Texas Promulgated Contract Forms Flashcards
Void Contract
Has no legal effect and can’t be enforced as terms do not create legal rights or call fro illegal acts
Voidable Contract
One or more of the parties has authority to rescind the contract (incompetent, fraud, duress)
Mutual Agreement
Offer and acceptance
Mirror Image Rule
Offer must be accepted without modifications
Parol Evidence
When parties agree in writing, all prior oral and written agreements integrated into one and prevents a party to add to the written terms of the contract
Electronic Signature
An electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record
Laches
Use it or lose it rule. Too bad, you are out of time. That door is now locked. Unreasonable delay, neglect
Executory Contracts
In the works
Option Money
Must be given to the seller or seller’s agent and NEVER to the title company
Contract Lawsuit Statute of Limitations
15 years
Time is of the essence addenda
Sale or Other Property by Buyer
Back-up Contract
Third Party Financing
Short Sale
Four Corners Rule
If a contract appears to be complete, no outside evidence can be used to challenge it
Nominal Damages
Token damages when breach occurred – not money loss
Liquidated damages
Specific damages
Specific Performance
Performance of a contractual duty, as ordered in cases where damages would not be adequate remedy
Restitution
Putting non breaching party back in position before breach
Assignment
Famous people purchasing property may have the original contract in the name of an unknown buyer and then at closing, the contract is assigned to the real purchaser
Assignment
Transfer of rights
Delegation
Transfer of duties
Statutes of Limitations in Texas
- Assault and battery: 2 years
- Contract: 4 years
- False imprisonment: 2 years
- Fraud: 4 years
- Legal malpractice: 2 years
- Libel: 1 year
- Medical malpractice: 2 years
- Personal injury: 2 years
- Product liability: 2 years or 15 years
- Property damage: 2 years
- Slander: 1 year
- Trespass: 2 years
- Wrongful death: 2 years
MUD
Municipal Utility District provides water, sewage, drainage etc.
Reasons for Termination
Fully executed contract is best way
Life of a Real Estate Transaction
Buyer orders home inspection Repairs Loan Application and Appraisal Survey Insurance Home Warranty Final Walk-through
Who approves and promulgates Texas RE forms
TREC
How many promulgated forms does TREC have
The Real Estate Commission has approved and promulgated 6 contract forms for licensee’s use. They include a One to Four Family Residential Contract, Two New Home Contracts, a Farm and Ranch Contract, a Condo Contract and an Unimproved Property Contract
Texas Veterans Loan
Can borrow u p to $150,000 to purchase land at competitive interest rates. 5% down for tracts one acre of more
MIP (Mortgage Insurance Premium)
FHA
Lender Paid PMI
Built into interest rate. Often monthly payment is less
Mortgage Premiums for FHA
Two mortgage insurance premiums are required on all FHA loans. The upfront premium is a % of the loan amount – currently 1.75%
The 2nd is the annual premium (paid monthly) based on LTV
FHA 203K
Based on current appraised value for repairs up to $35,000 nonstructural repairs (painting, replacing cabinets or fixtures)
Max FHA loan size
$625,500
Reverse Mortgage Age
62 and no escrow account and the mortgage isn’t due until last borrower dies, sells or fails to live in the home for longer than 12 months
Texas Veterans Land Board
Competitive interest rates Up to $417,000 Those with 30% or greater service connected disability get additional 1/2% discount and Funding Fee is waived 0 down No PMI
The date in the right side top of the contract is the date that
TREC approved and promulgated the form
How many versions of the Third Party Financing Addendum
8
The sales contract describes the property as
Land, Improvements and Accessories
If parties decide to add items that stay that are not in the contract, they should use
Non-Realty Items Addendum
On FHA loans being made currently, the MIP the borrower pays monthly will terminate when
Never until loan is paid off
The money to originate an FHA, VA, TVLB loan comes from the
The lender
A veteran may be able to get his VA entitlement restored by
Sending an application to the VA
According to the Loan Assumption Addendum, if the buyer does not deliver the credit information within the required time, the seller has how many days to terminate after expiration for the time of delivery?
7
According to the Seller’s Financing Addendum, if the buyer delivers his credit information to the seller in a timely fashion, and the seller determines it is unacceptable, how many days after the date for the expiration of the time for delivery does the seller have to terminate?
7
Property approval, according to paragraph 4, includes which of the following things?
The appraisal
Lender-required repairs
Insurability
The amount listed as the principal amount of the loan(s) in the addendum(s) should match the amount in Paragraph 3B of the contract
True
The buyer’s notice of failure to receive buyer approval from the lender, written on a napkin and given to the seller before the deadline, is sufficient to terminate the contract and receive a return of the earnest money
True
Who do you deliver earnest money to
Listing Agent
Paragraph 23
Paragraph 23 says the money must be delivered to the seller within three days after the effective date. Notice the last line of the paragraph says, “time is of the essence”. Time is of the essence means that five minutes after that 5PM deadline on that third day is too late. For example, if the effective date is the second day of the month, the option money must be delivered to the seller (or his or her agent) by 5PM on the 5th.
Who is responsible for Title Insurance Policy cost
The parties negotiate who will pay for the Owner’s Title Policy and which Title Company will be used. The Title Policy is a contract between the title company and the buyer. It is important the decision of which title company to use be left to the decision of the parties.
Who pays for Restrictive Covenants
According to paragraph 6B of the TREC contract the Title Company will send a commitment for title insurance, within 20 days after they receive the contract, to the buyer at the address listed in Paragraph 21 of the contract. The buyer will also receive a copy of the restrictive covenants, at the buyer’s expense, that are in place for the real estate. The restrictions dictate how the buyer can and cannot use the property. Restrictive covenants are an exclusion to the title policy.
Restrictive Covenants
The buyer will receive a copy of the restrictive covenants and other deed restrictions that are in place for the real estate. The restrictions dictate how the buyer can and cannot use the property. Restrictive covenants usually apply to a group of homes or lots, or property that’s part of a specific development or subdivision. They are normally put in place by the original developer and are different for every area of homes
Reservations
oil, gas, or other minerals, water, timber, or other interests is
made in accordance with an attached addendum
Who picks Title Company
if a seller wants to avoid a possible violation of RESPA, the seller should not insist on a particular title company for the transaction unless the seller is paying for both the owner policy and the lender policy of title insurance.
Who picks Title Company
if a seller wants to avoid a possible violation of RESPA, the seller should not insist on a particular title company for the transaction unless the seller is paying for both the owner policy and the lender policy of title insurance.
RESPA issues with choosing a Title Company
It’s the agents who care. If you are a seller’s agent and there is even the slightest possibility that trying to force the buyer to use a certain title company could cause your seller to be in violation of RESPA, it would be a very serious situation. Let the parties decide the title company.
When does buyer pay seller option fee (usually $100-200)
Within 3 day after date of contract and will not be credited to sales price at closing and not refundable
Stand By Fees
Charged by water district to unimproved property
Who pays for Title Insurance
Although it is customary for the seller to pay for the title policy, this is not required, and paragraph 6 provides the opportunity to check the buyer as the paying party. The title company has 20 days to produce the commitment with an automatic 15 day extension if needed.
Buyer pays for copies of restrictive covenants
Increase Value Endorsement
The title policy does NOT guarantee that no one will ever attack your title. They do guarantee that if anyone does attack your title, they will defend you and if they lose, you are insured up to a certain amount. The amount is usually what you paid for the property when you bought it. That was probably enough when you bought it. This is to increase value of property to what it is now.
Title Insurance Policies
T-1 for Seller and t-2 for buyer. 4 year statute of limitations
T-47 from Tex Dept of Insurance
Residential Real Property Affidavit – notarized document telling buyer of your home what you know about the home’s boundaries. I never added a fence or extension to house or moved a fence. Should be completed before you list your home for sale
Survey cost in Austin
$400-$550
Sellers Disclosure Notice
Buyer can terminate for any reason within 7 days of Notice and receive earnest money
Lead based paint disclosure
Remember, you risk a $10,000 penalty and up to three times the damages to someone injured each time you violate the federal lead-based-paint disclosure requirement.
When a contract is in writing, the parties have agreed to everything, all signatures and initials are in place and the acceptance has been communicated to the other party or their agent you can fill in the
Effective date
Amendment to change exceptions in the title is paid by
Negotiated party
Deed Restriction
Dictate how the buyer can and cannot use the property
Good Funds
Wire transfer, cashier’s check, certified check
Prepaid Interest
Discount points
Buy Down
Mortgage subsidy made to the homebuyer on behalf of the seller.
Commitment Fee
a banking term used to describe a fee charged by a lender to a borrower to compensate the lender for its commitment to lend
Liquidate Damages
Estimated guess of actual damages
Arbitration
Agreement in a dispute will be resolved on friendly basis. 3rd party (Judge) would make decision.
Escrow
legal document that outlines the terms and conditions between parties involved in an escrow arrangement. An escrow, third party, agent would then follow the instructions outlined in the agreement
Antitrust Violations
Protect trade and commerce from abusive practices
The closing will be on or before such and such date or…
or within 7 days after objections made under Paragraph 6D have been cured or waived, whichever date is later (Closing Date).
ABCs of Title Commitment
Schedule A – Actual facts (names, legal, price, lender)
Schedule B – Buyer Notice of things not covered by title policy
Schedule C – Clear in order to close must be resolved
Schedule D – Disclosure of all parties who will share any part of the title insurance premium
The buyer made an objection to something on the survey and the seller cured the objection. The parties will be able to close but it will be four days after the on or before date. Do they parties need an amendment?
No, they have 7 days to close after the objection is cured
The parties were to close on May 15th. The title company got the closing disclosure to the buyer on the 14th but they have to wait the three days and will close on the 17th. Do the parties need an amendment to the contract?
Yes
If the buyer is concerned about the exclusion in the title insurance for the standard printed exception as to discrepancies, conflicts, shortages in area or boundary lines, encroachments or protrusions, or overlapping improvements, is there anything he or she can do about it?
Yes, the buyer can get an endorsement to change it to only shortages in area*
203K
FHA Renovation Loan
Do the requirements of the Texas Property Code relating to security issues apply to a property under a Temporary Lease Agreement of under 90 days?
No
Most amortization schedules are based on 360 days
Statutory year
5 Texas Constitutional Rules for Property Tax
Taxation must be equal and uniform
Taxation must be on its current market value
All property is taxable unless Federal or State law exempts it
Property owners have a right to reasonable notice of increases in appraised value
Each property must have one appraised value
3 main parts to property tax system in Texas
Appraisal district in county sets value yearly – CAD district
Appraisal Review Board settles disagreements
Local taxing units decide how much money they will need
Property Tax bills go out when
October 1st. Have until Jan 31st to pay their taxes. Feb 1st penalty and interest charges, legal action
What is a form on interest that a lender collects up front?
Discount points
How long does a broker have to keep escrow account records
4 years
If a buyer has an escrow account on his new loan, how many months will they be debited at closing?
14 months
Any party who fails or refuses to sign a release acceptable to the escrow agent within how many days will be liable to other party for damages
7
Written demand for earnest money
Within 15 days
Buyer Broker Contract
Exclusive – you can’t buy a property without owing a commission to that agent even if that agent didn’t write your offer
An agreement that you will be paid
Which paragraph is used to add factual statements or business details as desired by the principals to conform to the negotiations?
Paragraph 11, Special Provisions, can only be used to add factual statements or business details as desired by the principals to conform to the negotiations. Factual statements and business details are clarifications of something in the contract. They are true, factual, and simply expand on a subject elsewhere in the contract, not a new negotiation.
The seller may not accept a second offer unless the back-up addendum is part of the second offer
True
Real Estate Developers
Not regulated
Homeowners Association
Not regulated
Mortgage Brokers
Texas Department of Savings an Mortgage Lending
Property Tax Consultants
Texas Department of Licensing and Regulation
Title Insurance Companies
Texas Department of Insurance
Auctioneers
Texas Department of Licensing and Regulation
Writ of Execution
Order of the court to any constable in the state of Texas ordering him to execute on any non-exempt assets. … A judgment creditor has the right, as a matter of law, to have a writ of execution issued unless and until the defendant files a proper supersedes bond.
Abstract of Judgment
Court document that renders judgment and summarizes damages, attorney’s fees and court costs
Max payment for a claim
$50,000 for single transaction and $100,000 for all claims against a single license holder
IABS (Information about Brokerage Services)
Cannot be a link in an email signature Can be an attachment in an email Can be in the body of the email, personal delivery, 1st class mail or overnight carrier Can be link in body of email Link is required on my website
To terminate a contract during option period
The Notice of Termination is the proper way to give the required notices of termination. Only the buyer has to sign this document. Since the buyer has been given these rights in the contract, it is not necessary to get the sellers approval.
If an agent is selling a new home and the builder has her own contract form, how can the agent ascertain that the buyer receives the required notice that he or she should have the abstract examined by an attorney or obtain a policy of title insurance?
Use TREC form OP-C, Notice to Prospective Buyer
A transaction is contingent upon the sale of another property and the seller notifies the buyer that he has accepted another offer. What must this buyer do?
Waive contingency on or before the date agreed to in the Sale of Other Property Addendum
A back-up contact was executed on July 1st. The buyer is willing to be in back-up position until July 16th and see if the first contact will terminate. What are the back-up buyer’s responsibilities while in back-up position?
Pay earnest money and option money agreed to in back-up contract
Fraud for Profit
Insiders
Fraud for Property
Borrow inflates information
Occupancy Fraud
Borrow states the home will be primary or secondary residence but is an investment property which have higher interest rates
Appraisal Fraus
Inflated appraisal value
Income Fraud
Overstated income
Equity Skimming
Multiple parties starting with appraiser inflating price, a phony buyer secures loan to hide ID of fraud organizers and then sign property over to organizers in quit claim deed and they rent the property until it goes into foreclosure
Straw buyer
Phony
Civil Rights Acts
Protects Race
Fair Housing Act
Protects color, sex, familial status and not age
Fair Housing Act
Protects color, sex, familial status and not age
Well publicized events that make the property notorious like murder/suicide
Must be disclosed
The seller has agreed to repair the front porch but he needs more time to finish. What is the maximum number of days the closing date can be delayed for repairs?
5 days
The seller does not have a current survey of the property. How many days before the closing date must a new survey at the seller’s expense be provided?
3 days
