Chapter 15

Question 1

An ______________ protects the buyer by ensuring that the property is valued at a price that is close to what is being offered by the buyer.

Answer 1

Appraisal contingency

Question 2

What are some of the most common ways to override an appraisal roadblock?

Answer 2

1) The seller might lower the sale price
2) The buyer might be able to put more money down
3) The cooperating licensees might reduce their compensation rate

Question 3

A ______________ gives the buyer time to apply for and obtain financing for the purchase of the property. This provides important protection for the buyer, who can back out of the contract in the event he or she is unable to secure financing.

Answer 3

Financing contingency

Question 4

True or false: If the buyer fails to comply with the financing terms of the contract, he or she must inform the seller, in writing, which terminates the contract. Fail to do so, automatically waives the contingency and now the buyer becomes obligated to purchase the property, even if a loan is not secured.

Answer 4

True

Question 5

A ________________________ gives a buyer a specified amount of time to sell their existing homes in order to finance the new one.

Answer 5

House sale contingency

Question 6

There are two different ways to write a “sell” contingency:

Answer 6

1) A “settlement contingency” that does not allow the seller to accept any additional offers
2) A “sale and settlement contingency” with the right to continue marketing the property

Question 7

True or false: A sale and settlement contingency with the right to continue marketing, means that the seller will continue to market the property to other potential home buyers and if an offer comes in on the property other than the one on the table and the seller wants to accept that offer the buyer then has a certain time period, typically 24-48 hours to remove their sale contingency.

Answer 7

True

Question 8

A sale and settlement contingency with the right to continue marketing, commonly called a ___________________, means that the seller will continue to market the property to other potential home buyers and if an offer comes in on the property other than the one on the table and the seller wants to accept that offer the buyer then has a certain time period, typically 24-72 hours to remove their sale contingency.

Answer 8

Kick-out clause

Question 9

An ____________________ gives the buyer the right to have the home inspected within a specified time period. This protects the buyer, who can cancel the contract or negotiate repairs based on the findings of a professional inspector.

Answer 9

Inspection contingency

Question 10

The __________________________ is just one professional organization that has standardized the home inspection process and has established what must be inspected.

Answer 10

American Society of Home Inspectors (ASHI)

Question 11

Scheduling, completing and reviewing a home inspection report usually take longer than expected. To be safe, be sure to tell your buyers to write in a home inspection contingency period of at least ______________.

Answer 11

15-20 days

Question 12

When does a contingency become part of a binding sales contract?

Answer 12

When both parties agree to the terms and sign the contract.

Question 13

A _____________________ includes information about previous title transfers, liens, encroachments, and easements on the property.

Answer 13

Preliminary title report

Question 14

An _____________________ requires that the seller can prove that the house can be adequately insured.

Answer 14

Insurance contingency

Question 15

A ______________________ makes the sale contingent upon receipt and approval of all POA documents, rules and fees.

Answer 15

POA or HOA contingency

Question 16

A list of general guidelines to follow when working with contingencies includes:

Answer 16

1) The fewer contingencies the more attractive the offer will be to the seller.
2) If possible, limit the offer to a single contingency.
3) Only carry out a contingency if absolutely necessary.
4) Contingencies can be negotiated after the fact.

Question 17

What type of contingency clause might an insurance agent want if he or she wants to buy a home and be able to conduct business from his basement office?

Answer 17

Home Business Contingency

Question 18

Which person is best suited to resolve a property title issue?

Answer 18

A Title Agent

Question 19

An _________________ is a document that makes a change to the ratified contract.

Answer 19

Amendment

Question 20

When a situation occurs that will require a change in the Residential Contract, instead of writing an entirely new contract, the licensee should use the ______________________.

Answer 20

Amendment to Contract

Question 21

An ______________ makes changes in an already existing agreement

Answer 21

Amendment

Question 22

An ____________ means including an additional document in the already existing agreement.

Answer 22

Addendum

Question 23

Which TREC form was designed to document a contract amendment?

Answer 23

TREC # 39-8 is a promulgated Texas amendment form that is a one page, easy to use document

Question 24

True or false: An amendment is more commonly used than an addendum.

Answer 24

True