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Understanding TREC Promulgated Contracts in Texas Real Estate Transactions, Exams of Advanced Education

A comprehensive overview of the key elements and requirements of trec (texas real estate commission) promulgated contracts used in real estate transactions in texas. It covers topics such as the purpose and use of different contract forms, the importance of specific contract sections and addenda, the roles and responsibilities of parties involved, and the legal considerations surrounding these contracts. The document aims to equip real estate professionals, students, and interested individuals with a thorough understanding of the trec contract framework, enabling them to navigate the complexities of real estate transactions in texas effectively. By exploring the nuances of these contracts, the document helps readers navigate the legal and practical aspects of real estate deals, ensuring compliance with industry regulations and protecting the interests of all parties involved.

Typology: Exams

2024/2025

Available from 10/25/2024

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PROMULGATED CONTRACTS EXAM SOLVED

EXAM WITH CORRECT QUESTIONS AND

ANSWERS 2023- 2024

When would it be appropriate to use the New Home Contract (Incomplete Construction)? - for a client buying a new home that is being built 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? - pay an additional option fee In TREC promulgated contracts, what does Paragraph 21: Notices provide information about? - where to send official notices about the contract If a seller wants to reserve part of their mineral rights after selling, where on the Reservation of Oil, Gas and Other Minerals Addendum would they note what percentage they're keeping? - Paragraph B If an agent makes a change to Paragraph 6A8 in a TREC promulgated contract, which of these is most likely to be the result? - The title policy will be amended to read "shortage in area" rather than the standard exception. In Paragraph 9 of the One to Four Family (Resale) contract, what must happen "on or before" the specified date? - Closing Rollback taxes are addressed in all of the following EXCEPT: - Residential Service Contract What are brokers required to do regarding Consumer Protection Notice TREC No. CN 1-2? - post it in each office Agent Ted advises his client that the title to the property he is buying is clear — no need to do a further title search. Why is this inappropriate? - It may constitute unauthorized practice of law under TRELA. To be valid and enforceable, a contract must be in writing, represent a complete agreement, have acceptance communicated, and: - be signed by all parties 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: - effective and executed date

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? - have them sign a notice informing them of the extra taxes Which of these is NOT something that is appropriate to put in Paragraph 11 (the Special Provisions section) of a TREC promulgated contract? - that the contract is contingent on the inspection The Special Provisions section can be used for relevant business information (such as the names of the parties or the property description) that did not fit in the fields provided. Which of the following laws protect people based on race only? - Civil Rights Act of 1866 According to Paragraph 10B, Possessions, what is a seller prohibited from doing after the effective date? - execute a lease without the buyer's permission Which of these is a technique license holders can employ to avoid mortgage fraud? - disclose everything to the lender If the seller is providing an existing survey during a real estate transaction, what must the license holder give to the buyer? - the T-47 Residential Real Property Affidavit A contract which courts cannot compel the parties to perform is: - unenforceable Which of these materials would be considered part of a property's mineral estate? - oil The mineral estate does NOT include water, sand, caliche, gravel, limestone, or iron. A seller is renting back a property from a buyer using the Seller's Temporary Residential Lease. The seller damages the property while they are staying there. Who is responsible for the cost of the repairs? - the seller/tenant Which of these is NOT true about a Seller's Temporary Residential Lease? - the buyer/landlord has no recourse if the seller/tenant overstays In TREC promulgated contracts, what does paragraph 6E(8) say about private transfer fees? - that if they exist, the seller must notify the buyer What is TRUE of a unilateral contract? - A unilateral contract is a promise exchanged for performance. Which of these is NOT something TREC has the power to do? - licensing developers and builders

If a seller is still accepting counteroffers, what is true about their property? - it is not yet officially in contract The cancellation of offers and counter offers must take place before the other party accepts the offer. License holders need to make buyers aware that while they are countering, the property is still available and the seller is free to sell it to someone else. Which of the following is TRUE regarding a contract to transfer real estate which contains no earnest money? - It is valid What does paragraph 7A of the One to Four Family Residential Contract grant every buyer the right to do? - have the property inspected Which of these is an example of an illegal buyer rebate? - an agent gives their buyer client half of their commission without disclosing it on the settlement statement 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? - Yes, because option money is never refundable. Option money is not refundable. Jeremy should only have gotten his $800 in earnest money back. 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? - The contract will terminate and the earnest money will be refunded to the buyer. How can an agent change a contract after it has been signed by both parties? - adding an amendment to contract Which of these is NOT true about the residential service contract? - the seller can prevent the buyer from purchasing it It is the buyer's responsibility to review and choose the coverage of the residential service contract. Which TREC promulgated contract are all the other contracts based on? - One to Four Family Residential Contract By what time is the seller required to furnish a new survey? - The seller must furnish the buyer a new survey no later than 3 days prior to closing How can a license holder ensure that any relevant addenda or notices are officially included in a contract? - by checking the appropriate boxes in Paragraph 22

According to the promulgated contracts, rollback taxes assessed because the buyer changed the usage after closing will be settled how? - The buyer will be obligated to pay the rollback taxes. What is the statute of limitations to claim fraud or misrepresentation against a license holder? - four years from discovery Emily and Josh signed a real estate contract with each other. The contract is now fully executed. What does that mean that Josh and Emily have done? - fulfilled the material terms of the contract According to TREC rules, which of these must be delivered to the seller within three days of a contract's effective date? - earnest money Paragraph C2 on the Lead Based Paint Disclosure states that: - the buyer has 10 days to have the property inspected for lead-based paint Which is the purpose of the Information About Brokerage Services form? - to inform clients how a license holder can represent a party in a real estate transaction Which of these is an example of a unilateral contract? - Mike signs a listing agreement with Broker Amy, agreeing to pay a 6% commission if she sells his house. Which of the following bodies appoints the public member on the Broker-Lawyer Committee? - the governor What is an express contract? - a contract that has a very specific offer and acceptance A seller is planning to convey a refrigerator through the Non-Realty Items Addendum. They financed the applianced purchase, and still have a few payments left. Is this allowed? Why or why not? - No, items conveyed though the Non-Realty Items Addendum must be owned fully by the seller. The seller CANNOT convey items that are not fully paid off. The buyer should not be taking on any payments for the non-realty items. Which of these does NOT create housing occupancy standards? - the Federal Housing Administration Which of the following would constitute unauthorized practice of law and/or be a violation of TRELA? - adding or striking things from pre-printed contract forms

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? - Addendum for Sale of Other Property by Buyer 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? - Mary will transfer the security deposit to the buyer at closing. Who pays for an investigation of an environmental, endangered species, or wetlands issue, according to the Environmental Assessment, Threatened or Endangered Species, & Wetlands Addendum? - the buyer A murder/suicide took place in a property. The crime was widely publicized. What is the disclosure requirement for this crime? - It must be disclosed forever. Per Paragraph 7D, what is it called when a buyer accepts the property, "with any and all defects and without warranty"? - accepting it in "as is" condition According to the Addendum for Back-Up Contract, if a first contract is terminated and the seller notifies the back-up buyer of the termination, what happens? - that date becomes the effective date of the back-up contract 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? - The builder required that she use their contract. What is the Addendum for Property Located Seaward of the Gulf Intracoastal Waterway for? - 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 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? - It should be written in a Non-Realty Items Addendum, not in the Special Provisions section. Which of these is NOT a place where commission split agreements between cooperating brokers can be determined? - the sales contract Which MUST be disclosed to potential buyers? - Prior flood damage that was repaired by the owner If legal action is required regarding a TREC sales contract, what will the non-prevailing party be responsible for? - the prevailing party's reasonable attorney fees and court costs

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? - Addendum for Release of Liability on an Assumed Loan and/or Restoration of Seller's VA Addendum A stand-alone refrigerator would be considered ______. - personal property that will not transfer BUT If the refrigerator is built-in it is considered real property and will transfer in the sale. Which of these is NOT a TREC promulgated form? - Condo Addendum According to Paragraph 9 of the One to Four Family Residential Contract, how must a buyer pay for the property? - "in good funds acceptable to the escrow agent" If a buyer is using VA financing, what will be part of the contract? - Third Party Financing Addendum for Credit Approval Which is TRUE regarding buyer rebates? - undisclosed buyer rebates are not legal In the Farm and Ranch Contract, where does a legal description and list of improvements staying with the property go? - Paragraph 2 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? - to reflect a previously agreed-upon commission What are rules about the maximum number of people allowed to live together in a single dwelling called? - occupancy Standards 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? - It's a violation to include anything in the Special Provisions section that alters the parties' legal rights, because that could be considered the unauthorized practice of law. When a property is purchased and then quickly resells at a higher value it is called: - flipping What does Paragraph A of the Addendum for Back-Up Contract specify a back-up contract holder do when they execute the contract? - deposit the earnest and option money agreed to in the contract According to the Short Sale Addendum the effective date of the contract is amended to the date the Seller notifies the Buyer that the - lender has approved the short sale Within how many days after the title company receiving a copy of the contract will the buyer receive the title policy documents? - 20 days

Why are there multiple promulgated contracts for use in Texas? - because different types of properties have different specific contract needs The type of promulgated contract you use for a real estate transaction is primarily based on what kind of property is being sold. There are different contracts for houses, condos, brand new homes, and ranches. What is one thing that differentiates TREC from the Broker-Lawyer Committee? - TREC members are only appointed by the governor, Broker-Lawyer Committee members can be appointed by different people. Which of these is appropriate to put in the Special Provisions section of the One to Four Family Residential Contract? - the names of sellers that wouldn't fit in Paragraph 1 The Special Provisions section of the One to Four Family Residential Contract provides space for the addition of contract terms that are not already included in the sales contract, or for which a TREC promulgated form does not already exist. In which type of property does the buyer purchase rights to the unit and an undivided interest in the common areas? - condominium 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? - a home inspection Paragraph 7D(2) of the contract indicates: - repairs that must be completed by the seller before closing Which of these is a possible result of when zoning is changed and a property no longer qualifies for a previous exemption? - the property owner owes charged rollback taxes What does the date in the Third Party Financing Addendum provide a deadline to buyers for? - informing a seller they didn't get their financing approved If the buyer fails to notify the seller within the termination time period that they did not receive buyer approval, the buyer forfeits their right to earnest money. Your buyer client has received their inspection report. In it, there are several identified items that they want the seller to fix. Seller has agreed to fix these items before close. What will you need to include in the contract to ensure this agreement is enforced? - amendment An amendment is something that is attached to the contract after it is accepted that changes the contract's requirements. Which of these is something TREC is empowered to do by TRELA? - require license holders to use contract forms for certain transactions According to TRELA, Texas Real Estate Commission has the power to require license holders to use contract forms for certain transactions.

When all parties have agreed to all terms of an offer, have signed the offer, and have initialed any changes that took place during negotiations, what happens to the offer? - it becomes a contract According to TRELA, which of these does one NOT need to be a licensed attorney to do? - fill out a TREC promulgated contract In loan fraud the lender is usually the - victim 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? - October 8, 5 pm The words "time is of the essence" are in: - Paragraph 23 of the one to four family contract What is the purpose of the Short Sale Addendum? - to protect a seller who is selling their home for less than they owe their lender i.e. The Short Sale Addendum protects the seller by referring to "net proceeds" and giving them a way to break the contract if the lender doesn't approve the sale. Why does the Option to Terminate require an extra consideration in the form of option money?

  • because it is another contract within the overall contract How can a buyer ensure they pay the least possible amount of pre-paid interest to the mortgage company? - close near the end of the month This means that scheduling an appointment to close with the title company late in the month is difficult. Which of these is an example of something that could go in Paragraph 12 of the One to Four Family Residential Contract? - the seller plans to pay some of the buyer's closing costs In paragraph 12B, Settlement and Other Expenses, each party's closing expenses are noted. The Seller's Temporary Residential Lease will only be used: - when the seller will remain on the property for no more than 90 days after 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? - the buyer pays it The buyer would make up the difference by paying the buyer's agent 1%.

What is special about the earnest money section (paragraph five) and the option money section (paragraph 23) in the TREC promulgated sales contract? - they contain "time is of the essence" language Only the earnest money and option money sections contain "time is of the essence" language in promulgated TREC contracts. Which one of these is a bilateral contract? - Zelda agrees to pay Gus $250,000 for ownership of his house. A bilateral contract obligates both parties to fulfill certain terms, where one party promises to do something for another party and that party promises to do something for the first party. According to Paragraph 9B, what happens when someone buys a property that currently under a lease? - the buyer must honor the lease, and the seller transfers them the security deposit When a contract has been fully executed, what has happened to it? - it has been terminated 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)? - the buyer can terminate the contract and get their earnest money back Who is tasked with drafting and editing Texas's promulgated contracts? - the Broker-Lawyer Committee What form must be provided to any unrepresented buyer or seller a license holder talks with? - Information About Brokerage Services form The TREC IABS must be presented to any unrepresented buyer or seller a license holder talks with. In which of these scenarios would it be correct to use the Residential Condominium Contract (Resale)? - 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. What is the name of the law that requires certain contracts (for example, sales contracts) to be written down and signed? - the statute of frauds 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? - within seven days after the effective date The seller must deliver a copy of the lease and any move-in condition form within seven days after the effective date of the contract.

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? - Angela will have to pay back the earnest money, attorney fees, and the cost of a lawsuit. Which of these constitutes a voidable contract? - A contract made with a minor Which of these is NOT a protected class of people, according to Fair Lending Laws? - Sexuality Laws prohibit lenders from discriminating against all of the same protected classes as the Fair Housing Act, with the addition of age, marital status, and receipt of public income. Buyer Ashley is shopping for empty lots on which to build a home. She found a lot for sale that looks promising, but she's concerned its located on a wetland. What should her agent do? - Use the Unimproved Property contract and attach the Environmental Assessment, Threatened or Endangered Species and Wetlands Addendum. What is the only time it is acceptable for a license holder not to present all offers to a seller client? - if the listing agreement specifies that it is not necessary 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? - They can terminate the contract within the first three days. When is it acceptable for a seller not to give a buyer a seller's disclosure notice? - when the buyer has indicated in the contract it isn't necessary If a buyer indicates they either already have or don't need the seller's disclosure (by checking box one or three in paragraph 7B of the contract), it is okay not to give them one. Agent Kara signed a buyer's representation agreement with her client that set her commission at 3%. The listing broker of the home her client chose offered 3.5% to the buyer's broker. What percentage of the sale price of the home will Kara's commission be? - 3.5% Kara would earn the 3.5% offered by the listing broker. What are two real estate governing bodies that were formed as a result of TRELA? - TREC and the Broker-Lawyer Committee TREC promulgates a contract for a certain type of transaction and governs the implementation of all real estate practice. TREC has 9 members, and the Broker-Lawyer Committee has 13 members. 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? - 3 days

Which of these forms is least likely to be involved in the sale of unimproved property? - Condominium Resale Certificate In which of these situations is the seller required to provide a seller's disclosure? - Brian is selling an investment property he has never lived in. Investors still have to provide seller's disclosures. The rest do not. Agent Aaron was drawing up a contract, and opted to use his brokerage's (lawyer-created) Seller's Disclosure Notice instead of TREC's. Is this allowed? Why or why not? - Yes, because the Seller's Disclosure Notice is not promulgated by TREC. In a TREC promulgated contract, what is the Third Party Financing Addendum concerned with? - financing contingencies What is the purpose of TREC form OP-C Notice to Prospective Buyer? - provides a notice to buyers using their own contract to obtain an Abstract of Title 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? - Laura can waive the addendum by a date she and the seller agree on, otherwise her contract terminates. A contract has an effective date of July 21st, with a seven day option period. What is the latest that contract can be terminated without penalty? - July 28 at 5 PM Thanks to "day zero," the seven day option period starts on July 22 and ends at 5 pm on July 28. According to Paragraph 6B: Commitments in the promulgated One to Four Family Residential Contract, what must be provided to the buyer along with the title policy documents? - any restrictive covenants What determines which New Home Contract a license holder should use? - whether or not the building has been completed There are two versions of the New Home Contract: one for completed construction, and one for incomplete construction. If nothing is added in Paragraph 7D, the agreement says that the buyer is accepting the property: - in its present condition The Seller's Disclosure Notice is a requirement of - The Texas Property Code

What information does the Disclosure of Relationship with Residential Service Company form convey? - that it is a violation of RESPA for a license holder to receive a referral fee for passing on a name to a service provider Agents are required to give all buyers a written copy of the title notice. Aside from Paragraph 6E(1) of the One to Four Family Residential contract, where else can this notice be found? - the Notice to Prospective Buyer If a property is occupied solely by people over the age of 62 and qualifies as senior housing it is exempt from: - The familial status portion of the Fair Housing Act Agent Yugo pads the income numbers on their client's loan application. What is TRUE regarding this situation? - Yugo has committed loan fraud. What part of the Third Party Financing Addendum for Credit Approval specifically pertains to people getting VA loans? - Paragraph D When seller financing is being used, the seller becomes: - the lender 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? - a Third Party Financing Addendum If clients want to make an offer to the seller offering a "lease with option to buy," the buyer's agent should: - tell the client they will need an attorney to draw up the documents Why do townhouses require the One to Four Family Residential Contract instead of the Residential Condominium Contract? - because unlike condo buyers, townhouse buyers are purchasing both the land and improvements Which of these is NOT necessary for a contract to be binding and effective? - the contract must be hand delivered to the title company According to the NAR Code of Ethics, unless the agent has written instructions stating otherwise, they must present all offers until: - The Closing Justine and Marilyn are legally competent parties. They want to create a valid real estate contract. What one other thing do they need? - consideration Which element of the TREC promulgated contracts is the same across all contract forms? - Paragraph 1 identifies the the parties to the contract. In every promulgated residential contract, Paragraph 1 identifies the the parties to the contract.

in a Texas real estate contract, what does an Addendum for Property Subject to Mandatory Membership allow a buyer to do? - terminate a contract if not given information about the property's HOA A buyer may elect to terminate a contract through the Paragraph B1 of the Third Party Financing Addendum if they aren't provided with the appropriate subdivision information sheet. 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? - Using TREC's promulgated One to Four Family Residential Contract License holders may only use promulgated contracts, contracts created by lawyers licensed in Texas, or contracts created by property owners. A broker license does not give brokers permission to create real estate contracts.