The Sales Contract Part I

Question 1

Describe the process of making an offer?

Answer 1

When there is a buyer who wants to put an offer on a house, the licensee sits down with the buyer to fill out a sales contract form. When the buyer has included all details, such as financing, closing date, and other considerations on the contract form, he or she signs the document, it is delivered to the seller or listing agent, and there is an offer.

Question 2

What four options does a seller have when presented with an offer?

Answer 2

Accept it
Reject it
Counteroffer
Fail to act

Question 3

When does an offer become a contract?

Answer 3

When an offer is accepted, that acceptance is communicated to the other party, and all signatures and initials are obtained.

Question 4

When does TREC require a licensee to present an offer to a seller?

Answer 4

Immediately after receiving it

Question 5

What information is included in the price and terms provision?

Answer 5

Final price, down payment, and financing information

Question 6

What does the escrow clause in a sales contract do?

Answer 6

It provides for the custody and disbursement of the earnest money deposit, and releases the escrow agent from certain liabilities in the performance of escrow duties.

Question 7

What does a right of rescission clause set forth?

Answer 7

Buyer’s right under certain conditions to rescind the sale contract and re-claim their deposits if sellers fail to complete and deliver the property condition disclosure statement to buyers in a timely fashion. The buyer must follow certain procedures and meet certain deadlines in order to legitimately effect the cancellation.

Question 8

What does a due-on-sale clause say?

Answer 8

The parties state their understanding that loans that survive the closing may be called due by the lender. Both parties agree to hold the other party harmless for the consequences of an acceleration of the loan.

Question 9

Which paragraph of the TREC One to Four Family Residential Contract (Resale) describes the good faith money?

Answer 9

Paragraph 5 – Earnest Money

Question 10

The Sales Price, Paragraph 3.C, is calculated by adding what two numbers together?

Answer 10

Paragraph 3.C is calculated by adding 3.A (the down payment) with 3.B (the total financing amount).

Question 11

What three types of financing are mentioned in Paragraph 3?

Answer 11

Third Party Financing
Assumption
Seller Financing

Question 12

Who is typically considered the escrow agent in Paragraph 5?

Answer 12

A title company

Question 13

List 4 environmental disclosures that could accompany a contract? (See screen 25 for additional correct answers.)

Answer 13

Asbestos
Lead-based paint
Radon gas
Waste disposal sites

Question 14

What is a material defect?

Answer 14

A material defect is any defect in a specific property that could either affect a Buyer’s decision to purchase it or affect the property’s value, such as a leaking roof or the presence of termites.

Question 15

What causes of death must be disclosed?

Answer 15

Faulty electrical wiring or a gas leak that caused a death on the property along with the corrections made to eliminate the danger.
Any murder. Texas has no time limits as to the date of death, however, only known information of a murder must be disclosed.

Question 16

Why do many brokers in south Texas often advise including a Lead-paint based disclosure regardless of a property’s age?

Answer 16

There is no similar law that applies to paint manufactured in Mexico, and border areas may have homes that used paint made south of the border.

Question 17

Once a real estate professional has a buyer that wants to make an offer on a house

Answer 17

he or she sits down and goes over the contract form. There is an offer when all blanks are filled in, the buyer signs the contract, and it is delivered to the seller or listing agent.

Question 18

When presented with an offer, a seller has four options:

Answer 18

Accept it
Reject it
Counteroffer
Fail to act

The buyer has the same four options if the seller decides to counter.

Question 19

If both parties agree to all of the details of the offers and counteroffers

Answer 19

acceptance is the final step that must occur before it can be called a contract. Once all signatures and initials are obtained, it’s a contract.

Question 20

Real estate professionals should get their clients to make

Answer 20

reasonable offers and the offer-counteroffer process should be limited.

Question 21

TREC RULES

Answer 21

call for immediate presentation of all offers. A real estate licensee must never withhold an offer from the seller unless specifically requested by a seller.

Question 22

A typical residential sale contract contains the following primary provisions:

Answer 22

Parties, consideration, and property
Legal description
Price and terms
Loan approval
Ernest money deposit
Escrow
Closing and possession dates
Conveyed interest; type of deed
Title evidence
Closing cost
Damage and destruction
Default
Broker's representation and commission
Seller's representations
Residential property condition disclosure 
Right of rescission
Agent's responsibility

Question 23

Secondary provisions of a sales contract include:

Answer 23

Inspection
Owner's association disclosure
Survey
Environmental hazards
Compliance with laws
Due-on-sale clause
Seller financing disclosure
Rental property; tenants’ rights
FHA or VA financing condition
Flood plain; flood insurance
Condominium assessments
Foreign seller withholding
Tax deferred exchange
Merger of agreements.
Notices
Time is of the essence
Fax transmission
Survival
Dispute resolution
Addenda

Question 24

Addenda to the sales contract become

Answer 24

binding components of the overall agreement. The most common addendum is the seller’s property condition disclosure.

There are two

Question 25

Two Addenda

Answer 25

Paragraph 3: The sales price, including down payment and amount financed information.
Paragraph 5: The amount of earnest money the buyer is providing and where it will be held.

Question 26

Always use dollar amounts in the form blanks

Answer 26

never use percentages

Question 27

A Seller of real property in Texas, a real estate Broker and their Associates must

Answer 27

disclose to prospective Buyers any known material defect in the property.

Question 28

Texas Legislature passed a

Answer 28

“mandatory Seller disclosure law”, requiring owners to fill out a Seller’s Disclosure of Property Condition.

Question 29

This obligation to disclose also includes

Answer 29

environmental hazards that may affect future occupants. One common environmental disclosure is Lead-based paint.