Unit 2: Common Real Estate Transaction Documents

What's an abstract of title?

A document that provides a summary of a property's title history

Establishes path and proof of ownership

Chain of title

While working with a buyer client, Jeffrey filled in the blanks on the purchase agreement, drafted an early occupancy addendum, and assured his buyer that she was "fully protected" and would get her earnest money back if the sale didn't close. He encouraged her to hire an attorney to review the contract and addendum, and invoiced her for a nominal $15 fee to prepare transaction documents. Which of these tasks would NOT be considered unauthorized practice of law?

Filling in the contract blanks

Nicholas is working with a buyer client who wants a special clause added to his purchase contract. How should Nicholas handle this?

Instruct the client to hire an attorney to draft the clause.

Which of the following provides a summary of the title history?

Abstract of title

A(n) _________ to a real estate contract or purchase agreement is a supplemental document attached to the original contract before the contract is actually ratified.

Addendum

Edie's contract includes a(n) ______, which gives her, as the buyer, the right to pull out of the deal if the house doesn't appraise at the agreed upon sale price.

Appraisal contingency

Indicates that legal disputes are to be solved through arbitration

Arbitration

Saul was unhappy after he and Janelle liquidated their business. Janelle sold some items for less than he'd initially agreed to and he wanted the full price to be included in the profit split. He wanted to sue, but he was required to pursue other options. What contract clause kept Saul from being able to sue?

Arbitration

Short-sale homes are usually sold "as-is," meaning the seller isn't going to make any repairs. In such a case, a(n) _______ addendum may be included.

Buyer purchasing as-is

Which document is used to establish the path and proof of ownership?

Chain of title

Describes the law under which the contract will be interpreted

Choice of law

Real estate licensee William is preparing a sale agreement that will include an unusual circumstance. What's his best course of action?

Consult an attorney.

A(n) _________ clause outlines additional conditions that must be met before a sales contract is enforceable and is often part of a sales contract.

Contingency

Used to establish ownership

Deed

Rachel agrees to receive her transaction documents via email, so her agent has her sign a(n):

Delivery addendum

What's the title insurance representative 's responsibility at a closing?

Ensures the title is marketable by performing a title search and provides the buyer with an abstract of title and title protection

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.

Which of these actions is allowed but avoids the licensee illegally practicing law?

Filling in blanks on an association-approved purchase contract

Farid's contract includes a(n) ________, which allows him, as the buyer, to pull out of the deal if he isn't able to secure the financing he needs.

Finance contingency

Basim made an offer on a home but included a(n) ________ contingency so she could check whether any repairs were needed before she committed to the purchase.

Home inspection

Hannah wasn't able to get the financing to open her boutique, so her mother came on as a silent partner and provided additional cash. Hannah and her mother have an agreement that states Hannah's mother can't be held financially or legally liable if there are any problems with the store. What type of contract clause is this?

Indemnification

Which clause in a contract states that one or more parties won't be held liable if there are losses or expenses related to the contract?

Indemnification clause

Jia's home inspection revealed some issues that she wants the seller to address, so her agent drafts an _______.

Inspection addendum

Which of the following is considered unauthorized practice of law?

Interpreting the legal consequences of a client's actions

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

Learn and understand tenant rights.

Allows the aggrieved party to recover damages

Liquidated damages

Julius wants to make an offer on a house, but he needs to sell his current home before he can get the funds he needs. His real estate professional suggests a(n):

Sale of existing home contingency

States that portions of the contract are enforceable even if one part is not

Severability

If one of his clients makes an offer on a short-sale property, Kevin always adds a(n) ___________ to identify a time period that the buyer is willing to wait for the lender to approve the sale.

Short-sale addendum

Jerry and Simon signed a contract so that Jerry could purchase all of Simon's restaurant equipment for one price after Simon closes his restaurant next month. The contract contains a provision that states Jerry has one year from the purchase date to file a suit relative to the purchase. After the year is up, Jerry forfeits the right. What kind of contract clause is this?

Statute of limitations

Specifies the deadline past which lawsuits related to the contract can no longer be filed

Statute of limitations

Proves no encroachments exist

Survey

What's typically used to prove there are no encroachments on the property?

Survey

Indicates the deadline by which contract terms must be met

Time of performance

Insures the policy owner against financial loss if the title to the real estate has defects

Title insurance policy

Darcy and her buyer client Josh are reviewing Josh's offer before they submit it to the seller. Which of these actions is Darcy safe to take without potentially crossing into unauthorized practice of law?

Use standard, approved language in contingencies, addenda, and additional provisions areas.

Unauthorized practice of law and acting outside the scope of one's expertise are similar issues. Which of the following circumstances specifically relates to the unauthorized practice of law?

Writing contract addenda or additional provisions that cover unfamiliar circumstances

Which one of Gerry's statements to a client crosses the line into unauthorized practice of law?

"Most couples take ownership of property as joint tenants, so that's what I'd advise."

Regarding documentation, which of the following actions can help a licensee avoid being accused of unauthorized practice of law?

Using approved fill-in-the-blank forms

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.