Unit 3 - Duties and Disclosures to Third Parties

Which of the following is typically covered as part of standard coverage in a Texas title policy? A) Unrecorded title defects B) Deed restrictions C) Defects found in public records D) Existing liens listed in policy

Defects found in public records

A home warranty company must be certified and registered through the National Association of REALTORS® in order to offer their programs in Texas. True False

False

A license holder who gives professional advice or an opinion to a third party on verifiable facts can never be liable under Texas law. True False

False

A license holder who is purchasing property on his own behalf is NOT required to disclose his license status. True False

False

Because the abstractor and attorneys are responsible for their own mistakes, the purchaser should not buy title insurance. True False

False

No disclosures need to be made regarding the type and quality of title to be conveyed. True False

False

Shopping an offer is NOT considered unfair to buyers. True False

False

Standard coverage offered in title insurance policies does NOT include coverage for acts of incompetent grantors and improperly delivered deeds. True False

False

TREC requires that real estate agents research the presence of registered sex offenders in the neighborhood if the purchasers have children under the age of six. True False

False

The agent can assist the seller by filling in the blanks of the Seller's Disclosure Notice. True False

False

The duty of honesty requires real estate agents to answer all questions from customers. True False

False

The real estate agent should assist an out-of-state buyer by researching the demographic and racial composition of the neighborhood. True False

False

Byron made an offer on Sally's home. Sally was out of town on a business trip and reviewed Byron's offer. When her agent, Angelica, called, Sally said that she liked the offer and would sign it when she returned. Even though Angelica asked her to sign it and fax it back that evening, Sally assured her that she would not change her mind. Angelica excitingly called her customer Byron and told him that Sally had accepted his offer. Unbeknownst to Angelica, Byron was working with another agent and had placed an offer on another home at the same time he placed an offer on Sally's home. Byron quickly called the other agent and withdrew the offer. The next day as Sally was flying back to her city, she decided that she was bothered by one of the requests made by the buyer as well as the amount of closing costs that she was being asked to pay. Sally decided that instead of accepting the offer, she would have Angelica write a counteroffer. When she met with Angelica later that day, Angelica became very upset and disclosed to Sally that she had told Byron that his offer had been accepted. When Angelica presented a counteroffer rather than an acceptance, Byron became livid. He said, "To heck with this house!" and walked away to make a new offer on the other house with the other brokerage. Sally is considering whether she will be asking Angelica's broker to assign a new sales agent to service her listing. Now Angelica has a damaged reputation, no sale, and a possible lost listing. Angelica's erroneous statement caused all this. What should Angelica have said instead to Byron? A) "The seller has verbally accepted your offer." B) Nothing, Angelica should tell Byron that she won't be speaking with Sally until Sally returns to the city. C) "The seller is still considering your offer." D) "The seller has verbally accepted your offer, but the statute of frauds renders a contract for the sale of real estate unenforceable unless it is in writing."

"The seller is still considering your offer."

Which of the following is NOT a third party to a listing agreement? A) A buyer B) A lender C) An inspector D) A broker

A broker

Which type of death on the property would a seller have to disclose? A) The suicide of a close relative B) The owner suffers a heart attack C) A friend visiting the owner slips and falls on the pool tile D) A friend visiting the owner trips over the cat, falls into the pool and drowns

A friend visiting the owner slips and falls on the pool tile

Should a license holder disclose information about sex offenders in the neighborhood of a listed residential property? A) A license holder has no duty to disclose such information. B) Texas law requires real estate agents to determine whether sex offenders live in the neighborhood. C) Texas law requires license holders to disclose such information. D) Texas law prohibits real estate agents from disclosing such information.

A license holder has no duty to disclose such information.

The listing associate, Betty Principi, gives the seller the Seller's Disclosure Notice. The seller says there is really nothing to disclose, and because he broke his writing hand playing golf, he asks Betty to fill out and sign the form for him. Which statement is TRUE? A) To avoid liability, Betty should limit her activity to marking the boxes under the direction of the seller, but instruct the seller to have a friend or other family member sign on his behalf. B) Although Betty may explain each section of the form, she should neither mark the boxes nor sign on the seller's behalf. C) Because she is acting under special agency, Betty has authority to fill out the form and sign on behalf of her client. D) Because Betty is only an agent of her broker, only her broker may fill out and sign on behalf of the client.

Although Betty may explain each section of the form, she should neither mark the boxes nor sign on the seller's behalf.

You have walked through the home and examined it. There were no smoke detectors in the home; however, the sellers have indicated on the form (in the second section) that smoke detectors are installed in the home. What do you do? A) Ask the sellers why they stated that there are smoke detectors when there are none. B) Suggest that the seller install smoke detectors so that the completed form will be correct. C) Demand that the seller change the answer. D) Pretend that you don't see this answer and let the buyer question it.

Ask the sellers why they stated that there are smoke detectors when there are none.

Gloria is the listing broker in a listing agreement between herself and Richard, the seller. Buyer Timothy is interested in purchasing Richard's property. Who is the third party to the listing agreement? A) Richard is the third party. B) Buyer Timothy is the third party. C) There is no third party. D) Gloria is the third party.

Buyer Timothy is the third party.

A buyer can rely on the Seller's Disclosure Notice as a guarantee or warranty that the property is in excellent condition. True False

False

The seller has decided that the outdoor grill, which is movable personal property, is negotiable and may remain with the property if the buyers ask for it and if the price they offer for the property is close enough to the listing price. Thus, the seller won't know until the time of an offer as to whether these will remain with the property or not. Given this, the seller should NOT check it on the Seller's Disclosure Notice. True False

False

There are many terms on the Seller's Disclosure Notice that can be confusing to sellers. There are also instances when the sellers are asked whether they are in compliance with Texas laws, which are cited. The sellers may just feel intimidated by the length and detail of the notice. The sellers ask you, as the seller's agent, to assist them in completing the form. You should follow the sellers' direction and help complete the notice so that you do not violate your fiduciary duties to the sellers. True False

False

To make a quick sale, the listing agent may disclose to the buyer-customer that the seller is willing to accept less than the asking price. True False

False

Indicate whether the following state is true or false and why: A broker owes the same duties to a third party buyer as they owe to a client seller under a listing agreement. A) False. A broker has fiduciary duties to a client and duties of honesty and fairness to a third party buyer. B) False. A broker owes fiduciary duties to clients and limited fiduciary duties to third party buyers. C) True. Sellers and buyers must be treated equally and fairly. D) True. Sellers and buyers must both be given advice and opinion.

False. A broker has fiduciary duties to a client and duties of honesty and fairness to a third party buyer.

How should a real estate license holder explain to buyers the value of having a licensed property inspector complete an inspection on a subject property? A) Having an inspector complete it is better than relying thoroughly on the Seller's Disclosure of Property Condition. B) An inspector is not necessary because of the provision of the Seller's Disclosure of Property Condition. C) Property inspections by licensed inspectors are likely to reveal hidden material defects that can be used in further negotiations with the seller. D) Licensed property inspectors provide warrantees on inspected equipment.

Having an inspector complete it is better than relying thoroughly on the Seller's Disclosure of Property Condition.

What are license holders in Texas responsible for telling buyers regarding quality of title? A) License holders must make certain that buyers purchase title insurance. B) License holders are responsible for recommending attorneys and title insurance companies to buyers and making certain that they receive title protection. C) License holders should not talk with buyers regarding title because this is a legal issue. D) License holders must advise buyers to obtain either an attorney's opinion of title, based on an abstract, or a policy of title insurance.

License holders must advise buyers to obtain either an attorney's opinion of title, based on an abstract, or a policy of title insurance.

A seller and a buyer enter into a contract for the buyer to purchase the seller's property. The seller is a trustee in a bankruptcy. Is the seller required to give buyer the Seller's Disclosure Notice (SDN)? A) Yes, there are no exceptions to providing the SDN. B) Yes, the seller must provide the SDN within seven days of the original owner declaring bankruptcy. C) No, the requirement to provide the SDN does not apply to a bankruptcy sale. D) Yes, the seller must provide the SDN within seven days of closing on the sale.

No, the requirement to provide the SDN does not apply to a bankruptcy sale.

The property was under contract earlier, but because of conditions discovered by a home inspection, the contract did not close. The sellers received a copy of the buyer's inspection report but don't disclose what is on the report because they don't agree that these conditions actually exist. How would you handle this situation? A) Suggest that the sellers pretend that they didn't see the report; besides, what are the chances anyone would know or check about this prior contract. B) Suggest that the sellers refrain from disclosing these conditions because they disagree with the inspector that there are problems. C) Suggest that the sellers consult with an attorney as to the best way to complete the Seller's Disclosure Notice under these circumstances. D) Suggest that the sellers disclose everything that is included on the inspection report, whether it is justified or not, in order to avoid a charge of misrepresentation.

Suggest that the sellers consult with an attorney as to the best way to complete the Seller's Disclosure Notice under these circumstances.

Which of the following is a TRUE statement regarding disclosure of information related to sex offenders to prospective buyers? A) Texas law requires owners to disclose such information. B) Texas law prohibits real estate agents from disclosing such information. C) Texas law relieves real estate agents from a duty to disclose such information. D) Texas law requires real estate agents to investigate information about sex offenders and disclose such information to potential buyers.

Texas law relieves real estate agents from a duty to disclose such information.

What does Texas law require of enforcement officials regarding publication of sex offender information? A) That they disclose such information to all new homeowners. B) That they maintain such information as confidential C) That they publish information regarding the offender in a local newspapers D) That they disclose such information only on a need-to-know basis

That they publish information regarding the offender in a local newspapers

What is the duty of a license holder regarding the disclosure of the fact that an occupant of the property died of AIDS? A) A license holder has complete discretion to disclose the information. B) The Real Estate License Act authorizes a license holder to disclose the information. C) A license holder must disclose the information as required by Section 5.008 of the Property Code. D) The Canons of Professional Ethics and Conduct prohibit its disclosure.

The Canons of Professional Ethics and Conduct prohibit its disclosure.

Two siblings were bequeathed the family home in their father's will. The oldest brother wants to sell his portion to his younger sister. In which of the two transactions, from the father's estate to the siblings, and the brother's sale of his interest to his sister, is the seller required to provide the Seller's Disclosure Notice (SDN)? A) The SDN need not be provided in the sale of the brother's interest to the sister, but it must be provided in the estate's transfer to the siblings. B) The SDN does not need to be provided in either transaction. C) The SDN must be provided in both transactions. D) The SDN must be provided to the siblings in the transfer from the father's estate to the siblings, but not in the sale from one sibling to the other.

The SDN does not need to be provided in either transaction.

Which of the following is considered a third party to a listing agreement? A) The client B) The broker C) The sales agent D) The buyer

The buyer

A seller provided the Seller's Disclosure Notice to the buyer before both parties sign the contract. Once the contract is in effect, what right does the buyer have to terminate the contract under Section 5.008 of the Texas Property Code? A) The buyer may not terminate the contract under Section 5.008 of the Property Code. B) The buyer may terminate the contract before closing if the notice discloses an adverse condition. C) The buyer may terminate the contract at any time before closing. D) The buyer may terminate the contract within seven days after signing the contract.

The buyer may not terminate the contract under Section 5.008 of the Property Code.

Which of the following entities is responsible for setting the minimum disclosures required in the Seller's Disclosure Notice in Texas? A) The Real Estate Commission B) The Association of REALTORS® in the county where the property is located C) The legislature D) The Texas Association of REALTORS®

The legislature

Which of the following is an example of a purely psychological stigma of real property? A) The property is a hazardous waste disposal site. B) A previous use of the property included manufacturing methamphetamines. C) The property is the location of a murder. D) There is the presence of electromagnetic fields.

The property is the location of a murder.

A sales agent regularly uses a Seller's Disclosure Notice created by the brokerage firm the sales agent is sponsored by. Which of the following statement is TRUE regarding the use of the notice? A) The sales agent may only use the TREC-promulgated Seller's Disclosure Notice. B) The sales agent may use the notice as long as it provides the minimum disclosures required by Section 5.008 of the Property Code. C) The sales agent may only use the TREC-approved notice and the notice created by the Texas Association of REALTORS®. D) The sales agent may use the firm brokerage firm notice as long as TREC has approved the form.

The sales agent may use the notice as long as it provides the minimum disclosures required by Section 5.008 of the Property Code.

Which of the following is NOT a statutory exception to providing the Seller's Disclosure Notice? A) Transfer under a contract for deed B) From one co-owner to one or more other co-owners C) Pursuant to a court order or foreclosure sale D) Transfer by a trustee in bankruptcy

Transfer under a contract for deed

Examples of material facts that must be disclosed include flooding, leaks in the roof, and a slipping foundation. True False

True

Honesty and fairness are duties owed to customers and to the general public. True False

True

License holders should never give an opinion about factual matters. True False

True

Omitting important facts can lead to charges of misrepresentation. True False

True

Texas law requires that a homicide on the property be disclosed, but the agent is NOT required to disclose a death by natural causes. True False

True

The MOST common misrepresentation complaint concerns a listing broker's failure to point out material defects in the property that the broker knew about or should have known about. True False

True

Title insurance is available for both the owner and the lender. True False

True

For the following statement, indicate whether it is true or false and why: An agent owes a duty to disclose all material facts to their client. A) False, an agent need only disclose material facts related to title. B) True, an agent must use the TREC-promulgated Material Fact Disclosure Notice to disclose material facts to a client. C) False, an agent need only disclose physical material facts to a client. D) True, all material facts must be disclosed to a client.

True, all material facts must be disclosed to a client.

The Seller's Disclosure Notice, which has been developed by TREC, A) does not relieve the seller or the listing agent of their responsibility to disclose property issues not covered by the form. B) should be completed with the help of the listing agent. C) relieves the listing agent of all responsibility of disclosure of material facts about the property's condition. D) includes all the components about the property that require disclosure.

does not relieve the seller or the listing agent of their responsibility to disclose property issues not covered by the form.

Megan's Law A) requires that agents provide prospective buyers with the website address where sex offender information may be found. B) requires that agents report the location of sex offenders to prospective buyers with children under 18 years of age. C) makes the agent and the seller liable under federal law for any harm that comes to a buyer's children from a sex offender whose location was not disclosed by the agent and the seller. D) does not require agents to make a disclosure of sex offenders reportedly living near their listed properties

does not require agents to make a disclosure of sex offenders reportedly living near their listed properties

A listing broker must explain to the seller that the seller's full disclosure responsibility includes A) physical material facts that may be of importance to the buyer's decision. B) material facts listed on the Seller's Disclosure Notice. C) material facts that may be of importance to the buyer's decision. D) physical material facts listed on the Seller's Disclosure Notice.

material facts that may be of importance to the buyer's decision.

The subagent showing a property to a buyer forgets to mention that even though the property is connected to the city water and sewage, it also has an abandoned septic tank. The subagent has A) misrepresented by omission and commission. B) misrepresented by omission. C) committed fraud. D) misrepresented by commission.

misrepresented by omission.

Additional coverage (endorsements) to title insurance may NOT be purchased to include A) unrecorded liens not known by the policyholder. B) property damage resulting from fire. C) rights of tenants in possession of the property at time of closing. D) homestead rights.

property damage resulting from fire.