Chapter 4
The earnest money was paid on time. The effective date of contract is July 4. The notice to terminate specifies 10 days from effective date. What is the last date and time to give notice of termination under paragraph 23 of the contract?
The answer is July 14, 5:00 pm local time. The time is as stated in paragraph 23, 5:00 pm local time. You count the first day as July 5, which makes the last date to give notice July 14.
The Statutory Tax District Notice in paragraph 6 of the One to Four Family Residential Contract applies to which of the following?
The answer is a utility district that provides water services.
What happens under paragraph 7E of the TREC One to Four Family Residential Contract if the cost of lender required repairs and treatments exceeds 5% of the sales price?
The answer is buyer may terminate the contract and the earnest money will be refunded to buyer. Buyer may terminate even if the seller agrees to pay for the repairs.
If the buyer and the seller have agreed upon an option to terminate under paragraph 23 of the contract, which of the following would be an invalid reason to terminate, resulting in loss of earnest money?
The answer is failure to give notice to terminate by the time and date specified.
A buyer enters into a contract with a seller using the TREC One to Four Family Residential Contract. He submits a small earnest money check upfront ($100), and wants to submit more earnest money when his certificate of deposit matures in five days. What should he do?
The answer is indicate that he will deposit $100 upon execution of the contract and $1,000 five days after the effective date of the contract.
Using the One to Four Family Residential Contract, who pays for a new survey if the survey is not acceptable to the title company?
The answer is it is negotiated between the parties.
Which of the following is NOT a reason for providing earnest money?
The answer is it serves as consideration for the contract.
Sellers purchased a home five years ago and had the property surveyed. After purchasing the property, they remodeled and added another structure in the backyard. Using the One to Four Family Residential Contract, what should the listing agent tell the sellers to do about a survey?
The answer is negotiate with the buyer on who pays for a new survey.
What types of transactions are covered by RESPA?
The answer is one-to four-family residential transactions with federally related financing.
Where in the One to Four Family Residential Contract would a license holder indicate that she is the seller in the transaction and that she has a real estate license?
The answer is paragraph 4.
If the seller furnishes the existing survey to the buyer, but it is not acceptable to the buyer's lender, who will cover the cost of a new survey?
The answer is party negotiated in the contract.
Using the TREC One to Four Family Residential Contract, buyers wish to make the purchase of the home contingent on the outcome of a home inspection. What should they do?
The answer is pay an option fee for the unrestricted right to terminate under paragraph 23.
Deed restrictions are also known as
The answer is restrictive covenants.
Who has the responsibility for turning on the utilities and keeping them on for the duration of the contract, according to the contract?
The answer is seller.
A buyer wishes to make an offer on a house but wants to ensure that she has time to ensure that the foundation is sound. What should she do using the TREC One to Four Family Residential Contract?
The answer is she should purchase an option to terminate under paragraph 23.
A buyer enters into a contract with a seller using the TREC One to Four Family Residential Contract. He submits a $100 earnest money check upfront, and indicates that he will deposit $500 11 days after the effective date of the contract. What happens if the buyer fails to deposit the additional earnest money?
The answer is the buyer is in default.
Using the TREC One to Four Family Residential Contract, the buyer submits an offer to purchase the seller's property but fails to pay earnest money as required by paragraph 5. The seller accepts the offer in writing by signing the contract and the acceptance is communicated to the buyer. What happens to the contract?
The answer is the buyer is in default.
The seller and buyer negotiate that the buyer will purchase a home "as is" with specific repairs listed and with an option period of 14 days using the One to Four Family Residential Contract. What are the buyer's choices during the option period?
The answer is the buyer may negotiate additional repairs by amending the contract.
Restrictive covenants may include rules regarding
The answer is all of these.
What happens if a buyer fails to pay to the seller an option fee she promises to pay within three days of execution of the contract under paragraph 23 of the TREC One to Four Family Residential Contract?
The answer is the buyer will not have the right to terminate the contract.
Which of the following is not a notice under paragraph 6 of the One to Four Family Residential Contract?
The answer is the seller's disclosure notice.
Who should fill out the Seller's Disclosure of Property Condition?
The answer is the seller. The seller should fill out the form, not the seller's agent.
A license holder represents a buyer in a transaction that is not using a TREC-promulgated contract form. To provide to the buyer the notice included in paragraph 6E1 of the promulgated contract forms, the license holder should
The answer is use the TREC form, Notice to Prospective Buyer.
What are restrictive covenants?
The answer is deed restrictions.
In the Earnest Money paragraph, the One to Four Family Residential Contract
The answer is gives the parties the option to negotiate for the buyer to pay the earnest money in two installments.
Which of the following is TRUE regarding earnest money?
The answer is earnest money is not necessary to bind the contract.
Under paragraph 5 of the TREC One to Four Family Residential Contract, what happens if the buyer fails to timely deposit the earnest money?
The answer is the buyer is in default.
A buyer pays an option fee of $25 under paragraph 23 of the TREC One to Four Family Residential Contract to purchase a 10 day option to terminate. What happens if the buyer fails to terminate by the 10th day?
The answer is the buyer will not have the unrestricted right to terminate the contract.
A buyer promises to pay an option fee of $100 within three days of execution under paragraph 23 of the TREC One to Four Family Residential Contract to purchase a 10-day option to terminate. What happens if the buyer fails to pay the fee?
The answer is the buyer will not have the unrestricted right to terminate the contract.
A buyer promises to pay an option fee of $500 within three days of execution under paragraph 23 of the TREC One to Four Family Residential Contract to purchase a 15-day option to terminate. What happens if the buyer pays the fee four days after execution?
The answer is the buyer will not have the unrestricted right to terminate the contract.
Under the One to Four Family Residential Contract, a buyer wishes to offer to buy the property as is with no repairs. How should the buyer's agent advise the buyers to fill in paragraph 7D?
The answer is the buyers should check the box under 7D(1).
What happens to the earnest money if the buyer terminates within the option period under paragraph 23 of the TREC One to Four Family Residential Contract?
The answer is the earnest money is refunded to the buyer.
Who holds the earnest money while a contract is pending under the TREC One to Four Family Residential Contract?
The answer is the escrow officer.
How is earnest money disbursed at funding?
The answer is it is applied to the sales price.
Who selects the appraiser to appraise a home when financing is involved?
The answer is the lender.
Using the TREC One to Four Family Residential Contract, the buyer submits an offer to purchase the seller's property and promises to pay earnest money of $500 in paragraph 5. The seller accepts the offer in writing by signing the contract and the acceptance is communicated to the buyer. Is there a binding contract?
The answer is yes, because the buyer promised to purchase the property and the seller promised to give the buyer title at closing.
A seller and buyer agree that the buyer will purchase a home "as is" with an option period of five days using the TREC One to Four Family Residential Contract. Paragraph 7D includes a lengthy list of repairs. What are the buyer's choices during the option period?
The answer is all of these. The contract specifically provides that the buyer's agreement to accept the property as is under paragraph 7D(1) or (2) does not preclude buyer from inspecting the property under paragraph 7A, from negotiating repairs or treatments in a subsequent amendment, or from terminating this contract during the option period, if any.
Which Texas state agency promulgates the Residential Real Property Affidavit?
The answer is Department of Insurance.
If the right to terminate under paragraph 23 is about to expire, and we know the paragraph contains a time is of the essence clause, which of the following might a buyer's agent suggest as a way to extend the deadline?
The answer is any of these. The seller is not obligated to extend; however, if the seller is anxious to see the deal go through, he might be willing to take the risk. On the other hand, remember that in a seller's market, the seller may also have one or more backup offers and the buyer may be faced with the choice of proceeding without the option to terminate or terminating it if he cannot tolerate the risk.
Under the TREC One to Four Family Residential Contract, what are the buyer's options if seller timely provides the seller's disclosure notice under paragraph 7B(2)?
The answer is buyer may terminate the contract within seven days after buyer receives notice.
How many exceptions to title are listed under paragraph 6A of the One to Four Family Residential Contract?
The answer is eight.
A buyer and seller agree that buyer will buy the seller's home for $475,000 with no option to terminate using the TREC One to Four Family Residential Contract. The lender requires the roof to be replaced, the perimeter to be treated for termites, and the stucco on the back of the house to be repaired. The roof will cost $10,000, the termite treatment will cost $1,800, and the stucco repair is estimated to cost $8,000. Seller agrees to pay for everything. What are the buyer's options?
The answer is the buyer may not terminate the contract.
Buyer and seller enter into a contract where buyer intends to take out a loan to purchase a home. The lender requires termite treatment before it will issue a loan to the buyer. What are the buyer's options under the One to Four Family Residential Contract?
The answer is the buyer may refuse to pay for the termite treatment.
A buyer promises to pay an option fee of $500 within three days of execution under paragraph 23 of the TREC One to Four Family Residential Contract to purchase a 12-day option to terminate. What happens if the buyer pays half of the fee up front and half four days after execution?
The answer is the buyer will not have the unrestricted right to terminate the contract.
Using the One to Four Family Residential Contract, the sellers must provide which of the following documents along with the Residential Real Property Affidavit if they wish to rely on an existing survey of the property?
The answer is the existing survey.
What happens to the option fee if the buyer terminates within the option period under paragraph 23 of the TREC One to Four Residential Contract?
The answer is the option fee is not refunded to the buyer.
Who signs the Residential Real Property Affidavit?
The answer is the owners of the property.
What happens if no dollar amount is inserted in paragraph 23 of the TREC One to Four Family Residential Contract but the time period is filled in as 10 days?
The answer is the paragraph is not part of the contract.
A buyer purchase property "as is" under the One to Four Family Residential Contract. "As is" means which of the following?
The answer is the present condition of the property with any and all defects, and without warranty except for the warranties of title and the warranties in the contract.
Which of the following is/are considered adequate consideration to create a legally binding contract?
The answer is the promise of the buyer to buy and the promise of the seller to deliver title.
Due to the number of repairs needed on the property, the buyer has determined that a residential service contract is necessary to protect against future repair costs. Who pays for this contract?
The answer is the seller, up to the limit agreed upon in paragraph 7H.
The potential buyers wish to make an offer to purchase a home but they want the seller to pay for a new fence because the old one is falling down. How should they make the offer using the One to Four Family Residential Contract?
The answer is they should check paragraph 7D(2) and indicate "replace fence" in the blank line.
What is the intent of the option period under paragraph 23 of the TREC One to Four Family Residential Contract?
The answer is to allow the buyers to do their due diligence.
Which if the following is NOT a way for license holders to give notice to buyers regarding a title policy?
The answer is using MLS.
Under paragraph 5 of the TREC One to Four Family Residential Contract, where does the buyer deposit the earnest money?
The answer is with the escrow officer.