contracts

Question 1

Valid

Answer 1

MEETS ALL THE REQUIREMENTS OF LAW

Question 2

Void

Answer 2

IS INVALID FROM THE START, SUCH AS A CONTRACT FOR SOME ILLEGAL ACT

Question 3

Voidable

Answer 3

NOT ENFORCEABLE AGAINST A PARTY

Question 4

Unenforceable

Answer 4

HAS A FLAW AND CANNOT BE ENFORCED, TOO MUCH TIME HAS ELAPSED OR OTHER ISSUES THAT MAKE IT UNENFORCEABLE

Question 5

Acceptance

Answer 5

WILL SOMETIMES BE REFERRED TO AS MUTUAL CONSENT, MUTUAL ASSENT OR THE MEETING OF THE MINDS.

Question 6

Consideration

Answer 6

IS SOMETHING OF VALUE GIVEN IN EXCHANGE FOR A PROMISE. IT DOES NOT HAVE TO BE MONEY AND IT IS DEFINITELY NOT THE EARNEST MONEY BECAUSE EARNEST MONEY IS NOT A REQUIREMENT TO HAVE A VALID CONTRACT

Question 7

CONTRACTS ARE REFERRED TO AS EXECUTORY CONTRACTS ONCE THEY

Answer 7

HAVE BEEN SIGNED BY ALL PARTIES AND IT HAS BEEN COMMUNICATED TO ALL PARTIES. IT WILL BE CALLED AN EXECUTORY CONTRACT UNTIL IT GOES TO CLOSING WHERE IT SHOULD BE FINALIZED OR FULLY EXECUTED.

Question 8

UNILATERAL CONTRACTS

Answer 8

LACK MUTUALITY AND AN OPTION CONTRACT IS A GOOD EXAMPLE OF A UNILATERAL CONTRACT. IN THIS CONTRACT THE SELLER HAS GIVEN THE BUYER THE RIGHT TO PURCHASE THE PROPERTY AT A PRESET PRICE AND TERMS FOR A PERIOD OF TIME. THE BUYER HAS PAID THE SELLER SOME CONSIDERATION UP FRONT, USUALLY IN THE FORM OF AN OPTION FEE.

Question 9

AMENDMENTS ARE USED TO

Answer 9

CHANGE SOME OF THE ORIGINAL PROVISIONS IN A CONTRACT FORM. COMMON EXAMPLES ARE:
TO CHANGE THE SALES PRICE, CHANGE THE CLOSING DATE, REQUEST REPAIRS OR TO REMOVE SOME CONTINGENCY

Question 10

AN ADDENDUM IS AN

Answer 10

ATTACHMENT THAT ADDS FURTHER LANGUAGE OR FURTHER CLARIFIES PREPRINTED CONTRACT LANGUAGE. A GOOD EXAMPLE WOULD BE THE THIRD PARTY FINANCING ADDENDUM TO EXPLAIN THE DETAILS OF THE FINANCING.

Question 11

IF THE LANGUAGE ON THE ADDENDUM CONTRADICTS THE LANGUAGE IN THE CONTRACT FORM

Answer 11

THE ADDENDUM PREVAILS.

Question 12

ADDENDUM =

Answer 12

Singular

Question 13

ADDENDA =

Answer 13

Plural

Question 14

KNOW THE STATUTE OF LIMITATION FOR FILING A LAWSUIT UNDER A CONTRACT IS

Answer 14

4 YEAR ON WRITTEN CONTRACTS AND 2 YEARS ON ORAL CONTRACTS IN TEXAS. FAILURE TO FILE WITHIN THAT TIMEFRAME WILL MEAN YOU LOSE YOUR RIGHTS TO FILE A LAWSUIT BASED ON THE DOCTRINE OF LACHES.

Question 15

KNOW WHAT IS MEANT BY A SELLER CONTRIBUTION OR CONCESSION

Answer 15

SUCH AS AN AGREEMENT FOR THE SELLER TO PAY PART OF THE BUYER’S CLOSING COSTS, PROVIDE A HOME WARRANTY, ETC.

Question 16

Know

Answer 16

KNOW THAT THE PARTIES TO THE CONTRACT ARE THE BUYERS AND THE SELLERS, AND ALSO THAT THE PROPERTY INCLUDES THE LAND, IMPROVEMENTS AND ACCESSORIES. IMPROVEMENTS ARE MAN MADE ADDITIONS TO THE PROPERTY THAT ARE PERMANENTLY INSTALLED OR BUILT-IN ITEMS

Question 17

YOU MAY NEED TO KNOW

Answer 17

THAT ANY TYPE OF EXISTING LEASE, SUCH AS RESIDENTIAL, FIXTURE LEASES AND NATURAL RESOURCE LEASES. THERE ARE ADDENDA TO USE FOR RESIDENTIAL LEASES AND FIXTURE LEASES THAT APPLY TO THE SALE.

Question 18

THIRD PARTY FINANCING INCLUDES

Answer 18

BOTH GOVERNMENT LOANS AND CONVENTIONAL LOANS AND THE LOAN PROGRAM BEING USED BY THE BUYER SHOULD BE EXPLAINED ON THE THIRD PARTY FINANCING ADDENDUM. THIRD PARTY FINANCING IS THE MOST COMMONLY USED TYPE OF FINANCING, BUT IT IS NOT TO BE USED FOR SELLER FINANCING OR AN ASSUMPTION OF AN EXISTING LOAN.

Question 19

BUYER APPROVAL IS DEEMED TO HAVE BEEN OPTAINED WHEN

Answer 19

THE TERMS OF THE LOAN IN THE ADDENDUM ARE AVAILABLE AND THE BUYER HAS SATISFIED ALL THE LENDER’S REQUIREMENTS REGARDING THE BUYER’S ASSETS, INCOME AND CREDIT HISTORY.

Question 20

EARNEST MONEY

Answer 20

MUST BE DELIVERED TO THE ESCROW AGENT WITHIN 3 DAYS AFTER THE EFFECTIVE DATE OF THE CONTRACT.
EARNEST MONEY IS NOT A REQUIREMENT TO HAVE A VALID CONTRACT SO THE DOLLAR AMOUNT OF EARNEST IS ALWAYS NEGOTIABLE BETWEEN THE PARTIES. IT CAN BE IN THE RANGE OF 1% OF THE PURCHASE PRICE. TECHNICALLY IT IS AN UPFRONT DEPOSIT PAID BY THE BUYER TO SHOW THEY ARE SERIOUS ABOUT COMPLETING THE PURCHASE.

Question 21

TERMINATION OPTION

Answer 21

PAID DIRECTLY TO THE ESCROW AGENT, OR TITLE COMPANY, ALONG WITH THE EARNEST MONEY. IT IS NOT A REQUIREMENT FOR THE CONTRACT, BUT WHEN AGREED UPON AND PAID WITHIN 3 DAYS OF THE EFFECTIVE DATE, IT GIVES THE BUYER THE UNRESTRCTED RIGHT TO TERMINATE WITHIN A NEGOTIATED NUMBER OF DAYS. THIS IS TYPICALLY WHEN THE BUYER WILL DO THEIR INSPECTIONS. ANY NOTICE OF TERMINATION MUST BE IN WRITING AND DELIVERED TO THE SELLER NO LATER THAN 5:00 PM ON THE FINAL DAY OF THE OPTION PERIOD AS DETERMINED BY THE EFFECTIVE DATE AND # OF OPTION PERIOD DAYS NEGOTIATED.

Question 22

TO CREATE A VALID OPTION

Answer 22

THE APPROPRIATE BLANKS IN PARAGRAPH 5 (A. & B) MUST BE FILLED IN, 2) THE OPTION FEE MUST HAVE BEEN PAID WITHIN 3 DAYS OF THE EFFECTIVE DATE OF THE CONTRACT, AND 3) THE OPTION FEE MUST HAVE BEEN DELIVERED TO THE ESCROW AGENT.

Question 23

KNOW THAT THE PREMIUMS ARE SET BY THE

Answer 23

TEXAS DEPARTMENT OF INSURANCE, WHO ALSO HAS PROMULGATED 9 EXCEPTIONS TO COVERAGE BY THE TITLE POLICY.

Question 24

A STANDARD TEXAS TITLE INSURANCE POLICY DOES NOT

Answer 24

INSURE AGAINST BOUNDARY ISSUES BUT SOMETIMES A LENDER REQUIRES THAT THE LANGUAGE BE AMENDED TO JUST READ SHORTAGES IN AREA. AN ENDORSEMENT TO THE STANDARD POLICY IS DONE TO MAKE THAT CHANGE.

Question 25

IN TEXAS, THE TITLE COMPANY HAS

Answer 25

20 DAYS AFTER RECEIPT OF A CONTRACT TO ISSUE A COMMITMENT FOR TITLE INSURANCE

Question 26

IF THE EXISTING SURVEY IS NOT ACCEPTABLE TO EITHER THE BUYER’S LENDER OR THE TITLE COMPANY

Answer 26

A NEW SURVEY WILL BE OBTAINED AT EITHER THE BUYER’S OR SELLER’S EXPENSE AS NEGOTIATED IN THE CONTRACT.

Question 27

THE OBJECTIONS PARAGRAPH IS WHERE THE AGENT WOULD LIST

Answer 27

ACTIVITIES THE BUYER INTENDS TO USE THE PROPERTY FOR, OTHER THAN RESIDENTIAL USE

Question 28

IF THE SURVEY, COMMITMENT OR EXCEPTION DOCUMENTS SHOW DEFECTS OR ENCUMBRANCES TO THOSE USES OR ACTIVITIES,

Answer 28

THE BUYER CAN NOTIFY THE SELLER WITHIN _____ DAYS OF THEIR OBJECTION. IF THE SELLER CANNOT CURE THE OBJECTION WITHIN 15 DAYS, THE BUYER CAN TERMINATE OR THEY CAN WAIVE THEIR OBJECTION AND CONTINUE WITH THE PURCHASE. EXAMPLES OF SOME TYPES OF PROHIBITED USES COULD BE OPERATING A DAY CARE CENTER, PARKING AN RV IN VIEW OF THE STREET, PUTTING IN A SWIMMING POOL IN THE BACK YARD, ETC.

Question 29

IF THE PROPERTY IS LOCATED IN A CERTIFICATED SERVICE AREA OF A UTILITY SERVICE PROVIDER

Answer 29

THERE MAY BE SPECIAL COSTS THE BUYER WILL HAVE TO PAY TO GET WATER AND SEWER SERVICES, AS WELL AS A DELAY IN REVEIVING THOSE SERVICES TO GIVE TIME TO CONSTRUCT THE DELIVERY LINES TO THE PROPERTY.

Question 30

A PUBLIC IMPROVEMENT DISTRICT (PID) IS A

Answer 30

IS A SPECIAL TAXING ENTITY THAT WAS CREATED AT THE REQUEST OF THE PROPERTY OWNERS IN A GIVEN AREA.

Question 31

IN ORDER TO CREATE THE PID

Answer 31

A VOTE OF AT LEAST 51% OF THE PROPERTY OWNERS AFFECTED BY THE NEW TAX IS REQUIRED.

Question 32

BUYERS PURCHASING PROPERTY IN A PID MUST BE PROVIDED NOTICE OF

Answer 32

THE EXTRA TAX THAT IS LEVIED BY EITHER THE COUNTY OR THE CITY WHO MADE THE REQUESTED IMPROVEMENTS TO THE AREA

Question 33

WHEN USING A SELLER’S EXISTING SURVEY

Answer 33

THE SELLER HAS TO PROVIDE A COPY OF THE SURVEY AND A NOTARIZED T-47 AFFIDAVIT TO THE BUYER AND THE ESCROW AGENT WITHIN AN AGREED UPON NUMBER OF DAYS AFTER THE EFFECTIVE DATE OF THE CONTRACT.

Question 34

SELLERS ARE SUPPOSED TO PROVIDE A WRITTEN SELLER’S DISCLOSURE NOTICE TO THE BUYER DISCLOSING ANY KNOWN DEFECTS ABOUT THE PROPERTY, UNLESS

Answer 34

THEY ARE ONE OF THE 11 EXCEPTIONS TO THIS RULE.

Question 35

IN ORDER TO MAKE THE CONTRACT BINDING ON THE BUYER, THE NOTICE SHOULD BE RECEIVED BEFORE

Answer 35

THE BUYER MAKES AN OFFER TO PURCHASE THE PROPERTY

Question 36

ALL SELLERS, EVEN THOSE EXEMPT FROM FILLING OUT THE SELLER’S DISCLOSURE, ARE REQUIRED TO DISCLOSE

Answer 36

ANY KNOWN MATERIAL DEFECTS TO THE BUYER. THIS COULD INCLUDE ANY PREVIOUS FLOODING, ANY TERMITE DAMAGE OR INFESTATION, ANY STRUCTURAL ISSUES, ETC.

Question 37

FOR PROPERTIES BUILT BEFORE 1978, SELLERS MUST PROVIDE BUYERS WITH

Answer 37

A LEAD BASED PAINT DISCLOSURE FORM REQUIRED BY FEDERAL LAW.

Question 38

THE LEAD BASED PAINT DISCLOSURE FORM

Answer 38

DISCLOSES ANY KNOWLEDGE THE SELLER MAY HAVE, GIVES THE BUYER COPIES OF ANY REPORTS ON LEAD THE SELLER MAY HAVE, ALLOWS THE BUYER TO WAIVE A RISK ASSESSMENT FOR LEAD OR TO CONDUCT ONE WITH 10 DAYS AFTER THE EFFECTIVE DATE OF THE CONTRACT AS WELL AS TERMINATE WITHIN 14 DAYS IF THEY DISCOVER DANGEROUS LEVELS OF LEAD. THE BUYER MUST ACKNOWLEDGE RECEIPT OF ANY REPORTS FROM THE SELLER AND ALSO RECEIPT OF THE FEDERAL BOOKLET “PROTECT YOUR FAMILY FROM LEAD IN YOUR HOME”
DON’T FORGET YOUR SPOUSE OR KIDS

Question 39

THE CONTRACT LANGUAGE DOES NOT REQUIRE EITHER PARTY TO PAY FOR OR MAKE

Answer 39

LENDER REQUIRED REPAIRS

Question 40

IF THERE ARE ANY LENDER REQUIRED REPAIRS THAT EXCEED 5% OF THE SALES PRICE

Answer 40

THE BUYER MAY TERMINATE THE CONTRACT AND GET A REFUND OF THEIR EARNEST MONEY

Question 41

HEN A BUYER IS CONCERNED ABOUT TOXIC SUBSTANCES, ETC. THEY SHOULD ATTACH THE

Answer 41

ENVIRONMENTAL ASSESSMENT, WETLANDS AND THREATENED OR ENDANGERED SPECIES ADDENDUM THAT ALLOWS THEM TO DO TESTING FOR ANY OF THESE SITUATIONS

Question 42

KNOW THAT ALL TEXAS CONTRACTS STATE

Answer 42

THAT THE BUYER IS BUYING THE PROPERTY “AS IS”

Question 43

KNOW THAT THE LICENSE HOLDER DISCLOSURE MUST BE GIVEN ANYTIME

Answer 43

YOU ARE REPRESENTING YOURSELF, YOUR SPOUSE, YOUR CHILDREN, YOUR PARENTS, OR ANYTIME YOU REPRESENT A BUSINESS IN WHICH YOU OWN MORE THAN A 10% INTEREST IT IS COMMONLY CALLED AGENCY COUPLED WITH AN INTEREST

Question 44

LENDER REQUIRED REPAIRS USUALLY MAKE THE PROPERTY

Answer 44

UNINSURAEABLE SO THE LOAN COULD NOT CLOSE.
PROPERTY
SOMETIMES LENDER WILL NOT CLOSE UNTIL THE REPAIRS ARE COMPLETED.

Question 45

THE PURPOSE OF THE SELLER’S DISCLOSURE NOTICE IS TO HAVE THE OWNER OF THE PROPERTY

Answer 45

DISCLOSE ALL KNOWN FACTS AND/OR DEFECTS CONCERNING THE PROPERTY.

Question 46

THE ENVIRONMENTAL ADDENDUM SHOULD BE USED ANYTIME THE BUYER IS CONCERNED ABOUT

Answer 46

TOXIC SUBSTANCES ON THE PROPERTY OR THE EXISTENCE OF THREATENED/ENDANGERED SPECIES OR WETLANDS ON THE PROPERTY. THE BUYER CAN TERMINATE IF THE REPORTS THEY RECEIVE SHOW CONDITIONS THAT ADVERSELY AFFECT THEIR INTENDED USE OF THE PROPERTY.

Question 47

THE TREC FORM RSC-2 MUST BE PROVIDED TO BUYERS AND SELLERS NO LATER THAN CLOSING TO

Answer 47

DISCLOSE THAT THE BROKERAGE HAS A RELATIONSHIP WITH THE RESIDENTIAL SERVICE COMPANY CHOSEN BY THE BUYER TO PROVIDE THE HOME WARRANTY/RESIDENTIAL SERVICE PLAN. ANY FEE BEING RECEIVED BY THE BROKER MUST BE DISCLOSED ON THE FORM AS WELL AS WHAT THE BROKER DID TO EARN THE FEE

Question 48

THE RSC-2 FORM SHOULD NOT BE ATTACHED TO THE CONTRACT AS AN ADDENDUM, BUT

Answer 48

A COPY OF IT SHOULD BE RETAINED IN THE RECORDS OF THE TRANSACTION AFTER THE BUYER AND SELLER HAVE SIGNED IT. SINCE BOTH PARTIES SIGN THIS FORM, IF EITHER COMPANY HAS A RELATIONSHIP WITH AN RSC COMPANY, THEN BOTH COMPANIES SHOULD USE THE FORM. TAKE A COPY OF THE FORM WITH YOU TO CLOSING SO YOU MAKE SURE TO GET IT SIGNED.

Question 49

CLOSING IS AGREED UPON BY THE PARTIES TO BE

Answer 49

ON OR BEFORE A CERTAIN DATE

Question 50

AT CLOSING THE SELLER WILL SIGN A

Answer 50

GENERAL WARRANTY DEED TO TRANSFER TITLE TO THE BUYER

Question 51

AT CLOSING, THE BUYER WILL PAY

Answer 51

THE SALES PRICE IN GOOD FUNDS WHICH IS DEFINED TO BE A CASHIERS CHECK OR A WIRE TRANSFER TO THE ESCROW AGENT

Question 52

POSSESSION IS EITHER AT CLOSING AND FUNDING, OR PER A TEMPORARY RESIDENTIAL LEASE. BE SURE TO ATTACH

Answer 52

THE APPROPRIATE LEASE EVEN IF POSSESSION IS FOR ONLY ONE DAY BEFORE OR ONE DAY AFTER CLOSING

Question 53

THAT SPECIAL PROVISIONS IS ONLY FOR

Answer 53

FACTUAL STATEMENTS OR BUSINESS DETAILS THAT ARE NOT ADDRESSED IN THE CONTRACT OR THAT CANNOT BE COVERED IN A TREC ADDENDUM, LEASE AGREEMENT OR OTHER MANDATORY FORM.

Question 54

THE SELLER’S TEMPORARY RESIDENTIAL LEASE IS USED WHEN

Answer 54

THE SELLER IS ALLOWED TO REMAIN IN POSSESSION OF THE PROPERTY AFTER CLOSING AND FUNDING. THERE IS ALSO A TREC FORM TO USE FOR THIS PURPOSE, AND THE OCCUPANCY BY THE SELLER IS TO BE FOR NO MORE THAN 90 DAYS AFTER CLOSING.

Question 55

IF THE SELLER DEFAULTS

Answer 55

THE BUYER’S OPTIONS ARE TO ACCEPT A REFUND OF THEIR EARNEST MONEY, SEEK OTHER MONETARY DAMAGES AS AFFORDED BY LAW OR TO SUE THE SELLER FOR SPECIFIC PERFORMANCE AND FORCE THEM TO COMPLETE THE TRANSACTION AS ORIGINALLY AGREED

Question 56

THE BROKER INFORMATION PAGE ALLOWS FOR TWO TYPES OF SALES:

Answer 56

COOPERATIVE SALES AND IN-HOUSE SALES

Question 57

IN A COOPERATIVE SALE THERE ARE TWO DIFFERENT BROKERAGE COMPANIES INVOLVED IN THE SALE

Answer 57

ONE FIRM WHO LISTED THE PROPERTY AND ANOTHER FIRM WHO IS SELLING IT.

Question 58

IN AN IN-HOUSE SALE, THERE IS ONLY ONE BROKERAGE INVOLVED

Answer 58

THEY ARE HANDLING BOTH SIDES OF THE TRANSACTION

Question 59

NOTICE THERE ARE TWO SEPARATE SELLER’S DISCLOSURES

Answer 59

THE REGULAR ONE THAT DEALS WITH THE CONDITION OF THE FARMHOUSE AND ANOTHER DISCLOSURE THAT DEALS WITH ADVERSE LAND CONDITIONS THAT MUST BE DISCLOSED IN THE CONTRACT, SUCH AS WHETHER THE OTHER ACREAGE HAS FLOODED, THERE ARE WETLANDS, ETC.