unit 9: real estate contracts
According to the Texas Real Estate Commission, the seller's agent may decide which contract offers to present to the seller.
False
The Texas Real Estate Commission drafts and revises standard contract forms used by real estate licensees.
False
Jerry and Mark agree that Jerry will buy Mark's farm for $400,000 cash. This is an example of
The answer is a bilateral contract. In a bilateral contract, both parties promise to do something. A real estate sales contract is a bilateral contract because the seller promises to sell a parcel of real estate and deliver title to the property to the buyer, who promises to pay a certain sum of money for the property.
A contract is void if it involves
The answer is an illegal purpose. An illegal purpose makes a contract void, not voidable. Voidable refers to the possibility for a contract to be canceled and includes a contract entered into with a minor or one in which fraud can be proven. Void refers to the inevitability that the contract cannot be enforced in a court. In most cases, an unenforceable contract is "valid between the parties" if both parties are satisfied and the agreement is fully performed.
The transfer of rights and/or duties under a contract is called
The answer is assignment. Generally, rights and obligations may be assigned to a third party unless the agreement forbids such an assignment or contains a personal obligation. Duties may be delegated, but the original obligor remains secondarily liable for them (after the new obligor) unless specifically released from this responsibility. Novation is a substitution of a new contract for an existing agreement with the intent of extinguishing the old contract.
Is the seller entitled to be present for the home inspection?
The answer is because it is the seller's home, he is entitled to be present at the home inspection. Listing agents typically strongly discourage sellers from hovering over home inspectors to prevent disputes from arising on the spot, suggesting that any questions be resolved or clarified after the report is made available to the buyer.
In an installment contract or contract for deed, the buyer obtains possession
The answer is before delivery of the deed. Although the buyer obtains possession under the contract for deed, the seller is not obligated to execute and deliver a deed to the buyer until the terms of the contract have been satisfied (hence the term contract for deed). However, if at any time a purchaser under a contract for deed elects to convert the contract into recorded legal title, he may deliver to the seller a promissory note that matches the terms and conditions of the contract for deed and the seller would be required to accept the note secured by a deed of trust and to deliver legal title.
Which is an act or a promise that is offered by one party to induce another to enter into a contract?
The answer is consideration. Consideration is that which is given in exchange for something from another. The actual consideration is the mutual exchanges of promises by buyer and seller; that is, the buyer promises to give money and the seller promises to give title to the property.
Who benefits most from the use of TREC-promulgated and/or approved forms?
The answer is consumers. Although all professionals, as well as consumers, benefit from having a clear and standardized procedural guide to the exchange of real estate property, the Texas Real Estate Commission primarily is a consumer protection agency. Without mandated forms, individual brokers would likely each create their own forms, possibly leaving consumers exposed.
In real estate sales contracts, which term is used to establish the effective date of the contract?
The answer is date of final acceptance. Without establishing a date of final acceptance, contracts could hang indefinitely without execution. Including a date of final acceptance gives principals a specific time frame to either act or terminate the transaction.
A licensed real estate broker is not authorized to practice law unless also a licensed attorney. Which contract activity is a real estate license holder allowed to perform?
The answer is filling in the blanks of a contract form promulgated or approved for that use by the Texas Real Estate Commission (TREC). Filling in the blanks of a promulgated contract form does not constitute the unauthorized practice of law—provided the forms are used correctly. When filling in a form authorized for use by TREC, the license holder may only fill in the blanks provided and may not add to or strike matter from the form, except that license holders must add factual statements and business details desired by the principals and strike only that matter desired by the principals and that is necessary to conform the instrument to the intent of the parties. TREC rules do not prevent the license holder from explaining to the principals the meaning of the factual statements and business details contained in the instrument so long as the license holder does not offer or give legal advice.
May a real estate sales agent simply write in an exception to a contract clause, or must an approved or promulgated addendum be used?
The answer is if there is an approved or promulgated form that addresses the modification, that form must be used. Sales agents are required to use an addendum if one is available.
Under Rule 537.11, must licensed real estate sales agents ALWAYS use promulgated forms?
The answer is no, licensees acting on their own behalf do not have to use promulgated forms. When acting on their own behalf (as a principal), they are considered private citizens.
Must the buyer be present for the home inspection?
The answer is no, the buyer is not obligated to attend the inspection. However, and especially for first-time homeowners, the inspection is not only an opportunity to discover flaws in the property but also a chance to have a better understanding of how systems work, where problems are likely to arise in the future, and learn some basics of home care. Most professional inspectors appreciate having the buyer present and encourage questions.
If an option is NOT exercised within the time specified, the
The answer is optionor's obligation and the optionee's right will expire. The option agreement requires the optionor to act only after the optionee gives notice that he elects to exercise the option and buy. If the option is not exercised within the time specified, the optionor's obligation and the optionee's right will expire.
MOST Texas real estate contracts provide that
The answer is reasonable time is permitted for performance of contract rights and duties. A few Texas-promulgated contracts/addenda provide that time is of the essence. This means that the contract must be performed within the time limit specified and that any party who has not performed on time is liable for breach of contract.
Is it permissible for a sales agent to suggest that a real estate attorney is NOT needed in a transaction?
The answer is sales agents must not discourage the use of an attorney. Sales agents need to make clear throughout the transaction that they are not permitted to practice law and that seeking legal advice is an option at any point in the negotiation and closing.
In real estate sales contracts, which term is used to clarify any business aspects of the sale NOT covered by any provisions of the printed earnest money contract form?
The answer is special provisions. A printed, standardized form cannot cover every possible extraordinary circumstance involved in a real estate transaction—therefore the law carves out an opportunity to address those exceptions.
Who is entitled to a copy of the inspection report when the buyer orders the inspection?
The answer is the buyer is the only one entitled to the inspection report. The buyer will typically will share the report with their buyer's agent so that a course of action can be discussed, but the report is owned by whoever pays for it—usually the buyer.
Which is NOT typical of a contract for deed?
The answer is the seller pays real estate taxes and insurance premiums. Under a typical contract for deed (sometimes called a land contract, an installment contract, or a contract of sale), the seller retains legal title until the buyer has paid the full purchase price to the seller or has accumulated enough down payment to obtain a new third-party mortgage loan. The buyer takes possession and gets equitable title to the property, establishing a homestead shield against the buyer's creditors. All expenses incident to home ownership are the responsibility of the buyer: real estate taxes, insurance premiums, repairs, and upkeep.
An oral listing agreement is which of the following?
The answer is unenforceable. An unenforceable contract has all of the elements of a valid contract; however, neither party can sue the other to force performance. Because contracts for the sale of real estate must be in writing to be enforceable, a broker who takes an oral listing risks being unable to sue a seller if the broker sells the seller's property but is not paid a commission as promised.
An acceptance that changes or qualifies the terms of an offer becomes a counteroffer.
True
unilateral contract
a one-sided contract/agreement formed when an act is done in consideration for a promise.
contract
a voluntary agreement between legally competent parties to perform or refrain from performing some legal act, supported by legal consideration.
bilateral contract
both parties promise to do something; one promise is given in exchange for another.
valid contract
complies with all the essential elements and is binding and enforceable on both parties.
implied contract
established by the acts and conduct of the parties
voidable contract
has all legal elements; may be rescinded
enforceable contract
has all the elements of a valid contract; however, neither party can sue the other to force performance.
void contract
has no legal force or effect because it does not meet the essential elements of a contract. For example, one essential condition for a contract to be valid is that it be for a legal purpose. Thus, a "contract" to commit a crime is void; it is not a contract at all.
express contract
parties show their intention in words