Texas Promulgated Contract Forms
Suppose a buyer was willing to offer a seller $300,000 on a property with a first lien of $215,000 and a second lien of $70,000, with $15,000 as a down payment. What would the licensee put in the sum of the financing paragraph of the One to Four Family Residential Contract (Resale)?
$285,000
What is the difference between a title policy and a title commitment?
A title commitment is issued prior to closing to describe the items on the title policy which will be issued after closing.
Alicia is set to close on her new home in three days, but today she received a phone call from her agent stating that the lender needs to push closing back seven days. What, if any, action needs to be done?
Alicia's agent should submit an "Amendment to Contract" with the new closing date to the seller's agent
Which group has the task to draft and revise contracts and forms for use by agents?
Broker-Lawyer Committee
Which item cannot be changed or modified by completing the Amendment form?
Brokerage fee (commission)
Who signs the Notice to Prospective Buyer form?
Buyer
Earnest money funds are usually applied to what at closing?
Buyer's closing costs Down payment
What form is used when the buyer wants to cancel the contract?
Buyer's termination of contract
Under the Texas Real Estate License Act (TRELA), a real estate agent will not be in violation of practicing law without a license if they do what?
Fills in the blanks on a standardized contract
How long is the Statute of Limitations for a written contract in Texas?
Four years
How long is the Statute of Limitations for an oral contract in Texas?
Four years
Maria, a licensed real estate professional, is working with Juan and Augustina, who are buyers. Juan wants Maria's opinion on whether or not she thinks the title is valid. What should Maria do?
Maria should advise Juan to call the title company or his favorite attorney for this type of advice
What is it called when all terms in a contract are agreed to by all the parties of the contract?
Mutual agreement
Consideration is also known as what?
Something in exchange for something else
Which paragraph in the One to Four Family Residential Contract (Resale) is used to put in items that have no other paragraph or addendum that can address them?
Special Provisions
Which paragraph in the One to Four Family Residential Contract (Resale), typically creates the potential for legal problems for an agent?
Special provisions
If a party feels they have been wronged, what law sets the length of time they are allowed to bring a civil lawsuit?
Statute of Limitations
What is misrepresentation?
An error
What legal status does a void contract have?
A contract that never existed
What is it called when someone listens to both sides of the situation and makes a decision?
Arbitration
How long does the owner's title policy stay in force?
As long as the buyers own the property
What determines whether someone is a competent party?
At least 18 years of age, mentally competent, and cannot be temporary incompetent
In completing a sales contract, the sale price should equal what?
Both the down payment and the loan amount are added together
What is it called when two or more real estate companies refuse, as a group, to show and sell another real estate companies' listings?
Boycotting
To make a valid contract, there must be four elements, including Agreement, Competent Parties and Legal objective. Which one is missing?
Consideration
What are some examples of discharging a contract?
Contract could not be accomplished legally, fraud, or some action of the law
What is the definition of an executory contract?
Contract for deed, lease option, or purchase option longer than 180 days
What is contract rescission?
Contract is completely canceled
What does the Four Corners Doctrine direct a judge to look at?
Document as a whole
As part of a loan, a lender may have a clause that keeps another person from assuming the loan. What is this clause called?
Due on sale
What clause in an insurance policy details an exemption from or a change in coverage?
Endorsement
Which of the following types of sellers would most likely use a contract prepared by an attorney?
A new home builder
To be an acceptable listing contract, TREC requires that the listing form contains what items?
A provision informing the parties to the contract that commissions are negotiable
What type of contract is it when two parties agree to and then sign it?
Executed
What contingencies will be covered by the title insurance policy?
Forgery Confusion due to similar names Error in the records
What does Ad valorem mean?
According to value
How is the effective date of the contract determined?
After both parties have signed/initialed the contract and all parties have been notified of such
What are the four basic elements of a contract?
Agreement, competency, consideration, and legal objective
What are some things you can do to avoid common contract mistakes?
Keep the contract neat Fill in all blanks correctly Use full names for the buyer/seller
Who is the mortgagee's title policy issued to?
Lender
What are damages that are agreed to in advance?
Liquidated.
What are some actions that would be considered practicing law without a license?
Modifying a 2012 TREC promulgated contract to fit the buyer's current situation Giving advice about the legal consequences of the purchase Offering a client an opinion regarding the validity of the title
What do the letters MUD stand for?
Municipal Utility District
What does it mean, that the title is "free and clear"?
No encumbrances
The TREC One to Four Family Residential Contract (Resale) should be used in which of the following transactions?
SIngle-Family A duplex Triplex Fourplex
Who promulgates contracts for real estate agents to use?
TREC
What entity regulates the title industry?
Texas Department of Insurance
Who fills out the Seller's Disclosure Notice?
The seller
An initial counteroffer would be best described as what?
The seller's offer to the buyer
How are buyers notified to obtain an abstract or a title policy?
There is a form to notify buyers to obtain an abstract or a title policy
What happens to the penalty funds collected from transfer fee violators?
They are placed in the general revenue fund of the state
How many total members are on the Broker-Lawyer Committee?
Thirteen
When are keys to the property given to the new buyer?
Upon closing and funding
What is duress?
Use of force
When can a seller have another party assume their loan?
When the lender allows it
Who is responsible for making sure all applicable addenda have been included with the contract?
You are, the client's agent
Once a contract is signed, how many days are there for automatic rescission?
Zero
What is a professional analysis of a property and its location relative to other property?
Survey
What can TREC do if a real estate agent fails to use a required contract form?
Suspend the agent's license
All of the following actions would be considered practicing law without a license except which one?
Tell the client known facts about the property that might affect the title
What group administers the Texas Real Estate License Act?
Texas Real Estate Commission
What is the best solution to solve a situation when the seller and buyer agree to alter a binding One to Four Family Residential Contract (Resale)?
The "Amendment" must be completed and signed by both parties
According to the One to Four Family Residential Contract (Resale), who is to advise the buyer to have an attorney examine the abstract or obtain a title policy?
The agent
What are the ramifications if an owner does not pay the mandatory Homeowners Association dues?
The association could file a lien and there is the possibility of foreclosure
Fraud in a contract makes it what?
Voidable
Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller's VA Entitlement, is used for what type of situation?
When a seller wants to be released from further liability on the VA assumed
At what point does an offer become a contract?
When all parties have signed/initialed the contracts and both parties have been notified
If a seller changes one item on an offer, what does that offer become?
Rejection of the entire offer
If your client is not married, what do you write after their name on the contract?
Single person
What is the minimum age a person must have attained to be of legal age in Texas?
18
In what year was the TRELA written?
1939
What is the Seller's Disclosure Notice?
It is a statement of the items and systems a property has and whether those work properly or not
Using the One to Four Family Residential Contract - (Resale), who is required to pay for the title insurance policy?
It is negotiable
There may be some private transfer fees that will continue, assuming they were created on, or before, what date?
January 31st, 2012
Which of the following would the title search uncover?
Judgments against previous owners Unpaid taxes Unpaid mortgages
Which form addresses a "contract for deed"?
None available
What is the minimum amount of earnest money needed to make a contract valid?
None, earnest money is not a requirement of the sale
Private transfer fees are considered what?
Not binding or enforceable
What is the purpose of paragraph 6.D, in the One to Four Family Residential Contract (Resale)?
Objections
What is the primary purpose of TREC?
Protect the public
What is the main law that governs the real estate industry?
Real Estate License Act
If the effective date of the contract is on a Monday, with the option period ending on the following Monday, the option period is for how many days?
Seven
According to the Loan Assumption Addendum, the seller must respond to the buyer within how many days, or it is assumed that the seller has given approval?
Seven days
If a buyer fails to provide their financial information to the seller by the deadline specified in the Seller Financing Addendum, how long can the seller wait to terminate the agreement?
Seven days
Which of the following is an exception to an agent using a TREC promulgated form?
The form is prepared and required by the property owner
In a transaction that does not involve owner financing or cash, who typically requires a title policy?
The lender
How can an agent determine the terms of the buyer's loan when completing the Third Party Financing Addendum?
The lender will provide this information after negotiations with the buyer
Which of the following statements best defines "promulgated"?
A form that has been made public and its use mandated
Which FHA loan is typically the lowest down payment loan for a buyer?
203 (b)
A buyer has a signed document that would allow them to purchase a property within one year at an agreed-upon price. Which contract feature allows this type of agreement?
A contract with an option to buy contract
During a title search, there may be additional claims of ownership by whom?
Government entities Property Owners' Associations (POA) Contractors
When should the Seller Financing Addendum be used?
If the seller is carrying a note for a buyer for all or a portion of the sales price
What is it called when two or more real estate companies work together to conspire to charge the same commission?
Price fixing
Who authorizes a licensee to strike information from a contract?
Principal to the transaction
What is probably the best action a seller can take if they want to take a ceiling fan with them prior to closing?
Remove any item prior to any showings
Which of the following forms are NOT promulgated by TREC?
Residential Listing agreement
What is a court's primary objective when interpreting a contract?
To ascertain and give effect to the intent of the parties
In which of the following situations would a temporary lease be inappropriate?
When the buyer moves in six months prior to the closing date
When can an agent use their own forms in a transaction?
When they are buying properties for themselves
