The Sales Contract Part I Flashcards
Describe the process of making an offer?
When there is a buyer who wants to put an offer on a house, the licensee sits down with the buyer to fill out a sales contract form. When the buyer has included all details, such as financing, closing date, and other considerations on the contract form, he or she signs the document, it is delivered to the seller or listing agent, and there is an offer.
What four options does a seller have when presented with an offer?
Accept it
Reject it
Counteroffer
Fail to act
When does an offer become a contract?
When an offer is accepted, that acceptance is communicated to the other party, and all signatures and initials are obtained.
When does TREC require a licensee to present an offer to a seller?
Immediately after receiving it
What information is included in the price and terms provision?
Final price, down payment, and financing information
What does the escrow clause in a sales contract do?
It provides for the custody and disbursement of the earnest money deposit, and releases the escrow agent from certain liabilities in the performance of escrow duties.
What does a right of rescission clause set forth?
Buyer’s right under certain conditions to rescind the sale contract and re-claim their deposits if sellers fail to complete and deliver the property condition disclosure statement to buyers in a timely fashion. The buyer must follow certain procedures and meet certain deadlines in order to legitimately effect the cancellation.
What does a due-on-sale clause say?
The parties state their understanding that loans that survive the closing may be called due by the lender. Both parties agree to hold the other party harmless for the consequences of an acceleration of the loan.
Which paragraph of the TREC One to Four Family Residential Contract (Resale) describes the good faith money?
Paragraph 5 – Earnest Money
The Sales Price, Paragraph 3.C, is calculated by adding what two numbers together?
Paragraph 3.C is calculated by adding 3.A (the down payment) with 3.B (the total financing amount).
What three types of financing are mentioned in Paragraph 3?
Third Party Financing
Assumption
Seller Financing
Who is typically considered the escrow agent in Paragraph 5?
A title company
List 4 environmental disclosures that could accompany a contract? (See screen 25 for additional correct answers.)
Asbestos
Lead-based paint
Radon gas
Waste disposal sites
What is a material defect?
A material defect is any defect in a specific property that could either affect a Buyer’s decision to purchase it or affect the property’s value, such as a leaking roof or the presence of termites.
What causes of death must be disclosed?
Faulty electrical wiring or a gas leak that caused a death on the property along with the corrections made to eliminate the danger.
Any murder. Texas has no time limits as to the date of death, however, only known information of a murder must be disclosed.
Why do many brokers in south Texas often advise including a Lead-paint based disclosure regardless of a property’s age?
There is no similar law that applies to paint manufactured in Mexico, and border areas may have homes that used paint made south of the border.
Once a real estate professional has a buyer that wants to make an offer on a house
he or she sits down and goes over the contract form. There is an offer when all blanks are filled in, the buyer signs the contract, and it is delivered to the seller or listing agent.
When presented with an offer, a seller has four options:
Accept it
Reject it
Counteroffer
Fail to act
The buyer has the same four options if the seller decides to counter.
If both parties agree to all of the details of the offers and counteroffers
acceptance is the final step that must occur before it can be called a contract. Once all signatures and initials are obtained, it’s a contract.
Real estate professionals should get their clients to make
reasonable offers and the offer-counteroffer process should be limited.
TREC RULES
call for immediate presentation of all offers. A real estate licensee must never withhold an offer from the seller unless specifically requested by a seller.
A typical residential sale contract contains the following primary provisions:
Parties, consideration, and property Legal description Price and terms Loan approval Ernest money deposit Escrow Closing and possession dates Conveyed interest; type of deed Title evidence Closing cost Damage and destruction Default Broker's representation and commission Seller's representations Residential property condition disclosure Right of rescission Agent's responsibility
Secondary provisions of a sales contract include:
Inspection Owner's association disclosure Survey Environmental hazards Compliance with laws Due-on-sale clause Seller financing disclosure Rental property; tenants’ rights FHA or VA financing condition Flood plain; flood insurance Condominium assessments Foreign seller withholding Tax deferred exchange Merger of agreements. Notices Time is of the essence Fax transmission Survival Dispute resolution Addenda
Addenda to the sales contract become
binding components of the overall agreement. The most common addendum is the seller’s property condition disclosure.
There are two
Two Addenda
Paragraph 3: The sales price, including down payment and amount financed information.
Paragraph 5: The amount of earnest money the buyer is providing and where it will be held.
Always use dollar amounts in the form blanks
never use percentages
A Seller of real property in Texas, a real estate Broker and their Associates must
disclose to prospective Buyers any known material defect in the property.
Texas Legislature passed a
“mandatory Seller disclosure law”, requiring owners to fill out a Seller’s Disclosure of Property Condition.
This obligation to disclose also includes
environmental hazards that may affect future occupants. One common environmental disclosure is Lead-based paint.
