Chapter 9: Real Estate Contracts

5. broker received deposit from tenant. broker= escrow agent. When does broker have to deposit tenant's money? A. It must be deposited w/in 2 business days after agreement becomes binding. B. W/in 30 days C. No less than 10 days D. Within 5 days 6. licensee has effective contract as of today, Friday, May 28th. Monday, May 31st is Memorial Day. What day earnest money due to title company per 1-4 Family Contract? A. By May 31st before 11:59pm B. On or before May 30th before 5pm C. By June 1st before 11:59pm D. By May 28th at 5pm

1. A 2. C

What is NOT true in contract for deed sale? A. The buyer receives the deed when the loan is paid off. B. The buyer receives the deed at closing. C. The buyer has the right of occupancy. D. The buyer can claim a homestead property tax exemption.

B

When negotiating contracts binding sale/lease of property, real estate licensee MUST use appropriate Texas Real Estate Commission promulgated form unless another contract form has been prepared & REQUIRED by: A. Lender's appraiser B. Owner of property C. Property surveyor D. Title company's attorney

B

What makes residential real estate industry in Texas unique? A. Texas Realtors® provides sales contracts used in real estate sales in Texas. B. TRELA is responsible for real estate sales forms and addenda. C. Real estate sales contract forms and addenda used in most transactions in Texas are developed through a state agency (TREC). D. Attorneys are responsible for promulgating real estate sales contracts and addenda in Texas.

C

What type of verbal lease agreement would be enforceable? A An oil and gas lease B. A graduated lease C. A lease for one year or less D. A land lease

C

When is Buyer's Temporary Residential Lease form used? A. form used only when Buyer will occupy property for no more than 30 days prior to closing on purchase contract. B. form used only when Buyer will occupy property for no more than 60 days prior to closing on purchase contract. C. form used only when Buyer will occupy property for no more than 90 days prior to closing on purchase contract. D. form used only when Buyer will occupy property for no more than 120 days prior to closing on purchase contract.

C

Which of following statements NOT true regarding equitable title? A. In a contract for deed, the buyer has equitable title until the loan is paid off. B. In a real estate sale, the buyer has equitable title once the property is under contract. C. Equitable title is the same as legal title. D. The buyer will receive legal title upon the closing and funding of the transaction.

C

Which statement TRUE regarding Seller Financing Addendum? A. Seller does not have the right to check the creditworthiness of the buyer. B. The sale must be closed in 15 days. C. This Addendum is used when the Seller is financing all or a part of the purchase price. D. None of the above

C

Which of details for Seller's Temporary Residential Lease is NOT true? A. The parties to the lease are the Landlord and the Tenant. B. The lease is for a seller lease back for not more that 90 days. C. The seller becomes the tenant and the buyer becomes the landlord. D. The tenants are not allowed to have pets on the premises during the lease period.

D

Which of following statements NOT true about One to Four Family Residential Contract (Resale)? A. It is the most frequently used contract form. B. It is used for the resale of residential properties that are either a single family home, a duplex, a tri-plex or a four-plex. C. It is not for use for condominium transactions, new homes being sold by a builder, or farm and ranch properties. D. The ESAC (Education Standards Advisory Committee) promulgates the One-to-Four Family residential contract and other approved real estate contracts for licensees.

D

Which of following statements about Third Party Financing Addendum NOT true? A. This Addendum is used when any type of financing for all or part of the purchase price will be provided by a third-party (not the Seller or Buyer). B. This addendum provides the buyer the ability to terminate the contract if he provides written notice to the seller if he cannot obtain credit approval within the time specified in the addendum. C. The purchaser agrees to provide the lender all necessary information requested to obtain approval. D. The Addendum does not cover FHA and VA loans.

D

Which statement about Lead-Based Paint Addendum NOT true? A. This Addendum used to comply w federal regulation to furnish lead paint disclosure in properties constructed prior to 1978. B. W/in ten days after effective date of contract, Buyer may have Property inspected by inspectors selected by Buyer. C. disclosure of lead-based paint required for both leases & sales. D. Buyer cannot waive opportunity to conduct risk assessment or inspection of Property for presence of lead-based paint/lead-based paint hazards.

D

Which statement does NOT represent definition of unilateral contract? A. Only one party makes a legally binding promise and the other has not. The promise will become legally binding if the other party chooses to accept it. B. A good example of a unilateral contract is a reward contract C. A unilateral contract is a reward contract. D. Insurance companies must pay the insured upon the occurrence or non-occurrence of an event.

D

expressed contract must contain all of following EXCEPT: A. It must have the signature of the parties. B. The grantor and the grantee must be identified. C. There must be evidence of the intent to convey the property. D. Implied contracts are the same as expressed contracts.

D

Paragraph 6E (10) also requires buyer to get from seller statutory notice from ___ disclosing ___ ___, bonded indebtedness, or standby fee of district. MUD districts have these available for owner. very important these documents get to buyer in timely manner. If Buyer does not receive documents w/in time stated, buyer can ___ __ __ day of ___

MUD - tax rate - terminate up to - closing

If buyer moves into property prior to closing or if seller stays in property after closing, there is agreement by parties they will execute "BUYER'S ___ RESIDENTIAL ___" or "SELLER'S TEMPORARY RESIDENTIAL LEASE" to establish terms & conditions of lease. Both forms TREC ___. Recommendation also made to ___ ___ agent if change in possession ___ __ ___

TEMPORARY - LEASE - promulgated - consult insurance -prior to closing

In Texas, real estate agents & brokers required to use TREC Promulgated Form "___ ___" to make changes on contract once contract signed & ___ by both parties. Again, form used whenever there's change to ___ ___ contract

The Amendment - accepted - existing accepted

Unless otherwise provided in contract, all contracts ___ w some ___ novation= new ___ ___ for existing one

assignable - exceptions contract substituted

Mortgage interest paid in arrears. When you pay mortgage on January 1, pays interest ___ ___

for December

when representing buyer find sellers' ___ ___ names on ___ printout or ___ ___ for that property. street address ___ ___ to describe property for ___ purposes

full legal - MLS - tax records - not sufficient - contract

Statute of Frauds says contracts for conveyance of ___ in real estate must be ___ ___ to be enforceable. Lease agreements for ___ ___/less= exception to Statute of Frauds. Therefore, oral lease for one year/less is ___ & enforceable

ownership - in writing - one year - valid

ELEMENTS OF VALID, ENFORCEABLE CONTRACT 1. Competent ___ 2. ___ and acceptance 3. Legal ___ 4. In ___ 5. ___ valid real estate sales contract requires: 6. ___ and initials 1. Competent parties: All parties involved should have the legal capacity to contract. Contracts with a person who lacks ___ ___ can be either void or voidable

parties Offer purpose writing Consideration Signature mental capacity

Although tenant does hold rights to real property (rights of ___, not rights of ownership), leasehold estate typically considered ___ ___

possession - personal property

three options according to Paragraph 15 when contract breached: 1. damaged party ___ ___ ___. 2. damaged party can sue for ___ ___, best described as court order to ___ ___ ___ of contract. 3. damaged party can sue for damages (___) PLUS mental ___ & pain & suffering You cannot combine #1 & #2 or #1 & #3. You can, however, ___ ___& ___

retains earnest money specific performance - carry out terms treble - anguish combine #2 and #3

addendum added at ___ __ ___. Add all appropriate addenda that pertain to transaction at time of offer. addendum further describes ___ _ ___ of parties

time of offer - rights & duties

seller give buyer copy of ___ ___ w/in __ ___ after ___ company receives copy of ___. title commitment not actual title insurance. spells out terms & conditions on which title insurance underwriter willing to ___ ___ ___. incl: 1. Name of ___ party 2. Legal ___ of property 3. interest or estate ___ 4. schedule of any exceptions - encumbrances & ___ found in public ___ 5. Any ___&/or stipulations under which policy issued. gives buyer (& buyer's agent) opportunity to examine each & every outstanding interest against title so ___ _ ___ purchase

title commitment - 20 days - title - contract issue title insurance insured description covered defects - records conditions - consistent w expected

agent's responsibility to notify buyer they should have abstract of ___ ___ by attorney/obtain ___ of title insurance. If agent /broker does not advise buyer, licensee can potentially have license ___/revoked & "___ payment of ___ on sale" (agent might not receive commission on transaction).

title examined - policy - suspended - preclude - commission

1. standard contract form developed for: A. Sale of single-family residences B. Sale of multi-family (five or more) residences C. Commercial conventional sales, leases & options D. Industrial conventional sales, leases & options 2. listing agent receives offer from buyers' agent & presents it to sellers. They love it, sign it and initial it everywhere. Today is July 31st. She does not communicate to buyer's agent that they accepted & signed contract until tomorrow, August 1st. What is effective date? A. August 1st B. July 31st C. August 2nd D. It is not an effective contract

1. A 2. A

1. What is it when buyer & seller agree to terminate contract? A. Mutual rescission B. Novation C. Assignment D. Default 2. What remedy available in every TREC contract form for Breach of Contract? A. Arbitration. B. Mediation. C. Suit for specific performance, seek such other remedies as may be permitted by law, or both D. Default

1. A 2. C

executed contract= completely performed (___& ___).

closed - funded

Exclusions must be on ___. exclusion not legally binding even if on Seller's Disclosure & signs placed in house. must state in contract any item described in 2B/2C ___ from sale, i.e., improvements (___) or accessories

contract - excluded - fixtures

difference b/w traditional purchase & ___ ___ ___= ___ property title ___ from seller to buyer. In traditional purchase using mortgage, buyer receives title to property at ___ ___, w mortgage holder having ___ ___ property until buyer pays off mortgage

contract for deed - when - transfers - sale closing - lien against

1. buyer wants to terminate based on not fully qualifying for mortgage loan. He can terminate & get earnest money back if: A. The property appraises for more than sales price. B. Per Paragraph A of the Third-Party Finance Addendum, the buyer terminates prior to the negotiated time frame. C. He terminated within 3 days of the closing date. D. He has terminated after the option period. 2. buyer would like to ask seller to extend closing date. What form is this done on & what paragraph number? A. The Amendment paragraph 2. B. Just line through the date in the contract and get all initials on the change. C. The Amendment paragraph 3. D. The Addenda paragraph 9.

1. B 2. C

1. sales contract that's signed & accepted (effective) by both parties but has not yet gone to closing called a(n): A. Defeasible contract B. Executory contract C. Unilateral contract D. Voidable contract 2. best description of counteroffer is: A. An offer that accepts some of the provisions of a previous offer. B. An offer that rejects some of the provisions of a previous offer. C. An offer that rejects some of the provisions of a previous offer and accepts some of the provisions of a previous offer. D. A rejection of an offer, creating a new one 3. Which of following contracts voidable? A. A contract for cash B. A verbal lease agreement for seven months C. A contract with a minor D. A contract to sell illegal drugs 4. buyer & agent visit listed property. buyer loves property & wants to purchase. speaks w seller, at home at time, & they come to agreement regarding price & terms. They shake hands on agreement & buyer happily leaves property. His agent should: A. Congratulate him on negotiating the purchase. B. Tell the buyer the verbal agreement is illegal. C. Tell the buyer that he will have to pay the agent's commission since the sales contract is verbal. D. Warn the buyer that the verbal sales contract is unenforceable

1. B 2. D 3. C 4. D

1. contract based upon promise exchanged for promise is: A. Semi-lateral contract B. Dilateral contract C. Binary contract D. Bilateral contract 2. Jane agreed to purchase real estate from Grant & gave earnest money deposit at time agreement made. Which of following constituted consideration in this contract? A. earnest money deposit B. The promise for a promise C. Earnest money is over $1000. D. Contract sales price 3. All of following included in buyer's option period EXCEPT: A. buyer's unrestricted right to terminate contract for ANY reason B. A time frame that allows the buyer to terminate contract C. monetary consideration to the seller for accepting the option period. D. The seller must complete any and all requests of the buyer within the option period.

1. C 2. B 3. D

Texas Real Estate Broker-Lawyer Committee created ____ (Senate Bill 636, 68th Legislature, Regular Session); drafts & ___ ___ forms for use by real estate licensees.

1983 - revises contract -

seller comes into office to sign contract. seller stumbling & smells of alcohol. How do you proceed? A. Tell the seller to leave and return at another time. B. Get them to sign the contract. C. Send them to an attorney. D. Write an addendum explaining the situation, then get them to sign the contract and the addendum

A

3. seller gives buyer copy of sellers' disclosure notice 3 days after contract becomes effective. If contract became effective June 1st, how long does buyer have to terminate if decides to do so according to contract? A. Up to June 11th before 11:59pm B. Up to June 7th before 11:59pm C. The buyer cannot terminate since the seller turned in the disclosure. D. The buyer cannot terminate for anything other than the option period. 4. If buyer does not turn in additional option money on time, what did amendment need to state for amount of option money? A. No option money needed to make option period enforceable B. option money should have stated at least $100 C. contract ended because option money not tendered D. doesn't matter. buyer does not have extended option period bc did not turn in money at time of acceptance to seller

3. A 4. D

3. buyers' agent sent in offer three days ago to listing agent who has not responded. Finally, this afternoon listing agent texts buyer's agent & asks if they're going to do inspection since option period now. buyer's agent had NO communication from listing agent but listing agent says today is day 2 of effective contract. What is true? A. Whenever sellers sign offer, it's effective. B. The listing agent does not have to tell the other party anything. C. The effective date is the date the last party to accept communicates acceptance. D. The buyer's agent is at fault for not automatically knowing about the acceptance. 4. seller counters offer & sends new counter over to buyer's agent. buyer decides not to accept counteroffer & sends in written revocation of offer to seller. seller then decides to sign off & accept original offer. What is true? A. buyer now bound to contract seller accepted. B. buyer not bound by sellers' acceptance, he already killed original. C. buyer must put earnest money down to get out. D. buyer is in default

3. C 4. B

Earnest money must be deposited by 11:59pm on ___ ___ ___. third day cannot land on Saturday, Sunday, or legal ___. It will move to next day that's not Saturday, Sunday, or legal holiday. All documents in transaction incl escrow account records must be maintained for four years, according to TREC rules. If buyer's agent does not deposit earnest money on time, seller can terminate contract using form "Notice of Seller's Termination of Contract"

3rd calendar day - holiday -

4. amount of earnest money deposit paid by purchaser is: A. Determined by negotiation B. Set by state law C. Equal to the agent's commission D. The minimum required to make the contract valid 5. phrase "time is of essence" in sales contract means that: A. The time limits set by the contract must be faithfully observed or the contract is voidable. B. The parties are prohibited from giving each other an extension. C. The contract is void. D. The contract is a counteroffer. 6. When property sold by means of installment contract: A. Seller delivers deed at closing. B. Buyer is NOT given the right to occupy the property until the contract terms have been fulfilled. C. Seller retains title. D. Time is of essence.

4. A 5. A 6. B

7. buyer hasn't turned in earnest money on time. What is true? A. The seller has the right to terminate contract after earnest money late & BEFORE buyer turns in late earnest money. B. contract now voidable by seller. C. seller has rights afforded to him by paragraph 15, default paragraph. D. There is no penalty. 8. seller been treating home for two years for active terminate infestation. puts home on market but does not disclose this to buyer. buyer discovers this prior to closing. What is true? A. The contract is now voidable by the buyer. B. The contract is now voidable by the seller. C. The contract is void. D. The contract is unenforceable.

7. A 8. A

7. ___= interest held by one party to purchase property before closing. buyer obtains upon execution of contract. A. Legal title B. Equitable title C. Specific performance D. Contract title 8. Seller's lead-based paint disclosure notice required for residential property constructed prior to: A. 1976 B. 1978 C. 1987 D. 1995 9. Paragraph 2 of One to Four Family Residential Contract (Resale) gives information about what? A. Land B. Improvements C. Accessories D. All of above

7. A 8. A 9. D

9. buyer's agent shows buyer listing in MLS. listing day offer sent in stated 3.5% commission to buyer's agent. At closing, listing agent said only paying 3% commission, seller changed mind. What is true? A. The seller can pay whatever commission he wants to at closing B. The buyer must pay the difference in commission C. The seller and listing broker are obligated to pay the commission stated in the MLS. D. The buyer's agent must accept the lower commission 10. If today were Friday (effective date) & Monday was Labor Day, when earnest & option money due? A. Tuesday before 11:59pm B. Monday before 11:59pm C. Wednesday before 5pm D. The effective date before 5pm

9. C 10. A

A bilateral contract is most synonymous with: A. A promise for a promise B. A way for the buyer to become qualified C. Option contracts D. Insurance contracts

A

If Seller Disclosure not delivered by ___ in contract, buyer has right to cancel contract within 7 days after receiving notice. A. Effective date B. Closing date C. Option date D. Earnest money date

A

Which common mistake made in completing contracts might put you in position of unauthorized practice of law? A. Improper use of special provisions section B. Leaving blanks in the contract C. Time for performance too short D. Failure to enforce time limitations

A

Which of following does NOT apply to Addendum for Seller's Disclosure of Information on Lead-Based Paint & Lead-Based Paint Hazards? A. This Addendum is used to comply with federal regulation to furnish a lead paint disclosure in properties constructed prior to 1990. B. The law requiring notice of possibility of lead-based paint is a federal law. C. The addendum for Lead-Based Paint must be attached to the sales contract. D. The buyer, seller, buyer's broker, and seller's broker must sign the addendum.

A

Which of following statements regarding sales contracts correct? A. Real estate sales contract forms developed thru TREC (Broker-Lawyer Committee). B. Texas only allows real estate agents to use promulgated contracts. C. The One to Four Family Residential Contract (Resale) has a clause relating to Roll Back Taxes. D. The use of the sales contract forms is not voluntary.

A

Texas Real Estate Broker-Lawyer Committee- 13 members: six members appointed by ___ ___ Commission & ___ members appointed by State Bar + _ ___ citizen appointed by governor

Real Estate - six - 1 private

Like any contract, offer or counteroffer can be revoked at any time ___ ___ ___, regardless of agreement to keep offer ___ for ___ ___. If you want to pull offer off table, must do so in ___ to ensure offer not still live offer that can be accepted at later date. After negotiations complete, including negotiating amount of ___ ___ & all parties have ___ offer would become contract

before it's accepted - open - specified time - writing - earnest money - signed

Paragraph 3A specifies ___ ___. On most conventional loans, lender require minimum _% of sales price down payment. buyer can also put 10%, 15%, 20%, or more as down payment. Paragraph 3B gives buyer option to choose ___ __ ___ plan to obtain by checking appropriate box. Each type of financing has own addendum. Remember 3A ___ __ always ___ __. sales price incl down payment + ___ ___

down payment - 5 - type of financing - plus 3B - equal 3C - loan amount

contract for deed AKA "___ ___" or "___ land contract," = transaction in which ___ ___ sale of their property. buyer doesn't get deed until property paid for. While buyer in process of paying for property, buyer has ___ ___ to property moment contract effective. In contract for deed sale, buyer agrees to pay purchase ___ of property in monthly ___. buyer has right of ___. contract for deed, also called installment contract, can be drawn up using TREC addenda, ___ ___ Addendum. buyer finances purchase w assistance from seller, who retains security in property. W contract for deed in Texas, property's title does not transfer until buyer completed terms of contract (meaning when ___ ___ ___).

land contract - installment - seller finances - equitable title - price - installments -occupancy Seller Financing - loan paid off

broker should fill in date ___ ___ ___ or initials. broker gives ___ ___ to date contracts

last party signs - agents authority

"Time is of essence" means all parties to contract ___ ___ w/in time ___ set forth in contract or contract become ___

must perform - limits

Remember offers considered "reasonable time." seller's definition of reasonable may ___ __ ___ as buyer. no ___ ___ ___ required for seller to respond to offer. If buyer feels it's ___ ___ amount of time for response, they should ___ ___ in writing

not be same - specific time frame - taking unreasonable - withdraw offer

Lender required repairs take priority bc buyer will ___ ___ ___ unless they're done. If lender requires certain repairs completed, this paragraph states ___ ___ ___ to pay & allows buyer to ___ if repairs exceed __ of sales ___

not get loan - neither party obligated - terminate - 5% - price

no requirement earnest money given to create ___ ___. Earnest money merely gesture of purchaser's good faith, used only to make offer ___ ___ to seller. very important for buyers & sellers to agree on ___ __ ___ agent as part of negotiating process. Most commonly escrow agent= selling broker, ___ ___, or attorney. earnest money should be deposited w escrow agent by 11:59pm on ___ ___ ___ that does not land on ___, Sunday, or legal ___. If third day lands on Saturday, Sunday, or legal holiday, it moves forward to ___ ___ that's not Saturday, Sunday, or legal holiday. if buyer or buyer's agent does not deposit earnest money w/in designated time, buyer in ___

valid contract - more enticing who is escrow - title company - third calendar day - Saturday - holiday - next day - default