Unit 9

Question 1

Question 1:
Which of the following is TRUE under the Addendum for Back-up Contract attached to the contract between Kramer and Sweeney?

Answer Choices:
A. Time is not of the essence.
B. An amendment of the First Contract will terminate the First Contract.
C. Time is of the essence.
D. A modification of the First Contract will terminate the First Contract.

Answer 1

Correct Answer: C. Time is of the essence.

Response Feedback:
The answer is time is of the essence. The remaining answers are incorrect. Learning Objective 9.3

Question 2

Question 2:
Under the Seller Financing Addendum to the contract from Johnson to Swanson, how long does Johnson have to terminate if Swanson timely delivers his credit report but Johnson determines that Swanson’s credit is unacceptable?

Answer Choices:
A. Within 10 days after expiration of the time for delivery
B. Within 7 days after the effective date
C. Within 10 days after the effective date
D. Within 7 days after expiration of the time for delivery

Answer 2

Correct Answer: D. Within 7 days after expiration of the time for delivery

Response Feedback:
The answer is within 7 days after expiration of the time for delivery. If the credit documentation is timely delivered, and the seller determines in the seller’s sole discretion that the buyer’s credit is unacceptable, the seller may terminate this contract by notice to the buyer within 7 days after expiration of the time for delivery. Learning Objective 9.2

Question 3

Question 3:
Who is responsible for paying for the residential service contract under the contract from Fleming to Donaldson?

Answer Choices:
A. Donaldson
B. ABC Title
C. Donaldson’s lender
D. Fleming

Answer 3

Correct Answer: D. Fleming

Response Feedback:
The answer is Fleming. Learning Objective 9.1

Question 4

Question 4:
Under the contract from Johnson to Swanson, how long does Swanson have to deliver a credit report?

Answer Choices:
A. 3 days
B. 15 days
C. 7 days
D. 5 days

Answer 4

Correct Answer: D. 5 days

Response Feedback:
The answer is 5 days. Buyer shall deliver a credit report to the seller within 5 days after the effective date of this contract. Learning Objective 9.2

Question 5

Question 5:
Under the contract between Kramer and Sweeney, Deep Pocket Mortgage decides to increase the interest rate on the loan to 5.5%. What are Sweeney’s options under the Loan Assumption Addendum?

Answer Choices:
A. May terminate and the earnest money will be refunded to Sweeney
B. May terminate only if Kramer refuses to pay the amount in excess of the existing interest rate
C. Must pay the excess interest
D. May extend the closing date by 21 days to find a second loan to finance the amount in excess of the existing interest rate

Answer 5

Correct Answer: A. May terminate and the earnest money will be refunded to Sweeney

Response Feedback:
The answer is may terminate and the earnest money will be refunded to Sweeney. Buyer may terminate this contract, and the earnest money will be refunded to Buyer if the noteholder increases the interest rate to more than 5%. Learning Objective 9.3

Question 6

Question 6:
Under the contract from Fleming to Donaldson, if the effective date is February 12, when must the Donaldsons terminate the contract under paragraph 23?

Answer Choices:
A. By midnight February 26
B. By 5:00 pm February 27
C. By 5:00 pm February 28
D. By midnight February 27

Answer 6

Correct Answer: B. By 5:00 pm February 27

Response Feedback:
The answer is by 5:00 pm February 27. The option period starts the day following the effective date and runs until midnight of the last day. Learning Objective 9.1

Question 7

Question 7:
Under the contract between Kramer and Sweeney, Deep Pocket Mortgage does not consent to the assumption of Kramer’s loan. What are Sweeney’s options?

Answer Choices:
A. Sweeney may extend closing by three days.
B. Sweeney may terminate and get the earnest money.
C. Sweeney may terminate but Kramer gets the earnest money.
D. Sweeney may terminate and Buyer’s Choice Title keeps the earnest money.

Answer 7

Correct Answer: B. Sweeney may terminate and get the earnest money.

Response Feedback:
The answer is Sweeney may terminate and get the earnest money. If the noteholder fails to consent to the assumption of the loan, either seller or buyer may terminate this contract by notice to the other party, and the earnest money will be refunded to the buyer. Learning Objective 9.3

Question 8

Question 8:
Under the lead-based paint addendum to the contract from Fleming to Donaldson, how long does Donaldson have to get a lead paint inspection?

Answer Choices:
A. 14 days
B. 15 days
C. 3 days
D. 10 days

Answer 8

Correct Answer: D. 10 days

Response Feedback:
The answer is 10 days. Within 10 days after the effective date of this contract, the buyer may have the property inspected by inspectors selected by the buyer. Learning Objective 9.1

Question 9

Question 9:
Under the contract from Johnson to Swanson, if the closing date is May 27, what is the effective date?

Answer Choices:
A. May 11
B. May 12
C. May 13
D. April 27

Answer 9

Correct Answer: B. May 12

Response Feedback:
The answer is May 12. They will close on or before May 27, which is 15 days from the effective date of the contract. Learning Objective 9.2

Question 10

Question 10:
Under the contract from Fleming to Donaldson, how should the Donaldsons ensure that they will be able to park their RV in the driveway?

Answer Choices:
A. They should put it in paragraph 11, Special Provisions.
B. They should use the Amendment to Contract.
C. They should send an email to Flemings with the statement.
D. They should add a statement to that effect in paragraph 6D.

Answer 10

Correct Answer: D. They should add a statement to that effect in paragraph 6D.

Response Feedback:
The answer is they should add a statement to that effect in paragraph 6D. The blank in paragraph 6D is used to articulate any objections. Learning Objective 9.1

Question 11

Question 11:
Under the Seller Financing Addendum to the contract from Johnson to Swanson, what happens if Swanson fails to get Johnson’s consent before Swanson sells the property?

Answer Choices:
A. Half of the entire amount is due and payable.
B. Swanson must pay an 18% penalty.
C. Swanson must pay twice the interest as a penalty.
D. The entire amount is due and payable.

Answer 11

Correct Answer: D. The entire amount is due and payable.

Response Feedback:
The answer is the entire amount is due and payable. If all or any part of the property is sold without seller’s prior written consent, seller may declare the balance of the note to be immediately due and payable. Learning Objective 9.2

Question 12

Question 12:
Regarding the referenced transaction from Fleming to Donaldson, why is the lead-based paint addendum attached to the contract?

Answer Choices:
A. Because the house is painted with lead-based paint
B. Because the Donaldsons wanted it to be included
C. It was attached in error
D. Because the house was built in 1975

Answer 12

Correct Answer: D. Because the house was built in 1975

Response Feedback:
The answer is because the house was built in 1975. The disclosure is required for homes built before 1978. Learning Objective 9.1

Question 13

Question 13:
Under the contract from Johnson to Swanson, who represents Swanson?

Answer Choices:
A. Smooth Sales Realty as buyer’s broker.
B. Smooth Sales Realty as intermediary.
C. Smooth Sales Realty as dual agent.
D. Swanson is not represented.

Answer 13

Correct Answer: D. Swanson is not represented.

Response Feedback:
The answer is Swanson is not represented. Swanson is a customer of Smooth Sales Realty, not a client. Learning Objective 9.2

Question 14

Question 14:
Under the contract from Fleming to Donaldson, how long does Donaldson have to obtain financing approval?

Answer Choices:
A. 3 days
B. 20 days
C. 21 days
D. 7 days

Answer 14

Correct Answer: B. 20 days

Response Feedback:
The answer is 20 days. If buyer cannot obtain buyer approval, buyer may give written notice to seller within 20 days after the effective date of this contract and this contract will terminate and the earnest money will be refunded to buyer. Learning Objective 9.1

Question 15

Question 15:
Under the contract between Kramer and Sweeney, what happens if the first contract between Kramer and Wright does not terminate by May 20?

Answer Choices:
A. The contract between Kramer and Sweeney terminates and the earnest money will be paid to Kramer.
B. The contract between Kramer and Sweeney terminates and the earnest money will be refunded to Sweeney.
C. The contract between Kramer and Sweeney is extended for another 21 days.
D. The contract between Kramer and Sweeney is void.

Answer 15

Correct Answer: B. The contract between Kramer and Sweeney terminates and the earnest money will be refunded to Sweeney.

Response Feedback:
The answer is the contract between Kramer and Sweeney terminates and the earnest money will be refunded to Sweeney. The other answers are wrong. Learning Objective 9.3

Question 16

Question 16:
Under the Addendum for Property Located Seaward of the Gulf Intracoastal Waterway attached to the contract between Kramer and Sweeney, who is responsible for removing a building located on a public beach if shoreline erosion causes private beach property to become a public beach?

Answer Choices:
A. The state of Texas
B. The county in which the property is located
C. The person ordered to remove it by a removal order
D. The owner of the structure

Answer 16

Correct Answer: D. The owner of the structure

Response Feedback:
The answer is the owner of the structure. The cost of removing a structure from a public beach is solely the responsibility of the owner of the structure. Learning Objective 9.3

Question 17

Question 17:
Under the Seller Financing Addendum to the contract from Johnson to Swanson, Swanson timely delivers his credit report after the May 12 effective date. The credit report shows that Swanson has very poor credit. Johnson was hospitalized with a heart attack three days after he gets the report. By what date must Johnson terminate based on Swanson’s credit report?

Answer Choices:
A. May 17
B. May 20
C. May 24
D. May 27

Answer 17

Correct Answer: C. May 24

Response Feedback:
The answer is May 24. With a May 12 effective date, Swanson has until May 17 to deliver the report. Johnson then has seven days from that date to terminate based on the credit report. Learning Objective 9.2

Question 18

Question 18:
Under the contract between Kramer and Sweeney, by what date was Sweeney required to pay the option fee if the first contract terminated on May 16 and Sweeney received notice on the same day?

Answer Choices:
A. May 16
B. May 18
C. May 19
D. May 23

Answer 18

Correct Answer: B. May 18

Response Feedback:
The answer is May 18. Sweeney had to pay the option fee within three days of the original effective date (May 15). Learning Objective 9.3

Question 19

Question 19:
How much is Fleming contributing to Donaldson’s closing costs under the contract from Fleming to Donaldson?

Answer Choices:
A. 1%
B. $1,000
C. 4%
D. Nothing

Answer 19

Correct Answer: D. Nothing

Response Feedback:
The answer is nothing. Other than paying for the residential service contract, Fleming is not contributing to closing costs. Learning Objective 9.1

Question 20

Question 20:
Under the Environmental Assessment, Threatened or Endangered Species, and Wetlands Addendum attached to the contract from Johnson to Swanson, who pays for the environmental assessment?

Answer Choices:
A. Johnson
B. Swanson
C. Johnson and Swanson split the cost
D. Secure Title

Answer 20

Correct Answer: B. Swanson

Response Feedback:
The answer is Swanson. Buyer, at buyer’s expense, may obtain an environmental assessment report prepared by an environmental specialist. Learning Objective 9.2

Question 21

Question 21:
Under the contract from Johnson to Swanson, who pays for mediation?

Answer Choices:
A. Swanson
B. Johnson
C. Swanson and Johnson equally
D. The listing agent

Answer 21

Correct Answer: C. Swanson and Johnson equally

Response Feedback:
The answer is Swanson and Johnson equally. The parties to the mediation shall bear the mediation costs equally. Learning Objective 9.2

Question 22

Question 22:
Why is it irrelevant if the parties did not wish to mediate any disputes under the TREC contract?

Answer Choices:
A. Mediation is automatically agreed to.
B. Mediation is not addressed in the contract.
C. Mediation is required by TREC rules.
D. Mediation is required by federal law.

Answer 22

Correct Answer: A. Mediation is automatically agreed to.

Response Feedback:
The answer is mediation is automatically agreed to. Under paragraph 16, the parties have no choice but to mediate disputes before filing a lawsuit. Learning Objective 9.1

Question 23

Question 23:
Under the contract between Kramer and Sweeney, when is Sweeney required to pay the earnest money?

Answer Choices:
A. On the amended effective date of the contract
B. When the first contract between Kramer and Wright terminates
C. On the effective date of the contract
D. At the end of the option period of the contract between Kramer and Wright

Answer 23

Correct Answer: C. On the effective date of the contract

Response Feedback:
The answer is on the effective date of the contract. The termination and option periods of the first contract are not relevant to determine when the earnest money is due. Learning Objective 9.3

Question 24

Question 24:
Under the contract from Fleming to Donaldson, who gets the earnest money if the Donaldsons timely terminate the contract under paragraph 5?

Answer Choices:
A. The Flemings
B. The Donaldsons
C. ABC Title
D. Wonderful Properties

Answer 24

Correct Answer: B. The Donaldsons

Response Feedback:
The answer is the Donaldsons. If buyer gives notice of termination within the time prescribed, the option fee will not be refunded; however, any earnest money will be refunded to buyer. Learning Objective 9.1

Question 25

Question 25:
Under the contract between Kramer and Sweeney, what happens if Sweeney paid the option fee on May 19 if the first contract terminated on May 16 and Sweeney received notice on the same day?

Answer Choices:
A. Nothing, the option fee was paid timely
B. Sweeney does not have the unrestricted right to terminate the contract
C. Nothing because time is not of the essence under paragraph 5
D. None of these

Answer 25

Correct Answer: B. Sweeney does not have the unrestricted right to terminate the contract

Response Feedback:
The answer is Sweeney does not have the unrestricted right to terminate the contract. Under the terms of the contract, Sweeney had to pay the option fee within three days of the effective date, or by May 18, so he lost the right to terminate under the option paragraph. Learning Objective 9.3

Question 26

Question 27:
Under the Seller Financing Addendum to the contract from Johnson to Swanson, how long does Johnson have to terminate if Swanson fails to deliver his credit report in five days?

Answer Choices:
A. Within 10 days after expiration of the time for delivery
B. Within 7 days after expiration of the time for delivery
C. Within 7 days after the effective date
D. Within 10 days after the effective date

Answer 26

Correct Answer: B. Within 7 days after expiration of the time for delivery

Response Feedback:
The answer is within 7 days after expiration of the time for delivery. If the credit documentation described in Paragraph A is not delivered within the specified time, seller may terminate this contract by notice to buyer within 7 days after expiration of the time for delivery. Learning Objective 9.2

Question 27

Question 26:
Under paragraph 7B of the contract from Fleming to Donaldson, how long does Donaldson have to terminate the contract after reviewing the seller’s disclosure notice?

Answer Choices:
A. Donaldson may not terminate under this paragraph
B. 7 days
C. 10 days
D. 3 days before closing

Answer 27

Correct Answer: A. Donaldson may not terminate under this paragraph

Response Feedback:
The answer is Donaldson may not terminate under this paragraph. Because Donaldson has already received the seller’s disclosure notice, he cannot terminate under paragraph 7B. Learning Objective 9.1

Question 28

Question 28:
Under the Seller Financing Addendum to the contract from Johnson to Swanson, what happens to the earnest money if Swanson timely delivers his credit report but Johnson determines that Swanson’s credit is unacceptable and Johnson terminates?

Answer Choices:
A. The earnest money will be paid to Johnson.
B. The earnest money will be paid to Swanson.
C. The earnest money will be paid to Secure Title.
D. The earnest money will be split between Swanson and Johnson.

Answer 28

Correct Answer: B. The earnest money will be paid to Swanson.

Response Feedback:
The answer is the earnest money will be paid to Swanson. If the credit documentation is timely delivered, and seller determines in seller’s sole discretion that buyer’s credit is unacceptable, seller may terminate this contract by notice to buyer within seven days after expiration of the time for delivery and the earnest money will be refunded to buyer. Learning Objective 9.2

Question 29

Question 29:
Under the contract between Kramer and Sweeney, Sweeney gets buyer’s remorse. On May 19, what are Sweeney’s options?

Answer Choices:
A. Sweeney cannot terminate until May 20.
B. Sweeney cannot terminate until the first contract terminates.
C. Sweeney may terminate under the option paragraph and the earnest money will be refunded to Sweeney.
D. Sweeney can terminate, but will forfeit the earnest money.

Answer 29

Correct Answer: C. Sweeney may terminate under the option paragraph and the earnest money will be refunded to Sweeney.

Response Feedback:
The answer is Sweeney may terminate under the option paragraph and the earnest money will be refunded to Sweeney. The time for giving notice of termination begins on the effective date of the back-up contract, continues after the amended effective date and ends upon the expiration of buyer’s unrestricted right to terminate the back-up contract. Learning Objective 9.3

Question 30

Question 30:
Why is the interest rate of the ARM addressed in paragraph 11 under the contract from Fleming to Donaldson?

Answer Choices:
A. Because the financing addendum does not address the ARM specifics
B. Because TREC rules require it
C. Because the broker wants it there
D. Because HUD regulations require it

Answer 30

Correct Answer: A. Because the financing addendum does not address the ARM specifics

Response Feedback:
The answer is because the financing addendum does not address the ARM specifics. The other answers are wrong. Learning Objective 9.1

Question 31

Question 31:
Under the Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller’s VA Entitlement attached to the contract between Kramer and Sweeney, how long must the parties wait for Deep Pockets to release Kramer from liability on the loan to be assumed by Sweeney?

Answer Choices:
A. Three days after the effective date
B. Until the closing date
C. Until the end of the option period
D. By the amended effective date

Answer 31

Correct Answer: B. Until the closing date

Response Feedback:
The answer is until the closing date. If any release of liability has not been approved by the closing date, the contract will terminate, and the earnest money will be refunded to the buyer. Learning Objective 9.3

Question 32

Question 32:
Under the Environmental Assessment, Threatened or Endangered Species, and Wetlands Addendum attached to the contract from Johnson to Swanson, how long does Swanson have to get an environmental assessment?

Answer Choices:
A. 10 days
B. 15 days
C. 3 days
D. 7 days

Answer 32

Correct Answer: A. 10 days

Response Feedback:
The answer is 10 days. Within 10 days after the effective date of the contract, the buyer may terminate the contract by furnishing the seller a copy of any report that adversely affects the use of the property and a notice of termination. Learning Objective 9.2

Question 33

Question 33:
What happens if cable TV services are not available under the contract from Johnson to Swanson?

Answer Choices:
A. The contract will automatically terminate.
B. Swanson may terminate the contract.
C. Swanson must object within 10 days of receiving the documentation.
D. Johnson may terminate the contract.

Answer 33

Correct Answer: C. Swanson must object within 10 days of receiving the documentation.

Response Feedback:
The answer is Swanson must object within 10 days of receiving the documentation. Within 15 days after he receives the objections, Johnson can ensure that cable TV can be installed, and the closing date will be extended as necessary. Learning Objective 9.2

Question 34

Question 34:
Under the contract between Kramer and Sweeney, Deep Pocket Mortgage does not consent to the assumption of Kramer’s loan. What are Kramer’s options?

Answer Choices:
A. Kramer may extend closing by three days.
B. Kramer may terminate but Sweeney is refunded the earnest money.
C. Kramer may terminate and get the earnest money.
D. Kramer may terminate and Buyer’s Choice Title keeps the earnest money.

Answer 34

Correct Answer: B. Kramer may terminate but Sweeney is refunded the earnest money.

Response Feedback:
The answer is Kramer may terminate but Sweeney is refunded the earnest money. If the noteholder fails to consent to the assumption of the loan, either seller or buyer may terminate this contract by notice to the other party, and the earnest money will be refunded to the buyer. Learning Objective 9.3

Question 34

Question 35:
What type of loan are the Donaldsons applying for under the contract from Fleming to Donaldson?

Answer Choices:
A. A reverse mortgage
B. Seller financing
C. An adjustable rate mortgage
D. An assumption of Fleming’s mortgage

Answer 34

Correct Answer: C. An adjustable rate mortgage

Response Feedback:
The answer is an adjustable rate mortgage. They can get an adjustable rate mortgage, fixed for one year, at 5% on conventional financing. Learning Objective 9.1

Question 35

Question 36:
According to Addendum for Coastal Area Property attached to the contract between Kramer and Sweeney, who owns tidally influenced submerged lands that adjoin beach property?

Answer Choices:
A. The federal government
B. The state of Texas
C. The county in which the property is located
D. The government of Mexico

Answer 35

Correct Answer: B. The state of Texas

Response Feedback:
The answer is the state of Texas. The real property described in and subject to the contract adjoins and shares a common boundary with the tidally influenced submerged lands of the state of Texas. Learning Objective 9.3

Question 36

Question 37:
Under the lead-based paint addendum to the contract from Fleming to Donaldson, how long does Donaldson have to terminate the contract if lead paint is present?

Answer Choices:
A. 14 days
B. 10 days
C. 15 days
D. 3 days

Answer 36

Correct Answer: A. 14 days

Response Feedback:
The answer is 14 days. If lead-based paint or lead-based paint hazards are present, the buyer may terminate this contract by giving the seller written notice within 14 days after the effective date of the contract, and the earnest money will be refunded to the buyer. Learning Objective 9.1

Question 37

Question 38:
Where is the current interest rate of the assumed loan referenced in the contract and attached addenda between Kramer and Sweeney?

Answer Choices:
A. In paragraph 3 of the contract
B. In the Loan Assumption Addendum
C. In the Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller’s VA Entitlement
D. The interest rate is not referenced

Answer 37

Correct Answer: D. The interest rate is not referenced

Response Feedback:
The answer is the interest rate is not referenced. The Loan Assumption Addendum references the maximum interest rate that the lender can increase the loan by and still bind Sweeney to the contract. Learning Objective 9.3

Question 38

Question 39:
Under the contract from Fleming to Donaldson, who holds the earnest money?

Answer Choices:
A. ABC Title
B. I Sell More Properties
C. Wonderful Properties
D. Fleming

Answer 38

Correct Answer: A. ABC Title

Response Feedback:
The answer is ABC Title. Learning Objective 9.1

Question 39

Question 40:
Under the Seller Financing Addendum to the contract from Johnson to Swanson, for how many years can Swanson continuously rent the property without having the due-on-sale clause kick in?

Answer Choices:
A. One
B. Two
C. Three
D. There is no limit

Answer 39

Correct Answer: C. Three

Response Feedback:
The answer is three. If the property is leased for a period longer than three years without the seller’s prior written consent, the seller may declare the balance of the note to be immediately due and payable. Learning Objective 9.2

Question 40

Question 41:
Who is responsible for choosing the residential service contract under the contract from Fleming to Donaldson?

Answer Choices:
A. Fleming
B. Donaldson
C. ABC Title
D. Donaldson’s lender

Answer 40

Correct Answer: B. Donaldson

Response Feedback:
The answer is Donaldson. The remaining answers are incorrect. Learning Objective 9.1

Question 41

Question 43:
Under the contract from Fleming to Donaldson, who holds the option fee?

Answer Choices:
A. ABC Title
B. I Sell More Properties
C. Wonderful Properties
D. Fleming

Answer 41

Correct Answer: D. Fleming

Response Feedback:
The answer is Fleming. Learning Objective 9.1

Question 41

Question 42:
Under the contract between Kramer and Sweeney, Deep Pocket Mortgage decides to charge an assumption fee of $3,000. What are Sweeney’s options under the Loan Assumption Addendum?

Answer Choices:
A. May terminate even if Kramer refuses to pay the amount in excess of 1% of the loan amount
B. May terminate if Kramer refuses to pay the amount in excess of 1% of the loan amount
C. Must pay the amount in excess of 1% of the loan amount
D. May extend the closing date by 21 days to pay the amount in excess of 1% of the loan amount

Answer 41

Correct Answer: B. May terminate if Kramer refuses to pay the amount in excess of 1% of the loan amount

Response Feedback:
The answer is may terminate if Kramer refuses to pay the amount in excess of 1% of the loan amount. Buyer may terminate this contract and the earnest money will be refunded to the buyer if the noteholder requires payment of an assumption fee in excess of 1% of the loan amount and the seller declines to pay such excess. Learning Objective 9.3

Question 42

Question 44:
Under the contract between Kramer and Sweeney, what happens if Kramer and Wright amend the first contract?

Answer Choices:
A. An amendment of the first contract automatically terminates it.
B. An amendment of the first contract does not terminate it.
C. An amendment of the first contract automatically terminates the back-up contract.
D. An amendment of the first contract terminates both contracts.

Answer 42

Correct Answer: B. An amendment of the first contract does not terminate it.

Response Feedback:
The answer is an amendment of the first contract does not terminate it. An amendment of the first contract does not terminate it and the second contract remains a back-up until it terminates under paragraph B of the back-up addendum. Learning Objective 9.3

Question 43

Question 45:
Under the Seller Financing Addendum to the contract from Johnson to Swanson, what happens to the earnest money if Johnson terminates after Swanson fails to deliver his credit report in five days?

Answer Choices:
A. The earnest money will be paid to Swanson.
B. The earnest money will be paid to Secure Title.
C. The earnest money will be split between Swanson and Johnson.
D. The earnest money will be paid to Johnson.

Answer 43

Correct Answer: D. The earnest money will be paid to Johnson.

Response Feedback:
The answer is the earnest money will be paid to Johnson. If the credit documentation described in paragraph A is not delivered within the specified time, the seller may terminate this contract by notice to the buyer within seven days after expiration of the time for delivery, and the earnest money will be paid to the seller. Learning Objective 9.2

Question 44

Question 46:
Under the Environmental Assessment, Threatened or Endangered Species, and Wetlands Addendum attached to the contract from Johnson to Swanson, who gets the earnest money if Swanson timely terminates based on the environmental assessment?

Answer Choices:
A. Johnson
B. Swanson
C. Johnson and Swanson split the earnest money
D. Secure Title

Answer 44

Correct Answer: B. Swanson

Response Feedback:
The answer is Swanson. Buyer may terminate the contract by furnishing the seller a copy of any report noted above that adversely affects the use of the property and a notice of termination of the contract. Upon termination, the earnest money will be refunded to the buyer. Learning Objective 9.2

Question 45

Question 47:
Under the Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller’s VA Entitlement attached to the contract between Kramer and Sweeney, what happens if Deep Pockets fails to release Kramer from liability on the loan to be assumed by Sweeney by the closing date?

Answer Choices:
A. The contract will terminate and the earnest money will be paid to Kramer.
B. The closing date will be automatically extended up to 15 days.
C. The contract will terminate and the earnest money will be refunded to Sweeney.
D. The closing date will be changed to the amended closing date.

Answer 45

Correct Answer: C. The contract will terminate and the earnest money will be refunded to Sweeney.

Response Feedback:
The answer is the contract will terminate and the earnest money will be refunded to Sweeney. If any release of liability has not been approved by the closing date, the contract will terminate and the earnest money will be refunded to the buyer. Learning Objective 9.3

Question 46

Question 48:
Under the Seller Financing Addendum to the contract from Johnson to Swanson, what is the due on sale clause?

Answer Choices:
A. A provision that requires Johnson’s consent if Swanson decides to sell the property
B. A provision that requires full payment if Swanson’s payments are late
C. A provision that requires Swanson to pay an 18% penalty if he sells the property
D. A provision that requires Swanson to pay an 18% penalty if he leases the property

Answer 46

Correct Answer: A. A provision that requires Johnson’s consent if Swanson decides to sell the property

Response Feedback:
The answer is a provision that requires Johnson’s consent if Swanson decides to sell the property. The remaining answers are incorrect. Learning Objective 9.2

Question 47

Question 49:
What is PMI?

Answer Choices:
A. Personal Mortgage Insurance
B. Permissive Mortgage Insurance
C. Private Mortgage Insurance
D. Private Mutual Insurance

Answer 47

Correct Answer: C. Private Mortgage Insurance

Response Feedback:
The answer is Private Mortgage Insurance. It is the insurance that the borrower must acquire to protect the interest of the lender in the event of borrower default on a greater than 80% LTV-ratio conventional loan. Learning Objective 9.1

Question 47

Question 50:
Under the Seller Financing Addendum to the contract from Johnson to Swanson, what does “escrow not required” mean?

Answer Choices:
A. Swanson is required to pay Johnson estimated monthly taxes and insurance.
B. Swanson is not required to pay Johnson estimated monthly taxes and insurance.
C. Swanson is required to pay Johnson estimated annual taxes and insurance.
D. Johnson is required to pay Swanson estimated monthly taxes and insurance.

Answer 47

Correct Answer: B. Swanson is not required to pay Johnson estimated monthly taxes and insurance.

Response Feedback:
The answer is Swanson is not required to pay Johnson estimated monthly taxes and insurance. Swanson is only required to provide Johnson paid tax receipts by February 1 of each year the loan is outstanding. Learning Objective 9.2

Question 48

Question 51:
Under the contract from Fleming to Donaldson, who gets the option fee if the Donaldsons timely terminate the contract under paragraph 5?

Answer Choices:
A. The Donaldsons
B. ABC Title
C. The Flemings
D. I Sell More Properties

Answer 48

Correct Answer: C. The Flemings

Response Feedback:
The answer is the Flemings. If the buyer gives notice of termination within the time prescribed, the option fee will not be refunded; however, any earnest money will be refunded to the buyer. Learning Objective 9.1

Question 49

Question 52:
Under the contract from Johnson to Swanson, what happens if, within 15 days after he receives Swanson’s objections, Johnson cannot ensure that cable TV can be installed?

Answer Choices:
A. The contract will terminate and the earnest money will be refunded to Swanson unless Johnson waives the objections.
B. The contract will terminate and the earnest money will be refunded to Swanson unless Swanson waives the objections.
C. The contract will terminate and the earnest money will be paid to Johnson unless Swanson waives the objections.
D. The contract will terminate and the earnest money will be split between Swanson and Johnson unless Swanson waives the objections.

Answer 49

Correct Answer: B. The contract will terminate and the earnest money will be refunded to Swanson unless Swanson waives the objections.

Response Feedback:
The answer is the contract will terminate and the earnest money will be refunded to Swanson unless Swanson waives the objections. If objections are not cured within such a 15-day period, the contract will terminate, and the earnest money will be refunded to the buyer unless the buyer waives the objections. Learning Objective 9.2

Question 50

Question 53:
Under the contract between Kramer and Sweeney, when is Sweeney required to pay the option fee?

Answer Choices:
A. On the amended effective date of the contract
B. Within three days of the effective date of the contract
C. When the first contract between Kramer and Wright terminates
D. At the end of the option period of the contract between Kramer and Wright

Answer 50

Correct Answer: B. Within three days of the effective date of the contract

Response Feedback:
The answer is within three days of the effective date of the contract. The termination and option periods of the first contract are not relevant to determine when the option fee is due. Learning Objective 9.3

Question 51

Question 54:
Under the lead-based paint addendum to the contract from Fleming to Donaldson, how long does Donaldson have to keep the addendum?

Answer Choices:
A. Five years
B. Seven years
C. Three years
D. One year

Answer 51

Correct Answer: C. Three years

Response Feedback:
The answer is three years. The buyer must retain a completed copy of the addendum for at least three years following the sale. Learning Objective 9.1

Question 52

Question 55:
Under the contract between Kramer and Sweeney, what is the amended effective date if the first contract between Kramer and Wright terminates on May 16, and Sweeney receives the notice on May 17?

Answer Choices:
A. May 15
B. May 17
C. May 5
D. May 20

Answer 52

Correct Answer: B. May 17

Response Feedback:
The answer is May 17. As stated in the contract, “For purposes of performance, the effective date of the Back-Up Contract changes to the date Buyer receives notice of termination of the First Contract (Amended Effective Date).” Learning Objective 9.3

Question 53

Question 56:
Under the contract between Kramer and Sweeney, Sweeney gets a home inspection on May 25 and learns that the microwave is not working properly in the unit. Assuming that the first contract terminated and the amended effective date is May 17, Sweeney wants to amend the contract to have all the kitchen appliances replaced before closing. What are Sweeney’s options?

Answer Choices:
A. Sweeney may not attempt to amend the contract because the option period ended on May 20.
B. Sweeney may not attempt to amend the contract because the option period ended on May 24.
C. Sweeney may attempt to amend the contract because the option period ends on May 27.
D. Sweeney may attempt to amend the contract because time is not of the essence under the option paragraph.

Answer 53

Correct Answer: B. Sweeney may not attempt to amend the contract because the option period ended on May 24.

Response Feedback:
The answer is Sweeney may not attempt to amend the contract because the option period ended on May 24. Because the amended effective date is May 17, Sweeney had seven days to get an inspection and had until May 24 to terminate or amend the contract. Learning Objective 9.3

Question 54

Question 57:
What is the initial interest rate of the ARM under the contract from Fleming to Donaldson?

Answer Choices:
A. 2%
B. 1%
C. 5%
D. 4%

Answer 54

Correct Answer: C. 5%

Response Feedback:
The answer is 5%. They can get an adjustable-rate mortgage, fixed for one year, at 5% on conventional financing. The lender has told them the interest rate on the loan cannot adjust for more than 2% a year or 5% over the life of the loan. Learning Objective 9.1

Question 55

Question 58:
Under the contract from Johnson to Swanson, what type of financing will Swanson have?

Answer Choices:
A. Third-party financing
B. Seller financing
C. Assumption of Johnson’s mortgage
D. Reverse mortgage

Answer 55

Correct Answer: B. Seller financing

Response Feedback:
The answer is seller financing. They are willing to pay $73,500 for it if the owner, Samuel A. Johnson, a bachelor, will owner-finance $25,000 for five years at 5% annual interest. Learning Objective 9.2

Question 56

Question 60:
Under the Seller Financing Addendum to the contract from Johnson to Swanson, what happens if Swanson timely delivers his credit report but Johnson does not terminate within seven days after expiration of the time for delivery?

Answer Choices:
A. Johnson will be deemed to have approved Swanson’s credit.
B. Johnson may terminate within three more days.
C. The contract is void.
D. Johnson may still terminate within the option period.

Answer 56

Correct Answer: A. Johnson will be deemed to have approved Swanson’s credit.

Response Feedback:
The answer is Johnson will be deemed to have approved Swanson’s credit. If the seller does not terminate this contract, the seller will be deemed to have approved the buyer’s creditworthiness. Learning Objective 9.2

Question 56

Question 59:
Under the Loan Assumption Addendum attached to the contract between Kramer and Sweeney, what happens if the total loan balance is $265,658?

Answer Choices:
A. Only Kramer may terminate, and Sweeney is refunded the earnest money.
B. Only Sweeney may terminate, and Kramer receives the earnest money.
C. Nothing, the loan balance may vary by up to 1% of the total loan.
D. Either Sweeney or Kramer may terminate unless the other party pays the excess amount.

Answer 56

Correct Answer: D. Either Sweeney or Kramer may terminate unless the other party pays the excess amount.

Response Feedback:
The answer is either Sweeney or Kramer may terminate unless the other party pays the excess amount. If the total principal balance of all assumed loans varies in an amount greater than $500 at closing, either party may terminate this contract, and the earnest money will be refunded to the buyer unless the other party elects to pay the excess of the variance. Learning Objective 9.3

Question 57

Question 61:
In the Kramer to Sweeney transaction, the lender will charge a 1-point assumption fee ($2,650). Where is this indicated in the contract or addenda to the contract?

Answer Choices:
A. Paragraph 3B of the One to Four Family Residential Contract
B. Paragraph 3C of the One to Four Family Residential Contract
C. Paragraph C of the Loan Assumption Addendum
D. Paragraph D of the Loan Assumption Addendum

Answer 57

Correct Answer: D. Paragraph D of the Loan Assumption Addendum

Response Feedback:
The answer is Paragraph D of the Loan Assumption Addendum. Specifically, it is indicated in Paragraph D(1). Learning Objective 9.3

Question 58

Question 62:
According to the lead-based paint addendum to the contract from Fleming to Donaldson, Donaldson has

Answer Choices:
A. 21 days to get a lead paint inspection done.
B. 14 days to get a lead paint inspection done.
C. 10 days to get a lead paint inspection done.
D. 7 days to get a lead paint inspection done.

Answer 58

Correct Answer: C. 10 days to get a lead paint inspection done.

Response Feedback:
The answer is 10 days to get a lead paint inspection done. Within 10 days after the effective date of this contract, buyer may have the property inspected by inspectors selected by buyer. Learning Objective 9.1

Question 59

Question 63:
Under the contract from Johnson to Swanson, if the closing date is June 27, what is the effective date?

Answer Choices:
A. June 11
B. June 13
C. May 27
D. June 12

Answer 59

Correct Answer: D. June 12

Response Feedback:
The answer is June 12. They will close on or before June 27, which is 15 days from the effective date of the contract. Learning Objective 9.2