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**Champions-Law of Contracts Course Exam** November 2018

Terms in this set (71)

In a residential lease with a "right of first refusal" provision:
The tenant has the right to match or better any offer the landlord receives to prevent the property from being sold to someone else
The four ECONOMIC characteristics of land are:
1) Scarcity
2) Modification
3) Situs
4) Fixity

GIVES LAND ITS VALUE
The Buyer and Seller Temporary Residential Lease forms may be used for a lease period not to exceed:
90 days
A contract that is said to lack mutuality because only one party is obligated to perform is a________ contract.
Unilateral Contract
At closing, the contract is:
fully executed
According to the Deceptive Trade Practices Act (DTPA), brokerage falls under the category of ________.
Services
The five essential elements of a valid and enforceable contract are:
COLIC
1. Component parties
2. Offer and acceptance
3. Legal purpose
4. In writing
5. Consideration
________ law is a body of law based on "common sense" and local custom.
Common Law
Which kind of rights extend above the surface of property without limitation?
Air rights
A(n) ________ occurs when a new contract is substituted for an existing one.
Novation
A(n) ________ is a business venture that is owned by one individual.
Sole proprietorship
A(n) __________ is an agreement between two or more parties to do something or to refrain from doing something.
Contract
3 physical characteristics of land
1. non-homogeneity
2. immobility
3. indestructibility
Jake (Seller) and Sarah (Buyer) entered into a contract for the sale of Jake's personal residence. In the contract, Jake promised to deliver a seller's disclosure of property condition within 5 days of the effective date of the contract. Jake never delivered the disclosure as promised. Which of the following statements is true?
Sarah has the right to terminate the contract and receive a refund of earnest money prior to closing (Page 24)
Owners within a __________________ do not actually own a specific unit. The entire cooperative complex is
owned by a corporation. Those who wish to live in the cooperative buy shares in the corporation, and
receive a proprietary lease on the unit. When listing and selling cooperatives, a real estate license is often
not required because the sale of a cooperative is the sale of stock rather than real property.
Cooperative
4 rights government has in all real property: PETE
1. police power
2. eminent domain
3. taxation
4. escheat
________ is the right of the government to regulate and control the way land is used.
Police Power
If property violates zoning, the owners must request a __________, which is permission to violate the rules.
Variance
A claim, lien, charge, or liability attached to and binding real property is a(n) ________.
Encumbrance
A seller of coastal property abutting tidally influenced water must provide the ________.
Notice Regarding Coastal Area Property
The Lead-Based Paint Disclosure is:
A federal requirement for residential property built prior to 1978
An example(s) of an appurtenance would be:
Easement
When an individual owns real property, he or she is said to have a (n) __________ in that property.
Freehold estate
The four major types of listing agreements are, exclusive agency, net listing, exclusive right to sell and __________.
Open listing

*Know that with a NET LISTING, the real estate broker's commission is the difference between the minimum net established by the seller and the price that the buyer is willing to pay.
The four categories of leasehold estates are: estate for years, tenancy at sufferance, tenancy at will and ________.
Periodic tenancy or periodic estate
If a broker receives more than one offer on a property:
All must be presented to the seller unless the seller has instructed the broker otherwise; no offer has priority of presentation over another
The person to whom an offer is made has several options when responding to the offer, which
include:
1. Do nothing
2. Reject
3. Accept
4. Counteroffer
An offer by a prospective purchaser can be terminated prior to acceptance due to:
expiration of a specified time period, bankruptcy of either party, a change in the law that renders the contract illegal
When a party is considering consulting an attorney for advice in a transaction an agent should:
Never discourage a party from consulting an attorney for advice in a transaction
The most common form of financing used by buyers is:
Third party financing such as a mortgage company or bank; In Texas, financing info. is now a separate addenda
___________________ is deposited in an escrow account when the contract is signed by all parties and acceptance is
communicated.
Earnest money
License holders should ensure that any _____________ ______________ added to a contract are factual statements that do not change the legal effect of the contact
Special Provisions
Acts of the parties depend on the conduct of the offeror and offeree. The offer, if no time is specified,
remains open for a reasonable time and the offeree may accept this offer within the reasonable time period. If there is a specified time period, the offer terminates upon the expiration of the time
period. An offer may include language such as "This offer is in effect until 5:00 p.m. (month, date, year)." In any event, an offer may be withdrawn at any time prior to its acceptance by the offeree. If there is not a specified termination time, an offer should be withdrawn in writing if that is the offeror's
desire.
Termination of Offers (pg.140)
A(n) __________ to a contract is an attachment that adds or further describes the rights and duties of the parties.
Addendum
In the event of default by the BUYER, the seller may have several options, which include:
1. Specific performance
2. Monetary damages
3. Liquidated damages
In the event of default by the SELLER, the buyer becomes the injured party. The buyer may have the
following options:

Scenario: A buyer and seller enter into a contract however prior to closing, the seller decides he does not want to sell. What are the buyer's options?
1. Specific performance
2. Monetary damages
3. Refund of earnest money
A(n) __________ is a provision in a contract that requires that a certain act or event happens in order for the contract to be binding on the party.
Contingency
________ are changes that are made to the original contract, such as changes to the closing date or changes to the sales price, down payment and/or the amount financed.; repairs the seller agrees to perform and removal or waiver of contingencies
Amendments
A ________ is the borrower's unconditional promise to repay the lender. Aka: real estate lien note
Promissory note
__________ is the process by which a lender exercises its power of sale under a mortgage that is in default.
Foreclosure
Mortgage loan originators can be broken down into three categories:
1. mortgage bankers
2. mortgage brokers
3. correspondent lenders**
If the loan factor is $4.49 and the loan amount is $357,500, taxes are $7300/year and the insurance is $3103 per year, what is the monthly PITI payment?
$2,472.09
A __________________________ covers more than one piece of property. A builder may buy more than one lot in a new subdivision; he will do so with one loan.
Blanket mortgage
Benefits of a loan assumption include:
1. The buyer is possibly assuming a loan at a rate that is not currently available.

2. The assumption of an existing loan is substantially less expensive than obtaining a new loan. Assumption fees are generally less than $500.

3. Even if the rate on the seller's existing loan is somewhat higher than a rate that is available today, the loan assumption might still make sense considering the savings in fees associated with a new loan.
___________________ is a benefit that every buyer with a military background should consider. To participate in the program, the veteran obtains an FHA, VA or conventional loan from a participating lender.

The difference is that the loan is sold to the Texas Veterans Land Board (VLB), as opposed to a secondary market purchaser such as Fannie Mae or Freddie Mac.
The Texas Veterans Land Board Housing Assistance Program (VHAP)
A "Section 502 Loan" is insured by the ________.
USDA (US Dept. of Agriculture)
The SAFE Act mandated the term ________.
Residential Mortgage Loan Originator
The ________ ensures that all consumers are given an equal chance to obtain credit; passed 1974
Equal Credit Opportunity Act (ECOA)
__________________ is the evidence an individual has of his or her right to possess land. It is most often transferred
from one owner to another by deed.
Title
Real property conveyed by will is called a ________.
Device
Personal property that is inherited is called a:
Bequest
___________ is a legacy
Money
One who received property through a will is called a:
Beneficiary
The formal judicial proceeding to prove the validity of a will and to distribute the assets of a decedent's estate is called:
Probate
A ________ is a deed with no guarantees or warranties.
Quitclaim deed
A complete history of the title of a piece of property that includes deeds, easements, liens, foreclosures, wills, marriages, deaths, life estates, fee simple estates, and anything else that may have ever been recorded about a property is called:
Abstract of Title
__________________ is not required on a contract but it will be indicated on a deed.
Martial status
Ongoing expenses such as property taxes and property owner association fees that are divided between the buyer and the seller at closing are called __________.
Prorations
When calculating prorations:
Use a 365-day year; debits and credits are determined by who is paying and who is receiving
RESPA prohibits ________, which is considered an abusive practice.
Kickbacks
If taxes for the current year vary from the amount _________________ at closing, the parties shall adjust the _________________ when tax statements for the current year are available.
Prorated, adjust the prorations
A loan assumption might be desirable because:
The loan assumption is generally less expensive than a new loan
The real estate broker's commission is the difference between the minimum net established by the seller and the price that the buyer is willing to pay:
Net listing
Elmer Fleckenfleck, an agent with After Hours Realty, was preparing a contract. The seller told Elmer that he wanted to stay in the property for at least a week after closing. Elmer said that would be no problem and entered the following text to Paragraph 11: "Seller and Buyer agree that Seller will remain in the Property for 7 days after closing and funding." In this case, Elmer has:

(a) Properly represented the interests of both parties

(b) Completed the contract according to established regulations and procedures

(c) Engaged in the unlawful practice of law

(d) Violated numerous provisions of RESPA
(c) Engaged in the unlawful practice of law
Joe is an agent at Tried and True Realty. He gets a $150,000 offer on a property that is listed for $199,500. In a recent phone conversation, the seller told Joe he would accept no less than $185,000 for the property. Knowing the seller's "bottom line," what should Joe do with the offer?

(a) Joe should notify the buyer that he will not present the offer because it is too low

(b) Joe should hold on to the offer for several days just to see if a better one comes in

(c) Joe should call the buyer and insist that a more satisfactory offer be presented

(d) Joe should present the offer to the seller
(d) Joe should present the offer to the seller
Prior to closing, severe damage to or destruction of a property under contract:
Can result in termination of the contract
FHA loans include two mortgage insurance premiums that must be paid by the borrower. They are the:

(a) UFMIP and Annual Premium

(b) UFMIP and PMI

(c) Escrow fee and down payment

(d) Hazard insurance and UFMIP
(a) UFMIP and Annual Premium
For tax prorations:
If taxes are not paid at or prior to closing the buyer shall pay for the current year, If taxes for the current year vary from the amount prorated at closing, the parties shall adjust the prorations when tax statements for the current year are available, The tax proration may be calculated taking into consideration any change in the exemptions that will affect the current year's taxes
If the loan factor is $5.53 on a $200,000 loan, taxes are $2400/year and insurance is $1800/year, what is the monthly PITI payment?
1,456
An offer may be withdrawn at any time prior to its acceptance by the offeree
True
Earnest money is deposited in an escrow account when:
The contract is signed by all parties and acceptance is communicated
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