Chapter 5 Flashcards
(34 cards)
License holders must use standard Contract forms when applicable.
Exceptions are: those prepared
by Attorneys from this state or any other state, or those specified by governmental agencies, property
owners, or their lawyers.
TREC has promulgated sales contract forms for most residential properties including
Farm and
Ranch. TREC has no forms for commercial transactions. TREC has no forms for the sale of Co-ops
or mobile homes.
The Broker Lawyer Committee writes
the promulgated contract forms. TREC promulgates them.
All backup offers must be presented to the seller
For a backup offer to become effective the previous
contract must be terminated and the backup buyer must pay any option fee, name any option period,
and deposit any earnest money with an escrow agent. An option fee must be paid independently of
any other consideration.
The option fee and the earnest money deposit cannot be
combined in one check.
A clause in a contract requiring a condition to be met is a contingency clause
If a contingency cannot
be met, the buyer is generally entitled to a refund of his earnest money.
If a broker has more than one offer on a listed property, he must present all offers
but there is no
required order of presentation.
Paragraph 3 –
The cash portion plus the financing = the Sales Price
Paragraph 4
Texas law requires a real estate license holder who is a party to a transaction or acting
on behalf of a spouse, parent, or child… to notify the other party in writing before entering into a
contract of sale. (Agency coupled with an interest must be disclosed)
Paragraph 5
Within 3 days after the Effective Date, BUYER must deliver earnest money to
escrow agent – Time is of the essence for this paragraph
Paragraph 6B
The title company has 20 days to provide the title commitment after they receive
the sales contract.
Paragraph 6C.(1)
Within _____ days after the Effective Date of this contract, Seller shall furnish
to Buyer and Title Company Seller’s existing survey and an Insurance T-47 Affidavit.
Paragraph 6D
allows a buyer to choose a number of days to review both the title commitment and
the survey. If the buyer is unhappy with the results of either, he has the negotiated number of days
to address his/her concerns with the seller
The purpose of a Municipal Utility District (also called a water supply corporation or a utility service
provider) is to
provide flood control or drainage, water and sewers to residents of the district.
Paragraph 6.E.(3)
Texas Water Code requires the Seller to deliver and the Buyer to sign the
M.U.D. disclosure prior to final execution of the contract. (A buyer who has not received the M.U.D.
disclosure has the right to terminate the contract.
Paragraph 6.E.(6)
If the property is located in a Certificated Service area of a Utility Service Provider
(a M.U.D.) the buyer must be given notice of this, disclosing to the buyer that there may be an
extra charge for having water and sewer services connected.
Paragraph 7.A.
Seller at Seller’s expense…..shall keep the utilities on during the time this contract
is in effect.
A Seller’s Disclosure of Property Condition must be given to
buyer BEFORE HE SIGNS AN
OFFER to make that offer binding on the buyer
Paragraph 7.B.(2)
If the buyer has not received the Seller’s Disclosure he chooses a number of days
for the Seller to provide it. If the buyer doesn’t receive it within that number of days he can terminate
the contract. If the Buyer receives the disclosure, the Buyer will have 7 days after receiving it
to terminate for any reason.
Paragraph 7.B.(3)
A seller’s disclosure is not required in a foreclosure sale, tax sale, sale by guardian,
executor, or administrator, or sale by a builder of a new home that has not been lived in. A
seller’s disclosure is not required if the house is worth less than 5% of the price of the property.
Paragraph 7.D. (1)
Buyer accepts the Property As Is.
Paragraph 7.E. -
…If lender required repairs exceed 5% of the Sale Price, Buyer may terminate the
contract and receive a refund of earnest money paid.
Paragraph 11
SPECIAL PROVISIONS – Factual statements and business details applicable to
the sale can be inserted here. It is prohibited by TREC rules to insert statements or business
details for which a contract addendum, lease or other form has been promulgated by TREC for
mandatory use.
Paragraph 15 –
Default – All TREC contracts have a default paragraph. This paragraph states that
if either party defaults, the injured party can: sue for specific performance, seek such other relief as
may be provided by law, or both, or the injured party can terminate the contract.
