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Law of Contracts > Chapter 1 Vocabulary > Flashcards

Chapter 1 Vocabulary Flashcards

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1
Q

Is the sale of the purchaser’s home before they can buy another called a contingency?
A. Yes
B. No

A

A. Yes

There are many contingencies in contracts, i.e. obtaining financing, making sure the property appraises, making sure the seller can convey clean title. Having a home to sell is also a contingency

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2
Q

In the event of a foreclosure, in which the borrower would default on his/her loan payments, the Trustee carries the responsibility of handling the foreclosure proceedings in a deed of trust.

True
False

A

True

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3
Q

The act which was designed to enhance consumer protection by reducing fraud and encouraging states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators is known as the SAFE Act. (2008)

True
False

A

True

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4
Q

The Fair Credit Reporting Act gives the individual the right to inspect his/her file, correct any errors, and make explanatory statements to supplement the file surrounding his/her credit.

True
False

A

True

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5
Q

The process by which the seller of the house lends the buyer the money to purchase the house, instead of the buyer going through a bank, is known as owner or seller financing.

True
False

A

True

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6
Q

The promissory note is the contractual agreement to repay the debt.

True
False

A

True

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7
Q

The primary purpose of FNLMC (Freddie Mac) is to provide financial assistance to low and moderate-income home buyers by promoting mortgage credit.

True
False

A

True

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8
Q

Farmer Mac is the shareholder-owned corporation that was federally chartered by Congress in 1988, which seeks to establish a secondary mortgage market for farmers, ranchers, and rural homeowners.

True
False

A

True

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9
Q

The system which strives to provide its members (members include thrift institutions, commercial banks, credit unions, insurance companies, and certified community development financial institutions) with a source of funding for mortgages and asset-liability management is known as the Federal Home Loan Bank (FHLB)

A

True

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10
Q

The Real Estate Settlement Procedures Act was put in place to ensure that consumers would be provided with more helpful information about the cost of the mortgage settlement.
A. True
B. False

A

Rationale: The correct answer is A. True.

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11
Q

Credit unions are part of the secondary market.
A. True
B. False

A

Rationale: The correct answer is B. False.

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12
Q

Fixed-rate mortgages, adjustable-rate mortgages, balloon mortgages, and hybrid loans are all considered conventional loans.
A. True
B. False

A

Rationale: The correct answer is A. True.

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13
Q

FNMA (Fannie Mae) sets the guidelines for conforming loans.
A. True
B. False

A

Rationale: The correct answer is A. True.

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14
Q

The Community Reinvestment Act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods.
A. True
B. False

A

Rationale: The correct answer is A. True.

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15
Q

A mortgage is a three-party instrument that includes the lender, borrower, and trustee.
A. True
B. False

A

Rationale: The correct answer is B. False.

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16
Q

The security for a mortgage loan is the property pledged as collateral for the loan.
A. True
B. False

A

Rationale: The correct answer is A. True.

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17
Q

The note is the promise to repay the loan.
A. True
B. False

A

Rationale: The correct answer is A. True.

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18
Q

Seller financing is a way to by-pass traditional lending methods.
A. True
B. False

A

Rationale: The correct answer is A. True

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19
Q

An FHA loan is an option for purchasers who are behind in making their mortgage payments.
A. True
B. False

A

Rationale: The correct answer is B. False.

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20
Q 
Redlining is prohibited by:
A.    Regulation Z 1969
B.    Fair Housing Act 1968
C.    Equal Credit Opportunity Act 1974
D.    Community Reinvestment Act 1977
A

Rationale: The correct answer is D. Lenders are prohibited from discriminating where they will make loans within a certain geographic area. In other words, they cannot “red-line” certain areas.

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21
Q 
Which party is NOT involved on the deed of trust?
A.    Mortgagor
B.    Mortgagee
C.    Trustor
D.    Trustee
A

The correct answer is C. Trustor

The borrower (mortgagee), the lender (mortgager), and the trustee are the three parties involved in the deed of trust.

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22
Q

The main purpose of RESPA is to provide credit scoring to prospective borrowers.
A. True
B. False

A

The correct answer is B. False

RESPA requires that consumers receive disclosures at various times in a transaction and outlaws kick-backs that increase the cost of settlement services

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23
Q 
A list of lenders and their loan rates to consumers is called:
A.    CLO 
B.    CEO
C.    COO
D.    ECOA
A

Rationale: The correct answer is A.

Obtaining a list of lenders is easy to do; however, it is advisable to develop a good working relationship with two or three lenders and stick with them. They might not always have the absolute lowest interest rate, but if you develop a good relationship, they will get your transactions closed!

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24
Q

Are an abstract of title and a deed the same thing?
A. Yes
B. No

A

The correct answer is B.

An abstract of title is an attorney opinion of the history of the title. A deed transfer property from one to another.

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25
Q

Abstract of title is a condensed history of the title to the property.

True
False

A

True

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26
Q 
The evidence of right which a person has to the ownership and possession of land. It is commonly considered a history of rights.
A.    Deed
B.    Deed of Trust
C.    Grant
D.    Title
A

Rationale: The correct answer is D. Title

Ownership to the property is acquired by deed. In other words, title passes by deed.

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27
Q 
What type of deed is used when purchasing a foreclosure?
A.    General warranty deed
B.    Special warranty deed
C.    Sheriff’s deed
D.    Quitclaim deed
A

Rationale: The correct answer is B. General warranty deeds go back to the Spanish Land grants and guarantee title back to that point where Special warranty deeds only warrant clear title the time the current owner owned the property. Special warranty deeds are often used by banks when selling foreclosed property.

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28
Q

The verification of deposit is the document prepared by an individual’s bank stating that he or she has a certain amount of funds in reserve in the bank, such as in a checking or savings account.
A. True
B. False

A

Rationale: The correct answer is A. True.

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29
Q

Examples of personal debt are auto loans, student loans, and mortgage loans.
A. True
B. False

A

Rationale: The correct answer is A. True.

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30
Q

The Community Reinvestment Act requires lenders, mortgage brokers, or servicers of home loans to provide borrowers with pertinent and timely disclosures regarding the nature and costs of the real estate settlement process.
A. True
B. False

A

Rationale: The correct answer is B. False.

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31
Q

NOT attending the home inspection is one of the most common mistakes made by both buyers and sellers.
A. True
B. False

A

Rationale: The correct answer is A. True

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32
Q

During the closing process, the underwriter is responsible for disbursing funds as the transaction dictates as well as maintaining the account into which the earnest money is deposited.
A. True
B. False

A

Rationale: The correct answer is B. False

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33
Q

If the taxes are not paid at or prior to closing for the current year, the title company will be responsible for paying them.
A. True
B. False
.

A

Rationale: The correct answer is B. False

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34
Q

The appraisal for the loan is conducted by an appraiser chosen by the buyer or the seller.
A. True
B. False

A

Rationale: The correct answer is B. False.

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35
Q

The Consumer Financial Protection Bureau administers and enforces the Real Estate Settlement Procedures Act.
A. True
B. False

A

Rationale: The correct answer is A. True.

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36
Q

The Loan Estimate and the Closing Disclosure came out of the Dodd-Frank Act.
A. True
B. False

A

Rationale: The correct answer is A. True.

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37
Q

The verification of deposit gives the buyer the unrestricted right to terminate the contract for any reason.
A. True
B. False

A

Rationale: The correct answer is B. False.

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38
Q

Equitable title is the type of title that refers to the right of one person to obtain full ownership of the property.

A

True

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39
Q

Voluntary alienation is the conveyance of title that must be done using a deed through sale or gift.

A

True

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40
Q

General warranty deed is the type of deed that conveys clear title back to the Spanish land grants.

A

True

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41
Q

Eminent domain is the right of the government to take private land for public use.

A

True

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42
Q

Deed is the way that real estate is conveyed in Texas.

A

True

43
Q

Chain of title is the past series of transactions affecting title to a specific piece of land.

A

True

44
Q

Foreclosure is the process by which a lender exercises their power of sale because a mortgage is in default.

A

True

45
Q

Upon the death of an individual is the time a life estate terminates.

A

True

46
Q

Special warranty deed is a type of deed that is provided in a foreclosure sale or from a builder.

A

True

47
Q

Probate is the way to confirm the validity of a will.

A

True

48
Q 
Approval of the loan, the property, and the Closing Disclosure is the responsibility of the:
A. Underwriter
B. Loan officer
C. Escrow officer
D. Broker
A

The correct answer is A. Underwriter.

The underwriter is responsible for the
approval of the loan. An escrow officer is an employee of the title company
and once the loan is approved prepares all the documents for closing.

49
Q 
Dividing expenses between the buyer and the seller in proportionate shares is called:
A. Proration
B. Assignment
C. Allotment
D. Conveyance
A

The correct answer is A. Proration.

Certain prepaid items (part of the
closing costs) are prorated or divided. Items that are prorated are interest,
taxes, insurance, rent, and maintenance fees.

50
Q 
The process that brings the note into legal existence:
A. Execution
B. Escrow
C. Underwriting
D. Closing
A

The correct answer is D. Closing. Once the property is closed and funded,
the buyer’s note to repay the loan becomes legally binding

51
Q

When are repairs most often negotiated?
A. Before the final acceptance of the contract
B. Immediately after execution of the contract by both parties
C. At the end of the option period
D. One week prior to closing

A

The correct answer is C. At the end of the option period.

Once the property is under contract, the buyer
has the right to have the home inspected. Once that is complete, the buyer will normally prepare a list of property items for the seller to repair. You do not want to wait until the last minute to negotiate and have
the repairs done because it can cause closing delays, disagreements, and unnecessary problems

52
Q

Do lenders require an appraisal on new residential loans?
A. Yes
B. No

A

The correct answer is A. Yes. Lenders will require the property to be appraised

53
Q

Is the seller required to have the utilities turned on during the time the contract is in effect?
A. Yes
B. No

A

The correct answer is A. Yes.

This is noted in paragraph 7A in the residential
contract

54
Q

Seller pays the buyer his prorated share of taxes while the seller has owned the home. What happens to the taxes at the closing?
A. Seller escrows his portion of taxes with the title company and title company pays the seller’s share at the end of the year.
B. Nothing. Buyer and seller each pay their share of taxes at the end of the year.
C. Buyer pays the entire year no matter when the property closes.
D. The seller pays, and the buyer gets credit for the amount of taxes due at the time of the closing.

A

The correct answer is D.

The seller pays, and the buyer gets credit for the amount of taxes due at the time of the closing. The buyer then pays the property taxes for the entire year when they are due at the end of the year. Seller will pay his portion of the taxes while he lived in the home, and the buyer will be credited that
amount. The buyer will then be responsible for paying the entire year’s property taxes when they are due.

55
Q

Property is normally delivered to the buyer upon closing and funding.
A. True
B. False

A

The correct answer is A. True.

Stated in paragraph 10 of the contract,
“normally” buyers do not move into the property prior to closing

56
Q

The Truth-in-Lending Act’s 1968 goal is to provide easy and understandable language to the borrower
regarding closing costs and fees associated with the loan.
A. True
B. False

A

The correct answer is A. True.

Such forms shall conspicuously and clearly itemize all charges
imposed upon the borrower and all charges imposed upon the seller in connection with the
settlement. The form that is used to explain this is the Closing Disclosure

57
Q

Instead of retrieving the seller’s name from tax records, it is recommended (and more reliable) to obtain the seller’s name from the D–d__________.

A

Rationale: deed

58
Q

The seller of real property in Texas and a real estate broker must disclose any known _d——_____ to the prospective buyer.

A

Rationale: defects

59
Q

Unrealistic time periods are unlikely to make the contract close sooner and may cause enforcement of the contract to be jeopardized.

A

True

60
Q

If the legal description in a contract is inadequate, the contract is unenforceable.

A

True

61
Q

For the title company to accept an existing survey, the seller must provide both the current survey and a(n) T-47

A

True

62
Q

Only factual statements should be used in the SPECIAL PROVISIONS paragraph of the contract.

A

True

63
Q

Who pays for the title policy is a negotiable item in the contract. Yes or No?

A

Yes

64
Q

Performance on the contract is often calculated from the effective date of the contract.

A

TRUE

65
Q

The rule for the Seller’s Disclosure came out of the Texas property code.

A

TRUE

66
Q

Paragraph 4: If a licensed agent is at least a 10% party to the contract, the licensed agent must disclose that fact.
A. True
B. False

A

Rationale: The correct answer is A.

Proper disclosure is required if an agent is going to own 10% or more of the property.

67
Q

Will a lender accept an existing survey?
A. No, lenders will require a new survey.
B. Yes, if the seller can produce one that is not older than 10 years.
C. Only when the seller provides the existing survey and signs an affidavit saying that no improvements have been made on the property.
D. It depends on the lender and their individual policies.

A

Rationale: The correct answer is C.

See paragraph 6 of the contract

68
Q

The termination option in paragraph 23 gives the buyer the unrestricted right to terminate the contract for any reason within a certain time- period.
A. True
B. False

A

Rationale: The correct answer is A.

This is usually a 7-10 day time frame. This is for any reason, not just an inspection. If the buyer finds another home to buy, they can terminate the contract within that time- period.

69
Q

True or False

Elements of a Valid Contract (Colics)
Competent Parties
Offer & acceptance
Legality of object
In writing 
Consideration (promise for promise)
Signatures & initials
A

True

70
Q

Express Contract can be In writing or oral

Best example Buyer representation remember only enforceable if in writing

A

True

71
Q

Implied Contract based on the action of the party think of a restaurant we eat, order and pay

A

True

72
Q

Unilateral 2 parties 1 has the right to act
Example Paragraph 23 one to four family contract
Option termination contract (paid by the buyer)

A

True

73
Q

Bilateral: promise for a promise

2 parties two parties 2 promises

A

True

74
Q

True or False

Void Contract never was and never will be

Illegally formed (written)
not in writing
no consideration or promise
no signatures, or initials
non competent parties
A

True

75
Q

Voidable contract has 2 choices:

1) gives one party the right to terminate and get earnest money back
2) Fix it and close it

A

True

76
Q

Voidable contract has 2 choices:

1) gives one party the right to terminate and get earnest money back
2) Fix it and close it

A

True

77
Q

If a contract is un enforceable it’s not in writing

A

True

78
Q

Physical characteristics of real estate

A Immobile
B Indestructible
C Nonhomenegity (unique in its location)
D All of the above

A

D All of the above

79
Q

S Corporation Shareholders income is tasked on each individual. The corporation doesn’t get taxed the individuals / shareholders gets taxed.

A

True

80
Q

Condominium ownership: you own air

Own the air
Fee simple ownership
Deed
Free hold estate _highest best example of ownership
Equal rights to use common areas (pool, community areas)
Appurtenance possibility parking space

HOA owns everything else.

A

True

81
Q

COOPERATIVES: Are a form of ownership where the owner receives shares. Unlike condominiums, which are real
property, cooperatives are personal property. The owner of the shares is entitled to use, rent, or sell a specific apartment
unit.

A

True

82
Q

TOWNHOMES: Differ from condominiums in that the owner receives “fee simple” title to the land under the townhome.
Common areas may or may not be present. Legal descriptions using “condominium” or “townhome” are not a
defining factor in this definition. It is a form of real property.

A

True

83
Q

TIMESHARES: Right to use time Period Are a form of shared property ownership, commonly in vacation or recreation condominium property,
in which rights vest in several owners to use property for a specified period each year. Tenancy in Common

One owner, different time periods common

A

True

84
Q

Freehold Estate MEANS YOU OWN IT

A

True

85
Q

Freehold Estate is that same as Non-Leasehold

A

True

86
Q

Tenancy in severalty MEANS one person owns it.

A

True

87
Q

Tenancy by the Entirety
(ownership between husband and wife in non
community property states)
includes dower (wife’s) rights and courtesy
(husbands) right if they pass away.

A

True

88
Q

Tenancy in Common two or more owners there is no limit as to the number of
individuals who can share ownership of a particular
parcel of real property. UNEQUAL SHARE and NO right of survivorship, KIDS WILL inherit the property (COMMON for kids to get the property)

A

True

89
Q

Joint Tenancy two or more owners have EQUAL shares, and FULL RIGHT of
Survivorship (CAN PASS THE JOINT THE KIDS goes tot he last serving owner)

A

True

90
Q

Joint Tenancy which unities must be present and are shared

A Time & Title
B Possession
C Interest
D All of The Above

A

D All of The Above

91
Q

Deeds must have words of conveyance from the owner

True
False

A

True

92
Q

Who has to sign the deed?

A Grantor
B Grantee
C Neither
D A & B

A

A Grantor

93
Q

Last step to a valid deed is

A Delivery & Acceptance
B Fling at the court house
C Moving into the property
D None of the above

A

a Delivery & Acceptance

94
Q

General Warranty Deed is the highest and best form of deed and is required on the one to four family contract.
True
False

A

True

95
Q

General Warranty Deed protects the Grantee from the day of closing to the sovereignty of the soil.

True
False

A

True

96
Q

Special warranty deed 2nd best type of deed, provided by builders & foreclosures). Warrants and guarantees title for the grantee (purchaser) from the day of closing through the current owner only.

True
False

A

True

97
Q

Information about brokerage Services

A Must be given (physically)
B Fully filled out with all agent contact info
C Substantiative dialogue regarding representation

A

True

98
Q

Types of Agency

A Seller = Listing
B Buyer Agency oral or written
C Intermediary dual agency rep buyer and seller
D sub agency = they just want to be a customer

True
False

A

True

99
Q

All are types of Leases payments

Gross fixed amount
Percentage lease - commercial
Net NNN lease flat amount +% o and portion of taxes, maintenance & insurance
Ground lease

True
False

A

True

100
Q

The secondary mortgage market is the market for the sale of securities or bonds collateralized by the value of mortgage loans.

Which of the following operate on the secondary market

A FNMA (Fannie Mae) 1938 
B FHLMC (Freddie Mac) 1970
C GNMA (Ginnie Mae) 1968
D VA or FHA 
E all of the above
A

E all of the above

101
Q

Mortgages are 2 parties in every state but Texas

True
False

A

True

102
Q

CLO stands for Computerized Loan Origination

True
False

A

True

103
Q

Types of leasehold estates or Non-Freehold (rentals)

Estate for years leased interest in property for a certain, exact period of time and for a specified consideration.
It must have a definite beginning and a definite ending.

Periodic Month to Month, no written contract Pay to Stay w/30 day notice

Tenancy at Will Tent over stays and becomes holdover this estate might last indefinitely

Tenancy in sufferance Give notice Tenant doesn’t leave Hold over Owner is now suffering.

A

True

104
Q

Leases more than 12 months have to be in writing.

A

True

Law of Contracts (3 decks)

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