Unit 3: Parties, Property, and The Money
If, as part of the agreement to let the buyer assume existing financing, the seller wants to make the assumption subject to the seller being released from future liability for the loan, which TREC form should be used?
Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller's VA Entitlement
The seller wants to have the buyer assume his existing VA loan and restore his VA entitlement. Which form should the agent use to achieve this goal?
Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller's VA Entitlement
Sellers contribution to a residential service contract is addressed is which paragraph of the TREC One to Four Family Residential Contract?
Sellers contribution to a residential service contract is addressed is which paragraph of the TREC One to Four Family Residential Contract?
Under paragraph 2 of the One to Four Family Residential Contract, items such as window air conditioning units, curtains and rods, and door keys are considered
accessories and are included in the sale unless specifically excluded.
The buyer wishes to make an offer to buy a house for $220,000, with 80% financed through 30-year fixed-rate mortgage and a 20% cash down payment. How much is the down payment?
Marital status must be included in which paragraph of the One to Four Family Residential Contract?
The buyer's expenses in the transaction have exceeded the amount she is willing and able to pay. What information is necessary to complete paragraph 12 of the contract?
The amount the seller is willing to contribute to buyer's expenses
The buyer wishes to make an offer to buy a house for $240,000, with 70% financed through 30-year fixed-rate mortgage and a 30% cash down payment. How much is the down payment?
The answer is $72,000. Thirty percent of $240,000 is $72,000. Third party financing is any type of new financing that is done by anyone that is a third party. Specifics of that financing are covered in the Third Party Financing Addendum.
If the buyer wishes to make an all cash offer, how should paragraph 3 of the TREC One to Four Family Residential Contract be completed?
The answer is 3A and 3C will be the same amount. If it is an all cash offer, then the cash payable at closing (3A) and the Sales Price (3C) will be the same. The other answers are wrong.
Under the TREC Loan Assumption Addendum, who gets the earnest money if the note holder fails to consent to the loan assumption?
The answer is the buyer. Since the buyer is not at fault if the note holder does not consent, the buyer gets the earnest money. He should not be penalized for that fact.
A married seller wishes to sell her separate property. Which of the following is an appropriate way to identify her in the TREC One to Four Family Residential Contract?
The answer is Jane Doe, as separate property. Because Texas is a community property state the marital status of the seller must be included in the names of the parties in paragraph 1. The proper way to identify a married seller who is selling separate property is "Jane Doe, as separate property."
In which paragraphs or forms would you address the fact that the buyer will be acquiring the eight-burner freestanding propane grill on the pool deck as part of the transaction?
The answer is Non-Realty Items Addendum and paragraph 22. The grill is not covered by either paragraph 2B or 2C. Because the Non-Realty Items Addendum is being used, it must be checked in paragraph 22 as one of the additional contract documents.
Which two TREC addenda both give the seller the ability to terminate the contract?
The answer is Seller Financing Addendum and Loan Assumption Addendum. Both the Seller Financing Addendum and Loan Assumption Addendum give the seller the option to terminate the contract under a couple of circumstances related to approval of the buyer's credit. Failure to timely terminate may subject the seller to accepting the buyer's creditworthiness.
Which TREC form should be used if the buyer wishes to include personal property such as a piece of furniture displayed in a home in the purchase price?
The answer is The Non-Realty Items Addendum. Typically, if a buyer wishes to buy personal property and have it built into the total purchase price, the Non-Realty Items Addendum must be used.
A buyer wishes to get a USDA guaranteed loan. Which form should the agent use to address that type of financing?
The answer is Third Party Financing Addendum. The Third Party Financing Addendum details the requirements for a USDA guaranteed loan. There is no such form as the USDA Financing Addendum.
If a buyer is obtaining a new conventional mortgage, which of the following will be checked in paragraph 3?
The answer is Third Party Financing Addendum. Third party financing is any type of new financing that is done by anyone that is a third party. Specifics of that financing are covered in the Third Party Financing Addendum.
The sellers want to sell the refrigerator to the buyers. How should it be noted in the contract?
The answer is Use the Non-Realty Items Addendum. If the seller wishes to sell the refrigerator to the buyer for a nominal fee and have it be part of the total sales price, the Non-Realty Items Addendum should be used.
The TREC Third Party Financing Addendum includes which of the following types of financing?
The answer is all of these. The Third Party Financing Addendum includes all of these in addition to Texas veterans loans, VA guaranteed financing, and reverse mortgage financing.
Under the TREC Third Party Financing Addendum, what happens when the terms of the loan described in the addendum are available, and the lender determines that the buyer has satisfied all of lender's requirements related to the buyer's assets, income, and credit history?
The answer is buyer approval will be deemed to have been obtained. As defined in the TREC Third Party Financing Addendum, buyer approval is "deemed" to have been obtained if the terms of the loan or loans detailed in the addendum are available to the buyer, and the lender concludes that the buyer has satisfied all of the lender's requirements related to the buyer's credit worthiness.
Which of the following is not negotiable in paragraph 23?
The answer is how long the buyer has to provide the option fee. The buyer must provide the option fee within three days after the effective date of the contract. The time period is not negotiable.
Under the TREC Loan Assumption Addendum, the seller has the right to terminate under each of the following conditions EXCEPT
The answer is if the property fails a home inspection. The TREC Loan Assumption Addendum does not address property condition. Paragraph B gives the seller the right to terminate if credit documentation is not delivered within the time frame. The seller must terminate within seven days after expiration of the time for delivery and the seller receives the earnest money. The seller also has the right to terminate if the items are timely delivered, but the seller determines that the buyer's credit is not acceptable. The seller may terminate within seven days after expiration of the time for delivery. In this event, the buyer receives the earnest money. If the seller fails to terminate, he is deemed to have approved the buyer's creditworthiness. Either seller or buyer may terminate if the note holder doesn't consent to the assumption. In this case, the buyer is refunded the earnest money.
The down payment in a transaction is indicated
The answer is in paragraph 3A of the contract. 3B is the sum of financing, and 3C is the sales price.
How should the TREC One to Four Family Residential Contract be filled out if the property is not located within a city?
The answer is in the blank for "city" put "unincorporated" or "none." All of the other answers are wrong. Never leave a blank line blank. At a minimum, it should be filled out as "none" or N/A.
What information is NOT required to fill out paragraph 3 of the TREC One to Four Family Residential Contract?
The answer is interest rate. 3A is down payment, 3B is sum of financing, and 3C is sales price.
What should a license holder do if the seller wishes to retain an item not specifically listed as an improvement or accessory in paragraph 2 of the TREC One to Four Family Residential Contract?
The answer is list the item as an exclusion in paragraph 2D. Even though some items are not specifically addressed as improvements for accessories, the lists are not exclusive. Therefore, the seller should itemize any items he or she wishes to keep in the exclusions subparagraph.
The seller wants to keep the built-in, high-end stovetop. How should the seller's agent note that?
The answer is list the stovetop in paragraph 2, Exclusions. Since the stovetop is built in, it is included in the list of improvements in paragraph 2. The sellers should list the stove top as an exclusion in paragraph 2.
Which of the paragraphs in the TREC One to Four Family Residential Contract addresses the sales price?
The answer is paragraph 3. Paragraph 1 includes the names of the parties and their marital status. Paragraph 2 includes the legal description and accessories. Paragraph 4 is an important license holder disclosure.
Which paragraph in the TREC One to Four Family Residential Contract deals with title issues?
The answer is paragraph 6. Information required to complete paragraph 6 includes who will pay for the title policy, what company will issue the title policy, whether a new or existing survey will be provided, who will pay for the survey, who will furnish the survey, the number of days to furnish the survey, objections to title, and whether the property is subject to an HOA.
Which paragraph of the TREC One to Four Family Residential Contract addresses title policy information?
The answer is paragraph 6. Paragraph 7 addresses the seller's disclosure notice and the condition of the property. Paragraph 5 deals with earnest money. Paragraph 8 addresses brokers' fees.
The buyer wishes to obtain an adjustable rate mortgage. How should paragraph 1 of the TREC Third Party Financing Addendum be filled out?
The answer is per annum for the first year of the loan. If the loan is an adjustable rate mortgage that will adjust in one year, it will be "per annum for the first year of the loan." Any adjustment caps or lifetime caps for an adjustable rate mortgage will need to be described in paragraph 11 of the contract.
A buyer wishes to take as much time to apply for financing as possible to get the best interest rate. Under the TREC Third Party Financing Addendum, how soon after the effective date must the buyer apply for financing?
The answer is promptly. Although the time for giving notice that the buyer has failed to obtain financing is negotiated between the parties, the buyer is required to promptly apply for financing.
Under the TREC Third Party Financing Addendum, which of the following is NOT considered by the lender?
The answer is property condition. Buyer approval means the terms of the loan described must be available and the lender has determined the buyer's assets, income, and credit history meet the lenders requirements. Full loan approval also takes into consideration the condition and value of the property.
If the property has a metes-and-bounds legal description, how should the property description in the TREC One to Four Family Residential Contract be filled out?
The answer is put N/A in the blanks for lot and block and attach the description to the contract. The attachment can be made by copying the legal description in the seller's deed or title policy.
Which of the following types of financing is not addressed in the TREC Third Party Financing Addendum?
The answer is seller financing. The Third Party Financing Addendum addresses conventional financing, Texas veterans loans, FHA insured financing, VA guaranteed financing, USDA guaranteed financing, and reverse mortgage financing.
Which of the following is NOT a form of financing listed on the Third Party Financing Addendum?
The answer is seller financing. There is a separate promulgated addendum for seller financing. The other choices listed are all given as alternatives on the Third Party Financing Addendum.
The buyer has offered to assume seller's loan under the TREC Loan Assumption Addendum, so long as the lender does not charge more than a $1,000 loan assumption fee. The lender wants to charge $3,000 and the seller refuses to pay the difference. What can the buyer do?
The answer is terminate the contract and receive the earnest money. Paragraphs D and E of the Loan Assumption Addendum (Loan Assumption Terms and Consent by Noteholder) protect the buyer in the event the lender should charge an assumption fee or an interest rate more than what was agreed to or refuses to consent to the assumption. In any of these events, the earnest money will be refunded to the buyer.
The antique cabinet that holds dishes has been made to appear to be built into an alcove in the dining room by surrounding the alcove with a frame; however, the cabinet is not attached to the walls or the floor of the alcove. The buyer wants to include the item in the sale. In which paragraph or form should this be documented?
The answer is the Non-Realty Items Addendum and paragraph 22. The goal of a contract is to avoid confusion about the details of an agreement. At the last minute, the seller could argue that this is not a fixture and should be excluded since it is not within the fixtures and accessories covered by paragraph 2B. It is safer to document the agreement to sell via the Non-Realty Items Addendum, as well as checking the appropriate box in paragraph 22.
If a titled vehicle (e.g., pickup, utility tractor, old car) is part of the real estate transaction, which of the following is applicable?
The answer is the Non-Realty Items Addendum. Even if the vehicle has a title and will be conveyed via that title document, the vehicle is part of the real estate transaction and should be noted as such. The way to avoid any confusion is to have the vehicle conveyed prior to the sale, but neither buyer nor seller will likely wish to do that as the transfer will likely not occur unless the real estate transaction closes.
Under the FHA insured financing paragraph of the TREC Third Party Financing Addendum, what happens if the property appraisal is less than the agreed upon amount?
The answer is the buyer is not obligated to purchase the property. Both FHA and VA paragraphs have verbiage that requires the property to appraise for a certain amount of money or give the buyer a right to terminate the contract.
What happens if buyer's credit is not approved under the TREC Third Party Financing Addendum, and the buyer gives timely notice to the seller?
The answer is the contract will terminate and the buyer will get the earnest money. The buyer must give notice that the buyer has not received approval within a certain number of days negotiated by the parties. If the buyer fails to provide notice, there is no longer any financing contingency on this contract.
What information is required to fill out paragraph 23 of the TREC One to Four Family Residential Contract?
The answer is the option fee to be paid in the option period. Paragraph 23 is the option fee which details the amount of the option fee and that option. It also details whether the option fee will be credited to the sales price at closing.
Which of the following is TRUE regarding the Loan Assumption Addendum?
The answer is the period for the seller to terminate under the Loan Assumption Addendum is seven days. As is specified in the contract, the seller has seven days to terminate if buyer does not provide credit documentation on time or if the buyer's credit is unacceptable.
How long does the buyer have to give notice that the buyer is unable to obtain buyer approval under the TREC Third Party Financing Addendum?
The answer is the time period is negotiable. The firm has a blank line for the time to give notice. Note, however, that the buyer is required to promptly apply for financing.
The earnest money paragraph addresses all of the following EXCEPT
The answer is title policy company. While the title company and the escrow officer may be the same entity, the title policy company is named in paragraph 6 and the escrow officer in paragraph 5.
Under the assumption paragraph of the TREC Loan Assumption Addendum, how many notes are assumable using the preprinted form?
The answer is two. The TREC Loan Assumption Addendum provides for assumption of a first and second lien promissory note.
The seller wishes to convey the washer and dryer, but the buyers wish to pay a nominal price for them and the sellers agree. What should the agent do?
The answer is use the Non-Realty Items Addendum. If the seller wishes to sell the appliances to the buyer for a nominal fee and have those be part of the total sales price, the Non-Realty Items Addendum should be used.
The buyer wants the free standing bookshelves in the study to be included in the sales price. How should the agent handle it?
The answer is use the Non-Realty Items Addendum. If the seller wishes to sell to the buyer the bookshelves and have those be part of the total sales price, the Non-Realty Items Addendum should be used.
The seller wishes to sell to the buyers all of the flower pots on the patio. What should the agent do?
The answer is use the Non-Realty Items Addendum. If the seller wishes to sell to the buyer the flowerpots and have those be part of the total sales price, the Non-Realty Items Addendum should be used.
The option fee paragraph in the TREC One to Four Family Residential Contract requires either a negotiated response or a selection for all of the following EXCEPT
The option fee paragraph in the TREC One to Four Family Residential Contract requires either a negotiated response or a selection for all of the following EXCEPT
