Contract Law Part I-2

Question 1

Acceleration Clause

Answer 1

A contract provision that allows a lender to require a borrower to repay all or part of an outstanding loan if certain requirements are not met.

Question 2

Addendum

Answer 2

A document attached to and made a part of the original contract. It can be explanatory, informational or indicate other requirements of the parties that aren’t clearly spelled out in the contract.

Question 3

Amendment

Answer 3

A document that makes a change to the ratified sales contract.

Question 4

Amortized Loan

Answer 4

Installment loan in which the monthly payments are applied first toward reducing the interest balance, and any remaining sum towards the principal balance.

Question 5

Appraisal

Answer 5

The process of valuing real property, using one of three approaches: cost approach, income capitalization approach, or sales comparison approach.

Question 6

Balloon Payment

Answer 6

The final installment of a loan to be paid in an amount that is disproportionately larger than the regular installment.

Question 7

Closing

Answer 7

The completion of a transaction involving the sale or exchange of real estate.

Question 8

Computer loan origination (CLO)

Answer 8

An electronic network for handling loan applications through remote computer terminals linked to various lenders’ computers.

Question 9

Contingency

Answer 9

A provision in a real estate contract that specifies the contract would cease to exist upon the occurrence of a certain event.

Question 10

Counteroffer

Answer 10

An offer made in response to a previous offer by the other party during negotiations for a final contract

Question 11

Deed of Trust

Answer 11

A type of secured real-estate transaction that some states use instead of mortgages.

Question 12

Earnest Money

Answer 12

A deposit made to a seller showing the buyer’s good faith in a transaction

Question 13

Exclusive Agency Listing

Answer 13

An agency agreement in which the seller reserves the right to sell the property on his or her own, without paying a commission to the agent.

Question 14

Exclusive Right to Sell Listing

Answer 14

An agency agreement under which a real estate agent has the sole right to sell a specified property.

Question 15

Land Contract

Answer 15

A contract between a seller and buyer of real property in which the seller provides financing to buyer to purchase the property for an agreed-upon purchase price and the buyer repays the loan in installments.

Question 16

Lease

Answer 16

A legal document outlining the terms under which one party agrees to rent property from another party.

Question 17

Mortgage

Answer 17

A debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments.

Question 18

Net Listing

Answer 18

Listing in which the broker’s commission is the excess of the sale price over an agreed-upon (net) price to the seller; illegal in some states but not Texas.

Question 19

Offer to Purchase

Answer 19

A preliminary agreement, secured by the payment of earnest money, between a buyer and seller as an offer to purchase real estate.

Question 20

Open Listing

Answer 20

A property listing that uses multiple real estate agents to sell it; with an open listing, the agent that sells the property collects the commission.

Question 21

Option

Answer 21

An agreement in which one party buys the right to have the first chance of purchasing a piece of property at a specific price at some point in the future.

Question 22

Promissory Note

Answer 22

A written, signed, unconditional promise to pay a certain amount of money on demand at a specified time.

Question 23

Proration

Answer 23

The amount of or the act of determining a portion or share of a cost or benefit to be allocated between two parties.

Question 24

Rescission

Answer 24

The unmaking or termination of a contract between parties.

Question 25

Any sale of real estate that generates proceeds that are less than the amount owed on the property.

Answer 25

Short Sale

Question 26

Underwriter

Answer 26

Typically works for a lender to go over all the required paperwork and give the final approval for a loan.