Chapter 13/14 Flashcards
A __________ is a negligent or wrongful act concerning a breach of duty rising out of law. It is an act that damages another person and may bring about legal action.
Tort
When does an offer become a contract?
When an offer is accepted, that acceptance is communicated to the other party, and all signatures and initials are obtained.
A typical residential sale contract contains the following kind of provisions:
1) parties, consideration, and property
2) legal description
3) price and terms
4) loan approval
5) earnest money deposit
6) escrow
7) closing and possession dates
8) conveyed interest - type of deed
9) title evidence
10) closing costs
11) damage and destruction
12) default
13) broker representation and commission
14) seller’s representations
15) residential property condition disclosure
16) right of rescission
17) agent’s responsibility
18) completing the form
A sale contract may contain numerous additional clauses, depending on the complexity of the transaction including:
1) inspections
2) owner’s association disclosure
3) survey
4) environmental hazards
5) compliance with laws
6) due-on-sale clause
7) seller financing disclosure
8) rental property; tenant’s rights
9) FHA or VA financing condition
10) flood plain - flood insurance
11) condominium assessments
12) foreign seller withholding
13) tax deferred exchange
14) merger of agreements
15) notices
16) time is of the essence
17) fax transmission
18) survival
19) dispute resolution
20) addenda
What does foreign seller withholding in a sales contract mean?
The seller acknowledges that the buyer must withhold 10% of the purchase price at closing if the seller is a foreign person or entity, and forward the withheld amount to the Internal Revenue Service.
In a sales contract, that does the tax deferred exchange provision mean?
For income properties only, buyer and seller disclose their intentions to participate in an exchange and agree to cooperate in completing necessary procedures.
What information is included in the price and terms provision of a sales contract?
1) final price
2) down payment
3) financing information
What does the escrow clause in a sales contract do?
It provides for the custody and disbursement of the earnest money deposit, and releases the escrow agent from certain liabilities in the performance of escrow duties.
What does a right of rescission clause set forth?
Buyer’s right under certain conditions to rescind the sale contract and re-claim their deposits if sellers fail to complete and deliver the property condition disclosure statement to buyers in a timely fashion.
What does a due-on-sale clause say?
The parties state their understanding that loans that survive the closing may be called due by the lender. Both parties agree to hold the other party harmless for the consequences of an acceleration of the loan.
There are six different types of financing in this addendum. They include:
1) Conventional
2) Texas Veterans Loan
3) FHA Insured Financing
4) VA Guaranteed Financing
5) USDA Guaranteed Financing
6) Reverse Mortgage financing
The __________________ pertains to the duty of the buyer to obtain financing promptly and to furnish all information and documents required by their lender. Additionally, this addendum contains an option for a loan contingency and property approval contingency.
Third Party Financing Addendum
The ___________________ discusses credit documentation and approval, assumption of the seller’s loan and the terms, consent by noteholder, seller’s liens, tax and insurance escrow, and notices to the buyer and seller.
Loan Assumption Addendum
The _________________ addresses credit documentation and approval, financial verification, employment verification, and tax and insurance escrow.
Seller Financing Addendum
True or false: Most earnest deposits are typically between 1-3% of the offer price, with a minimum of $500.
True
Which paragraph of the TREC One to Four Family Residential Contract (Resale) describes the good faith money?
Paragraph 5 - Earnest Money
The Sales Price, Paragraph 3.C, is calculated by adding what two numbers together?
3.A (down payment) + 3.B (total financing amount) = 3.C (sales price)
Who is typically considered the escrow agent in Paragraph 5?
A title company
A _________________ is any defect in a specific property that could either affect a Buyer’s decision to purchase it or affect the property’s value, such as a leaking roof or the presence of termites.
Material defect
TheTexas Real Estate License Act includes a section stating certain information the licensee is NOT required to disclose, because the issue relates to occupants of the property, not material defects in the real estate. Specifically, licensees do not need to disclose:
1) if a previous or current occupant has or had AIDS or any HIV related illness
2) a death on a property by natural causes, suicide, or accident unrelated to the condition of the property.
What causes of death must be disclosed?
1) Faulty electrical wiring or a gas leak that caused a death on the property along with the corrections made to eliminate the danger.
2) Any murder must be disclosed. Texas has no time limits as to the date of death, however, only known information must be disclosed.
In _______, the Texas Legislature passed a “mandatory Seller disclosure law.” It became mandatory in 1994 and has been amended to update the disclosure.
1993
True or false: Seller’s failure to deliver the Disclosure Notice creates a voidable contract at the option of the Buyer.
True
There are eleven exemptions to filling out a seller’s disclosure:
1) Court ordered or actual court foreclosures
2) Bankruptcy trustee sale
3) Deed in lieu of foreclosure sale
4) Resale of property acquired by a lender by foreclosure
5) Probate sale, guardian, conservatorship, or trust sale
6) Co-owner sale from one co-owner to another
7) Sale to a relative or spouse
8) Divorce sale between two spouses
9) Government sale
10) Homebuilder sale of a house never occupied as a home
11) Land sale with a house valued at 5% or less of the property value
True or false: Seller’s disclosures that are mostly marked “unknown” are indicators of the necessity of inspections.
True
The Lead-Based Paint Hazard Reduction Act, a federal law, effective in ______, requires disclosure of any tests for lead and/or the possibility of the presence of lead-based paint or lead-based paint hazards.
1996
True or false: The EPA pamphlet “Protect Your Family From Lead In Your Home” is required to be given to all Buyers before entering into contract to buy a targeted property.
True
Real estate Brokers are responsible for ensuring Seller compliance and failure to do so can result in fines up to ___________ per omission.
$11,000
Texas Legislature passed a “mandatory Seller disclosure law”, requiring owners to fill out a ___________________________.
Seller’s Disclosure of Property Condition
What is the contract term that means parties are liable for the truthfulness of representations and warranties after the closing?
Survival
