Law of Contracts Flashcards
1
Q
What’s the difference between an addendum and an amendment?
A
An addendum is attached to a contract to create additional terms, and an amendment changes the terms within an existing contract.
2
Q
Community Property:
A
A special form of joint tenancy that exists between a married couple, with each owning a one-half interest; any house or real estate purchased during a marriage is considered community property
3
Q
Deed:
A
The legal written document that conveys the intangible ownership rights (title) of a real estate property to another party
4
Q
Deed of Trust
A
A security instrument that places the deed to the property in a trust held by the lender until the mortgage is paid off, when the trustee will transfer the deed to borrower
5
Q
Encumbrance:
A
Any restriction, encroachment, claim, or lien on a property (such as a mortgage) that affects the value or use of the property
6
Q
Equal Credit Opportunity Act (ECOA):
A
A legal protection for consumers against unfair and discriminatory lending; located in Title VII of the Consumer Credit Protection Act
7
Q
TREC
A
9 members of commission and all appointed by governor for 6 year terms
8
Q
The Texas Real Estate Commission does not write or change TRELA.
A
TRUE
9
Q
TREC is made up of 5 division
A
Education, Licensing, & Communication Enforcement Information Services Staff Services Administration
10
Q
Promulgated Contracts
A
Contracts promoted by the Texas Real Estate Commission and required for use by all real estate sales agents when completing the transaction for which the contract was created
11
Q
approved contracts
A
Contracts that are allowed by the Texas Real Estate Commission but not required
12
Q
Broker-Lawyer Committe
A
is comprised of one public member, six attorneys appointed by the Texas State Bar, and six brokers appointed by the Commission. They develop and recommend contract forms to the Texas Real Estate Commission. 6 year terms
13
Q
TREC’s 6 promulgated contracts
A
One to Four Family Residential Contract (Resale)
Farm and Ranch Contract
Condominium Contract
Unimproved Property Contract
New Home Contract (Completed Construction)
New Home Contract (Incomplete Construction)
14
Q
Texas Deceptive Trade Practices Act (DTPA)
A
is the primary consumer protection law in Texas. While the law has changed from its original version in 1973, it continues to provide protection to consumers
15
Q
Deed
A
A legal document that is signed and delivered, especially one regarding the ownership of property or legal rights
16
Q
Bill of Sale
A
A certificate of transfer of personal property
17
Q
Fixture:
A
An object that was once personal property but is now firmly attached to the land in such a way that it is considered to be a part of the real estate
18
Q
Trade Fixture
A
Objects affixed to the leased property that are owned by and necessary for the tenant’s trade or business
19
Q
annexation
A
Attaching (or affixing) personal property to real estate in a way that transforms the personal property into real property
20
Q
Adaptation
A
The use and modification of a particular item for a specific use in a property — specific use for a property could deem an item as real property
21
Q
intention
A
The owner’s intent for an item — was it designed to be a part of the real property
22
Q
severance
A
The act of separating real property from the land (and hence, turning it into personal property)
23
Q
Emblements
A
Crops growing on a property which require annual care and are considered the personal property of the owner
24
Q
3 ways personal property can become fixtures
A
annexation, adaptation, intention
25
Bill of sale
is a certificate of transfer of personal property.
26
Real estate is transferred y a
deed
27
Personal property is transferred by
bill of sale
28
Trade fixtures
Objects affixed to the leased property that are owned by and necessary for the tenant’s trade or business
29
removing the fixture must be done by?
the tenant must remove the fixture by the last day of the lease
30
annually cultivated crops are
fructus industriales or emblements and are considered personal property
31
Situs:
The economic significance of a property's location
32
fixity
The fact that real estate exists in a fixed location and cannot be moved
33
What are unique characteristics of land?
indestructibility, immobility, non-homogeneity
34
what are economic characteristics of land?
scarcity, situs, modification, fixity, illiquidity
35
In Severalty:
Describes undivided ownership of an estate, with an interest that is exclusive from other owners (sole ownership)
36
co-ownership
Ownership of an estate by multiple individuals or entities
37
joint tenancy
Co-ownership in which the parties have the right of survivorship — when one dies, the others receive that person's portion of the estate
38
community property
Property owned by a married couple in which each spouse has ½ ownership of any property obtained during the marriage, plus a right of survivorship ownership after the death of either spouse
39
tenancy in common
Co-ownership with rights of inheritance; assumed form of co-ownership if joint tenancy is not declared
40
trustor
The transferor or creator of the trust
41
beneficiary
The individual who receives the trust
42
trustee
the manager of the trust
43
testamentary trust
A type of trust that is effective upon the death of the trustor
44
living trust
Type of trust created during someone's life to manage their assets in life and in death
45
3 types of ownerships
```
In severalty (exclusively)
In co-ownership (multiple people)
In trust (an organization)
```
46
Larry, Moe, and Curly have a tenancy in common for a 200 acre plot of land. The ownership is divided evenly. What do they each own?
1/3 ownership of property
47
what is the difference in tenants in common and joint tenancy when it comes to inheritance rights?
tenants in common: interest in estate goes to persons descendants; Joint tenancy: interest in estate goes to the other owner
48
4 unities of joint tenancy
unity of interest, unity of time, unity of title, unity of possession
49
3 types of coownership
community property, tenancy in common and joint tenancy
50
trust
is an entity created for the benefit of another
51
2 types of trusts
testamentary and living
52
testamentary trust
is effective upon the death of the trustor. The deceased (trustor) conveys the property to the trust of the trustee, who manages the ownership for the beneficiary.
53
living trusts
are created during someone's life to manage their assets in life and in death. also known as inter vivos trusts
54
Sole Proprietorship
A business entity in which revenue, liability, and all responsibilities are owned by one person
55
partnership
A business entity legally formed for two or more individuals to share profits
56
corporation
A company or group of people recognized as one entity under the law; owners purchase stocks in the corporation (shareholder) and the corporation is run by the board of directors (elected by the shareholders)
57
S Corp
A corporation (that can only be formed with less than 100 shareholders) that is similarly taxed like a partnership to avoid double taxation
58
general partner
Person who takes the lead on day-to-day relationships and assumes full liability for the business
59
limited partner
Person who is only liable for the amount they have invested into the business venture
60
joint venture
A partnership formed by a group of investors for one venture — it dissolves after the venture is complete
61
What do general partners assume in a partnership?
unlimited personal liability
62
Which of the following best describes a joint venture?
investors plan to part ways after the stated venture is finished.
63
common law
law derived from past judicial decisions of courts
64
statutory law
law formally created by legislatures
65
rights included in the bundle of rights
right of exclusion, possession, disposition, quiet enjoyment
66
Thanks to the rule of capture, surface right owners have the right to:
groundwater (if they can pump it up to the surface)
67
Groundwater Conservation District GCD
government districts formed to preserve a regions groundwater
68
Riparian rights
rivers and streams
69
Litotorial
lakefront or seafront
70
3 types of Co-ownership
community property, tenancy in common and joint tenancy
71
when a married couple purchases a home in Texas, who is required to sign the deed?
both partners
72
separate property
is a type of property owned by a spouse that is not community property
73
the most common type of co-ownership
tenancy in common
74
Single family home owners own
the building and the lot on which it stands
75
Promissory Estoppel
a legal doctrine that forces a party to keep a promise and prevents a party from backing out of an agreement
76
the uniform commercial code
a uniform act (enacted by all 50 states) that regulates the sale of transfer of personal property. since it does not apply to real property, it would only affect license holders if a real estate transaction involved the sale of personal property
77
parol evidence rule
a common law rule that prevents a consumer from using things outside of the written contract to make a claim. verbal promises not in the contract will not be upheld by court.
78
What laws dictate what types of real estate building can be built in a geographical area?
building and zoning laws
79
When dealing with a property sale that includes mineral rights, an agent is required to use:
the TREC promulgated contract addendum
80
contract
a legally binding agreement that can be written or oral
81
5 essential elements of a legally valid contract:
legally competent parties, mutual consent, lawful objective, consideration, in writing and signed
82
In a bilateral contract, what kind of obligations are created?
reciprocal obligations
83
proving the breach
Evidence that a contract existed
Evidence that a contract was broken
Evidence that you suffered a loss
Evidence of the other party’s responsibility
84
Describe an important distinction between unilateral and bilateral contracts.
In unilateral contracts, the offeror promises to pay for the ACCOMPLISHED performance of an act. In a bilateral contract, the offeror is paying for the PROMISE of performance of an act.
85
Statute of limitations
Legal concept that establishes time limits from the date of event for bringing certain kinds of legal actions
86
The Doctrine of Laches
A legal principle used to bar dated claims; used in conjunction with an unreasonable delay or negligence in asserting or defending one’s rights
87
contracts can fall into 4 categories
void, valid, voidable, unenforceable
88
Voidable contracts can never be valid contracts
False: Voidable contracts are potentially valid contracts where at least one party has the option to rescind the contract.
Next Page
89
ratified contract
When a party performs their obligation to a contract that they could have rescinded,
90
statute of frauds
is a state law that requires certain types of contracts to be set out in writing and signed by all the parties bound by the contract.
91
In Texas, the statute of limitations for specific performance of a contract for the conveyance of real property is
4 years
92
To describe a contract as "executory" is to:
identify its stage of existence
93
stages of a contract
offer, acceptance, performance
94
to be executory, two elements must exist:
A binding contract on multiple parties
| One or more of the parties has yet to perform their contractual duties
95
Which of the following is an example of an executory contract with a set end date?
A rent-to-buy lease where the tenant exercises an option to buy the property is an example of an executory contract with a set end date.
96
When an individual performs an act due to unlawful pressure or coercion, they are said to be operating under ____
duress
97
Allodial System
system of ownership in which land is owned completely, without an obligation of services or duties to another
98
interest
a right or legal share in a property
99
estate
the degree, quality, nature, and extent of one's interest in property
100
ownership interest
an undisputed right of an owner to their property
101
security interest
the right of a lender to claim ownership of a property if a borrower defaults on payments
102
equitable interest
a secondary and lesser interest in a property than the ownership interest with which it is associated
103
In the early days of real estate, why was it easy for a seller to cheat a buyer by selling a property multiple times?
deeds were not always recorded
104
4 main types of estates are
freehold estate, leasehold estate, equitable estate, concurrent estate
105
public land use controls
government issues land use controls such as zoning ordinances, subdivision regulations and building codes
106
private land use controls
land use controls that are put into place by non government entities, such as real estate developers
107
public ownership of land
the role of government to own and maintain public land such as streets, highways and parks
108
police power
right of the state to regulate and restrict land use in order to protect the public, including enforcing zoning and building codes
109
eminent domain
right of the state to seize a citizen's private property for public use without the owner's consent but with compensation
110
taxation
right of the state to charge real estate to pay for services provided by the government
111
escheat
right of the state to seize a deceased person's estate if an individual dies without a will and has no surviving spouse, lineal descendants, or other known heirs (intestate)
112
4 types of land use controls under police power
zoning, building codes, private controls on land, application of rules
113
zoning
is the division of land within a jurisdiction into separate districts within which uses are permitted, prohibited or permitted with conditions.
114
application of rules
when there is an issue between a government restriction and a private restriction, the strictest restriction will be applied
115
rollback tax
is a property tax rate that applies when land changes from a qualifying use to a non-qualifying use.
116
Public improvement district PID
is an area that receives special assessments (taxation) that ultimately pay for improvements to the area
117
4 public controls
PETE: police power, eminent domain, taxation, escheat
118
private land use controls come in forms of
covenants, conditions and restrictions or CC&R's
119
dedicatory instrument
by the way, is a document governing the establishment, maintenance, or operation of a residential subdivision, planned unit development, condominium or townhouse regime, or any similar planned development.
120
The most common way in which restrictive covenants control the way private land use can be regulated is through
deed restrictions
121
T/F Deed restrictions override municipal zoning regulations.
T
122
Deed restrictions are enforced in and by
court
123
Which of the following is an example of a private land-use control?
Jimmy's HOA won't allow him to keep his trash can out by the curb past 8pm
124
freehold estate
An estate in land in which ownership will last for an indeterminate duration
125
Leasehold Estate:
A type of property interest allowing tenants to occupy and use a property they do not own; contains a reversionary right
126
fee simple estate
Maximum ownership of real property; also called a fee or a fee simple absolute and is of indefinite duration, freely transferable, and freely inheritable
127
Defeasible Fee Estate
Also known as fee simple defeasible or qualified fee, is a type of freehold estate in which the person who has possession of the property is only able to hold the property until an event takes place or does not occur; two common defeasible fee estates are fee simple determinable and fee simple subject to condition subsequent
128
fee simple determinable estate
A defeasible fee estate that will come to an end automatically and immediately upon the occurrence of a designated event, the time of such occurrence being uncertain
129
fee simple subject to condition subsequent
A defeasible fee estate in which a grantor conveys a parcel of real estate subject to a condition of ownership; the grantor must go to court to assert their right to retake ownership (right of re-entry)
130
life estate
An interest in real estate that will end upon the death of the life tenant or the pur autre vie life
131
Conventional Life Estate
A type of freehold life estate created by a deed or will that lasts for the duration of the tenant's life
132
Pur Autre Vie:
A type of freehold life estate that grants someone ownership of a property for the duration of another person's life- conventional life estae is based on life other than the life tenant
133
Legal Life Estate
A type of freehold life estate created by an act of law; a Texas homestead would be one example
134
Remainderman interest:
A party who has been named as the recipient of a life estate by a grantor — the remainderman gains fee simple estate after the life estate is conveyed.
135
Reversionary Interest
Refers to an estate wherein, upon the death of the life estate owner, full ownership reverts to the original fee simple owner; also known as a revisionary right
136
Estate for Years:
A leased possession of property for a certain, specific period of time; also known as a tenancy for years
137
Periodic Estate
Has a fixed lease period, meaning that the lease is automatically renewed at the end of each lease period until the landlord or tenant acts to terminate it; also known as periodic tenancy
138
3 types of freehold estate
fee simple absolute estate, defeasible fee estate, life estate
139
2 types of defeasible fee estates
fee simple determinable and fee simple subject to condition subsequent
140
If no third party is named as remainderman, when a life estate owner dies, the property reverts to the:
owner
141
2 types of life estate
conventional life estate and legal life estate
142
A couple renting a home have a leasehold estate, which means they have:
right of possession
143
4 types of leasehold estates
estate for years, periodic estate, estate at will, tenancy at sufferance
144
encumbrance
Any claim or right against a property held by another that is not the fee title owner
145
lien
A claim or charge against property, usually as security for a debt
146
easement
The right to use another owner's property for a specific purpose
147
encroachment
A structure (or extension of) that extends onto another party's property
148
general lien
affect any property an individual or institution owns, including both real and personal property. This includes many kinds of taxes, such as IRS and inheritance taxes.
149
specific lien
are claims against particular parcels of real estate and they do not affect any other property. Examples of specific liens are vendor’s liens, execution liens, vendee’s liens, surety bail bond liens, mechanic’s liens, mortgages, special assessments, property taxes, and attachments.
150
voluntary liens
When a person takes some action that places a lien on their own property,
151
A vendor’s lien is an example of an
equitable lien
152
A buyer does not pay for a property in full. This is an example of a(n):
equitable lien or vendor's lien
153
mechanics liens are
specific, involuntary and statutory liens
154
judgment liens are
general, involuntary and statutory
155
writ of execution
issued by a court to force payment of monies owed from a judgement when a debtor does not pay- also known as execution lien
156
execution liens are
specific and involuntary
157
Lis pendens
is used to inform the pulic when a lawsuit is filed that affects a specific piece of real estate
158
writ of attachment
the court seizes property until it reaches a judgement -also called attachment lien
159
attachment liens are
general and involuntary
160
a vendors lien is a
specific, involuntary lien
161
80-10-10 loan
80 percent borrowed, 10 percent down payment and remaining 10 percent borrowed from seller
162
vendee's lien
When a seller fails to deliver title to a parcel of real estate when all terms of the contract for a sale have been satisfied by the buyer
163
vendee's liens are
specific and involuntary
164
bail bond liens
can be put up in the form of real estate in lieu of cash when a property owner is accused of a crime. a specific, statutory, involuntary lien
165
municipal utility liens
specific and involuntary
166
Federal Tax Lien
general, involuntary, statutory lien
167
Easement Appurtenant
exists when two tracts of adjacent land are owned by two different people. Because property cannot be landlocked in Texas, one of the owners has the easement, or right to cross the other’s land
168
dominant vs servient tenement
When an easement appurtenant exists, there is one parcel of land which benefits (dominant) at the (relative) expense of another (servient)
169
easement in gross
an individual or company is allowed to be on the owner's property for specific purposes. (given to person not property)
170
Easement by Prescription
the area in question would have to have been used by the non-owner of the property for at least ten years. That person would have had to use the easement continuously, exclusively, and without the owner’s permission.
171
easement by necessity
when it's necessary to use the land in order to get in and our of property
172
4 types of encumbrances
lien, encroachment, deed restrictions and easement
173
non navigable waters
are owned to the middle of the body of water
174
navigable waters
are owned up to the vegetation line
175
Doctrine of prior appropriation
water users to obtain a permit from the state- first in time, first in right"
176
Severance:
The division of the mineral estate and surface estate
177
Forbearance Agreements
Part of a contract that requires one or more of the contracting parties to refrain from actions they are otherwise legally entitled to perform
178
Breach of Contract:
Occurs when the terms or conditions of a contract have been violated
179
Rescission
The act of terminating the contract without suffering any consequences
180
actual damages
Monetary compensation given to an injured party for losses that were a result of the actions or omissions of another party
181
liquidated damages
Sum of money established by the contract as compensation in the event of default
182
exemplary damages
Fines used to punish the breaching party
183
When a buyer defaults on a real estate contract, the seller has four options: and vice versa
1. forfeit the contract. 2. rescind the contract 3. sue for performance 4. sue for compensatory damages
184
2 types of tenancies:
residential and commercial
185
Within x days of signing a lease, the landlord must give the tenant a copy of the signed lease. It's Texas law, landlords.
3 days
186
A tenant calls the landlord to report a window broken during a hurricane.The landlord:
Landlords are responsible for conditions that materially affect the health or safety of an ordinary tenant. A window broken in a storm should be fixed for safety reasons.
187
According to the Texas Property Code, landlords must make repairs within a reasonable amount of time. What's a reasonable amount of time?
7 days
188
What charges may a landlord deduct from the security deposit?
tenant damages that do NOT qualify as "normal wear and tear"
189
landlords must mail a tenant's security deposit within x days of the tenant moving out of the residence
30
190
Landlords must rekey residences within x days of a tenant turnover
7 days
191
Lease Term:
The initial rental period from commencement to expiration; the duration of the lease
192
gross lease
A lease in which the tenant will be responsible for the payment of a fixed monthly charge, while the landlord is responsible for paying all operating expenses
193
net lease
A lease in which the tenant pays a base rent rate plus all or part of the operating expenses - most common in commercial properties
194
percentage lease
A commercial lease in which the tenant pays a base rent amount and a percentage of their business profits to the landlord
195
variable lease
A leasehold agreement in which the base rent changes
196
graduated leases
A variable lease agreement in which the amount of rent increases periodically at regular intervals
197
index lease
A variable lease agreement that also allows for a graduated increase of rent at periodic intervals
198
ground lease
A leasing of bare, undeveloped land
199
Sale and Leaseback Agreement:
A way for landowners to free up capital while maintaining the same overhead expenses by selling their interest in a property and leasing it back at the same monthly rate
200
double net lease
Any net lease that requires a tenant to pay a base rent, property taxes, and insurance
201
triple net lease
Any lease that requires a tenant to pay rent, property taxes, insurance, and maintenance expenses
202
In a triple-net lease, the expenses that a tenant must pay:
can be both fixed and variable
203
2 types of variable leases:
index and graduated
204
4 ways a lease can be discharged:
operation of law; landlord/tenant agreement; breach of contract; or expiration; special statutory rights
205
There are two broad categories of conditions that fall under the umbrella of landlord responsibility. Can you remember what they are?
health and saefty & hot water
206
option agreement
Unilateral contract to give one party the right to do or not do something without making a commitment to do anything
207
option period
This period of time in which the buyer is able to exercise the termination option
208
A check for the option fee must be delivered to the seller or the seller’s agent within x days after the effective date of the contract.
3 calendar days
209
Compare option money and earnest money.
Earnest money is often refundable, whereas option money is never refundable.. could be applied to purchase price or kept by seller
210
contract for deed
An agreement between the seller and buyer for the sale of real estate wherein the seller holds the legal title to the property until it is paid in full-executory contract
211
Texas House Bill 311
This bill amends provisions of the Texas Property Code relating to executory contracts for conveyance of real property to make contracts for deed more akin to transactions employing traditional seller financing using a deed and lien
212
lease purchase agreement
is used when a tenant wishes to buy a property but cannot do so right away. part of a tenant’s rent is applied to the purchase of the property.
213
Cameron, a seller, receives an offer. He signs and dates it, and his agent communicates acceptance to the other agent. What is this called?
total acceptance
214
A buyer gives the seller earnest money. What will happen?
the buyer's credit will be applied at the closing of the sale.
215
6 types of third party financing
```
Conventional financing
Texas veterans loan
VA guaranteed financing
FHA insured financing
USDA guaranteed financing
Reverse mortgage financing
```
216
A seller is concerned about continuing to have liability for their mortgage after they sell the property and a buyer assumes the loan. The seller should attempt to get this document from their lender:
release of liability
217
Three Financing Addenda
third party financing addendum, loan assumption addendum, seller financing addendum
218
SDL needs to be provided
at least 7 days prior to closing or buyer can terminate contract - should really be provided when house is listed on MLS or at open houses
219
If the seller does not provide the buyer with a completed Seller’s Disclosure Notice before signing the contract, the buyer has a legal right to:
the buyer has a legal right to terminate the contract within seven days of receiving the notice (or before closing, whichever is earlier)
220
ownership interest
is what a person gains when they purchase real estate. It provides a buyer with rights to use or to dispose of the property as they want.
221
Uniform Electronic Transactions Act, or UETA
says that electronic signatures are just as legal as handwritten signatures, and therefore have legally binding status.
222
What is a characteristic of ESIGN?
is a federal law that ensures the legal validity of electronic contracts.
223
Which statement BEST compares digital signatures and electronic signatures?
Digital signatures do the same thing as plain electronic signatures, but are a much more secure way of going about it.
Next Page
224
A law that requires real estate contracts to be in writing is the:
statute of frauds
225
Assignment
The transference of obligations in a contract from one party to another
226
novation
The act of substituting one contract for another
227
What is it called when one or more of the contracting parties either partially or completely fails to fulfill the contractual obligations?
breach of contract
228
when a contract is not legally valid or becomes unenforceable due to a statute of frauds, a statute of limitations, or other legal regulations
The property is condemned as uninhabitable prior to closing.
operation of law
229
One or all parties involved act illegally.
| Any party called upon to perform illegal acts is not required to meet the terms of the contract and can discharge it.
non performance due to legal issues
230
Remember, if a buyer defaults on a real estate contract, the seller has four options:
Forfeit the contract
Rescind the contract
Sue for specific performance
Sue for compensatory damages
231
In order for a loan to be approved, both buyer approval and ___ approval must be met.
property
232
There are five main types of contingencies:
title contingency, financing contingency, inspection contingency, sale of other property contingency, and appraisal contingency
233
The title company is required to issue the title report as soon as possible. Specifically, within
20 days
234
Consumer Financial Protection Bureau (CFPB)
Independent agency created under the Dodd-Frank Wall Street Reform Act to supervise financial companies, banks, and credit unions as well as enforce federal consumer financial laws-enforcement over TILA and RESPA
235
Civil Rights Act of 1968
also referred to as the Fair Housing Act, prohibited discrimination concerning the sale, rental, and financing of housing based on race, religion, and national origin.
236
The Fair Housing Act Amendment of 1974
added sex as a protected class to the Fair Housing Law.
237
disparate impact.
the uneven effect of a policy
238
Equal Credit Opportunity Act (ECOA)
prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or use of public assistance.
239
Real Estate Settlement Procedures Act (RESPA)
requires lenders to deliver an estimate of the buyer closing costs to the buyer after application.
240
Truth in Lending Act (TILA)
is a consumer protection law that helps protect consumers against predatory lending by requiring lenders to disclose all of the terms of a mortgage loan.
241
Collateral or equity “stripping”:
The practice of making loans that rely on the liquidation value of the borrower's home or other collateral rather than the borrower's ability to repay.
242
Padding or packing:
The practice of charging customers unearned, concealed, or unwarranted fees.
243
Flipping:
The practice of encouraging customers to frequently refinance mortgage loans solely for the purpose of earning loan-related fees.
244
single-premium credit insurance
The requirement to obtain life, disability, or unemployment insurance for which the consumer does not receive a net tangible financial benefit.
245
Loan Estimate must be provided to the consumer within
3 days after receiving the loan application
246
the Closing Disclosure must be delivered to the consumer
3 days prior to closing
247
Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act)
gave states one year to pass legislation requiring Mortgage Loan Originators (MLOs) to have both a state (Texas) and national mortgage license on the Nationwide Mortgage Licensing System and Registry (NMLS).- set minimum standards for licensing mortgage loan originators
248
The SAFE Act regulates the licensure of which type of real estate professionals?
mortgage loan originators
249
Promissory Note:
Also known just as a note, its a document in which the borrower acknowledges their debt and promises to repay the holder of the promissory note
250
Negotiable/security Instrument
A transferable, written promise by a party to pay a specific amount of money
251
A promissory note includes a promise to pay; the time and place of payments; and the amount of the payments, interest rate, and loan. What other element does it typically include?
what happens if the borrower fails to pay the payments.
252
secured note
refers to a mortgage that pledges rights (a lien or title, depending on state law) against a property as security for the debt. When applicable, the note will refer to the mortgage or deed of trust that is security for it.
253
unsecured note
has no collateral pledged for the loan and is a promise backed only by the signature of the borrower. An unsecured loan is often referred to as a signature loan.
254
Acceleration Clause:
Clause in a security instrument (mortgage/deed of trust) which makes the entire loan amount due immediately upon default
255
Power-of-Sale Clause:
Gives lenders the ability to post property for foreclosure if the debtor is behind on payments
256
Lien Theory States
Principle where mortgagors (borrower) retain legal and equitable rights to their property; mortgagee (lender) has a lien on the property until payment of loan
257
Title Theory States:
Principle where the trustor (borrower) conveys the legal title to the lender (or another party) and the borrower retains equitable title and right of possession until payment of loan
258
The three parties in a deed of trust are:
```
The trustor (mortgagor and trustor)
The lender (mortgagee and beneficiary)
The trustee
```
259
The trustee
(a third party) holds the deed of title on behalf of the lender (the beneficiary).
260
The borrower
homebuyer) has equitable rights to the title. This means that the borrower could one day earn the title to their property (after they repay their loan).
261
The beneficiary
(the lender), through the trustee, has the right to the title. They cannot possess the property, but if the borrower defaults on payments, they can quickly seize the title through the trustee (third party).
262
The Major Difference Between Title Theory and Lien Theory
In title theory states, or states where deeds of trust are used, foreclosure proceedings for default are usually simpler and faster than for mortgage loans.
263
Seller Financing
A loan that is provided by the seller to the purchaser of the property
264
Judicial Foreclosure:
A foreclosure that is processed through the court
265
non judicial foreclosure
A foreclosure that does not involve a suit or ruling of the court — the two types are power-of-sale foreclosures and strict foreclosures
266
Equitable Redemption:
Occurs before the foreclosure sale (auction) of the property and allows defaulting debtors to pay the defaulted portion of the debt and prevent foreclosure
267
Statutory Redemption:
Occurs after the foreclosure sale (auction) of the property and allows defaulting debtors to regain possession of the property
268
Short Sale:
A real estate transaction in which the property is sold for less than the existing mortgage balance
269
There are four main types of foreclosure. They are:
Judicial foreclosure
Non-judicial foreclosure
Auction
Deficiency judgments
270
2 types of non judicial foreclosures
Power-of-sale foreclosures
| Strict foreclosures
271
power-of-sale
allows the lender to bypass the courts and take possession of and sell a collateral property when the borrower defaults on their loan.
272
strict foreclosure
the lender gives notice of the default, and, if it is not paid in some specified time period, the lender may foreclose on the property, eliminating the borrower’s redemption rights (both equitable and statutory).
273
deficiency judgement
against a defaulted borrower, guarantor on a loan, or endorsers if a foreclosure sale does not generate enough money to pay off the loan and cover the costs of the foreclosure
274
There are two types of redemption:
```
Equitable redemption (before the auction)
Statutory redemption (after the auction)
```
275
purchase & sale (P&S) agreement
initial step in a short sale
276
If Michael finds a buyer who will pay less than the amount owed on his home, which of the following statements BEST describes what must happen before he can proceed with the sale?
his lender must approve the short sale
277
2 types of Pre-foreclosures sales
short sale and deed in lieu of foreclosure sale
278
liens are created in 3 ways
Consensual liens
Statutory liens
Judgment liens
279
2 categories of consensual liens (voluntarily entered)
Purchase-money security interest liens
| Non-purchase-money security interest liens
280
purchase-money security interest lien
is a type of consensual lien that holds the actual purchase as collateral.
281
Non-purchase-money security interest liens
are a little more rare, but the essential difference from the inverse type of lien is that instead of putting the purchased property up as collateral for the loan, the borrower puts up their already owned personal property up as collateral.
282
A seller sells their property to a buyer. However, the buyer does not pay them the full price. The seller can place a lien on the home and maintain the right to repossess the home until the buyer pays the full price to the seller. What is this kind of lien?
vendors lien
283
Housing Affordability Index
greater than 100 means that the median-income family could qualify for more than the median-priced home with an 80 percent loan.
284
High inflation is usually accompanied by:
high interest rates
285
Texas law requires school districts to offer a tax exemption on residence homesteads in what amount?
$25,000
286
A common tax-deductible expense associated with a real estate purchase is:
mortgage interest, property taxes, discount points paid at closing, and loan origination fees.
287
What do FHA and VA loans have in common?
they are funded by lenders
288
Regulation Z
The Act is designed to help consumers compare the costs of credit from different lenders.
289
Which of these advertisements violates the Truth in Lending Act?
A lender may not advertise terms that are not actually available to the consumer. A mortgage payment varies depending on many factors, such as down payment and interest rate.
290
Thanks to RESPA, the lender must provide the applicant truth in lending statement about APR within x days
3 days
291
A lender provides a loan applicant with a booklet entitled "Settlement Costs and You" published by HUD, a truth in lending statement indicating the total credit costs and the APR of the loan, and a good-faith estimate of settlement costs. What else does the lender need to provide?
Nothing. The lender has met all of RESPA's requirements.
292
Why can't license holders accept payment of any sort for referring clients to a bank?
RESPA is concerned with reducing unnecessary and ethically dubious charges associated with settlement and closing services. It prohibits anyone from giving or accepting anything of value in exchange for referrals of settlement service business involving a federally related mortgage loan.
Next Page
293
Computerized Loan Origination (CLO)
help consumers find a lender, fill out an application, and get loan approval all from their computer.
294
What happens if a borrower's loan application is rejected by a CLO?
The file goes to a lie underwriter for review.
295
Desktop Underwriter (DU)
It is designed to reduce the time involved in underwriting, as well as the cost.Fannie Mae encourages lenders to use its automated electronic underwriting system,
296
Stand-by Fees:
Fees charged by the water district to owners of unimproved property in an area where the property has potable (drinking) water and sewers available
297
Special Assessment:
A charge that the government can assess against real estate parcels for specific public projects
298
What is a characteristic of mortgagee title policies?
it is typically based on the dollar amount of the loan. Plus, it protects the lender’s interests
299
Richard is reading over his title policy. It states that it will not cover any overlapping of improvements. Is this standard in Texas?
In Texas, it is standard for the title policy to decline to cover any discrepancies, conflicts, or shortages in area or boundary lines, or any encroachments or protrusions, or any overlapping of improvements.
Next Page
300
alienation
The process and act of transferring property from one party to another ex. dead
301
dedication
the voluntary gift of one's land to the public
302
testate
a person who dies with a will
303
intestate
a person who dies without a will
304
holographic will
a handwritten will created solely by the maker (and not witnessed)
305
codicil
the process of making changes to a will already made
306
Inverse Condemnation
Occurs when the government has over-regulated a property so that it can’t be fairly used via restrictions, permitting, etc., that virtually eliminate any use of the property
307
Accession:
Refers to the acquisition of new land or real property by artificial or natural means
308
3 types of conveyance
Fee simple absolute (or fee simple)
Life estate
Fee simple defeasible
309
Michael owns his house, and he has the right to sell it both today or in the future, including by will upon his death. What type of conveyance is this?
fee simple absolute
310
Four forms of court order may force the conveyance of a property:
Action to quiet title
Suit for partition
Suit for condemnation
Foreclosure
311
action to quiet title
it holds a hearing in which all parties who believe they might have a claim to the property may appear and plead their case
312
suit for partition
the court orders the physical division of a disputed property or sale of that property.
313
suit for condemnation
the court can order a private owner to surrender their real estate to the state or federal government if the government can prove that the use of the property will benefit the public, show fair compensation to the property owner, and assure that the owner will receive due process.
314
actual notice
Notice given to a specific party regarding the ownership of a property. taking possession of a property
315
Constructive Notice
Recording of a deed in publicly accessible records
316
A sneaky seller sells a house to two different buyers. Buyer 1, who actually moved into the house, claims that this is enough notice of their ownership. Is Buyer 1 right?
yes. moving in qualifies as notice of ownership
317
General Warranty Deed
The most frequently used deed format, provides the greatest protection of all the deeds; shows that the grantor transferred clear title to the current owner.
318
special warranty deed
A deed that only provides one covenant instead of five- covenant against encumbrances
319
quitclaim deed
A deed used to correct a title defect usually discovered after the fact
320
5 basic warranties of general warranty deed
Covenant of seisin, covenant against encumbrances, covenant of quiet enjoyment, covenant of further assurance and covenant of warranty forever
321
Covenant of Seisin
the seller warrants that they are the owner
322
Covenant Against Encumbrances
the property is free of any liens
323
Covenant of Further Assurance:
where the seller promises to make good any problems with title
324
Covenant of Warranty Forever
if title ever fails, seller will compensate buyer
325
Default:
Failure to fulfill an obligation by duty, contract, or law
326
Paragraph 23 of the One to Four Family Residential Contract:
gives the buyer the right to terminate for any reason within the option period
327
What form should be used when opting out of a Texas real estate sales contract?
TREC's Notie of buyers termination of contract form
328
Assumption transactions:
A transaction in which the buyer purchases the home and assumes the existing mortgage on the property (FHA and VA loans are assumable with qualifying.)
329
Origination charges include application fees, origination fees, underwriting fees, verification fees, rate-lock fees, and what kind of fees?
processing
330
The Consumer Finance Protection Bureau (CFPB) enforces RESPA laws through
Regulation X
331
TRID combined disclosures from which two previous laws?
TILA and RESPA
332
TRID
TILA-RESPA Integrated Disclosure
333
Regulation Z
TILA
334
Regulation X
RESPA
335
Loan estimate must be given
3 days after application
336
closing disclosure must be given
3 days prior to closing
337
Marketing Services Agreement (MSA)
are usually framed as payments for advertising or promotional services, but in some cases the payments are actually disguised compensation for referrals
338
Affiliated Business Arrangement (ABA)
exists when a real estate brokerage provides services related to closing transactions via subsidiary companies that operate under the corporate umbrella of that brokerage.
339
Can a seller ever require a buyer to purchase title insurance from a specific title company?
A seller CANNOT require a buyer to purchase title insurance from a specific title company UNLESS they pay for all costs for themselves and the buyer.
340
According to RESPA guidelines, if an escrow account contains an amount more than $50 in excess of the allowable limit, the lender:
must return that amount to the borrower within 30 days
341
APR
It is the ratio of the total cost of financing to the loan amount. The cost of financing includes interest paid, discount points, and loan fees but does not include other fees that would have to be paid regardless of financing
342
Deficiency
(as defined by the Standards of Practices) A condition that, in the reasonable judgment of the inspector, adversely and materially affects the performance of a system, or component or constitutes a hazard to life, limb, or property
343
Procedural Rule 53
was enacted to significantly restrict the marketing assistance given by title companies to real estate license holders.
344
Section 8
prohibits the giving or accepting of kickbacks.
345
T-47
A notarized Texas Department of Insurance form that is used in conjunction with a recertified survey to attest the accuracy of the original survey.
346
home warrenty
is a one-year service agreement to cover repairs or replacement of major home systems and appliances. Also known as a residential service contract, a home warranty is something a buyer will often ask the seller of a home to pay for but can purchase themselves
