The CE Shop Law of Contracts

What can be used as solid proof of ownership in Texas?

A deed and either certificate of title or title insurance

What must be in place before a licensee can legally advise a client?

A signed agency agreement

What type of CLO system is used through an intermediary, such as a real estate or mortgage professional?

Closed CLO

A listing agent must include provisions informing parties of the availability of natural hazards information applicable to residents near _____ in Texas.

Coastal areas

In contract law, partial performance occurs when a party ______.

Does some, but not all, of what the party has agreed to do

In which of the following scenarios is impossibility of contract performance occurring?

Due to circumstances beyond their control, the parties can't legally or practically do what they've agreed to do.

Why might a homebuyer use an FHA 203(k) loan instead of the standard 203(b) loan?

To roll the cost of rehabilitating the purchased home into the mortgage

Charlene shares one wall with her neighbors to the side, but her home has three levels and she has no upstairs or downstairs neighbors nor a neighbor on the other side. What type of dwelling does Charlene own?

Townhome

If a contract is for an illegal purpose, it's ______.

Void

Which part of a loan is the agreement to repay the debt?

Promissory note

Leon and Beth own 1/13 of a timeshare estate. How many weeks each year do they get to use the timeshare unit?

Four

Which of the following is a broker's obligation per TAR's Residential Buyer/Tenant Representation Agreement?

Locate a property that meets the client's criteria within a specified market area.

How does the "break-even point" relate to percentage leases?

The landlord doesn't charge a percentage of sales until the tenant's sales exceed a break-even point.

Mason was leasing lakeside property when his one-person sailboat capsized, and he drowned. Under Texas law, which of the following occurs if a tenant dies during the term of lease?

The lease doesn't terminate and becomes the responsibility of the tenant's heirs.

Allen and Lewis are friends who each recently purchased real estate. Allen purchased a patio home in a small town an hour from the city, while Lewis purchased a condo in a really hot area near the city center. Although they paid similar amounts for their properties, Lewis' condo is worth much more two years later. Which economic characteristic does this demonstrate?

Area preference

Home inspector Murray is explaining to first-time buyers what he looks for during a home inspection. What is his primary goal?

Document health and safety issues that may affect both the cost and enjoyment of the home.

Duke Cartwright wants to sell his property. Mavis, his wife, has a small ownership interest in the property. The Cartwrights are entering into a listing agreement with Samuel Feines, a broker. Whose names must appear as parties to the listing agreement?

Duke, Mavis, and Samuel

Without this easement—usually involving access to a road—the owner requiring the right of passage would be landlocked.

Easement by necessity

Which of the following best describes a marketable title?

Ensures the title to property is free and clear of liens and only subject to loan payoff and any taxes owed.

When someone dies intestate with no heirs, the real property owned by that person may be taken by the state through _______.

Escheat

Harvey and his wife, Dana, have made an offer on a home but specified in the sales contract the items on the property that they wanted the seller to remove prior to them taking possession. These items are referred to in the Property section of the TREC residential One to Four Family (resale) contract as ______.

Exclusions

The primary mortgage market operates to _____.

Originate loans

Which of the following describes the amount a lender charges a borrower for using money?

Interest

How can a foreclosure be stopped or prevented?

Pay all outstanding liens against the property.

What's NOT true of an easement appurtenant?

It's an encumbrance on the dominant property.

Charles runs a small vacuum cleaner repair business. His commercial property ____________ lease agreement has him paying a base rent plus an allocated amount of gross sales above a certain threshold.

Percentage

Which of the following actions concerning tenant rights should real estate licensees take?

Learn and understand tenant rights.

Marigold is leasing her commercial space with an option to buy the property when the lease expires. What type of commercial lease does Marigold have?

Lease purchase

Quentin is the seller in a Texas contract for deed agreement. What type of rights to the property does he have during the contract for deed process?

Legal title rights

In accordance with the TREC residential One to Four Family (resale) contract, which of the following expenses are paid by the seller?

Releases of existing liens

______ is the gradual receding of water, which uncovers new land.

Reliction

You're representing a tenant client in a lease transaction. Which of the following duties do you owe your client?

Represent the client's interest in all negotiations and transactions regarding the lease of the property

Herbert is selling his 1980 single-family home, which he purchased from the original owner in 1995. Which of the following must he provide to any potential buyers?

Seller's Disclosure Notice

During the earnest money demand process, how many days after receiving a request to send a release of earnest money notice to the escrow agent do the parties to the transaction have to respond?

Seven days

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

How many members does TREC appoint to the Broker-Lawyer Committee?

Six

Which right allows a property owner to use or sell underground resources?

Sub-surface

Who or what entity must keep records of all funds deposited into the custodial or trust account that indicate the date and from whom the broker received the funds, the date deposited, the date any withdrawals are made, and other necessary information?

The broker

Who's responsible for doing the final walk-through of a property?

The buyer and the buyer's agent

Kim's seller just received an offer accompanied by the Texas Addendum for Sale of Other Property by Buyer. What do we know about this transaction?

The buyer may not be able to complete the transaction if their current home doesn't sell.

Per TREC's residential One to Four Family (resale) contract, who's authorized to pay the buyer's broker fee at closing?

The escrow agent

Which of these is the best definition of a straight loan?

The periodic payments go to interest only and the entire principal amount is due at the end of the term.

According to custom, who pays the costs on the day of closing for property taxes, utilities, etc.?

The seller

Prior to closing, who should request a loan payoff statement?

The seller

The seller and ______ must approve a short sale.

The seller's lender

Jacqueline found a ready, willing, and able buyer for her client's condo, with a sales price of $20,000 more than the asking price. However, the appraisal came in just under the asking price. Which number will the lender use to calculate the loan-to-value ratio?

The smaller number

Which of the following statements is true about septic systems?

They differ in the way they are installed.

Bruno, a tenant, and Becka, the landlord, have entered into a nine-month lease agreement. Per their agreement, Bruno will pay Becka a monthly amount in exchange for using the property. What type of contract is this?

This is an express contract because the specific terms of the agreement and consideration to be exchanged are defined in words.

What's the minimum number of business days prior to closing that lenders have to provide borrowers with the Closing Disclosure form?

Three

A _______ is a piece of real estate owned by multiple unrelated individuals who, in addition to their ownership rights, each hold the right to occupy the dwelling unit based on the specific terms of a timeshare agreement, usually in one- to two-week intervals during the year.

Timeshare estate

Which document provides the buyer with data about the property's title record, legal description, and other matters that may need to be acted upon in order to obtain a marketable title?

Title report

Harry is meeting with a prospective buyer client, June. Harry has presented June with the Information About Brokerage Services form and explained June's agency relationship options. Harry is now ready to present June with a buyer agency agreement. What will he say is the purpose of the contract?

To identify the terms of the buyer agent/buyer agency relationship

Monica is meeting with a prospective seller client, Max. Monica has presented Max with the Information About Brokerage Services form and explained Max's options for agency relationships. Monica is now ready to present Max with the listing agreement. What is the purpose of the contract?

To identify the terms of the listing agent/seller agency relationship

What's the purpose of the ECOA?

To prevent discrimination in lending

A contract that is in theory legal, but is not defensible in court, would be considered _________.

Unenforceable

Of the following, which is considered a typical accrued adjustment?

Unpaid real estate taxes

In Texas, how long does a homeowner have to pay off outstanding liens against their property to prevent a foreclosure sale?

Until the foreclosure sale is held

Which of the following defines when a lender charges a borrower more than the highest allowable interest rate?

Usury

Which of the following are substances found in air fresheners, cleansers, paint, and building materials that can make indoor air quality toxic at high levels?

VOCs

Roberto, a licensee, filled in the blanks on a standard form used in his brokerage firm. Is this okay?

Yes, licensees can use standard forms originally created or approved by an attorney.

Which document is used to provide a summary of the title history?

Abstract of Title

Which type of easement provides a right-of-way for a railroad?

An easement in gross

What is a discount point?

An upfront charge to make up for the difference between the rate the borrower is receiving and the rate the lender normally requires

Ezra's lease on his condo includes an option to purchase. He told his landlord, Sherm, that he's ready to purchase the condo, and they've negotiated a purchase price and closing date. What kind of contract is this?

Bilateral

Before closing, the ______ should get a home inspection.

Buyer

Which of the following is true about volatile organic compounds?

Paint, air fresheners, and cleaners are primary sources.

Which government power can place a lien on a property?

Taxation

At the time of closing, the buyer and the seller close on which contract?

The sales agreement

Which term is defined as a tax that's applied when property changes ownership?

Transfer Tax

Within how many days after the title company receives a copy of the signed sales contract is the seller required to deliver commitment for title insurance to the buyer?

20

When Marcy toured her new client's house, she noticed paint peeling off of the shutters. When she asked the seller if the house was painted with lead-based paint, he replied, "I'm not sure ... I inherited the house from my dad, who built it in the '50s." What is Marcy required to do?

Inform the seller that he needs to complete the lead-based paint disclosure form and provide potential buyers with the EPA pamphlet regarding lead hazards.

Glynnis is ready to close on her new house, but her agent told her that they have to wait for the homeowner to fix the electrical box as agreed. What clause in her contract allowed her to request the repair?

Inspection contingency

The term "right of survivorship" is closely linked with _____________________.

Joint Tenancy

Which of the following describes a unilateral contract?

One in which only one party is obligated

When does a breach of contract occur?

One party fails to meet the obligations of the contract.

What type of CLO system can be accessed directly by the consumer from home?

Open CLO

Jeb's lease renewed every six months. If he decided to leave, he was required to give his landlord two months' notice. What type of tenancy does Jeb have?

Periodic estate or tenancy at will

Texas homeowner James is required to present any prospective buyers with a notice as to the legal and economic risks of purchasing coastal property. Which TREC addendum is James required to include?

Addendum for Property Located Seaward of the Gulf Intracoastal Waterway

Linda is selling her home, but she wants to retain all or a portion of the property's mineral rights. Which of the following addenda must she include in the TREC One To Four Family Residential Contract (Resale)?

Addendum for Reservation of Oil, Gas, and Other Minerals

This addendum, when signed, makes the buyer's offer to the seller contingent on the sale of the buyer's current property.

Addendum for Sale of Other Property by Buyer

With which type of mortgage does the interest rate vary according to a specified index?

Adjustable rate

Which of the following statements about the TAR Residential Lease agreement's automatic renewal policy is true?

After the lease term has expired, the lease will be automatically renewed on a month-to-month basis.

Ken, Barbie, and Skipper owned a property as a joint tenancy. When Skipper moved out of state, she sold her interest to Midge. Two years later, Ken died. How is the interest in the property divided?

Barbie owns two-thirds, and Midge owns one-third.

Dean and Michael have an oral contract. Dean said he would sell Michael his bike in return for Michael's vinyl album collection. What does the record collection represent?

Consideration

In real estate, what are emblements?

Cultivated crops

The _____ is used to transfer the title.

Deed

Robin has obtained a loan to purchase a home. Which of the following serves as security for that loan?

Deed of trust

What information does the Loan Estimate NOT provide to buyers under required disclosures law?

Final closing costs

In Texas, how long must completed real estate forms be kept on file with the broker?

Four years

Which of the following would be considered personal property?

Free-standing refrigerator

Which term refers to the person receiving title, often called the "party of the second part," in a deed?

Grantee

Which organization regulates and enforces the construction methods used for manufactured homes?

HUD's Manufactured Housing Program

If a seller provides a buyer with HOA documents and the buyer fails to review them by the deadline, the buyer __________.

Has accepted them

Which of the following is a benefit to business owners for leasing instead of buying real estate for their business?

Monthly rent is a tax deduction as a business expense.

Another name for the borrower of a loan is ______.

Mortgagor

Rhonda, a small business owner and lessee, has a commercial property _________________ lease agreement with her landlord. Rhonda pays the rent and some expenses related to the property, such as maintenance and insurance, separately.

Net

Elmer died and left a will. Before his estate can be distributed according to his wishes, it must go through ______.

Probate

To whom are licensees in Texas required to give the Information About Brokerage Services (IABS) form?

Prospective clients

What is the purpose of the Texas seller property condition disclosure?

Protect the seller from future liability.

Hugo was the highest bidder on a foreclosed property. What type of deed gives him ownership rights?

Referee's deed