Chapter 5

Question 1

License holders must use standard Contract forms when applicable.

Answer 1

Exceptions are: those prepared
by Attorneys from this state or any other state, or those specified by governmental agencies, property
owners, or their lawyers.

Question 2

TREC has promulgated sales contract forms for most residential properties including

Answer 2

Farm and
Ranch. TREC has no forms for commercial transactions. TREC has no forms for the sale of Co-ops
or mobile homes.

Question 3

The Broker Lawyer Committee writes

Answer 3

the promulgated contract forms. TREC promulgates them.

Question 4

All backup offers must be presented to the seller

Answer 4

For a backup offer to become effective the previous
contract must be terminated and the backup buyer must pay any option fee, name any option period,
and deposit any earnest money with an escrow agent. An option fee must be paid independently of
any other consideration.

Question 5

The option fee and the earnest money deposit cannot be

Answer 5

combined in one check.

Question 6

A clause in a contract requiring a condition to be met is a contingency clause

Answer 6

If a contingency cannot

be met, the buyer is generally entitled to a refund of his earnest money.

Question 7

If a broker has more than one offer on a listed property, he must present all offers

Answer 7

but there is no

required order of presentation.

Question 8

Paragraph 3 –

Answer 8

The cash portion plus the financing = the Sales Price

Question 9

Paragraph 4

Answer 9

Texas law requires a real estate license holder who is a party to a transaction or acting
on behalf of a spouse, parent, or child… to notify the other party in writing before entering into a
contract of sale. (Agency coupled with an interest must be disclosed)

Question 10

Paragraph 5

Answer 10

Within 3 days after the Effective Date, BUYER must deliver earnest money to
escrow agent – Time is of the essence for this paragraph

Question 11

Paragraph 6B

Answer 11

The title company has 20 days to provide the title commitment after they receive
the sales contract.

Question 12

Paragraph 6C.(1)

Answer 12

Within _____ days after the Effective Date of this contract, Seller shall furnish
to Buyer and Title Company Seller’s existing survey and an Insurance T-47 Affidavit.

Question 13

Paragraph 6D

Answer 13

allows a buyer to choose a number of days to review both the title commitment and
the survey. If the buyer is unhappy with the results of either, he has the negotiated number of days
to address his/her concerns with the seller

Question 14

The purpose of a Municipal Utility District (also called a water supply corporation or a utility service
provider) is to

Answer 14

provide flood control or drainage, water and sewers to residents of the district.

Question 15

Paragraph 6.E.(3)

Answer 15

Texas Water Code requires the Seller to deliver and the Buyer to sign the
M.U.D. disclosure prior to final execution of the contract. (A buyer who has not received the M.U.D.
disclosure has the right to terminate the contract.

Question 16

Paragraph 6.E.(6)

Answer 16

If the property is located in a Certificated Service area of a Utility Service Provider
(a M.U.D.) the buyer must be given notice of this, disclosing to the buyer that there may be an
extra charge for having water and sewer services connected.

Question 17

Paragraph 7.A.

Answer 17

Seller at Seller’s expense…..shall keep the utilities on during the time this contract
is in effect.

Question 18

A Seller’s Disclosure of Property Condition must be given to

Answer 18

buyer BEFORE HE SIGNS AN

OFFER to make that offer binding on the buyer

Question 19

Paragraph 7.B.(2)

Answer 19

If the buyer has not received the Seller’s Disclosure he chooses a number of days
for the Seller to provide it. If the buyer doesn’t receive it within that number of days he can terminate
the contract. If the Buyer receives the disclosure, the Buyer will have 7 days after receiving it
to terminate for any reason.

Question 20

Paragraph 7.B.(3)

Answer 20

A seller’s disclosure is not required in a foreclosure sale, tax sale, sale by guardian,
executor, or administrator, or sale by a builder of a new home that has not been lived in. A
seller’s disclosure is not required if the house is worth less than 5% of the price of the property.

Question 21

Paragraph 7.D. (1)

Answer 21

Buyer accepts the Property As Is.

Question 22

Paragraph 7.E. -

Answer 22

…If lender required repairs exceed 5% of the Sale Price, Buyer may terminate the
contract and receive a refund of earnest money paid.

Question 23

Paragraph 11

Answer 23

SPECIAL PROVISIONS – Factual statements and business details applicable to
the sale can be inserted here. It is prohibited by TREC rules to insert statements or business
details for which a contract addendum, lease or other form has been promulgated by TREC for
mandatory use.

Question 24

Paragraph 15 –

Answer 24

Default – All TREC contracts have a default paragraph. This paragraph states that
if either party defaults, the injured party can: sue for specific performance, seek such other relief as
may be provided by law, or both, or the injured party can terminate the contract.

Question 25

Paragraph 16

Answer 25

The contracts require the parties to agree to mediation for dispute resolution. In
mediation, a mediator hears both sides and tries to help the parties come to an agreement.

Question 26

If mediation fails, the parties may move to

Answer 26

arbitration. The arbitrator hears both sides and then tells

the parties how to proceed.

Question 27

Paragraph 18.C.

Answer 27

If the contract is terminated and the escrow agent receives a demand of release
of earnest money from one party, they must notify the other party. If the other party does not send
a written objection to the demand within 15 days, the escrow agent may disburse the earnest money
to the party making the demand.

Question 28

Paragraph 22

Answer 28

– review the Addenda.

The Seller’s Temporary Lease Addendum and the Buyer’s Temporary Lease Addendum are for use
when the lease period is for 90 days or less.
A seller of coastal property abutting tidally influenced water must provide the “Addendum for
Coastal Area Property.” This notice tells buyers that owners may gain or lose portions of the land
Copyright © 2020 Champions School of Real Estate®
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Chapter 5
Contracts
due to the actions of water. A seller who sells property located seaward of the Gulf Intracoastal
Waterway must provide the addendum to disclose that structures must not be erected seaward of
the vegetation line. If a structure is erected seaward of that line, or becomes seaward as a result of
natural causes, the structure would be subject to a lawsuit by the State of Texas for removal.
The HOA or POA Addendum allows a buyer to obtain a resale certificate on a property.

Question 29

Paragraph 23

Answer 29

within this paragraph be sure to understand: the Buyer must deliver the option fee
to the Seller within 3 days after the Effective Date of this contract. Day 1 of the option period is the
day following the effective date of the contract. Notice to terminate this agreement by the Buyer,
must be given by 5:00 pm on the date specified. The option fee is never refunded to the Buyer but
may be applied to the price if the parties agree. Time is of the Essence for this paragraph

Question 30

Paragraph 24

Answer 30

if the parties need or want to see an attorney, an agent should send their clients to
an attorney before the clients sign the contract.
The last party to sign the contract is the party accepting the final change. The broker is responsible
for filling in the effective date after the last party signs.

Question 31

NOTE:

Answer 31

Specifically paragraphs 5, 7.D.(1), 11 and 23 should be recognized by their number!

Question 32

STAUTE OF FRAUDS

Answer 32

The Statute of Frauds requires that all contracts that relate to the transfer of any interest in real estate
must be in writing to be enforceable. This also applies to compensation/employment agreements,
such as listings and buyer representation agreements. Verbal agreements make you a volunteer in the
eyes of the courts.

Question 33

TEXAS DEPARTMENT OF INSURANCE REGULATIONS REGARDING MOLD

Answer 33

1. Testing mold is not necessary to determine if it should be removed. If mold is visible it
   should be removed.
2. Removal is called remediation.
3. Both mold assessors and mold remediators must be licensed.
4. Testing after remediation is not required.
5. Property owners can assess and remediate their own properties without a license.
6. If you hire a mold remediator, he must give you a Certificate of Mold Remediation no later
   than 10 days after work is complete. The certificate verifies that the mold has been removed
   and certifies with a reasonable certainty that the underlying cause of the mold has been
   corrected.
7. Receiving a Certificate of Mold Remediation is an advantage for a homeowner because it
   prevents an insurer from making an underwriting decision on the property based on previous
   mold damage or claims.
8. On selling a home, the law requires the seller provide the buyer with copies of all Certificates
   of Mold Remediation they have received for the property within the past 5 years.

Question 34

REMOVAL OF MOLD IS CALLED

Answer 34

REMEDIATION