Law of contracts

How many lawyers does the governor appoint to the Broker-Lawyer Committee?

Zero

Who handles all of the 1031 exchange paperwork?

intermediary

An amendment to a contract is defined as which of the following?

A modification

When a sales contract doesn't cover the terms needed by the parties, which of the following actions is a licensee allowed to take?

Add a standard addendum using standard language.

What is the difference, if any, between a TREC-approved form and a TREC-promulgated form?

An approved form is optional; a promulgated form is required.

What's a discount point?

An upfront charge to make up for the difference between the rate the borrower is receiving and the rate the lender normally requires

_______ is a standardized measure for interest rates and other costs of the loan.

Annual percentage rate

Corinne's deed has no covenants of warranty, but if it did, it would be a specialty warranty deed. What type of deed does Corinne have?

Bargain and sale deed

In a deed of trust situation, the lender is a ______.

Beneficiary

How does a lender in the primary mortgage market earn money when a loan is originated?

By charging loan origination fees

How is a joint tenancy relationship created?

By the signed, written agreement of the joint owners

What type of loan meets certain criteria that are accepted by Fannie Mae and Freddie Mac?

Conforming loan

Which of the following is NOT a characteristic of a corporation?

Corporations are tangible and nontaxable.

Luke recently moved from a condominium to a cooperative. With a cooperative, his share of mortgage interest and real estate taxes will be ______.

Deductible on his personal income tax returns

Question 83 Mario lives in a state that requires an abstract of title for property conveyance. The chain of title is broken approximately 50 years prior to the current date. Which of these properly identifies the status of Mario's title?

Depending on his state's laws, Mario may have marketable title.

When a contract is executory (for instance, in an installment sales contract), what type of title does the buyer hold?

Equitable

What entity or entities set the criteria for conforming loan limits?

Fannie Mae and Freddie Mac

If Acme Bank, a primary lender, wants to sell its loans on the secondary market, it would be easier for it to do so if its loans meet ______.

Fannie Mae and Freddie Mac guidelines

You're representing an owner client in a lease transaction. Which of the following duties do you owe your client?

Gather information about the type of property that the owner wants to lease, and then list and market the property accordingly

Which term refers to the person receiving title, often called the "party of the second part," in a deed?

Grantee

Mark, the landlord, has a commercial property ______ lease agreement with his tenants. Mark pays all expenses related to the property and passes the costs on to the tenants in their rent payments.

Gross

A holographic will is a will that is ______.

Handwritten

Where are underground storage tanks primarily found?

In older homes and former industrial sites

In accordance with the TREC One to Four Family Residential Contract (Resale), which of the following expenses is paid by the buyer?

Inspection fees

Conveyance of property by escheat is an example of _______ alienation.

Involuntary

Atticus is considering using utilities interruption as a means of collecting rent. Which of the following statements is true about what Atticus is planning to do?

It's illegal.

Your buyers love the 1891 Victorian they have under contract, but they want to get both the water and the paint tested as soon as possible. What are they testing for in both water and paint?

Lead

Which of the following, once completed, initiates the loan process?

Loan application

Carol and her husband, Mick, have decided that instead of taking out a loan to help finance their property purchase, they are going to take up where the seller left off on the seller's current mortgage. What type of financing is this?

Loan assumption

Texas licensee Jan drafted a sales contract, which the buyer and the seller of the home both signed. Jan could ______.

Lose her license

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?

Nonny will receive prorated rents beginning the day of closing.

Identify the two types of CLO systems.

Open and closed

You have a net listing with your seller client. With what other type of listing (or listings) may the net listing be used?

Open, exclusive agency, or exclusive right to sell

Rescission, suit for specific performance, liquidated damages, and acceptance of partial performance are all examples of what?

Options a wronged party has to remedy a breach of contract

A title insurance company ______ to prove that a seller has ownership rights to a property.

Performs a title search

Henry is a Texas real estate licensee representing Ginger, a buyer. Henry recommended Ginger obtain a professional home inspection. Ginger asked Henry for a referral. What should Henry do?

Provide several names for Ginger to contact, ultimately letting her decide who will perform the inspection.

Jamie is a Texas licensee and is not an attorney. Which of the following would be considered engaging in the unauthorized practice of law?

Providing legal advice to her client

Sinclair wants to purchase his neighbor's property, but he can't afford both his home and the neighbor's home. What can he include in the offer to protect himself if his current home doesn't sell?

Sale contingency

Sheldon and Jean retired and bought a townhome in a community about 30 minutes from their children and grandchildren. They're excited about their new living situation because Sheldon's arthritis is getting worse, and he'll no longer have to handle ______.

Shoveling snow

How can volatile organic compounds be reduced in the home?

Stick to natural scents and fibers.

Which right allows a property owner to use or sell underground resources?

Sub-surface

According to the TREC One to Four Family Residential Contract (Resale), what recourse does a buyer have if a seller is unable to complete agreed-upon repairs and treatments prior to closing?

The buyer can extend the closing date up to five days to allow the seller to complete the repairs.

What does it mean when a Texas buyer accepts a property "as is" under the terms of the TREC One to Four Family Residential Contract (Resale)?

The buyer is accepting the property in its current condition with any and all defects and without warranty.

What is the final step to a successful closing?

The change in ownership must be recorded.

Which of the following statements about the number of contingencies in a sales contract is true?

The inclusion of numerous contingencies makes it less likely that the buyer's offer will be accepted.

Per the Casualty Loss section of the TREC One to Four Family Residential Contract (Resale), who's responsible for restoring the property to its previous condition in the event the property is damaged or destroyed?

The seller

The _____ should provide the title insurance company with an affidavit of title when necessary.

The seller

Why might a homebuyer use an FHA 203(k) loan instead of the standard 203(b) loan?

To roll the cost of rehabilitating the purchased home into the mortgage

Warren signed a contract with the Samsons for the sale of property he didn't own. What type of contract is this?

Void

When does offer and acceptance occur?

When one party makes an offer, and the other party signs it and returns to the original party

Rachel's loan to buy Scott's house fell through because Rachel couldn't obtain financing. No one told her not to run up a lot of credit card debt on the way to closing. Rachel's earnest money was all Scott had to show for six weeks of his home being off the market. This is an example of _________.

Accepting liquidated damages

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?

Assignment

Ezra's lease on his condo includes an option to purchase. He told his landlord, Sherm, that he's ready to purchase the condo, and they've negotiated a purchase price and closing date. What kind of contract is this?

Bilateral

A contract is bilateral when ______.

Both parties are obligated to act

Kendra made an offer on Sam's property. Sam rejected Kendra's offer, but made a counter-offer. Kendra is now considering the counter. What role does Kendra currently have in this scenario?

Offeree

Your buyer client Christine asks you when she'll have to pay the transfer tax. What do you tell her?

She'll pay it at closing.

Along with property ownership, rights are granted to use the land's physical components. Which right allows a property owner to use or sell the underground resources, such as natural gas and minerals?

Sub-surface

Which authority administers the Texas Real Estate License Act?

Texas Real Estate Commission

Which section of the TREC One to Four Family Residential Contract (Resale) identifies who's responsible for paying legal fees when a legal action has been brought against one or more parties to a sales transaction?

The Attorney's Fees section

Which section of the TREC One to Four Family Residential Contract (Resale) identifies the fees associated with closing the sales transaction that both the seller and the buyer are responsible for paying?

The Settlement and Other Expenses section

Which of the following statements is true about constructive eviction in Texas?

The court may award damages to the tenants and order the landlord to make repairs.

Which of the following statements is true regarding the length of term of the TAR's Residential Buyer/Tenant Representation Agreement?

The term has a specified start and end date.

Which of the following is true about air rights?

They allow the owner to use the open space above buildings.

Gail was supposed to close on her new home by the end of May, but she kept asking the sellers if they could push the closing date back. Soon the summer was over, and she still hadn't closed. Gail was guilty of not adhering to which aspect of the contract?

Time is of the essence

In a deed of trust situation, the borrower/property owner is a ______.

Trustor

Widget Corporation just bought land on which it plans to build a new manufacturing facility. How is the land owned?

It's owned as an estate in severalty.

Brandon has a right-to-use timeshare. What can he NOT do with this type of timeshare?

Pass the timeshare on to an heir.

With a land contract, who retains the title to the property?

Seller

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 broker

The term of Carl's buyer agency agreement with his client has expired, and they have still not located a property that the buyer is interested in making an offer on. Given the situation, which of the following statements is true?

The buyer agency agreement is automatically terminated because the term of the agreement has expired.

Which of the following statements about the closing date in the TREC One to Four Family Residential Contract (Resale) is true?

The buyer selects the settlement date.

What must occur before the deed can be recorded in the buyer's name?

The existing mortgage must be paid off.

What type of foreclosure is commonly used when a mortgage is the security instrument?

Judicial

Kirk and his cousin Dewey decided to buy a vacation home. They entered into a contract with the seller, Crystal. Before finalizing the sale, Dewey wanted out, but he didn't want to let his cousin down. So instead of pulling out altogether, Dewey convinced his son to replace him in the purchase contract. Kirk and Crystal agreed to the substitution, and Dewey was released from all his obligations under the contract. Dewey's son is now the contracting party. What's this an example of?

Novation

For which of the following reasons can a Texas real estate sales contract be terminated?

One or both parties are in default.

"Separate property" is property most likely acquired ______.

Prior to marriage

Kyle is meeting with Martha, a prospective tenant client who wants him to negotiate a one-year lease for her. Prior to entering into an agency representation agreement with Martha, what must Kyle do in accordance with Texas law?

Review the Information About Brokerage Services form with her

The right to access non-navigable rivers, streams, and other flowing bodies of water adjacent to a property is called ______ rights.

Riparian

What happens if the seller is unable to furnish the buyer with the commitment and exception documents within 20 days after the title company has received a signed copy of the TREC One to Four Family Residential Contract (Resale)?

The deadline for delivery is automatically extended.

Commercial leases may contain an automatic renewal clause. If this is the case, what happens after the lease's original term has come to an end?

The lease continues on a month-to-month basis.

Mason was leasing lakeside property when his one-person sailboat capsized, and he drowned. Under Texas law, which of the following occurs if a tenant dies during the term of lease?

The lease doesn't terminate and becomes the responsibility of the tenant's heirs.

In Texas, a potential consequence for the unauthorized practice of law is ______.

The revocation or suspension of one's real estate license

The Texas Deceptive Trade Practices-Consumer Protection Act (DTPA) protects consumers against real estate licensees who ______.

Use lies, misrepresentations, fraud, or other deceptive practices or acts to advertise or sell real estate

Sondra thinks the new business contract she signed with her business partner is valid. Both parties are legally competent, the contract has a legal purpose, an offer was made and accepted, and a fee has been negotiated and documented. Which essential element of a valid contract has Sondra not yet considered?

Whether consent was voluntary

A buyer is purchasing a home appraised at $480,000. The buyer is obtaining a 90% loan, and the lender will charge an origination fee of 1% at closing. How much will the loan origination fee be?

$4,320

Sondra, a buyer, signs all the required mortgage documentation, promising to make all payments to her lender. Unfortunately, Sondra falls on hard times and misses multiple payments, and the bank indicates that it's going to foreclose on her. The foreclosure proceedings are more difficult for the lender because Sondra holds the deed to the land. What kind of state does Sondra live in?

A lien theory state

Which statement best describes an adjustable-rate mortgage?

A loan with a rate that fluctuates based on the economic index to which it is tied.

Which of the following is included with real property rights?

Enjoyment

Which of the following is true regarding the purchase of a condominium?

If the prospective buyer has the financial means to buy the condominium, neither the association nor the residents can block the purchase.

If your aunt asks your sister to paint her house and pays her $1,000, asks your brother to plant her garden and pays him $1,000, and then asks you to build her deck and doesn't pay you, this would feel like a breach of which type of contract?

Implied

Per TAR's Residential Real Estate Listing Agreement Exclusive Right to Sell contract, for which of the following is a broker liable?

Injury to persons or property as a result of broker negligence

Which one of the following is a true statement regarding prepayment penalties?

Lenders must disclose up front if they reserve the right to charge a prepayment penalty, and under what conditions a penalty will apply.

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?

Performance of this part of the contract

Which term means "for another's life"?

Pur autre vie

Which of the following statements would you use to describe a net listing to a prospective seller client?

You, as the seller, specify the price you want for the property and agree to pay me as your agent any amount received above that price.

Items that aren't attached permanently to the real property but are assumed to belong to the house, such as draperies, fireplace inserts and screens, and above-ground swimming pools, are referred to in the Property section of the TREC residential One to Four Family (resale) contract as ______.

Accessories

Which of the following refers to the inherent or automatic rights that are the natural consequences of property ownership such as water rights?

Appurtenance

Which step of the transaction process involves the buyer writing a check to show good faith in making the offer?

Depositing the earnest money

Which of the following is an example of a bilateral contract?

A sales contract