Promulgated Contract Forms (Exam Review)

TREC contract forms and their uses - Answer- - Sales Contracts: 1) One-to-Four Family Contract (Resale) 2) New Home Contract (Incomplete Construction) 3) New Home Contract (Completed Construction) 4) Unimproved Property Contract 5) Residential Condominium Contract (Resale) 6) Farm and Ranch Contract - Leases: 1) Buyer's Temporary Residential Lease 2) Seller's Temporary Residential Lease TREC rules regarding the buyer's use of inspectors - Answer- - seller permits buyer access to the property at reasonable times for inspections; will turn on utilities and leave utilities on during the time covered by this contract - Seller is to permit the buyer to perform as many inspections as the buyer deems necessary - Inspector must be TREC licensed or another person allowed by law The purpose and use of Paragraph 6 - Answer- - This paragraph protects both buyer and seller in the event that there is an issue with the title - If the seller fails to resolve these issues, it is an out for the buyer, and the buyer will get their earnest money back if they terminate within the contract's allowed time from receipt of the title commitment. - It protects the seller in that it gives the seller time to resolve issues that are identified before the buyer can back out for that reason. The parties to the contract specifically as noted in Paragraph 18.A - Answer- Buyer and seller; the escrow agent is not a party to the contract and has no liability for the performance of either party; title company provides two primary functions: escrow services and title insurance Stigmatized properties - causes and/or features - Answer- A property where there has been a murder or alleged haunting; can also be stigmatized if it is in the vicinity of the residence of a known sexual offender The unlawful practice of law - specific examples - Answer- - License holder must not draw a deed, note, deed of trust, or other written instrument that can transfer or affect the title to or an interest in land - Must not advise or counsel a person as to the validity or legal sufficiency of an instrument or as to the validity of real estate - License holders should not alter the pre-printed text of a promulgated form, as this may lead to the unlawful practice of law Items to be retained by the Seller as specified in the contract - Answer- Exclusions; must have a name and a location; must be removed prior to the delivery of possession Paragraph 5 - features - Answer- - earnest money; deposit paid upfront by buyer to show that he or she is serious in his or her intent - option period; time allowed for inspections that the buyer may want Requirements for buyer approval according to the TREC Third Party Financing Addendum - Answer- - If the buyer cannot obtain credit approval and she wants to exercise her right to terminate the contract under the Third Party Financing Addendum, she must give written notice to the seller within the time period agreed to in the addendum. - If the buyer gives notice within the time required, the contract terminates, and the earnest money is refunded to the buyer. - If the buyer doesn't provide the notice within the time required, the contract will no longer be subject to the addendum and the buyer could end up in breach of the contract if she is unable to obtain credit approval. Closing costs or settlement expenses - Answer- 1) Expenses payable by the seller 2) Expenses payable by the buyer - If any expense exceeds an amount expressly stated in this contract for such expense to be paid by a party, that party may terminate this contract unless the other party agrees to pay such excess. Items typically prorated/the proration process - Answer- - the process of dividing ongoing expenses between the buyer and the seller at closing - calculated through the day of closing for taxes, maintenance fees, and rents Required used of TREC forms and exceptions to required use - Answer- 1) Required Use: - When a license holder is negotiating contracts for the sale, exchange, option, lease, or rental of any interest in real property, he or she must use a mandatory TREC form if one is available for the transaction. 2) Exceptions to Required Use: - forms used by a property owner or attorney - transactions without mandatory TREC forms or addenda Types of contracts - valid, void, voidable, executory, executed, unenforceable - Answer- - Valid Contract: one that meets all of the requirements of law - Void Contract: invalid from the beginning and does not affect the parties - Voidable Contract: one that cannot be enforced against one or more of the parties - Executed Contract: all parties have fulfilled their promises - Unenforceable Contracts: one that cannot be enforced due to some flaw in the contract, passage of time, or other issues that make enforcement impossible Use of Third Party Financing Addendum - Answer- - If the buyer cannot obtain credit approval and she wants to exercise her right to terminate the contract under the Third Party Financing Addendum, she must give written notice to the seller within the time period agreed to in the addendum. - If the buyer gives notice within the time required, the contract terminates, and the earnest money is refunded to the buyer. - If the buyer doesn't provide the notice within the time required, the contract will no longer be subject to the addendum and the buyer could end up in breach of the contract if she is unable to obtain credit approval. Requirements of a valid contract - Answer- - COLIC - Competent parties - Offer and acceptance (mutual consent) - Legal Purpose - In writing (when required by law) - Consideration When does an offer become a contract - Answer- An offer becomes a binding contract when all parties sign it, and the acceptance is communicated to the offering party. Paragraph 23 - use and timing - Answer- - representation in Texas is optional - the execution date follows Paragraph 23 Paragraph 8.A - disclosure of agency coupled with an interest and family relationships - Answer- Paragraph 8.A. states that a license holder with a familial relationship with a party to the transaction must disclose this information to the other parties before entering into a contract. Lead Paint - disclosures, dates, timing, buyer's rights, seller's responsibilities - Answer- - must be disclosed if a house was built before 1978 - buyer may have the property inspected within 10 days of the effective date of the contract - seller must check the correct box about whether they know about lead paint or not TREC Form RSC-2 -- purpose and use - Answer- - to disclose to a party to a real estate transaction in which the license holder represents one or both of the parties any payments received for services provided for or on behalf of a residential service company licensed under Texas Occupations Code Chapter 1303. - used when residential service companies are involved Fair Housing terminology and prohibited acts - Answer- 1) Terminology: - Steering/Channeling: taking buyers or renters to, or away from, a particular area based on the race, religion, etc. of the buyer or renter and is the most common cause for complaint under the law. - Blockbusting/Panic Peddling: any attempt to induce panic selling in a neighborhood for financial gain. The most common tactic is to imply the entrance into the neighborhood of a new ethnic or racial group and suggest to homeowners that they sell now "While values are still high." 2) Prohibited Acts; based on race, color, national origin, religion, sex, familial status, or handicap in the sale or rental of house: - refuse to rent or sell housing - refuse to negotiate for housing - make housing unavailable - set different terms, conditions or privileges for sale or rental of a dwelling - provide different housing services or facilities - falsely deny that housing is available for inspection, sale, or rental The T-47 affidavit - purpose and use - Answer- -an affidavit that accompanies a survey in real estate transactions when the buyer and seller wish to use an existing survey rather than paying for a new one at the time of the transaction. - The seller is responsible for filling out this form. Loan assumption - features and requirements - Answer- - When a purchaser assumes an existing mortgage, the original borrower is not necessarily released from on-going liability for repayment. - If the seller does not receive a release of liability, the buyer assuming the loan "joins the original borrower" on the note, leaving both with liability for repayment of the loan. - When negotiating an assumption, a license holder representing the seller would be wise to suggest that the contract include the release contingency. Promulgated loan forms and their use - Answer- Promulgated contract forms are forms that are both approved and required by the Texas Real Estate Commission Features of the Lead Based Paint disclosure form - Answer- - lead warning statement - seller's disclosure - buyer's rights - buyer's acknowledgement - broker's acknowledgement - certification of accuracy Paragraph 20 - Federal Tax Requirements - Answer- - If Seller is a "foreign person," as defined by Internal Revenue Code and its regulations, or if Seller fails to deliver an affidavit or a certificate of non- foreig