Parties section of the TREC One To Four Family Residential Contract (Resale) to list two of the three names. Where should she note the name of the third buyer?

In the Special Provisions section The Special Provisions section may be used to add provisions that can't fit into a space, such as the names of multiple buyers or sellers. It's not to be used in place of a promulgated form, if one exists, to cover the situation.

Barb is concerned that the property she's considering buying may be a habitat of an endangered species. How can she protect herself when making the offer?

Include the TREC Environmental Assessment, Threatened or Endangered Species, and Wetlands Addendum in her offer.

What typically happens to any earnest money when a sales transaction successfully closes?

It's applied to the down payment and closing costs owed by the buyer.

What happens to any excess earnest money when the property closes?

It's refunded to the buyer.

An example of a party in default of the TREC One To Four Family Residential Contract (Resale) would be:

Johann, who agreed to apply for an FHA loan by April 3, but he hasn't done so by April 10. Someone who doesn't do something promised in the contract, or doesn't do something by the agreed-upon date in the contract, is considered in default of the TREC One To Four Family Residential Contract (Resale).

Justin Time is a business name for a Texas general partnership between Justin Leung and Anne Claren. How should a licensee identify their general partnership as a party to a sales contract?

Justin Time, a Texas partnership

Kelly is selling his property and has accepted an offer from a buyer, but there's a contingency that the buyer must sell an existing home first in order to fund the purchase. Which of the following is a true statement?

Kelly can accept another offer without a contingency.

Which of the following elements does the Statute of Frauds require as part of a valid real estate contract in Texas?

Legal description

Your seller client, Tammy's, late husband, George, died on the front lawn of their two-story home after falling off the roof while drunkenly attempting to imitate a stunt he'd seen on YouTube. Is she required to disclose this to potential buyers, now that she's selling her house?

No, because the death wasn't caused by the property condition.

You have a signed contract in your hand, but it's missing the effective date. Is this a binding contract?

No, the contract isn't binding because the effective date hasn't been filled in.

Donovan is searching for a home in a hot market in Texas. Every time he is interested in a property, another party makes an offer before he can. But not the next time! Donovan asks his agent what his options are, and when he makes his next offer, he will be entering into a(an) ______, allowing him the exclusive right to purchase the property within a specified window of time. He is legally able to terminate this agreement should he decide the property isn't right for him.

Option contract

What paragraph of the TREC residential One to Four Family (resale) contract contains the promise to sell and the promise to purchase, known as the consideration, of the contract?

Parties

Peter is selling his ranch and has decided to exclude his cotton crop from the sale. Which of the following is true?

Peter must remove the crops before closing. If crops are excluded from the sale, they must be removed before closing.

Janice is helping her buyer, Sue, make an offer to purchase Tom's property using the TREC One to Four Family Residential Contract (Resale). Where in the sales contract can Janice reserve the right for Sue to access the property for inspections?

Property Condition

Ahmad and Mahasin recently put in an offer on a home. The seller tells his agent to reject the offer. What should the seller's agent do?

Provide written notice to Ahmad and Mahasin.

Expenses paid by the buyer and the seller at the closing are detailed in which paragraph of the TREC One To Four Family Residential Contract (Resale)?

Settlement and Other Expenses

Jessica is selling her own home. What promulgated form must she use per TREC rules?

She is not required to use a TREC form per the exception that she is selling the home on her own

Archie is behind in his mortgage payments. He wants to sell his house and get out from under the loan. You agree to help Archie list his property. Which TREC addendum will you and Archie need to complete and attach to the sales contract?

Short Sale Addendum

What are voluntary use forms in Texas?

TREC doesn't require you to use them, but they have been reviewed by attorneys.

The notice that advises the buyer to have the abstract or title policy examined by an attorney is required by which of the following pieces of legislation?

Texas Real Estate License Act (TRELA) TRELA requires that every licensee give a written notice advising that either the abstract or title policy should be examined by an attorney. This notice is included in the TREC One to Four Family Residential Contract (Resale).

Vanessa has had her Texas real estate broker's license for 12 years. What law or organization stipulates the requirements Vanessa must follow to keep her license?

The Texas Real Estate License Act This is a dirty question, because TREC DOES stipulate the requirements through TRELA. Just remember if you get this question again, they're looking for TRELA not TREC.

You are the Texas agent for the buyers, the Jansens. The Yothers are the sellers, and their mortgage holder is Richard Steele. To which of these parties must you disclose your agency status?

The Yothers only You are required to make an agency disclosure to the parties involved in the transaction whom you do not represent. In this scenario, that's the Yothers. Mr. Steele is not part of the transaction.

What does it mean when a buyer assumes the seller's mortgage loan?

The buyer is allowed to take over the seller's mortgage and make mortgage payments.

For purposes of performance, what is the effective date of the "Back-Up" contract based upon?

The date the buyer received notice of the termination of the first contract The seller must immediately notify the back-up buyer that the first contract has been terminated. The date that the buyer receives the notification is considered the effective date of the "Back-Up" contract.

Cain purchased a residential service contract. If, during his year of contracted service, he has a repair issue, which of the following would likely be covered?

The dishwasher breaks

Which of the following statements about TAR's Release of Earnest Money form is true?

The form releases all parties, brokers, and title companies from all liability under the contract.

Anything that's being hidden from ______ that relates to seller concessions, property condition, buyer qualification, or sales price is considered fraud.

The lender

Real estate professionals handle many documents related to real estate transactions. Which one of the items listed below is one of the most important in detecting mortgage fraud?

The original sales agreement and any addenda

Craig is selling his condominium. What document must he provide to the buyer that contains information on HOA financials, frequency and amount of assessments, and any pending lawsuits?

The resale certificate

Using the TREC Environmental Assessment, Threatened or Endangered Species, and Wetlands Addendum to the TREC One To Four Family Residential Contract (Resale), a buyer may opt to have a natural resources professional determine if there any threatened or endangered species on the property. If the natural resources professional reports an adverse finding, what right does the buyer have?

The right to terminate the contract within a specified number of days

Although who pays for the title policy can be negotiated, in Texas, it's customary for the ________ to pay for the title policy that the seller furnishes to the buyer.

The seller

Per the Addendum for Sale of Other Property by Buyer, what happens if the seller accepts a written offer to sell the property?

The seller is required to notify the buyer and give the buyer the opportunity to waive the contingency.

What happens when a Texas buyer who has paid the seller an option fee under the TREC residential One to Four Family (resale) contract terminates the contract after the option period expires?

The seller keeps the option fee and may get to keep the buyer's earnest money. Take note that this question is asking specifically about what happens in a situation AFTER the option period expires. There is a very similar one that asks about what happens about termination DURING the option period, in which case the buyer would get to keep their earnest money.

The ranch that Adam and Maria are interested in buying has a cotton crop already planted on it. Which of the following is a true statement?

The seller needs their permission to harvest the crop after closing.

Sally and Jake have signed an offer to purchase a home that is still being constructed. If rollback taxes are assessed, who must pay them?

The seller pays for the whole thing. Sellers are responsible for rollback taxes on new construction because the seller would be the party changing the land's use.

Joaquin, a broker in Houston, needs to act as an intermediary in one of his transactions. He has received written consent from the parties of the transaction. Now he just needs to fulfill the other requirement, which is providing ______.

The source of the broker's expected compensation

If the title company doesn't deliver the title commitment within 20 day after receiving a copy of the TREC One To Four Family Residential Contract (Resale), what happens next?

The time for delivery is automatically extended by 15 days, or to three days before closing, whichever occurs earlier.

You're helping your client Scot with the purchase of a ranch home. Scot wants to bring his cattle over, so he's asked for early possession. The transaction is scheduled to close on July 15, and Scot needs to move his cattle in on February 1. What form should you help Scot complete?

There's no form for this. Licensees may not assist with drafting leases for longer than 90 days. You would ask your client to have an attorney prepare the lease, or consult with your broker.

Although Cami's client's property is already under contract, the seller continues to receive numerous back-up offers. How many back-up contracts can Cami's client enter into?

Unlimited

Vanessa just received two offers for a Texas listing. One is $15,000 below the asking price, and one is for the asking price. Vanessa's client, Nevaeh, has asked her in writing to not present offers that are more than $10,000 below the asking price. What should Vanessa do?

Vanessa should submit only the offer that meets Nevaeh's request.

How should a licensee identify unmarried persons buying a property together as parties on a Texas sales contract? The names of the persons are Veronica Charles and Kathy Sharpe.

Veronica Charles and Kathy Sharpe, as tenants in common

Besides the name of the title company, which of the following information is needed in the Title Policy paragraph of the TREC One To Four Family Residential Contract (Resale)?

Whether the buyer or the seller will pay for the title policy

Donald Lee's best friend, Jake, is helping him look for a house. It just so happens that one he listed just yesterday might be the perfect fit for Donald and his girlfriend. Can Jake show a house that he has listed with another client to his new client and friend Donald?

Yes, Jake will need to follow all of the requirements to act as an intermediary.

Is any response required in the sub-paragraphs of the Title Notice section of the TREC One to Four Family Residential Contract (Resale)

Yes, whether or not the property is subject to mandatory membership in any property owners association(s)