Unit 3 Flashcards
Objective 1: Describe third parties, the obligations a license holder has to those parties, and the legal concerns associated with the failure to properly fulfill those obligations.
Answer: Third parties in real estate transactions include any persons who deal with the broker or client on matters related to representation, such as buyers, tenants, lenders, appraisers, and service providers. License holders must treat third parties fairly and honestly and are liable for any misrepresentation or failure to disclose material facts that may affect the transaction.
Objective 2: Describe a buyer’s rights and a seller’s obligations under Section 5.008 of the Texas Property Code and how the obligations can be fulfilled.
Answer: Under Section 5.008, sellers of single-family residential properties in Texas must provide a written disclosure notice to buyers, which outlines the property’s condition and any known defects. Failure to provide the disclosure notice allows the buyer to terminate the contract within seven days of receiving the notice.
Objective 3: Describe material facts as they relate to a property’s physical condition, title, and survey.
Answer: Material facts include any issues that could affect a reasonable buyer’s decision to purchase or the amount offered for the property. These facts may pertain to the physical condition (e.g., foundation cracks, flooding), title issues (e.g., liens, ownership disputes), or survey discrepancies (e.g., boundary encroachments).
Objective 4: Describe the different types of stigmas associated with real estate and the disclosure issues surrounding stigmatized properties.
Answer: Stigmas can be psychological or physical. Psychological stigmas arise from events like a death on the property, which do not affect the physical condition but can impact marketability. Physical stigmas relate to health or safety concerns, such as environmental hazards. Disclosure of stigmas depends on whether they are considered material facts under Texas law.
Keyterm: Nonfiduciary Duties
Meaning: Duties owed to customers and the general public, including honesty and fairness. Although not as extensive as fiduciary duties owed to clients, nonfiduciary duties ensure that brokers do not engage in fraudulent behavior or misrepresentations to third parties.
Keyterm: Third Party
Meaning: Any person other than the client, such as buyers, tenants, lenders, or appraisers, who is involved in a real estate transaction. License holders owe general duties of honesty and fairness to third parties.
Keyterm: Material Fact
Meaning: Any fact that is relevant to a person making a decision. This includes physical defects, title issues, or survey problems that might influence a buyer’s decision to purchase or the amount they would pay.
Keyterm: Disclosure
Meaning: The act of making known to others information that is pertinent to a transaction. Texas law requires disclosure of material facts that affect the value and desirability of a property.
Keyterm: Stigmatized Property
Meaning: A property that has been negatively impacted by a condition or event, such as a death on the premises, criminal activity, or environmental concerns, that may affect its marketability or value.
Keyterm: Psychological Stigma
Meaning: A negative perception of a property due to events that do not physically affect the property but may deter buyers, such as a death or criminal activity.
Keyterm: Physical Stigma
Meaning: A negative perception due to health or safety-related concerns, such as the presence of asbestos, radon, or groundwater contamination.
Keyterm: Texas Property Code Section 5.008
Meaning: A law that requires sellers of residential properties in Texas to provide a disclosure notice detailing the condition of the property and any known defects to the buyer.
Keyterm: Seller’s Disclosure Notice
Meaning: A form used to provide the buyer with information about the property’s condition, including known defects. It is required under the Texas Property Code and must be completed to the best of the seller’s knowledge.
Keyterm: Misrepresentation
Meaning: Providing false or misleading information about a property, either intentionally or negligently, that could influence a buyer’s decision. This can include failure to disclose known material defects.
Keyterm: Fraud
Meaning: A type of misrepresentation committed knowingly with the intent to deceive. Fraudulent behavior in real estate can lead to severe legal consequences for license holders.
Keyterm: Megan’s Law
Meaning: A federal law that requires states to implement registration procedures for released sex offenders living in the community. Real estate agents are not required to disclose information related to sex offenders but should refer buyers to the Texas Department of Public Safety (DPS) database.
Keyterm: Prohibited Disclosures
Meaning: Information that cannot be disclosed under federal or state fair housing laws, such as details relating to race, color, religion, sex, national origin, familial status, or handicap.
Keyterm: Materiality
Meaning: The significance of a fact in influencing a reasonable buyer’s decision to purchase a property. Materiality determines whether a disclosure is required.
Keypoint Question: What are nonfiduciary duties, and how do they differ from fiduciary duties?
Keypoint Answer: Nonfiduciary duties include honesty and fairness owed to all parties in a transaction. They differ from fiduciary duties, which are owed exclusively to the client and involve a higher standard of care, such as loyalty and confidentiality.
Keypoint Question: What are the requirements of the Texas Property Code Section 5.008?
Keypoint Answer: Section 5.008 requires sellers of single-family properties to provide a written disclosure notice detailing the property’s condition and any known defects. This notice must be given to the buyer before the contract’s effective date.
Keypoint Question: What are the key differences between psychological and physical stigmas in real estate?
Keypoint Answer: Psychological stigmas arise from events like a death on the property, while physical stigmas involve health or safety concerns, such as environmental hazards. Disclosure of psychological stigmas is not always required, whereas physical stigmas that affect health or safety must be disclosed.
Title insurance companies in Texas are regulated by:
A. the Texas Department of Insurance.
B. the Texas Real Estate Commission.
C. the Texas attorney general.
D. the U.S. attorney general.
Correct Answer: A – the Texas Department of Insurance
Explanation of Answer: Title insurance companies in Texas are regulated by the Texas Department of Insurance (TDI), which sets standards and rules for policies, endorsements, and exceptions to protect the interests of policyholders.
Title coverage for the lender is called:
A. mortgagor’s title insurance.
B. mortgage company title insurance.
C. title commitment.
D. mortgagee’s title insurance.
Correct Answer: D – mortgagee’s title insurance
Explanation of Answer: Mortgagee’s title insurance protects the lender’s interest in the property, ensuring that the lender has a valid lien. It is different from an owner’s title policy, which protects the buyer’s interest.
The buyer should only rely on measurements furnished by
A. the seller’s previous survey.
B. the listing agent.
C. the registered professional land surveyor.
D. all of these.
Correct Answer: C – the registered professional land surveyor
Explanation of Answer: Buyers should rely only on measurements provided by a registered professional land surveyor, as this ensures accuracy. Measurements from other sources may not be reliable or legally binding.
