Contract Law Part III

Question 1

What does TRELA Section 537.11 use of Standard Contract Forms state?

Answer 1

When negotiating contracts binding the sale, exchange, option, lease or rental of any interest in real property, a real estate licensee shall use only those contract forms promulgated by the Texas Real Estate Commission for that kind of transaction.

Question 2

TREC does not promulgate which forms and agreements?

Answer 2

Listing or buyer representation agreements, property management contracts, forms for commercial property, or residential leases (other than temporary residential leases used in connection with a sale)

Question 3

In the One to Four Family Residential Contract, what does the financing paragraph identify? Which form will be completed in addition to the residential contract for financing?

Answer 3

The financing paragraph identifies the type of financing the buyer intends to secure. The details of the financing are specified in one of the financing addendums available.

Question 4

When is mediation used?

Answer 4

When resolving conflicts between a buyer and seller in which a mediator listens to each side and helps make a mutually agreeable decision

Question 5

The Farm and Ranch Contract is designed for what types of properties? Name three specific buildings to ask about.

Answer 5

This form is designed to be used for anything from the country getaway place or the small farm to the large working farm or ranch. It covers barns, outbuildings, and farm homes.

Question 6

In Paragraph 2 of the Residential Condominium Contract, the Property paragraph addresses what other topics besides Unit and Building type legal description, itemization of improvements and accessories?

Answer 6

The Condominium Declaration, Bylaws, Rules of the Association, and the Resale Certificate

Question 7

List items addressed in the Seller’s Financing Addendum.

Answer 7

The items addressed in the addendum are: 
Credit worthiness of the buyer
Credit approval
The Promissory Note
Deed of Trust and if it is assumable
Tax and Insurance Escrows

Question 8

The contingencies in the Notice of Buyer’s Termination of Contract are for what reason?

Answer 8

To protect buyers from contractual obligations they cannot fulfill

Question 9

The Third Party Financing Addendum for Credit Approval addresses which types of loans?

Answer 9

Conventional, Texas Veterans, FHA insured, VA guaranteed financing, and USDA Guaranteed Financing

Question 10

A condominium resale certificate must be solely prepared by whom?

Answer 10

The Condominium Association

Question 11

An amendment to a contract is specifically drafted to reflect what?

Answer 11

Changes negotiated AFTER the original contract has been signed

Question 12

In the Buyer’s Temporary Residential Lease, name 3 items the buyer/tenant may NOT do.

Answer 12

The buyer/tenant is not allowed to:
Make any holes or drive nails into the woodwork, floors, walls or ceilings
Alter, paint or decorate the property
Install improvements or fixtures without the prior written consent of landlord/seller

Question 13

The Use of Standard Contract Forms section of TRELA states that

Answer 13

“when negotiating contracts binding the sale, exchange, option, lease or rental of any interest in real property, a real estate licensee shall use only those contract forms promulgated by the Texas Real Estate Commission (the commission) for that kind of transaction with exceptions.”

Question 14

TREC contract forms are intended for use only by

Answer 14

licensed real estate brokers or salespersons that are trained in their correct use. Mistakes in the use of a form may result in financial loss or a contract which is unenforceable.

Question 15

TREC does not promulgate

Answer 15

listing or buyer representation agreements, property management contracts, forms for commercial property, or residential leases (other than temporary residential leases used in connection with a sale).

Question 16

When filling in a form authorized for use by TRELA

Answer 16

the licensee may only fill in the blanks provided and may not add to or strike matter from the form, except that licensees can add factual statements and business details desired by the principals and can strike only such matter as is desired by the principals and as is necessary to conform the instrument to the intent of the parties.

Question 17

The contract you will probably use most often is the

Answer 17

ONE TO FOUR FAMILY RESIDENTIAL CONTRACT.

Question 18

Real estate licensees should avoid attempting

Answer 18

to interpret the builder’s contract or give opinions. It is very wise to advise the buyer to seek legal counsel before signing the contract.

Question 19

The Farm and Ranch Contract is designed

Answer 19

to be used for anything from the country getaway place or the small farm to the large working farm or ranch. It covers barns, outbuildings, and farm homes.

Question 20

The Texas Property Code defines a Condominium as

Answer 20

“a form of real property ownership that combines separate ownership of individual apartments or units with common ownership of all other elements.”

Question 21

Often a seller must sell another house before he or she can buy the new house

Answer 21

The ADDENDUM FOR SALE OF OTHER PROPERTY BY BUYER creates a contingency contract based on the sale of the buyer’s current house.

Question 22

The SELLER FINANCING ADDENDUM is for

Answer 22

seller financing when the seller owns the property “free and clear” and does not require the entire amount of the sales price in cash.

Question 23

Contingencies are

Answer 23

intended to protect buyers from contractual obligations they cannot fulfill.

Question 24

Coastal area addenda are required for properties along the Gulf coast of Texas

Answer 24

Damage that occurs as a result of a storm may erode the beach more than any property owner could have imagined. These addenda serve as a warning about shifting boundaries due to erosion and flooding.

Question 25

A buyer may choose to request the seller to provide

Answer 25

certain subdivision information such as subdivision restrictions and rules and bylaws of the association.

Question 26

The third party financing addendum addresses

Answer 26

conventional, Texas Veterans, FHA insured, VA guaranteed financing, and USDA Guaranteed Financing.

Question 27

Loan assumptions are rare today

Answer 27

Loan documents for the past 20 plus years do not allow assumptions and current loan programs make it more attractive to secure a new home loan.

Question 28

The Condo Resale Certificate must be requested

Answer 28

in writing with information for delivery and solely prepared by the condominium association.

Question 29

An amendment to a contract is

Answer 29

specifically drafted to reflect changes negotiated AFTER the original contract has been signed. It is not a part of the original contract as addenda are. Each amendment is signed by the parties and has an effective date as of the signing.

Question 30

There are nine reasons to amend the contract. As a licensee, you should not make any other changes to the contract than those listed on the form.

Answer 30

Changing the Sales Price, down payment and/or amount financed.
Specifying additional repairs.
Extending the closing date.
Changing the seller’s contribution to the buyer’s closing costs.
Reallocating the amount the parties agree to pay for lender required repairs.
Extending the Termination Option with amount of additional option fee.
Waiving the right to the remainder of an existing option period.
Extending the date by which the buyer must give notice regarding the securing of financing.
Adding or deleting factual statements or business details concerning the existing contract.

Question 31

The ADDENDUM FOR RESERVATION OF OIL, GAS AND OTHER MINERALS is for use only if

Answer 31

the seller reserves all or a portion of the mineral estate, meaning oil, gas, and other minerals in or under the property and any royalty under existing leases. It also addresses certain surface rights such as production and drilling rights, easements, lease payments and other benefits.

Question 32

When a seller needs to remain in possession of the house after closing, this temporary lease is used

Answer 32

This form is an addendum to a TREC contract form and is never to be used as any other lease agreement. The Seller’s Temporary Residential Lease is used in home and condo sales.

Question 33

Occasionally a buyer may lease a house before closing, using the temporary lease form

Answer 33

This is done only rarely and obviously the seller has already vacated the house. The buyer/tenant may use the property only for residential purposes.