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Real Estate Contracts Form and Addenda > Unit 6 > Flashcards

Unit 6 Flashcards

1
Q

Question 1
A new home builder is selling a spec house she briefly lived in before listing it in the MLS. A buyer wants to make an offer on the house. Which TREC contract should the buyer’s agent advise the buyer to use?

A. The TREC New Home Contract (Completed Construction)
B. The One to Four Family Residential Contract (Resale)
C. The builder’s contract
D. The TREC New Home Contract (Previously Occupied)

A

Correct Answer: B. The One to Four Family Residential Contract (Resale)
Explanation: The One to Four Family Residential Contract (Resale) should be used because the new home contract does not address the seller’s disclosure of property condition, which is required by section 5.008 of the property code. Learning Objective 6.5

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2
Q

Question 2
In what way are the Condominium Contract and the Farm and Ranch Contract different from the other four contract forms?

A. Paragraph 5 is different in both
B. Paragraph 6 is different in both
C. Paragraph 3 is different in both
D. They are the same as the other forms

A

Correct Answer: B. Paragraph 6 is different in both
Explanation: The difference lies in paragraph 6, as the structure and details of this paragraph are unique to the Condominium and Farm and Ranch contracts. Learning Objective 6.1

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3
Q

Question 5
What law or rule requires disclosure of insulation R-Value?

A. State law
B. TREC rule
C. Federal regulations
D. TDLR rule

A

Correct Answer: C. Federal regulations
Explanation: Federal law mandates that builders disclose the insulation’s R-value to the buyer of a new home. Learning Objective 6.5

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4
Q

Question 4
Using the TREC Residential Condominium Contract, the seller timely delivers the condominium documents five days after the effective date. If the buyer terminates the contract, what happens to the earnest money?

A. The earnest money will be refunded to the seller.
B. The earnest money will be refunded to the buyer.
C. The parties will split the earnest money.
D. The earnest money will be held in escrow.

A

Correct Answer: B. The earnest money will be refunded to the buyer.
Explanation: The contract states that if the buyer cancels under this provision, the earnest money will be refunded. Learning Objective 6.2

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5
Q

Question 3
Buyer and seller enter into a contract for the purchase of a condominium using the TREC Residential Condominium Contract. The roof is partially destroyed by fire on February 3. The seller notifies the buyer on February 5. What is the latest date the buyer can terminate the contract?

A. February 8
B. March 5
C. At or before closing
D. February 12

A

Correct Answer: D. February 12
Explanation: The buyer has seven days from receiving notice to terminate the contract unless the buyer receives written confirmation that the damage will be restored at no cost within a reasonable time. Learning Objective 6.2

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6
Q

Question 6
Under the TREC Residential Condominium Contract, if the association fails to provide written notification of repairs within seven days, what option does the buyer have?

A. Terminate and forfeit the earnest money
B. Terminate and receive the earnest money
C. Terminate at the end of the option period
D. Terminate and receive the option fee

A

Correct Answer: B. Terminate and receive the earnest money
Explanation: If the association fails to provide written confirmation of repairs, the buyer may terminate, and the earnest money will be refunded. Learning Objective 6.2

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6
Q

Question 8
Under paragraph 13 of the TREC Residential Condominium Contract, which statement is TRUE?

A. Cash reserves from regular assessments for capital improvements will be credited to the seller.
B. Cash reserves from deferred maintenance will be credited to the seller.
C. Cash reserves from deferred maintenance assessments will not be credited to the seller.
D. All of these are false.

A

Correct Answer: C. Cash reserves from deferred maintenance assessments will not be credited to the seller.
Explanation: Cash reserves from deferred maintenance or capital improvements established by the association are not credited to the seller. Learning Objective 6.2

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7
Q

Question 7
A buyer purchasing a farm wants to harvest the growing corn. What should the buyer’s agent advise?

A. Advise that the contract provides the buyer gets to harvest all crops.
B. Advise that the seller always harvests growing crops.
C. Get a written agreement from the seller acknowledging the buyer’s right to harvest the corn.
D. Inform the buyer that the seller harvests only certain listed crops.

A

Correct Answer: C. Get a written agreement from the seller acknowledging the buyer’s right to harvest the corn.
Explanation: The seller retains rights to harvest until closing unless agreed otherwise in writing. Learning Objective 6.3

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8
Q

Question 11
How is paragraph 13 different in the New Home Contracts, the Unimproved Property Contract, and the Farm and Ranch Contract?

A. Taxes for the current year are not prorated.
B. Taxes for the current year are prorated differently.
C. There is a possibility of the assessment of rollback taxes.
D. Maintenance fees are not prorated through the closing date.

A

Correct Answer: C. There is a possibility of the assessment of rollback taxes.
Explanation: Rollback taxes can apply when the property’s zoning is changed. The cost of these taxes can be significant. Learning Objective 6.1

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8
Q

Question 9
A buyer and seller agree to a sales price calculated at $6,000 per acre for a 150-acre ranch. The buyer’s survey indicates 135 acres. The buyer wants an adjusted sales price. What is the seller’s option?

A. Seller may terminate with written notice.
B. Seller may terminate due to the 10% variance.
C. Seller may not terminate because the variance is 10%.
D. Seller may terminate and keep the earnest money.

A

Correct Answer: C. Seller may not terminate because the variance is 10%.
Explanation: The 10% variance does not allow the seller to terminate, and the price will be adjusted. Learning Objective 6.3

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9
Q

Question 10
Under the TREC Residential Condominium Contract, how recent must the resale certificate be when delivered to the buyer?

A. No more than three months old
B. No more than six months old
C. No more than 21 days old
D. No more than 30 days old

A

Correct Answer: A. No more than three months old
Explanation: The resale certificate must have been prepared within three months of delivery to the buyer.

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10
Q

Question 13
In the TREC New Home Contract (Incomplete Construction), which documents include change orders?

A. Survey
B. Construction documents
C. Appraisal report
D. HOA documents

A

Correct Answer: B. Construction documents
Explanation: Construction documents include plans, specifications, finish schedules, change orders, and any allowances related to the finish-out schedule. Learning Objective 6.5

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11
Q

Question 12
The definition of property in paragraph 2 of the TREC Farm and Ranch Contract addresses all of the following EXCEPT:

A. Parking
B. Improvements
C. Accessories
D. Crops

A

Correct Answer: A. Parking
Explanation: Parking is not included in the property definition in paragraph 2 of the TREC Farm and Ranch Contract. Learning Objective 6.3

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12
Q

Question 14
A buyer and seller enter into a contract for buyer to purchase a ranch. The seller was denied a special use valuation, resulting in assessments. Who is responsible for payment of these assessments?

A. Buyer
B. Seller
C. Both buyer and seller proportionally
D. Neither buyer nor seller

A

Correct Answer: B. Seller
Explanation: If a change in use or denial of special valuation leads to assessments for periods before closing, the seller is responsible. This obligation survives closing. Learning Objective 6.3

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13
Q

Question 16
Which of the following is NOT a specifically listed right, privilege, or appurtenance in the TREC Unimproved Property Contract?

A. Harvest rights
B. Water rights
C. Claims
D. Strips and gores

A

Correct Answer: A. Harvest rights
Explanation: Harvest rights are not specifically listed, while water rights, claims, strips, and gores are included in the contract. Learning Objective 6.4

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13
Q

Question 15
What does the statement on page 10 of the TREC Farm and Ranch Contract indicate about brokers’ fees?

A. Brokers’ fees are fixed by TREC.
B. Brokers’ fees are controlled by TREC.
C. Brokers’ fees are maintained by TREC.
D. Brokers’ fees or sharing of fees are not fixed, controlled, recommended, suggested, or maintained by TREC.

A

Correct Answer: D. Brokers’ fees or sharing of fees are not fixed, controlled, recommended, suggested, or maintained by TREC.
Explanation: TREC does not regulate the amount or sharing of brokers’ fees. Learning Objective 6.3

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14
Q

Question 17
A buyer wishes to purchase a ranch but wants to exclude a hunting blind currently on the property. What should the seller’s agent advise the seller?

A. Counteroffer by listing the hunting blind as an exclusion.
B. Counteroffer by checking the box in paragraph 2C(1).
C. List the hunting blind in paragraph 11, Special Provisions.
D. Use the amendment form to list the hunting blind as an exclusion.

A

Correct Answer: A. Counteroffer by listing the hunting blind as an exclusion.
Explanation: The hunting blind should be listed as an exclusion if the seller intends to keep it. Checking the box in paragraph 2C(1) would convey it rather than exclude it. Learning Objective 6.3

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15
Q

Question 18
In the TREC Unimproved Property Contract, who is responsible for conducting the survey?

A. A licensed appraiser
B. A registered professional land surveyor
C. A TREC home inspector
D. An engineer

A

Correct Answer: B. A registered professional land surveyor
Explanation: Only a registered professional land surveyor is qualified to conduct the property survey. Learning Objective 6.4

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16
Q

Question 19
How is paragraph 2 of the Unimproved Property Contract different than some paragraphs in other TREC contracts?

A. It is less complicated.
B. It is more complicated.
C. It is identical to other forms.
D. It is similar but not exactly the same as other forms.

A

Correct Answer: A. It is less complicated.
Explanation: Due to the lack of fixtures and accessories, paragraph 2 in the Unimproved Property Contract is simpler than similar paragraphs in other contracts. Learning Objective 6.4

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17
Q

Question 20
Using the TREC Residential Condominium Contract with an effective date of January 15, if the resale certificate is delivered on January 18, when is the latest date for the buyer to cancel the contract?

A. January 21
B. January 18
C. January 31
D. January 23

A

Correct Answer: D. January 23
Explanation: The contract allows cancellation before the sixth day after receiving the resale certificate, which would be January 23. Learning Objective 6.2

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18
Q

Question 21
A buyer purchases a lot using the TREC Unimproved Property Contract, intending to use it commercially, resulting in rollback taxes. Who pays for these taxes?

A. Seller
B. Buyer
C. Both buyer and seller proportionally
D. Title company

A

Correct Answer: B. Buyer
Explanation: The party changing the property’s use is responsible for the rollback taxes. Learning Objective 6.4

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19
Q

Question 22
Who is responsible for paying rollback taxes under the TREC Unimproved Property Contract?

A. Buyer after closing
B. Seller before closing
C. The party changing the property usage
D. Both parties proportionally

A

Correct Answer: C. The party changing the property usage
Explanation: Rollback taxes are the responsibility of the party altering the property’s use. Learning Objective 6.4

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20
Q

Question 25
Buyer and seller enter into an agreement for the builder to sell a new home to the buyer using the TREC New Home Contract (Incomplete Construction). The buyer changes the tile in the bathrooms, and it costs less than initially specified. How is the decreased cost addressed in the contract?

A. The amount paid in cash is reduced.
B. The amounts paid in cash and financed are reduced proportionately.
C. The amount financed is reduced.
D. The parties negotiate which amount to reduce.

A

Correct Answer: B. The amounts paid in cash and financed are reduced proportionately.
Explanation: Any decrease from change orders and unused allowances reduces the sale price, adjusting amounts in paragraphs 3A and 3B as required by the lender. Learning Objective 6.5

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20
Q

Question 23
How is paragraph 14 different in the TREC Residential Condominium Contract?

A. Casualty loss is not addressed in the condominium contract.
B. Casualty loss specifically addresses the ownership of a single unit.
C. It suggests buyers consult an attorney due to the complexity of the casualty loss.
D. The paragraph does not address common elements.

A

Correct Answer: B. Casualty loss specifically addresses the ownership of a single unit.
Explanation: Because the seller owns a single unit in the condominium, the casualty loss section addresses this specific ownership situation. Learning Objective 6.1

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21
Q

Question 24
In the TREC Residential Condominium Contract, how long does the seller have to provide condominium documents?

A. Three days
B. Seven days
C. It is negotiated by the parties.
D. Seven days after the option period ends

A

Correct Answer: C. It is negotiated by the parties.
Explanation: The timeframe for providing condominium documents is determined by negotiation between the buyer and seller. Learning Objective 6.2

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22
Q

Question 27
Buyer and seller enter into an agreement for builder to sell a new home to the buyer using the TREC New Home Contract (Incomplete Construction). Buyer wants significant changes to the plans, which may affect marketability if the contract is terminated. What are the builder’s options?

A. The builder must agree if the buyer will pay.
B. Seller need not agree to the changes.
C. Seller may request payment upfront.
D. Seller can do nothing.

A

Correct Answer: B. Seller need not agree to the changes.
Explanation: If buyer selections in the Construction Documents are outside normal standards, the seller may refuse changes that could affect marketability. Learning Objective 6.5

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22
Q

Question 26
Why must a buyer of an unimproved building lot carefully research the availability of utilities under the TREC Unimproved Property Contract?

A. They are not negotiable if not already in place.
B. They affect the lot’s suitability for the buyer’s intended use.
C. Utilities are unsustainable.
D. Utilities are not transferrable.

A

Correct Answer: B. They affect the lot’s suitability for the buyer’s intended use.
Explanation: The buyer must research utilities and other factors that impact the lot’s suitability for its intended purpose. Learning Objective 6.4

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23
Q

Question 28
Why are improvements and accessories not addressed in paragraph 2 of the two TREC New Home Contracts?

A. They are purchased using a bill of sale.
B. They are purchased separately from the home.
C. They are covered in the Construction Documents.
D. They are addressed in the Non-Realty Items Addendum.

A

Correct Answer: C. They are covered in the Construction Documents.
Explanation: Improvements and appliances are detailed in the Construction Documents, which are referenced in the contract. Learning Objective 6.5

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24
Q

Question 29
Which TREC contract should be used to buy or sell a new home if the closing will happen before construction is finished?

A. The Unimproved Property Contract
B. The New Home Contract (Incomplete Construction)
C. None of the TREC contracts are suitable for this transaction
D. The New Home Contract (Completed Construction)

A

Correct Answer: C. None of the TREC contracts are suitable for this transaction
Explanation: The TREC contracts are not designed for closing prior to construction completion. Learning Objective 6.5

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25
Q

Question 30
How is paragraph 13 in the Residential Condominium Contract different from that in the One to Four Family Residential Contract?

A. It addresses cash reserves from regular condominium assessments.
B. There is a possibility of rollback taxes.
C. Taxes for the current year are not prorated.
D. Taxes for the current year are prorated differently.

A

Correct Answer: A. It addresses cash reserves from regular condominium assessments.
Explanation: The Residential Condominium Contract specifies that cash reserves for maintenance or improvements will not be credited to the seller. Learning Objective 6.1

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26
Q

Question 34
Buyer and seller enter a condominium contract with a March 1 effective date, and resale documents are delivered on March 5. If buyer terminates, what happens to earnest money?

A. Held in escrow
B. Refunded to seller
C. Refunded to buyer
D. Split between parties

A

Correct Answer: C. Refunded to buyer
Explanation: If the contract is terminated under this clause, earnest money is refunded to the buyer. Learning Objective 6.2

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26
Q

Question 31
How long does the buyer have to terminate the contract after receiving the condominium documents in the TREC Residential Condominium Contract?

A. Six days after delivery
B. Seven days after the effective date
C. Three days after delivery
D. Buyer may not terminate based on condominium documents.

A

Correct Answer: A. Six days after delivery
Explanation: The buyer has until the sixth day after receiving the documents to cancel, per contract terms. Learning Objective 6.2

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27
Q

Question 36
Under the Residential Condominium Contract, if a buyer fails to respond to notice of property damage within seven days, what happens?

A. Buyer is deemed to have accepted the property as is.
B. Buyer accepted the property but confirmation may be required.
C. Buyer may terminate but forfeits earnest money.
D. Buyer accepted with repair confirmation.

A

Correct Answer: A. Buyer is deemed to have accepted the property as is.
Explanation: After seven days, the buyer is deemed to accept the property without repair confirmation. Learning Objective 6.2

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27
Q

Question 32
A buyer and seller agree for buyer to purchase seller’s 2,000-acre ranch with a survey determining acreage for pricing adjustments. If the survey shows a 20% increase, what is buyer’s option?

A. Buyer may not terminate due to the adjustment agreement.
B. Buyer may terminate with written notice to the seller.
C. Buyer may not terminate because variance is under 10%.
D. Buyer may terminate and forfeit the earnest money.

A

Correct Answer: B. Buyer may terminate with written notice to the seller.
Explanation: The buyer may terminate if the survey reveals a variance over 10% of the original price. Learning Objective 6.3

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28
Q

Question 33
Buyer and seller enter a contract for an unimproved property, and the seller starts commercial development. Who pays rollback taxes?

A. Buyer
B. Seller
C. Both buyer and seller proportionally
D. Title company

A

Correct Answer: B. Seller
Explanation: The party changing usage is liable for the rollback assessment. Learning Objective 6.4

29
Q

Question 35
Which of the following is not listed as a farm and ranch improvement in paragraph 2 of the TREC Farm and Ranch Contract?

A. Garages
B. Sheds
C. Windmills
D. Tanks

A

Correct Answer: A. Garages
Explanation: Garages are residential, not farm/ranch improvements. Learning Objective 6.3

30
Q

Question 37
Which of the following is NOT addressed in the Seller’s Disclosure in the TREC Unimproved Property Contract?

A. Foundation problems
B. Dumpsites
C. Wetlands
D. Endangered species

A

Correct Answer: A. Foundation problems
Explanation: Since the property is unimproved, the seller’s disclosure focuses on environmental hazards rather than structural issues. Learning Objective 6.4

31
Q

Question 39
A buyer wants the fuel tank to stay with the property in a ranch purchase. What should the agent advise?

A. List it in paragraph 11, Special Provisions.
B. Use the amendment form for paragraph 1.
C. List in paragraph 2 under “Conveyed.”
D. Check “fuel tanks” in paragraph 2C(1).

A

Correct Answer: D. Check “fuel tanks” in paragraph 2C(1).
Explanation: Paragraph 2C(1) includes checkboxes for conveying farm and ranch accessories. Learning Objective 6.3

32
Q

Question 38
Under paragraph 12A(3) of the Condominium Contract, who pays transfer-related association fees?

A. Buyer
B. Title company
C. Seller
D. Negotiated by parties

A

Correct Answer: D. Negotiated by parties
Explanation: The payment for transfer fees or association charges is negotiable, as specified in the contract. Learning Objective 6.2

33
Q

Question 43
Which TREC contract is suitable if a new home is currently tenant-occupied?

A. The builder’s contract
B. New Home Contract (Completed Construction)
C. New Home Contract (Currently Occupied)
D. One to Four Family Residential Contract

A

Correct Answer: D. One to Four Family Residential Contract
Explanation: The One to Four Family Residential Contract includes required disclosures about property conditions for occupied homes. Learning Objective 6.5

33
Q

Question 40
If a ranch survey reveals extra acreage, how is the additional cost paid?

A. It’s always cash.
B. It’s always financed.
C. Negotiated by parties.
D. Half financed, half cash.

A

Correct Answer: C. Negotiated by parties.
Explanation: The allocation of additional cost may be negotiated between buyer and seller. Learning Objective 6.3

34
Q

Question 41
Under the Residential Condominium Contract, what type of interest does a unit owner have in common elements?

A. Divided
B. Special
C. Qualified
D. Undivided

A

Correct Answer: D. Undivided
Explanation: Unit owners hold an undivided interest in the common elements. Learning Objective 6

35
Q

Question 42
Who is responsible for paying the listing broker’s commission in a 3,500-acre ranch sale?

A. Seller
B. Buyer
C. Negotiated by parties
D. Proportional split

A

Correct Answer: C. Negotiated by parties
Explanation: Commission payment is agreed upon by the buyer and seller in the contract. Learning Objective 6.3

36
Q

Question 44
Under the Unimproved Property Contract, who pays for a survey if the seller fails to provide it?

A. Buyer
B. Seller
C. Title company
D. Both buyer and seller

A

Correct Answer: B. Seller
Explanation: The seller must cover the cost if they fail to furnish the promised survey. Learning Objective 6.4

37
Q

Question 45
Who pays for assessments resulting from pre-closing periods in the Unimproved Property Contract?

A. Buyer
B. Seller
C. Both parties
D. Neither

A

Correct Answer: A. Buyer
Explanation: The buyer assumes responsibility if any sale or use results in pre-closing assessments. Learning Objective 6.5

38
Q

Question 46
Why must a buyer research zoning ordinances for an unimproved lot?

A. Zoning is assumed commercial.
B. Zoning is assumed residential.
C. Zoning affects lot suitability.
D. Zoning is assumed industrial.

A

Correct Answer: C. Zoning affects lot suitability.
Explanation: Zoning determines whether the lot is fit for the buyer’s intended use. Learning Objective 6.4

39
Q

Question 47
Why should an adequate termination option be purchased under the TREC Unimproved Property Contract?

A. Provides time to ensure property suitability
B. Incentivizes the seller
C. Motivates the buyer
D. Compensates the agents

A

Correct Answer: A. Provides time to ensure property suitability
Explanation: A termination option allows time for suitability research. Learning Objective 6.4

40
Q

Question 48
Who pays for the owner’s title policy under the Unimproved Property Contract?

A. Buyer
B. Seller
C. Both parties
D. Negotiated by parties

A

Correct Answer: D. Negotiated by parties
Explanation: Title insurance costs and provider selection are subject to negotiation. Learning Objective 6.4

41
Q

Question 49
A buyer has until what date to cancel a condominium contract with a January 5 effective date and documents received before the effective date?

A. January 14
B. January 11
C. January 5
D. January 8

A

Correct Answer: B. January 11
Explanation: Buyer may cancel the contract before the sixth day after receiving documents. Learning Objective 6.2

42
Q

Question 50
Most builders in Texas:

A. Use the TREC New Home Contract (Completed Construction).
B. Provide their own contract.
C. Use the TREC New Home Contract (Incomplete Construction).
D. Use the TR New Home Contract.

A

Correct Answer: B. Provide their own contract.
Explanation: Most builders use their own contract, often one from the Texas Association of Builders. Learning Objective 6.5

43
Q

Question 51
Under paragraph 13 of the TREC Residential Condominium Contract, who pays any special condominium assessment due and unpaid at closing?

A. Buyer
B. Seller
C. It is negotiated
D. The association

A

Correct Answer: B. Seller
Explanation: The contract states that any unpaid special condominium assessment at closing is the seller’s responsibility. Learning Objective 6.2

44
Q

Question 52
What type of home is typically purchased using the TREC New Home Contract (Completed Construction)?

A. A spec home
B. A new home under a lease
C. A new home as a back-up
D. A new home without warranties

A

Correct Answer: A. A spec home
Explanation: A spec home is built for sale without a specific buyer, which aligns with the TREC New Home Contract (Completed Construction). Learning Objective 6.5

45
Q

Question 53
How is paragraph 7 different in both New Home Contracts, the Unimproved Property Contract, and the Farm and Ranch Contract from the residential contract?

A. Different inspections are provided based on property type.
B. Different seller’s disclosures are required based on property type.
C. Access to the property differs by property type.
D. They all address property condition similarly but differ from the one to four residential contract.

A

Correct Answer: B. Different seller’s disclosures are required based on property type.
Explanation: Paragraph 7 specifies different seller’s disclosures depending on the property type. Learning Objective 6.1

45
Q

Question 54
Which of the following is NOT considered a construction document in the TREC New Home Contract (Incomplete Construction)?

A. Survey
B. Plans
C. Specifications
D. Finish out schedules

A

Correct Answer: A. Survey
Explanation: Construction Documents include plans, specifications, finish out schedules, and change orders but exclude the survey. Learning Objective 6.5

46
Q

Question 55
How is paragraph 3 different in the Farm and Ranch Contract from the other five contracts?

A. The sales price can be adjusted after the effective date.
B. The listing agent can contribute to the sales price.
C. The title company can contribute to the sales price.
D. The sales price depends on the appraisal.

A

Correct Answer: A. The sales price can be adjusted after the effective date.
Explanation: In the Farm and Ranch Contract, the sales price may be adjusted based on the survey. Learning Objective 6.1

47
Q

Question 56
In what way is paragraph 2 in the TREC Farm and Ranch Contract different from paragraph 2 of the One to Four Family Residential Contract?

A. It includes terms related to water rights.
B. It references a recorded plat rather than a metes-and-bounds description.
C. It has no property description.
D. It omits property boundaries.

A

Correct Answer: A. It includes terms related to water rights.
Explanation: The Farm and Ranch Contract addresses water rights, fitting rural property needs. Learning Objective 6.3

48
Q

Question 58
In the TREC Unimproved Property Contract, who pays assessments if the seller’s change in property use results in prior-period assessments?

A. Buyer
B. Seller
C. Both equally
D. Neither

A

Correct Answer: B. Seller
Explanation: Any assessments from the seller’s property use changes before closing are the seller’s responsibility. Learning Objective 6.4

48
Q

Question 57
Buyer and seller enter into a contract using the TREC Residential Condominium Contract with an effective date of January 5. Documents are delivered three days later. What is the latest date the buyer can cancel?

A. January 11
B. January 13
C. January 5
D. January 8

A

Correct Answer: B. January 13
Explanation: Buyer may cancel before the sixth day after receiving the documents, making January 13 the deadline. Learning Objective 6.2

49
Q

Question 59
Which of the following is NOT defined as a “Document” in the TREC Residential Condominium Contract?

A. Resale certificate
B. Declaration
C. Bylaws
D. Rules of the Association

A

Correct Answer: A. Resale certificate
Explanation: The Declaration, Bylaws, and Rules are “Documents,” but the resale certificate is not. Learning Objective 6.2

50
Q

Question 60
How are cash reserves for maintenance and improvements addressed in the TREC Residential Condominium Contract?

A. They are credited to the seller.
B. They are credited to the buyer.
C. They are not credited to the seller.
D. Buyer pays seller outside closing.

A

Correct Answer: C. They are not credited to the seller.
Explanation: Cash reserves for deferred maintenance or improvements are not credited to the seller. Learning Objective 6.2

51
Q

Question 61
Paragraph 6G(8) of the Farm and Ranch Contract requires notification if the property has a private transfer fee. Who must notify the buyer?

A. The agent
B. The title company
C. The seller
D. Notification isn’t needed as it’s public information.

A

Correct Answer: C. The seller
Explanation: The seller is responsible for notifying the buyer of any private transfer fee. Learning Objective 6.3

52
Q

Question 63
Which of the following is NOT listed as a farm and ranch improvement in the TREC Farm and Ranch Contract?

A. Irrigation equipment
B. Barns
C. Fences
D. Gates

A

Correct Answer: A. Irrigation equipment
Explanation: Irrigation equipment is classified as an accessory, not an improvement. Learning Objective 6.3

53
Q

Question 62
A buyer terminates an Unimproved Property Contract due to financing issues. How does the escrow agent handle unpaid expenses?

A. Deducts seller’s unpaid expenses
B. Deducts buyer’s unpaid expenses
C. Deducts all unpaid expenses
D. Refunds without deductions

A

Correct Answer: B. Deducts buyer’s unpaid expenses
Explanation: The escrow agent may deduct the buyer’s unpaid expenses from the earnest money. Learning Objective 6.4

54
Q

Question 64
How is paragraph 2 of the Residential Condominium Contract different from the One to Four Family Residential Contract?

A. It provides the condominium unit’s property description.
B. It addresses improvements differently.
C. It addresses accessories differently.
D. It addresses exclusions differently.

A

Correct Answer: A. It provides the condominium unit’s property description.
Explanation: Paragraph 2 specifically describes the condominium unit. Learning Objective 6.2

54
Q

Question 66
If a buyer plans to develop a ranch for commercial use under the TREC Farm and Ranch Contract, who pays any additional taxes?

A. Seller
B. Buyer
C. Both proportionally
D. Neither

A

Correct Answer: B. Buyer
Explanation: The buyer pays any additional taxes resulting from property changes post-closing. Learning Objective 6.3

55
Q

Question 65
Under the TREC Farm and Ranch Contract, who has the right to harvest crops until delivery of possession?

A. Buyer
B. Tenant
C. Sharecropper
D. Seller

A

Correct Answer: D. Seller
Explanation: The seller retains the right to harvest crops until closing. Learning Objective 6.3

56
Q

Question 67
Under paragraph 12A(4) of the TREC Residential Condominium Contract, who pays deposits for reserves required by the association at closing?

A. Seller
B. Buyer
C. It is negotiated
D. Title company

A

Correct Answer: B. Buyer
Explanation: Buyer is responsible for any association-required reserve deposits. Learning Objective 6.2

57
Q

Question 70
In the TREC Unimproved Property Contract, who is responsible for getting a survey if the seller fails to provide it?

A. Seller
B. Buyer
C. Both equally
D. Title company

A

Correct Answer: B. Buyer
Explanation: Buyer must obtain a new survey if the seller fails to provide one. Learning Objective 6.4

58
Q

Question 68
The seller of unimproved property provides a disclosure in:

A. The Sellers’ Disclosure of Property Condition.
B. Paragraph 7E of the Unimproved Property Contract.
C. Verbally.
D. No disclosure is provided.

A

Correct Answer: B. Paragraph 7E of the Unimproved Property Contract.
Explanation: Disclosure is outlined in paragraph 7E for unimproved property. Learning Objective 6.4

59
Q

Question 69
Under the TREC New Home Contract (Incomplete Construction), how long does the buyer have to select finishes like carpeting?

A. 7 days
B. 14 days
C. 21 days
D. The time period is negotiated

A

Correct Answer: D. The time period is negotiated
Explanation: Selection time is agreed upon in the contract. Learning Objective 6.5

60
Q

Question 74
What is a rollback tax?

A. A tax that can be assessed when zoning changes.
B. A different way of prorating taxes.
C. A tax on the number of rental units.
D. A railroad district tax.

A

Correct Answer: A. A tax that can be assessed when zoning changes.
Explanation: Rollback taxes may apply if property zoning changes. Learning Objective 6.1

61
Q

Question 71
Why should a buyer of an unimproved building lot research restrictive covenants?

A. They may affect lot suitability.
B. They always prohibit commercial use.
C. They permit only residential use.
D. They are permanent.

A

Correct Answer: A. They may affect lot suitability.
Explanation: Restrictive covenants can impact the lot’s suitability for the buyer’s intended use. Learning Objective 6.4

62
Q

Question 72
What does the R-Value in TREC new home contracts refer to?

A. Hot water heater
B. Appraisal
C. Insulation
D. Air conditioner

A

Correct Answer: C. Insulation
Explanation: R-Value measures insulation’s effectiveness against heat transfer. Learning Objective 6.5

63
Q

Question 73
A buyer intends to develop unimproved property for commercial use. What impacts the buyer’s decision most?

A. Zoning ordinances
B. Restrictive covenants
C. Availability of utilities
D. All of these

A

Correct Answer: D. All of these
Explanation: Zoning, covenants, and utilities are key factors for commercial suitability. Learning Objective 6.4

64
Q

Question 75
Why is the Seller’s Disclosure of Property Condition form not addressed in the TREC Unimproved Property Contract?

A. It is specifically exempt under section 5.008 of the property code.
B. It is not required under section 5.008 of the property code.
C. It is considered commercial property under section 5.008 of the property code.
D. It is considered agricultural property under section 5.008 of the property code.

A

Correct Answer: B. It is not required under section 5.008 of the property code.
Explanation: The law requires the form only if the property is residential; thus, it is not required for undeveloped property. Learning Objective 6.4

65
Q

Question 76
In the TREC Unimproved Property Contract, if there used to be underground storage tanks that were removed, does the seller need to disclose this to the buyer?

A. No, as long as they were removed more than five years before the sale.
B. Yes, even though they were removed.
C. No, because they were removed.
D. Yes, but only if they were removed less than five years before.

A

Correct Answer: B. Yes, even though they were removed.
Explanation: The seller must disclose knowledge of any underground tanks, even if they have been removed. Learning Objective 6.4

66
Q

Question 77
Under the TREC New Home Contract (Incomplete Construction), who is responsible for paying the increased costs resulting from change orders?

A. Seller
B. Builder
C. Buyer
D. Lender

A

Correct Answer: C. Buyer
Explanation: Buyer pays for any increase in costs resulting from change orders exceeding the allowances in the Construction Documents. Learning Objective 6.5

67
Q

Question 78
If a condominium’s roof is partially destroyed by hail, how long does the association have to confirm repairs will be completed at no cost to the buyer?

A. Within three days of getting the notice
B. Within 15 days before closing
C. Within seven days of getting the notice
D. Within three days before closing

A

Correct Answer: C. Within seven days of getting the notice
Explanation: The association has seven days to confirm restoration will be done at no charge to the buyer. Learning Objective 6.2

67
Q

Question 79
Which TREC contract should be used to sell or purchase a new condominium?

A. The One to Four Family Residential Contract.
B. The Residential Condominium Contract.
C. The TREC New Home Contract (Completed Construction).
D. None of the TREC contracts should be used.

A

Correct Answer: D. None of the TREC contracts should be used.
Explanation: None of the TREC contracts cover new condominium sales. Learning Objective 6.5

68
Q

Question 80
TREC’s new home contracts:

A. Are required in the sale of all new homes.
B. Address only completed construction.
C. Are available for both complete and incomplete construction.
D. Are identical to the One to Four Family Residential Contract except for the title.

A

Correct Answer: C. Are available for both complete and incomplete construction.
Explanation: TREC offers separate contracts for completed and incomplete new home construction. Learning Objective 6.5

69
Q

Question 82
Which of the following is TRUE regarding paragraph 3 of the promulgated Farm and Ranch Contract?

A. It allows for a change in the sales price if the survey reveals a different acreage.
B. It’s the same as paragraph 3 in the One to Four Family Residential Contract.
C. It does not include a provision for a price change.
D. It assumes initial acreage is rarely accurate.

A

Correct Answer: A. It allows for a change in the sales price if the survey reveals a different acreage.
Explanation: Paragraph 3 adjusts the sales price based on the actual surveyed acreage, ensuring fair payment. Learning Objective 6.1

69
Q

Question 84
Which paragraph from the One to Four Family Residential Contract changes in only one of the promulgated forms?

A. Paragraph 13
B. Paragraph 6
C. Paragraph 7
D. Paragraph 14

A

Correct Answer: D. Paragraph 14
Explanation: Paragraph 14 differs only in the Condominium Contract, as it addresses damage to condo units specifically. Learning Objective 6.1

70
Q

Question 81
Seller’s disclosure of lead-based paint is:

A. Included in the One to Four Family Residential Contract but not the New Home Contracts.
B. Included in the New Home Contracts but not the One to Four Family Residential Contract.
C. Included in both the One to Four Family Residential Contract and the New Home Contracts.
D. Not included in either contract.

A

Correct Answer: A. Included in the One to Four Family Residential Contract but not the New Home Contracts.
Explanation: Lead-based paint disclosures are only required in resale contracts, not for new homes. Learning Objective 6.5

71
Q

Question 83
If a property’s use changes from residential to commercial due to a condemnation, how does this impact rollback taxes?

A. Rollback taxes are assessed retroactively.
B. No rollback taxes apply since condemned property isn’t subject to them.
C. Taxes accrue interest at 7% per year.
D. The tax applies based on the new commercial use.

A

Correct Answer: B. No rollback taxes apply since condemned property isn’t subject to them.
Explanation: Condemned property is exempt from rollback taxes, among other exceptions. Learning Objective 6.1

72
Q

Question 85
What is the doctrine that prevents a small tract from being omitted from a metes-and-bounds description, potentially causing access issues?

A. Auto correction doctrine
B. Strips and gores doctrine
C. Auto inclusion doctrine
D. No such doctrine exists

A

Correct Answer: B. Strips and gores doctrine
Explanation: This doctrine assumes that the tract is included unless expressly excluded in the deed. Learning Objective 6.3

72
Q

Question 87
The buyer of a new home should:

A. Assume the builder’s standard finishes are satisfactory.
B. Assume everything is properly installed.
C. Be comfortable with an “as is” clause.
D. Never assume everything is properly installed and working.

A

Correct Answer: D. Never assume everything is properly installed and working.
Explanation: New homes should be inspected like resales, with all installations verified. Learning Objective 6.5

72
Q

Question 86
If a buyer selects an expensive flooring material for an under-construction home, what should be done?

A. Arrange a pre-installation inspection.
B. Issue a detailed change order.
C. Use the construction defect notice.
D. Extend the property completion date.

A

Correct Answer: B. Issue a detailed change order.
Explanation: A detailed change order records all contract adjustments due to the material change. Learning Objective 6.5

Real Estate Contracts Form and Addenda (6 decks)

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