FINAL - Law of Contracts
The seller may pay less in capital gains taxes if he receives the proceeds from the sale over time rather than in a lump sum.
Which of the following is a reason a seller might consider selling his property through an installment contract rather than a traditional sale?
trees
Which of the following would be considered real property?
Cultivated crops
In real estate, what are emblements?
No, because that would be unauthorized practice of law.
Is it ever appropriate for a Texas licensee to provide legal counsel?
Fee simple determinable
Joe gave land to a school, but still wanted to have some control over its use, so a deed was prepared that gave the school title as long as the land is used for educational purposes. What type of interest does the school have?
Advise her client to seek legal counsel
Kelly is a Texas real estate licensee, and her client has just asked for legal advice. Kelly should _____________.
Fee simple determinable
The Crows gave their son, Gibson, the family property, so long as he doesn't join his friend's rock band. If he joins the band, the property goes back to them. What type of estate is this?
Seller insured loan
The Hendersons don't have enough money to make the full 20% down payment their institutional lender requires. To close the sale, the seller is willing to finance a loan for the amount between the home's list price and what the institutional lender is willing to loan. What's this type of financing called?
deed
The _____ is used to transfer the title.
Executor's deed
The court has granted Mr. Kennedy the authority to follow through with his deceased client's wishes and sell the property. What type of deed will Mr. Kennedy use to convey the property?
Originate loans
The primary mortgage market operates to _____.
Fannie Mae, Ginnie Mae, Freddie Mac, Farmer Mac, and lending institutions that buy loans from other lenders
What entities make up the secondary mortgage market?
Sheila Mae Drew, a single person
What is the correct way to list the buyer's name on the Texas sales contract?
To protect the public
What is the purpose of the Texas Real Estate License Act?
It contains formaldehyde
What makes urea formaldehyde foam insulation a health hazard?
A loan that fails to meet the criteria set forth by Fannie Mae and Freddie Mac
What's a non-conforming loan?
It was an intentional violation.
When Will was found guilty of violating the Deceptive Trade Practices Act, the actual damages to his client were $7,000. But the court required Will to pay $21,000. Why might this be?
One party fails to meet the obligations of the contract.
When does a breach of contract occur?
Escheat
When someone dies intestate with no heirs, the real property owned by that person may be taken by the state through _______.
Leasehold Estate
Selma and Richard have the temporary right to live at 123 Elm Street. They can come and go and use the property as they see fit, but they can't do so indefinitely. They must vacate the property at the end of next year. What sort of interest do they have in 123 Elm Street?
The seller and buyer share the cost of the mediation
Shelley is the seller and is in mediation with her buyer over a dispute with the sales contract. Who's responsible for paying for the cost of the mediation?
They may receive a refund of earnest money, but they're responsible for expenses associated with the completed inspection and appraisal.
Lyle and his wife, Carol, were unable to obtain the loan they needed to buy the home they wanted, and have had to terminate their contract with the seller. Which of the following statements about Lyle and Carol is true?
The seller
The _____ should provide the title insurance company with an affidavit of title when necessary.
The broker
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 buyer and the seller
Who should review the settlement statement before closing?
Closing agent
Who's responsible for calculating prorations at closing?
The escrow agent
Who's responsible for receiving, handling, and disbursing earnest money for a residential sales transaction in Texas?
To understand what happens in the event of a contract failing
Why is it important for the parties to read and understand the default section of the Texas sales contract?
To roll the cost of rehabilitating the purchased home into the mortgage
Why might a homebuyer use an FHA 203(k) loan instead of the standard 203(b) loan?
Intestate succession
Wilma died without a will. How will her heirs be determined?
Requires board approval
With a cooperative, the transfer of ownership ______.
Borrower
With a deed of trust, who or what has equitable title to the property?
Easement by necessity
Without this easement—usually involving access to a road—the owner requiring the right of passage would be landlocked.
The title insurance contract
At the time of closing, the buyer and the title company rep will close on which contract?
Once the contract is paid in full
At what point in the Texas contract for deed process does the buyer receive the deed from the seller?
month to month
After Bill's one-year lease expired, he continued to rent from his landlord for several months. If he decides to leave, he will be required to give a month's notice. What type of tenancy does Bill have?
Negotiate a new closing date
As a licensee, what should you do if closing will be delayed?
Rent
Consideration is one element of a valid contract. In a lease, which of the following does the lessee give as consideration?
A real estate attorney
Cynthia loves her apartment and would like to have the option to buy it once her lease is up. Who is the best person to help Cynthia prepare a lease option?
Nonny will receive prorated rents beginning the day of closing.
Nonny is purchasing a rental property where the tenants pay month-to-month rent. Which of the following is the most likely way for the rent to be prorated?
She should go to the TREC website to download the forms.
Eliza heard that TREC updated nearly all of their promulgated forms recently. Where can she go to ensure she has the latest versions of the required forms?
Zero
How many lawyers does the governor appoint to the Broker-Lawyer Committee?
Referee's deed
Hugo was the highest bidder on a foreclosed property. What type of deed gives him ownership rights?
Purchase money mortgage
If home repairs are agreed upon in the sales contract, who's responsible for making them?
Add an addendum to the contract
If the intent of a 1031 exchange wasn't initially disclosed by the seller in the TREC One to Four Family Residential Contract, what must the seller's agent do?
Tenancy at sufferance
In Texas, what type of leasehold is characterized by possession of a property, such as a situation in which a tenant continues to occupy an apartment after the lease has terminated?
Addendum for Property Located Seaward of the Gulf Intracoastal Waterway
Which TREC addendum notifies buyers of the risks of purchasing coastal property?
Homestead law
Which law protects the Texas property owner from loss of a family home due to claims by general creditors?
Addendum for Sale of Other Property by Buyer
Which of the following addenda is required as part of the TREC residential One to Four Family (resale) contract when the buyer's purchase of the property is contingent upon the buyer having to sell their own property first?
When signed by the parties, they become part of the sales contract.
Which of the following is a true statement regarding amendments and addenda?
Paint, air fresheners, and cleaners are primary sources.
Which of the following is true about volatile organic compounds?
If the buyer can't meet the terms of the agreement due to the inability to obtain a loan, the agreement is terminated.
Which of the following statements is true if a loan contingency is in effect in a sales contract?
The underwriter determines if a loan meets the lender's underwriting standards.
Which of the following statements is true of the mortgage commitment stage of the loan approval process?
Citibank
Which of these is a member of the primary mortgage market?
It's a legally binding contract.
Which one of the following statements is true about a sales contract that's been signed by both parties, and both parties have been notified of its acceptance?
joint tenancy
Which ownership type is defined by four unities: time, title, interest, and possession?
buyer
Which party to the loan approval process is responsible for completing a loan application and supplying supporting documentation?
Phase IV: Management
Which phase of the environmental site assessment involves addressing any on-going or potential issues?
Warranty
Which required clause in a Texas deed describes the type of warranty being made by the grantor?
Prorations
Which section of the TREC One to Four Family Residential Contract (Resale) identifies charges that must be adjusted to the day of closing?
A commitment
Before the title company will issue an insurance policy to a Texas buyer, which of the following must the seller furnish to the buyer?
Executory
The Nettles have accepted the Briars' purchase offer, and both parties have signed the sales contract. The funds, and the title, should transfer in a matter of days, but otherwise all elements and terms of the contract have been met. What type of contract do the Nettles and the Briars have?
Performance of this part of the contract
Tyne entered a contract to buy Fred's home. Per the terms of the contract, Tyne agreed to pay $20,000 in earnest money by this coming Wednesday and have the property inspected within seven days. She submitted the earnest money deposit on time and had the property inspected within five days. What action does this scenario exemplify?
By acceptance of both parties
Under the terms of the TREC One to Four Family Residential Contract (Resale), if mediation is required due to a dispute between parties to a real estate transaction, how is the mediator selected?
The client
A Texas licensee may only strike through a clause or line item if it is not applicable to the transaction and the deletion is at the request of ______.
Handwritten
A holographic will is a will that is ______.
Leasehold estate
A tenant's right to occupy real estate is known as a(n) _____________.
Performs a title search
A title insurance company ______ to prove that a seller has ownership rights to a property.
Codicil
Amending a will involves drafting an additional document, called a/an _________________.
The seller can keep all of the proceeds received up until that point, and repossess the property.
Andy is in a contract for deed arrangement in Texas and has been paying the seller for over a year. Unfortunately, Andy lost his job several months ago and can no longer make the payments. What will happen with the contract for deed arrangement now that Andy can no longer meet his financial obligations to the seller?
Anna May and her agent must mutually agree in writing to terminate their agreement.
Anna May wants out of her contract because she doesn't believe her buyer agent is working hard enough to find her a property that meets her criteria. What must happen before the buyer agency agreement can be terminated?
Recommend a specific investment.
Hank is a Texas real estate licensee working for an investor. Which one of the following actions is he prohibited from performing?
Tenancy for shorter periods
Jasmine rents on a daily basis. If she decides to leave, she has to give her landlord 24 hours' notice. What type of tenancy does Jasmine have?
Court-ordered partition of property
In which method of involuntary alienation does a court decide how the proceeds from the sale of land owned by tenants in common will be distributed?
Mediation
Kevin and Inez are having a dispute with the seller about an apparent undisclosed item in the sales contract. What type of resolution approach are the parties required to use first in an attempt to resolve the dispute?
The cooperative board must approve Mariah's application before Leo can sell his membership share to her.
Leo would like to sell his membership share in a cooperative to Mariah. Which of the following statements is true?
Fee simple
Leon and Beth own 1/13 of a timeshare estate. They own weeks 20 and 21, and also weeks 40 and 41. These weeks are inheritable. What type of ownership is this?
Personal property
Lester is interested in a two-bedroom unit in a cooperative. A residence in a cooperative, unlike a condominium, is legally considered ______.
Assignment
Mary agreed to buy her mother's house when her mother planned to move to a senior living community. They signed a purchase agreement, but when Mary had to move because of work, she signed her rights in the contract over to her sister, Tina. Mary may still owe money if Tina can't come up with the agreed-upon funds. What's happening in this scenario?
An escrow agent
Per the TREC One to Four Family Residential Contract (Resale), to whom does the buyer pay the sale price funds at closing?
Indestructibility
Sander and Ginny bought an old industrial site and plan to get grant money to put an environmental education center on the site. There are a few structures on the property, but they are in disrepair, and it will likely be less expensive to tear them down and build new than to rehabilitate them. However, the new owners are sure that they've made a great investment because the land is in great shape. This reflects which physical characteristic of real property?
Any amount agreed to by the parties
Sanjeev leases a house from Clara, and the lease has an option contract attached that permits Sanjeev to buy the house if he chooses to exercise the option within three years. How large does the option fee need to be in order to be legally binding?
Oil or gas
Stacy and her husband, Blake, have a special lease agreement in which they, as the landowners, receive a cash payment for executing the lease, with more to come if the lessee's drilling efforts are successful. What type of commercial lease do Stacy and Blake have with the lessee?
Performance
Sue Ellen has a contract to buy Roger's house, which she has always admired, when Roger decides he's ready to move to a senior living community. After Roger finds a suitable senior apartment and moves, Sue Ellen writes a check for the agreed-upon amount, and Roger transfers the deed to her. What is happening in this scenario?
It will be put through probate.
Susan Duffield died testate at age 49. What can be said about Susan's estate?
Addendum for Property Subject to Mandatory Membership in a Property Owners' Association
The property that Joan is selling is subject to mandatory membership in a POA. Which TREC addendum is she required to include as part of the sales contract?
Specify how the tenant may use the property, including allowable activities
The purpose of the use statement in a Texas lease agreement is to ______.
Regulatory taking
The state has seized a strip of Marge's land. It's relatively small but goes right through her sheep pastures. She just found out that the state will use it for a six-lane highway. She's pretty sure that the value of her land is going to plummet, and she can't figure out how to use it as pastureland anymore. What kind of involuntary alienation is she dealing with?
Deed
Through which method of voluntary alienation does the grantor convey real property and transfer title to the grantee?
The owner must file a certified copy of the home's Statement of Ownership and Location (SOL) in the real property records of the county where the home is located
To be considered real property in Texas, a manufactured home must be permanently attached to a foundation and ______.
A property with a defect on the title
What is a clouded title?
Acting outside the scope of one's license; offering legal advice or drafting legal forms
What is the unauthorized practice of law in Texas?
Private mortgage insurance
What may the lender require if the borrower is unable to put at least 20% down on a conventional loan?
Deed of trust
What mortgage document is most commonly used to secure a home loan in Texas?
Time is of the essence
What phrase do many real estate contracts contain that reminds the parties to avoid unnecessary delays to the transaction, and to adhere to all contract dates?
The bundle of rights
What term explains the complexity of property ownership rights and how rights for a single property can be "owned" by multiple parties at the same time?
To prevent discrimination in lending
What's the purpose of the ECOA?
Suing for specific performance
When Flip, the buyer, tried to cancel just prior to closing, Wilson, the seller, used the courts to compel him to go through with the purchase. This is an example of ________.
