Texas Real Estate Contract Fundamentals, Exams of Advanced Education

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Texas Pre-License - Promulgated

Contracts Exam Graded A+

According to TREC rules, which of these must be delivered to the seller within three days of a contract's effective date? - ANS-earnest money What are brokers required to do regarding Consumer Protection Notice TREC No. CN 1-2? - ANS-post it in each office Rollback taxes are addressed in all of the following EXCEPT: - ANS-Residential Service Contract Agent Sarah knows her client wants to make the sales contract contingent on appraisal, so she adds a notation to that effect in the Special Provisions section of the contract. Why is that wrong? - ANS-it could be considered the unauthorized practice of law What are two real estate governing bodies that were formed as a result of TRELA? - ANS-TREC and the Broker-Lawyer Committee If a seller is still accepting counteroffers, what is true about their property? - ANS-it is not yet officially in contract Which of the following bodies appoints the public member on the Broker-Lawyer Committee? - ANS-the governor What is the statute of limitations to claim fraud or misrepresentation against a license holder? - ANS-4 years from discovery Anthony changed the use of his land from farm land to residential before he sold it. According to TREC rules, who is responsible for any rollback taxes he might owe? - ANS-Anthony Paragraph D of the Short Sale Addendum contains a date by which the seller must get approval from their lender for the sale. What happens if the lender does not give approval by the date? - ANS-The contract will terminate and the earnest money will be refunded to the buyer. Which of the following is TRUE regarding a contract to transfer real estate which contains no earnest money? - ANS-It is valid. What is the purpose of the "Listing Broker's fee" section at the bottom of Page 9 of the One to Four Family Residential contract? - ANS-to reflect a previously agreed-upon commission

Which of these is NOT something that is appropriate to put in Paragraph 11 (the Special Provisions section) of a TREC promulgated contract? - ANS-that the contract is contingent on the inspection According to Paragraph 9B, what happens when someone buys a property that currently under a lease? - ANS-the buyer must honor the lease, and the seller transfers them the security deposit A back-up buyer's contract is executed on September 28 with a four-day option period. On October 4, the seller informed the back-up buyer that the first contract was terminated. When does the back-up buyer's option period end? - ANS-October 8, 5 pm Reggie made Betty an offer on her house. She countered, but Reggie has not yet accepted. Then along comes Archie with a better offer. Before accepting Archie's offer, what must Betty do? - ANS-withdraw her counter to Reggie What form must be provided to any unrepresented buyer or seller a license holder talks with? - ANS-Information About Brokerage Services form A buyer was unable to obtain financing. How would they notify the seller that they are terminating the contract? - ANS-by sending a promulgated Notice of Buyer's Termination What is the name of the document prepared by a condo association (or HOA) to outline the fees and rules of the condo for a prospective buyer? - ANS-The Condominium Resale Certificate When seller financing is being used, the seller becomes: - ANS-the lender If a buyer is sent an Addendum for Property Subject to Mandatory Membership in an Owner's Association and they don't like the terms, what remedy do they have? - ANS- They can terminate the contract within the first three days. Agent Ralph has a buyer client that wants the seller to leave them the refrigerator, built- in microwave, and vent hood. Ralph notes this expectation in the Special Provisions section. What is wrong with this scenario? - ANS-It should be written in a Non-Realty Items Addendum, not in the Special Provisions section. Buyer Jeremy gave Seller Anthony $800 in earnest money and an additional $200 in option money. During the option period, Jeremy decided to terminate the contract. Anthony gave him back $800. Is this correct? Why or why not? - ANS-Yes, because option money is never refundable. A buyer who discovers a defect which they believe was misrepresented has a certain time after discovery to make a claim for damages. This is known as the: - ANS-Statute of Limitations

What is special about the earnest money section (paragraph five) and the option money section (paragraph 23) in the TREC promulgated sales contract? - ANS-they contain "time is of the essence" language Which of these materials would be considered part of a property's mineral estate? - ANS-oil Seller Vera agrees to allow another veteran to assume their mortgage loan. To make sure Vera can get their VA entitlement restored, what must be attached to the contract?

• ANS-Addendum for Release of Liability on an Assumed Loan and/or Restoration of Seller's VA Addendum The words "time is of the essence" are in: - ANS-Paragraph 23 of the One to Four Family Contract Which of these is something TREC is empowered to do by TRELA? - ANS-require license holders to use contract forms for certain transactions Buyer Raz goes into contract on a house in Texas. At the last minute, he is unable to obtain financing. What would he need to have in his contract to terminate it without penalty? - ANS-a Third Party Financing Addendum In loan fraud, the lender is usually the ________. - ANS-victim Which TREC promulgated form allows for the sales price to be adjusted because of the survey? - ANS-The Farm and Ranch Contract To be valid and enforceable, a contract must be in writing, represent a complete agreement, have acceptance communicated, and: - ANS-be signed by all parties Which of these is an example of something that could go in Paragraph 12 of the One to Four Family Residential Contract? - ANS-the seller plans to pay some of the buyer's closing costs Which of these forms is least likely to be involved in the sale of unimproved property? - ANS-Condominium Resale Certificate Which of these is an example of a time when it is acceptable not to use a TREC promulgated form? - ANS-the U.S. government requires a different form to be used According to the NAR Code of Ethics, unless the agent has written instructions stating otherwise, they must present all offers until: - ANS-The closing Which of these is NOT a place where commission split agreements between cooperating brokers can be determined? - ANS-the sales contract

As outlined in the TREC promulgated sales contracts, what obligations does the seller have regarding the property condition at the time of sale? - ANS-Seller's obligations are a matter of negotiation with the buyer. Seller Xavier's home is in a special statutory tax district. According to the Texas Water Code, what does Xavier have to do before going into contract with a buyer? - ANS-have them sign a notice informing them of the extra taxes When would it be appropriate to use the New Home Contract (Incomplete Construction)? - ANS-for a client buying a new home that is being built In a Texas real estate contract, what does an Addendum for Property Subject to Mandatory Membership allow a buyer to do? - ANS-terminate a contract if not given information about the property's HOA According to TRELA, which of these does one NOT need to be a licensed attorney to do? - ANS-fill out a TREC promulgated contract What part of the Third Party Financing Addendum for Credit Approval specifically pertains to people getting VA loans? - ANS-Paragraph D A married couple is buying a property. Which is the BEST way to write their names in the contract? - ANS-Georgianna Serif and spouse Bryan Serif Mary has a rental property with a two year lease on it. She collected a $500 security deposit at the beginning of the lease. Now she is selling the property. What will happen to the security deposit? - ANS-Mary will transfer the security deposit to the buyer at closing. Which of these is NOT something TREC has the power to do? - ANS-licensing developers and builders Which is the purpose of the Information About Brokerage Services form? - ANS-to inform clients how a license holder can represent a party in a real estate transaction A Residential Real Property Affidavit Promulgated by the Texas Department of Insurance (T-47 Affidavit) must be furnished to the buyer _______________________. - ANS-When the seller provides the existing survey What does Paragraph A of the Addendum for Back-Up Contract specify a back-up contract holder do when they execute the contract? - ANS-deposit the earnest and option money agreed to in the contract Which of these agent scenarios involving contracts is NOT inappropriate or in violation of TRELA? - ANS-Avery explains the meaning of factual statements or business details in the contract form.

According to Paragraph 10B, Possessions, what is a seller prohibited from doing after the effective date? - ANS-execute a lease without the buyer's permission What is the only time it is acceptable for a license holder not to present all offers to a seller client? - ANS-if the listing agreement specifies that it is not necessary What does paragraph 7A of the One to Four Family Residential Contract grant every buyer the right to do? - ANS-have the property inspected How can an agent help protect the earnest money of a buyer who is financing their purchase? - ANS-by submitting a Third Party Financing Addendum A seller is selling a property that is under a lease. When does the seller have to deliver a copy of the lease and any move-in condition form to the buyer? - ANS-within seven days after the effective date In TREC promulgated contracts, what does Paragraph 21: Notices provide information about? - ANS-where to send official notices about the contract Which of these is an example of a unilateral contract? - ANS-Mike signs a listing agreement with Broker Amy, agreeing to pay a 6% commission if she sells his house. A buyer and seller have been in negotiations. They have everything in writing, have agreed to all terms, the contract is signed and changes initialed. Today, the written acceptance of the final agreement has been communicated to the other party. What is today called? - ANS-the effective date What is the Addendum for Property Located Seaward of the Gulf Intracoastal Waterway for? - ANS-warns buyers that if their property become located on the beach area by erosion, they can be required to remove the structure at their own expense How can an agent change a contract after it has been signed by both parties? - ANS- adding an amendment to contract In a TREC promulgated contract, what is the Third Party Financing Addendum concerned with? - ANS-financing contingencies Which one of these is a bilateral contract? - ANS-Zelda agrees to pay Gus $250,000 for ownership of his house. What is the purpose of the Short Sale Addendum? - ANS-to protect a seller who is selling their home for less than they owe their lender A contract which courts cannot compel the parties to perform is: - ANS-unenforceable

According to the Environmental Assessment, Threatened or Endangered Species, & Wetlands Addendum, what happens if the buyer can provide the seller with a report proving that the use of the property is negatively affected by one of the noted factors (before the agreed-upon deadline)? - ANS-The buyer can terminate the contact and get their earnest money back. What part of the One to Four Family Residential Contract advises the buyer to get an abstract of title reviewed by a lawyer? - ANS-Paragraph 6E Which of these is appropriate to put in the Special Provisions section of the One to Four Family Residential Contract? - ANS-the names of sellers that wouldn't fit in Paragraph 1 Which of the following would constitute unauthorized practice of law and/or be a violation of TRELA? - ANS-adding or striking things from pre-printed contract forms If a property is occupied solely by people over the age of 62 and qualifies as senior housing it is exempt from: - ANS-The familial status portion of the Fair Housing Act The Seller's Temporary Residential Lease will only be used: - ANS-when the seller will remain on the property for no more than 90 days after closing Which element of the TREC promulgated contracts is the same across all contract forms? - ANS-Paragraph 1 identifies the the parties to the contract. There are three different types of financing choices in Paragraph Three of TREC's One to Four Family Residential Contract. They are: - ANS-third party, assumption, seller financing Who pays for an investigation of an environmental, endangered species, or wetlands issue, according to the Environmental Assessment, Threatened or Endangered Species, & Wetlands Addendum? - ANS-the buyer If an agent makes a change to Paragraph 6A8 in a TREC promulgated contract, which of these is most likely to be the result? - ANS-The title policy will be amended to read "shortage in area" rather than the standard exception. When both parties mutually agree to terminate a contract, who provides the appropriate form? - ANS-the title company What is the name of the law that requires certain contracts (for example, sales contracts) to be written down and signed? - ANS-the statue of frauds In which of these situations is the seller required to provide a seller's disclosure? - ANS- Brian is selling an investment property he has never lived in.

What will you need to include in the contract to ensure this agreement is enforced? - ANS-amendment In which type of property does the buyer purchase rights to the unit and an undivided interest in the common areas? - ANS-condominium How can a buyer ensure they pay the least possible amount of pre-paid interest to the mortgage company? - ANS-close near the end of the month A murder/suicide took place in a property. The crime was widely publicized. What is the disclosure requirement for this crime? - ANS-It must be disclosed forever. Which of these is NOT true about the residential service contract? - ANS-the seller can prevent the buyer from purchasing it How long after receiving an Addendum for Property Subject to Mandatory Membership in an Owner's Association does a buyer have to terminate the contract? - ANS-3 days Which type of TREC promulgated contract form(s) gives disclosure about the type of insulation in the property? - ANS-Both New Home Contracts Laura is in contract for a home. Her contract contains a Sale of Other Property by Buyer Addendum. The seller has just accepted a back-up contract for the property that doesn't have this contingency. What happens to Laura and her contract? - ANS-Laura can waive the addendum by a date she and the seller agree on, otherwise her contract terminates. A potential buyer's current home is under contract. He has found a home he would like to make an offer on, but does not want to take a chance on being obligated to buy if his current home does not close. What form can help this buyer? - ANS-Addendum for Sale of Other Property by Buyer What happens when a homebuyer takes out a residential service contract on their newly-purchased home? - ANS-they get a warranty for the property, usually for a year Within how many days after the title company receiving a copy of the contract will the buyer receive the title policy documents? - ANS-20 days A contract that is fully performed is referred to as: - ANS-executed What does the date in the Third Party Financing Addendum provide a deadline to buyers for? - ANS-informing a seller they didn't get their financing approved Seller Ben wants to make sure that their agent offers a cooperating broker a commission. Ben believes this will drive better traffic to the listing. How can Ben BEST

make sure this is a part of the transaction? - ANS-make sure it appears in the listing agreement that Ben signs with the broker Where in the One to Four Family Residential Contract does it spell out what remedy the buyer has if the property is damaged after going into contract but before closing? - ANS- Paragraph 14 makes it clear that the seller is responsible for damages until closing. Agent Kara's buyer's representation agreement with her client says she will be paid a 3% commission. In the MLS listing of the home her client has chosen to buy, the listing broker offered only 2%. Where does the other 1% of her commission come from? - ANS-the buyer pays it What is an express contract? - ANS-A contract that has a very specific offer and acceptance is a express contract. What is the purpose of TREC form OP-C Notice to Prospective Buyer? - ANS-provides a notice to buyers using their own contract to obtain an Abstract of Title If legal action is required regarding a TREC sales contract, what will the non-prevailing party be responsible for? - ANS-the prevailing party's reasonable attorney fees and court costs Alex is a licensed sales agent. Her client is selling her single-family home. In order not to violate TRELA contract law and run afoul of TREC, how should she create the contract? - ANS-Using TREC's promulgated One to Four Family Residential Contract Buyer Javier sends a formal offer to Seller Joy: $250,000 and the appliances stay. Joy counters: $250,000, no appliances. She then reconsiders and accepts the first offer. Is Javier obligated to buy the home? Why or why not? - ANS-No, because the first offer was terminated when Joy countered. Paragraph 7D(2) of the contract indicates: - ANS-repairs that must be completed by the seller before closing What is one way that a homebuyer can locate any physical faults that may affect the safety or value of a home before purchasing it? - ANS-a home inspection George Jr. inherited the family compound after George Sr. died. The will was contested, and some family is still disgruntled. George is now selling the property. How can a buyer best protect themself from any claims on the title? - ANS-ask the family to sign a quitclaim deed In which of these scenarios would it be correct to use the Residential Condominium Contract (Resale)? - ANS-A client is buying a property where the land is not owned individually and the common areas are shared equally among the community's owners.

Even the most experienced home inspectors have limitations. Which of these are frequently difficult to vet by visual inspection? - ANS-HVAC issues, slow leaks, and environmental toxins According to Paragraph 9 of the One to Four Family Residential Contract, how must a buyer pay for the property? - ANS-"in good funds acceptable to the escrow agent." A buyer needs more option period time. They have asked the seller, who agreed, and signed TREC's Amendment to Contract. What else must they do to make the extension official? - ANS-pay an additional option fee Because many things in the contract depend on these two items, it is important that the agent finalizing the acceptance of the contract fill in which of the following dates for their broker: - ANS-Effective and executed date Agent Alicia is helping her client buy a newly built home. She does not use the New Home Contract (Completed Construction). What is the most likely reason why? - ANS- The builder required that she use their contract. Per Paragraph 7D, what is it called when a buyer accepts the property, "with any and all defects and without warranty"? - ANS-accepting it in "as is" condition Additions to the standard coverage in a title policy can be purchased via: - ANS- endorsements Which of the following laws protect people based on race only? - ANS-Civil Rights Act of 1866 If clients want to make an offer to the seller offering a "lease with option to buy," the buyer's agent should: - ANS-Tell the client they will need an attorney to draw up the documents Who is tasked with drafting and editing Texas's promulgated contracts? - ANS-The Broker-Lawyer Committee Which is TRUE regarding buyer rebates? - ANS-Undisclosed buyer rebates are not legal. Angela's buyer has decided to terminate their contract during the option period. The buyer has sent a written demand to the escrow agent to release the earnest money, but Angela wants to keep it. What penalty might she eventually face, according to the TREC contract? - ANS-Angela will have to pay back the earnest money, attorney fees, and the cost of a lawsuit. If a buyer is using VA financing, what will be part of the contract? - ANS-Third Party Financing Addendum for Credit Approval