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Real Estate Law of Contracts Exam 2024: Champion School of Real Estate, Exams of Real Estate Management

A comprehensive overview of real estate law concepts, focusing on contracts and their elements. It covers key topics such as the texas real estate commission, the real estate recovery trust account, the deceptive trade practices act, and the different types of estates in land. The document also explores various aspects of real estate contracts, including listing agreements, leasehold estates, and the process of offer and acceptance. It is a valuable resource for students and professionals seeking to understand the legal framework governing real estate transactions in texas.

Typology: Exams

2024/2025

Available from 12/11/2024

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Champion School of Real Estate-Law

of Contracts Exam 2024

Texas Real Estate Commission TREC-created by the Legislature in 1949. 9 member commission whose primary purpose is to carry out the provision of the License Act Real Estate Recovery Trust Account administered by TREC. the purpose of the account is to protect aggrieved individuals who suffer monetary loss due to illegal acts of license holders unlawful practice of law license holder is not qualified to add provisions to contracts that go beyond factual business details. Promulgated Forms residential contract forms that are mandatory for license holder Deceptive trade practices Act Texas law that applies to trade and commerce that was passed in 1973. Part of the Texas Business and Commerce code Land surface of the earth extending downward to the center and upward above the surface to infinity Real Estate all that encompassed in land with the addition of all man-made additions to the land (improvements) Real Property goes beyond physical real estate and includes the rights that a person has in the land. Bundle of Rights rights that a person has in the land severable different rights can be separate Surface Rights the ability to develop the surface and to use resources extracted from or near the surface Subsurface Rights rights to oil, gas and minerals, are commonly conveyed through a lease, mineral deed or reservation Air Rights

extend above the surface without limitations improvements man-made additions to the land that is permanent and is considered to become part of the land personalty/chattel personal property bill of sale used to accomplish the transfer of personal property, accompanies the deed Fixture personal property that has become attached to the land annexation personal property that becomes real property severance removing fixtures to become personal property Physical Characteristics of Land Indestructibility-cannot be destroyed Immobility-cannot be moved Non-homogeneity-no two parcels are the same Economic Characteristics of Land Scarcity-supply and demand Modification-value is affected by man made changes Fixity-additions take long periods of time to pay Situs-location, location, location Estate in Severalty ownership by one individiual Co-Ownership ownership by two or more Trust ownership conveyed to a trustee for the benefit of others tenancy in common ownership by 2 or more with undivided interests Partition own a distinct tract of land Joint Tenacy type of co-ownership with the right of surviorship Right of surviorship when joint tenant dies right of property are equally divided among surviving owners community property

marriage is regarded as a partnership rather than husband and wife become one. separate property property owned by a married person that is not community property steering/channeling taking buyers or renters to or away from a particular area based on the race, religion, etc, of the buyer or renter. Blockbusting/panic peddling attempt to induce panic selling in a neighborhood for financial gain. Contract an agreement between 2 or more parties to do something or to refrain from doing something. implied contract an agreement created by our behavior express contract an agreement through negotiation of an agree price and terms between parties bilateral contract contract of sale between a buyer and seller Option an agreement between a buyer and a seller Elements of a valid and enforceable contract Competent Parties Offer and acceptance (mutual consent) Legal Purpose In writing Consideration Executory Contract once the terms of an offer have been agreed upon and signed by the parties and acceptance communicated the contract becomes binding assignment transfers all rights related to the contract to another party allodial system privately owned land by individuals Police Power the right of government to regulate and control the way land is used zoning example of police power variance permission to violate the rules

buffer zone area of land separating one land use from another building codes all residential structures must conform to code eminent domain the right of the government to take private land for public use condemnation the action of taking land for public use taxation the right of the government to tax real property assessed value property value for tax purposes escheat if a person dies intestate and without heirs the government will take title to his real property freehold estate when an individual owns real property bundle of rights rights associated with ownership of real property: control sell exclusion lease develop mortgage posses Fee simple absolute least number of limitation on the owner conditional, defeasible or determinal fee ownership that could be voided if a condition is not met life estate ownership for the duration of someone's life life tenant owner of a life estate statutory estates created by statute or law community property homestead

dower and curtsey tenancy by the entirety homestead primary residence will be exempt from the claims of certain creditors dower and curtsey based on English law dower is the interest a wife has in the property of her husband; curtsey is the interest a husband has in the property of his wife lien claim against property encumberance a lien easement gives one the right to use or pass over another's property for a specific purpose Discharge of Contracts a contract is considered discharged when: all parties have performed a change in law that makes performance illegal destruction of property Listing agreements is an employment agreement between the seller and the broker elements of a listing agreement

  1. Agency Relationship 2.Brokerage Fees
  2. Property condition
  3. Relationship with buyers
  4. Market value of the property being listed
  5. local market condition a listing agreement should provide the broker to
  6. permission to place a sign on the property
  7. permission to place a lock box on the property
  8. permission to advertise the property on the Internet
  9. other provisions regarding showing times and instructions Types of listing agreements
  10. Exclusive right to sell
  11. Exclusive agency
  12. open listing
  13. Net Listing

Exclusive Right to sell grants an exclusive right to sell the property during the listing term, commission is paid even if the property is sold by the owner Exclusive agency seller agrees to list the property with only one broker during the listing term with the provision the seller can sell the property himself without payment of commission Open Listing gives the seller the right to list the property with multiple competing brokers and to sell the property personally without liability for payment of commission Net Listing seller establishes a minimum acceptable net price net price. The Broker's commission is the difference between the minimum net established by the seller and the price that the buyer is willing to pay Multiple Listing Service inventory of properties for sale among member brokers Comparative Market analysis information from the MLS data to show the seller the market value of the property Buyer Agency Agreements written agreement that a buyer signs that allows a broker to represent them, tells the duties and responsibilities of both the buyer and the broker Leasehold Estate gives one possession and use of property without ownership. Lessor landlord lessee tenant 4 types of Leasehold estates

  1. Estate for Years-lease with a definite beginning date and ending date
  2. Periodic Tenancy-a lease that renews itself automatically for like period of time
  3. Tenancy at sufferance-interest in leased property created when holdover tenant is occupying the leased property against owners will.
  4. Tenancy at Will-tenant occupies real estate with the permission of owner for an uncertain or unspecified length of time. Requirements of a valid lease
  5. Competent Parties
  6. Let and Take agreement
  7. adequate Consideration (rent)
  8. Description of the property

Recommendation for lease great than 1 year

  1. Execution (signed by all parties)
  2. Term of the lease
  3. Delivery
  4. In writing if the lease is more than one year Gross Lease Landlord pays costs regularly incurred in ownership: taxes, insurance, utilities, and maintenance. Tenant pay only rent Net Lease tenant pays rent, and taxes, insurance and maintenance. Percentage lease retail lease, obligates the tenant to pay a base rent and a percentage of the gross sales. Right of first refusal the tenant has the right to match or better any offer the landlord may receive on the property before it can be sold sale and leaseback owner will sell the property to investor and then lease back the property with a long term lease. Eviction legal process that allows the landlord recover possession of a property when a tenant defaults on a lease Assignment when a tenant's rights and liabilities are transferred to another Sublet the transfer of some or all of the tenant's right and leased space to another with liability remaining with the lessee. Termination when a lease agreement comes to an end of the lease period. Lease Option allows a tenant to buy the property at a preset price and terms for a given period of time. Contract for deed a contract between buyer and seller An offer can be communicated by:
  5. phone
  6. fax
  7. email
  8. letter
  9. hand delivery Offeror

the person making the offer offeree the person to whom the offer is made an offer must meet legal requirements

  1. communicated to a specific offeree.
  2. Intended to be a serious offer
  3. definite and certain enough to be accepted by the offeree The offeree has options for the response to an offerr
  4. do nothing
  5. reject
  6. accept
  7. counteroffer acceptance the accepting party does so with no change to the contract whatsoever. Sales price indicated in the document and is usually reflected as the sum of the down payment and the amount financed Earnest Money is a payment that is placed into escrow to show the buyer is serious in the intent to purchase the property. It also serves as a payment of liquidated damages to the seller in the event of default of the buyer Statute of Frauds must be in writing to enforce. Default when a party to a contract fails to perform breach of contract when a party to contract fails to perform Contingency a provision in a contract that requires that a certain act or event happens in order for the contract to be binding Mortgage a pledge of real estate as a security for repayment of debt Mortgagor the borrower Mortgagee the lender Promissory note or real estate lien note; the borrower's unconditional promise to repay

Foreclosure legal procedure where by the secured property may be sold to satisfy the unpaid promissory note. short sale will take place when a seller is unable to sell the property at or above what the seller owes the lender. Title in Theory State a mortgage is an actual transfer of ownership form the borrower to the lender. Title remains with the lender until the loan is repaid. Lien in Theory State the borrower retains ownership of the property, subject to the lien that secures repayment of the loan. Federal Reserve the US Central Banking system Secondary Market exists for the purchase and sale of existing mortgages to investors. Liquidity a steady supply of funds from investors Fannie Mae Federal National Mortgage Association; plays a vital role in financing mortgages and increasing home ownership opportunities. Freddie Mac Federal Home Loan Mortgage Corporation; created for the purpose of purchasing mortgages in the secondary market. Stockholder owned corporation chartered by congress to increase the supply of funds available. Primary Mortgage Market made up of businesses that lend to borrowers for the purchase of real estate. Mortgage companies Usually not licensed or regulated; rely on commercial banks that great a warehouse line of credit Mortgage bankers generally a person or firm that provides its own funds for mortgage financing. Mortgage Brokers provides consumers with assistance securing hard to place or niche sources of mortgage money. Correspondent Lenders usually small lenders who have the necessary funds to extend loans at their own risk. after closing will usually sell loan to larger wholesale lender. Origination the process of creating a new mortgage loan, including all steps taken by a lender to attract and qualify a borrower. Loan Processing

the loan processor will build a file that will be used to make an underwriting decision underwriting the detailed process of evaluating a borrower's loan application to determine the risk involved for the lender Close the consummation of a contractual real estate transaction in which all appropriate documents are signed and the proceeds of the mortgage loan are then disbursed by the lender Fund transferring funds to a title or escrow company for disbursement Servicing includes sending monthly payment statements and collecting monthly payments, maintaining records of payments and balances, collecting and paying taxes and insurance. Title the evidence an individual has of his or her right to possess land. Alienation change in the ownership of real property Voluntary Alienation the transfer of title that is a free act of the grantor involuntary alienation a transfer of ownership against the will of the owner Forclosure the process by which a lender exercises its power of sale under a mortgage that is in default. Eminent Domain the right the government has to acquire property to satisfy a public purpose Condemnation the process by which the government exercises its right to eminent domain. Adverse Possession occurs when an individual acquires title from the rightful owner through hostile, actual and continuous occupation of the land for the statutory period. will a written expression of the desire of a person as to the disposition of that person's property after death Devise Real property conveyed by a will Bequest personal property that is inherited legacy money that is inherited

beneficiary one who receives property through a will Hereditament any property, whether real or personal, that is capable of being inherited. testate individual who dies leaving a valid will executor person who settles the will. Holographic will a handwritten will, perfectly legal Nuncupative will oral or deathbed will codicil an addition or amendment to an existing will. intestate leaving no valid will, property will be disposed of under the provision of the laws of the state. descent a person who receives property from intestate possession descendant an individual who inherits property by intestate possession, acquires title by descent. probate the formal judicial proceeding to prove or confirm the validity of a will. Accretion the process that results in a gradual increase in land area through natural forces. Alluvion material or soil that is deposited through the process of accretion that is the result of avulsion, erosion, and reliction Erosion the gradual loss of land over time as the land bordering a river or stream washes away Reliction a gradual increase in land area when water gradually withdraws, as happens when the path of a stream or river changes over time Avulsion sudden addition to or loss of land when a stream or river changes course. deed a written document that conveys ownership or an ownership interest in real property from one party called a grantor or another party, called a grantee.

consideration something of value given in exchange for conveyance by the grantor Habendum clause A clause in a deed that indicates the extent of the premises being conveyed. legal description Requirement for a valid deed, usually just a lot and block number. Delivered and accepted when title is conveyed and recorded restriction a limitation placed on the new owner by the grantor reservation deed reserves the rights for the grantor general warranty deed most common type of deed used in TX and the one that affords the purchaser the greatest degree of protection. the grantor states promises to warrant and defend the grantee's interest in the property back to the sovereignty of the soil. special warranty deed the grantor promises to warrant and defend title, but only against claims which may have risen during period of ownership. bargain and sale deed no guarantees or warranties quitclaim deed no guarantees, warranties or covenants assemblage combining 2 or more properties in to 1