Unit 3 Flashcards
Under the TREC Seller Financing Addendum, who pays to provide the buyer’s credit report to the seller?:
Seller
Buyer
Buyer and seller
Title company
Buyer
Response Feedback:
The answer is buyer. Under the TREC Seller Financing Addendum, the buyer is responsible for payment for the credit report. Learning Objective 3.4
Which of the following is not negotiable in paragraph 5?:
How long the buyer has to provide the option fee
The option fee amount
The option period
The escrow agent
How long the buyer has to provide the option fee
Response Feedback:
The answer is how long the buyer has to provide the option fee. The buyer must provide the option fee within three days after the effective date of the contract. The time period is not negotiable. Learning Objective 3.1
What information is NOT needed to complete paragraph 5 of the TREC One to Four Family Residential Contract?:
The option fee amount
How many days in the option period
The name of the escrow agent
Whether the option fee is refundable
Whether the option fee is refundable
Response Feedback:
The answer is whether the option fee is refundable. The option fee is not refundable. Paragraph 5 addresses information related to the termination option. Learning Objective 3.1
What information is required in paragraph 12 of the TREC One to Four Family Residential Contract?:
Seller’s contribution to buyer’s expenses
Amount of earnest money to be provided by the buyer
Addresses for notices to be provided for buyer and seller
Specific repairs required by the buyer
Seller’s contribution to buyer’s expenses
Response Feedback:
The answer is seller’s contribution to buyer’s expenses. Earnest money is addressed in paragraph five. The addresses of the buyer and the seller for purposes of providing notices are addressed in paragraph 21. Specific repairs required by the buyer are addressed in paragraph seven. Learning Objective 3.1
What happens if buyer’s credit is not approved under the TREC Third Party Financing Addendum, and the buyer gives timely notice to the seller?:
The contract will terminate and the buyer will get the earnest money.
Seller may terminate and get the earnest money.
Either party may terminate and the earnest money is split.
Buyer may terminate but seller gets the earnest money.
The contract will terminate and the buyer will get the earnest money.
Response Feedback:
The answer is the contract will terminate and the buyer will get the earnest money. The buyer must give notice that the buyer has not received approval within a certain number of days negotiated by the parties. If the buyer fails to provide notice, there is no longer any financing contingency on this contract. Learning Objective 3.4
Which law requires that a contract have a proper legal description?:
The Statute of Frauds
The Statute of Limitations
The Deceptive Trade Practices Act
The Real Estate License Act
The Statute of Frauds
Response Feedback:
The answer is The Statute of Frauds. Obtaining the correct legal description is essential to having a valid contract. The Statute of Frauds requires that any agreement affecting the title to real estate have a valid legal description. Learning Objective 3.2
Sellers contribution to a residential service contract is addressed is which paragraph of the TREC One to Four Family Residential Contract?:
Paragraph 6
Paragraph 7
Paragraph 5
Paragraph 8
Paragraph 7
Response Feedback:
The answer is paragraph 7. Paragraph 7 addresses property disclosure and repair information including sellers contribution towards a residential service contract. Learning Objective 3.1
How should the TREC One to Four Family Residential Contract be filled out if the property is not located within a city?:
In the blank for “city” put the nearest city.
In the blank for “city” put the largest city in the county.
Leave the “city” blank line blank.
In the blank for “city” put “unincorporated” or “none.”
In the blank for “city” put “unincorporated” or “none.”
Response Feedback:
The answer is in the blank for “city” put “unincorporated” or “none.” All of the other answers are wrong. Never leave a blank line blank. At a minimum, it should be filled out as “none” or N/A. Learning Objective 3.2
If the buyer wishes to make an all cash offer, how should paragraph 3 of the TREC One to Four Family Residential Contract be completed?:
3A and 3B will be the same amount.
3B and 3C will be the same amount.
3A, 3B, and 3C will be the same amount.
3A and 3C will be the same amount.
3A and 3C will be the same amount.
Response Feedback:
The answer is 3A and 3C will be the same amount. If it is an all cash offer, then the cash payable at closing (3A) and the Sales Price (3C) will be the same. The other answers are wrong. Learning Objective 3.2
The down payment in a transaction is indicated:
in paragraph 3A of the contract.
in paragraph 3B of the contract.
in paragraph 3C of the contract.
in the financing addenda.
in paragraph 3A of the contract.
Response Feedback:
The answer is in paragraph 3A of the contract. 3B is the sum of financing, and 3C is the sales price. Learning Objective 3.2
Under the TREC Loan Assumption Addendum, who gets the earnest money if the note holder fails to consent to the loan assumption?:
The buyer
The seller
Both the buyer and the seller
The title company
The buyer
Response Feedback:
The answer is the buyer. Since the buyer is not at fault if the note holder does not consent, the buyer gets the earnest money. He should not be penalized for that fact. Learning Objective 3.4
A buyer makes an all-cash offer of $168,000. How will paragraphs 3A, 3B, and 3C be filled out?:
3A is $168,000, 3B is $168,000, and 3C is $0.
3A is $168,000, 3B is $0, and 3C is $168,000.
3A is $0, 3B is $0, and 3C is $168,000.
3A is $33,600, 3B is $134,400, and 3C is $168,000.
3A is $168,000, 3B is $0, and 3C is $168,000.
Response Feedback:
The answer is 3A is $168,000, 3B is $0, and 3C is $168,000. In an all cash offer, 3A and 3C will be the same amount. 3B will be $0. Learning Objective 3.2
Which of the following is not included in the legal description in paragraph 2 of the One to Four Family Residential Contract?:
Lot and block number
Subdivision name
County
Name and marital status of the parties
Name and marital status of the parties
Response Feedback:
The answer is name and marital status of the parties. The name and marital status is part of paragraph 1. All the remaining answers are in paragraph 2. Learning Objective 3.1
The seller wishes to sell to the buyers all of the flower pots on the patio. What should the agent do?:
Use the Amendment to Contract.
Use the Non-Realty Items Addendum.
Add “flower pots” to the list in paragraph 2.
Identify the flower pots in paragraph 11.
Use the Non-Realty Items Addendum.
Response Feedback:
The answer is use the Non-Realty Items Addendum. If the seller wishes to sell to the buyer the flowerpots and have those be part of the total sales price, the Non-Realty Items Addendum should be used. Learning Objective 3.3
The seller wants to keep the built-in, high-end stovetop. How should the seller’s agent note that?:
Use the Non-Realty Items Addendum.
Use the Amendment to Contract.
List the stovetop in paragraph 2, Exclusions.
Note it in paragraph 11.
List the stovetop in paragraph 2, Exclusions.
Response Feedback:
The answer is list the stovetop in paragraph 2, Exclusions. Since the stovetop is built in, it is included in the list of improvements in paragraph 2. The sellers should list the stove top as an exclusion in paragraph 2. Learning Objective 3.3
A buyer wishes to take as much time to apply for financing as possible to get the best interest rate. Under the TREC Third Party Financing Addendum, how soon after the effective date must the buyer apply for financing?:
Promptly
3 days
15 days
Negotiable
Promptly
Response Feedback:
The answer is promptly. Although the time for giving notice that the buyer has failed to obtain financing is negotiated between the parties, the buyer is required to promptly apply for financing. Learning Objective 3.4
The buyer wishes to obtain an adjustable rate mortgage. How should paragraph 1 of the TREC Third Party Financing Addendum be filled out?:
Per annum for the first 15 years of the loan.
The blank should not be filled in since it makes sense blank
Per annum for the first year of the loan.
The blank should be filled in as NA since it envisions a term longer than one year.
Per annum for the first year of the loan.
Response Feedback:
The answer is per annum for the first year of the loan. If the loan is an adjustable rate mortgage that will adjust in one year, it will be “per annum for the first year of the loan.” Any adjustment caps or lifetime caps for an adjustable rate mortgage will need to be described in paragraph 11 of the contract. Learning Objective 3.4
Paragraph 2 of the TREC One to Four Family Residential Contract includes all of the following EXCEPT:
the sales price.
the street name.
the county.
excluded fixtures and accessories.
the sales price.
Response Feedback:
The answer is the sales price. The marital status of the parties is part of paragraph 1. Each of the remaining answers is included in paragraph 2. Property price is in paragraph 3. Learning Objective 3.1
A buyer wishes to cap the interest rate on a loan to finance the purchase of a home at 3%. Where is the interest rate inserted in the TREC One to Four Family Residential Contract?:
The interest rate is included in paragraph 4.
The interest rate is included in paragraph 3.
The interest rate should be added in paragraph 11, Special Provisions.
There is no blank line for interest rate in the TREC One to Four Family Residential Contract.
There is no blank line for interest rate in the TREC One to Four Family Residential Contract.
Response Feedback:
The answer is there is no blank line for interest rate in the TREC One to Four Family Residential Contract. The TREC One to Four Family Residential Contract has no blank lines to put a cap on interest rate. The agent should include the interest rate using the Third Party Financing Addendum. Learning Objective 3.1
Buyer wants to submit an offer and has already been approved for financing. How should the TREC Third Party Financing Addendum be filled out?
The addendum is not required since the buyer has already been approved for financing.
The contingency paragraph should be left blank.
The conventional financing box should be checked.
The buyer should indicate that 0 days are required to obtain financing.
The addendum is not required since the buyer has already been approved for financing.
Response Feedback:
The answer is the addendum is not required since the buyer has already been approved for financing. The form should not be used if the buyer has already been approved for financing and needs no contingency in the contract to obtain financing. Learning Objective 3.4
Under the TREC Loan Assumption Addendum, which of the following is NOT listed in the preprinted form to establish the buyer’s creditworthiness?:
Credit report
Verification of employment, including salary
Stocks and bonds
Verification of funds on deposit in financial institutions
Stocks and bonds
Response Feedback:
The answer is stocks and bonds. The preprinted forms lists credit report; verification of employment, including salary; verification of funds on deposit in financial institutions; current financial statement and a blank line in which additional documentation may be negotiated. Learning Objective 3.4
Which of the following is not included in paragraph 6 of the TREC One to Four Family Residential Contract?:
Seller’s contribution to a residential service contract
Who will pay for the title policy
Who will pay for the survey
HOA information
Seller’s contribution to a residential service contract
Response Feedback:
The answer is seller’s contribution to a residential service contract. Whether the seller contributes towards the purchase of a residential service contract is addressed in paragraph 7, the remaining choices are all addressed in paragraph 6. Learning Objective 3.1
A married buyer wishes to purchase a home as separate property. This will be indicated in:
paragraph 2 of the contract.
paragraph 3 of the contract.
paragraph 1 of the contract.
TREC’s Buyer Information Form.
paragraph 1 of the contract.
Response Feedback:
The answer is paragraph 1 of the contract. Because Texas is a community property state, the marital status of the buyer must be included in the names of the parties. A married buyer purchasing a home as separate property must indicate that in the contract. Parties are listed in paragraph 1. Learning Objective 3.2
A married buyer wishes to purchase a home as separate property. Which of the following is an appropriate way to identify him on the contract?:
John Doe, as separate property
John Doe, a married person with consent of Jane Doe
John Doe
John Doe, as individual legal owner
John Doe, as separate property
Response Feedback:
The answer is John Doe, as separate property. Because Texas is a community property state, the marital status of the buyer must be included in the names of the parties in paragraph 1. The proper way to identify a married buyer who is buying separate property is “John Doe, as separate property.” Learning Objective 3.2
The seller wants to have the buyer assume his existing VA loan and restore his VA entitlement. Which form should the agent use to achieve this goal?:
Loan Assumption Addendum
Seller Financing Addendum
Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller’s VA Entitlement
Third Party Financing Addendum
Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller’s VA Entitlement
Response Feedback:
The answer is Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller’s VA Entitlement. While the Loan Assumption Addendum will also be used, the Release of Liability is not in that form, it is in the Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller’s VA Entitlement. Learning Objective 3.4
The legal description of the property, improvements, accessories, and any exclusions to improvements or accessories are:
in paragraph 3.
in paragraph 1.
in paragraph 2.
not covered in the promulgated contract forms.
in paragraph 2.
Response Feedback:
The answer is paragraph 2. The land, improvements, and accessories are collectively referred to as the “Property” and are covered in paragraph 2. Learning Objective 3.2
The seller wishes to convey the washer and dryer, but the buyers wish to pay a nominal price for them and the sellers agree. What should the agent do?:
Use the Non-Realty Items Addendum
Note the appliances in paragraph 11
Have the buyers pay the sellers outside of closing
Use the amendment form
Use the Non-Realty Items Addendum
Response Feedback:
The answer is use the Non-Realty Items Addendum. If the seller wishes to sell the appliances to the buyer for a nominal fee and have those be part of the total sales price, the Non-Realty Items Addendum should be used. Learning Objective 3.3
What information is required to fill out paragraph 5 of the TREC One to Four Family Residential Contract?:
The various addenda attached to the contract form
The names of the parties’ attorneys
Whether the parties will engage in mediation
The option fee to be paid and the option period
The option fee to be paid and the option period
Response Feedback:
The answer is the option fee to be paid in the option period. Paragraph 5 is the option fee which details the amount of the option fee and that option. It also states that the option fee will be credited to the sales price at closing. Learning Objective 3.1
Which paragraph of the TREC One to Four Family Residential Contract addresses title policy information?:
Paragraph 7
Paragraph 6
Paragraph 5
Paragraph 8
Paragraph 6
Response Feedback:
The answer is paragraph 6. Paragraph 7 addresses the seller’s disclosure notice and the condition of the property. Paragraph 5 deals with earnest money and the termination option. Paragraph 8 addresses brokers’ fees and license holder disclosures. Learning Objective 3.1
Which paragraph of the TREC One to Four Family Residential Contract provides a breakdown of sellers’ and buyers’ expenses?:
Paragraph 12
Paragraph 11
Paragraph 9
Paragraph 8
Paragraph 12
Response Feedback:
The answer is paragraph 12. Paragraph 12 addresses the amount of money that seller is willing to contribute towards buyers’ expenses. Paragraph 11 includes a blank space for business details or special provisions. Paragraph 9 addresses the closing and possession date. Paragraph 8 addresses the brokers’ fees and license holder disclosures. Learning Objective 3.1
The TREC Third Party Financing Addendum includes which of the following types of financing?:
All of these
Conventional financing
FHA-insured financing
USDA-guaranteed financing
All of these
Response Feedback:
The answer is all of these. The Third Party Financing Addendum includes all of these in addition to Texas veterans loans, VA guaranteed financing, and reverse mortgage financing. Learning Objective 3.4
Which paragraph in the TREC One to Four Family Residential Contract deals with title issues?:
Paragraph 7
Paragraph 5
Paragraph 6
Paragraph 4
Paragraph 6
Response Feedback:
The answer is paragraph 6. Information required to complete paragraph 6 includes who will pay for the title policy, what company will issue the title policy, whether a new or existing survey will be provided, who will pay for the survey, who will furnish the survey, the number of days to furnish the survey, objections to title, and whether the property is subject to an HOA. Learning Objective 3.1
Which of the paragraphs in the TREC One to Four Family Residential Contract addresses the sales price?:
Paragraph 4
Paragraph 2
Paragraph 3
Paragraph 1
Paragraph 3
Response Feedback:
The answer is paragraph 3. Paragraph 1 includes the names of the parties and their marital status. Paragraph 2 includes the legal description and accessories. Paragraph 4 addresses leases. Learning Objective 3.1
