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Texas Prom Contracts > Closing, Possession and Temporary Leases > Flashcards

Closing, Possession and Temporary Leases Flashcards

1
Q

With the Seller’s Temporary Lease, who is the landlord?

A

Buyer

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2
Q

What is the maximum amount of days that is allowed using the Seller’s Temporary Lease?

A

90 days

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3
Q

At what time is the rent due according to the Seller’s Temporary Lease?

A

On the date of closing of the purchase agreement

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4
Q

How does the Seller’s Temporary Lease handle the tenant making improvements?

A

If the tenant is allowed to improve the property by the landlord, those improvements become the landlord’s.

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5
Q

According to the Buyer’s Temporary Lease, who is responsible for all repairs during the lease period?

A

Tenant

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6
Q

The closing of a contract is determined between

A

negotiation between a buyer and a seller. This negotiation could be that the seller wants out in a hurry because he is not able to pay next month’s house payment. Maybe the buyer wants a quick closing because she is in an apartment and the lease expires at the end of the month

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7
Q

As a hint to new real estate professionals, it is best to close

A

early than late. Too many things can go wrong by waiting. Interest rates may go up (or down) and now the buyer wants to renegotiate. The seller thinks the market is better and now wants more money from the buyer.

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8
Q

At a listing, real estate professionals should ask a series of questions so that they can be better prepared for when it is time to close the transaction.

A 
What are the names of all parties with ownership?
What is the marital status of seller?
If divorced; was it before or after the purchase?
Widowed since purchase of property?
Is property homestead?
Who is the 1st, 2ndlienholders?
Are payments current?
Mineral rights?
Any delinquent taxes?
If paid off, release of lien?
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9
Q

Special Provisions in a contract is to be for

A

“Factual Statements or Business Details”. The real estate salesperson should be cautious before writing in special provisions. This is the most frequent loss of license because the licensee takes it too far and practices law

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10
Q

Some things that might go in special provisions could be that

A

the buyer is a licensed real estate salesperson. This buyer must identify their license status to avoid a Deceptive Trade Practices Act violation and the best place for this disclosure is in Paragraph 11 Special Provisions.

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11
Q

“The buyer wants to do a walkthrough three hours prior to closing.” This is a business detail and it is best to put in Special Provisions.

A

A special provision

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12
Q

Prorations

A

is the dividing of expenses between the buyer and seller for fairness.

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13
Q

Casuaty loss

A

describes the ramifications of the property being damaged or destroyed prior to closing.

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14
Q

Default

A

when one or both parties do not perform according to the terms of the contract. This paragraph addresses the non-defaulting party’s remedies. If the earnest money is disbursed, then both parties are released from any further liability.

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15
Q

Mediation

A

a method of resolving conflicts in which a mediator listens to each side and helps make a mutually agreeable decision. Mediation is not binding and is typically cheaper than a court case. This paragraph requires the parties to submit to mediation.

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16
Q

Residential Contract Paragraph 17

A

Attorney’s Fees and court costs will be paid for by the loser of any court case. This is standard contract law.

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17
Q

Residential Contract Paragraph 18

A

deals with escrow, which is the holding of the earnest money typically in a non-interest banking account.

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18
Q

Residential Contract Paragraph 18.A

A

is a disclosure paragraph stating that the escrow agent is not a party to the contract and is not liable for the money deposited.

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19
Q

Residential Contract Paragraph 18.B

A

discusses expenses and how the earnest money will be paid out.

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20
Q

Residential Contract Paragraph 18.C

A

addresses demand - how the earnest money will be released. If both parties agree as to whom the earnest money is to be released, then the title company will release it. If agreement cannot be reached, the title company will not release the money and the parties must take it to court. If one party demands the earnest money and the other party does not respond within 15 days, the title company will release the money to the demanding party.

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21
Q

Residential Contract Paragraph 18.D

A

explains damages. If one party refuses to release the earnest money when they should have, that party could be liable for three times the amount.

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22
Q

Residential Contract Paragraph 18.E

A

covers notices and when they are effective.

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23
Q

Residential Contract Paragraph 19

A

states that all covenants, representations, and warranties survive closing. If the seller has made any representations that are untrue on the day of closing, the seller is in default. The seller may continue to show the property and entertain other offers as back up, unless doing so is strictly prohibited in the contract.

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24
Q

Residential Contract Paragraph 20

A

Federal Tax Requirements - states that on the close of a real estate transaction if taxes are owed the IRS will still be paid. If a person is a foreign person and flees the United States for their own country the IRS cannot go after them to collect the taxes owed. The IRS will then set a lien on the property to collect from the buyer. This all stems from the Foreign Investment Real Property Tax Act (FIRPTA) and the title company will be sure all are in compliance.

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25
Q

Residential Contract Paragraph 21

A

states that all notices from one party to another must be in writing and are effective when they are mailed, hand-delivered, e-mailed, or faxed.

This “Notices” paragraph is frequently overlooked as not that important, but in reality it could be drastic if not addressed correctly. This paragraph asks for the addresses of both the buyer and seller so that information that is relevant to the transaction can get to the appropriate parties. Failure of a real estate agent to fill in the address properly could result in lack of notification and possible license violations as well as legal liability.

If paragraph 21 is not completed, the buyer or licensee for the buyer would not have a place to send a notification of major importance to the seller, such as the Notification of Termination of Contract. Therefore, it is extremely important to fill in the buyer’s and seller’s addresses.

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26
Q

Residential Contract Paragraph 22

A

Agreement of Parties includes most of the frequently used addendums (addendum means added to). If an addendum not listed is desired by the parties to the contract, then it is to be added under “Other.”

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27
Q

Residential Contract Paragraph 23

A

Termination Option allows the buyer to terminate this contract for any reason during an agreed amount of time for an agreed upon amount of money. The option fee can be credited at closing if agreed to. This is designed to allow the buyer time to get inspections and develop a prioritized repair list.

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28
Q

One of the biggest areas of dispute is with repairs

A

Buyers feel the sellers should fix everything and the sellers think the buyers should take the home “as-is.” The real estate professional is caught in the middle and, if not careful, this could place the licensee in the position of financial liability.

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29
Q

Seller’s Temporary Residential Lease Paragraph 1

A

many licensees put the names in the wrong place. The “landlord” is the buyer in the contract and the “tenant” is the seller. Use the same names as indicated in Paragraph 1 of the Residential Contract.

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30
Q

Seller’s Temporary Residential Lease Paragraph 2

A

needs the address of the property being leased. Be sure to include the city, state, and zip code.

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31
Q

Seller’s Temporary Residential Lease Paragraph 3

A

you would enter the ending date of this agreement. The beginning date is the closing of the sale. The ending date should not be more than 90 days after the closing date. If the seller wants to stay in longer than 90 days, you must use an actual lease agreement.

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32
Q

Seller’s Temporary Residential Lease Paragraph 4

A

is about the rent for this lease. Enter a daily rate here so that if the tenant moves out before the agreement is over, there will be no reimbursement for the unused rental portion. Also, all rent will be paid on the day of closing from the seller to the buyer.

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33
Q

Seller’s Temporary Residential Lease Paragraph 5

A

discusses the security deposit the seller will give to the buyer. This will also be handled at closing. However, the buyer will need to give this deposit back to the seller when he or she moves out - with reasonable deductions for such things as damage to the property. Any deductions the buyer (landlord) takes will need to be itemized and provided to the tenant within 30 days after the tenant moves out of the property.

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34
Q

Seller’s Temporary Residential Lease Paragraph 6

A

addresses who will pay the utilities. In most cases the tenant (seller) continues to pay the same utility bills that he or she was paying previously when owning the property.

35
Q

Seller’s Temporary Residential Lease Paragraph 7

A

limits the seller’s use of the property during the terms of the lease including the tenant’s leasing or subleasing the property to someone else.

36
Q

Seller’s Temporary Residential Lease Paragraph 8

A

is about pets. The seller (now tenant) will generally be allowed to keep whatever pets he or she has had there in the past. This, however, is a negotiable item and the buyer could demand that the seller keep no pets or limit the number and size. This blank is open-ended to provide for such matters and descriptions.

37
Q

Seller’s Temporary Residential Lease Paragraph 9

A

concerns the condition of the property upon returning it to the landlord. The buyer should do a final walk-through of the property just prior to the closing so that both parties are aware of the condition. This gives the landlord a basis for deciding (when the tenant moves out) if something significant happened to the property after the closing which would require the landlord to retain some or all of the security deposit for repairs. This is not the time for the buyer to ask the seller for cosmetic repairs.

38
Q

Seller’s Temporary Residential Lease Paragraph 10

A

keeps the tenant from making improvements to the property without the owner’s permission during the period of this lease. If the tenant gets permission, any and all of those improvements become the property of the landlord.

39
Q

Seller’s Temporary Residential Lease Paragraph 11

A

that special provisions area that most promulgated forms have to allow for something unique in the lease agreement that is not covered in any other part of the agreement. Anything written in this section must be agreed to by both parties. Licensees must be careful not to practice law when addressing this paragraph.

40
Q

Seller’s Temporary Residential Lease Paragraph 12

A

gives the new owner the ability to inspect the property at reasonable times and to receive keys and access to the property should it become necessary.

41
Q

Seller’s Temporary Residential Lease Paragraph 13

A

makes sure the tenant understands that he or she will comply with all laws concerning the community and subdivision that he or she is living in. The tenant does not have the right to start a business on the property if zoning will not allow it. The tenant does not have the right to have a meth lab on the premises

42
Q

Seller’s Temporary Residential Lease Paragraph 14

A

says that the tenant (former owner) is responsible for all repairs during this lease period.

43
Q

Seller’s Temporary Residential Lease Paragraph 15

A

allows that the tenant will be responsible for all injuries or damage that may be caused on the property during the lease agreement.

44
Q

Seller’s Temporary Residential Lease Paragraph 16

A

indicates that insurance will be kept up on the property. There may have to be some adjustment made to the current policy that the seller has as he or she becomes a tenant. There may also be some adjustment made on the buyer’s policy. Although the paragraph does not deal with it, if a lender is involved, the mortgage company will want to express their desires as to how the property will be covered by insurance.

45
Q

Seller’s Temporary Residential Lease Paragraph 17

A

states that the tenant needs to honor this agreement or he or she is in default of the lease agreement. For example, if the tenant is not maintaining the yard in a satisfactory way, the landlord can notify the tenant and if the tenant does not resolve this problem within 24 hours, he or she would be in default.

46
Q

Seller’s Temporary Residential Lease Paragraph 18

A

addresses when this lease agreement terminates

47
Q

Seller’s Temporary Residential Lease Paragraph 19

A

What if the tenant stays in the property past the originally agreed-upon date? Paragraph 19 takes care of that by allowing the landlord to charge a per day penalty. Usually the amount entered here will be a higher amount than the daily rental amount indicated as the rental amount in paragraph 4.

48
Q

Seller’s Temporary Residential Lease Paragraph 20

A

indicates that if a lawsuit takes place involving this lease agreement, the prevailing party’s attorney and legal fees will be paid by the losing party. This is in agreement with paragraph 17 of the residential contract.

49
Q

Seller’s Temporary Residential Lease Paragraph 21

A

Because the tenant that is now in the property was the owner until recently, the new landlord is not required to maintain the smoke alarms. According to paragraph 21, the tenant waives the landlord’s responsibility for inspection and repair of the smoke alarms. The tenant must do this himself.

50
Q

Seller’s Temporary Residential Lease Paragraph 22

A

In a normal lease agreement, the landlord has requirements concerning door locks, dead bolts, pin locks for sliding glass doors, and other such items. Paragraph 22 waives this requirement, since the tenant is the former owner.

51
Q

Seller’s Temporary Residential Lease Paragraph 23

A

suggests strongly that both parties should seek legal advice. This suggestion should be made by the licensees involved in the transaction throughout the negotiations.

52
Q

Seller’s Temporary Residential Lease Paragraph 24

A

is the place to enter the addresses where the buyer (now landlord) and the seller (now tenant) will receive all mailings and notifications throughout the agreement term.

53
Q

TREC No. 16-5 Buyer’s Temporary Residential Lease

A

The Texas Real Estate Commission discourages licensees from getting involved in a transaction in which the buyer leases the property for a period of time and then either buys or exercises an option to purchase the property at the end of that time, which is called an executory contract. These contracts should be referred to an attorney for proper legal advice.

However, using this addendum, the buyer can lease the property up to 90 days prior to closing.

54
Q

Buyer’s Temporary Residential Lease Paragraph 1

A

the “landlord” is the seller in the contract and the “tenant” is the buyer.

55
Q

Buyer’s Temporary Residential Lease Paragraph 2

A

needs the address of the property being leased. Be sure to include the city, state, and zip code.

56
Q

Buyer’s Temporary Residential Lease Paragraph 3

A

enter the beginning date of this agreement. This date should not be more than 90 days before the closing of the sale.

57
Q

Buyer’s Temporary Residential Lease Paragraph 4

A

is about the rent for this lease. Enter a daily rate here. Notice that if the tenant moves out before the agreement terminates, there will be no reimbursement for the unused rental portion. Also, all rent will be paid on the commencement of the lease from the buyer to the seller. If the closing is taking place at a title company, the seller will use this money to help with closing costs.

58
Q

Buyer’s Temporary Residential Lease Paragraph 5

A

discusses the security deposit the buyer will give to the seller. This will also be handled at closing. However, the seller will need to give this deposit back to the buyer if he or she moves out without closing - with reasonable deductions for such things as damage to the property. Any deductions the seller (landlord) takes will need to be itemized and provided to the tenant within 30 days after the tenant moves out of the property.

59
Q

Buyer’s Temporary Residential Lease Paragraph 6

A

discusses for who will pay the utilities.

60
Q

Buyer’s Temporary Residential Lease Paragraph 7

A

limits the buyer’s use of the property during the terms of the lease including the tenant’s leasing or subleasing the property to someone else.

61
Q

Buyer’s Temporary Residential Lease Paragraph 8

A

is about pets. Usually, the seller (now landlord) will allow the tenant to keep one or two pets.

62
Q

Buyer’s Temporary Residential Lease Paragraph 9

A

is about the condition of the property. The buyer agrees to take the property in its present condition with the understanding that the seller will make the repairs agreed upon in the Residential Contract. This would make it extremely important for the buyer to do a walk-through of the home just prior to possession so that both parties know the condition of the property. If the buyer does not close and moves out, the buyer must leave the property in its present condition, normal wear and tear excluded.

63
Q

Buyer’s Temporary Residential Lease Paragraph 10

A

keeps the tenant from making improvements to the property without the owner’s permission during the period of this lease.

64
Q

Buyer’s Temporary Residential Lease Paragraph 11

A

is that special provisions area that most promulgated forms have to allow for something unique in this lease agreement that is not covered in any other part of this agreement.

65
Q

Buyer’s Temporary Residential Lease Paragraph 12

A

gives the owner the ability to inspect the property at reasonable times and to receive new keys if the tenant changes the locks to the property should it become necessary.

66
Q

Buyer’s Temporary Residential Lease Paragraph 13

A

makes sure the tenant understands that he or she will comply with all laws concerning the community and subdivision that the property is located. Failure to follow the rules and regulations would be considered breach of contract and the landlord would have certain remedies explained in paragraph 17.

67
Q

Buyer’s Temporary Residential Lease Paragraph 14

A

says that the tenant (buyer) is responsible for all repairs during this lease period.

68
Q

Buyer’s Temporary Residential Lease Paragraph 15

A

allows that the tenant will be responsible for all injuries or damage that may be caused on the property during the lease agreement. This is usually taken care of by the buyer obtaining an insurance policy on the day of taking possession of the property.

69
Q

Buyer’s Temporary Residential Lease Paragraph 16

A

indicates that insurance will be kept up on the property. The licensee should never advise either party on insurance matters but should direct them to their insurance representative.

Although the paragraph does not deal with it, if a lender is involved the mortgage company will want to express its desires as to how the property will be covered by insurance.

70
Q

Buyer’s Temporary Residential Lease Paragraph 17

A

states that the tenant needs to honor this agreement or he or she is in default of the lease agreement. For example, if the tenant is not maintaining the yard in a satisfactory way, the landlord can notify the tenant and if the tenant does not resolve this problem within 24 hours he or she is in default.

71
Q

Buyer’s Temporary Residential Lease Paragraph 18

A

defines when this lease agreement is over. The lease terminates upon closing and funding of the Residential Contract, if agreed to by both parties and/or the tenant’s default under this lease of the Residential Contract.

72
Q

Buyer’s Temporary Residential Lease Paragraph 19

A

states the remedies for the seller if the buyer does not move out or buy the property by the date indicated. Usually the amount entered here will be a higher amount than a prorated amount of the monthly rental rate. The reason for the increased amount is to serve as a penalty or incentive for the tenant to close by the agreed-upon date.

73
Q

Buyer’s Temporary Residential Lease Paragraph 20

A

indicates that if a lawsuit takes place involving this lease agreement, the prevailing party’s attorney and legal fees will be paid by the losing party. This agreement is normal for written contracts. This is in agreement with paragraph 17 of the residential contract.

74
Q

Buyer’s Temporary Residential Lease Paragraph 21

A

the new landlord is not required to take care of the smoke alarms. However, the owner should have had the smoke alarms installed properly prior to the lease agreement.

75
Q

Buyer’s Temporary Residential Lease Paragraph 22

A

In a normal lease agreement, the landlord has requirements concerning door locks, dead bolts, pin locks for sliding glass doors, and other such items. Paragraph 22 waives this requirement because the length of the term of the lease is less than 90 days.

76
Q

Buyer’s Temporary Residential Lease Paragraph 23

A

suggests strongly that both parties should seek legal advice. This suggestion should be made by the licensees involved in the transaction throughout the negotiations.

77
Q

Buyer’s Temporary Residential Lease Paragraph 24

A

is the place to enter the addresses where the buyer (now tenant) and the seller (now landlord) will receive all mailings and notifications throughout the agreement. These paragraphs should be filled out in their entirety to avoid confusion. The licensees should never put their addresses here on behalf of their clients because it would increase their liability and is not how the Texas Real Estate Commission intended these blanks to be used.

78
Q

In instances where the seller needs to stay in the home beyond the closing date a Seller’s Temporary Lease is required via

A

the TREC No. 15-5. The temporary lease is only valid for up to 90 days, anything longer than that will require an actual lease agreement.

79
Q

A Buyer’s Temporary Lease is required in instances where the buyer wants to lease the property for a period of time and then either buys or exercises an option to purchase the property at the end of that time

A

This practice is discouraged, but can be completed using the TREC No. 16-5. This temporary lease is only valid for up to 90 days as well.

80
Q

When will the closing of a transaction be held?

A

It is negotiable between the buyer and seller.

81
Q

If a buyer terminates a Buyer’s Temporary Residential Lease prior to the closing date, the security deposit

A

is refunded, less any itemized deductions

82
Q

According to the TREC promulgated Seller’s Temporary Lease, how long does the landlord have to itemize and provide to the tenant any deductions to the security deposit?

A

30 days

83
Q

On the TREC No 15-5 Seller’s Temporary Residential Lease, the ____________ is the landlord and the ____________ is the tenant.

A

buyer, seller

Texas Prom Contracts (16 decks)

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