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Real Estate Contracts Form and Addenda > Unit 5 > Flashcards

Unit 5 Flashcards

1
Q

Question 1
Under paragraph 13 of the One to Four Family Residential Contract, what happens if taxes are not paid at or prior to closing?

A. Seller shall pay taxes for the current year.
B. Buyer’s agent shall pay taxes for the current year.
C. Seller’s agent shall pay taxes for the current year.
D. Buyer shall pay taxes for the current year.

A

Correct Answer: D. Buyer shall pay taxes for the current year
Explanation: Paragraph 13 states that if taxes are not paid by the time of closing, the responsibility falls to the buyer for the current year.

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2
Q

Question 2
Under paragraph 9 of the TREC One to Four Family Residential Contract, what happens if the seller fails to close the sale by the closing date?

A. The buyer forfeits the earnest money if there is good cause.
B. The buyer may exercise a remedy under paragraph 15.
C. The seller may request the earnest money if good cause exists.
D. The buyer receives three times the earnest money as a penalty.

A

Correct Answer: B. The buyer may exercise a remedy under paragraph 15
Explanation: Paragraph 9A allows the non-defaulting party, in this case, the buyer, to exercise the remedies in paragraph 15 if the seller fails to close by the agreed date.

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3
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Question 3
Using the TREC One to Four Family Residential Contract, the closing of the sale is set for September 30. Buyer timely objects based on defects disclosed in the survey under paragraph 6D, and the defects are finally cured on September 28. What is the latest date for closing?

A. September 30
B. October 7
C. October 5
D. September 28

A

Correct Answer: C. October 5
Explanation: Paragraph 9 specifies that the closing date may be extended up to 7 days from the time that objections are cured or waived, which would be October 5 in this case.

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4
Q

Question 4
Whose name should be added into the licensed supervisor’s name if the agent is a salesperson and the sponsoring brokerage firm has orally assigned a supervisor?

A. The licensed supervisor’s name
B. The office manager’s name
C. The associate broker’s name
D. The name of the broker of record

A

Correct Answer: D. The name of the broker of record
Explanation: A licensed supervisor’s designation must be formally documented, so the broker of record’s name is used if no written designation exists.

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5
Q

Question 5
Under paragraph 14 of the TREC Buyer’s Temporary Residential Lease, who bears the cost of maintaining the property?

A. Landlord
B. Tenant
C. Both landlord and tenant
D. Seller

A

Correct Answer: B. Tenant
Explanation: Paragraph 14 specifies that the tenant (buyer) is responsible for expenses related to property maintenance during their occupancy.

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6
Q

Question 6
A buyer purchases a house from a seller that is currently occupied by a tenant. What happens to the security deposit at closing under the TREC One to Four Family Residential Contract?

A. It is returned to the tenant.
B. The seller keeps it.
C. The seller must transfer it to the buyer.
D. It is credited to closing costs.

A

Correct Answer: C. The seller must transfer it to the buyer
Explanation: Paragraph 9 mandates that the seller transfer the tenant’s security deposit to the buyer, who must then notify the tenant.

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6
Q

Question 8
Which of the following is a seller’s expense under paragraph 12 of the One to Four Family Residential Contract?

A. Appraisal fees
B. Loan application fees
C. Adjusted origination charges
D. Releases of existing liens

A

Correct Answer: D. Releases of existing liens
Explanation: Paragraph 12 outlines that releasing existing liens is a seller’s responsibility, while the other expenses listed are typically buyer’s costs.

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7
Q

Question 7
Under the TREC Buyer’s Temporary Residential Lease, what happens if the buyer fails to close on the closing date in the contract and wants to remain in the property longer than the term provided in the lease?

A. The buyer must vacate the property unconditionally at the end of the lease term.
B. The buyer must pay an additional daily holdover fee.
C. The buyer may stay three days more than the lease term at no extra charge.
D. The buyer may stay as long as it takes to close by paying the daily rental fee.

A

Correct Answer: B. The buyer must pay an additional daily holdover fee
Explanation: Paragraph 19 of the Buyer’s Temporary Residential Lease specifies that a daily holdover fee applies if the buyer stays beyond the lease term.

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8
Q

Question 12
Buyer and seller enter into a contract for the buyer to purchase the seller’s property using the One to Four Family Residential Contract. The seller wants to reference and attach the seller’s disclosure notice to the contract. What should the seller’s agent advise the seller?

A. Attach and reference the notice but do not sign it
B. Do not attach the notice to the contract
C. Attach the notice and reference it in paragraph 11, Special Provisions
D. Reference the notice in paragraph 22

A

Correct Answer: B. Do not attach the notice to the contract
Explanation: The seller’s disclosure notice is informational and should not be attached to the contract. Learning Objective 5.6

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8
Q

Question 9
Under the TREC One to Four Family Residential Contract, who is responsible for payment of appraisal fees?

A. Seller
B. Buyer
C. Lender
D. Title company

A

Correct Answer: B. Buyer
Explanation: Appraisal fees are classified as buyer expenses in paragraph 12 of the contract.

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9
Q

Question 18
Buyer and seller have entered into a contract for buyer to purchase residential property from the seller. Buyer wants to move in early and begin remodeling so that the house will be ready by closing. What are the buyer’s rights under the TREC Buyer’s Temporary Residential Lease?

A. The buyer has the unconditional right to remodel under the lease since she will soon own the property.
B. The buyer has no right to remodel without the prior written consent of the seller.
C. The buyer has a limited right to remodel as long as the total cost is negotiated in paragraph 10.
D. The buyer has a right to remodel as long as new fixtures stay with the property if the buyer fails to close.

A

Correct Answer: B. The buyer has no right to remodel without the prior written consent of the seller
Explanation: Paragraph 10 restricts the buyer from making changes without written consent from the landlord. Learning Objective 5.2

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9
Q

Question 10
Seller and buyer enter into a contract for buyer to purchase seller’s home with an effective date of November 22, with a closing date of December 31. On November 28, the home is damaged by fire. The fire was too extensive, and the seller is unable to restore the house by closing. What is NOT a buyer’s option under paragraph 14 of the One to Four Family Residential Contract?

A. Terminate the contract and receive the earnest money
B. Extend the time for performance up to 15 days and extend the closing date
C. Enforce specific performance to restore the property to its previous condition
D. Accept the property in its damaged condition with an assignment of insurance proceeds and credit from seller for insurance deductible

A

Correct Answer: C. Enforce specific performance to restore the property to its previous condition
Explanation: The contract does not provide the buyer with the right to enforce specific performance to require repairs to the damaged property.

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9
Q

Question 19
Who is allowed to insert legal rights or remedies in the special provisions paragraph of the One to Four Family Residential Contract?

A. Seller’s agent during negotiation
B. A party
C. Buyer’s agent as part of the offer
D. Listing broker

A

Correct Answer: B. A party
Explanation: Only buyers, sellers, or their attorneys may include legal rights or remedies in paragraph 11. Learning Objective 5.3

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9
Q

Question 11
The buyer’s agent delivers the option fee to the seller’s agent. How should the seller’s agent acknowledge that the option fee was delivered to her?

A. By signing the seller’s name on the option fee receipt
B. By sending an email to the buyer’s agent
C. By signing and dating the option fee receipt
D. By verbally acknowledging receipt

A

Correct Answer: C. By signing and dating the option fee receipt
Explanation: Signing and dating the Option Fee Receipt provides proof of delivery within the required timeframe. Learning Objective 5.8

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10
Q

Question 14
Which of the following is TRUE regarding the Special Provisions section of the One to Four Family Residential Contract?

A. Buyers/sellers and their attorneys are not allowed to enter legal rights or remedies.
B. Business details and factual statements can be entered by license holders.
C. License holders are allowed to enter legal rights on behalf of their clients.
D. If a situation is addressed in a TREC addendum, the license holder should enter that information under Special Provisions and reference the addendum.

A

Correct Answer: B. Business details and factual statements can be entered by license holders
Explanation: License holders can enter factual statements, but legal rights or remedies can only be added by buyers, sellers, or their attorneys. Learning Objective 5.3

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10
Q

Question 13
Where is earnest money first applied at closing under paragraph 18 of the One to Four Family Residential Contract?

A. Buyer’s expenses
B. Seller’s expenses
C. Cash down payment
D. Commission to agents

A

Correct Answer: C. Cash down payment
Explanation: At closing, earnest money is applied to the cash down payment first, then to buyer’s expenses with any excess refunded to the buyer. Learning Objective 5.5

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10
Q

Question 15
Which of the following forms should be attached and referenced on the One to Four Family Residential Contract?

A. Information About Brokerage Services
B. Third Party Financing Addendum
C. Seller’s Disclosure Notice
D. Listing agreement

A

Correct Answer: B. Third Party Financing Addendum
Explanation: Forms like the IABS, employment agreements, or notices should not be attached to the contract. Learning Objective 5.6

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10
Q

Seller wishes to contribute $1,000 to the buyer’s closing costs. Using the TREC One to Four Family Residential Contract, what should the seller’s agent advise the seller?

A. Insert “$1,000 to buyer’s closing costs” into paragraph 11, Special Provisions.
B. Insert $1,000 into paragraph 12A(1).
C. Let agent insert “$1,000 to buyer’s closing costs” into paragraph 11, Special Provisions.
D. Have the buyer insert “$1,000 to buyer’s closing costs” into paragraph 11, Special Provisions.

A

Correct Answer: B. Insert $1,000 into paragraph 12A(1)
Explanation: Entering it in paragraph 12A(1) is the correct method per TREC rules. Learning Objective 5.4

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10
Q

Question 21
Under the TREC One to Four Family Residential Contract, what type of warranty deed is conveyed at closing?

A. Special warranty deed
B. General warranty deed
C. Quitclaim deed
D. No warranty is conveyed

A

Correct Answer: B. General warranty deed
Explanation: Paragraph 9 specifies that the seller will convey title with a general warranty deed. Learning Objective 5.1

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10
Q

Which type of loans have unallowable fees that a buyer is prohibited from paying under the TREC One to Four Family Residential Contract?

A. Seller financing loans
B. FHA loans
C. Conventional loans
D. Assumption loans

A

Correct Answer: B. FHA loans
Explanation: Buyers cannot pay certain fees expressly prohibited by FHA, VA, or other governmental loan programs. Learning Objective 5.4

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10
Q

Question 23
The buyer experiences buyer’s remorse and cannot decide whether to close on a home already under contract. Under paragraph 9 of the TREC One to Four Family Residential Contract, what can the seller do if the buyer fails to close by the closing date?

A. The seller may request three times the earnest money from the buyer.
B. The seller may exercise a remedy under paragraph 15.
C. The seller may request three times the option fee from the buyer.
D. The seller may only extend the closing date.

A

Correct Answer: B. The seller may exercise a remedy under paragraph 15
Explanation: If the buyer defaults, the seller can pursue remedies as provided in paragraph 15. Learning Objective 5.1

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10
Q

Question 22
When does the Seller’s Temporary Residential Lease terminate?

A. On closing and funding
B. When the term in paragraph 3 expires
C. On termination of the contract prior to funding
D. On tenant’s default under the contract

A

Correct Answer: B. When the term in paragraph 3 expires
Explanation: This lease terminates when the specific term expires, as outlined in paragraph 3. Learning Objective 5.2

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11
Q

Question 20
Under paragraph 9 of the TREC One to Four Family Residential Contract, the buyer needs to move in before closing because she is starting a new job and moving in from out of state. What kind of tenancy is formed if she moves in early without a written lease?

A. Tenancy by the entirety
B. Tenancy pur autre vie
C. Tenancy at sufferance
D. Tenancy from month to month

A

Correct Answer: C. Tenancy at sufferance
Explanation: Without a written lease, any pre-closing possession creates a tenancy at sufferance. Learning Objective 5.1

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11
Q

Question 24
Which of the following is TRUE regarding leases under the TREC One to Four Family Residential Contract?

A. Seller may lease the property after the effective date without buyer’s written consent.
B. Seller may not lease the property after the effective date without buyer’s written consent.
C. Seller may lease the property after the effective date.
D. Seller may lease the property after the effective date with buyer’s oral or written consent.

A

Correct Answer: B. Seller may not lease the property after the effective date without buyer’s written consent
Explanation: Paragraph 10B states that any new lease after the effective date requires the buyer’s written consent. Learning Objective 5.1

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11
Q

Who issues the receipt for the earnest money under the One to Four Family Residential Contract?

A. The listing agent
B. The buyer’s agent
C. The escrow agent
D. The seller

A

Correct Answer: C. The escrow agent
Explanation: The escrow agent is responsible for issuing the receipt for earnest money. Learning Objective 5.8

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11
Q

Question 25
Buyer submits an offer to purchase the seller’s property using the One to Four Family Residential Contract. The seller counteroffers, the buyer accepts the counteroffer, and the buyer signs the contract. How should the buyer’s agent communicate the buyer’s acceptance to the seller?

A. The buyer’s agent may only communicate the acceptance in writing.
B. The buyer’s agent may only communicate the acceptance in writing directly to the seller.
C. The buyer’s agent may call the seller’s agent to communicate acceptance.
D. The buyer’s agent is not required to communicate acceptance since the buyer signed the contract.

A

Correct Answer: C. The buyer’s agent may call the seller’s agent to communicate acceptance.
Explanation: Acceptance must be communicated to the other party or their agent, which can be done by phone. Documenting this communication is essential. Learning Objective 5.7

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11
Q

Who is required to maintain insurance under the TREC Buyer’s Temporary Residential Lease?

A. Landlord only
B. Landlord and tenant
C. Tenant only
D. Negotiable by the parties

A

Correct Answer: B. Landlord and tenant
Explanation: Both parties are responsible for maintaining insurance during the lease term. Learning Objective 5.2

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11
Q

Question 30
Which of the following may be included in paragraph 11, Special Provisions, of the One to Four Family Residential Contract?

A. Multiple sellers if the blanks in paragraph 1 are insufficient
B. Contingencies added by the license holder
C. License holder’s use of the term “time is of the essence”
D. Requirement for appraisal to meet the contract price

A

Correct Answer: A. Multiple sellers if the blanks in paragraph 1 are insufficient
Explanation: Special Provisions can be used when there isn’t enough space elsewhere; it’s not for defining legal rights. Learning Objective 5.3

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12
Q

When should the TREC Seller’s Temporary Residential Lease be used?

A. When the seller wants to stay in the home after closing for no more than 90 days
B. When the buyer wants to move in before closing for at least 90 days
C. When the seller wants to stay in the home after closing for at least 90 days
D. When the buyer wants to move in before closing for no more than 90 days

A

Correct Answer: A. The seller wants to stay in the home after closing for no more than 90 days.
Explanation: This lease is for use when the seller occupies the property for no more than 90 days after closing. Learning Objective 5.2

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12
Q

Question 31
Who pays for utilities under the TREC Buyer’s Temporary Residential Lease?

A. Landlord
B. Tenant
C. Both landlord and tenant
D. Negotiable between the parties

A

Correct Answer: B. Tenant
Explanation: The tenant is responsible for utility charges unless specified otherwise in the lease. Learning Objective 5.2

12
Q

Question 29
Which of these may a license holder enter under Special Provisions on the One to Four Family Residential Contract?

A. Contingencies
B. Legal rights
C. Items addressed by TREC addenda
D. Business details

A

Correct Answer: D. Business details
Explanation: Only factual details are allowed in Special Provisions; contingencies and legal terms are not permitted. Learning Objective 5.3

13
Q

Question 32
Which of the following is an appropriate use for paragraph 11, Special Provisions, of the One to Four Family Residential Contract?

A. The property is subject to mandatory membership in a property owners’ association.
B. The buyer wishes to retain mineral rights.
C. The assumption transaction is contingent upon the seller’s restoration of VA entitlement.
D. None of these are correct.

A

Correct Answer: D. None of these are correct.
Explanation: Special Provisions should not cover issues addressed in TREC-promulgated addenda. Learning Objective 5.3

13
Q

Question 34
Which of the following is NOT a seller’s expense under paragraph 12 of the One to Four Family Residential Contract?

A. Releases of existing liens
B. Release of seller’s loan liability
C. Appraisal fees
D. Tax statements or certificates

A

Correct Answer: C. Appraisal fees
Explanation: Appraisal fees are generally the buyer’s responsibility. Learning Objective 5.4

13
Q

Question 33
What is the purpose of paragraph 23 of the One to Four Family Residential Contract?

A. It requires both parties to get an attorney.
B. It requires the names of all attorneys, including the agents’ attorneys.
C. The parties may add contact information of their attorneys.
D. The parties may add contact information of their agents.

A

Correct Answer: C. The parties may add contact information of their attorneys.
Explanation: Paragraph 23 allows attorney contact information but does not require it. Learning Objective 5.6

14
Q

Question 35
How should the One to Four Family Residential Contract be amended if the buyer wishes to extend the closing date?

A. Change and initial the closing date on the original contract.
B. By email.
C. Using the Amendment to Contract form.
D. Orally agree on the new closing date.

A

Correct Answer: C. Using the Amendment to Contract form.
Explanation: Amendments must be documented on the Amendment to Contract form after execution. Learning Objective 5.7

14
Q

Question 38
Which of the following is NOT a buyer’s expense under paragraph 12 of the One to Four Family Residential Contract?

A. Credit reports
B. Preparation of loan documents
C. Recording fees
D. Tax statements or certificates

A

Correct Answer: D. Tax statements or certificates
Explanation: Tax statements or certificates are a seller’s responsibility. Learning Objective 5.4

15
Q

Question 37
If the seller fails to show up to closing, what is one of the buyer’s options under paragraph 15?

A. Make the seller pay three times the earnest money as a penalty.
B. Enforce specific performance.
C. Terminate the contract and receive the option fee as damages.
D. Enforce specific performance and receive the earnest money as damages.

A

Correct Answer: B. Enforce specific performance.
Explanation: The buyer can enforce specific performance or terminate the contract if the seller defaults. Learning Objective 5.5

15
Q

Question 36
Under paragraph 13 of the One to Four Family Residential Contract, how are taxes calculated?

A. They are prorated up to the closing date.
B. They are prorated through the closing date.
C. They are prorated for the full year.
D. They are prorated for the first quarter.

A

Correct Answer: B. They are prorated through the closing date.
Explanation: Taxes are prorated up to and including the closing date. Learning Objective 5.5

16
Q

Question 39
Which of the following is TRUE regarding escrow agents under paragraph 18 of the One to Four Family Residential Contract?

A. The escrow agent is liable for the buyer’s performance.
B. The escrow agent is not a party to the contract.
C. The escrow agent is liable for interest on the earnest money.
D. The escrow agent is liable for any loss of earnest money.

A

Correct Answer: B. The escrow agent is not a party to the contract.
Explanation: The escrow agent has no performance obligations under the contract. Learning Objective 5.5

17
Q

Question 40
What are the liquidated damages if the buyer wrongfully refuses to sign a release of earnest money to the seller?

A. Three times the earnest money
B. Four times the earnest money
C. Damages, earnest money, reasonable attorney’s fees, and all costs of suit
D. Damages and earnest money only

A

Correct Answer: C. Damages, earnest money, reasonable attorney’s fees, and all costs of suit
Explanation: Refusing to sign a release results in liability for damages, the earnest money, attorney’s fees, and suit costs. Learning Objective 5.5

17
Q

Question 42
Buyer wants seller to help with closing costs by paying $1,500. What should the buyer’s agent advise the buyer regarding the TREC One to Four Family Residential Contract?

A. Insert “$1,500” into paragraph 12A(1).
B. Insert “seller contributes $1,500 to buyer’s closing costs” into paragraph 11, Special Provisions.
C. Let the agent insert “seller contributes $1,500 to buyer’s closing costs” into paragraph 11, Special Provisions.
D. Ask the seller’s agent to insert “seller contributes $1,500 to buyer’s closing costs” into paragraph 11, Special Provisions.

A

Correct Answer: A. Insert “$1,500” into paragraph 12A(1).
Explanation: TREC rules specify using paragraph 12A(1) for contributions to closing costs, not Special Provisions. Learning Objective 5.4

17
Q

Question 41
What happens if an addendum is not referenced on the One to Four Family Residential Contract?

A. A court may not accept the addendum as part of the agreement.
B. A court will imply the addendum is part of the agreement.
C. Parol evidence will be used to determine the addendum’s status.
D. A court will accept an affidavit to decide if the addendum is part of the agreement.

A

Correct Answer: A. A court may not accept the addendum as part of the agreement.
Explanation: If not referenced in the contract, a court may reject the addendum as part of the agreement. Learning Objective 5.6

18
Q

Question 43
Seller offers to reimburse buyer $350 for a residential service contract on a home purchase. The service contract costs $500, and the buyer refuses to pay the extra $150. What is the seller’s option under paragraph 12B?

A. Terminate the contract
B. Extend the closing date
C. Bill the buyer for the difference outside of closing
D. Request payment from the buyer’s agent

A

Correct Answer: A. Terminate the contract
Explanation: If expenses exceed an agreed amount, the paying party may terminate unless the other party covers the excess. Learning Objective 5.4

18
Q

Question 44
When must the buyer deliver the option fee to the escrow agent?

A. Within three days after the effective date
B. Within two days after the effective date
C. Within three days after the option termination date
D. Within two days after the option termination date

A

Correct Answer: A. Within three days after the effective date
Explanation: The contract specifies that the option money must be delivered to the escrow agent within three days of the effective date. Learning Objective 5.7

19
Q

Question 45
Whose name should be added in the licensed supervisor’s name field if the agent is a salesperson and the brokerage has not assigned a supervisor?

A. The sponsoring broker’s name
B. The office manager’s name
C. The associate broker’s name
D. The agent’s name

A

Correct Answer: A. The sponsoring broker’s name
Explanation: The broker of record’s name should be added if no supervisor is assigned. Learning Objective 5.8

19
Q

Question 54
Which of the following is NOT a seller’s expense under paragraph 12 of the One to Four Family Residential Contract?

A. Loan application fees
B. Preparation of deed
C. One half of escrow fee
D. Release of seller’s loan liability

A

Correct Answer: A. Loan application fees
Explanation: Loan application fees are a buyer’s expense. Learning Objective 5.4

19
Q

Question 52
The buyer needs to sell his existing home before buying a home from the seller. What should the buyer’s agent do?

A. Use the Addendum for Sale of Other Property by Buyer.
B. Write in the special provisions paragraph that the transaction is contingent upon the sale of another property.
C. Instruct the buyer to write in the special provisions paragraph that the transaction is contingent upon the sale of another property.
D. Tell the buyer to wait until the first property is under contract before making an offer.

A

Correct Answer: A. Use the Addendum for Sale of Other Property by Buyer.
Explanation: The special provisions paragraph should not be used for contingencies covered by TREC-promulgated addenda. Learning Objective 5.3

19
Q

Question 48
When should the TREC Buyer’s Temporary Residential Lease be used?

A. When the seller wants to stay in the home after closing for no more than 90 days
B. When the buyer wants to move in before closing for no more than 90 days
C. When the buyer wants to move in before closing for at least 90 days
D. When the seller wants to stay in the home after closing for at least 90 days

A

Correct Answer: B. When the buyer wants to move in before closing for no more than 90 days.
Explanation: The lease is only used when the buyer occupies the property for up to 90 days before closing. Learning Objective 5.2

20
Q

Question 46
Seller and buyer enter a contract for the sale of a farm with an effective date of March 15 and a closing date of April 30. On April 1, a hailstorm damages the roof. What must the seller do if the buyer decides to accept the property in its damaged condition?

A. Assign insurance proceeds to buyer and credit the deductible at closing
B. Credit the buyer for insurance proceeds and deductible at closing
C. Pay the insurance proceeds and deductible to buyer before closing
D. Terminate the contract and pay three times earnest money as a penalty

A

Correct Answer: A. Assign insurance proceeds to buyer and credit the deductible at closing
Explanation: Under paragraph 14, if the buyer accepts the damaged property, the seller must assign insurance proceeds and credit the deductible. Learning Objective 5.5

20
Q

Question 47
Whose name should be added to the licensed supervisor’s name if the seller’s agent is a salesperson and no supervisor is assigned by the broker?

A. The sponsoring broker’s name
B. The salesperson’s name
C. The office manager’s name
D. The associate broker’s name

A

Correct Answer: A. The sponsoring broker’s name
Explanation: The licensed supervisor field should contain the broker’s name if no supervisor is designated. Learning Objective 5.8

20
Q

Question 51
Which of the following may be included in paragraph 11, Special Provisions, of the One to Four Family Residential Contract?

A. The transaction is contingent upon the sale of another property.
B. The seller is unavailable by phone on Tuesdays and Thursdays from 1:00 to 4:00 pm.
C. The contract is in a second or backup position.
D. The assumption transaction is contingent upon the seller’s release of liability.

A

Correct Answer: B. The seller is unavailable by phone on Tuesdays and Thursdays from 1:00 to 4:00 pm.
Explanation: The other responses require addenda or are not appropriate for Special Provisions. Learning Objective 5.3

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Question 50
Under the TREC Seller’s Temporary Residential Lease, what happens if the seller wants to stay in the property for one week longer than the lease term?

A. The seller may stay three days more than the lease term at no extra charge.
B. The seller may stay seven days longer than the lease term by paying the daily rental fee.
C. The seller must pay an additional daily holdover fee.
D. The seller must vacate the property unconditionally at the end of the lease term.

A

Correct Answer: C. The seller must pay an additional daily holdover fee.
Explanation: Paragraph 19 of the Seller’s Temporary Residential Lease states that “Tenant shall pay $_____ per day during the period of any possession after termination as damages, in addition to any other remedies to which Landlord is entitled.” Learning Objective 5.2

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Question 53
How are smoke alarms dealt with in the TREC temporary lease forms?

A. Tenant expressly waives landlord’s duties to inspect and repair smoke alarms.
B. Tenant expressly waives landlord’s duties only to repair smoke alarms.
C. Tenant expressly waives landlord’s duties only to inspect smoke alarms.
D. Tenant does not waive landlord’s duties to inspect and repair smoke alarms.

A

Correct Answer: A. Tenant expressly waives landlord’s duties to inspect and repair smoke alarms.
Explanation: The other choices are incorrect as the tenant waives both duties of inspection and repair. Learning Objective 5.2

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Question 55
Which of the following is NOT a buyer’s expense under paragraph 12 of the One to Four Family Residential Contract?

A. Copies of easements and restrictions
B. Loan title policy with endorsements required by lender
C. Loan-related inspection fees
D. Releases of existing liens

A

Correct Answer: D. Releases of existing liens
Explanation: Release of existing liens is a seller’s expense. Learning Objective 5.4

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Question 56
Who keeps the option fee under the One to Four Family Residential Contract once it has been executed by both parties?

A. The listing agent
B. The seller
C. The escrow agent
D. The buyer’s agent

A

Correct Answer: C. The escrow agent
Explanation: The escrow agent holds both earnest money and option fee payments. Learning Objective 5.7

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Question 49
Under the TREC One to Four Family Residential Contract, if the buyer needs to extend the closing date due to financing issues, what form should the buyer’s agent have the buyer fill out?

A. The extension of closing addendum
B. The amendment form
C. The original contract with the old date crossed out
D. A new contract with the new closing date

A

Correct Answer: B. The amendment form
Explanation: Extending the closing date requires all parties to sign an amendment to the contract. Learning Objective 5.1

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Question 58
Which of the following is NOT a cause for termination under the Buyer’s Temporary Residential Lease?

A. When the term in paragraph 3 expires
B. On closing and funding
C. On termination of the contract before funding
D. On tenant’s default under the contract

A

Correct Answer: A. When the term in paragraph 3 expires
Explanation: Expiration of the term is not a termination cause under paragraph 18 of the Buyer’s Temporary Residential Lease. Learning Objective 5.2

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Question 60
Whose name should be added into the licensed supervisor’s name field if the agent is a broker associated with a firm and the brokerage has not assigned a supervisor?

A. The name of the broker associated with the firm
B. The name of the broker of record
C. The office manager’s name
D. Any other broker’s name associated with the firm

A

Correct Answer: B. The name of the broker of record
Explanation: The broker of record’s name should be included if no supervisor is assigned. Learning Objective 5.8

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Question 61
What is the buyer required to do under paragraph 20 of the One to Four Family Residential Contract if the seller is a foreign person?

A. Notify the IRS before closing
B. Obtain the consent of the IRS before closing
C. Notify the IRS at closing
D. Withhold an amount sufficient to comply with tax law

A

Correct Answer: D. Withhold an amount sufficient to comply with tax law
Explanation: Paragraph 20 specifies that if the seller is a foreign person, the buyer must withhold an amount from the sales proceeds to comply with applicable tax law and deliver it to the IRS. Learning Objective 5.5

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Question 57
Seller and buyer enter into a contract for buyer to purchase seller’s home, effective on July 1. On July 4, a small fire damages the laundry room. What is required of the seller under paragraph 14?

A. Seller may extend the closing date by 30 days to restore the property.
B. Seller must restore the property to its previous condition by the closing date.
C. Seller must terminate the contract and refund the earnest money to buyer.
D. Seller must restore the property and assign insurance proceeds to buyer.

A

Correct Answer: B. Seller must restore the property to its previous condition by the closing date.
Explanation: Paragraph 14 mandates the seller restore the property to its previous condition as soon as possible and by the closing date. Learning Objective 5.5

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Question 59
Seller offers to pay $750 toward buyer’s expenses in a TREC One to Four Family Residential Contract for an FHA loan. If buyer’s expenses exceed $750 and seller won’t cover more, what is buyer’s option under paragraph 12B?

A. Buyer may pay the excess costs to seller outside of closing as incentive to seller.
B. Buyer may terminate.
C. Buyer may extend the closing date.
D. Buyer may pay more earnest money to make up the difference.

A

Correct Answer: B. Buyer may terminate.
Explanation: If expenses exceed the agreed amount, the buyer may terminate unless the seller pays the excess. FHA unallowables prevent buyer from paying certain costs. Learning Objective 5.4

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Question 63
What are “unallowables” under the TREC One to Four Family Residential Contract?

A. Fees that the parties agree are not allowed under the contract
B. Agent commission fees not allowed under the contract
C. Attorney fees not allowed under the contract
D. Lender fees that the borrower is prohibited from paying, so the seller pays them

A

Correct Answer: D. Lender fees that the borrower is prohibited from paying, so the seller pays them
Explanation: “Unallowables” are lender fees that FHA and VA loans prohibit the borrower from paying, which the seller then covers. Learning Objective 5.4

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Question 64
How should a change to the One to Four Family Residential Contract be made after the contract is executed?

A. By initialing the original contract
B. Using the Amendment to Contract form
C. By email
D. By telephone

A

Correct Answer: B. Using the Amendment to Contract form
Explanation: All changes after execution require the use of the Amendment to Contract form. Learning Objective 5.7

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Question 62
Which form should NOT be attached or referenced on the One to Four Family Residential Contract?

A. Seller Financing Addendum
B. Information About Brokerage Services
C. Buyer’s Temporary Lease
D. Addendum for Coastal Area Property

A

Correct Answer: B. Information About Brokerage Services
Explanation: The Information About Brokerage Services (IABS) form is not an addendum and should not be attached to the contract. Learning Objective 5.6

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Question 66
Buyer purchases a seven-day option to terminate the contract and delivers the option fee to the seller’s agent on the third day after the effective date. How should the buyer’s agent document the delivery?

A. Have the seller’s agent sign the seller’s name on the option fee receipt.
B. Record a statement from the seller’s agent indicating the date received.
C. Have the seller’s agent sign and date the option fee receipt.
D. Have the seller’s agent sign an affidavit indicating the date received.

A

Correct Answer: C. Have the seller’s agent sign and date the option fee receipt.
Explanation: The Option Fee Receipt on page 9 of the contract provides the easiest method to document timely delivery. Learning Objective 5.8

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Question 71
Which of the following is allowed in paragraph 11, Special Provisions?

A. Seller retains possession for up to 14 days after closing.
B. Absence of acceptance by a certain date/time is deemed rejection.
C. Any disputes under the contract will be submitted to arbitration.
D. None of the provisions are appropriate for paragraph 11.

A

Correct Answer: D. None of the provisions are appropriate for paragraph 11.
Explanation: Possession post-closing requires a temporary lease; arbitration and time-based acceptance fall outside Special Provisions scope. Learning Objective 5.3

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Q

Question 68
After signing a contract to sell his ranch, the seller receives an offer from an oil company to lease mineral rights. How should the seller’s agent respond?

A. Advise that the seller can proceed with the lease.
B. Note that paragraph 10 prohibits a mineral lease without buyer’s written consent.
C. State that minerals cannot be leased apart from the surface of the property.
D. Allow a new mineral lease up until the closing date.

A

Correct Answer: B. Note that paragraph 10 prohibits a mineral lease without buyer’s written consent.
Explanation: Paragraph 10 restricts the seller from leasing mineral rights post-contract without the buyer’s consent. Learning Objective 5.1

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Q

Question 65
Under paragraph 9 of the TREC One to Four Family Residential Contract, if the seller wants to stay in the property for one month after closing without a written lease, what kind of tenancy is formed?

A. Tenancy at will
B. Tenancy at sufferance
C. Tenancy from month to month
D. Tenancy by the entirety

A

Correct Answer: B. Tenancy at sufferance
Explanation: If the seller remains in the property post-closing without a written lease, a tenancy at sufferance is established. Learning Objective 5.1

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Q

Question 67
The lender informs the buyer that approval of the purchase loan will be delayed beyond the closing date. The buyer assumes closing is automatically extended. Which statement is TRUE?

A. An extension will have to be negotiated to preserve the deal.
B. The lender is correct; closing will be automatically extended.
C. The buyer can use paragraph 6D to extend the closing date.
D. Paragraph 9A(5) automatically allows this extension.

A

Correct Answer: A. An extension will have to be negotiated to preserve the deal.
Explanation: Paragraph 6D extensions apply only to title objections or survey issues, so a new closing date must be negotiated. Learning Objective 5.1

25
Q

Question 70
Which of the following is permitted in paragraph 11, Special Provisions?

A. Inspection for termites must be satisfactory to buyer.
B. Time is of the essence.
C. This is a backup contract.
D. Factual statements.

A

Correct Answer: D. Factual statements.
Explanation: License holders may include only factual statements in Special Provisions. Backup contracts and “time is of the essence” clauses require separate addenda or legal consideration. Learning Objective 5.3

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Q

Question 69
On closing day, the seller learns their apartment won’t be ready for two more weeks. The buyer agrees to delay possession. Which form must be used if the parties or their attorneys don’t prepare a lease?

A. A temporary document drafted by agents
B. TREC-promulgated Seller’s Temporary Residential Lease form
C. A verbal agreement recorded on smartphones
D. Postpone the closing until seller moves out

A

Correct Answer: B. TREC-promulgated Seller’s Temporary Residential Lease form
Explanation: Agents must use the TREC form or risk practicing law without a license; verbal agreements are insufficient. Learning Objective 5.1

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Q

Question 72
A local charity has used the property parking lot annually at no charge. The seller wants the buyer to be aware of this tradition. Where should this information go?

A. Seller’s Temporary Lease Addendum
B. Paragraph 10, Possession
C. Paragraph 9, Closing
D. Paragraph 11, Special Provisions

A

Correct Answer: D. Paragraph 11, Special Provisions
Explanation: Since this is a statement of fact with no legal implications, it belongs in Special Provisions. Learning Objective 5.3

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Q

Question 73
If a party sends a demand for release of the earnest money to the escrow agent with no response, after how long can the agent release the funds?

A. 10 business days
B. One week
C. 15 days
D. The period agreed upon by the parties

A

Correct Answer: C. 15 days
Explanation: The escrow agent can release funds after 15 days if there’s no objection and applicable costs are deducted. Learning Objective 5.5

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Q

Question 74
Under paragraph 16, is mediation mandatory for dispute resolution?

A. True, TREC makes mediation mandatory to reduce costs.
B. False, mediation is encouraged but not mandatory.
C. False, because TREC prohibits mediation.
D. True, as mediation and arbitration are similarly priced.

A

Correct Answer: B. False, mediation is encouraged but not mandatory.
Explanation: TREC encourages mediation but does not require it, making it a non-mandatory step. Learning Objective 5.5

Real Estate Contracts Form and Addenda (6 decks)

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