TEXAS LAW OF CONTRACTS 20+
Will and Grace purchased a home from Eric and Tracy. The closing is set for June 17. The yearly real estate taxes of $2,400 will be due at the end of the year. Using the 12- month/30-day method, what will be Will and Grace's share of the taxes?
$1,286.61
What does a standard home inspection cover?
A home's major mechanical systems — electrical, plumbing, heating, and cooling — and its construction from roof to foundation, exterior to interior
The best method of disclosing constructive notice is what?
By recordation of ownership documents in public records
What does prorated mean?
Divided proportionately between the buyer and the seller
When do issues regarding real and personal property usually come into focus?
During the final walkthrough of the property right before closing
When do most of the important activities regarding a closing happen?
During the period between the signing of the agreement of sale and the actual closing date.
2. Name the three major credit reporting companies.
Experian, Equifax, and Trans Union
Removing a cloud on a title requires which type of suit?
Quiet Title Suit
RESPA specifically prohibits what action?
RESPA specifically prohibits any payment or receiving of fees or kickbacks when a service has not been rendered
RESPA does not apply to what kinds of loans?
Seller-financed loans or loan assumptions (unless the lender has changed the terms of the assumed loan or charges more than $50 for the assumption).
Closing agents and lenders typically use one of two methods when calculating items that need to be prorated. Name the two methods.
The 12- month/360 day method and the 365 day method
- Which person must enter the date of final contract acceptance?
The broker
In a real estate closing company, a checklist will usually provide places for what important information?
The checklist will generally provide a place to check off the item received and the initials of the person responsible
What does RESPA require lenders to give to borrowers?
The correct figures pertaining to their closing costs.
The Torrens system differs from other title recording systems how?
Title passes only when the conveyance has been duly registered on the title certificate itself
- Where are blank lines for the initials of the buyers and sellers located?
at the bottom of every page of the contract
Intangible property
has no physical existence.
Define the term marketable title.
A marketable title is one that is so free of defects that the buyer is certain he or she will not have to defend the title.
Which of the following statements best defines a marketable title?
A marketable title is one that is so free of defects that the buyer is certain he or she will not have to defend the title.
Define a will.
A will, or more properly a last will and testament is a legal instrument for the voluntary transfer of real and personal property after the owner's death.
Define Loan Estimate.
An itemized list of all costs related to obtaining and closing on a mortgage loan.
Any item that is prorated is shown on the settlement statement how?
As a debit to one party and a credit to the other party for the same amount
Who needs title insurance and why?
Both the buyer and the lender need title insurance. Insurance for the buyer ensures a clear title and protects his or her investment. Insurance for the lender protects the lender's interest in the property.
How can an owner prevent involuntary alienation by adverse possession?
By periodically inspecting the property within statutory deadlines and evicting any trespassers found
What is the chain of title?
Chain of title refers to the succession of property owners of record dating back to the original grant of title from the state to a private party.
What are the two common mistakes licensees make when dealing with addenda?
Check off an addendum in the paragraph and then not attach it. Attach an addendum to the contract without indicating in paragraph 22 that it is being attached.
List three things a licensee should do to help facilitate the closing.
Check with the lender to see how loan approval is coming along. Check the appraisal results and help the client decide how to proceed if it comes in low. Keep track of any special provisions included in the sale, such as items of personal property.
Name five items covered in a Residential Real Estate Closing Checklist.
Closing Date Seller's exact names Buyer's exact names Broker's names Commission (There are many more)
What is constructive notice?
Constructive notice, or legal notice, is knowledge of a fact that a person could have or should have obtained
The brokers that earn a split of the commission are known as what?
Cooperating brokers
Define the process of Escheat?
Escheat is an involuntary alienation common law doctrine which transfers the property of a person who dies without heirs to the state. It serves to ensure that property is not left in "limbo" without recognized ownership.
Define Estoppel.
Estoppel prevents a person from claiming a right or interest that is inconsistent with the person's previous statements or acts.
Explain marketable title.
Explain marketable title.
Explain what happens with every inspection ordered.
For every kind of inspection ordered, the reports must be approved or rejected by the buyers or the lender, any repairs must be done and then re-inspected, and the buyers and lender must get notification of the final results.
List three activities that take place during the escrow period.
Getting an appraisal. Ordering pest control and other inspection reports. Obtaining property insurance.
What happens if a person dies intestate?
If there are heirs, the estate will pass to them according to title by descent or the state's laws of succession. If there are no heirs, the estate will go to the state or county after all claims and debts have been settled.
Where must documents regarding interests in property be recorded?
In the office of the county clerk in the county in which the property is located
What does a typical inspection report include?
Information about poor workmanship and deterioration and it should also include information about projected repairs and identify problems that would occur if the property were remodeled.
What can happen if a licensee forgets to check some of the check boxes on a contract?
It can cause delays in the transaction or bad feelings between the parties. In addition, the licensee could be viewed as careless or incompetent.
What happens if any problem is found with either the physical layout of the property or in the title search results?
It creates a cloud on the title that must be resolved prior to closing on the loan.
What is important to know about a full covenant and warranty deed?
It is the deed most used in real estate transfers and offers the greatest protection of any deed. With this type of deed the grantor gives certain covenants or warranties that promise the grantee will have ownership of the property that is unchallenged.
Choose the example of the correct name of the party:
Julia Ann Gray, a single person
What can a lender require a borrower to do with regard to taxes and insurance and why would the lender make this requirement?
Lenders can require the borrower to maintain an escrow account for property taxes and insurance, so that the lender is sure money will be available for the payments.
Explain a nuncupative will
Made orally, and written down by a witness; generally not valid for the transfer of real property
A seller is required to deliver what type of title at closing?
Marketable Title
1. RESPA applies to what types of purchases?
Of residential property - that is, one-to-four family homes, cooperatives and condominiums Involving first or second mortgages Financed by a federally-related loan
Name three forms required for loan application.
Permission to Request Credit Report Uniform Residential Loan Application Loan Estimate Verification of Employment (VOE) Verification of Deposit (VOD)
What are the definitions of real property and personal property?
Real property is ownership of real estate and the bundle of rights associated with owning the real estate. Personal property is ownership of anything that is not real estate, and the rights associated with owning the personal property item.
Name three items in the real estate transaction process.
Receive and review all Offer to Purchase contracts submitted by buyers or buyer's agents Evaluate offer(s) and prepare a "net sheet" on each for the owner for comparison purposes Counsel seller on offers. Explain merits and weakness of each component of each offer Contact buyer's agents to review buyer's qualifications and discuss offer
Typically, when does a purchaser receive the original deed and title insurance policy?
Several weeks after the closing
How can real property be changed to personal property?
Severance is the conversion of real property to personal property by detaching it from the real estate.
1. Name three items required on most loan applications.
Social Security card & driver's license Residence address for past 2 years Employment for past 2 years Gross monthly income (includes Social Security, alimony, child support, pension, etc) Name, address, account number, minimum monthly payment & balance due for all installment loans, charge accounts, student loans, car loans and other mortgage loans (including any co-signatures on loans)
Name three types of inspections buyers can request.
Standard Home Inspection Pest Inspection Soil Inspection Structural Inspection
What is the negative aspect of a bargain and sale deed with covenants?
The deed does not protect the grantee against claims that predate the owner's period of ownership.
What does a title search reveal?
The legal description of the property The owners of record Any outstanding liens or encumbrances on the property
What does a title search reveal?
The legal description of the property. The owners of record. Any outstanding liens or encumbrances on the property.
Name three items that are prorated for closing.
The most common items that are prorated include taxes, insurance, mortgage interest, and utilities.
What is adverse possession?
The process by which an owner can lose title to his or her property because an adverse possessor entered, occupied, and used the property without the knowledge or consent of the owner, or with the knowledge of the owner who failed to take any action over a statutory period of time.
What is escrow?
The process in which a disinterested third party holds all money and documents relating to a transaction until all of the terms and conditions of the escrow instructions have been satisfied.
Who is responsible for reporting the real estate sale to the IRS?
The responsibility for filling out and submitting the form generally falls to the person who conducted the closing.
Describe the role of the listing broker during the closing process.
The role of the listing broker is to ensure that the closing occurs on time and that all documents necessary to the closing are accurately and timely produced
The listing broker is responsible for the accuracy of what for closing?
The settlement statements and making sure that all parties get signed copies of the settlement statements
What is true about using the street address in the property description paragraph?
The street address is never enough. The property paragraph must contain the full legal description of the property.
Explain what a checklist is and does.
They are quick and simple tools aimed to buttress the skills of expert professionals
What would a lender order a to be sure there are no liens on the property?
Title Search
How should a party's name be listed on the sale contract?
Using the person's full legal name
What does a probate proceeding do?
Validates the will, if one exists Identifies and settles all claims and outstanding debts against the estate Distributes the remainder of the estate to the rightful heirs
What is voluntary alienation?
Voluntary alienation is an unforced transfer of title by sale or gift from an owner to another party.
What is a cloud on title?
What is a cloud on title?
When a property goes under contract, what additional checklists might be generated?
When a property goes under contract, that event then generates more checklists: inspections to be ordered, disclosures to be made, title report to be inspected, etc.
What is a quitclaim deed and what is probably its most common use?
With a quitclaim deed, the grantor makes no claim to any interest in the property being conveyed and offers no warrants to protect the grantee. It is often used in divorce settlements.
Where are blank lines for the initials of the buyers and sellers located?
at the bottom of every page of the contract
