MGRADES EXAMS
Champions School of Real Estate: Law of
Contracts UPDATED ACTUAL Exam
Questions and CORRECT Answers
Default - CORRECT ANSWER - When a party to a contract fails to perform under the
contract, that party is in _________.
Breach of Contract - CORRECT ANSWER - Failure to perform is also commonly referred
to as a ___________
Injured Party - CORRECT ANSWER - When a party is in default or has breached the
contract, the other party is known as the ___________________
Liquidated Damages
Monetary Damages
Specific Performance - CORRECT ANSWER - 3 options available to seller in the event
the buyer defaults
Liquidated Damages - CORRECT ANSWER - When The seller can choose to accept the
buyer's earnest money, releasing all parties from any further obligation under the contract. These
are are established in the contract.
Monetary Damages - CORRECT ANSWER - In addition to specific performance, the
injured party may "seek such other relief as may be provided by law." This would be an awarded
by the court. Because awarded by the court, one never knows what they will be until the court
rules.
Specific Performance - CORRECT ANSWER - The injured party files a court action
seeking an order of the court directing the defaulting party to perform according to the terms of
the contract. It's the only remedy that would possibly result in the full execution (closing) of the
transaction.
,MGRADES EXAMS
Specific Performance
Monetary Damages
Refund of Earnest Money (buyers acceptance terminated contract) - CORRECT
ANSWER - 3 options available to the buyer In the event of default by the seller, the buyer
becomes the injured party. The buyer may have these options
Right of First Refusal - CORRECT ANSWER - Some residential leases contain this,
giving the tenant the right to purchase the leased property by matching or bettering any offer
before the property will be sold to someone else.
Buyer's Temporary Residential Lease
Seller's Temporary Residential Lease - CORRECT ANSWER - The only 2 promulgated
lease forms provided by TREC
Buyer's Temporary Residential Lease - CORRECT ANSWER - for use when the buyer
occupies the property for no more than 90 days prior to closing
Seller's Temporary Residential Lease - CORRECT ANSWER - for use when the seller
occupies the property for no more than 90 days after closing.
TVLB - Texas Veterans Land Board - CORRECT ANSWER - TEXAS VETERAN'S
LOAN PROGRAM
The Texas Veterans Land Board Housing Assistance Program (VHAP) is a benefit that every
buyer with a military background should consider. To participate in the program, the veteran
obtains an FHA, VA, or conventional loan from a participating lender. The qualification process
is the same as for any other FHA, VA, or conventional loan. The difference is that the loan is
sold to the Texas Veterans Land Board (VLB), as opposed to a secondary market purchaser such
as Fannie Mae or Freddie Mac. The primary benefit to the veteran is that the rate on the Veterans
Land Board loan is often up to one percent below prevailing market rates. For more information,
visit the VLB website at texasveterans.com.
Indestructibility or Durability
,MGRADES EXAMS
Immobility
Nonhomogeneity - CORRECT ANSWER - 3 physical characteristics of land
Indestructibility or durability - CORRECT ANSWER - refers to the fact that land cannot
be destroyed. It remains, no matter what happens to it. It may go underwater, become a crater, or
be added to. In any case, the land will still be there; it is permanent.
Immobility - CORRECT ANSWER - refers to the fact that land cannot be moved. When
personal property is pur- chased, the buyer can move it to a new location. When land or rights in
land are purchased, the owner must go to the land.
Nonhomogeneity - CORRECT ANSWER - refers to the fact that no two parcels of land
are the same. Even two identi- cal-looking lots in a subdivision at least differ in their position on
the earth. Each parcel of land is unique.
Scarcity
Modification
Fixity
Situs - CORRECT ANSWER - 4 economic characteristics of land
Scarcity - CORRECT ANSWER - comes from the theory of supply and demand. When
there is a shortage of some- thing that individuals want, the price goes up. For example, in a new
golf course commu- nity, only a limited number of lots can be "on" the golf course. The scarcity
will increase the value of these lots. Another example is property in cities. Because of the higher
demand for this land, it will be more valuable than land in suburban or rural areas.
Modification - CORRECT ANSWER - refers to the fact that value is affected by man-
made changes to the land. These changes can be on the land itself or off-site. Examples of
modification include improved transportation, which makes land more accessible, such as the
railroads crossing the United States, or airports. When freeways are extended or widened, land in
previously undeveloped areas becomes attractive for new residential and retail development. The
most well-known case is probably that of the agricultural land in the Orlando, Florida area that
experienced an enormous increase in value after the construction of Disney World®.
, MGRADES EXAMS
Fixity - CORRECT ANSWER - refers to the fact that land, and additions to the land, such
as buildings, take long pe- riods to pay for themselves. It may take twenty years for the owner of
a new office building to recover the cost of the acquisition of the land, construction, and the cost
of financing. Because of this, investors must analyze the long-term nature of owning an
investment property. Fixity is also used to refer to the fact that land cannot be moved, but is fixed
in location.
Situs - CORRECT ANSWER - refers to the location of the property or land from an
economic, not a geographic viewpoint. The familiar phrase, "location, location, location" is
based on the preferences people have for specific characteristics in property, and the fact that
location dominates those preferences. Both natural and man-made factors will have an impact on
preferenc- es. Climate, views, access to natural recreation, as well as schools, job opportunities,
and transportation, will all be important. Situs may change over time as society changes, and
different lifestyles prevail.
Present - CORRECT ANSWER - Agents must ______ all ofers
Phone
Fax
Email
Letter
Hand Delivery - CORRECT ANSWER - 5 ways an offer can be communicated
Net Sheet - CORRECT ANSWER - an estimate of the net proceeds to the seller and
should be prepared based upon the offer being considered and present with the offer
Offeror - CORRECT ANSWER - The person making the offer
Offeree - CORRECT ANSWER - The person receiving an offer
Champions School of Real Estate: Law of
Contracts UPDATED ACTUAL Exam
Questions and CORRECT Answers
Default - CORRECT ANSWER - When a party to a contract fails to perform under the
contract, that party is in _________.
Breach of Contract - CORRECT ANSWER - Failure to perform is also commonly referred
to as a ___________
Injured Party - CORRECT ANSWER - When a party is in default or has breached the
contract, the other party is known as the ___________________
Liquidated Damages
Monetary Damages
Specific Performance - CORRECT ANSWER - 3 options available to seller in the event
the buyer defaults
Liquidated Damages - CORRECT ANSWER - When The seller can choose to accept the
buyer's earnest money, releasing all parties from any further obligation under the contract. These
are are established in the contract.
Monetary Damages - CORRECT ANSWER - In addition to specific performance, the
injured party may "seek such other relief as may be provided by law." This would be an awarded
by the court. Because awarded by the court, one never knows what they will be until the court
rules.
Specific Performance - CORRECT ANSWER - The injured party files a court action
seeking an order of the court directing the defaulting party to perform according to the terms of
the contract. It's the only remedy that would possibly result in the full execution (closing) of the
transaction.
,MGRADES EXAMS
Specific Performance
Monetary Damages
Refund of Earnest Money (buyers acceptance terminated contract) - CORRECT
ANSWER - 3 options available to the buyer In the event of default by the seller, the buyer
becomes the injured party. The buyer may have these options
Right of First Refusal - CORRECT ANSWER - Some residential leases contain this,
giving the tenant the right to purchase the leased property by matching or bettering any offer
before the property will be sold to someone else.
Buyer's Temporary Residential Lease
Seller's Temporary Residential Lease - CORRECT ANSWER - The only 2 promulgated
lease forms provided by TREC
Buyer's Temporary Residential Lease - CORRECT ANSWER - for use when the buyer
occupies the property for no more than 90 days prior to closing
Seller's Temporary Residential Lease - CORRECT ANSWER - for use when the seller
occupies the property for no more than 90 days after closing.
TVLB - Texas Veterans Land Board - CORRECT ANSWER - TEXAS VETERAN'S
LOAN PROGRAM
The Texas Veterans Land Board Housing Assistance Program (VHAP) is a benefit that every
buyer with a military background should consider. To participate in the program, the veteran
obtains an FHA, VA, or conventional loan from a participating lender. The qualification process
is the same as for any other FHA, VA, or conventional loan. The difference is that the loan is
sold to the Texas Veterans Land Board (VLB), as opposed to a secondary market purchaser such
as Fannie Mae or Freddie Mac. The primary benefit to the veteran is that the rate on the Veterans
Land Board loan is often up to one percent below prevailing market rates. For more information,
visit the VLB website at texasveterans.com.
Indestructibility or Durability
,MGRADES EXAMS
Immobility
Nonhomogeneity - CORRECT ANSWER - 3 physical characteristics of land
Indestructibility or durability - CORRECT ANSWER - refers to the fact that land cannot
be destroyed. It remains, no matter what happens to it. It may go underwater, become a crater, or
be added to. In any case, the land will still be there; it is permanent.
Immobility - CORRECT ANSWER - refers to the fact that land cannot be moved. When
personal property is pur- chased, the buyer can move it to a new location. When land or rights in
land are purchased, the owner must go to the land.
Nonhomogeneity - CORRECT ANSWER - refers to the fact that no two parcels of land
are the same. Even two identi- cal-looking lots in a subdivision at least differ in their position on
the earth. Each parcel of land is unique.
Scarcity
Modification
Fixity
Situs - CORRECT ANSWER - 4 economic characteristics of land
Scarcity - CORRECT ANSWER - comes from the theory of supply and demand. When
there is a shortage of some- thing that individuals want, the price goes up. For example, in a new
golf course commu- nity, only a limited number of lots can be "on" the golf course. The scarcity
will increase the value of these lots. Another example is property in cities. Because of the higher
demand for this land, it will be more valuable than land in suburban or rural areas.
Modification - CORRECT ANSWER - refers to the fact that value is affected by man-
made changes to the land. These changes can be on the land itself or off-site. Examples of
modification include improved transportation, which makes land more accessible, such as the
railroads crossing the United States, or airports. When freeways are extended or widened, land in
previously undeveloped areas becomes attractive for new residential and retail development. The
most well-known case is probably that of the agricultural land in the Orlando, Florida area that
experienced an enormous increase in value after the construction of Disney World®.
, MGRADES EXAMS
Fixity - CORRECT ANSWER - refers to the fact that land, and additions to the land, such
as buildings, take long pe- riods to pay for themselves. It may take twenty years for the owner of
a new office building to recover the cost of the acquisition of the land, construction, and the cost
of financing. Because of this, investors must analyze the long-term nature of owning an
investment property. Fixity is also used to refer to the fact that land cannot be moved, but is fixed
in location.
Situs - CORRECT ANSWER - refers to the location of the property or land from an
economic, not a geographic viewpoint. The familiar phrase, "location, location, location" is
based on the preferences people have for specific characteristics in property, and the fact that
location dominates those preferences. Both natural and man-made factors will have an impact on
preferenc- es. Climate, views, access to natural recreation, as well as schools, job opportunities,
and transportation, will all be important. Situs may change over time as society changes, and
different lifestyles prevail.
Present - CORRECT ANSWER - Agents must ______ all ofers
Phone
Fax
Letter
Hand Delivery - CORRECT ANSWER - 5 ways an offer can be communicated
Net Sheet - CORRECT ANSWER - an estimate of the net proceeds to the seller and
should be prepared based upon the offer being considered and present with the offer
Offeror - CORRECT ANSWER - The person making the offer
Offeree - CORRECT ANSWER - The person receiving an offer
