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Real Estate Contracts Form and Addenda > Unit 7 > Flashcards

Unit 7 Flashcards

1
Q

Question 1
Question: Which of these is FALSE regarding the Information About Brokerage Services form?

Answer Choices:
A. A link to the completed IABS must be included on a broker’s website.
B. The form must be provided to a consumer at first substantive discussion.
C. A license holder can manipulate the form as the license holder sees fit.
D. A license holder can reproduce the IABS form for the purpose of prefilling the broker section.

A

Correct Answer: C – A license holder can manipulate the form as the license holder sees fit.

Response Feedback: The answer is a license holder can manipulate the form as the license holder sees fit. While the IABS doesn’t state that it is promulgated like the other mandatory forms, it is for all intents and purposes a mandatory form and can only be reproduced or manipulated under specific instances. Learning Objective 7.9

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2
Q

Question 2
Question: A buyer wishes to sell her existing home before buying a new home. Which TREC form should be used?

Answer Choices:
A. Addendum for Sale of Other Property by Seller
B. Addendum for Back-Up Contract
C. Amendment to Contract
D. Addendum for Sale of Other Property by Buyer

A

Correct Answer: D – Addendum for Sale of Other Property by Buyer

Response Feedback: The answer is Addendum for Sale of Other Property by Buyer. It is usually used when the buyer needs the money from the first sale to complete the second sale. Learning Objective 7.1

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3
Q

Question 3
Question: What should a license holder advise a seller to do if the seller wants to keep a TV projector that is installed in the theater room?

Answer Choices:
A. Put a note on the projector to indicate that the seller wishes to withhold the projector
B. List the item as an exclusion in paragraph 2D
C. Use the Non-Realty Items Addendum to keep the projector
D. Do not list the projector as an exclusion in paragraph 2D

A

Correct Answer: B – List the item as an exclusion in paragraph 2D

Response Feedback: The answer is list the projector as an exclusion in paragraph 2D. Even though some things are specifically addressed as improvements or accessories, the lists are not exclusive. Therefore, the seller should itemize anything he or she wishes to keep in the exclusions subparagraph, especially if it is attached to the house. Learning Objective 7.10

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4
Q

Question 4
Question: Which of the following is NOT included in the TREC Notice of Buyer’s Termination of Contract?

Answer Choices:
A. Buyer wants a refund of earnest money.
B. Buyer cannot obtain buyer approval in accordance with the Third Party Financing Addendum to the contract.
C. The property does not satisfy property approval in accordance with the Third Party Financing Addendum to the contract.
D. Buyer elects to terminate under paragraph A of the Addendum for Property Subject to Mandatory Membership in a Property Owners’ Association.

A

Correct Answer: A – Buyer wants a refund of earnest money.

Response Feedback: The answer is buyer wants a refund of earnest money. Earnest money is not addressed in the termination form. Learning Objective 7.4

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5
Q

Question 6
Question: A back-up contract allows:

Answer Choices:
A. The seller to negotiate with a second buyer on terms that will be used if the first buyer’s transaction falls through.
B. An unlimited number of back-up buyers.
C. The seller to terminate the first buyer’s agreement if the seller prefers the terms of a back-up buyer.
D. The seller to move up the closing date by up to five days without notifying the buyer.

A

Correct Answer: A – The seller to negotiate with a second buyer on terms that will be used if the first buyer’s transaction falls through.

Response Feedback: The answer is the seller to negotiate with a second buyer on terms that will be used if the first buyer’s transaction falls through. A back-up contract enables the seller to negotiate with a second buyer and agree upon terms that will be used for the back-up buyer in the event the first buyer’s transaction falls through. Learning Objective 7.2

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6
Q

Question 5
Question: A buyer wishes to purchase a fully furnished ranch house. What form or paragraph in the contract should be used to convey the personal property?

Answer Choices:
A. Paragraph 11
B. Amendment to Contract
C. Non-Realty Items Addendum
D. A bill of sale

A

Correct Answer: C – Non-Realty Items Addendum

Response Feedback: The answer is Non-Realty Items Addendum. Typically, if a buyer wishes to buy personal property and have it be part of the total purchase price, the Non-Realty Items Addendum should be used. Learning Objective 7.10

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7
Q

Question 8
Question: Under the Addendum for Property Subject to Mandatory Membership in a Property Owners Association, who is required to pay for the updated resale certificate if required by the title?

Answer Choices:
A. Buyer
B. Seller
C. The title company
D. It is negotiated

A

Correct Answer: D – It is negotiated.

Response Feedback: The answer is it is negotiated. If the title company needs updated information, the parties negotiate who pays for it. Learning Objective 7.6

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8
Q

Question 7
Question: Buyer 1 enters into a contract with seller with an option to terminate 14 days after the effective date. The effective date is January 5. The seller accepts a back-up offer with the Addendum for Back-Up Contract attached from Buyer 2 with an effective date of January 6, and with the date in paragraph B of the addendum filled in as January 15. Buyer 1 terminates the first contract on the last day of the option period and the seller gives notice to Buyer 2 on the same day. What is the status of the second contract with Buyer 2?

Answer Choices:
A. The amended effective date is January 19.
B. The amended effective date is January 20.
C. It terminated on January 15.
D. It will terminate on January 20.

A

Correct Answer: C – It terminated on January 15.

Response Feedback: The answer is it terminated on January 15. If the first contract does not terminate on or before the date in the addendum, the back-up contract terminates and the earnest money is refunded to Buyer 2. In this case, the date in paragraph B was January 15, so the contract terminated. Learning Objective 7.2

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9
Q

Question 9
Question: Buyer 1 enters into a contract with seller with an option to terminate 21 days after the effective date of January 5. The seller accepts a back-up offer with the Addendum for Back-Up Contract attached from Buyer 2 with an effective date of January 6, and with a 10-day option period. Buyer 2 finds another place she likes better on January 17. What are her options under the back-up offer?

Answer Choices:
A. She may terminate and get a refund of the earnest money.
B. She must wait to terminate until she gets notice from the seller that Buyer 1 has terminated.
C. She may terminate but will forfeit the earnest money.
D. She may not terminate because the option period ended on January 16.

A

Correct Answer: A – She may terminate and get a refund of the earnest money.

Response Feedback: The answer is she may terminate and get a refund of the earnest money. The back-up buyer is free to continue to look for homes; if she finds one she likes, she can terminate at any time as long as she has negotiated for an option to terminate in paragraph 23 of the contract. Learning Objective 7.2

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10
Q

Question 10
Question: What does the lienholder agree to under the TREC Short Sale Addendum?

Answer Choices:
A. Accept seller’s net proceeds in partial satisfaction of seller’s liability under the mortgage loan.
B. Accept the sales price as full satisfaction of seller’s liability under the mortgage loan.
C. Accept seller’s net proceeds in full satisfaction of seller’s liability under the mortgage loan.
D. Accept the sales price as partial satisfaction of seller’s liability under the mortgage loan.

A

Correct Answer: C – Accept seller’s net proceeds in full satisfaction of seller’s liability under the mortgage loan.

Response Feedback: The answer is accept seller’s net proceeds in full satisfaction of seller’s liability under the mortgage loan. The lienholder agrees to: (i) accept seller’s net proceeds in full satisfaction of seller’s liability under the mortgage loan; and (ii) provide seller an executed release of lien against the property in a recordable format. Learning Objective 7.7

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11
Q

Question 11
Question: The Addendum for Reservation of Oil, Gas, and Other Minerals:

Answer Choices:
A. Is approved for use by the Texas Real Estate Commission.
B. Is used to waive mineral rights.
C. Makes an attorney’s advice unnecessary.
D. Is for use only if the seller reserves all or a portion of the mineral estate.

A

Correct Answer: D – Is for use only if the seller reserves all or a portion of the mineral estate.

Response Feedback: The answer is for use only if the seller reserves all or a portion of the mineral estate. The addendum is promulgated by TREC and is used if the seller will reserve mineral rights. Buyers and sellers should seek legal advice before signing an agreement for matters like this. Learning Objective 7.3

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12
Q

Question 12
Question: What right does a buyer have if a seller of Gulf Coastal property fails to timely provide the notice in the Addendum for Property Located Seaward of the Gulf Intracoastal Waterway?

Answer Choices:
A. The buyer may only extend the closing date.
B. The buyer may terminate the contract and receive the earnest money.
C. The buyer may terminate the contract and forfeit the earnest money.
D. The contract automatically terminates, and the earnest money is deposited in the Open Beaches Recovery Fund.

A

Correct Answer: B – The buyer may terminate the contract and receive the earnest money.

Response Feedback: The answer is the buyer may terminate the contract and receive the earnest money. The statute provides that the seller must provide the disclosure at least 10 days before closing. Learning Objective 7.5

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13
Q

Question 13
Question: Under the Addendum for Sale of Other Property by Buyer, what happens if the seller accepts a back-up offer from Buyer 2, and Buyer 1 timely waives the contingency but fails to sell their existing house and is unable to close on the new house?

Answer Choices:
A. Buyer 1 will be in default.
B. Buyer 2 will be in default.
C. Buyer 1 may terminate but forfeit the earnest money.
D. Buyer 2 may waive the contingency on the back-up offer.

A

Correct Answer: A – Buyer 1 will be in default.

Response Feedback: The answer is Buyer 1 will be in default. Paragraph D cautions the buyers not to waive the contingency unless they are certain they can close even if their first property does not close. Otherwise, the buyers will be in default. Learning Objective 7.1

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14
Q

Question 14
Question: Under paragraph B of the Addendum for Property Subject to Mandatory Membership in a Property Owners Association, when is the seller required to provide information to the buyer regarding material changes to the subdivision information?

Answer Choices:
A. As soon as possible
B. Immediately
C. Timely
D. Promptly

A

Correct Answer: D – Promptly

Response Feedback: The answer is promptly. If the seller becomes aware of any material changes in the subdivision information, the seller shall promptly give notice to the buyer. Learning Objective 7.6

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15
Q

Question 15
Question: Under the Addendum for Property Subject to Mandatory Membership in a Property Owners Association, who is required to pay for the subdivision information?

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

A

Correct Answer: C – It is negotiated.

Response Feedback: The answer is it is negotiated. Buyer and seller negotiate who will obtain and pay for the subdivision. Learning Objective 7.6

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16
Q

Question 16
Question: Buyer and seller enter into an agreement for the buyer to purchase the seller’s property, which is located in a property owners association. Seller provides the buyer with the subdivision information, and the buyer requests that the seller provide an updated resale certificate at the buyer’s cost. How long does the seller have to provide the updated resale certificate under paragraph A(3) of the Addendum for Property Subject to Mandatory Membership in a Property Owners Association?

Answer Choices:
A. 3 days
B. 7 days
C. A number of days agreed upon by the parties
D. 10 days

A

Correct Answer: D – 10 days

Response Feedback: The answer is 10 days. If the buyer requires an updated resale certificate, the seller, at the buyer’s expense, shall deliver it to the buyer within 10 days after receiving payment for the updated resale certificate from the buyer. Learning Objective 7.6

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17
Q

Question 17
Question: Which of the following is required of an intermediary?

Answer Choices:
A. May disclose that the owner will accept a price less than the asking price.
B. Must treat all parties honestly.
C. May disclose that the buyer will pay a price greater than the price submitted in a written offer.
D. May disclose any confidential information.

A

Correct Answer: B – Must treat all parties honestly.

Response Feedback: The answer is must treat all parties honestly. An intermediary specifically may not disclose the information in the remaining answers. Learning Objective 7.9

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18
Q

Question 18
Question: What are the seller’s net proceeds in the TREC Short Sale Addendum?

Answer Choices:
A. The sales price less seller’s expenses under paragraph 12 of the contract and seller’s obligation to pay any brokerage fees.
B. The sales price plus seller’s expenses under paragraph 12 of the contract and seller’s obligation to pay any brokerage fees.
C. The sales price plus seller’s expenses under paragraph 12 of the contract and less seller’s obligation to pay any brokerage fees.
D. The sales price less seller’s expenses under paragraph 12 of the contract and less seller’s obligation to pay any brokerage fees.

A

Correct Answer: A – The sales price less seller’s expenses under paragraph 12 of the contract and seller’s obligation to pay any brokerage fees.

Response Feedback: The answer is the sales price less seller’s expenses under paragraph 12 of the contract and seller’s obligation to pay any brokerage fees. As used in the addendum, “seller’s net proceeds” means the sales price less seller’s expenses under paragraph 12 of the contract and seller’s obligation to pay any brokerage fees. Learning Objective 7.7

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19
Q

Question 19
Question: Seller and buyer enter into an agreement for the buyer to purchase the seller’s property, and the seller reserves all of the mineral estate that they own using the Addendum for Reservation of Oil, Gas, and Other Minerals. The seller elects not to retain any implied right of ingress or egress and reasonable use of the property. How does this election affect the surface rights of other owners of the mineral estate?

Answer Choices:
A. Their rights are similarly not retained.
B. It only affects mineral lessees.
C. It has no effect.
D. They forfeit all mineral rights.

A

Correct Answer: C – It has no effect.

Response Feedback: The answer is it has no effect. Surface rights that may be held by other owners of the mineral estate who are not parties to this transaction (including existing mineral lessees) will not be affected by the seller’s election. Learning Objective 7.3

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20
Q

Question 20
Question: Under the Addendum for Reservation of Oil, Gas, and Other Minerals, what information must the seller provide to the buyer if the seller conveys all of the seller’s interest in the mineral estate?

Answer Choices:
A. Contact information of any existing mineral lessee.
B. Copies of all existing mineral leases.
C. Contact information for all landmen who have contacted the seller.
D. Copies of all royalty conveyance contracts in the seller’s possession.

A

Correct Answer: A – Contact information of any existing mineral lessee.

Response Feedback: The answer is contact information of any existing mineral lessee. If the seller does not reserve all of the seller’s interest in the mineral estate, the seller shall, within seven days after the effective date, provide the buyer with the contact information of any existing mineral lessee known to the seller. Learning Objective 7.3

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21
Q

Question 21
Question: Buyer enters into a short sale agreement with a seller with an option to terminate seven days after the effective date using the TREC Short Sale Addendum. The effective date is January 2. The seller notifies the buyer that the lienholder has consented to the sale on January 10. What is the amended effective date of the short sale agreement?

Answer Choices:
A. January 17
B. January 2
C. January 10
D. January 9

A

Correct Answer: C – January 10

Response Feedback: The answer is January 10. According to the Short Sale Addendum, “For purposes of performance, the effective date of the contract changes to the date Seller provides Buyer notice of the Lienholder’s Consent and Agreement (Amended Effective Date)”. Learning Objective 7.7

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22
Q

Question 22
Question: According to the Addendum for Property Located Seaward of the Gulf Intracoastal Waterway, who is responsible for the cost of removing a structure from a public beach pursuant to a removal order?

Answer Choices:
A. The State of Texas
B. The municipality in which the structure is located
C. The owner of the structure
D. The county in which the structure is located

A

Correct Answer: C – The owner of the structure

Response Feedback: The answer is the owner of the structure. The cost is solely the responsibility of the owner. Learning Objective 7.5

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23
Q

Question 24
Question: If the back-up buyer (Buyer 2) has an option to terminate, when does the option period start?

Answer Choices:
A. On the amended effective date
B. On the date seller gives notice to Buyer 2
C. On the original effective date of the back-up contract
D. On the effective date of the first contract with Buyer 1

A

Correct Answer: C – On the original effective date of the back-up contract

Response Feedback: The answer is on the original effective date of the back-up contract. If the back-up buyer has an option to terminate, it begins on the original effective date of the back-up contract and continues after the amended effective date for the number of days agreed to in paragraph 23 of the contract. Learning Objective 7.2

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24
Q

Question 23
Question: Where should TREC’s Consumer Protection Notice be prominently displayed?

Answer Choices:
A. On the website of every licensed inspector and broker in Texas
B. Attached to every listing agreement of every broker in Texas
C. At the TREC offices
D. In the office of every licensed inspector and broker in Texas

A

Correct Answer: D – In the office of every licensed inspector and broker in Texas

Response Feedback: The answer is in the office of every licensed inspector and broker in Texas. TREC’s Consumer Protection Notice is to be prominently displayed in the office of every licensed inspector and broker in Texas. Learning Objective 7.9

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25
Q

Question 25
Question: Which of the following is considered a surface material that may be used for developing or removing oil, gas, or other minerals?

Answer Choices:
A. Air
B. Freon
C. Sand
D. Lithium

A

Correct Answer: C – Sand

Response Feedback: The answer is sand. The mineral estate does not include water, sand, gravel, limestone, building stone, caliche, surface shale, near-surface lignite, and iron, but does include the reasonable use of these surface materials for mining, drilling, exploring, operating, developing, or removing the oil, gas, and other minerals from the property. Learning Objective 7.3

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26
Q

Question 26
Question: The “Texas Real Estate Commission Information About Brokerage Services” link on a broker’s website must be:

Answer Choices:
A. In at least 10-point font.
B. In at least 20-point font.
C. At the very top of the first page.
D. To an IABS created in-house for that broker.

A

Correct Answer: A – In at least 10-point font.

Response Feedback: The answer is in at least 10-point font. The link must be in a readily noticeable place on the broker’s page. If the link is labeled “Texas Real Estate Commission Information About Brokerage Services,” it must be in at least 10-point font, and if it is labeled “TREC Information About Brokerage Services,” it must be in at least 12-point font. Learning Objective 7.10

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27
Q

Question 27
Question: A seller of real property wishes to sell to a buyer for an additional price the home theater television. Which form or paragraph in the contract should be used?

Answer Choices:
A. The Non-Realty Items Addendum
B. Paragraph 7, as a repair item
C. Paragraph 11, Special Provisions
D. Paragraph 2, with the price added

A

Correct Answer: A – The Non-Realty Items Addendum

Response Feedback: The answer is the Non-Realty Items Addendum. The addendum was approved by TREC for this purpose. Learning Objective 7.10

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28
Q

Question 28
Question: What happens if coastal erosion moves the public easement to a public beach in the Texas Gulf Coast?

Answer Choices:
A. Structures located on the easement must be removed by the county.
B. Structures located on the easement must be removed by the state.
C. Private coastal real property may become a public beach.
D. Private coastal property becomes a private beach.

A

Correct Answer: C – Private coastal real property may become a public beach.

Response Feedback: The answer is private coastal real property may become a public beach. Coastal erosion and storm events may cause private beach property to become a public beach. Learning Objective 7.5

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29
Q

Question 29
Question: The seller wants to keep the above-ground pool. How should it be addressed if using the TREC One to Four Family Residential Contract?

Answer Choices:
A. Address it in an attached amendment form.
B. Note it in paragraph 11.
C. Use the Non-Realty Items Addendum.
D. List the pool in paragraph 2, Exclusions.

A

Correct Answer: D – List the pool in paragraph 2, Exclusions.

Response Feedback: The answer is to list the pool in paragraph 2, Exclusions. Because the pool is included in the list of improvements in paragraph 2, the seller should list the pool as an exclusion in paragraph 2. Learning Objective 7.10

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30
Q

Question 30
Question: The buyers want to include some unusual paintings in the purchase of their new home. How should it be noted in the contract?

Answer Choices:
A. Use the Non-Realty Items Addendum.
B. Add the paintings to paragraph 11.
C. Add the paintings to the list in paragraph 2.
D. Note the paintings as an exclusion.

A

Correct Answer: A – Use the Non-Realty Items Addendum.

Response Feedback: The answer is to use the Non-Realty Items Addendum. The addendum was approved by TREC for this purpose. Learning Objective 7.10

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31
Q

Question 31
Question: Under the Addendum for Sale of Other Property by Buyer, what happens if the seller accepts a back-up offer?

Answer Choices:
A. Seller may waive the contingency before the agreed upon date.
B. Buyer 2 may waive the contingency before the effective date.
C. Buyer 1 must terminate the back-up contract.
D. Buyer 1 may waive the contingency before the agreed upon date.

A

Correct Answer: D – Buyer 1 may waive the contingency before the agreed upon date.

Response Feedback: The answer is buyer 1 may waive the contingency before the agreed upon date. If the seller accepts a back-up offer, buyer 1 may waive the contingency on or before a date they have agreed upon; otherwise, this first contract will terminate. Learning Objective 7.1

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32
Q

Question 32
Question: Buyer 1 enters into a contract with the seller with an option to terminate 21 days after the effective date. The effective date is January 5. The seller accepts a back-up offer with the Addendum for Back-Up Contract attached from buyer 2 with an effective date of January 6, and with the date in paragraph B of the addendum filled in as January 25. Buyer 1 terminates the first contract on the last day of the option period, and the seller gives notice to buyer 2 on the same day. What is the status of earnest money on the second contract?

Answer Choices:
A. It was paid to the seller.
B. It was refunded to buyer 2.
C. It is part of a live contract with buyer 2.
D. It was paid to buyer 1.

A

Correct Answer: B – It was refunded to buyer 2.

Response Feedback: The answer is it was refunded to buyer 2. If the first contract does not terminate on or before the date in the addendum, the back-up contract terminates, and the earnest money is refunded to buyer 2. In this case, the date in paragraph B was January 25, so the contract terminated. Learning Objective 7.2

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33
Q

Question 33
Question: What happens if the seller fails to complete paragraph C of the Addendum for Reservation of Oil, Gas, and Other Minerals?

Answer Choices:
A. All surface rights are reserved.
B. All surface rights are shared proportionally.
C. All mineral rights are conveyed.
D. All surface rights are conveyed.

A

Correct Answer: D – All surface rights are conveyed.

Response Feedback: The answer is all surface rights are conveyed. Seller’s failure to complete paragraph C will be deemed an election to convey all surface rights described herein. Learning Objective 7.3

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34
Q

Question 34
Question: Which of the following is NOT included in the TREC Notice of Buyer’s Termination of Contract?

Answer Choices:
A. Buyer elects to terminate due to alleged seller fraud.
B. Buyer elects to terminate under Paragraph 7B(2) of the contract relating to the Seller’s Disclosure Notice.
C. The unrestricted right of buyer to terminate the contract under paragraph 23 of the contract.
D. The property does not satisfy the lender’s underwriting requirements for the loan under Paragraph 4A(1) of the contract.

A

Correct Answer: A – Buyer elects to terminate due to alleged seller fraud.

Response Feedback: The answer is buyer elects to terminate due to alleged seller fraud. This is not a condition or contingency for buyer to terminate using the TREC contracts. Learning Objective 7.4

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35
Q

Question 35
Question: Which TREC form should be used if the buyer wishes to terminate the contract because they cannot obtain approval?

Answer Choices:
A. Notice of Buyer’s Termination of Contract
B. Mutual Termination of Contract
C. Amendment to Contract
D. Seller Financing Addendum

A

Correct Answer: A – Notice of Buyer’s Termination of Contract.

Response Feedback: The answer is Notice of Buyer’s Termination of Contract. If the buyer cannot obtain approval in accordance with the Third Party Financing Addendum, the buyer should use the form to terminate the contract. Learning Objective 7.4

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36
Q

Question 36
Question: What right does a buyer have if a seller of coastal property fails to timely provide the Addendum for Coastal Area Property?

Answer Choices:
A. The buyer may only extend the closing date.
B. The buyer may terminate the contract and receive the earnest money.
C. The buyer may terminate the contract, but the seller receives the earnest money.
D. The contract automatically terminates, and the earnest money is deposited in the Open Beaches Recovery Fund.

A

Correct Answer: B – The buyer may terminate the contract and receive the earnest money.

Response Feedback: The answer is the buyer may terminate the contract and receive the earnest money. Learning Objective 7.5

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37
Q

Question 37
Question: What is the purpose of the Texas Real Estate Consumer Notice Concerning Hazards or Deficiencies?

Answer Choices:
A. To help the buyer understand the meaning of hazards and deficiencies as reported by a home inspector
B. The home inspection report
C. The home inspection contract
D. The appraisal report explanation

A

Correct Answer: A – To help the buyer understand the meaning of hazards and deficiencies as reported by a home inspector.

Response Feedback: The answer is to help the buyer understand the meaning of hazards and deficiencies as reported by a home inspector. It is an optional form that can be used to help the buyer understand the reason for the inspector reporting many items that were acceptable when the home was built (and are still functioning), but have been grandfathered in as the codes changed. Learning Objective 7.10

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38
Q

Question 38
Question: According to the Addendum for Coastal Area Property, who owns submerged lands in coastal areas?

Answer Choices:
A. The federal government
B. The adjacent landowner
C. The state
D. The public

A

Correct Answer: C – The state

Response Feedback: The answer is the state. The notice provides in part: “The real property described in and subject to this contract adjoins and shares a common boundary with the tidally influenced submerged lands of the state.” Learning Objective 7.5

39
Q

Question 39
Question: When should the Addendum for Property Subject to Mandatory Membership in a Property Owners Association be attached to the contract?

Answer Choices:
A. When the property is in a POA
B. When the buyer wants information about the POA
C. It should be attached to every contract
D. When the POA will be dissolved

A

Correct Answer: B – When the buyer wants information about the POA.

Response Feedback: The answer is when the buyer wants information about the POA. Whether the property is in a POA is disclosed in the main contract. This addendum is used when the buyer wants information regarding the POA. Learning Objective 7.6

40
Q

Question 40
Question: When should the Addendum for Reservation of Oil, Gas, and Other Minerals be used?

Answer Choices:
A. When the seller reserves all or a portion of the mineral estate
B. When the seller conveys all of the mineral estate
C. When the seller is aware of other mineral estate owners
D. Only when an attorney is involved in the transaction

A

Correct Answer: A – When the seller reserves all or a portion of the mineral estate.

Response Feedback: The answer is when the seller reserves all or a portion of the mineral estate. The note at the top of the addendum states that it is for use only if the seller reserves all or a portion of the mineral estate. Learning Objective 7.3

41
Q

Question 41
Question: A buyer decides to exercise her right to terminate under the option period. What is the proper process?

Answer Choices:
A. Execute a Notice of Buyer’s Termination of Contract.
B. Deliver the Notice of Buyer’s Termination of Contract to the title company.
C. Deliver the Notice of Buyer’s Termination of Contract to the seller according to the instructions in paragraph 21 of the contract.
D. Execute a Notice of Buyer’s Termination of Contract and deliver it to the seller according to the instructions in paragraph 21 of the contract.

A

Correct Answer: D – Execute a Notice of Buyer’s Termination of Contract and deliver it to the seller according to the instructions in paragraph 21 of the contract.

Response Feedback: The answer is execute a Notice of Buyer’s Termination of Contract and deliver it to the seller according to the instructions in paragraph 21 of the contract. Learning Objective 7.4

42
Q

Question 42
Question: Under paragraph B of the Addendum for Property Subject to Mandatory Membership in a Property Owners Association, for what reason may a buyer terminate the contract prior to closing by giving written notice to the seller?

Answer Choices:
A. For any reason.
B. If buyer disapproves of the subdivision information.
C. If any of the subdivision information provided was not true.
D. If seller fails to pay for the information.

A

Correct Answer: C – If any of the subdivision information provided was not true.

Response Feedback: The answer is if any of the subdivision information provided was not true. Buyer may terminate the contract prior to closing by giving written notice to seller if: (i) any of the subdivision information provided was not true; or (ii) any material adverse change in the subdivision information occurs prior to closing, and the earnest money will be refunded to the buyer. Learning Objective 7.6

43
Q

Question 43
Question: Under the Addendum for Property Subject to Mandatory Membership in a Property Owners Association, who is required to obtain the subdivision information?

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

A

Correct Answer: C – It is negotiated.

Response Feedback: The answer is it is negotiated. Buyer and seller negotiate who will obtain and pay for the subdivision information. Learning Objective 7.6

44
Q

Question 44
Question: A buyer wishes to sell her existing home with an existing mortgage before buying a new home. The new lender will not approve the loan on the new property until the existing loan is paid in full. The buyer enters into a contract with a seller and attaches the Addendum for Sale of Other Property by Buyer. The seller accepts a back-up offer and notifies Buyer 1 that she must waive the contingency. Buyer 1 timely waives the contingency, confident that her first house will close. Buyer 1 doesn’t close on her existing home and cannot get a loan by the closing date on the new house. What is the result?

Answer Choices:
A. Buyer may terminate.
B. Buyer is in default.
C. Seller is in default.
D. Seller forfeits the earnest money to the buyer.

A

Correct Answer: B – Buyer is in default.

Response Feedback: The answer is buyer is in default. Paragraph D cautions the buyer not to waive the contingency unless they are certain they can close even if their first property does not close. Otherwise, the buyer will be in default. Learning Objective 7.1

45
Q

Question 45
Question: Buyer 1 wishes to sell her existing home before buying a new home. Buyer 1 enters into a contract with a seller and attaches the Addendum for Sale of Other Property by Buyer. The seller accepts a back-up offer with the Addendum for Back-Up Contract attached from Buyer 2 and notifies Buyer 1 that she must waive the contingency. Buyer 1 timely waives the contingency. What happens to the back-up contract?

Answer Choices:
A. It remains in place until the first contract closes.
B. It remains in place until terminated by the seller.
C. It terminates if the first contract does not terminate by the date agreed upon in the addendum.
D. It remains in place until terminated by Buyer 2.

A

Correct Answer: C – It terminates if the first contract does not terminate by the date agreed upon in the addendum.

Response Feedback: The answer is it terminates if the first contract does not terminate by the agreed upon date in the addendum. If the first contract does not terminate on or before the date in the addendum, the back-up contract terminates and the earnest money is refunded to Buyer 2. Learning Objective 7.2

46
Q

Question 46
Question: What is the amended effective date under the TREC Short Sale Addendum?

Answer Choices:
A. The date the seller provides buyer notice of the lienholder’s consent and agreement.
B. The date the lienholder provides seller notice of the lienholder’s consent and agreement.
C. The date the seller obtains notice of the lienholder’s consent and agreement.
D. The date the buyer inserts after the seller provides the lienholder’s consent and agreement.

A

Correct Answer: A – The date the seller provides buyer notice of the lienholder’s consent and agreement.

Response Feedback: The answer is the date the seller provides buyer notice of the lienholder’s consent and agreement. As is stated in the Short Sale Addendum, “For purposes of performance, the effective date of the contract changes to the date the seller provides buyer notice of the Lienholder’s Consent and Agreement (Amended Effective Date).” Learning Objective 7.7

47
Q

Question 47
Question: Buyer and seller have agreed to terminate a contract and agree on how to distribute the earnest money. The buyer’s agent is a REALTOR®. Which form should be used?

Answer Choices:
A. TREC 20-13
B. TDLR 21-5
C. T-57
D. TR 1904

A

Correct Answer: D – TR 1904

Response Feedback: The answer is TR 1904. TR 1904 Release of Earnest Money Form has language that releases everyone from the contract. It can only be used by individuals who are members of the Texas Association of REALTORS®. Learning Objective 7.4

48
Q

Question 48
Question: Buyer enters into a short sale agreement with seller with an option to terminate seven days after the effective date using the TREC Short Sale Addendum. The effective date is January 2. The seller notifies the buyer that the lienholder has consented to the sale on January 10. What is the last day of the option period?

Answer Choices:
A. January 9
B. January 17
C. January 19
D. January 10

A

Correct Answer: B – January 17

Response Feedback: The answer is January 17. If the buyer has the unrestricted right to terminate the contract, the time for giving notice of termination begins on the effective date of the contract, continues after the amended effective date, and ends upon the expiration of the buyer’s unrestricted right to terminate the contract under paragraph 23. Learning Objective 7.7

49
Q

Question 49
Question: Under the TREC Short Sale Addendum, when must the option fee be paid?

Answer Choices:
A. Only after the lienholder gives consent and agreement.
B. At the beginning of the option period.
C. As provided in the contract.
D. At the end of the option period.

A

Correct Answer: C – As provided in the contract.

Response Feedback: The answer is as provided in the contract. The contract to which the addendum is attached is binding upon execution by the parties, and the earnest money and the option fee must be paid as provided in the contract. Learning Objective 7.7

50
Q

Question 50
Question: Buyer 1 enters into a contract with seller with an option to terminate 10 days after the effective date. The effective date is January 5. The seller accepts a back-up offer with the Addendum for Back-Up Contract attached from Buyer 2 with an effective date of January 6, and with the date in paragraph B of the addendum filled in as January 16. Buyer 1 and seller amend the first contract on the last day of the option period. What is the status of the first contract with Buyer 1?

Answer Choices:
A. It is still live.
B. It was automatically terminated.
C. It will terminate on January 16.
D. It is void.

A

Correct Answer: A – It is still live.

Response Feedback: The answer is it is still live. The seller is free to continue to work with the first buyer; an amendment of the first contract does not terminate the first contract. Learning Objective 7.2

51
Q

Question 51
Question: The buyers love the freestanding antique wardrobe in the sellers’ master bedroom, and the sellers have agreed to leave it with the property for an additional $2,000. What is the most appropriate way to account for this in the transaction?

Answer Choices:
A. Use the Amendment to Contract form.
B. List the wardrobe in paragraph 2D.
C. Simply add $2,000 to the sales price.
D. Use the Non-Realty Items Addendum.

A

Correct Answer: D – Use the Non-Realty Items Addendum.

Response Feedback: The answer is Use the Non-Realty Items Addendum. If the parties insist upon adding some additional items of personal property that are to stay with the property, attach TREC’s Non-Realty Items Addendum to the contract. Learning Objective 7.10

52
Q

Question 52
Question: If a transaction is contingent upon the sale of Buyer 1’s property and the seller notifies Buyer 1 that the seller has accepted a back-up offer, Buyer 1 must:

Answer Choices:
A. Waive the contingency on or before the date they have agreed upon in the Addendum for Sale of Other Property by Buyer.
B. Pay the additional earnest money agreed to in the Addendum for Sale of Other Property by Buyer.
C. Waive all negotiations of repairs.
D. Waive the contingency on or before the date they have agreed upon and pay the additional earnest money agreed to in the Addendum for Sale of Other Property by Buyer.

A

Correct Answer: D – Waive the contingency on or before the date they have agreed upon and pay the additional earnest money agreed to in the Addendum for Sale of Other Property by Buyer.

Response Feedback: The answer is waive the contingency on or before the date they have agreed upon and pay the additional earnest money agreed to in the Sale of Other Property by Buyer Addendum. Learning Objective 7.1

53
Q

Question 53
Question: Buyer enters into a short sale agreement with the seller with an option to terminate 14 days after the effective date using the TREC Short Sale Addendum. The effective date is February 5. The seller has until February 19 to notify the buyer that the seller has obtained lienholder’s consent and agreement. The seller notifies the buyer that the lienholder has consented to the sale on February 19, but then withdraws its consent based on new information on February 27. What is the status of the contract?

Answer Choices:
A. It is still live because the seller gets additional time to obtain the lienholder’s consent.
B. The contract is void.
C. The contract is in limbo.
D. It is terminated.

A

Correct Answer: D – It is terminated.

Response Feedback: The answer is it is terminated. The contract will terminate, and the earnest money will be refunded to the buyer if the lienholder refuses or withdraws its consent and agreement prior to closing and funding. Learning Objective 7.7

54
Q

Question 54
Question: According to the Addendum for Property Subject to Mandatory Membership in a Property Owners Association, who may act on behalf of the parties to obtain the subdivision information?

Answer Choices:
A. The buyer’s agent.
B. The seller’s agent.
C. The title company.
D. The lender.

A

Correct Answer: C – The title company.

Response Feedback: The answer is the title company. The title company or its agent is authorized to act on behalf of the parties to obtain the subdivision information only upon receipt of the required fee for the subdivision information from the party obligated to pay. Learning Objective 7.6

55
Q

Question 55
Question: Buyer 1 enters into a contract with the seller with an option to terminate 10 days after the effective date. The effective date is January 5. The seller accepts a back-up offer with the Addendum for Back-Up Contract attached from Buyer 2 with an effective date of January 6, and with the date in paragraph B of the addendum filled in as January 16. Buyer 1 and the seller amend the first contract on the last day of the option period. What is the status of the second contract with Buyer 2?

Answer Choices:
A. It was automatically terminated when the first contract was amended.
B. It is void.
C. It will terminate on January 16.
D. It is voidable.

A

Correct Answer: C – It will terminate on January 16.

Response Feedback: The answer is it will terminate on January 16. If the first contract does not terminate on or before the date in the addendum, the back-up contract terminates, and the earnest money is refunded to Buyer 2. Learning Objective 7.2

56
Q

Question 56
Question: When is the TREC Addendum for Sale of Other Property by Buyer used?

Answer Choices:
A. When the buyer is unable to buy the new property unless her existing property is sold.
B. When the buyer is buying two properties at the same time.
C. When the seller is buying a new property at the same time he is selling the existing property.
D. The addendum is not used in any of these situations.

A

Correct Answer: A – When the buyer is unable to buy the new property unless her existing property is sold.

Response Feedback: The answer is when the buyer is unable to buy the new property unless her existing property is sold. It is usually used when the buyer needs the money from the first sale to complete the second sale, but it could be necessary because the new lender would not approve the loan on the new property until the debt is paid in full on the existing loan. Learning Objective 7.1

57
Q

Question 57
Question: Which of these are included in the Texas Real Estate Consumer Notice Concerning Hazards or Deficiencies?

Answer Choices:
A. Improperly installed or defective safety devices.
B. Lack of electrical bonding and grounding.
C. Lack of bonding on gas piping, including corrugated stainless steel tubing (CSST).
D. All of these.

A

Correct Answer: D – All of these.

Response Feedback: The answer is all of these. To ensure that consumers are informed of hazards such as these, the Texas Real Estate Commission (TREC) has adopted Standards of Practice requiring licensed inspectors to report these conditions as “Deficient” when performing an inspection for a buyer or seller, if they can be reasonably determined. Learning Objective 7.10

58
Q

Question 59
Question: The buyers wish to have the refrigerator remain on the property after closing and are willing to pay a nominal price for it, and the sellers agree. What form or paragraph in the contract should be used?

Answer Choices:
A. The amendment form.
B. The Non-Realty Items Addendum.
C. Note the refrigerator in paragraph 11.
D. List the refrigerator in paragraph 2.

A

Correct Answer: B – The Non-Realty Items Addendum.

Response Feedback: The answer is the Non-Realty Items Addendum. If the seller wishes to sell the refrigerator to the buyer for a nominal fee and have it be part of the total sales price, the Non-Realty Items Addendum should be used. Learning Objective 7.10

58
Q

Question 58
Question: Which of the following types of information are included in the Subdivision Information, Including Resale Certificate for Property Subject to Mandatory Membership in a Property Owners Association?

Answer Choices:
A. Current regular assessment.
B. Special assessment.
C. Capital expenditures.
D. All of these.

A

Correct Answer: D – All of these.

Response Feedback: The answer is all of these. All of the items are addressed in the resale certificate. Learning Objective 7.9

58
Q

Question 60
Question: How many back-ups does the TREC Addendum for Back-Up Contract allow?

Answer Choices:
A. Two.
B. Three.
C. One.
D. May be negotiated by the seller.

A

Correct Answer: C – One.

Response Feedback: The answer is one. The TREC Addendum for Back-Up Contract allows for just one back-up. Learning Objective 7.2

59
Q

Question 61
Question: Which of the following is considered part of the mineral estate in the TREC mineral rights addendum?

Answer Choices:
A. Gravel
B. Water
C. Sand
D. Oil

A

Correct Answer: D – Oil

Response Feedback: The answer is oil. “Mineral Estate” means all oil, gas, and other minerals in and under and that may be produced from the Property. The mineral estate does not include water, sand, gravel, limestone, building stone, caliche, surface shale, near-surface lignite, and iron. Learning Objective 7.3

60
Q

Question 62
Question: When must the TREC Notice of Buyer’s Termination of Contract be delivered to the seller to exercise the unrestricted right to terminate under the option period?

Answer Choices:
A. Within three days of the option period.
B. Prior to expiration of the option period.
C. Before delivery of the option money.
D. After the seller rejects any amendment to the contract.

A

Correct Answer: B – Prior to expiration of the option period.

Response Feedback: The answer is prior to expiration of the option period. The remaining answers are incorrect. Learning Objective 7.4

61
Q

Question 63
Question: Under the Addendum for Sale of Other Property by Buyer, what happens if the seller accepts a back-up offer from Buyer 2 and Buyer 1 does not waive the contingency before the agreed upon date?

Answer Choices:
A. Seller may waive the contingency.
B. Buyer 2 may waive the contingency.
C. Buyer 1 will be in default.
D. The first contract will terminate.

A

Correct Answer: D – The first contract will terminate.

Response Feedback: The answer is the first contract will terminate. If the seller accepts a back-up offer, Buyer 1 may waive the contingency on or before a date they have agreed upon; otherwise, the first contract will terminate. Learning Objective 7.1

62
Q

Question 64
Question: Under the Addendum for Reservation of Oil, Gas, and Other Minerals, how long does the seller have to provide contact information of any existing mineral lessee to the buyer if the seller conveys all of the seller’s interest in the mineral estate?

Answer Choices:
A. Within three days after the effective date.
B. Within seven days after the effective date.
C. Within seven days after the closing date.
D. Within seven days before the closing date.

A

Correct Answer: B – Within seven days after the effective date.

Response Feedback: The answer is within seven days after the effective date. If the seller does not reserve all of the seller’s interest in the mineral estate, the seller shall, within seven days after the effective date, provide the buyer with the contact information of any existing mineral lessee known to the seller. Learning Objective 7.3

63
Q

Question 65
Question: Buyer and seller entered into a contract for the buyer to purchase the seller’s home. The buyer now wishes to terminate the contract based on information disclosed in the seller’s disclosure notice. Which form should the buyer use?

Answer Choices:
A. TR 1904
B. Seller’s Disclosure Notice
C. Amendment to Contract
D. Notice of Buyer’s Termination of Contract

A

Correct Answer: D – Notice of Buyer’s Termination of Contract.

Response Feedback: The answer is Notice of Buyer’s Termination of Contract. The Notice of Buyer’s Termination of Contract has a list of reasons for the buyer’s termination. Learning Objective 7.4

64
Q

Question 66
Question: According to the Addendum for Property Located Seaward of the Gulf Intracoastal Waterway, where can a person find erosion rates for all Texas Gulf property subject to the Open Beaches Act?

Answer Choices:
A. The Texas Real Estate Commission.
B. Any coastal county clerk’s office.
C. The Texas General Land Office.
D. Any city office of the city in which the property is located.

A

Correct Answer: C – The Texas General Land Office.

Response Feedback: The answer is the Texas General Land Office. Much of the Gulf of Mexico coastline is eroding at rates of more than five feet per year. Erosion rates for all Texas Gulf property subject to the Open Beaches Act are available from the Texas General Land Office. Learning Objective 7.5

65
Q

Question 67
Question: Under paragraph B of the Addendum for Property Subject to Mandatory Membership in a Property Owners Association, for what reason may the buyer terminate the contract prior to closing by giving written notice to the seller?

Answer Choices:
A. For any reason.
B. If the buyer fails to obtain the subdivision information.
C. Any material adverse change in the subdivision information occurs prior to closing.
D. If the seller fails to pay for the information.

A

Correct Answer: C – Any material adverse change in the subdivision information occurs prior to closing.

Response Feedback: The answer is any material adverse change in the subdivision information occurs prior to closing. Buyer may terminate the contract prior to closing by giving written notice to the seller if: (i) any of the subdivision information provided was not true; or (ii) any material adverse change in the subdivision information occurs prior to closing, and the earnest money will be refunded to the buyer. Learning Objective 7.6

66
Q

Question 68
Question: Which form should be used if the broker is a REALTOR® and the seller and buyer agree that they want to mutually terminate the contract and agree on how the earnest money will be distributed?

Answer Choices:
A. Notice of Buyer’s Termination of Contract.
B. Release of Earnest Money Form.
C. Notice of Seller’s Termination of Contract.
D. Distribution of Earnest Money Form.

A

Correct Answer: B – Release of Earnest Money Form.

Response Feedback: The answer is Release of Earnest Money Form. TR 1904 Release of Earnest Money Form has language that releases everyone from the contract. Learning Objective 7.4

67
Q

Question 69
Question: The Addendum for Property Located Seaward of the Gulf Intracoastal Waterway provides a disclosure regarding:

Answer Choices:
A. State of Texas submerged lands.
B. Federal laws regarding oil well placement.
C. Public beach easements.
D. Federal laws on beach protection.

A

Correct Answer: C – Public beach easements.

Response Feedback: The answer is public beach easements. The remaining answers are not addressed in the disclosure. Learning Objective 7.5

68
Q

Question 70
Question: Under the Addendum for Property Subject to Mandatory Membership in a Property Owners Association, who is required to pay the deposits for reserves?

Answer Choices:
A. Seller.
B. Buyer.
C. It is negotiated.
D. Lender.

A

Correct Answer: B – Buyer.

Response Feedback: The answer is buyer. Buyer shall pay any deposits for reserves required at closing by the association. Learning Objective 7.6

69
Q

Question 71
Question: Buyer and seller enter into an agreement for buyer to purchase seller’s property, which is located in a property owners association. Seller provides buyer with the subdivision information, and buyer requests that seller provide an updated resale certificate at buyer’s cost. What is the buyer’s option if the seller fails to obtain it as required by paragraph A(3) of the Addendum for Property Subject to Mandatory Membership in a Property Owners Association?

Answer Choices:
A. Buyer may terminate and forfeit the earnest money.
B. Buyer may extend closing until the POA provides the information.
C. Buyer may terminate and receive the earnest money.
D. Buyer may terminate and receive three times the earnest money.

A

Correct Answer: C – Buyer may terminate and receive the earnest money.

Response Feedback: The answer is buyer may terminate and receive the earnest money. Buyer may terminate this contract, and the earnest money will be refunded to buyer if the seller fails to deliver the updated resale certificate within the time required. Learning Objective 7.6

70
Q

Question 73
Question: According to the Addendum for Property Located Seaward of the Gulf Intracoastal Waterway, what causes coastal property to become part of a public beach?

Answer Choices:
A. Condemnation
B. Eminent domain
C. Lis pendens
D. Coastal erosion

A

Correct Answer: D – Coastal erosion.

Response Feedback: The answer is coastal erosion. Coastal erosion and storm events may cause private beach property to become a public beach. Learning Objective 7.5

70
Q

Question 72
Question: When is the TREC Addendum for Sale of Other Property by Buyer used?

Answer Choices:
A. When the buyer is buying two properties at the same time.
B. When the seller is selling two properties at the same time to the same buyer.
C. When the buyer’s existing property is about to be foreclosed.
D. When a new lender will not approve the loan on the new property until a mortgage on an existing property is paid in full.

A

Correct Answer: D – When a new lender will not approve the loan on the new property until a mortgage on an existing property is paid in full.

Response Feedback: The answer is when a new lender will not approve the loan on the new property until a mortgage on an existing property is paid in full. It is usually used when the buyer needs the money from the first sale to complete the second sale, but it could be necessary because the new lender would not approve the loan on the new property until the debt is paid in full on the existing loan. Learning Objective 7.1

71
Q

Question 74
Question: Who must approve a short sale?

Answer Choices:
A. The escrow officer
B. HUD
C. The title company
D. The seller’s lender

A

Correct Answer: D – The seller’s lender.

Response Feedback: The answer is the seller’s lender. A short sale transaction cannot move forward without the approval and cooperation of the seller’s lender’s loss mitigation department. Learning Objective 7.7

72
Q

Question 75
Question: When must the Information About Brokerage Services be provided to a consumer?

Answer Choices:
A. At first contact
B. Before a listing agreement is signed
C. At the first substantive discussion
D. Before closing

A

Correct Answer: C – At the first substantive discussion.

Response Feedback: The answer is at the first substantive discussion. A substantive discussion is defined as the first discussion at which substantive information about a particular property occurs. Learning Objective 7.9

73
Q

Question 76
Question: A seller wishes to keep an antique fireplace screen that was installed when the house was built. How should this be addressed in the TREC One to Four Family Residential Contract?

Answer Choices:
A. Identify the screen in paragraph 11.
B. Cross out “fireplace screen” where it is listed as an accessory in paragraph 2.
C. Address it in the Non-Realty Items Addendum and attach it to the One to Four Family Residential Contract.
D. List the screen under Exclusions.

A

Correct Answer: D – List the screen under Exclusions.

Response Feedback: The answer is list the screen under Exclusions. While one might be tempted to merely cross out an item where it is listed in Accessories, the appropriate thing to do is to itemize accessories that will go with the seller in the exclusions subparagraph. Learning Objective 7.10

74
Q

Question 77
Question: Buyer and seller enter into an agreement for buyer to purchase seller’s property, which is located in a property owners association (POA). Buyer wants additional information about the POA and asks the seller to provide and pay for the subdivision information. What is the buyer’s option if the seller timely provides it as required by paragraph A(1) of the Addendum for Property Subject to Mandatory Membership in a Property Owners Association?

Answer Choices:
A. Buyer may terminate and forfeit the earnest money.
B. Buyer may terminate within three days and receive the earnest money.
C. Buyer may renegotiate the sales price.
D. Buyer may terminate and receive three times the earnest money.

A

Correct Answer: B – Buyer may terminate within three days and receive the earnest money.

Response Feedback: The answer is buyer may terminate within three days and receive the earnest money. If the seller delivers the subdivision information, the buyer may terminate the contract within three days after receiving the subdivision information or prior to closing, whichever occurs first, and the earnest money will be refunded to the buyer. Learning Objective 7.6

75
Q

Question 78
Question: Buyer enters into a short sale agreement with the seller with an option to terminate 14 days after the effective date using the TREC Short Sale Addendum. The effective date is February 5. The seller has until February 19 to notify the buyer that the seller has obtained lienholder’s consent and agreement. The seller notifies the buyer that the lienholder has consented to the sale on February 20, even though he received the notice on February 19. What is the status of the contract?

Answer Choices:
A. It is still live because the notice was given to the seller on February 19.
B. It is still live because it was only a day late.
C. It terminated on February 19.
D. The contract is void.

A

Correct Answer: C – It terminated on February 19.

Response Feedback: The answer is it terminated on February 19. If the seller does not notify the buyer that the seller has obtained lienholder’s consent and agreement on or before the agreed-upon date, the contract terminates, and the earnest money will be refunded to the buyer. Learning Objective 7.7

76
Q

Question 79
Question: Seller and buyer enter into an agreement for buyer to purchase seller’s property, and the seller conveys a portion of his mineral estate to the buyer. The effective date of the contract is February 2. The closing date is February 28. Under the Addendum for Reservation of Oil, Gas, and Other Minerals, by what date must the seller provide the buyer with the contact information of any existing mineral lessee known to the seller?

Answer Choices:
A. February 5
B. February 9
C. February 25
D. February 21

A

Correct Answer: B – February 9.

Response Feedback: The answer is February 9. If the seller does not reserve all of the seller’s interest in the mineral estate, the seller shall, within seven days after the effective date, provide the buyer with the contact information of any existing mineral lessee known to the seller. Learning Objective 7.3

77
Q

Question 80
Question: Which of the following is TRUE regarding the information contained in the Texas Real Estate Consumer Notice Concerning Hazards or Deficiencies?

Answer Choices:
A. A Texas home inspector is required to conduct a code compliance inspection.
B. A Texas home inspector is not required to conduct a code compliance inspection.
C. A Texas home inspector is required to conduct a partial code compliance inspection.
D. A Texas home inspector is required to conduct a code compliance inspection on new homes only.

A

Correct Answer: B – A Texas home inspector is not required to conduct a code compliance inspection.

Response Feedback: The answer is a Texas home inspector is not required to conduct a code compliance inspection. While they are not required to provide a code inspection, the potential for damage or injury from the listed hazards warrants the notice. Learning Objective 7.10

78
Q

Question 81
Question: The property is under contract, with two backup deals in the wings. Which promulgated form should you use to write the third backup?

Answer Choices:
A. Addendum for Sale of Other Property by Buyer
B. Short Sale Addendum
C. Addendum for Back-Up Contract
D. There is no such promulgated form

A

Correct Answer: D – There is no such promulgated form.

Response Feedback: The answer is there is no such promulgated form. Any backup beyond the first should be written by competent legal counsel. Learning Objective 7.2

79
Q

Question 82
Question: The first contract has just terminated, but the original time period for expiration of the option to terminate in the backup has also expired. Can the second buyer get her earnest money back?

Answer Choices:
A. No, the option has terminated, and the earnest money is therefore forfeited.
B. No, both the option money and the earnest money are forfeited.
C. Yes, because the option to terminate (and therefore receive earnest money back) can be extended by payment of a second option fee.
D. Yes, because the option period starts over when the second buyer receives notice that the first contract has terminated.

A

Correct Answer: D – Yes, because the option period starts over when the second buyer receives notice that the first contract has terminated.

Response Feedback: The answer is yes, because the option period starts over when the second buyer receives notice that the first contract has terminated. Paragraph 23 of the promulgated contract forms provides the buyer the opportunity to terminate the contract, without cause, within the stated time period if the buyer has paid an option fee. Learning Objective 7.2

80
Q

Question 83
Question: The seller and the buyer under the first contract extend the closing date due to the seller’s difficulty in completing the required repairs. The new closing date is after the backup’s automatic closing date. What happens?

Answer Choices:
A. The backup contract is automatically extended to conform to the new closing date for the first contract.
B. The backup contract automatically terminates per the terms of the backup, and the earnest money and option money are refunded.
C. The second buyer sues the seller for fraud in trying to defeat the backup by not completing the repairs in a timely fashion.
D. The backup contract automatically terminates per the terms of the backup, and the earnest money is refunded.

A

Correct Answer: B – The backup contract automatically terminates per the terms of the backup, and the earnest money and option money are refunded.

Response Feedback: The answer is the backup contract automatically terminates per the terms of the backup, and the earnest money is refunded. The option money remains with the seller. Learning Objective 7.2

81
Q

Question 84
Question: If a buyer or the buyer’s agent has questions regarding the coastal location of property, the source for information is:

Answer Choices:
A. The Coastal Surveyor’s Office in Austin.
B. The General Land Office in Austin.
C. The county surveyor’s office in the county in which the property is located.
D. The Intracoastal Waterway Office in Austin.

A

Correct Answer: B – The General Land Office in Austin.

Response Feedback: The answer is the General Land Office in Austin. If there is any question about the property, it is prudent for the agent to refer the client to this resource. Learning Objective 7.5

82
Q

Question 85
Question: What is one of the primary concerns with a home located on the beach near the Gulf of Mexico?

Answer Choices:
A. Public access across the property to the Gulf.
B. Erosion that results in a change in property liens.
C. The right of the State to require removal of improvements.
D. All of these.

A

Correct Answer: D – All of these.

Response Feedback: The answer is all of these. These items are risks associated with owning property that borders the Gulf. The first three items are emphasized in the Addendum for Property Located Seaward of the GICW. Learning Objective 7.5

82
Q

Question 86
Question: How many customers must a retailer have to obtain a license for a propane gas system service area?

Answer Choices:
A. 10
B. 25
C. 15
D. There is no minimum number.

A

Correct Answer: A – 10

Response Feedback: The answer is 10. Current legislation requires the seller to notify the buyer if the property is in the propane gas system service area before the buyer signs the contract. Learning Objective 7.5

83
Q

Question 87
Question: A short sale is:

Answer Choices:
A. A consequence-free means to unload a property without paying off the loan balance in full.
B. A sale of the property without any income tax consequence.
C. A sale of property for an amount less than the balance of the debt encumbering it.
D. A sale of the property for less than the listing price.

A

Correct Answer: C – A sale of property for an amount less than the balance of the debt encumbering it.

Response Feedback: The answer is a sale of property for an amount less than the balance of the debt encumbering it. A short sale can have tax and credit rating consequences and should be undertaken only with adequate legal representation. Learning Objective 7.7

84
Q

Question 88
Question: Which of the following is NOT a lender requirement for a short sale?

Answer Choices:
A. A collapsed real estate market
B. Financial hardship of the seller
C. Value of property below balance due on loan
D. Loan at or near default

A

Correct Answer: A – A collapsed real estate market.

Response Feedback: The answer is a collapsed real estate market. While such a market may result in short sales, it is not necessary from a lender’s point of view. All other items listed are typical lender requirements before the lender approves a short sale. Learning Objective 7.7

85
Q

Question 89
Question: It is not unusual for a short sale approval to:

Answer Choices:
A. Be completed within a few days.
B. Be based on the selling agent’s opinion of value.
C. Take 90-120 days or more.
D. Result in proceeds that are more than the balance of the loan.

A

Correct Answer: C – Take 90-120 days or more.

Response Feedback: The answer is take 90-120 days or more. The other choices range from highly unlikely to virtually unheard of. Learning Objective 7.7

86
Q

Question 90
Question: The Addendum Containing Notice of Obligation to Pay Improvement District Assessment indicates that the failure to pay the assessment might result in penalties, interest, a lien, or:

Answer Choices:
A. Foreclosure of the property
B. Prison time
C. Remedial education
D. Exclusion from the homeowners association

A

Correct Answer: A – Foreclosure of the property.

Response Feedback: The answer is foreclosure of the property. This is the addendum referred to in paragraph 6E(7) of the promulgated contracts. If a property is subject to assessments for the costs of a public improvement or services project, this addendum must be used. It provides notice that the assessment has been levied, indicates where the amount of the assessment can be obtained, and states that the failure to pay the assessment might result in penalties, interest, a lien, or foreclosure of the property. Learning Objective 7.8

87
Q

Question 91
Question: According to the Addendum Regarding Fixture Leases, the seller must provide copies of any fixture leases within how many days after the effective date?

Answer Choices:
A. 2 days
B. 3 days
C. 5 days
D. 7 days

A

Correct Answer: C – 5 days

Response Feedback: The answer is 5 days. The seller must provide copies of any fixture leases within five days after the effective date. The buyer can terminate within seven days after receiving the fixture leases. Learning Objective 7.8

88
Q

Question 92
Question: According to the Addendum Regarding Fixture Leases, the buyer can terminate within how many days after receiving the fixture lease?

Answer Choices:
A. 2 days
B. 3 days
C. 5 days
D. 7 days

A

Correct Answer: D – 7 days

Response Feedback: The answer is 7 days. The seller must provide copies of any fixture leases within five days after the effective date. The buyer can terminate within seven days after receiving the fixture leases. Note that this is different from the Addendum Regarding Residential Leases (must be provided within 3 days of the effective date, and the parties negotiate the number of days for the buyer to terminate). Learning Objective 7.8

89
Q

Question 93
Question: According to the Addendum Regarding Residential Leases, the seller must provide copies of any residential leases within how many days after the effective date?

Answer Choices:
A. 2 days
B. 3 days
C. 5 days
D. 7 days

A

Correct Answer: B – 3 days

Response Feedback: The answer is 3 days. The seller must provide copies of any residential leases within three days after the effective date. The parties can negotiate the number of days for the buyer to terminate after receiving the leases. Note that this is different from the Addendum Regarding Fixture Leases (must be provided within 5 days of the effective date, and the buyer has 7 days to terminate after receiving the leases). Learning Objective 7.8

Real Estate Contracts Form and Addenda (9 decks)

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