Kizito Akobundu

Questions Option A Option B Option C Option D Bill and Sarah Sarah Option E Principles of Real Estate 1 Bill and Sarah met at the University of Texas in 1990 and married in 1992. They decided that since they loved their times at UT so much, they would stay and make Austin their home. In 2008, Sarah’s aunt died, leaving her her home. Sarah and Bill preferred living in the home they purchased together several years before, and decided to turn her aunt’s home into a rental property. From 2008 to 2014, the property was rented to various tenants. In early 2014, Bill divorced Sarah. Sarah got the home they bought together in the divorce, and Bill moved to LA. Sarah sold her aunt’s home to young urban professionals for a tidy sum. She listed the home she shared with Bill and plans to use the proceeds to buy a small home on an island in the Caribbean. Who owned the rental home from 2008 to 2014? Click row 2 for statement Bill Sarah's aunt As a rule, what is community property in this scenario? The rent house The gain on the sale Theofrental the house incomeAll from of these the lease of the property The gain on the sale of the house is: A tax write-off Community property Sarah's separate None property of these If the income from the rental of the property was used to make the improvements in 2012: Bill and Sarah became Bill becomes joint tenants the sole Bill and owner Sarah of the became property Bill willtenants likely be in due common an accounting of his community investments A less common type of ownership by more than one is _________tenancy. joint A/n ________ trust is a trust that is created by will, and is effective upon the death of the decedent. Testamentary Texas is one of nine states that adhere to the concept of ________ property. Community An estate in _________ involves ownership of real estate by one individual or entity. Severalty Condominiums are established under laws referred to as ________ property acts. Horizontal Property owned by a married person that is not community property is called _______ property. Separate The Rule Against _________ reflects the broader societal interest in avoiding the creation of a “landed class” and ensuring that real estate is widely available. Perpetuities An ________ trust is a trust created during the lifetime of the trustor. Inter vivos All trusts include an individual, known as a/n ________ who places title to real property into the control of a trustee. Trustor The ________ partner’s liability is limited to the amount he or she invested in the partnership. Limited ___________ involves ownership of real estate by two or more entities. Co-ownership A/n ____________ features part ownership of a property coupled with the right to its exclusive use for a specified number of days per year, without the responsibility of full ownership. Timeshare Any relationship in which one party acts for or represents another Agency Another name for the principal Client A Texas consumer protection law DTPA A person who is authorized to act for another Agent A person who has the legal authority to act as a broker or sales agent in a real estate transaction License holder A person who has the legal authority to act as a broker or sales agent in a real estate transaction General agency The most limited type of agency relationship that does not give the agent the authority to bind a principal only advise the principal. Special agency A relationship that allows an agent to transact all matters for the client. The agent can sign documents and bid the client the same way the client would. Universal agency A person who acts for or on behalf of another person, representing the best interests of the other person. Agent A person who hires an agent and gives the agent authority. Jeffrey holds a real estate sales agent’s license in the state of Texas. He is selling a house that he owns. Jeffrey advertises the property online on several social media sites. Each ad states that Jeffrey is not just the owner of the property but that he holds a real estate license. This is an example of disclosing what type of relationship? Maria represents an owner who wants her lease house to be listed in the MLS for $2700 a month. Maria shares with the owner a CMA that shows the property could be leased for closer to $3000 a month. The owner instructs Maria to list it for $2700 which Maria does. What duty is Maria following? Principal Agency coupled with an interest Obedience Imelda represents Robert who wants to sell his condominium. Robert instructs Imelda to list the condo for $215,000 but he’ll take an offer if it is over $200,000 because he needs a quick sell. Tony, an unrepresented buyer who is interested in making an offer on the condo, asks Imelda what price he should offer. Imelda tells Tony to offer $200,000 to see how her client would respond. What duty is Imelda violating? Tina would like to sell her house, so she meets with the local specialist, an agent named Roberta. After presenting a detailed marketing plan and CMA. Tina desires to hire Roberta as her agent. Roberta and Tina establish their relationship with a written listing agreement. How have Tina and Roberta created the agency relationship? Ignacio is excited to make an offer on a property he just viewed with his agent, Ming. He is willing to offer full price. Ming is aware of a very similar property in the neighborhood that is listed for $25,000 less than the one Ignacio is interested in. Ming suggests to Ignacio that he at least view that property before making an offer on the first property. Which duty to her client is Ming fulfilling? Confidentiality Express authority Disclosure Each transaction has two sides: a listing side and a selling side. TRUE Because of the agency relationship the broker has with the broker’s clients, all the sales agents of the broker share the same agency duties of the broker. TRUE Brokers are general agents of the buyer or seller in a transaction. FALSE The seller is on the selling side of the transaction. FALSE Subagency is a cooperative sale that occurs when the selling broker along with the listing broker represents the seller. TRUE The agent working with the buyer is the selling agent. TRUE Both brokers in a cooperative sale must represent the seller in the transaction. FALSE An agent sponsored by a broker is usually a general agent of the broker. TRUE A cooperative sale has only one broker who works with both the buyer and seller. FALSE The broker represents a seller through a special agency relationship. TRUE Ryan can show Delia homes listed with XYZ Realty and other brokers in the market if: None of the homes Ryan are discloses owned by to Ryan Delia broker gives Bradley verbal that Delia consent he has will to show given see homes written homes listed intermediary listed by by XYZ XYZconsent Realty Realty If Delia decides to purchase a home that is listed by XYZ Realty, which of the following is TRUE? The sale would beBroker completed Bradley accordindg can Broker choose to Bradley the to have rules can Broker intermediary for choose intermediary Bradley to have with can without Intermediary appointments appoint appointments Ryan with and to Appointments work workas asboth the listing the andlisting work agent agent asinthe the and selling transaction the agent sellinginagent the transaction and give advice to both parties as long as they are Ok with it. If Broker Bradley hires another agent and appoints that agent to represent the seller, this would be called: A cooperative saleSingle agency Agent Sue is meeting a potential seller this evening to give her information about listing her property for sale. Information aboutDisclosure brokerage of services representation A buyer calls a listing agent to get information about a home he saw listed for sale. The agent reminds the buyer that she represents the seller. Information aboutDisclosure brokerage of services representation Agent Mary, a buyer’s agent, calls Agent Steve, a listing agent, to ask questions about some of the features of Agent Steve’s listing. During her introduction, Agent Mary, tells Agent Steve that she represents a buyer. Information aboutDisclosure brokerage of services representation A buyer calls a listing agent about a property the agent has listed for sale. After the conversation, the agent emails the buyer a document that discloses how agency works. Information aboutDisclosure brokerage of services representation In the real estate brokerage business, most license holders are not employees of the broker. They are ______________________, engaged in a principal-agent relationship. Clients Customers Selling agents Independent contractors The purpose of the Seller’s Disclosure Notice is to have the owner of the property disclose all facts and defects concerning the property. This is a good tool to use as a defense in a ___________ lawsuit. DTPA TREC TRELA Agency by ratification _____________ means actual awareness, or flagrant disregard of prudent and fair business practices. Agency by ratification Knowingly Intentionally Agency coupled with an interest ________________ means actual awareness of a falsity, deception, or unfairness of an act. Agency coupled with Knowingly an interest Intentionally Agency by ratification ________________ are defined as tangible chattels (real property is tangible when purchased or leased). Consumers Services Sales According to the Texas Real Estate License Act, when one firm sells a property listed by another firm to a buyer that they are not representing, the selling firm represents the seller in this type of relationship: Agency relationship Sub agency Fiduciary Cooperative The most limited of all the agency relationships and is also referred to as “limited agency”: Special agency Agency relationship Subagency Client Exists when one person (the agent) acts for, or on behalf of another person (the principal): Cooperative Special agency Subagency Agency relationship A person, sometimes called a principal, who engages the professional advice or services of another, called an agent, and whose interests are protected by the specific duties and loyalties of an agency relationship: Seller's agent Client Cooperative Texas law that was passed in 1973 that allows an aggrieved consumer to sue a seller of goods for damages: Cooperative Special agency DTPA EEOC A broker representing the seller in a real estate transaction: Match the description to the corresponding term. Fiduciary Client Cooperative Seller's agent A person who receives limited brokerage services without establishing an agency relationship: Cooperative Customer Fiduciary Client Goods Intermediary with Statutory appointments dual agency Subagency A broker selling the listing of another broker: Fiduciary Cooperative The relationship is based on trust: Fiduciary Special agency Customer Subagency Investigates allegations of discrimination and enforces the State and Federal laws: Clients EEOC DTPA Special agency In real estate, a buyer or seller is considered an agent’s customer until he or she becomes a(n) _____. Subagent Intermediary Client Associate The agreement between a broker and a client is most often a(n) _____ agency relationship. Subagency Seller's agent QUIZ Special General Universal Sub The broker and his or her associates are most often in a(n) _____ agency relationship. Special General Universal Sub Loyalty, confidentiality, and disclosure are considered the _____. Duties of an agentResponsibilities ofResponsibilities the seller ofCanons the buyer of Ethics A(n) _____ relationship exists when one person acts on behalf of another person from whom he has derived authority. Agency A broker or sales agent licensed under TRELA License Holder A broker who is employed to negotiate a transaction between two parties to a transaction and may act as an agent of the parties Intermediary Drafts and revises contract forms that are capable of being standardized to expedite real estate transactions and minimize controversy Broker-Lawyer Committee An individual who sells or leases real estate for another in exchange for a commission Broker Qualified to transact business in the state Business Entity Principal Client Broker General Provisions and Subchapter A of the License Act. A broker is a person who, for compensation: Sells, exchanges Lists or leases or attempts real estate to Controls list property realthe estate acceptance for Allsale, of the or lease above deposit or exchange of rent from a resident of a single-family real property unit A person who offers, for consideration, to locate a unit in an apartment complex for lease to a prospective tenant is known as a: Residential agentResidential locatorResidential rental Residential locator broker The number of hours required for a broker or sales agent license is established by the: State Legislature Education Standards Education Advisory department Committee Broker-Lawyer Committee A subagent is a license holder who: Represents a principal Is notthrough sponsored cooperation by Both or A associated and with B andwith None the the consent ofprincipal's the above of a broker brokerrepresenting the principal Sarah gets a job as a sales representative for Galaxy Custom Homes. She will be working in the new Galaxy model home park and will be limited to selling Galaxy homes only. Sarah will: Need to become a licensed real estate sales agent Need to become aBe licensed exemptreal fromestate the Berequirement able broker to sell homes to be licensed without a license, so long as her builder/employer has a valid broker’s license Julie is a licensed attorney in Louisiana. She wants to be paid a commission to represent/negotiate on behalf of a purchaser of real estate in Texas. Can Julie do this? No, because only Yes, a licensed because Texas attorneys Yes, broker but are isonly required exempt if she No, from for obtains attorneys allLicense transactions a Texas from Act Estate other in Texas states License are never allowed to represent clients in Texas The provision of the License Act that could potentially abolish the Texas Real Estate Commission is the: Sundowner Act The Texas Real Estate License Act is a part of the: Occupations CodeLicense Code Mark gets a new job as a petroleum landman and will be securing leases for a variety of oil and gas companies. Before Mark can begin work, he must obtain a valid real estate license. TRUE FALSE Broker members of the Texas Real Estate Commission must have been actively engaged in the real estate brokerage business as their primary source of income for the previous: Two years The Commission consists of _____ members. Six The Commission members are appointed by the ____________________ and approved by the ______________. Governor, TAR Governor, SenateTREC, Governor Commission, Senate _______ members of the Commission represent the public. Three Six Two Nine _______ members of the Commission are brokers. Four Two Seven Six The Commission has the authority to set fees for Filing an application Branch for a office brokerlicenses license Receiving trainingAll from of the a broker above The Commission may adopt rules that require license holders to use certain contract forms adopted by the Commission _________. In all transactions,Inunless all transactions, the buyerInor unless all seller transactions the instrusts brokerInthe or allsales broker transactions, agent to create prefers except a specialized a different those where contract forma form form has been prepared by the property owner or the property owner's attorney The Commission may solicit and accept gifts, grants, and donations from: Any source The research center License holders only The Advisory Committee True or False - Members of advisory committees created by the Commission are compensated on an hourly basis for their service on the committee. TRUE FALSE True or False - The Texas Real Estate Commission has the authority to establish standards of advertising by a license holder acting as a residential rental locator. TRUE FALSE The Commission shall prepare and maintain a written plan that describes how a person who has __________ may be provided reasonable access to the commission’s programs. A mental disabilityA physical disability Both A and B The Commission will investigate a complaint that is: Written and signed Filled within six years Oral of orthe written date ofFilled the incident with the commission The Commission is required to prioritize the investigation of complaints based upon: The degree of potential Potential harm forto immediate theOverall consumer harm severity to the ofAll consumer the ofallegations the above in the complaint The Texas Broker-Lawyer Committee: Has nine members Has appointed eleven members by the Approves governor appointed and promulgates by Writes the governor theTREC TREC-promulgated contract formscontract forms True or False - A residential apartment locator in Texas is not required to be a license holder. TRUE An applicant for a real estate license must disclose in the license application whether the applicant has: Been convicted ofEntered a felonya plea of Been nolo contendere convicted ofto All aafelony offelony the above and the time for appeal has lapsed or the judgment or conviction has been affirmed on appeal The sales agent exam is divided into two parts. The state portion has _____ questions, and the national portion has _____ questions 80, 20 40, 80 60, 40 30, 80 The passing grade on the sales agent exam is ___%. 75 80 70 60 Deceptive Trade Practices ExpirationAct Act Sunset Act Revenue code State Department of Brokers Ten years Six years Five years Four Five Nine None of the above FALSE Sally wishes to once again become active in the real estate brokerage business. Her license has been expired for seven months. She must: Submit a sponsorship Submit form ansigned application by Pay her aforfee broker a new equal and license toPay pay twoatimes fee renewal equal the fee regular to 1.5 times the regular fee to renew an option, select the submit button below True or False - A license holder must advise a buyer who has a written offer to have the abstract covering the real estate examined by an attorney to be provided with or obtain a title insurance policy. TRUE FALSE True or False - A broker may act as intermediary between parties to a real estate transaction if the broker obtains oral consent from each party for the broker to act as intermediary. TRUE False A broker who represents a party in a real estate transaction or who lists real estate for sale under an exclusive agreement for a party: May not instruct another Must inform broker the toparty directly At minimum, if the or indirectly broker answer receives Alltalk of thethe toparty’s material the above broker's questions information clientand related presenttoany a transaction offer to or from including the party a receipt of an offer A license holder who represents a party in a proposed transaction shall disclose orally or in writing that representation At first contact with After another receiving partyanWhen offer showing property At the first to buyer substantive discussion of real estate All of the following are true regarding the Real Estate Recovery Account, EXCEPT: Each applicant for$125,000 licensureismust the maximum pay TREC $10.00 sets pertowards the transaction, maximum If the the balance Trust and payments Account $250,000 in thefrom Trust is the the account fund maximum on Dec. on behalf 31 of of a year a license is more holder than $3.5 million, the Commission will transfer the excess into the state's general fund The Real Estate Recovery Account is: To protect aggrieved An account individuals wher who an Ansuffer aggrieved automatic a monetary individual deduction Administered lossmay after duefirst to anby illegal aggrieved come the acts Texas to recover of individual Comptroller's license a monetary holders wins aOffice judgement loss against a license holder in civil court The Recovery Account receives deposits from TREC when TREC: Anually from the Upon State of maturity Texas's ofGeneral the Each mortgage time Fund a license bonds Receives holder holdingsubmits an theadministrative Recivery a change Account penalty of broker funds from reques a licensed form or unlicensed individual True or False - A broker may disclose to the buyer or tenant that the seller or landlord will accept a price less than the asking price if the broker has oral instruction to do so. FALSE A licensed broker may not pay a commission to or otherwise compensate a person directly or indirectly for performing an act of a broker unless the person is: A real estate broker A license licensed holder in another Bothstate who does None notof conduct the above in this state any of the negotiations for which the commission or other compensation is paid All of the following are grounds for suspension or revocation of a certificate of registration, EXCEPT: Fraud Acts in good faith MisrepresentationUntrustworthiness True or False - TREC may suspend or revoke a license if a license holder induces or attempts to induce a party to a contract of sale or lease to break the contract for the purpose of substituting a new contract. FALSE TRUE When an amount is paid out of the Recovery Account on behalf of a license holder, the license will be revoked: If the repayment of Immediately the accountupon is not Ifpayment repayment receivedtoby consumer ofthe the And 31st account may daynever after is notTREC be received recovered provides by thenotice 60th day to the after license TRECholder provides notice to the license holder The Real Estate Commission may impose an administrative penalty of up to ________ per day. $2,000 In determining the amount of an administrative penalty, the executive director of TREC may consider all of the following except: The seriousness of How thelong violation the license Theholder historyhas of previous been Efforts licensed violations to correct the violation If an unlicensed person does an act that requires a real estate license, that person is guilty of: Et sequential The civil penalty of up to _____________ may be levied for practicing real estate brokerage without first obtaining a real estate license. 5 times the amount $10,000 of money received 3 times the amount $5,000 of money received Which of the following is true regarding the imposition of an administrative penalty by TREC? The Commission The may dollar impose amount an administrative Ifof the the person administrative penalty doesAll not of on penalty pay the anyone, the Above. may administrative at not anyexceed time, without fee, $10,000 the notifying administrator per infraction, them.is authorized per day. by the Commission to refer the matter to the attorney general for collection. TRUE $4,000 $10,000 $5,000 Tortious Interference A class A misdemeanor A felony QUIZ To be eligible to obtain a real estate license in Texas, a person must be at least _____ at the time of application 17 years old The commission may adopt rules in the public's best interest that require license holders to use contract forms prepared by the _____ and adopted by the commission. Texas Ethics Commission Texas Real EstateTexas Broker-Lawyer Real Estate Committee National Research Association Center of REALTORS® Sarah gets a job as a sales representative for Galaxy Custom Homes. She will be working in the new Galaxy model home park and will be limited to selling Galaxy homes only. Sarah will: Need to become aNeed licensed to become real estate aBe licensed exempt brokerreal fromestate the Berequirement able salestoagent sell homes to be licensed without a license, as long as her builder/employer has a valid broker's license A business entity is not required to be licensed if it is at least _____ on whose behalf the entity receives compensation 10% owned by a licensed 51% owned broker by a license Wholly owned holder by 100% an out-of-state owned byattorney a licensed broker Julie is a licensed attorney in Louisiana. She wants to be paid a commission to represent/negotiate on behalf of a purchaser of real estate in Texas. Can Julie do this? Yes, but only if she Yes, obtains because a Texas attorneys No, Real attorneys Estate are exempt License fromNo, from other because the states Texas an areReal individual never Estate allowed who License lives to represent in Act. Louisiana clients cannot in Texas. be licensed to sell real estate in Texas. 18 years old 21 years old 25 years old ETHICS The license holder is a fiduciary for his/her client Fidelity The license holder is obligated to be knowledgeable as a real estate brokerage practitioner Competency Display the TREC No. CN 1-4 in a prominent location in each place of business maintained by a broker Consumer information Real estate professionals must employ prudence and caution in the discharge of his/her responsibilities Integrity Real estate license holders shall not facilitate inquiries about, or make a disclosure which indicates any preference, on race, color, religion, sex, national origin, ancestry, familial status, or disability of an owner, purchaser, etc. Discriminatory practices Sales agent Maria, a residential area specialist, had the opportunity to represent a buyer on a high-rise apartment building. Even though Maria had never been involved in a transaction of this type, she agreed to represent the buyer and made some mistakes during the transaction. Which Canon of Professional Ethics did Maria violate? Competency Broker Jaime represented a buyer who was interested in a house for sale by owner. Jaime contacted the seller but failed to tell the seller that he represented a buyer. Which Canon of Professional Ethics did Jaime violate? Consumer information Competency Integrity Discriminatory practices Consumer information Integrity Fidelity Sales agent Lucy had a new listing that she just posted on the local Multiple Listing Service website. Because of the amenities in the neighborhood and the great schools, Lucy advertised that the house was great for a family with children. Which Canon of Professional Ethics did Lucy violate? Fidelity Discriminatory practices Competency Broker Tony had a website about his real estate company. The website showed all of Tony’s listings and agents. It had sections about the type of real estate brokerage services that Tony and his agents provided. The website did not have a link to the TREC Consumer Information Notice. Which Canon of Professional Ethics did Tony violate? Fidelity Discriminatory practices Consumer information Competency Sales Agent Tammy represented a buyer who was interested in making an offer on a seller’s home that was for sale. The seller told Tammy that the house had a termite infestation. Concerned that her client would not make an offer if she knew of the termites, Tammy withheld the information. Which Canon of Professional Ethics did Tammy violate? Consumer information Competency A person may file a complaint with TREC against a real estate license holder if the person believes the license holder violated this act TRELA Founded in 1908 and is America’s largest trade association. NAR Included for real estate license holders in the Rules of the Commission. Cannons of professional ethics This must be displayed in a prominent location by a real estate inspector CN 1-3 When a real estate broker or sales agent, while acting as an agent for another. Fiduciary Acting in strict regard for what is considered right or proper. Scrupulously Marked by extreme or excessive care in the consideration or treatment of details; careful. Meticulously It is the obligation of a real estate agent to be knowledgeable as this position. Real estate brokerage practitioner Required to adopt procedures governing informal disposition of contested cases. TREC A possible disciplinary action Reprimand Integrity Consumer information Discriminatory practices MODULE 8 QUIZ If an alleged ethics violation is reported to the NAR®, a hearing panel will convene to hear testimony and presentation of evidence, decide whether a violation of the association’s code of ethics occurred, and order which of the following disciplinary actions? Fine Probation Supervision or Revocation Any of these For a case involving a consumer, TREC's presiding officer is required to appoint a(n) _____, consisting of three Commission members who will determine whether a person's license to practice should be suspended temporarily. Intermediary Mediator Administrative Law Disciplinary Judge Panel The _____ must be displayed in a prominent location in each place of business a broker maintains. TILA disclosure Consumer Protection Information Notice CN About 1-5Texas Brokerage Real Estate Services License Act Federal and State Legislation Taking buyers or renters to or away from a particular area based on race, religion, etc. Steering Prohibits redlining by banks Community Reinvestment Act Any attempt to induce panic selling in a neighborhood for financial gain Blockbusting Governs consumer reporting agencies and those who access consumer credit reports Fair Credit Reporting act Each credit applicant must be evaluated based on the same information as every other applicant Equal credit opportunity act It is a good practice in advertising to describe... Families Under the Fair Housing Act, violations can be up to: When someone files a discrimination complaint with HUD, HUD will first attempt to: Property $50,000 Proximity to religious People facilities $100,000 $150,000 Resolve through conciliation Resolve through litigation Levy a penalty The Texas Fair Housing Act was passed in... 1986 1866 $75,000 Refer to criminal court 1989 1974 The Americans with Disabilities Act prohibits discrimination against those with disabilities by denying: Redlining All of the following are exempt from ADA except: Single-family homes Historic buildings Retail space The CFPB is responsible for: Enacting anti-discrimination Enforcing ADA law Administering the Enforcing Fair Housing Federal Act Consumer financial laws The Fair Credit Reporting Act protects consumers from... Blockbusting Redlining Unfair credit reporting Anti-discrimination practices laws The Equal Credit Opportunity Act prohibits discrimination in: Selling Leasing Renting Lending The Community Reinvestment Act says lenders cannot: Steer Panic sell Redline Blockbust Any attempt to induce panic selling in a neighborhood for financial gain is known as Steering Price fixing Blockbusting Redlining While there are some exceptions to the application of subsequent fair housing laws (1968 law), the_____provides for no exceptions whatsoever. Fair Housing Act ADA Fair Credit Reporting CivilAct right act of 1866 Prohibition against discriminatory advertising applies to _____________ and owner-occupied housing that is otherwise exempt from the Fair Housing Act Handicapped persons Single-family Panic peddling Confidentiality If a case goes to an administrative hearing, _____________ attorneys will litigate the case, and an administrative law judge will consider the evidence. ADA CRA CFPB HUD The prohibits discrimination in lending based on race, color, religion, national origin, sex, marital status, age or the receipt of income from a public assistance program. ADA CRA CFPB ECOA Housing Equal enjoyment of Receiving goods and a loan facilities Private clubs The has the authority to examine and enforce consumer protection regulations for all mortgagerelated businesses, large non-bank financial companies, and banks and credit unions with assets greater than $10 billion. CFPB In addition to the Federal Fair Housing Act, Texas passed the in 1989, which closely parallels the federal law. Texas Fair Housing Americans Act with Disabilities Fair CreditAct ReportCredit Act Reporting Act Blockbusting is also known as . Steering ADA ECOA Panic peddling CRA Redlining Price fixing QUIZ The Civil Rights Act of 1866 essentially prohibited discrimination based upon ______. Economic status Race or color Gender Familial status _____ was added to federal fair housing as a protected class in 1974. Physical handicapSex Familial status Race Attempting to induce panic selling in a neighborhood for financial gain is known as _____. Steering Flipping Channeling Blockbusting Legal Descriptions Uses a recorded map or plat to describe land Lot and Block North/South lines established at six mile intervals as part of the government survey system Range lines Uses terminal points and angles to describe land Metes and Bounds A street address Informal Reference East/west lines established at six mile intervals as part of the government survey system Township lines A legal description uses a recorded map or Plat to define a property Metes and Bounds Lot and Block Plat Natural or man-made markers called Monuments are used as reference points to determine the point of beginning for metes and bounds. Point of BeginningMonuments Plat The Point of Beginning is the origination point for Metes and Bounds legal descriptions. Point of BeginningLot and Block Monument An acre of land has 43,560 square feet 43,560 40,000 29,564 Commonly used in residential subdivisions, Lot and Block method of legal description uses a recorded plat. Monument The oldest method of defining property is called Metes and Bounds and uses terminal points and angles to define a property. Point of BeginningLines and Drawings Metes and Bounds A section of land contains ____________, which is one square mile. 3,232 feet 600 acres 220 acres 640 acres A ____________ is 36 square miles. Partition Range Township Acre Surveys are used to ____________ land or to divide a piece of property between multiple owners. Section Partition Gift Lease There are 36 ____________ in a township. Roads Ranges Sections Acres The ____________ uses a grid system to describe property. Street address Range recording system Informal Reference Government System Survey System A street address is used as an ____________ for property Township Informal Reference Government Survey Section System The Government Survey System uses a grid to divide land into ____________, Townships, and Sections. Partitions Ranges Descriptions that use terminal points and angles to describe a parcel of land. Metes and bounds A permanent marker installed on the land by a surveyor Monuments The most common form of survey. Land Division of a property between multiple owner. Partition Set forth the definitions for land surveying and its practices in the State of Texas. Professional land surveying practice This method of describing property was adopted by Congress in 1785. Rectangular Survey system Most often refers to a recorded map or plat. Lot and Block method The most commonly used informal reference to a parcel of land. Street address The technique, profession, and science of accurately determining the terrestrial or three-dimensional position of points and the distances and angles between them. Land surveying Referred to as deed restrictions. Covenants Metes and Bounds Lot and Block The street address allows the property to be easily located and is a valid legal description because it includes detail as to corners, boundaries and quantity of property described. TRUE FALSE Field work often involves activity in rugged terrain, but individuals considering a surveying profession do not necessarily have to enjoy or get used to working outdoors TRUE FALSE Descriptions of real estate serve to identify corners, boundaries and quantity of land. TRUE FALSE The Professional Land Surveying Practices Act set forth the definitions for land surveying and its practices in the State of Texas, and established the Board of Professional Land Surveying. TRUE FALSE Each lot is assigned a lot number, and the number, often along with the section and block number, becomes the legal description of the property. TRUE FALSE The name of a township comes from its location in the grid. TRUE FALSE Metes and bounds descriptions are the most commonly used descriptions in states that use the Government Survey System. TRUE FALSE To convert acres to square feet, simply divide 43,560 by the number of acres. TRUE FALSE States Acres Surveying is a significant part of a real estate transaction because boundary coverage is generally required by lenders. Most lenders require this coverage, which triggers a need for a survey. TRUE FALSE QUIZ A legal description that contains the words “Beginning at a point” is a _ Lot and block description Metes and boundsInformal description referencePLSS description The reference point of the Government Survey System grid is known as a(n) _____. Initial point One acre of land contains _____. 23,459 square feet 640 square feet 43,560 square feet 1 square mile Meridian line Home base Latitudinal line LISTING AGREEMENTS The individual who, through a series of uninterrupted activities or actions, brought about the completion of a contract Procuring cause of sale Marketing that uses adjectives and opinions rather than details or facts Puffing The broker is the only listing broker, and a commission is paid even if the property is sold by the owner Exclusive right to sell Gives the seller the right to list the property with multiple competing brokers and to sell the property personally without liability for payment of a commission Open listing The broker’s commission is the difference between the seller’s established net and the price that the buyer is willing to pay Net listing All listings must be in be enforceable to oral agreements listings Writing employment contracts The listing is taken in the name of the , and all commissions and fees must be paid directly to the broker. oral agreements special agency principal-agent broker The listing agreement establishes the relationship between the client and the broker. broker listings special agency are not enforceable against the client. Oral agreements Special agency Employment contracts Listings Listing agreements are between a seller or landlord and the broker. employment contracts broker are the lifeblood of any real estate operation Employment contracts Oral agreements Listings Principal-agent The listing agreement is a relationship between the broker and the client. broker special agency principal-agent principal-agent The open listing gives the seller the right to list the property with multiple competing brokers and to sell the property personally, without liability for payment of a commission TRUE FALSE In an exclusive agency listing, the seller agrees to list the property with only one broker during the listing term, with the provision that the seller can sell the property independently, without paying a commission TRUE FALSE Under a net listing, the seller establishes a minimum acceptable net price. 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. TRUE FALSE Net listings should be qualified so as to assure the principal of not less than his desired price, and to limit the broker to a specified maximum commission TRUE FALSE The exclusive right to sell and exclusive agency listing agreements usually call for the broker to place the listing into one or more net listings. TRUE FALSE TRUE FALSE The listing agreement is not an employment contract between a seller or landlord and the broker oral agreements listings listings ______________ are fungi that can be found both indoors and outdoors. Mold Latent or hidden defects such as _______________ or zoning or deed restrictions must be disclosed. Encroachment _______________ can suspend or revoke an agent’s license if the license holder is found guilty of making a material misrepresentation or failing to disclose. TREC In Texas, the state consumer protection law that affects the brokerage business the most is the _______________. DTPA The individual who, through a series of uninterrupted activities or actions, brought about the completion of a contract is called the __ Procuring cause of sale _______________ is a federal law requiring all states to release information to the public about know convicted sex offenders. Megan's law Mold remediators must provide a _______________ no later than 10 days after completion of mold removal Certificate of Remediation Certain sellers must provide a _______________ before a buyer signs a contract or the buyer may back out of the agreement. Seller's disclosure notice A type of listing that allows the seller to list with as many brokers as the seller chooses or seller the property himself or herself. Exclusive agencyNet listing A listing is terminated by all of the following except: Fulfillment of purpose Death of the salesDeath agentof the broker Bankruptcy of the seller Consumer protection law that allows the purchaser of a good or service to sue the provider for monetary loss due to misrepresentation of the condition of the good or service. Sherman Anti-Trust Certificate Act of moldTRELA remediation In Texas, a seller uses a certain document to tell prospective buyers the seller’s knowledge of the condition of the property Amendment to listing Seller's DisclosureCertificate Notice of moldFraud remediation disclosure notice Which of the following seller is exempt from disclosing the known condition of the property? An estate sale Exclusive Right toOpen Sell listing A trustee in a foreclosure A buildersale DTPA None, all must disclose Which listing allows the seller to list with only one broker and the broker gets paid even if the seller sells the property himself or herself? Exclusive agencyNet listing When a listing is terminated, the listing agent must do all of the following except: Remove signs and Cease lockboxes all marketing Withdraw activities the listing Terminate in the MLS the listing in the MLS Procuring cause is determined by The broker An agent describes a property in an advertisement as having “The best view of downtown!” This is an example of: MisrepresentationPuffing Fraud A DTPA violation Commission rates are Set by the MLS Standard Negotiable Set by the market Open listing Exclusive right to sell Who listed the property Who showed the property A series of uninterrupted events QUIZ While listing the property with a licensed sales agent, the seller asks, “Who sets real estate commission rates?” The correct response would be: The standard rateThe is set standard by TREC. commission Long ago,rate theisindustry set There by state agreed is nolaw. standard on a set rate, rate, and and different that is pretty brokers much canhow charge it is today. different However, fees. I can cut the standard rate and make you a deal. Julie, a sales agent at Acme Realty, obtained a listing on Seller Sam’s property on Oak Street. The following week, Julie was found to be mentally incompetent and was admitted to the state mental hospital in Rusk. Given Julie’s unfortunate status, what is the effect on the listing with Seller Sam? The listing agreement The listing is unaffected agreement The because listing is terminated itagreement is an agency The because listing is unaffected agreement Julie agreement is mentally because between is terminated impaired. mental Seller Sam impairment because and the Seller isbroker. never Samanwould issuenot in agency want to agreements. have an agent that no longer lives in the local market area. Seller Steve listed his property with City Realty, Acme Realty, and Countrywide Realty all at the same time. After signing the listing agreements, Steve continued to run for sale by owner ads on Craigslist. The type of listing agreement Steve signed with the various companies is a(n) _____. Exclusive Right toExclusive Sell AgencyOpen Agreement Listing Net Listing The type of listing agreement that affords the broker the greatest protection is the _____. Exclusive Right toExclusive Sell AgencyOpen Agreement Listing Net Listing Real Estate Contracts Lacks mutuality Unilateral contract A contract that cannot be enforced because a flaw in the contract or some other issue Unenforceable contract Contract created by acceptance of an offer Express contract A contract created by behavior Implied contract A contract under which both parties are obligated to perform Bilateral contract Who writes or drafts the promulgated forms? Broker-Lawyer committee TREC A Buyer’s Temporary Residential Lease of a Seller’s Temporary Residential Lease is for use up to _______ days. 90 Texas real estate Education center standards and Advisory Committee 180 30 60 A Right of First Refusal contract and a Lease with an Option to Purchase may be written by a(n) Title company Attorney Promulgates contract forms for residential and farm and ranch real estate TREC Texas real estate Education center standards Broker-Lawyer and Advisory committee Committee Only written offers must be presented to the intended party TRUE FALSE Contracts executed by a minor are voidable at the discretion of the minor. TRUE FALSE To be valid, a contract must be in writing. TRUE FALSE A void contract is binding on one of the parties only. TRUE FALSE A valid contract has mutual agreement by both parties TRUE FALSE An executory contract is a contract that all the terms and conditions have been met. TRUE FALSE Offers terminate by the acts of the parties or by an operation of the law. TRUE FALSE Martin’s home was listed for $209,500 and the listing agent received three The has passed, offers6-week within deadline a short period of time.and The Guy has not financing. first offer wasyet farsecured too low for Martin’sHe claims has not even tried yetoffer, because taste athe $197,500. The second at there has been delay in receiving his $199,900, cameawith a contingency that inheritance, he claims willthe be the buyer sellwhich his home before received in about a week. Guy statesto contract could close. Martin decides that he the is not sure he of still wants tofrom buy accept third offer $200,000 the If Guy defaults the Guyproperty. whose offer is closer to on Martin’s contract, theAlso seller all of liking the courses bottom line. tohas Martin’s is that of action available to him EXCEPT: the offer has no contingency for sale of other currently If Guyproperty secures because financingGuy andislearns he renting apartmentproperty month towithout month.the can buyan a $190,000 Martin and his agent like the fact inheritance, which of also the following is that Guy is willing to put down 80% cash TRUE about renegotiating the sales on the deal. There is one catch, contract? however. Guy is inheriting some money If Guy’s mother decides to become a cofrom his grandmother’s estate. The borrower and co-owner of the home, it parties have agreed to allow Guy 6 would make the most sense for the weeks to secure financing since he has parties to have a contract _________. not yet received his inheritance money A/n is and an agreement between from_______ the estate his financing pretwo or more partiesontoaeither dodown approval is based sizable something payment. or to refrain from doing something Sales agent Broker The seller can choose File atocourt accept action theFile seeking buyer’s a court earnest monetary actionmoney Ifseeking damages. Guy cannot asan liquidated order obtain of damages, financing the court for and releasing specific still wants all performance. parties to purchase from any thefurther property, obligation. the seller has to accept the 80% down payment as partial performance of the contract. The parties cannot The renegotiate seller is under since The no it isseller obligation technically musttoeither still None renegotiate only renegotiate of an these offer theare sales and ortrue. return not price an Guy’s and executory may earnest still contract. seek money. remedy against Guy if he does not complete the sale. Amendment Termination Contract Contracts that are created in writing or orally are called _______ contracts Express Contracts that are not stated but are just understood or are created by actions are called _______ contracts. Implied The _______ requires that the transfer of any interest in real estate to be in writing to be enforceable. Statue of fraud An option contract is an example of a/n _______ contract. Unilateral _______ contracts are enforceable on both parties meaning both buyer and seller must perform. Bilateral Real estate license holders do not have the authority to write agreements. The Texas Real Estate Commission has promulgated contracts and addenda for real estate license holders to use. These documents are written by the _______. Broker Lawyer committee An agent who writes his or her own contracts or makes changes to TREC’s promulgated forms is guilty of the _______. Agents may add factual statements and business details to TREC forms. Unauthorized practice of law To be both Valid and Enforceable, a contract must have _______. COLIC Novation Assignment Contracts that have been signed are called executed contracts. The period of time from the effective date to the closing date is called the _______ period. It is the time period the parties are working on meeting their obligations. Executory A/n _______ of contract transfers all the rights related to the contract to another person known as the assignee. Though the assignee assumes primary liability of the contract, the original party is still liable if the assignee fails to perform. Assignment A/n _______ occurs when a new contract is substituted for an existing contract. The original contract is cancelled and a new one takes its place. Novation FINAL QUIZ The Statute of Frauds applies to: Contracts for the sale Listing of real agreements estateBuyer Representation All ofAgreements these are correct Consideration is defined as _____. An offer You can use the acronym _____ to remember the five essential elements of a valid and enforceable contract. COLIC ; C-Commpetent COLLIEparties, O-PETE Offer and acceptance, OLDCAR L- Legal purpose, I- In writing, C- Consideration A contract for the purpose of performing an illegal act is _____. Voidable Void Valid Unilateral A contract has been signed, and acceptance has been communicated. Prior to closing, the contract is a(n) _____ contract. Voidable Executory Fully executed Unenforceable A counteroffer A bribe Something given in exchange for a promise REAL ESTATE APPRAISAL 2 The approach used as the best indicator of value for existing properties Sales comparison Refers to the loss in desirability of the style, layout, or function of an element of a property over time Functional obsolescence The price a willing seller will sell for, and the price a willing buyer will pay Market value The legal use for property that gives the greatest return in money and/or amenities Highest and best use The loss in value of a property caused by factors outside of the property itself External obsolescence Also known as a drive-by appraisal, used for low LTV and low-risk loans. Limited Appraisal An Appraiser’s opinion of value Appraisal A review of the appraisal verifying the accuracy of the data, elements and procedures used by the original appraiser. Field review The percentage of value or sales price that a lender is willing to finance. Loan-to-value ratio A checklist of items an appraiser uses to analyze the appraisal report for completeness and acceptable conclusions. Desk review The presence of lower valued properties in the area will cause a decline in the value of the subject property. Principle of regression The value of a commodity is influenced by the cost of acquiring a substitute or comparable item. Principle of substitution The forces acting on a parcel of land are always affecting the value of the land. Principle of change An economic principle stating that when demand is great and supply is short, prices in the marketplace increase. Principle of supply and demand The value of a property is equal to the value of the sum of the contributory value of each of its components, not their price. Principle of Contribution The legal use that gives the greatest return in money and or amenities. Highest and best use Value is maximized when there is a reasonable degree of homogeneity in a neighborhood. Principle of conformity The purchase price is affected by the expectation of future appeal and benefits. Principle of anticipation The absence of competition in the marketplace will cause prices to increase. Principle of competition The value of a subject property is increased by the value of surrounding properties Principle of progression Improve a property when the value added by the improvement exceeds the cost of the improvement Principle of increasing and decreasing returns Characteristics of Value Which characteristic of value states that the property must fulfill a need? Transferability Scarcity Utility Demand _______ is the most probable price a property should bring Value Market value Demand Ad valorem _______ refers to the assessed value of the property. Value Demand Market value Ad valorem _______ is when ownership cannot be transferred from one person to another, it has no to little value. Transferability Scarcity Demand Utility Which characteristic of value states that limited supply in the marketplace creates value? Utility Scarcity Transferability Demand What is the adjusted sale price of Sale 1? 157,000 What is the adjusted sale price of Sale 2? $157,500 What is the adjusted sale price of Sale 3? $157,800 External obsolescence is the loss in desirability of the style, layout, or function of an element of a property over time. TRUE FALSE Deterioration is the reduction in value of property from causes such as deterioration or obsolescence. TRUE FALSE Reconciliation is the final step in the appraisal process. TRUE FALSE Functional obsolescence refers to the loss in value of a property caused by factors outside of the property itself. TRUE FALSE GRM = Sales Price ÷ Monthly Rent TRUE FALSE The appraiser will gather at least three comparison sales known as “comparables”. TRUE FALSE The three approaches to value are the sales comparison approach, the cost approach, and capitalization. TRUE FALSE The comparable sale can differ from the subject property in two ways. It can have features that are superior or inferior. TRUE FALSE The value of a property may be affected by social, economic, governmental, and environmental influences. TRUE FALSE The principle of conformity suggests that the value of a property is equal to the sum of the contributory value of each of its component parts. TRUE FALSE Chronological age is the actual age of the property in years. TRUE FALSE A field review, which has an exterior only, or drive-by, inspection is deemed acceptable for low LTV or low-risk loans. TRUE FALSE The principle of anticipation states that the purchase price is affected by the expectation of future appeal and benefits. TRUE FALSE The loan-to-value ratio (LTV) is the percentage of value or sales price that a lender is willing to finance. TRUE FALSE Most lenders, especially for conforming loan programs, do not normally conduct simple desk reviews at their desks. TRUE FALSE Fannie Mae and Freddie Mac have been instrumental in standardizing residential appraisal reporting through the widespread adoption of the Uniform Residential Appraisal Report TRUE FALSE Market value is not one of the concepts that are typically misunderstood in an appraisal TRUE FALSE Appraisals are a critical part of any transaction where financing is involved because lenders use them to determine the market value of the property being used to secure the loan. TRUE FALSE MODULE 1 QUIZ An opinion of value A market analysisThe market value of a property The appraised value of a property is The sale price _____ are assessed based upon the assessed value of the property and the existing tax rate. Ad valorem taxesEnvironmental Impact Comparative Statements Market (EISs) Offers Analyses (CMAs) In the appraisal report, the property being appraised is referred to as the _____ property. Target property Comparable property Sold property Subject property The principle of _______ suggests that the value of a property is equal to the sum of the contributory value of each of its component parts. Anticipation Change Substitution Contribution Real Estate Financing Principles- Module 2 The process of making a lending decision Underwriting The process of creating a new mortgage loan Origination The practice of refusing to provide financing in a particular location Redlining The market in which borrowers and lenders come together to create and negotiate the terms of a mortgage transaction Primary mortgage market The legal procedure under which property may be sold to satisfy an unpaid promissory note Foreclosure All of the following are mortgage lending activities except: Loan origination Funding Closing Promissory note The legal procedure whereby the secured property can be sold to satisfy the unpaid promissory note is called: Mortgage REO Foreclosure Servicing All of the following are part of the primary mortgage market except: Fannie Mae Correspondent lenders Mortgage BankersMortgage Brokers The pledge of the property as security of repayment of the note is called: Underwriting Promissory note Mortgage A real estate lien note is also known as: Promissory note Funding Created in 1938 to bring stability to the US housing market, this privately-owned company plays a vital role in financing mortgages and increasing home ownership opportunities in the U.S. Fannie Mae A federal law that ensures that all consumers are given an equal chance to obtain credit by prohibiting discrimination in any aspect of the credit transaction. ECOA This government owned association operates the mortgage-backed securities program in the U.S. Ginnie Mae This federal agency is responsible for enforcing federal consumer financial law. CFPB A federal law designed to protect consumers in credit transactions by requiring clear disclosure of key terms of lending arrangement and all the associated costs. TILA This federal law enhances consumer protection by establishing minimum standards for the licensing and registration of state licensed mortgage loan originators and by establishing a nationwide mortgage licensing system. SAFE Act This chartered corporation was created to increase the supply of funds that mortgage lenders can make available to homeowners and multi-family investors. Freddie Mac This federal law was passed to ensure that banks would do business in the communities in which they are chartered to do business. CRA The Federal Reserve uses three primary monetary policy tools to influence the cost and availability of credit. TRUE FALSE Mortgage Closing Foreclosure The yield on the loan is determined by the interest rate charged on the loan and the discount points. TRUE FALSE Banks must hold a percentage of deposits in reserve in cash or at a reserve bank. TRUE FALSE A par loan is a loan with no discount points. TRUE FALSE TILA and RESPA were integrated into one disclosure using two documents: the Loan Estimate and the HUD-1. TRUE FALSE The Federal Reserve manages the secondary market. TRUE FALSE All borrowers who apply on the same day receive the same interest rate. TRUE FALSE Monthly payment in a loan is referred to as: P&I T&I In this type of loan, the interest can change at scheduled intervals throughout the loan. Balloon note Fixed-rate mortgage Adjustable rate mortgage Cap loan In this type of loan, monthly payments include both principal and interest throughout the term of the loan until the principal is repaid. Interest Fully amortized Principal In an ARM, the lender usually offers a lower interest during the first year or more of the loan, called: Discounted Initial Lifetime Rate Cap This is the interest rate limit over the life of an Adjustable Rate Mortgage Initial Cap Adjustment Constant MaturityPer Treasury Cap Adjustment Rate Lifetime Cap All of the following are advantages of interest-only ARM loans except: Protects against aInvest real estate the cash bubble flow Pay principal when Buy it'smore convenient house All of the following are advantages of ARM loans except: Higher loans A purchase with the intent to refurbish a property would need this type of loan. Construction to permanent loan A loan that has two or more lenders who share in financing and in risk of the loan. Participation loan Allows a homeowner who is 62 or older to borrow equity from their home without making payments. Reverse Annuity Mortgage A partially amortized loan with a final payment that is substantially higher than the other payments. Balloon note A loan to finance both real property and personal property in the same loan. Package Mortgage Asset-based financing made by a private investor. Collateral- Dependent Loan Financing that preserves the low, existing interest rate on the original note with seller financing on a new note. Wraparound Mortgage A loan that includes principal, interest, taxes, and insurance in the monthly payment. Budget Mortgage A type of seller financing wherein the seller retains title to the property until the balance of the note is repaid Contract for deed Amortization PITI Fixed rate mortgage Initial cap adjustment Per Cap Adjustment Unpredictable loan Lower payments interest rate Falling interest rates Sarah wants to upgrade to a new, larger home for her and her two young daughters. Recently divorced, she has listed the home she and her ex-husband shared and is looking for homes in the low $300,000s in her daughters’ school district. As a Certified Registered Nurse Anesthetist (CRNA), Sarah has a gross annual income of $158,250. She has decided to apply for a conventional loan, and because she has excellent credit, she qualifies for a lower interest rate. Sarah currently has fixed monthly obligations totaling $1,760 What maximum monthly house payment does she qualify for using the front ratio? $1,760.50 $13,187.50 $3,692.50 $4,747.50 What is the maximum she can qualify for using the back ratio? $4,747.50 $3,676.94 $5,697.00 $3,692.50 $3,692.50 $2,987.50 $8,440.00 $4,747.50 Assuming that she has a total fixed monthly obligation of $1,760, what is the maximum house payment that she can qualify for? A loan that meets the standards of Fannie Mae and Freddie Mac. Conforming loan The ratio of the borrower’s total recurring monthly debts and house payment as part of the borrower’s gross monthly income. Back ratio A loan that is neither federally insured nor guaranteed. Conventional loan The percentage of the lesser of the appraised value or the sales price that the lender is willing to lend. Loan-to-Value A special insurance designed to allow the lender to increase the LTV ratio. PMI A ratio of the proposed house payment as part of the borrower’s gross monthly income. Front ratio FHA loan programs include a balloon loan. TRUE FALSE FHA had an influence on real estate financing by creating standards for borrower qualification. TRUE FALSE MIP is paid only once, at closing TRUE FALSE Mortgage insurance on an FHA loan is called MIP. TRUE FALSE FHA loans are for U.S. citizens only. TRUE FALSE The LTV on an FHA is as high as 96.5%. TRUE FALSE FHA allows for the use of non-traditional credit for borrower’s who do not have an established credit history. TRUE FALSE A purchaser of a residential rental property may obtain an FHA loan. TRUE FALSE A purchaser of a working ranch may obtain an FHA loan. TRUE FALSE FHA insurance is for the whole loan amount. TRUE FALSE Sum of regular debt plus house payment as a percentage of monthly income. Back ratio Housing Assistance Program VLB A loan with no discount points Par Loan Mortgage insurance found on an FHA loan MIP Where investors purchase loans Secondary market House payment as a percentage of income Front ratio Government rural loan USDA Section 502 loan Default insurance on a conventional loan PMI Percentage of sales price lender will finance LTV Collateral-dependent loan Hard money loan Central Banking System in the United States Federal Reserve MODULE 2 QUIZ The _____ is an agency responsible for affordable housing as well as the regulation of the state’s manufactured housing industry Texas Real EstateTexas Commission DepartmentTexas of Insurance DepartmentTexas of Housing REALTORS and Community Affairs Which of the following federal laws was passed to ensure that banks would serve the needs of the community in which they were chartered to do business? Truth in Lending Act Regulation Z _____ is a special form of insurance designed to allow lenders to increase the LTV ratio. Errors and Omissions Liability insurance insuranceMortgage Insurance Private Premium Mortgage Insurance The _____ is the central banking system of the United States. Federal Reserve FHA FOMC Federal Credit Union The ________ is based on the loan to value ratio. Annual premium POA fee Funding fee Up-front mortgage insurance premium Which of the following includes both real and personal property (fixtures and furnishings)? Blanket loan Budget loan Sub-prime loan A(n) _____ is also known as a land contract or installment land contract Contract for deedOpen-end mortgage Wraparound mortgage Sub-prime loan According to the Fannie Mae 1003 Application, which of the following may be a source of a gift or grant to the borrower? Federal agency Religious nonprofit Relative Package loan Equal OpportunityCommunity Credit Act Reinvestment Act All of the above Control of Land Usee The right of the government to take an individual’s land if he or she dies without a will or heirs Escheat The government’s right to tax real estate Taxation The right of the government to regulate and control the way that an individual uses his or her land Police power The right of the government to take private land for public use Eminent domain Title to land in the United States can be traced back to its original owner Sovereignty of the soil __________ is the action of taking land for public good. Inverse condemnation Eminent domain Zoning Condemnation A piece of land that separates one land use from another is referred to as ____________. Sovereignty of theMills soil Variance The right the government has to regulate and control land use is: Police power Special assessment Eminent Domain Escheat The government is the original owner of all land. This is known as: Taxation Sovereignty of theZoning soil A tax levied on a group of landowners to pay for a benefit to the limited number of owners is called: Special assessment Redemption Escheat Unpaid property taxes create: Downzoning Escheat The highest property Intestate lien The government has the right to take land when someone dies without a will and has no heirs is called: Redemption Downzoning Inverse condemnation Escheat Private control of land imposed by developers Covenants, Conditions and Restrictions Deed restrictions and CCRs control Present and future owners Passed by Congress to protect consumers from fraud in the sale or lease of land Interstate land sales full disclosure act Private control of land imposed by the seller of a parcel of land Deed restrictions An energy audit can be used to prioritize projects before beginning a major remodel or retrofit project. TRUE FALSE The HIS rater provides the homeowner with a detailed report that indicates areas of improvement. TRUE FALSE A good strategy for limiting liability is to focus on green features that are verifiable rather than characterizing a home as “green” or “eco-friendly.” TRUE FALSE Included in the green buyer types are Economizers, Investors, and Health Conscious Buyers. TRUE FALSE More than 47,000 residential units have not been certified under the LEED for Homes rating system. TRUE FALSE For Industrial Plants, a professional engineer must certify that the information used to calculate the plants energy performance score is correct without any additional EPA environmental compliance criteria. TRUE FALSE Commercial buildings must be verified by a Licensed Professional (Professional Engineer or Registered Architect) to be eligible to apply for the ENERGY STAR. TRUE FALSE Buffer zone Variance Condemnation QUIZ Located in between incompatible uses, a _______ is an area of land separating one land use from another, such as residential from commercial. buffer zone forward condemnation reverse condemnation police power zone A change in zoning could result in a(n) _____ use of land for a property use that was permitted under former rules. Variance Non-conforming Illegal Property taxes are referred to as _______ taxes, which means "according to value." Highest priority lien Lowest priority lien Assessed value Ad valorem Which of the following acts passed by Congress gives the authority to recover natural resource damages caused by releases of hazardous substances? Comprehensive Environmental Clean Air Act Response, Clean Water Compensation Act Dodd-Frank and Liability Act Act Examines a home and prepares a report that lists deficiencies in a property Home inspector Protects and enhances the value of a property while generating income on behalf of the owner Property manager Represents a buyer in a real estate transaction Selling agent Specialist who estimates the value of properties for owners, lenders, and taxing authorities Real estate appraiser Setback Works with a seller to list property with a brokerage firm Listing agent Judy is nearing the end of her first year at a commercial real estate firm. She realizes that her sales are nowhere she had projected at the beginning of the year. She wonders how Kevin, another new agent at the firm had much greater success than she did when they both spent six years as residential agents with an equivalent rate of success. Kevin just seems to have a knack for working in the world of commercial real estate. How is it possible that two equally successful residential agents could end up on completely opposite ends of the production spectrum by the end of their first year? In the business of real estate, there is a degree of ability and talent necessary to become a top performer in a given specialty. In each scenario below, help Judy decide which specialization she might be better suited for instead of commercial real estate. Judy grew up on a working ranch in the Hill Country and she knows a lot about soil types and farm equipment. She also understands how mineral estates can be split between owners. She is patient with buyers and is willing to work with them in order to make a commission on a cash sale. Which of the following specializations is best for Judy? Property management Commercial Farm and Ranch Auction Judy would like more independence with her schedule. She knows a lot about the local rental market and she possesses good marketing skills. From the given information, which of the following specializations would you recommend to Judy? Leasing Investment Auction Judy can manage a budget and prepare financial reports with ease. She is confident she could enhance a property’s value while still generating income. From the given information, which of the following specializations would you recommend to Judy? Leasing Foreclosure Property management Land brokerage How is a broker required to communicate the sales agents’ scope of authorized activities? In the written policies Through and procedure periodic Through emails manualscheduled In sales the independent meetings contract agreement Besides the establishment of the scope of the sales agents’ authorized activities, the broker must ensure that sales agents are: Competent to do the Physically authorized capable activities Motivated to do theto required succeed Organized work by using calendars and planners Competency includes: Taking the minimum Proving amount yourself of continuing inReceiving the field education the necessary Passingadditional a broker administered education required exam by the broker REO QUIZ _____ are specialists who estimate the value of properties for owners, lenders, estates and taxing authorities. RMLOs The sale of unimproved property is referred to as _____. Land brokerage Farm and ranch brokerage Auctioneering When a license holder is asked to locate an investment property for a potential buyer: The license holderThe should license go ahead holderThe with should license thedecline transaction holder because The should because license the go ahead License holder havingwith should Act a real the prohibits apply estate transaction for this license antype investment only means ofifactivity. he that orendorsement she he is orcompetent she isfor qualified his/her to do so. license Appraisers Inspectors Property Managers Real Estate Investment Real Estate Investments Found by dividing the net income of a property by its sales price Capitalization rate Deducted from gross income to determine the net operating income Operating expenses The passive increase in the value of a parcel due to market forces Appreciation The amount of rent that will be collected in a year, assuming that a property was fully rented with no vacancies and no credit losses Gross scheduled income The ease of converting an investment into cash Liquidity Mr. and Mrs. Chen have been investing in residential real estate properties for the last 10 years, at one time owning three quadplexes and one duplex. They bought in a down market, and rehabilitated each of the properties. They have grown tired of the constant upkeep and search for tenants that residential rental properties require. They recently joined an investor’s club and have decided that they like the sound of investing in commercial real estate better than residential. Sam is the license holder who has represented the Chens in the sale of three of their four rental properties. The fourth and last property, a quadplex, was listed by Sam for $575,000. After paying off the mortgage on the last property, they will have a total of $1,000,000 cash to put towards a new investment. After attending several seminars on commercial investing, the Chens decide to buy a light industrial building for $840,000. Since interest rates are low, the Chens decide to take out a loan, using leverage instead of cash, in order to increase their return on investment. The gross income for the Chen’s quadplex the preceding year was $120,000. Operating expenses were $18,000. How much was the net income? $156,000 $138,000 $120,000 $102,000 If the depreciable improvements on the industrial property they chose are equal to $390,000, how much is per year depreciation? (Remember, commercial property is depreciated over 39 years.) $100,000 $31,540 $11,540 $10,000 5% 9% 11% 9% If the net income of the industrial property the Chens are purchasing is $89,000, what is the capitalization rate rounded to the nearest percent? Colin is interested in investing in real estate because it offers a higher rate of return than other investment products currently on the market. Since he does not have a large amount of capital to purchase a commercial property outright, he should consider purchasing shares in a _____ that has more than 100 investors involved. Real Estate Investment 1031 exchange Trust Real Estate Investment CapitalSyndicate gain Ali and his family own three small retail properties (strip malls with tenants) as investment properties. The 2018 total gross income collected from rents, parking, and other fees comes out to $385,000. Expenses for operating the properties totaled $57,500. What was the NOI for Ali’s investment properties for 2018? $327,500 $385,000 $57,500 $442,500 7.35% 10% 3.50% 5.92% $76,200 $10,100 $166,200 $121,200 Matteo is listing one of his freestanding commercial buildings for sale. The building is occupied by a major fast-food chain on a 15-year lease with 5-year renewal options. Business is good, ensuring the tenant will stay in the location in the long term. The asking price is $2,500,000 with an annual NOI of $148,000. What is the cap rate? Asmaa’s 8-unit apartment building is fully rented with 6 1-bedroom units renting for $1,200 per month and 2 2-bedroom units renting for $1,450 per month. Expenses for the property include property management fees, insurance, property taxes, and maintenance cost Asmaa in excess of $45,000 per year. What is the gross scheduled income for the property? QUIZ Additional capital or property included in a transaction to even out the exchange is called _____. Capital gain The potential income of a property that is derived from rents collected in a year is called _____. Gross Rent Multiplier Gross Scheduled Great Income Rental Income Appreciation Schedule Residential income property is depreciated over a _____. 39-year period using 27.5-year straight-line perioddepreciation using 30-year straight-line period using 29-year depreciation straight-line period using depreciation curved-line depreciation The capital gain on the sale of a property is calculated by _____. Multiplying purchase Subtracting price by residual 25% Subtracting value from theasset adjusted Adding cost basis the adjusted from thebasis net sales to theprice net sales price A _____ allows for the indirect investment in mortgages through the sale of securities. Real Estate Investment Real Estate Syndicate Investment Real Estate Trust Mortgage Real Investment Estate Cooperative Conduit ____ can never be depreciated for income tax purposes. Buildings Capital improvement Boot Appreciation Machinery or furniture Computer software Land Real Estate Leases All or part of the rental is based on the gross receipts of the tenant’s business Percentage rate A lease in which the tenant pays rent plus expenses to pay for taxes, insurance, repairs, and utilities Net lease A lease in which payments begin at a lower, fixed rate, but gradually increase as the lease matures Graduated lease The instrument used to create the leasehold estate Lease A lease with a definite beginning and ending date Estate for years is a lease that automatically renews for a like period of time requiring a notice of termination to end. Tenancy at Will Periodic Tenancy Tenancy at Sufferance Estate for Years is a tenant who refuses to leave a property after the end of a lease Eviction Tenancy at Will is a lease with a definite beginning and definite ending date needing no notice to terminate. Periodic Tenancy Estate for Years Tenancy at Will Tenancy at Sufferance is a lease in which the tenant pays rent which includes any utilities. Percentage LeaseGraduated LeaseGross Lease Net Lease is a lease in which all or part of the rent is based on the gross receipts of the tenant’s business. Percentage LeaseGross Lease Net Lease Graduated Lease is a lease in which payments begin at a lower rate but gradually increase as the lease matures. Gross Lease Net Lease Graduated lease Percentage Lease states that a lease of one year or less is not required to be in writing to be enforceable Tenancy at Will Percentage LeaseNet Lease is a type of lease that an owner who wishes to free up capital but wants to retain possession of a property would use. Periodic Tenancy Lease Option A valid lease must include a legal description of the property, not just a street address TRUE FALSE Expiration is the way one tenant transfers the lease to another tenant. TRUE FALSE A tenant who has the right to match or better an offer received by the landlord before the property is sold to someone other than the tenant has the right of first refusal. TRUE FALSE A lease does not need to be recorded to be valid TRUE FALSE Leases for more than one year must be in writing to be valid TRUE FALSE A tenant who fails to move out of a property when the lease has expired is subletting the property. TRUE FALSE Action of forcible detainer is the legal process used to evict a tenant. TRUE FALSE A tenant is subletting the property to another tenant when the tenant has the right to transfer some or all of the rights to another tenant with liability remaining with the original tenant. TRUE FALSE Holdover Tenant Forcible Entry and Detainer Statute of Frauds Holdover TenancySale and Leaseback _______ defines the rights and obligations of both landlords and tenants in the leasing of residential and commercial properties. TREC's rule A residential landlord must do all of the following except: Equip exterior window Provide witha afire window extinguisher Install, latch inspect and Provide repair smoke a keyless alarm bolting device and a door viewer on every exterior door An exterior sliding glass door must have all but the following: Door pin lock A landlord must account for security deposits within _____ days after the lease has ended Forcible entry andLandlord detainer and Tenant TRELA Act A door handle latch A screen door 30 21 Security bar 7 14 A Temporary Lease Promulgated by TREC can be used to give the buyer possession of the property for a period of 90 days or less and the lease is for Texas REALTORS® Attorney Agreement between Residential Brokers Use Security Deposit Prior to signing a lease, the tenant and the landlord should be advised to seek the advice of a(n) . Texas REALTORS® Attorney Agreement between Residential Brokers Use Security Deposit Besides the two Temporary Residential Leases, TREC does not have a lease agreement. The ____has a lease that may be used by its members Texas REALTORS® Attorney Agreement between Residential Brokers Use Security Deposit A(n) _________for Residential Leases would be used to create a commission agreement between the listing broker and cooperating broker on a residential lease. Texas REALTORS® Attorney Agreement between Residential Brokers Use Security Deposit According to the Agreement Between Brokers For Residential Leases, the commission does not become payable until after the tenant pays the full First Month’s Rent the Prorated Rent and the_______ Texas REALTORS® Attorney Agreement between Residential Brokers Use Security Deposit QUIZ Termination of a lease by agreement of the parties is referred to as _____. Assignment A(n) _____ is a lease of property where the landlord pays charges regularly incurred in ownership, such as taxes, insurance, utilities, and repairs. The tenant pays only rent. Graduated lease Net lease Lease and take back Gross lease A _____ is an agreement that conveys the right to use property for a period of time. Deed Lease The transfer of some or all of the tenant’s rights and/or leased space to another with liability remaining with the lessee is known as _______. Right of first refusal Tenancy at sufferance Subletting Mutual rescissionExpiration Warranty deed Subletting Life estate Termination Property Management The property manager’s employment contract with the owner Management agreement Deterioration of a property due to delayed maintenance Deferred maintenance Servicing a property and its equipment in order to prevent mechanical failure and keep property values high Preventive maintenance A list of all cash that was received and all expenses paid out during a reporting period Cash flow report Compares each category of income and expense to a prior period’s report so that trends can be identified Operating statement Property Managers should carry this type of insurance to protect from mistakes. Management agreement Errors and omissions Employment insurancelaw Building and fire code This occurs when a property is not properly maintained. Maintenance Maintenance to reduce the cost of failures in expensive mechanical equipment Maintenance management Payroll The document used to create the property management relationship. Building and fire codes Federal Fair Housing Management Laws Manuela is managing a new multifamily residential property that has just come on line. Her clients are a group of investors who want to capitalize on the property’s convenient proximity to the local university and cater exclusively to students. Manuela is used to managing garden apartments in the suburbs. What should she be aware of? Occupancy rates will be higher in the summer. The majority of the She property’s must provide residents concierge will be services moving Residents inand or out foodat will delivery the move same to in her time. andresidents out throughout the year in much the same manner as a regular apartment complex. Grace is a residential sales agent who recently transferred to the commercial property management side of her brokerage. As a commercial property manager, what activities will Grace most likely be performing? Screening applicants Signing leases Harlan is a champion for the environment. He became a property manager because he wanted to manage green buildings constructed to provide a healthy, sustainable, and productive work environment. What certification should Harlan pursue to further his career in his chosen profession? The IREM Certificate The Property BOMA Systems Manager TheMaintenance Certified (CPM) Commercial Technician The LEED Investment (SMT) Green Associate Member (CCIM) Advertising Preventive maintenance Deferred maintenance Deferred maintenance Preventive maintenance Management agreement Arranging for building All ofmaintenance these are activities Grace will be performing QUIZ A property manager is a(n) _____ of a property owner. Special agent When a property is not well-maintained, the result is _____. Preventive maintenance Deferred maintenance Escalation clauses Assignment and sublet A property manager will have a business account and a separate _____ account to hold tenant security deposits. Trust Personal Checking Agents interested in property management must have a _____ authorizing them to do so. License Certification Sponsoring brokerDegree If the property manager is an agent of the landlord, the management firm should also carry _____ and liability insurance. Homeowner’s insurance Renter’s insurance Title insurance Secret agent Estates, Transfers And Titles Transfers ownership form the government to an individual Patent Divides property between joint owners Partition Document that conveys an interest in real estate from one party to another Deed Evidence of an individual’s right to possess land Title A written expression of an individual’s desire of how his/her property will be distributed after death Will Title is the evidence an individual has of his or her right to possess land. TRUE FALSE The government is the original owner of land. This is known as Annexation TRUE FALSE The Torrens System uses an ownership certificate of land which is recorded in the public records. TRUE FALSE The best way to ensure that the grantor has good and marketable title is to get a title commitment. TRUE FALSE The Treaty of Annexation of the Republic of Texas gave all public land in Texas to the United States government. TRUE FALSE The database of county records is known as the abstract plant. TRUE FALSE An abstract of title is a complete history of all the recorded events of the title of a piece of property TRUE FALSE General agent Sponsoring broker Secret Errors and omissions insurance An attorney reads the abstract of title creating a document called the Chain of Title. TRUE FALSE Deed and title are the same. TRUE FALSE The government uses a document called a patent to transfer ownership of land. TRUE FALSE Corrects an error in a previously executed deed Correction deed Used to convey title to property sold by the government at a tax sale Tax deed Conveys a minor’s interest Guardian's deed The consideration is love and affection Gift deed Used by grantors to warrant and defend title, but only against claims arising during his or her period of ownership Special warranty deed The grantor does not even claim to own the property and gives no guarantees, warranties, or covenants Quitclaim deed The grantor implies ownership but does not provide a warranty of title Bargain and Sale deed Used in the case of foreclosure Sheriff's deed Affords the purchaser the greatest degree of protection General warranty deed Margaret Sullivan died in Texas without a will on file. She has one son, Tyler, who lives in Maine. Mr. Manning, a former neighbor of Margaret’s, claims that he and Margaret were “common law” married, and that it had been Margaret’s dying wish to leave the house and all of its contents to him. He also claims that Margaret made this declaration on many occasions and in the presence of several witnesses. To date, none of Mr. Manning’ s claims have been substantiated. He and Margaret never lived under the same roof, no one remembers them actually being a couple, much less “husband and wife,” and their finances were never combined, so the common-law marriage cannot be lawfully proven. A real estate investor would like to purchase the property from Margaret’s descendant because the state is constructing a freeway in close proximity to the home, causing property values in the area to increase. The neighborhood is an older one, and most of the homes have been converted to commercial properties, like law firms and doctor’s offices. With Tyler being Margaret’s only known descendant: The state will receive Tylerthe willhome inherit through the The home estate escheat. after cannot the estate Tyler passwill to passes Tyler inheritthrough because the home probate of after Margaret’s in theMaine. estate verbal passes pledge through to Mr. probate Manning.in Texas. If the real estate investor purchases the home for $350,000 from the grantor, when will the title be conveyed to the grantee? When the deed isWhen signedthe and freeway delivered After is built a 60-day waiting After period the property is rezoned for commercial If, prior to the sale of the property, evidence of a common-law marriage existing between Margaret and Mr. Manning were to be found, creating a cloud on the title, what steps might the investor take to ensure the security of his investment? Insist on a bargainPurchase and sale title deed insurance File for an easement Secure a guardian's deed If the investor purchases the property and the government later exercises the right to acquire the property to build a highway, this would be an example of _____. Accretion Escheat Reliction Eminent domain Title is conveyed when the deed is signed and _____. Witnessed Delivered Recorded Notarized The most common type of deed used in Texas is the _____. Bargain and Sale Quitclaim Deed Deed General WarrantySpecial Deed Warranty Deed Which of the following is not a type of involuntary alienation? Bankruptcy QUIZ Devise Condemnation Foreclosure Closing Procedures Compensates or reimburses against losses sustained as a result of defects in title Title insurance policy Provides the client with information regarding the general condition of the property Property inspection Responsible for ensuring the closing follows the terms agreed to by the parties in the sales contract Escrow agent Usually 1 to 3% of the sales price of a property Earnest money Form that replaced the HUD-1 settlement statement Closing disclosure Lenders will require that a buyer who is taking out a mortgage on the property have an _______________ performed to ensure that the home is worth the loan amount being requested. Appraisal Walkthrough Survey Lis pendens The _______________ is responsible for ensuring that closing follows the terms agreed to by the parties in the sales contract. Sales agent Escrow agent RMLO Inspectors The _______________ is used to determine whether or not the information in the sales contract concerning the property’s boundaries is accurate Lis pendens Appraisal Title commitment Survey Unless the buyer waives the home inspection _______________, the property will be inspected. Contingency Optional Escrow According to TREC Property Inspection Report (REI 7-6), the inspector is looking at the following systems: structural systems, electrical systems, HVAC systems, plumbing systems, appliances, and _______________. Pool Optional systems Appraisal Pending lawsuits that can affect property title are called _______________. Title commitmentsLiens Lis pendens Deed restrictions The Closing Disclosure should match up with the _______________ contract. Executory Option Sales Loan The buyer can accept the property condition _______________ or request that the seller make specific repairs as-is Cleaned Remodeled Sanitized One to three days before the closing, a buyer’s agent will recommend that the buyer do a final _______________ of the property. Inspection Survey Walk-through Appraisal Right Refrigerator Under _______________ rules, residential closings must be performed using the Closing Disclosure TREC RESPA SML The Real Estate Settlement and Procedures Act is administered by HUD. TRUE FALSE RESPA is applicable to all federallyrelated residential mortgage loans. TRUE FALSE The Dodd – Frank Wall Street Reforms and Consumer Protection Act directed the CFPB to integrate the mortgage loan disclosures under TILA and RESPA. TRUE FALSE Mortgage loan originators must provide a copy of Your home loan toolkit: A stepby-step guide no later than 7 days after the lender receives the loan application. TRUE FALSE RESPA section 8 requires the lender to disclose a controlled business arrangement. TRUE FALSE A seller may require a purchaser to use a specific title insurance provider when the purchaser is paying for the title insurance. TRUE FALSE RESPA Section 10 allows a lender to collect a cushion for the escrow account of amount up to 1/6 of the total disbursement for the year. TRUE FALSE CFPB The loan amount will be found in the _______________ section of the Loan Estimate. Loan terms Costs at closing Closing costs details Projected payments The _______________ section has costs associated with the loan that the buyer may not choose the provider of the services. Services you can Origination shop for charges Other costs Services you cannot shop for Calculating Cash to Close _________________. Is a summation ofIssection unknown A, Btoand theIs C buyer aonly summation until closing ofIssections a summation E, F, Gofand sections H onlyA, B, C, E, F, G, and H Signing the Loan Estimate locks the borrower into the loan described in the LE form. TRUE FALSE All of the following are part of the section called Due From Borrower at Closing on page 3 of the Closing Disclosure except: Sales price of anySales personal priceproperty of the Seller's propertyloan payoff Closing costs paid at closing The borrower receives a credit on the disclosure for which of the following: The sales price Seller's loan payoff Loan amount The seller receives a credit at closing for all of the following except: Unpaid property taxes The sales price ofThe anysales personal priceproperty ofAthe balance property in the seller's reserve account The seller is debited at closing for Pre-paid HOA fees The sales price ofPre-paid the property taxes Pre-paid property taxes Pay-off of the first mortgage QUIZ RESPA manages closings on _____ federally-related financing. All properties without All properties withOne-to-four familyAll residential commercial properties properties withwith Which of the following items is NOT covered by a title policy? A lien filed againstSurvivorship the title because rightsAaof charge previous a policyholder’s byowner a property Legal failed spouse owners descriptions to pay or condominium on property association use that were not disclosed in the title policy The _____ is responsible for closing the transaction as set forth in the sales contract. Selling agent Escrow agent Buyer’s agent Loan underwriter Real Estate Maths A property was listed for $159,500 and sold for $157,000. The listing agent had negotiated a 6% commission on the sale. What commission was paid to the broker at the closing? Sales agent, John Simmons, earned $5,458.75 as his half of a 5.5% commission. What price did the property sell for? $9,570 $150 $12,300 $9,420 $198,500 $99,250 $150,116 $300,321 Mary, a sales agent for ABC Realty, earns 40% of her broker’s share of a commission on any property she sells. If Mary recently sold a property at the price of $224,500 where the listing agent had negotiated a 6.5% commission to be split equally between the listing and selling broker, how much would Mary make? $5,837 $7,296.25 $2,918.50 $14,592.50 Mary wishes to net $50,000 after selling her property. She has a mortgage balance of $120,310 and must pay $5,000 in repairs and other closing costs. She has agreed to pay the broker 6%. What is the lowest price she can accept for her property? $185,828 $5,843,666 $186,500 $180,569 A seller wants to net $25,000 after paying closing costs of $3,200 and a loan balance of $66,800. He has agreed to pay a 5% commission on the sale. At what price should he sell his property? $99,000 $99,750 $100,000 $1,900,000 Latisha's savings account earns compound interest at 2.5% per year compounded annually. If the initial deposit is $4,000, how much money will she have in her account at the end of five years? $4,500 $4,210 $50,000 $4,525.63 Natalie's account has a balance of $24,333.06 at the end of 5 years. If the interest was compounded at an annual rate of 4%, what was the amount of her original deposit? $20,000 $17,833 $18,102.50 $22,000 If Mary paid $300 in interest only on the first month’s loan payment, and the interest rate on her loan was 9%, how much did she borrow? $3,240 $38,880 $40,000 $3,333.33 Mark and Ann have a mortgage loan balance of $126,385.20. Their monthly loan payment is $908.70. The interest rate on their loan is 7.5%. How much interest will they owe on their current payment? $798.91 $454.35 $8,570.19 $118.79 If a 4-story building has dimensions of 100’ × 125’ and construction costs are $55.00 per square foot, what is the cost to build this building? $5,500 $12,500 $687,500 $2,750,000 John owns 9 acres of land. He wants to subdivide it into half-acre lots. He must leave room for a road 1980’ by 33’. How many lots will he have? 16.5 18 1.5 15 How many cubic feet of storage space will there be in a warehouse measuring 80’ × 60’ with 20-foot ceilings and a 10’ × 10’ office space (to the ceiling)? A borrower has to pay 2 1/2 points at closing. The amount of principal borrowed is $155,000.00 on a sales price of $198,000.00. What amount will be charged for points? 94,000 cu ft $1,550 76,000 cu ft $3,875 96,000 cu ft $4,950 98,000 cu ft $1,980 The sale of a $292,500 home gave the listing broker $10,237.50. The selling broker received the same amount of commission. What was the rate of the commission charged? The market value of a property is $425,000. The appraised value is 95% of market value. What is the appraised value of the property? John owns 787,253 square feet of land. How many acres does he own? 5.30% 9.25% 7.30% 7% $403,750 $21,250 $416,350 $395,675 20 18 180 10 Any relationship in which one party acts for or represents another Agency Another name for the principal Client Drafts and revises contract forms that are capable of being standardized to expedite real estate transactions and minimize controversy Broker-Lawyer Committee An individual who sells or leases real estate for another in exchange for a commission Broker The individual who, through a series of uninterrupted activities or actions, brought about the completion of a contract Procuring cause of sale Marketing that uses adjectives and opinions rather than details or facts Puffing The broker is the only listing broker, and a commission is paid even if the property is sold by the owner Exclusive right to sell Gives the seller the right to list the property with multiple competing brokers and to sell the property personally without liability for payment of a commission Open listing The broker’s commission is the difference between the seller’s established net and the price that the buyer is willing to pay Net listing The percentage of value or sales price that a lender is willing to finance. Loan-to-value ratio Created in 1938 to bring stability to the US housing market, this privately-owned company plays a vital role in financing mortgages and increasing home ownership opportunities in the U.S. Fannie Mae A partially amortized loan with a final payment that is substantially higher than the other payments. Balloon note A loan to finance both real property and personal property in the same loan. Package Mortgage Questions Option A Option B Option C Option D Option E In an agency relationship, the client gives authority to the agent to work on the client’s behalf Agent Authority Client Benefit Loyal Fiduciary Agency is the relationship between two parties, the agent and the principal. Agent Authority Client Benefit Loyal Fiduciary An agent must always remain loyal to their client. Agent Authority Client Benefit Loyal Fiduciary The role of an agent when working for the principal is always for the benefit of the principal. Agent Authority Client Benefit Loyal Fiduciary The fiduciary relationship is based on trust. Agent Authority Client Benefit Loyal Fiduciary The principal and the client are the same person. Agent Authority Client Benefit Loyal Fiduciary LAW OF AGENCY Agent Phillip received an earnest money check payable to the title company from a buyer. Five days later he found the check under some paperwork on his desk. He deposited the check immediately. Decide if the actions are in violation of TRELA and could result in the suspension or revocation of the agent's license. Violation of TRELA Not a violation The Texas Real Estate Commission TREC was created in 1949 1929 1939 1959 Agent Dirk negotiated a transaction where the buyer wrote a $2000 earnest money deposit. The earnest money was deposited in Dirk’s escrow account. The transaction fell through, and feeling sorry for the buyer, he refunded the earnest money without the consent of the seller. Decide if the actions are in violation of TRELA and could result in the suspension or revocation of the agent's license. Violation of TRELA Not a violation Part of the licensing process is to determine Motivation for success Income potential Moral character Understanding of sales A broker may pay a fee to Another broker's sales An unlicensed agent person Another as abroker referral An attorney Agent Dwayne discovered that a great way to get more listings was to tell homeowners in the neighborhood that a huge Violation commercial of TRELA project Notwas a violation about to commence that would seriously devalue property in the subdivision. The claim was false, but it did result in a number of listings. Agent Willard got a call from a promising prospective buyer on one of the properties that he had put signs on without the owner’s knowledge. He went ahead and began negotiating a sale knowing that the seller had not even put it on the market. His rationale was that “Everything is for sale at some price.” Decide if the actions are in violation of TRELA and could result in the suspension or revocation of the agent's license. Violation of TRELA Not a violation Agent Maggie was showing properties to a buyer who inquired about the racial makeup of the neighborhood. She declined to respond to the inquiry. Decide if the actions are in violation of TRELA and could result in the suspension or revocation of the agent's license. Violation of TRELA Not a violation A person licensed by the Texas Real Estate Commission (TREC) to act as a broker or sales agent in a real estate transaction. License holder A broker who represents a seller, landlord, buyer or tenant. (2) Sales agent or broker license holders who represent the broker Agent with whom they are associated. A license holder not associated with the seller’s broker, but who is representing the seller through a cooperative agreement, Subagent often through membership in a Multiple Listing Service (MLS), with the seller’s broker. A broker selling the listing of another broker. A cooperative broker may complete the transaction as a subagent of the listing Cooperative broker, orbroker may represent the buyers under an agency agreement; he also known as the other broker An individual holding a broker’s license issued by TREC. Brokers may act independently in conducting real estate transactions, Broker license or may holder engage other broker or sales agent license holders to represent them in the conduct of their real estate business. A broker associated with and conducting all of his or her business as an agent of another broker. Broker associate An individual holding a license issued by TREC - an agent of the sponsoring broker. He or she may conduct business only Sales through agenthis license or herholder sponsoring broker. A sales agent or broker license holder associated with and conducting business as an agent of his or her sponsoring broker. Sales associate A broker representing the seller in a real estate transaction, also referred to as a Seller’s Broker, Listing Broker, or ListingSeller's Agent.agent A broker representing the buyer in a real estate transaction, also referred to as a Buyer’s Broker, Selling Broker, or Selling Buyer's Agent.agent A broker representing a landlord in a real estate transaction Landlord's agent A person, sometimes called a principal, who engages the professional advice or services of another, called an agent, and Client whose interests are protected by the specific duties and loyalties of an agency relationship. Many of these duties are outlined in a listing or buyer/tenant representation agreement. A person who receives limited brokerage services without establishing an agency relationship. Customer Choose the Principal's Duty that best describes each situation given: Agent Bill is instructed to arrange for lawn mowing for a seller who has moved out of state. Bill pays for the mowing and Compensation submits an invoice Reimbursement to the seller. Indemnification Performance Broker Sam sells a property for Seller Sue. At closing Broker Sam is to be paid a commission. Performance Compensation Reimbursement Indemnification Seller Wanda lists a property with Broker Susan. Wanda completes a seller’s disclosure indicating that there are no defects. Compensation After closing, Reimbursement the buyer discovers Indemnification major termite damage Performance and considers a lawsuit. Wanda considers implicating the broker in the misrepresentation. Seller Jane lists with Broker Bob. The house is never in showing condition, and Jane continually tells Bob that “Now is not Compensation a good time to show”. Reimbursement Indemnification Performance There are specific services that a license holder will perform when working on either the customer level (not representing the buyer) or client level (representing the buyer). Read each of the scenarios and decide if the actions would be appropriate when working with a Buyer Client, Buyer Customer or Both. Remember when answering each of these questions, you are working with the BUYER. Refusing to tell a buyer how long a property has been on the market. Customer level only Client level only Both Helping the buyer formulate a negotiating strategy Customer level only Client level only Both Disclosing material facts about a seller’s property. Customer level only Client level only Both Refusing to provide a negotiating strategy to a seller Customer level only Client level only Both Providing public information related to the property, such as square footage and taxes. Customer level only Client level only Both Telling a buyer that a seller’s property is overpriced. Customer level only Client level only Both Disclosing to a buyer that the current use of a property is in violation of deed restrictions. Customer level only Client level only Both Presenting a comparative market analysis to a buyer, showing the property is overpriced. Customer level only Client level only Both Telling the seller that the buyer can offer more money for his property. Customer level only Client level only Both Leading a buyer to believe that you are working in the buyer’s best interest. Customer level only Client level only Both The Texas Real Estate License Act TRELA was created in 1949 1909 1929 1939 The Texas Real Estate License act was created to ___________ the public. Indemnify Protect Defend Exonerate TREC’s role is to administer the provisions of Disclosure TREC's rules The license act Agency law ____________ is a duty of the principal to the agent. Communication Fiduciary Indemnification Agent The Canons of Professional Ethics and Conduct include Compensation Authority Integrity Ratification Agency Law does not require an agent to look after the best interests of a ________________ Broker Customer Client Principal Client, agent Agent, principal Principal, agent Broker, customer QUIZ An agency relationship exists when one person, the _____, acts for or on behalf of another person, the _____. Which of the following is grounds for suspension or revocation of a real estate license by TREC? Splitting a commission Splitting witha acommission person Disclosing other with than aaTexas material a license All real ofdefect holder estate theseofare license a property grounds holder for suspension or revocation of a real estate license The commission can deny licensure to an applicant based on the applicant’s _____. Credit score Work history Determination of fitness College transcript A(n) _____ is a broker selling the listing of another broker. Dual agent Intermediary Listing broker Cooperative broker Agency Relationships The right to represent the principal in a particular type of transaction or business. General agency Authority that comes from specific instructions, either oral or written. Express authority The power to act for the principal in all transactions. Universal agency Established when an agent acts without prior authorization and the principal accepts it. Agency by ratification Also known as Limited Agency. Also known as Limited Agency. Choose Yes or No to indicate which relationship an agent must disclose to another party in a transaction: A real estate agent is selling his house as a For Sale By Owner (FSBO) and is not using the brokerage to represent him.Yes No A real estate agent represents her cousin who is buying a condominium. Yes No A real estate agent with an inactive sales agent license wants to make an offer to purchase a house. Yes No An investor, who wholly owns an LLC that will purchase a commercial retail center. Yes No A real estate agent represents his parents who are buying a second home on the beach. Yes No A real estate agent who has 5% ownership of a corporation that is buying a rental house. Yes No A real estate agent represents his sister who is buying a house to live in. Yes No An LLC is purchasing a home to remodel and then lease to a residential tenant. A real estate agent is 25% owner of the Yes LLC. No Broker Weston is the owner of a property that is currently listed by his brokerage. Weston is showing the property to potential buyers, Kris and Ricky. The couple has another property in mind as well, but Weston wants to sell the property quickly and tries, subtly, to steer the couple in the direction of his property by emphasizing its amenities and location over the other property that the couple likes. He makes sure to advise them to submit a competitive offer because, in truth, the property is desirable and will most likely sell for over list price. Weston feels that if Kris and Ricky knew that the property belonged to him they might be biased against it, so he waits to tell them until after they have submitted their offer. Which type of agency was created by Broker Weston's actions? Agency by ratification Agency by estoppel Agency by actual Agency authoritycoupled with Ostensible an interest agency Jeanette, a seller, had to relocate to another state for work. She left her house vacant and listed it with real estate salesperson, Tim. Tim finds a buyer for Jeanette’s property and Jeanette accepts the offer. At closing, Jeanette is surprised to learn that she will receive one week’s rent in addition to the sales price of the property. In spite of the fact that Tim had no authority to do so, he authorized the buyers to move in one week before closing. Jeanette, happy to be out from under the house, accepts Tim’s action, even though it was risky and unprofessional. She receives the additional rental income. Which type of agency was created by Tim's actions? Agency coupled with Agency an interest by actual Agency authorityby estoppel Ostensible agencyAgency by ratification Seller Mike signs a listing agreement with real estate salesperson Joseph, giving Joseph’s broker the exclusive right to sell the property. Per the listing agreement, Joseph puts a lockbox on the front door and a sign in the front yard. Which type of agency was created by Mike and Joseph's actions? Ostensible agencyAgency coupled with Agency an interest by ratification Agency by estoppel Agency by actual authority Pam, a real estate salesperson, tells a potential buyer that she is representing Leon as the leasing agent for his commercial property. Leon was informed by a member of his custodial staff that Pam requested the key to an office suite for a showing. Leon allowed the custodian to give Pam the key so that she could show the suite to the potential tenant. Which type of agency was created by Pam and Leon's actions? Agency by actual Agency authorityby estoppel Ostensible agencyAgency by ratification Agency coupled with an interest A broker manages rental properties for a landlord. Universal agency General agency Special agency A sales agent sponsored by a broker Universal agency General agency Special agency Buyer Representation Agreement Universal agency General agency Special agency A seller lists a home for sale Universal agency General agency Special agency The broker representing a tenant in a commercial real estate transaction Universal agency General agency Special agency An agent with authority to conduct any and all business for the client Universal agency General agency Special agency The most limited form of agency Universal agency General agency Special agency An agency relationship with authority in a particular area of business Universal agency General agency Special agency An agent with no authority to bind the client. Universal agency General agency Special agency An agent with no authority to sign or initial anything on behalf of the client Universal agency General agency Special agency An agent with the authority to sign a listing agreement on behalf of a broker. Universal agency General agency Special agency The broker is responsible for compliance with fair housing laws TRUE FALSE The broker is responsible for an agent's health insurance TRUE FALSE The broker is responsible for compliance with advertising regulations. TRUE FALSE The broker is responsible for providing adequate opportunities for generating income. TRUE FALSE The broker is responsible for use of promulgated forms. TRUE FALSE The broker is responsible for providing a company car. TRUE FALSE The broker is responsible for compliance with regulations for disclosure. TRUE FALSE The broker is responsible for providing disability benefits. TRUE FALSE The broker is responsible for compliance with the Texas Real Estate License Act. TRUE FALSE The broker is responsible for timely renewal of an agent's license. TRUE FALSE The broker is responsible for completion of an agent's continuing education requirements. TRUE FALSE Read the following scenarios and for each one, determine which fiduciary duty the agent is violating: An agent tells others in office that the property is listed $150,000 above market. Confidentiality An agent disregards an instruction given by the seller Obedience A listing agent helps an unrepresented buyer when making an offer to purchase Loyalty An agent commingles funds Accounting An agent leaves doors unlocked after showing property Reasonable care A seller's agent fails to inform seller that a price increase is justified based on changes in the market. Disclosure Agent Anne is holding an open house at 123 Main St. This property is a new listing and she is very excited about it, as she Give feels them it will a tour sellof Inform quickly. the home, the The Smiths Smiths pointing Explain that attend out sheit's the represents the most IABS open attractive Attempt inhouse detail the seller and to features determine begin to question their motivation Anne about in buying some of the property’s features. What is Agent Anne’s first course of action? Agent Bob has signed a buyer’s representation agreement with the Nelsons. He is calling ABC Realty to make an appointment That hetoisshow a licensee, their That listing along he wants atwith 10 to Park hisshow That TREC Lane. he their license isWhat alisting buyer's must number on That 10 agent Agent he Park found Bob lane tell their ABC phone Realty number whenon making Zillowthe appointment? Later, when the Nelsons arrive at 10 Park Lane, they find the owners at the home. When the sellers come to the door, Bob Yes, tells thethem oral disclosure that No, he isbecause aisbuyer’s sufficient heagent. did No,not the Isdeliver Bob’s disclosure the oralIABS Yes, disclosure mustbecause when be made he sufficient? the made indisclosure writing the disclosure is a good practice, but is not required When must the agent provide an individual with a copy of the Information About Brokerage Services? A potential buyer visits your open house and no substantive conversation took place. Required Not Required You respond to an email inquiry from your website regarding a home for sale Required Not Required A stranger on the street, knowing that you are in real estate asks you “how is business?” Required Not Required You visit a seller to discuss listing their home Required Not Required A potential buyer meets with you to discuss the purchase of an office building Required Not Required A tenant that wants to discuss the terms of a 1 year lease. No sale is being considered Required Not Required QUIZ What form must an agent provide to a potential client at the first substantive discussion of a real estate transaction? Buyer's Representation Information Agreement AboutStatement BrokerageofServices Understanding Independent Contractor Agreement An example of a general agent in the world of real estate would be a(n) _____. Property managerEscrow agent Which of the following would NOT be an example of the fiduciary duty of reasonable care? Helping the client Assisting meet contract the seller deadlines Discovering to arrive atrelevant a reasonable Taking facts the and listing buyer disclosing price or seller these out to facts dinner to the when client the transaction closes The duties of the agent to the principal can be remembered by using the acronym _____. PETE Cooperative Broker Intermediary NEWCAR OLDCAR; O-Obedience, HOTROD L-loyalty, D-disclosure, C- Confidentiality, A-accounting, R-reasonable care In writing Both orally and in writing broker, agent agent, broker Creation and Termination of Agency A property is sold by the listing firm. In-House sale A property is sold by a firm other than the listing firm. Cooperative sale Created automatically with no discussion or action needed on the part of a brokerage firm. Subagency The seller retains the services of a broker. Listing side The buyer retains the services of a broker. Selling side The best way to create an agency relationship is Orally An oral agency agreement is enforceable against the ____________, and in unenforceable against the _____________.Client, broker broker, client If a broker learns confidential information during a listing presentation, the broker by _________ might be bound to keepConfidentiality the information confidential Presumption if the broker Implication is unsuccessful Construction in obtaining the listing. The written listing agreement creates a ________________ relationship. Customer The relationship between the broker and sponsored agents is a ___________ relationship. Special agency Customer Universal agency General agency Special agency general agency universal agency Broker Bob's company, Acme Realty is a small firm with three agents, Sue, Megan and Bill. Agent Sue lists Seller Steve’s Broker property. BobWho owns Sue, the because listingshe agreement? Broker is the listing Bob, Sue, agent None Megan ofand the Bill above Broker Bob's company, Acme Realty is a small firm with three agents, Sue, Megan and Bill. Agent Sue lists Seller Steve’s Broker property. BobIn the firm, Sue, who because has ashe fiduciary Broker is the listing Bob, duty to Sue, agent represent None Megan ofthe and theinterests Bill above of Seller Steve? Agent Joseph works for Broker Pete. Joseph signed a Buyer’s Representation Agreement with Buyer Markus. Agents Cindy and Flora just signed Independent Contractor Agreements with Broker Pete. Which of the following is true? Joseph, Cindy, Flora, Floraand andPete Cindy all do share Cindy not the have andsame Flora any agency agency are Broker therelationship relationship cooperative Joseph is the with or agents duties listing andin duties to agent. the Markus transaction. to Markus. Agent Joseph signed a listing agreement with Sherri and Steven to sell their condo while sponsored by Broker Pete, then left to go work for Broker Randy. Who is responsible for taking offers on behalf of Sherri and Steven’s condo? Broker Randy Broker Pete No one, the agency Joseph agreement is terminated Agent Joseph used to be sponsored by Broker Pete. He originally signed the listing agreement with Sherri and Steven in Broker Pete’s name. Joseph is now sponsored by Broker Randy and he submits an offer for a buyer who wants to purchase Broker Pete’s listing. The offer has been accepted by Sherri and Steven. Which of the following is true? Broker Randy is the Thecooperating transactionbroker isAgent an in-house Josephsale willBroker collect Pete both is thethe listing cooperating side andbroker the selling side of the commission Broker Pete is the listing broker for Sherri and Steven’s condo. Agent Joseph, who works for Broker Randy, has submitted an offer on the condo that has been accepted by Sherri and Steven. Broker Pete has been notified by TREC that his broker’s license has been revoked due to a host of violations including but not limited to unlawful trust fund handling. What happens to the listing? All Broker Pete’s agency The listing agreements automatically The with listing reverts buyers automatically and to one TREC sellers of the takes reverts are agents terminated. ownership to Broker in Broker ofRandy allPete’s Broker and firm. Agent Pete’sJoseph. agency agreements with buyers and sellers. Agent Bill at Acme Realty negotiated a listing agreement with Seller James. Three days later Bill unexpectedly died. AfterThe Bill’s agreement death, what isBill's terminated is the death status hasofno the Seller effect listing James onagreement? thehas agreement The the right agreement to terminate is terminated the agreement but canbecause be reinstated of theatdeath the option of theof agent the broker Agent Megan negotiated a listing agreement with Seller Sarah. Megan explained that the firm’s policy is to have listing agreements Consideredthat to be doAcceptable anot good have marketing aifdefinite the broker Preferred strategy termination andby client alldate. MLS agree A violation Listings system of with in the Texas the license firm can act be terminated only with notice from the client. This practice is: If the broker’s license is revoked The listing agreement Only and listing theagreements buyerAgency representation are agreements terminated agreement Theare listing put continue "on agreements hold"inuntil full and the force buyer broker's representation license is reinstated agreement are terminated Seller Brian gave Acme Realty notice of termination of the listing agreement 60 days into a 180 day term. Seller Brian... has the right to terminate has the power only if the to terminate, Can broker never determines but terminate could has that be an the liable the agreement unrestricted termination for damages early right was iftothe done terminate courts with adetermine the justagreement cause that itwithout was notfurther done with liability a just cause When a broker is given notice of termination, the broker must Immediately change Remove the status signsofand the Cease lockboxes listingalltomarketing "withdrawn" if the Cease local activities MLS inallMLS marketing determines and change activities that thethe status and seller change ofhad the just listing thecause status to "terminated" to ofterminate the listing in to MLS "terminated" if the broker in MLS determines that the seller has just cause to terminate Confidential information learned in an agency relationship must remain confidential Forever unless disclosure Forever without is required exception Until by the law agency or courtagreement On order the expiration is terminated of the protection period Agents of a brokerage firm all share the same agency duties to all clients of the firm. TRUE FALSE An oral agency agreement is not enforceable against the client or the agent. TRUE FALSE There is no assumed or implied agency in Texas. TRUE FALSE A special agency relationship is created when a broker hires an agent. TRUE FALSE When one firm sells a property listed by another firm to a buyer that they are not representing, the selling firm represents the TRUE seller in a subagency FALSE relationship. Agency can only be terminated by mutual agreement or operation of law. TRUE FALSE When a listing agreement has been terminated, the agent must go into the MLS and designate it as a “withdrawal.” TRUE FALSE Confidentiality of the broker is the duty that survives termination of the agency agreement. TRUE FALSE The broker in the selling firm, if different from the listing firm, is known as the “cooperative broker” in the transaction TRUE FALSE If a license holder fails to specify a termination date in a listing contract, TREC can suspend or revoke his or her license. TRUE FALSE QUIZ Seller Kristin meets with agent Angel and likes his plan for marketing her home. She decides to sign a listing agreement General with him,agency therebySpecial creatingagency a _____ Intermediary relationship. Universal agency Broker Susan is representing the seller at We Sell it Fast Realty while Broker Daniel from Daniel Daniels's Properties is working The seller with a buyer Thecustomer. buyer andSusan seller Theisbuyer representing only Broker the seller. Susan Who is Daniel representing? In Texas, there is no _____ agency relationship with any party to a transaction. Implied General Special Universal The commission charged is negotiated between the _____ and the _____. Seller, broker Seller, TREC Broker, TREC Listing agent, regional brokerage firms Duties and Disclosures to Third Parties Commonly known as a DBA, is a name used in business by a broker that is other than the name shown on the broker’s license Assumed issued business by the name Commission, a team name, or an alternate name. Being truthful; a special duty applied to license holders buying or selling property in their names. Honesty Commonly known as an alias, a name used by an individual license holder other than the name shown on the license issued Alternate by the name Commission. A property on which a past event or condition affects its sale. Stigmatized A name used by a group of one or more license holder sponsored by or associated with the same broker that performs real Team estate name under an elusive collective name other than the brokers’s licensed name or assumed business name TREC Rules require license holders be honest and fair to: Only people they Only represent Clients Only non-represented All parties customers in a transaction The Texas Real Estate License Act states that TREC could revoke or suspend a license holder’s license if the license holder Clientengages in misrepresentation, Customer Principal dishonesty, or fraud All of when the above representing: Which of the following is NOT a fiduciary duty? Disclosure Fraud in Real Estate and Stock Transactions considers fraud to be when: False representation Theofbuyer a material receives fact Agents truthful is made fulfill information their Disclosure promises is made Confidentiality Honesty Obedience Anna is making an offer to purchase a property at 2564 Elm Lane. Review Paragraph 7 of her One-to-Four Family Residential Contract Below and answer the questions that follow: If the Seller delivers the notice in the five days allotted, what rights does the Anna have after receiving the notice? Anna has the rightAnna to negotiate has the repairs, rightAnna to terminate but has does the not right within have Anna to7terminate days the hasright after the right the toreceiving terminate contract to terminate the fornotice any under reason if the thisproperty with paragraph, 7 days condition after but only receiving justifies if a separate termination the notice option fee was paid If the Seller never delivers the notice, what rights does the buyer have? The buyer has theThe right buyer to negotiate has theThe repairs right buyer to but terminate has does theThe not right at any have buyer totime terminate the has prior right theto to right the closing terminate contract to terminate for any under reason thiswith paragraph, 7 days after but only receiving if a separate the notice option fee was paid If Anna elects to terminate under 7B, will she be refunded earnest money? Yes What is the best way to avoid issues that arise under Paragraph 7B? Always insist on inspections Deliver the prior seller's toDeliver making disclosure the anseller's offer to theAvoid buyer disclosure seller's prior prior todisclosures closing to the buyer because making they anadd offer extra to purchase complexity to the negotiations No Imagine that Paragraph 7B(3) had been checked rather than 7B(2). Under which of the following circumstances would aAn seller investor be exempt sellingA from ahomeowner rent providing house who that a Seller’s Ahe lived property has inDisclosure? never the with property occupied considerable A lender for some selling property time, a property but condition hadthat rented issues theyit had out thatfor acquired must the be past in repaired 5 a years foreclosure prior to closing If a seller is exempt from delivering a Seller’s Disclosure, does that mean that they are exempt from disclosing known defects? Yes No Agent Sue works with Broker Bob at Acme Realty. Sue just listed Seller Steve’s home and discovered that a previous owner had committed suicide in the home 4 and a half years ago. Steve instructs Sue not to mention it. Sue thinks that suicide on the property is a significant issue. She defies Steve’s instructions and discloses the suicide to a potential buyer. Sue has violated her Suefiduciary has not violated to Steve Sueher because didfiduciary not violate sheduty made She herbecause has fiduciary a disclosure not violated allduty death that toher Steve on is fiduciary the notbecause property required to Steve itmust wasbecause be a direct disclosed question the disclosure from the of death buyer,byand suicide she isisobligated required under to answer the law all questions. Has Sue violated her fiduciary duty to Steve? Assume that Sue disclosed the information about the death on the property in response to a direct question from the potential She has buyer. not violated Has She Sueher did then fiduciary not violated violate toShe her Steve herfiduciary has fiduciary because violated duty duty the her Sue totodisclose Steve? fiduciary Steve violated because of to her death Steve fiduciary itby because was suicide to a direct Steve she is required question because made aunder disclosure from deaththe the onbuyer, law the thatproperty isand notshe required. is is never obligated The an event fact to answer that thatit requires was all questions a direct disclosure question from a buyer is not relevant. What if the previous owner had died of HIV-related illness in the home and Sue disclosed that fact? Her disclosure is not Heran disclosure issue because is not Shean so violated issue manybecause the buyers License Sheare all didHIV concerned Act, notrelated violate the Federal about matters her fiduciary Fair HIV must Housing duty be disclosed to Act Steve and her because fiduciary the duty License to Steve act specifically by disclosing requires the HIV therelated disclosure death of all HIV matters QUIZ A broker’s responsibility for disclosure is limited to areas: Inside the property Outside the property Accessible for visual Theinspection seller informs them of According to TREC’s advertising rules, which of the following terms MUST be used in a real estate team name? Company Realty Associates Group TREC’s Advertising rules require sales agents to include the broker’s name, the brokerage name, or the broker’s _____ E-mail in at least address 50% ofWebsite the largest URL contact Cell information phone # fontAssumed on all forms name of advertising. Any stigma that relates to a material defect in a property must be _____. Disclosed Hidden Psychological Ignored Seller Agency Paul Johnson signed a listing agreement with agent Tom with XYZ Realty. He also signed a listing agreement with Jake who is an agent at XYZ’s competitor Sun Realty. Both of the agreements give the agents the right to list the property for Paul. Even though Paul listed the property with Tom first, and Tom spent more time and money on advertising, it is Jake who ultimately finds a willing and able buyer and collects the commission. What type of listing agreement did Paul sign with these agents? Open Exclusive agency Exclusive right to Net sell listing Dorothy has listed her property twice in the past year and a half. Both of the listing agreements expired without producing a buyer. Dorothy feels that the agents didn’t try hard enough to sell her property. She knows that she definitely doesn’t want a For Sale By Owner (FSBO) because she doesn’t feel like dealing with the public, and just feels safer knowing that an agent will set up appointments to show the home for her so she doesn’t have to let just anybody in the door. Dorothy has a specific dollar amount in mind that she wants to realize from the sale of the home and anything over that is What type of listing agreement might Dorothy be contemplating? Open listing Exclusive agency Exclusive right to Net sell listing Yvonne wants to list her commercial property with multiple, competing brokers but feels like she has just as much chance at selling the property as any listing agent. Yvonne understands that there are a variety of benefits to listing with a broker, and knows that it will produce more prospects than selling it on her own. Yvonne also wants to be able to sell her property without paying a broker’s commission to anyone. What type of listing agreement does Yvonne want to enter into? Open listing Exclusive agency Exclusive right to Net sell listing Charles is a very cautious agent who always makes sure that he and his broker are covered in every situation. His latest listing at 705 Hauser Street was done by the book, in a way in which his broker will approve. Charles knows that regardless of who sells the property, his broker will be able to collect a commission on the sale. What type of listing does Charles have? Open listing Exclusive agency Exclusive right to Net sell listing April is an owner who is trying to sell her property on her own. She has taken some pictures of the property herself and has posted them on her Facebook and Instagram pages for all of her friends to see. Her home is lovely, but it has been sitting on the market for several months. What is the main benefit of seller agency that April is missing out on? Negotiation strategies Pre-qualification of Entry buyers into MLS Safety matters Randy wants to put his 4-bedroom home on the market. He’s been online viewing sites like Zillow and Trulia to get an idea of what the houses in his neighborhood are selling for. Armed with this information, he sets what he believes is a realistic price on his home. Three months later, his home has not sold. What could an agent offer Randy that he was not able to do himself? Provide a CMA Negotiate with potential Pre-qualify buyers buyersEnsure that there are no potential burglars looking at his home on Zillow Seth and Pat have decided not to enlist the services of an agent to sell their well-appointed condo because they do not want to pay a broker’s commission or fees. Seth has been fielding phone calls from potential buyers on his cell phone while at work, and setting up viewings in the evenings and on the weekends, taking up most of the couple’s free time. Neither Seth nor Pat thought to find out whether or not the callers were pre-qualified for a mortgage before they set up the appointments, and later found out that none of them actually were qualified to purchase the property. How could a selling agent have lessened these sellers’ headaches? Pre-qualification of Entry buyers into MLS Providing Seth and Scheduling Pat with Ibuprofen appointments for Seth and Pat Josie and Eduardo want to get a fair price for their property. Their property is in a highly desirable neighborhood with easy access to main roads and shopping centers and should be a quick sale. Eduardo figured that they could sell their property themselves and save a few bucks by avoiding commissions and broker’s fees. Two offers have already been submitted to them, but they were way below asking price. Neither Josie nor Eduardo enjoy haggling and are unsure how to proceed when they talk to the potential buyers’ selling agents. What benefit of a selling agent could Josie and Eduardo use now? Negotiation strategies Providing a CMA Appointment setting Safety Mark and Ann are buyers working with Agent Joe at Acme Realty. Joe explained to Mark and Ann the benefits of being represented in the purchase of a home. Being reluctant to sign contracts, Mark and Ann decide to have Joe help them find a home without entering into an agency relationship. Joe agrees to this arrangement. Later, Joe is showing them a home listed by City Realty. Liking the home very much, they decide to make an offer. In this scenario, who is Joe representing? The buyer As the transaction moves forward, what is the relationship between Acme Realty and City Realty? Single buyer representation Intermediary The seller Both the seller and Mark the is buyer not representing anybody because Mark and Ann refused to enter into an agency agreement Buyer agency Subagency Mark and Ann are deciding what to offer for their home. They ask Agent Joe advice on values. What might be Joe’s bestPrepare response? a CMA ofGive the property Mark andtoAnn give Give his them no personal advice a better opinion asidea Suggest to the of ofthe market the that market value they value of offer value the of $15000 the property of their property under home list because all sellers are inclined to sell below the original asking price In this transaction, who is representing the buyer? Agent Joe and City Nobody Realty Acme Realty Agent Joe, because he is the one who showed them the home The employment agreement between the seller and the broker is created in: Paragraph 3 Paragraph 4 Paragraph 2 Paragraph 1 Which of the following would NOT be considered an improvement in the listing agreement? Door keys Fireplace screensShrubbery Stove Accessories in the listing agreement would include Garage door Ceiling fans Artificial fireplace Mailbox logs Improvements and accessories retained by the seller are known as Improvements exclusions accessories The list price of the property should be based upon The assessed value Theofprice the property high enough Afor range tax to purposes encourage of probable The the prices price seller based that to sign will onprovide the a CMA listing the prepared agreement seller their by the desired agent net proceeds When listing a property, the term of the agreement should be Long enough to market Indefinite. the property A listingThe that under number never current expires of days market The provides set minimum conditions by the thelocal number bestMLS protection of days set for the by the agent broker The broker’s compensation is A set rate determined Any fee by TREC as long asA itpercentage meets minimum to be A fixed not feesless set percentage than by National whatorisother Association required fee negotiated by of theRealtors localwith MLS the seller The broker’s compensation is earned when The seller sells the The property broker sells the A cooperative property broker Anysells of the the above property The broker’s fee is most often payable When the seller signs When the the listing selleragreement breaches When thethe sake listing closes When agreement and thefunds sale closes exceptions The protection period... Automatically expires Provides whenthat, the listing in some Establishes terminates cases, athe minimum broker Establishes may number bea due certain of days commission number that theoflisting when daysthe must in which property be active thesells seller forafter the canprotection the selllisting the property of expires the agent without paying the broker a fee The protection period runs for The same numberThe of days number thatofthe days listing Tennegotiated days is for after between theThe listing number the expires seller of days and the established broker by TRELA The broker will file the listing with the Multiple Listing Service Within a certain number Within 10 of days daysunless per Always paragraph paragraph because 6A6C filing Only is checked isif required the listingbycomplies the localwith association MLS rules of found realtors in the Texas Real Estate License Act Organizations that handle the booking of showings are known as Home warranty company Scheduling companies MLS In the listing agreement a key box is placed on a property If required by TREC Always if requiredAutomatically by the local MLSIf the seller agrees Booking companies Paragraph 8 provides for two tiers of commission payment to cooperating brokers based on whether the cooperating broker Subagent is a buyer’s agent Intermediary or ________.Seller's agent The listing agreement authorizes Intermediary... Listing agent If the appropriate Always box is checked as intermediary onOnly paragraph ifislocal required 9 MLS by If rules required TREC allow by intermediary the listing broker Confidential information is kept confidential... Forever The listing will be displayed on the internet Listings are neverAlways placed on the internet Only if the appropriate Only ifboxes local are MLSchecked rules prohibit in paragraph internet11B display In Paragraph 12, the seller represents that the Seller Has the legal capacity Has no to convey liens against theHas property the noproperty knowledgeHas of previous no knowledge flooding of material defects in the property Forever unless disclosure Until the is listing required expires Until by the law transaction closes The seller agrees to cooperate with the broker’s efforts to market the property in Paragraph 13G Paragraph 13A The broker is not liable for: MisrepresentationFreezing by the agent water pipes The accuracy of information The accuracy provided of information by the agent provided to MLS The seller agrees to hold the broker harmless for Incorrect information Seller's provided failure bytoseller disclose Damages material or costsinformation Any caused of thebyabove seller If a dispute cannot be resolved through negotiations, the parties agree to first submit the dispute to Mediation In the event of litigation, court costs and attorney fees will be Split between broker Paidand by seller the seller Paid by the non-prevailing Paid by the party broker Arbitration Paragraph 13C Paragraph 13D Any of the above The court The one addenda or other document that is required in all listing agreements is the Request for mortgage Information information aboutInformation special flood About hazard Seller Brokerage areas disclosure Services notice Paragraph 20A states that All statements by The seller listing are correct agreement This is binding the entire onagreement The all parties obligation that andto sign may paynot a commission be changed isexcept binding byon written the seller's agreement heirs Most property theft is Carefully plannedCommitted by the perpetrator by agents Committed by contractors A crime of when opportunity objects when are leftobjects in plainare view left in plain view The Addendum for Seller’s Disclosure of Information on Lead-Based Paint is required On all homes builtOn prior all to new 1970 homesOn all homes builtOn prior all to homes 1978 If lead-based paint hazards are discovered during an inspection per the Lead-Based Paint Addendum The buyer can require The buyer that the canseller terminate The remediate buyer the can contract thefile lead-based The suit within buyer seeking 14paint can days damages terminate hazard of the from effective the the contract, seller date of but forthe misrepresentation will contract forfeit the andearnest receive of the money a property refund ofwithin earnest 14 money days of the effective date of the contract In order to terminate a listing early Termination agreements The listing should should be The entered be terminated listing into should paragraph using All bethat the terminated 15 TREC is -required Special termination using provisions is athe verbal Texas of listing of agreement Realtors theform listingTermination toagreement terminateof Listing form A Realtor® with a prospective buyer approaches the owner of a home that is for sale by owner. The owner agrees to pay Have the broker the owner a fee sign Have if he a registration or theshe owner successfully sign agreement Have anthe exclusion negotiates owner between sign right Enter a broker sale an tointo exclusive sell with and an listing the oral owner buyer. agency agreement agreement The agreement broker with the in this seller case for should: the payment of commission An agent lists the property of a seller who has been attempting to sell without an agent for a period of time. The seller has Explain a list of that names this isof List not people the a problem excluded who expressed because Add names thethe inan named paragraph Exclusive interest exclusions Explain in15 right buying - special that toaddendum sell the theproperty. listing provisions exclusive toagreement the The right listing seller toautomatically sell wants listing to ensure agreement excludes that,does anybody if anynot of allow these that looked for buyers such atreturn an theagreement property and buyprior the to property, signingthat the he agreement will not owe a fee to the broker. The agent should: Agent Bob wants to generate activity on a listing by advertising that the seller has been transferred and that the seller is Have “highlythe motivated” seller authorize Upload to sell.the such Thelisting best an advertising Add course to MLS theof and seller's action bywrite adding authorization isAdd an to:itad the tostating paragraph seller's to that release hold the 15harmless -seller and special advertise is highly addendum provisions certain motivated to information the listing addendum QUIZ All listing agreements must have a definite _____. Termination date Sell-by date Subagency is: When a broker appoints Punishable associates by revocation When to the aselling of license realside estate holder When andlicense not the oneassociated listing agentside at awith ofbrokerage anthe in-house seller’s firmsale broker takes over is representing when the listing the seller agentthrough is sick or a cooperative on vacation agreement with the seller’s broker A license holder is not required to provide the IABS when the license holder meets with a party who is: Not already represented Represented by another A familylicense member holder Also a real estate license holder The shared information from the MLS can be used by agents to prepare a(n) _____. Comparative Market Inspection Analysisreport Appraisal Renewal period Minimum accepted offering price Seller’s Disclosure Notice Buyer Agency Creates buyer agency. Buyer representation agreement Federal legislation that specifically deals with illegal fixing of commission rates. Sherman anti-trust act Setting commission rates between groups of brokers in an area. Price fixing An agent may not deceive or defraud a customer. Honest dealing The agent is held to the standards of knowledge, expertise and ethics defined by TRELA. Reasonable care The listing agreement and buyer representation agreement is a(n) employment contract Broker Agency/compensation Procuring agreement cause of the sale agent employee Duress Client Broker Customer Agent Client Oral agency agreements are not enforceable against the Only a The . , but are enforceable against the broker. may sue for commission. is the broker who, through a series of uninterrupted activities, brought about the completion of a contract procuring cause ofClient sale agency/compensation Agentagreement A broker can not successfully sue for commission without a signed written Procuring cause of Employment sale contract Agency/compensation Broker agreement The broker must provide a(n) Punctual Rich Employed Ready, willing and qualified Duress The weather Employed Dressed The buyer must not be under buyer who agrees to the sale terms required by the seller. . Nick is looking for a home and calls Anna at ACME Real Estate Agency to inquire about several properties he saw online. Anna mentions that she represents ACME Real Estate Company and its clients. She also takes Nick’s contact information and asks in-depth questions about his needs and wants. Nick states that one of the most important considerations for him is that the home is in a neighborhood that has the highest likelihood of increasing in value. Anna advises Nick about several neighborhoods and recommends some properties that she thinks might be just right for him. She also sen What did Anna do that could expose her and her broker to liability? She shared property Shedetails scheduled with Nick anShe appointment before did not heprovide signed withNone Nick him the of to Buyer/Tenant with these view theproperties are Information correct representation About Brokerage agreement Service (IABS) form before discussing Nick's wants and needs When Anna meets Nick for the appointment, she spends a few minutes discussing representation and explains the advantages She might of allowing not getItpaid her is against to represent the law She him to will in represent the notpurchase have Nick Since to under worry of ait home. isabout ananoral oral Nick intermediary agreement agreement, agrees that problems she shewill should not when have represent showing to disclose any him,ofbut compensation thehelistings stateson that the heMLS will not since sign she the would Residential be representing Buyer/Tenant the buyer Representation Agreement. He prefers an oral agreement and states that he has always been true to his word. What is one of the most important facts for Anna to consider entering into an oral agreement? What course of action can be taken if Anna works very hard to find Nick a home, and then he uses a different license holder The to broker submit may thefile Anna contract suitmay forand commission filebuy suitThe the for home? commission listing broker No may one filemay suit file for commission suit for commission since they did not have a signed agreement to establish agency The parties to the Residential Buyer/Tenant Representation Agreement include: (select all that apply) Client A buyer can enter into multiple Buyer/Tenant Representation Agreements if If the multiple brokers The buyer optionchooses is selected The to market do in the so agreement areasIfdo thenot buyer overlap is not satisfied with the agent Broker Sales agent Lawyer Buyer Scott signed a buyer/tenant representation agreement with Agent Sue at Acme Realty. Sue diligently searched forCity a suitable Realty home is required in Scott theto can market split freely their area terminate commission There designated is the no consequence with agreement in the acme Scott agreement. realty probably to because avoidOn paying owes the the way abuyer/tenant acommission commission home from representation on to a the day Acme purchase of realty looking agreement toatAcme homes realty creates with Sue, a non-exclusive Scott dropped agency into an relationship open house between held byAcme an agent Realty from and City Scott Realty. He was so impressed with the home that he made an offer that was accepted by the seller. The home purchased by Scott was in the market area designated in Paragraph 3 of the agreement. What is the likely consequence of Scott’s purchase? The term of the buyer/tenant representation agreement is 90 days The broker will first seek to obtain payment of commission from The seller in paragraph The buyer 9 in paragraph The seller 4 in paragraph The seller 11B in paragraph 11D Negotiable 180 days The protection period establishes a period of time where: The sales agent isThe guaranteed broker is the protected payment The broker from of competitive a is commission guaranteed Underclients certain the payment conditions, of a the fee broker will be paid a commission after the agreement expires The length of the protection period is Negotiated between Thethe same client term andofthe 90 thedays broker agreement stated 180 days in paragraph 4 Clarity in compensation is one of the many good reasons to insist upon a written buyer representation agreement TRUE FALSE Buyer agency agreements may be created orally or in writing, but by far the best method is to do so orally. TRUE FALSE The ABR® designation takes the fundamentals of agency law and looks deeper. TRUE FALSE Set by Texas Realtors® A phrase one could use after the buyer has signed the buyer representation agreement might be: “Okay, now let’s talk freely about TRUEthe house, FALSE price and terms you want to find.” The subagency relationship was not to the buyer’s advantage. It was more in favor of the seller, and awkward for the broker. TRUE FALSE Commission rates and any other means by which brokers are compensated by sellers and buyers are never negotiable between TRUE the parties. FALSE Prior to discussing the needs and wants of the buyer, the buyer should be provided the Information About Brokerage Service TRUE agency information FALSE form as required by the License Act. Only a broker may earn a commission and only a broker may sue to collect a commission. TRUE FALSE Any attempt to take short cuts and avoid compliance requirements will create possible license revocation or suspension by TREC. TRUE FALSE The listing agreement or buyer representation agreement is a/n _______. Employment contract Any attempt by a group of brokers to set the commission rates in their area or between a group of brokerage firms wouldClayton be considered Act, Sherman illegal Anti-Trust price fixing. Act The federal laws that have the greatest impact in this area are the __________ and the __________. The duties we know as ___________ apply in all states, and understanding these duties on the highest level establishesOLD the agent’s CAR credibility and competitive standing in the marketplace. A benefit of a buyer-agency relationship is assistance in _________. Buyers’ agents will have a number of trusted lenders Obtaining to refer, financing which is preferable to the random selection of a lender. When written provisions are in conflict with oral provisions, the _________ ones virtually always prevail. Written An agent may not deceive, defraud or otherwise _____ with a customer in a dishonest manner. Deal ________ agreements are not enforceable against the client, but are enforceable against the agent. Oral Most litigation over the payment of real estate commissions arises from disputes over who was the _________ of sale. Procuring cause The license holder must disclose all facts that he or she knows of or should reasonably be expected to know that materially Disclosure affect the of agency, value of environmental or desirability of hazard the property. , structural Thisdamage includes ___________, _________, and _________. All parties to a real estate transaction have a right to be represented in the marketplace; brokers also have the right to determine Federal Fair what Housing business Laws relationships they choose to enter into, so long as they comply with ________. QUIZ The agreement that buyers sign allowing a broker to represent them is called a _____. Listing agreementSeller’s DisclosureBuyer/Tenant Representation IndependentAgreement Contractor Agreement Fee-splitting arrangements between brokers are often established in the _____. Statement of Understanding Seller's DisclosureTexas Real EstateMultiple LicenseListing Act Service The individual who, through a series of uninterrupted activities or actions, brought about the completion of a contract is also The known procuring as _____. cause Theofcloser sale The closing coordinator The escrow agent In Texas, commissions are commonly paid by _____ to the listing broker. Buyers agents Subagents The seller Subagency Sellers Buyers Intermediary Brokerage The practice that allows a real estate firm to represent both the buyer and seller with their written permission Dual agency The practice that allows a real estate firm to represent both the buyer and seller with their written permission Intermediary with appointment Occurs when an agent sells his or her own listing, but cannot give advice or negotiate for either party. Intermediary without appointment The legislation that gave the industry the Intermediary process. Senate bill 489 A transaction in which a broker is on both the listing and selling side. In-House sale Originally, all brokers represented sellers because representation was linked to_______________. The listing agreement Compensation Prior to ______________, transactions between client buyers and client sellers were done following the common law of dual agency1993 in Texas. 2005 1939 Written consent Intermediary In order to practice intermediary, the broker must remain: On the seller's side Impartial of the transaction On the buyer's side Involved of the transaction by giving advice to both parties Intermediary allows the broker to: Appoint one agentAppoint to the seller himself and orAppoint another herself an to agent give agent to advice Appoint the to give buyer to advice the himself seller and or herself opiniontotogive bothadvice partiesto the buyer All of the following statements about a broker in intermediary are true EXCEPT: The broker must disclose The broker confidential may not The be information broker appointed may to appoint The either broker agents partymust to advise remainthe neutral broker's clients With regard to the payment of a fee (commission) by a client, Only the client paying A broker our fee cancan represent be Only represented the a buyer sellerorcan seller A pay broker ina afee can transaction torepresent the broker regardless a buyer as who a client is paying onlythe if the broker's buyer fee is paying the broker's fee In 1993 TREC addressed the issue of representing clients on both sides of a transaction by adding ___________ to the Subagency License Act. Buyer agency 1949 Senate Bill 489, passed in 1995, amended the License Act by creating this process: Disclosed dual agency Common law dualStatutory agency dual agency Intermediary In 1995, Senate Bill 489 introduced the ______________ process to brokerage in Texas. Subagency Statutory dual agency Intermediary When a broker sells its own listing, the transaction is known as a(n) _________________. In-House sale Subagency relationship Cooperative sale Dual representation A conflict of interest occurs when Brokers representBrokers buyers represent in a transaction Brokers both buyer represent and seller Brokers sellers in ain engage transaction a transaction in a cooperative sale When representing both the buyer and seller in a transaction the broker must do so as a(n) Subagent In order to practice Intermediary, the broker must have Notified the parties Written in writing or oral of the consent Written intermediary from consent both process parties from TREC's both approval parties Intermediary Common law dual agency Transaction broker Dual agent Agent Sue is the listing agent for Seller Steve. Agent Megan is the buyer’s agent for Buyer Sally, a client of the firm. When Statutory Buyer Sally dual agency makes Intermediary an offer to without purchase Intermediary appointment Steve’s with property, Common appointment thelaw process dual agency will most likely be When the Intermediary process begins, the Broker must provide to the clients the Disclosure of representation IABS Agent Sue with Acme Realty is both the listing agent and buyer’s agent in a transaction. The process used was Dual agency Seller's disclosureIntermediary of property condition relationship notice Intermediary with Transaction appointmentbrokerage Intermediary without appointment Some brokers have a policy that requires an appointed associate in an Intermediary transaction. They avoid Intermediary reduces withoutthe appointments grossiscommission discouraged because toby Intermediary the isTREC preferred broker without by most Carries appointments agents a higher______. level of risk than intermediary with appointment It is illegal in Texas for a broker to be on both the listing and selling side of a transaction TRUE FALSE The broker has no duty to inform the client of the intermediary relationship as it is assumed in Texas. TRUE FALSE According to Texas real estate laws, a broker must always appoint associates in an intermediary relationship TRUE FALSE Intermediary without appointments requires that the broker sponsor at least two agents. TRUE FALSE To appoint associates or not in an in-house transaction is at the discretion of the broker. TRUE FALSE The Intermediary process makes it possible to bring client buyers and sellers together while at the same time representing their TRUE best interests.FALSE A cooperative sale is one in which a brokerage firm sells its own listing. TRUE FALSE Match each paragraph in the Texas Realtors® Intermediary Relationship Notice with its given purpose: Notifies the parties that they are both clients of the broker Paragraph B A place for relevant disclosure Paragraph F Addresses if appointments will be made Paragraph D Reminds both parties that they previously authorized the use an intermediary Paragraph C Acknowledges the notice and consent for intermediary Paragraph E A broker in an in-house sale must always work as an intermediary. TRUE FALSE Intermediary gives the broker two options, intermediary with appointments or intermediary without appointments. TRUE FALSE A broker who is an intermediary may not work as an appointed associate. TRUE FALSE Intermediary requires written consent from both the buyer and the seller. TRUE FALSE In intermediary with appointments, the broker appoints one agent associated with the broker to give advice and opinion to oneTRUE party while the broker FALSEgives advice and opinion to the other party. Disclosed dual agency takes precedence over intermediary in Texas. TRUE FALSE In intermediary, the broker may never disclose material fact to either party. TRUE FALSE A broker may not represent only one party in a transaction. TRUE FALSE A broker practicing intermediary doesn’t have to treat all parties fairly if the broker has appointed associates to the two parties. TRUE FALSE QUIZ Which of the following is TRUE regarding intermediary rules for a transaction? The transaction must Bothbe parties an in-house to theThe transaction sale broker must musthave All beofclients written theseof are consent the true. broker. from both parties Broker Steve, having no agents, is a solo practitioner in the state of Texas. He has a buyer-client who wants to purchaseIntermediary one of his listings. without Transaction The appointments process brokerage that Intermediary Broker Steve with must Dual appointments use agency is: What are the duties and obligations of an Intermediary? To treat all partiesTo fairly decide whetherToorobtain not to written appointconsent All associates of these fromare both duties parties andtoobligations act as the of intermediary an intermediary When a broker in Texas represents both the buyer and the seller, the broker is a(n) ____. Intermediary Dual agent Appointed broker Ostensible agent Clarifying Agency Relationships A brokerage firm represents buyers and sellers Intermediary A brokerage firm will only represent buyers. Buyer agency only A license holder who represents a party in a proposed real estate transaction shall disclose that representation at the contact Representation with other disclosure parties to the transaction and to the license holders who represent them. A brokerage firm will only represent sellers Seller agency only Communication that involves a specific discussion that relates to a specific property. Substantive dialogue Disclosure of representation should be made at the first _________ with another party to a transaction or another licensediscussion holder who represents substantive another discussion party meeting to the transaction. Contact The Information About Brokerage Services form should be provided At first meeting with At least a prospective three days party Atprior thetofirst to a transaction closing substantive Prior discussion to any discussion with a prospective of the real estate party market to a transaction The Information About Brokerage Services can be provided by Check all that are correct A link in the signature Personal line ofdelivery an email An attachment to First an email class mail orThe overnight body of common an email carrier delivery service A substantive dialogue is An open house A local associationA or substantive Realtors®meeting discussion Any discussion that relates of real to aestate specific property The Information About Brokerage Services ________ Creates an agency Discloses relationship representation withInforms a buyeraor potential seller Discloses party of various the relationship agency relationships of the sale agent to the broker Possible agency relationships allowed in a Texas brokerage operation include Select all that are correct transaction brokerage dual agency Advantages of buyer-agency only or seller-agency only include Select all that are correct No responsibility of Nounintended intermediary dual practice The representation responsibilityAgents of earning are commission only responsible on both for giving sides of advice the transaction to the buyer or seller but not both Disadvantages of buyer-agency only or seller-agency only include Select all that are correct Brokers do not have Thetoreluctance act as an of intermediary The some broker buyers and tothe sign The agent the firmBuyers have is limited toRepresentation worry to earning about unintended commissions Agreement dual on representation only one side of the transaction Intermediary advantages include Select all that are correct The firm works with Some bothbuyers buyersprefer and Agents sellers to work ofwidening the directly firmThe can the withbroker client earn the listing commissions base can negotiate agent onon both behalf sides of of allthe clients transaction The Buyer Representation Agreement should be signed prior to showing properties prior to writing an at offer theon first a property substantive threediscussion days prior to closing buyer-agency onlyintermediary seller-agency only QUIZ Which statement is CORRECT? The IABS may notThe be IABS sent as can anbe attachment An provided agent in may in the anprovide email body An agent of oraan alink link email. must tointhe the provide IABS bodyin aofblank the an signature email copywith of the line specific IABS of an reference at email. the first to substantive the IABS form dialogue in thewith body a potential of the email. client. A broker who acts as an intermediary in a transaction: May disclose that May the owner disclose willany accept Must confidential atreat priceallless information parties than All of honestly the these the asking broker areprice correct deems if thewill broker help feels sell the thatproperty it is the right thing to do Disclosure of representation is required by the _____. Texas Real EstateThe License Supreme Act Court The Governor National Association of REALTORS Employment Issues Receives a paycheck that is net of deductions for income taxes and other charges. Employee Shows the sum of payments received from a sales agent’s broker during the tax year. 1099-NEC May be hired to assist a sales agent, but is not required to hold a real estate license. Personal assistant The broker in the broker-sales agent relationship in real estate. Principal broker Receives a gross check and a 1099-NEC. Independent contractor Independent contractors should file an estimate of income tax liability Monthly Estimated tax liability should be filed using IRS form 1080-FR Quarterly Anually 1040-ES 1040-EZ Weekly 1040 Which of the following activities might lead the IRS to determine that the agent is an employee? The broker pays the Theagent's broker license provides The feedesk broker for provides the agent Themarketing broker pays materials for advertising In most real estate companies, the agents of the firm are Employees An agent will be considered to be “full time” if the agent Signs a statementHas thatanother he or she jobis Has "full time" no other job other Worksthan at least sales8 agent hours for a day the broker For the tax year, the sales agent will receive a ___________ that details all of the commissions paid during the year. The sales agent should keep careful records of income and business expenses because Independent contractors Subcontractors--NEC Subagents 1422 W-2 Brokers require annual The sales report agent does TREC notrules wantrequire to pay The annual too sales much reporting agent in income must report tax expenses and income monthly to the IRS Jeanne is a recently retired Residential Mortgage Loan Originator who has just begun to work with her Buyer’s-Agent son, Scott, as his assistant. Jeanne is halfway through her qualifying real estate courses at Champions School of Real Estate. Please read the following short scenarios and determine whether or not Jeanne is permitted, as an unlicensed assistant to a sales agent, to perform the actions asked of her. “Of course, I’d be “It’s happy a nice to show house, you “I’m but thesorry, a property! bit overpriced only sales Since “I’mfor agents you sorry, thesigned area. only who licensed are If a you Buyers-Representation members like, assistants I can of help theare golf you permitted club find Agreement can a comparable to show unlock with properties my and property son, show on as properties that the his assistant, course.” is more torealistically clients I can show and priced.” customers, you any property and I have you like.” not yet obtained my real estate license. I’d be happy to schedule an earlier showing on Saturday for Scott to show you the home.” Dr. Morris Ashcroft, a buyer-client of Scott’s, calls the office to schedule a Saturday afternoon showing at 2:00 p.m. for a three-bed, three-and-a-half-bath home in a gated community on the golf course. Jeanne tells Dr. Ashcroft that Scott already has an open house scheduled for another client from 12:00-6:00 p.m. on Saturday. Dr. Ashcroft asks Jeanne if she is available to open the home and show him the property. How should Jeanne respond? No, TREC expressly forbids unlicensed assistants from communicating with real estate inspectors while acting as assistants for real estate agents or brokers as it is considered a conflict of interest. Jeanne rushes out to 813 Euclid St. to meet the home inspector, Orlando, after Scott texts her that he is stuck in traffic across Yes, but town. onlyCan under Jeanne the direct accompany supervision No, Orlando unlicensed of a until licensed assistants Scott Yes, agent, can TREC arrive are soallows she never and must unlicensed take allowed find over? another to be Why assistants onagent or site why at to innot? aaccompany the listed brokerage property inspectors. tofor goany withreason. her. Scott has been so busy that he has fallen behind in his marketing activities, particularly on his cold calling. Jeanne wantsThe to help Telephone him generate Consumer She may more Protection cold business callTREC asAct so long he makes prohibits as canshe be it illegal unlicensed does aTREC topto so producer cold encourages only assistants call forather tothe solicit son unlicensed brokerage. from and real telemarketing not estate assistants for She any listings learns offor to the and listings. in cold other her buyers. call Law sales inof order Agency agents to help at course the their brokerage. that: agents solicit listings and buyers. The owner of the apartment complex Jeanne lives in knows that Jeanne has a lot of knowledge about real estate because "Great! she has I'd love beenthe taking "Ok, job but and, classes since evenand I'm as"TRELA unlicensed, working an unlicensed requires as an I can assistant assistant, all "Irenew can property only leases for I can her manage managers act ,son. but ascannot She the antocomplex on-site isbelooking accept licensed apartment if payment for I work by a reliable TREC." and manager." aslive an and offsite." apartment knowledgeable manager person until Itoam take licensed." over for the former on-site apartment manager and offers Jeanne the job. The money is very enticing for Jeanne, who is now living on a fixed income until she finishes her coursework and takes the exam. What should Jeanne tell the owner? Jeanne is an excellent motivational speaker who has the uncanny ability to encourage people to strive for the best and to There reachare new noheights rulesMaybe, one in their way guidance or careers. another Absolutely isScott’s unclear, regarding broker, not, so Broker motivational unlicensed Stefan, Absolutely, Stefan noticed speaking, assistants will unlicensed have Jeanne’s so are to she check assistants prohibited go-get-’em can with try,are TREC by but attitude TREC allowed none before and of from tothe the train asked engaging licensed meeting and hermotivate ifin agents she training could will license and want lead motivational holders to a motivational hear from activities someone coaching with who session license does holders for notthe have sales a license agents during the firm’s next marketing meeting. Is this an activity Jeanne can take part in? Jeanne finished her 6 qualifying real estate courses and took the Prep course at Champions School of Real Estate. AfterNo, passing Scott the should National cancel Yes, and but the only State open if exams another house Yes, on anyone because agent the first accompanies can hetry, host Yes, has Jeanne to an now be open her that present signs and house, Jeanne an assumes with Independent no has Jeanne, license her hosting real who isContractor required duties estate is notlicense, able agreement to she hostisopen with permitted Broker houses. to Stefan. host an Scott open has house. to go out of town suddenly, so he and his wife can spend time with his wife’s ailing father. He asks Jeanne if she can fill in for him as host of an open house that Saturday afternoon. Can Jeanne fill in for him at the open house? The Independent Contractor Agreement For Sales Associate is a _____ form. IRS Texas Realtors Texas real estate National commission Association of Realtors The Independent Contractor Agreement For Sales Associate requires that the sales associate maintain files for each transaction In the sales associate's In the cloud home In the broker's office In a location designated by the sales associate An associate can’t terminate an agency relationship unless the _________ approves the termination in writing Agent Buyer Broker Seller Files related to the Broker’s real estate business are confidential business property. The associate is not to disclose information without Brokers knowledge and consent unless: Select all that are correct The agent is required The by information court order isThe useful to disclose information in negotiations request The information is from a client is otherwise public information Associates must deposit checks or funds of others in Any account at anIninsured the associates depository A operating trust institution account account maintained A trust account by thespecified associatein the contract The agreement can be terminated by either party With at least 60 days At any advance time bynotice either On the party termination with written Atdate any notice specified time by the in the broker agreement with a written notice QUIZ Unlicensed assistants may not: Answer real estate Schedule office phones appointments Receive a commission Register on aprospects real estate transaction Is an unlicensed assistant permitted to open doors for prospective buyers or tenants? Yes, as long as the Yes, broker but only gaveifthe theNo, assistant home unlicensed hasthe been key. assistants emptied It is up toare ofthe allnot of individual permitted its contents. broker’s to show policy properties as no for guidance licensed is provided sales agents, from this TREC includes on thisopening issue doors for prospects. Steven, a sales agent, signed an independent contractor agreement with broker Jean-Yves. Jean-Yves is now Steven's Client _____. Principal Employer Consultant Agency, Ethics and the Law The real estate agent should be informed on market conditions affecting the real estate business Competency The real estate agent should employ prudence and caution so as to avoid misrepresentation in any way. Integrity The real estate agent should place no personal interest above that of his or her client. Fidelity A real estate agent must not respond to or facilitate inquiries about or make disclosure which indicates any racial, or religious Discriminatory preference. practices A set of principles or a system of values. Ethics consisted of 282 laws etched into a large basalt slab that covered everything from the duties of workers Code and trade of Ethics to slander, Hammurabi's theft and divorce. Code Canons of Professional ADA Ethics and Conduct Most brokerage firms have adopted a that license holders must follow. Code of Ethics Hammurabi's Code Canons of Professional ADA Ethics and Conduct prohibits discrimination against those with disabilities by denying the the full and equal enjoyment of goods, Codefacilities, of Ethicsaccommodations, Hammurabi's Code services Canons andofprivileges Professional ADA Ethics and Conduct The Texas Real Estate Commission has included the for real estate license holders in the Rules of the Commission. Code of Ethics Hammurabi's Code Canons of Professional ADA Ethics and Conduct Enacted in 1968, this federal law that prohibits discrimination against certain protected classes of people in connection with Americans the salewith or leasing Disability Canons of real Act of Professional estate. Federal Ethics Fair Housing and Real Conduct Act Estate Settlement Sherman andAnti-Trust Procedures Truth ActAct In Lending Act Enacted in 1990, this federal law removed barriers and created access to public and commercial buildings for all. It also Americans required employment with Disability Canons decisions Act of Professional to be Federal based Ethics Fair on an Housing and applicant’s Real Conduct Act Estate qualifications. Settlement Sherman andAnti-Trust Procedures Truth ActAct In Lending Act Fidelity, Integrity, Competency, the Consumer Protection Notice, and Anti-Discrimination are all addressed in this part of Americans the TREC Rules. with Disability Canons Act of Professional Federal Ethics Fair Housing and Real Conduct Act Estate Settlement Sherman andAnti-Trust Procedures Truth ActAct In Lending Act The federal law that prohibits monopolies and monopolistic practices. In real estate, this law says brokers cannot set commissions Americans between with Disability Canons companies Act of Professional andFederal that commissions Ethics Fair Housing and Real Conduct areAct Estate always Settlement negotiable Sherman and between Anti-Trust Procedures a consumer Truth ActAct In Lending and a service Act provider. This federal law, administered by the Consumer Financial Protection Bureau (the CFPB), concerns residential real estateAmericans transactions withwith Disability Canons federally Act of related Professional Federal financing. Ethics Fair Housing and Real Conduct Act Estate Settlement Sherman andAnti-Trust Procedures Truth ActAct In Lending Act This federal law requires that disclosure in advertising take place when the advertiser uses trigger terms like monthly payment, Americans interest with rate, Disability Canons downAct of payment, Professional Federal or theEthics number Fair and Housing ofReal Conduct payments Act EstateorSettlement term. Sherman andAnti-Trust Procedures Truth ActAct In Lending Act A business practice may not be ethical even if it is legal. TRUE FALSE It is legal for a real estate license holder to reveal the national origin and ancestry of a potential purchaser of real property. TRUE FALSE If there is evidence that establishes that a license holder violated TRELA, TREC may revoke or suspend his or her license. TRUE FALSE All license holders are REALTORS®. TRUE FALSE Texas members of the National Association of REALTORS® are not regulated by the Texas Real Estate Commission. TRUE FALSE Laws are always based upon common religious practices. TRUE FALSE Texas real estate license holders are obligated to disclose whether or not a current or former tenant of a property has or had AIDS TRUEor HIV-related FALSE illness to a potential buyer. Making good ethical decisions requires sensitivity to ethical issues. TRUE FALSE Article 4 of the Canons of Professional Ethics and Conduct of Real Estate License Holders states that brokers must display the TRUE Equal HousingFALSE sign in each place of business. Good ethics are good business TRUE FALSE Articles 1 through 9 of the Code of Ethics and Standards of Practice of the National Association of Realtors addresses the Clients agent’s andduties customers to ____________________ Articles 15 through 17 of the Code of Ethics and Standards of Practice of the National Association of Realtors addressesOther the agent’s realtorsduties to ___________________________ . Article 1 of the Code of Ethics requires that the agent pledge themselves to _____________________the interests of their Protect client.and promote Article 2 of the Code of Ethics prevents an agent from _____________________ pertinent facts relating to the property or Exaggerating the transaction. and misrepresenting Article 6 of the Code of Ethics requires a Realtor to have the consent of their _____________ before accepting commissions Clientor rebates. True or False - Article 10 of the Code of Ethics prevents discrimination by Realtors against certain classes of people includingTRUE based on sexualFALSE orientation and gender identity. True or False - Article 15 of the Code of Ethics allows a Realtor to make false or misleading statements about other real estate TRUE professionals. FALSE Which Source of Ethical Standards attempts to make ethical actions equal for and at least on a defensible standard? Hammurabi's Code The fairness or Justice The common approach good The approach Utilitarian approach Which Source of Ethical Standards focuses on common conditions that are important to the welfare or common good of The all? Utilitarian approach The virtue approach The common good The approach Fairness or Justice approach Which source of Ethical Standards requires ethical actions that produce the greatest balance of good over harm to thoseThe whoUtilitarian are affected? approach The common good The approach fairness or Justice The Rights approach approach The Texas Real Estate Commission has included the ____________ for real estate license holders in the Rules of the Commission. Sherman Anti-Trust Truth Act In Lending Act The(TILA) Utilitarian approach Cannons of professional ethics and conduct QUIZ What does the Consumer Protection Notice (CN1-5) give consumers notification of? How to file a complaint The Recovery against aTrust license TREC Account holder regulates brokers, All of these sales agents, and easement or right-of-way agents The _____ Approach to ethical standards is defined as ethical action that produces the best balance of good over harm.Rights Common Good Utilitarian Fairness or Justice TREC has included _____ for real estate license holders in the Rules of the Commission. The Canons of Professional Pachelbel'sEthics Canon T and he NAR Conduct Code ofTexas EthicsEthical Competency and Practices Proof that the act or omission was a significant factor in bringing about injury Producing cause An individual, corporation, partnership, or government source who seeks to acquire of purchase goods or services. Consumer Tangible chattels which includes real property when sold or leased. Goods A consumer may waive their rights under the DTPA by signing a specific document. Waiver of consumer rights Work, labor, or repair of goods, which includes brokerage. Services Part of the Texas Business and Commerce Code that allows an aggrieved consumer to sue a seller of goods for damages. Deceptive Trade Practices Act The Deceptive Trade Practices Act is a federal law. TRUE FALSE Real estate license holders are rarely sued under an action of DTPA. TRUE FALSE All sellers have an obligation to disclose any known material defects to a buyer. TRUE FALSE A court of law cannot suspend or revoke an agent’s license under a DTPA violation. TRUE FALSE In Texas, the agent is always responsible for the accuracy of the Seller’s Disclosure Notice. TRUE FALSE Claims filed under DTPA will be thrown out if there is no indication of intent to do harm. TRUE FALSE Stating that an item is “new” or “original” when it is reconditioned or secondhand is considered misleading or deceptive underTRUE DTPA. FALSE Consumers can recover up to 4 times the amount of economic damages if the defendant’s conduct is found to be intentional. TRUE FALSE A consumer can bring suit against anyone who is proven to be the procuring cause of the deceptive or misleading practice. TRUE FALSE Myra owns Dirt Cheap Realty and is representing Owen in the sale of a home. Owen has durable power of attorney for his elderly mother, who is incapacitated, and he is helping his mother liquidate her assets. Shortly after Myra lists the home, Owen decides to sell the home to his niece, Kristina, who is just moving back to the area. Myra recommends that she be allowed to represent both parties and indicates that she can save them money this way because she will do the whole transaction for only 4%. They agree to allow Myra to represent them both because they believe this will help Kris Kristina is a bit concerned about buying an older home because of the maintenance and upkeep. When Myra is showing the home, she proudly discusses the “new roof” that Owen had put on about two years ago. Myra has heard good things from a couple of other license holders about the roofer, so she tells Kristina that the roofer only uses the top-of-the-line material, so the roof should last a very long time. Myra mentions that most people get a home inspection, but Kristina declines to have the home inspection since her uncle is selling the home. Shortly after moving into the home, Kristina When Myra told Kristina that the roofing contractor only uses “top-of-the-line material” and that the roof should last a veryPuffery long time, she was An unconscionable most likely guilty Intentional action of what?fraud Misrepresentation What conditions are present in this situation that give Kristina the right to file a lawsuit against Myra and Dirt Cheap Realty? The misrepresentation The misrepresentation was calculated Theand misrepresentation violates devious. the The NARmisrepresentation Code was witnessed of Ethics and bywas afraud third a key party canelement be and proven. the in roof Kristina’s repairs decision exceedtothe purchase allowable thethreshold. property and the buyer was harmed by the purchase. If a lawsuit is filed, all of the following defenses could potentially help Myra EXCEPT... Written documents A from certificate the roofing showing Acontractor signed that Myra seller’s which tookdisclosure A show an signed online thatdocument that Myra class provides was about showing basing visual details her that roof about statements Myra inspections how advised the onroof their Kristina was written actually to get claims a installed. home andinspection guarantees. but she declined. QUIZ _____ can suspend or revoke a sales agent’s license under a DTPA violation. TREC A court of law Congress The agent’s sponsoring broker _____ uses adjectives and opinions rather than details or facts and is not considered misrepresentation. Phishing Commingling Puffing Pyramiding Under DTPA, a residence is defined as _____. A single-family house A unit in a multi-unit A condominium complex orAll cooperative of these qualify system as a residence under DTPA Implementation and Presentation Harming the reputation of another person by making a false statement to a third party. Defamation A great way license holders can market. Geographic farming Reducing and managing the legal issues involved with doing business. Risk management When coupled with activity, the result is production. Consistency Assisting buyers arrive at a realistic offer for a property and helping them negotiate. Counseling When should the seller receive the seller’s disclosure notice? It's not necessaryAt closing When presenting Prior the buyer's to beginning offer the listing presentation The listing agreement is between the seller and the _________________. Sales agent Broker It is necessary to obtain written consent to place a for sale sign on a property. The RENE certification course can aid in developing negotiation strategies. Which of the following would NOT be a service an agent would provide a buyer client? Title company TRUE FALSE TRUE FALSE Buyer Transaction management Staging a propertyNegotiating True or False - A buyer would want to know if an agent is a buyer’s agent or a seller’s subagent. TRUE FALSE True or False - Most sales are made at the agent's first contact with the buyer. TRUE FALSE True or False - The buyer may seek the services from a buyer specialist like an ABR. TRUE FALSE Counseling ABC Real Estate sponsors 35 agents who have a varying degree of experience in real estate. Bob Jones, the broker forYes, ABCthrough Real Estate, supervision No, hasTREC orally andrules given oral require instruction, the agents a broker the a list broker toofhave how has written hefulfilled wants policies his the responsibility agents and procedures to conduct for his the business. sponsored If heagents actively supervises the agents, has he fulfilled his responsibility under the law? Sales Agent, Estelle, has been referred to a buyer by a friend she has helped previously buy and sell real estate. The new Yes, buyer since has Estelle asked No, isEstelle knowledgeable representing to represent aabout buyer hercommercial intounfamiliar buy a commercial real geographic estate, property she territories canwhich work could is anywhere her cause specialty. unforeseen in theThe state buyer issues without is looking creating additional inrisks a risk part to of Estelle, the state her Estelle broker, has and never the buyer worked before. Should Estelle represent the buyer? Agent Larry is representing a seller who has completed a seller’s disclosure notice. Larry notices a broken window that the Yes,seller the listing has left agent off No,ofis Larry the required disclosure was not to disclose given notice. permission all At material an open bydefects house, his client known anto unrepresented disclose to the agent the broken buyer asks window for a copy of the seller’s disclosure notice. Along with the disclosure notice, Larry discloses the broken window. Has Larry disclosed properly? Agent Ignacio has a listing appointment with a potential seller client. After walking around the house with the seller, Ignacio Yes,decides as an agent he would for No,the like since seller, to Agent make Ignacio Ignacio the seller would is an honest have offerbeen and to purchase has in aintegrity, position the house to heput could from hisrepresent interests the seller. before the Ignacio seller those and informs ofhimself histhe client, seller as the breaching ofbuyer his intentions as hislong dutyas and tothe the encourages seller client.approves the seller of thetosituation find a different agent to represent him. Did Agent Ignacio act appropriately? TREC requires brokers to keep transactional records for at least ______ years from the date of a closing or the termination of the contract. 1 Considering an agent’s duties to a client (OLD CAR), the duty of _______________ has no expiration date. Obedience 2 Confidentiality 3 4 Disclosure Loyalty Social media Email communication Brokers may not require additional education over the amount required by TREC to ensure competency in the scope of the agent’s TRUE practice of FALSE real estate. Which of the following is NOT considered a type of advertising by TREC? Business cards Billboards An EBR can exist with someone who made an inquiry with the broker’s company within the last ____ months Which of the following must be included on every advertisement. 3 6 9 Sales agent's license Broker's number license number Broker's name 12 Sales agent's name According to TREC’s Safe Harbor Policy, the broker’s name must be at least __________________ the largest item of contact The same information. size as50% the size of twice the size of 25% the size of While the Dodd-Frank Act targets financial regulatory reform, it will have an impact on the real estate industry, primarily because TRUE mortgage lending FALSE is a significant part of most real estate transactions. The first two or three transactions new real estate professionals usually close are with a seller. TRUE FALSE The first and the oldest accepted form of macro target marketing is Demographic Farming. TRUE FALSE Advertisements promoting rebates must disclose terms of rebates. TRUE FALSE Consistently means for two-three months. TRUE FALSE Specifically, before making a cold call, a license holder must verify whether the number is on the National Do-Not-Call-registry. TRUE FALSE Potential buyers begin as unrepresented customers and remain in that status until they enter into an agency relationship TRUE FALSE Fair Housing laws are federal, state and local laws that are designed protect people from discrimination in housing. TRUE FALSE The homeowner today sells every 5 years on average. TRUE FALSE Having half-hour planning periods typically does not work well for many agents. TRUE FALSE Real estate license holders who make “cold calls” must comply with the requirements of the National ____________________ Do-not-call and ____________________. registry, Phone do-not-call bank, safe rule Safe harbor harbor rulesrules,Association TREC rulesof Realtors, Texas Association of Realtors There are many recipes for success but none as basic, or as proven as: ____________ = Production Activity+consistency Showings+consistency Presentations+confidence Planning + knowledge It is important to remember that the seller is a customer or in a third-party relationship with the broker until he or she becomes Intermediary a/n ____________________. Client Buyer Seller's agent ____________________ is the act of harming the reputation of another person by making a false statement to a third person Misrepresentation either by slander Puffing (spoken words) Predatory or libellending (printed Defamation words). ____________________ is a great place to kick off your marketing, particularly if your marketing budget is lean, and thatDo-not-call tends to be registry the case Geographic for mostfarming newDemographic agents when farming launching Predatory theirlending new career. ____________________ is when an unscrupulous lender takes advantage of a consumer’s lack of knowledge regardingPredatory lending practices. lendingTermination ________ would NOT be a service an agent would provide a buyer client. Defamation Demographic farming Transaction management Staging of the property Counseling Negotiation Confidentiality of information while performing as a fiduciary does not have a/n ________________ unless this duty is released Termination in writing, date Reason such as in a conventional Rule listing or Additional buyer representation fee agreement. ____________________, perhaps more so than other license holders, have a duty to respond to parties in a transaction,Buyer's to provide agent disclosure Subagent of important Seller's information agent to their Supervising principal, and brokers to act honestly and fairly with third parties. QUIZ A buyer is: Anyone who wants Someone to view homes who wishes Someone to listwho a home wants Always with to abuy abroker customer, a home and never is on a client a timeline to do so Which of the following actions creates risk for the broker? Mishandling trust Unintentionally funds creating Failingan to unwritten give theAll proper agency of these disclosures relationship actions create in with a timely risk a potential for manner the broker buyer/seller TREC rules require that most records for brokerage firms be retained for at least _____ years 4 6 10 25 Questions Option A Option B Option C Option D Drafts Monitors Initiates Defends Option E LAW OF CONTRACTS Texas Contract Law The Broker-Lawyer Committee _______________ promulgated forms. When a license holder adds provisions to contracts that go beyond factual business detail, the agent is engaged in: A legal activity Unauthorized practice of law includes: Failure to use An impromptu event Something that requires The unauthorized a broker to practice do of law Advising a personUsing regarding a contract the validity form Using promulgated orasufficiency contract form Recommending by of TREC an from instrument a government a or client of title agency to seek to real the property advise of an attorney forms, a form written by an attorney, or a form required by a party can result in a license TREC-promulgated revocation orTREC suspension by TREC. Conveys A license holder must not prepare any document that any interest in real property. A foreign broker or a broker from another state may collect The TREC-promulgated Lease-Purchase TREC The educational requirements for the broker are hours. Some residential leases contain a right of first A Buyers Sellers a commission Auctioneers Affects 900 , giving the tenant the right to purchase the leased property Lease-Purchase by matching Conveys or bettering any Attorneys offer before the Refusal property will be sold to someone else. Temporary Residential Lease is for use when the buyer occupies the property for no more than Auctioneers 90 days prior to closing. Seller's licensed in Texas may represent clients in real estate transactions without a license. A lease with an option to purchase is commonly known as agreement. 900 Sellers Buyer's Buyer's TREC Auctioneers Attorneys Lease-Purchase TREC Refusal may call an auction without the need for a real estate license so long as no other real estate services Refusal are being provided. TREC-promulgated Conveys A Refusal Conveys or affectsSeller's or buyer'sRefusal or auctioneers from a Texas broker, as long as that broker does not 900 negotiate Affectsin Texas. Conveys was created by the Legislature in 1949. Temporary Residential Lease for use when the seller occupies the property for no more than 90Seller's days after closing. Auctioneers Auctioneers Affects 900 Mr. and Mrs. Smith have hired Jay to list the home they have been renting out for the last five years. When Jay first walked through the home with the Smiths, he noticed a large water stain on the living room ceiling. He also noted that the roof was not in the best condition. When Jay received the signed Seller’s Disclosure from the Smiths, he noticed that they listed the roof’s age at 8 years and did not indicate that it had any condition issues. He also noticed that the Smiths had painted over the stain on the ceiling. Jay should: Discuss his observations Ignore the with issue the Smiths, since the inform sellerthem is responsible of their legal for duty the accuracy to disclose of the all material Seller's defects Disclosure. related to the property, encourage them to be honest about the stain, document their efforts to contact the tenants, and request a roof certificate. Document the stain Discuss on thehis ceiling observations and ask awith roofer the to Smiths, give him inform an opinion them ofabout the potential the roof liability issues, encourage them to be honest, ask that they disclose the ceiling stain, and suggest that they look into the issue since it may not have been reported by the tenants. What are some ways Jay can handle this issue to minimize the risk of liability for him and his broker? Require the Smiths Document to document the steps theMake ceiling he sure took stain he to encourage andAll hisofbroker these honesty are covered correct and full disclosure by Errors and Omissions Insurance QUIZ Which of the following is a requirement for a Texas real estate sales agent license? College degree 30 hours of Real Estate Show competency Principles only Must by passing be Texan thebylicensing birth exam An active sales agent license may only be issued under _____. Court order A license holder must NOT prepare which of the following documents? Option agreements Title commitmentsWills The sponsorship of The a licensed supervision broker ofThe a fellow Deceptive sales Trade agent Practices Act A license holder must not prepare any of these documents Basics Of Real Estate Law _______________ is the body of laws and regulations enacted by federal and state legislatures. Much of what was Statutory once embodied law in common law is now codified in statutes passed at the state and federal level. _______________ understanding the relationship between the parties to a transaction, sales agents, brokers, andAgency others is law vitally important. The level of service provided to a buyer, seller, landlord, or tenant is determined by the presence of or lack of an agency agreement with the broker. _______________ is a body of law developed in England and based upon “common sense” and local custom, which Common has expanded law over the years as a result of prior court decisions. _______________ is the law that determines a valid and enforceable contract. Contract law The rights to oil, gas, and other minerals and extend to the center of the earth. Water rights Subsurface rightsSurface rights The right to develop or improve the surface and to use resources extracted from or near the surface including stone, Water gravel, rights water, and Air rights limestone. Air rights Subsurface rightsSurface rights The rights that extend above the surface without limitation. Air rights Subsurface rightsWater rights Surface rights Man-made additions to the land that are permanent and are part of the land. Land Real property Improvements Real estate All of the following are part of the subsurface except: Gas Water Oil Other minerals All of the following are examples of improvements except: Buildings Fence Ceiling fan Patio All that encompasses the land with the addition of all man-made additions to the land. Improvement Real property Land Real estate The surface of the earth extending downward to the center of the earth and upward above the surface to infinity. Real estate Land Real property Improvement Personal property that has become attached to the land in such a way to become part of the real property. Emblement Adaptation Personalty Fixture Things that are temporary or moveable and are not part of the real property. Emblement Personalty Adaptation Fixture The process of attaching personal property in such a way that it becomes real property. Chattel Annexation Emblement Fixture Detaching a fixture from the real property to create personal property Emblement Severance Annexation Personalty The most important test of a fixture. Adaptation Method of attachment Emblement Intention of the party Personal property is also known as: Chattel Emblement Fixture Annexation Fixtures that are needed to carry out a business. Emblement Trade fixtures Personalty Annexation Annual crops that are produced with labor are called: Severance Personalty Annexation Emblement A custom-made and installed fireplace screen is a fixture through this test: Adaptation Method of attachment Annexation _______________ comes from the theory of supply and demand. A limited supply causes an increase in price. Scarcity _______________ refers to the fact that land cannot be destroyed. It is permanent. Indestructibility Personalty _______________ refers to the fact that land, and additions to the land such as buildings, take a long period of time Fixity to pay for themselves. Land cannot be moved. _______________ refers to the fact that no two pieces of land are the same. They cannot occupy the same place Non on earth, homogeneity making them unique. _______________ refers to the fact that value is affected by man-made changes to the land. These changes could Modification be off-site as well like an improved transportation system. _______________ refers to the fact that land cannot be moved. You must go to the land. Immobility _______________ refers to the location of the property or land from an economic stand point, not geographic. This Situs is location, location, location! Ownership by two or more entities in undivided interest and is the most common type of co-ownership. Tenancy in common Interest Estate in severaltyJoint tenancy The four unities of joint tenancy are time, title, interest, and ______________. Beneficiary Separate Survivorship Co-ownership Inherited propertyTrust When a joint tenant passes away, the decedent’s share immediately passes to the other joint tenants. This is commonly Poor man's called:will Possession Concept of Spanish law stating marriage is a partnership. Under this concept, property owned by both spouses cannot Tenancy be conveyed by entirety Trust without both signatures. Co-ownership Community property Ownership by two or more with the right of survivorship. Tenancy in common Joint tenancy Community property Trust Property owned by a married person but not the spouse is considered: Community property Tenancy in common Estate in severaltySeparate property An entity created for the benefit of another. Separate propertyBeneficiary Trust Survivorship This ends tenancy in common by dividing the land into separate pieces. Trustee Severalty Possession Ownership by one person or entity. Tenancy in common Trust Co-ownership Estate in severalty Partition General partners are not involved in the day to day operations. They are the investor. TRUE FALSE A sole proprietorship is a venture owned by a couple. TRUE FALSE Limited partnerships have both general partners and limited partners. TRUE FALSE Partnerships must have at least one limited partner. TRUE FALSE Corporations are created easily by an oral or written agreement. TRUE FALSE A corporation is considered a distinct legal entity under the law and may own real estate and other assets. TRUE FALSE The primary benefit to a sole proprietorship is that the owner has total control of the business. TRUE FALSE Corporations are owned by the board of directors. TRUE A partnership can be created with a simple written agreement or it may be created orally. TRUE An S Corporation eliminates the double taxation issue of a large corporation. TRUE Townhouses are connected to each other by a . Common wall A condominium complex has a manager who is employed by the Known as interval ownership, a The owner of a is commonly used for ownership of a vacation property. . In a co-op, the owner buys a share of the corporation, and has a Really a type of tenancy in common ownership, a timeshare or In a FALSE on the unit. Home owner's association Condominium Timeshare Proprietary lease Timeshare Townhouse Cooperative Condominium Townhouse Timeshare Condominium Cooperatives Horizontal property Cooperatives acts Proprietary leasesHomeowner's Association Proprietary lease Homeowner's Association Interval ownershipTimeshare is part ownership of a property coupled Interval with ownership the rightProprietary to occupy for lease a certain Cooperatives amount of time Common throughout wall the year. , an owner has separate legal ownership of their unit. Owners of a FALSE to maintain the value of the property. Home owner's association Cooperative usually owns a small front or backyard with their unit. Condominiums are established un laws referred to as FALSE Timeshare Condominium Cooperatives do not actually own their unit but do have an ownership share in the corporation that Cooperative owns the building.Timeshare The owner of surface rights does not have the ability to develop the surface and to use resources extracted from or near TRUE the surface. Common wall Timeshare Condominium Homeowner's association FALSE Shrubs, trees, and landscaping are considered improvements and go with the property. TRUE FALSE Refrigerators are generally considered to be items of personal property that are not included in a sale of real estate. TRUE FALSE The ADA is an expansive law that affects almost all public accommodations. TRUE FALSE Property owners can assess and remediate their own properties without a license. TRUE FALSE The CAN-SPAM Act of 2003 involves an agreement among two or more competitors not to do business with another competitor TRUE for the purpose FALSE of inducing the other competitor to change its business practices. Penalties for violation of anti-trust laws include fines and possible prison sentences. TRUE FALSE Commission rates and other means by which brokers are compensated by sellers and buyers are always negotiable between TRUE the parties. FALSE Two brokers, Michael and Kathleen, discussed how they list their properties. Michael informs Kathleen that he recently joined a private listing group on HipRocket, a social listing service site for real estate agents. He encourages Kathleen to join the listing group. Michael informs her that his group shares listings that they do not enter into the MLS amongst themselves in order to keep the “undesirables” from stomping through their sellers’ houses. Kathleen thinks this a good idea and asks Michael how to join the group on HipRocket. Michael tells her that it’s an “open group” as far as HipRocket is concerned, mainly because the brokers don’t want to break antitrust rules. He then tells her to keep it a secret from Surrealty because no one wants to work with the agents from that firm. Kathleen agrees to keep it quiet and interjects that she doesn’t want to work with the agents at Surrealty either. Does the fact that the HipRocket group is classified as “open” protect the brokers from violations of antitrust laws?No Yes Is the HipRocket group itself an actual violation of anti-trust laws? Yes No No, if they take additional Yes, if they steps take to exclude additional others steps to exclude others With regard to Michael and Kathleen’s discussion about Surrealty, could it be a potential violation of anti-trust lawsNo if they were not discussing Yes access to the HipRocket group, and just agreeing that they did not like working with them? QUIZ Todd planted two live oaks and four magnolia trees on his 3-acre property. These trees are examples of _____. Improvements Emblements Fixtures Personal property Patti, David, and Arthur inherited several acres from their parents. They received unequal shares of the estate. What Joint type tenancy of ownership Estate do in theseveralty siblingsTenancy have? in common Community property If you hire a mold remediator, he must give you a(n) _____ no later than 10 days after work is complete. Environmental Impact TexasStatement Property Code EPAreceipt Certificate Certificate of Mold Remediation The rights that extend above the surface of land without limitation are known as _____ rights. Mineral Subsurface Surface Air _____ are man-made additions to the land that are permanent and considered to become part of the land. Surface rights Improvements Fixtures Personal properties Another name for personal property is _____. Furniture Fixtures Subsurface rightsPersonalty One of the physical characteristics of land is _____. Scarcity Indestructibility Fixity Modification Introduction to Contracts A contract that is binding on the parties even though certain contractual duties have not yet been performed Executory contract A contract created by offer and acceptance Express contract A contract requiring both parties to perform certain duties Bilateral contract A contract created by behavior Implied contract A contract that must have competent parties, offer and acceptance, legal purpose, consideration, and be in writingValid contract Sales Agent Sally has sent an offer for her clients, the Joplins, who would like to purchase a house they saw listed by ABC Realty and Sales Agent Connie. ABC Realty represents a seller named Steve. The property is being offered for $675,000. The Joplins have offered $650,000 because of the comparable sales their agent showed them while preparing the offer. The offer contains a 15 day contingency for the Joplins to secure financing and a 7 day termination option for which they paid $200. The offer Sally prepared is written on a TREC promulgated One to Four Family Residential C Once Steve and his agent, Connie have reviewed the offer, Steve agrees to the terms of the offer, signs the One to Four Contract form and has Connie send the signed agreement back to the buyers’ agent. Assuming that Steve and the Joplins are competent, is this a valid contract? No, because the contract No, because price itishas less Yes, an than option because the period listing it meets No, price because the four of elements the financing of a valid contingency contract What is the consideration in the contract? What type of contract has been created between the Joplins and Steve? $650,000 Voidable $675,000 Void $25,000 Implied Because of the payment of $200 and the agreement to allow the buyers to terminate for the first 7 days, what typeUnilateral of contract contract has been Bilateral created? contract Void contract What element of the contract creates an enforceable contract meeting the criteria of the Statute of Frauds? Competent partiesConsideration Transfers all the rights related to the contract to another party. Assignment $200 Express Implied contract Offer and acceptance In writing A contract that is binding on the parties, with one or more of the parties having contractual duties that have not been Executory performed. contract A type of contract that cannot be assigned. Listing agreement A contract that has been agreed to, signed by the parties, and the acceptance communicated to the offeror. Executed contract A new contract is substituted for an existing contract. Novation All the terms of the agreement have been met and the sale closes. Fully executed contract According to the TREC-promulgated contract forms, all representations made by seller and buyer “survive closing,” which TRUE means that both FALSE parties remain liable beyond closing for their representations made in the contract. Consideration is always monetary. TRUE FALSE The best time to get the parties to sign a contract is during drinks at a local bar because everyone is relaxed. TRUE FALSE A novation may include new parties to a contract. TRUE FALSE Mutuality is found in bilateral contracts. TRUE FALSE A contract for an illegal purpose is void. TRUE FALSE A person entering into a contact who is under the influence of narcotics could be considered mentally impaired. TRUE FALSE The Statute of Frauds requires that contracts for the conveyance of an interest in real estate for a term of six months orTRUE less must be in writing. FALSE All contracts are assignable, no exceptions. TRUE FALSE An option contract is binding on both parties. TRUE FALSE In Texas, an individual under the age of 21 is considered a minor. TRUE FALSE QUIZ In order to comply with the _____, contracts for the conveyance of an interest in real estate or leases for a term ofSAFE more Act than one year Statute mustofbeFrauds in writing. Statute of Limitations Real Estate Settlement Procedures Act Broker Bernardo has a signed sales contract that has not yet gone to the closing table; therefore, Bernardo has a(n) Executory _____ contract.Executive Non-binding Voidable Bryan’s client shows up to his closing after drinking three beers at a baseball game. Due to his consumption of alcohol, Impaired the closing cannot Intelligent takeenoughCompetent place because Bryan’s Sane client is not legally _____ to sign. Ownership Rights and Limitations Occurs when an individual owns property Freehold estate The government’s right to regulate land usage Police power First in time is first in right Prior appropriation Created by law Statutory estate Rights or privileges in land that are less than ownership, but exist Equitable estate Creates the highest priority lien, getting paid first at foreclosure M and M lien IRS taxes Mortgage The right the government has to take private land for public use. Escheat Condemnation Eminent domain Police power All of the following are examples of police power except Condemnation Zoning Building codes Permission to violate a zoning law Buffer zone Eminent domain Variance Downzoning The action of the government when it takes private land Escheat Police power Eminent domain When a homestead property is sold at tax auction the owner has: Escheat rights Property tax consultant Two year rights right of redemption Allodial rights When a person dies without a will and is not married and has no children, the property goes to: Their heirs The state The property value for tax purposes. Inverse condemnation Condemnation Condemnation Ad valorem taxes Buffer zone The federal government The county government Mills Assessed value Eric is a married individual who inherited his grandfather’s house after his death. He and his wife bought a home together, Community but property divorced Separate five years property later. What is the status of Eric’s grandfather’s house? Eric and his wife divide up their assets during the divorce. What is the status of the home they purchased together? Community property Separate property Steve purchases a home. Four years later, he asks his girlfriend to move in. He pays all the bills associated with the Community house. She property pays Separate for cable, property groceries, and half of the entertainment budget. What is the status of Steve’s home? Shanay and Travis are a hardworking couple who have been saving for a home for their family, but life keeps getting Community in the way. property TheSeparate house next property door to her family goes on the market, and Shanay’s parents decided to gift her the house. What is the status of Shanay and Travis’s new home? Arthur was driving to work one day when a work truck plowed into his car. Arthur and his attorney successfully sueCommunity the driver’sproperty company Separate for compensation property for pain and suffering. He and his wife are embroiled in a contentious divorce, and she lays claim to the settlement. What is the status of Arthur’s settlement? Nadine inherits $40,000 from her grandfather’s estate. She deposits the check into her and her husband’s savingsCommunity account into property which Separate they both property deposit funds each month. Six year’s later, Nadine and her husband use their savings to purchase a vacation home. She and her husband part ways amicably. What is the status of the vacation home? Fernando and his family has a company that owns several commercial properties. When he and his wife, who is aCommunity doctor and property not involved Separate in the property family business, begin divorce proceedings, she inquires about the family’s holdings. What is the status of his family’s commercial holdings? Edgar and Kaycee purchase their first home together after ten years of apartment living. They separate, and Kaycee Community and her sister property buy Separate a home property together with funds they receive from a sizable family inheritance. Two years later, they finalize the divorce. What is the status of the home Edgar and Kaycee purchased together? Curtesy is the interest of a wife in her husband’s estate. TRUE FALSE Texas homestead laws limit an urban homestead to 10 acres, but do not put a limit on rural homesteads. TRUE FALSE A freehold estate includes certain rights or privileges referred to as the bundle of rights. TRUE FALSE Property that was owned before marriage falls under community property once a couple is married. TRUE FALSE The best type of ownership is conditional fee ownership. TRUE FALSE The remainderman in a life estate receives fee simple ownership upon the death of the life tenant. TRUE FALSE Fee simple ownership is defeated by death. TRUE FALSE TRUE FALSE Texas is one of nine states that adhere to the concept of community property. A right given by law to certain creditors to have debts paid out of the property of a defaulting debtor. Lien A mortgage lien. Voluntary lien Limitations placed in a deed when the property is conveyed to a new owner. Private deed restrictions A lien that is created by law. Statutory lien A claim, lien, charge, or liability attached to and binding real property. Encumbrance A lien that is placed on the property against the wishes of the property owner. Involuntary lien The right to enter the land and explore for and recover oil, gas, and other minerals is Appropriative rightWater rights Mineral rights Easement rights The right to use water from a river or stream that borders a property Alluvion Accretion Littoral Riparian The CC&Rs are found in a recorded document called: Deed Reliction document POA regulations Declaration of restrictions A seller of coastal property abutting tidally influenced water must provide Navigable water disclosure Gulf intracoastal waterway Notice regarding declaration coastal Information arearegarding property tidal water notice A theory of water law based on the idea that “first in time is first in right.” Prior appropriationAlluvion Accretion Littoral A right or privilege or improvement that belongs to and passes with the land but is not necessarily part of the land.Appropriative rightAppurtenance Encroachment Mineral rights An intrusion of one’s property onto another’s property. Encroachment Littoral Appurtenance Avulsion All of the following are about water rights except: Riparian Appurtenance Appropriative Littoral Recommend water testing Underground storage of fuel tanks Abatement plan outlines Asbestos There is no duty to remediate Lead Mitigation Radon Find location and disclose EMF's QUIZ Lynne purchased a lakefront lot in order to build her dream home. Under _____, Lynne has the right to take her fishing Riparian boatrights out on the Docking waterrights to catch Appropriative catfish on therights weekends. Littoral rights Cities and municipalities have the right to regulate the type of buildings constructed in an area through _____. Escheat Many states recognize statutory estates, including: Community property Homestead Zoning Eminent domain Taxation Tenancy by the entirety All of these may be recognized Contracts Used in Real Estate Employment agreement for selling broker Buyer-Agency agreement Also called an installment contract, a land contract or a real estate contract Contract for deed Employment agreement for listing broker Listing agreement Gives a potential buyer or tenant the right to purchase or lease a property Option agreement Rights or privileges in land that are less than ownership, but exist Lease All of the following are types of contracts except: Buyer representation Property agreement management Performance agreement agreement Listing agreement Contracts can be discharged due to: Loss of license byUnilateral one of theacceptance brokers Death of the buyerA or change seller in law that makes the performance illegal What is a phrase commonly inserted into a contract to ensure that certain tasks must be completed as stipulated?Time is of the essence Impossibility act The gout corners Stipulation rule of performance __________ stipulates that a contract that is clear, not ambiguous, and states that the terms for performance under Four thecorners contractrule may Anti-ambiguity be determined clause by Discharge a readingofofa the contract Time entire is contract. of the essence Nick has been looking for a home for his family ever since he got a big promotion. He hires real estate agent Anna who negotiates $16,500 a 5.5% $166,500 commission on the$18,333 sale. Anna helps $54,545 Nick purchase a home listed at $325,900, for $300,000. If Anna gets half (50%) of her broker’s commission, how much does Anna make on the deal? If Nick were to refuse to pay the commission what would happen? $8,250 $27,272 $9,166 $83,250 Anna's broker could Nick sue is Nick not legally Nick bound would to pay automatically the Anna commission could be arrested sue Nick The representation agreement may include more documents than just the Buyer/Tenant Representation Agreement. Paragraph If so, the16 documents Addenda should be listed. The broker informs the client that the broker may have other clients who may be interested in similar properties in Paragraph the same market 9 Competing area. clients The License Act requires a broker to have a definite termination date in a listing agreement and a buyer/tenant representation Paragraph 4agreement. Term The client agrees to work exclusively through the broker in acquiring property and negotiate the acquisition of the property Paragraph in 6 the Client's marketobligations area only through the broker, informing others that the client is working exclusively with the broker. Besides agreeing that the broker will receive a fee after it is earned and payable, this paragraph determines from whom Paragraph the broker 11 Broker's will seek feespayment. This paragraph addresses whether the buyer client will allow the broker to represent the seller and the buyer at theParagraph same time. 8 Intermediary Market area means that area in the State of Texas within the perimeter boundaries specifically detailed in this paragraph. Paragraph 3 Definitions This paragraph explains that commission rates are a matter of negotiation and that brokers and sales agents may Paragraph not discriminate 18 Additional while providing notes services. It also tells the buyer to have an abstract of title examined by an attorney or to obtain a title policy. The client grants the broker the exclusive right to act as the Client’s real estate agent for the purpose of acquiring property Paragraph in 2 the Appointment market area. The broker agrees not tell private information to another person during the term of this agreement or after unless required Paragraph by 10 lawConfidentiality to do so. Eviction is referred to as: Action of forcible detainer Assignment Lease option Gross lease In this type of lease, the tenant pays rent and the landlord pays the costs associated with ownership including the Percentage utilities. TheleaseGross tenant only lease pays rent. Net lease All of the following are requirements of a valid lease except: Graduated lease Let and take agreement Competent partiesAdequate consideration Delivery This type of leasehold estate is created when the lease has expired and the tenant refuses to move out and the tenant Estate is for notyears payingTenancy rent. at will Periodic tenancy Tenancy at sufferance A lease can be discharged for many reasons except: By condemnation Eviction By constructive eviction At the end of their term When a tenant transfers all of his rights and liabilities under the lease to another person, it is called: Sublet Eviction Termination Assignment This type of lease is one in which in addition to paying rent, the tenant also pays expenses such as taxes, insurance, Gross andlease maintenance. Percentage leaseNet lease This type of leasehold estate automatically renews for a like period of time until the landlord or tenant gives notice Estate to terminate: for years Tenancy at will Graduated lease Periodic tenancy Tenancy at sufferance When a tenant has the right to match or better an offer the landlord may receive on the property before the property Tenancy can beat sold willto someone Right of first else, refusal it isSale called: and leaseback Graduated lease In Texas, a real estate license holder may not write all of the following transaction agreements, except: Lease-option purchase Contract agreement for deedTREC promulgated Lease-purchase sales contract agreement This type of transaction allows a tenant to buy the property at a preset price and terms for a given period of time but Installment does not contract obligate Lease-option the buyer toagreement purchase. Contract for deedAssignment All of these terms are synonyms for a contract for deed except: Purchase agreement Installment contract Cash for deed agreement Land contract This type of transaction obligates the tenant to purchase the property at a preset price at some agreed to time andReal terms. estate contract Lease-option agreement Lease-purchase agreement Executory contract Risks to a buyer in a contract for deed include all of the following except: The seller may notThe be buyer able tomay deliver failAnto clear unscrupulous make titlepayments in the seller The future toseller the mayseller could mortgage file bankruptcy, the propertyencumbering without the buyer's the titleknowledge A buyer may pay for an option on a property to: Hold the property Create while the anbuyer enforceable isObligate having contract inspection the buyer on the Show performed tobuyer purchase the seller thehow property serious the buyer is about purchasing the property QUIZ Only a(n) _____ may earn a commission, and only a(n) _____ may sue to collect a commission. Broker, agent Regardless of representation, all buyers should be provided with a(n) _____ disclosure of representation at first contact. Oral Which of the following is an example of a contract used often in the real estate business? Agent, broker Broker, broker Agent, agent Written Email Any of the above Property management Listingagreement agreementLease agreementAll of these are contracts used in real estate The Sales Contract Terms that are not covered in the standard contract forms or addenda Special provisions Damage to or destruction of property Casualty loss Payment placed into escrow to show that the buyer is serious in intent to purchase Earnest money Rejection of an offer coupled with a new offer Counteroffer Simon has received multiple offers on his home the first 4 days it has been on the market. He decides to stop allowing showings on the home and is ready to look closely at all the offers. Gary – his listing agent – has five offers in hand, and the top two offers are very close in amount. He receives two more last-minute offers, one that is submitted orally during a phone conversation and one that is well below asking price and lower than all of the other offers. Which offers should Gary present to Simon? Gary should present only the top two since they will offer the most benefit to the seller. Gary should present Gary allshould offers. present Gary only should thosepresent offers that the first include five the offers complete since the contract last one and was all so needed low and addenda. it came after Simon decided to stop showing his home. What can Gary do to look out for his client’s best interest? Gary can make sure Gary that can alltry offerors to getPresent know a better that the offer this cash by is Hold offer disclosing a multiple first backsince the offer the highest amount itsituation, is notoffers of likely the so they for to first fall a all offer few through can days to make alllater inofferees hopes their duehighest to that in financing hopes Simon abd ofwill best starting issues allow offers amore bidding showings war and get an even higher offer. How can Gary help Simon evaluate the offers? He can prepare a He spreadsheet can prepare on net the Hesheets offers can point being on the out considered offers the He offers can being present so with considered Simon the the highest can bestso see offers sales Simon details first price can so of and compare the thatfinancial the Simon largest all is of strengths more the cash details able down and to and payments. weaknesses focus better on determine the of ones each with the buyer, the bottom highest as well line yield for as the each amount other. each one is asking for in the seller concessions. What options does Simon have when responding to the offers? Accept, reject, rescind Remand, or relegate agree, delineate, Deliberate, delay agree,Accept, counterbalance reject, counteroffer or obligateor do nothing QUIZ What does a real estate agent do with multiple offers on a property? The agent can choose The agent the best canoffer hold The for allagent the offers client. may untilpresent one Thecomes agent the highest in must thatpresent isoffers over only. the all offers asking toprice. the client. Agent Jay has received an offer on his client’s property, but they are still considering it. What is true of this situation? The offer is a binding The contract offer is no because longer No other up it was foroffers negotiation prepared can The be byoffer between presented the is buyer’s notthe yet oragent parties. accepted a contract and presented bybecause the sellers. Agent to the sellers Jay’s clients have not accepted it. The Reeves’ agent submitted an offer of $349,500 on a property priced at $365,000. The seller’s agent informed the Counteroffer buyer’s agent that Novation the sellers have Appraisal made a(n) _____ Acceptance of $359,900 instead. Contingencies, Addenda and Amendments Forms that describe changes to a contract Amendment Related to financing contingencies due to a maximum loan amount being a percentage of the lesser of the sale price Appraisal or appraised contingency value Attachment to a contract that further describes the rights and duties of the parties Addendum Gary Inspection contingency Subject to a title examination Title contingency Barbara is the buyer’s agent for Lin. She submits an offer package on Lin’s behalf and is careful to include the Third Party Financing Addendum, so the contract will be contingent on Lin’s ability to secure financing for $210,000 within 14 days. Lin’s offer is accepted. As her financing deadline approaches, Lin’s lender decides that she is only eligible to borrow $200,000. Which of the following options is NOT available to Lin? Lin can terminate Lin the can contract choose andnot forfeit Lintocan take her choose any earnest actions toLin money putcan $10,000 attempt cash to re-negotiate extra in orderthe to price makeofupthe thehome difference as long as Babara submits a new or amended contract What should Barbara do to make sure she is fulfilling her fiduciary responsibilities to Lin? Barbara should encourage Barbara should Lin to back Barbara out off and ofshould the letcontract Lin keep Barbara make Linher informed should own decision encourage of her options Lin to ashire wellan asattorney the approaching to look fordeadline(s) a loophole in the contract What additional amendments, contingencies, or addenda may be used if Lin and the seller decide to proceed withBarbara the sale must at a lower submit There sales theischange price? no need in Barbara for financing Barbara must addendum to submit submit Barbara an on anyamendment Lin's additional must behalf submit amendments that thereflects counterthe ortoaddenda new the original , lower offer salesaddendum price on Lin's behalf The contract does not have to include a title contingency. TRUE FALSE A contingency is a provision in a contract that requires that a certain act or event happens in order for the contract to beTRUE binding on the party. FALSE The home inspector might cite deficiencies, but those never require additional inspections. TRUE FALSE A contingency to a contract is an attachment that adds or further describes the rights and duties of the parties. TRUE FALSE Appraisal contingencies are not related to financing contingencies because lenders use appraisals to determine the amount TRUEof money they FALSE will lend on a property. Under federal law all sellers of homes built prior to 1968 must provide to the buyer a disclosure of their knowledge of possible TRUE lead-based FALSE paint hazards. A financing contingency is a special concern for both buyer and seller. TRUE FALSE Common time frames in an escape clause are 24, 48 or 72 hours. TRUE FALSE If the seller agrees to do repairs, or agrees to a financial adjustment for needed repairs, an amendment to the contract will TRUE be needed. FALSE Lead-based paint is a special concern in the basement areas of certain homes. TRUE FALSE In many rural homes, water is provided from an on-site well. TRUE FALSE QUIZ Gerald and Finn are selling their classic 1959 Mid-Century Modern home. What form must they complete when they Amendment list their property? to Contract Addendum for Seller’s Seller-Financing Disclosure of Addendum The Information contingency on Lead-Based that the Buyer Paint recognize Hazards the Historical Integrity of the Home Sellers can _____ the oil, gas, and minerals associated with their property. Sell Which of the following is NOT considered a common addenda form? Exclusive Right toFinancing Sell addendum Mineral reservations Lead-based paint Reserve Divide Any and all of the above Consummation of a contractual real estate transaction in which all appropriate documents are signed and the proceeds Closing of the loan are disbursed by the lender Sending monthly payment statements, collecting monthly payments, and following up on delinquencies Servicing a loan Borrower’s unconditional promise to repay Promissory note Detailed process of evaluating a borrower’s loan application to determine the risk involved for the lender Underwriting The person who pledges the property to secure the debt is called the mortgagee. TRUE FALSE The promissory note pledges the property to secure the debt. TRUE FALSE Mortgages can be in one of two forms, a standard mortgage and a deed of trust. TRUE FALSE The deed of trust is a four-party mortgage including, the borrower, the lender, the trustee, and an attorney. TRUE FALSE A short sale is used when the buyer must move in quickly, closing the transaction in less than 14 days. TRUE FALSE Seller financing is the least common form of mortgage financing. TRUE FALSE Foreclosure is the legal process used by the lender to sell the property when the borrower is in default of the promissory TRUE note. Mortgage loans are secured loans and are preferred by lenders over unsecured loans. FALSE TRUE FALSE In a lien theory sate, the mortgage transfers the title of the property to the lender from the borrower until the debt is satisfied. TRUE FALSE All of the following are mortgage lending activities except: Origination Loan processing Servicing The Government National Mortgage Association, established in 1968, operates the __________________. VA Primary market Mortgage-backedFHA security program Non-depository mortgage loan originators include all but the following: Mortgage bankersCorrespondent lenders Fannie Mae Conservatorship Mortgage brokers The ______________________ exists for the purchase and sale of existing mortgages to investors creating liquidity Thefor Federal lenders. reserve Mortgage bankersUnderwriters Secondary market The central banking system in the United States is called: Fannie Mae Federal loan home The mortgage primarycorporation market The Federal Reserve This GSE was established in 1970 for the purpose of purchasing mortgages in the secondary market: Federal National Mortgage Government Association National Fannie Mortgage Mae Association Freddie Mac The market where buyers and mortgage lenders come together to create and negotiate a mortgage transaction is Origination called: Non-depository mortgage The primary lending market The secondary market The building of a file that will be used to make an underwriting decision is called: Origination Processing Funding Servicing ______________ are small lenders who have the funds necessary to extend loans at their own risk, usually sellingMortgage their loanbanker to a larger Mortgage wholesale broker lender. Mortgage company Correspondent lender A buyer is purchasing a home and wants to assume a seller’s existing FHA loan. The sales price is $170,000. The seller’s existing loan balance is $128,000. Is this loan assumable? Yes No Will the buyer be required to qualify for the assumption? Yes No Will there be a change in the rate of interest charged if assumed? Yes No If the loan is assumed, what is the seller’s equity in the property? $128,000 What downpayment is required for the loan assumption? If the loan is assumed by the buyer, can the seller be released from further liability for repayment of the loan? $128,000 Yes $170,000 $0 $42,000 $42,000 $4,480 $5,950 No The FHA is not a lender, but a mortgage insurance program that protects the lender from loss in the event of default by TRUE the borrower by insuring FALSE the full amount of the loan. Veterans who were discharged under any conditions, even dishonorable, can apply for a VA loan. TRUE FALSE The front ratio is used to qualify a borrower for a loan based upon the proposed house payment and the borrower’s gross TRUE monthly income. FALSE For property to qualify for the USDA Rural Housing Program, the home must be located in an approved rural area. TRUE FALSE Conventional loans are either guaranteed or insured by the federal government. TRUE FALSE A USDA loan is commonly referred to as a Section 8 loan. TRUE FALSE Lenders may use the High Cs of good lending to determine ability and willingness to make timely payments. TRUE FALSE Any seller concession or combination of concessions which exceeds 3 % of the established reasonable value of the property TRUE is considered FALSE excessive and unacceptable for VA-guaranteed loans. Passed in 1974, this act covers all creditor who regularly extend credit, prohibiting discrimination and ensuring thatEqual all consumers Credit Opportunity are givenAct an equal chance to obtain credit. This federal law is designed to protect consumers in credit transactions by requiring clear disclosure of key terms of Truth the In lending Lending arrangements Act and all costs. This act was passed to ensure that banks and insurance companies serve the needs of the community in which they Community were chartered Reinvestment to do business. Act It prohibits redlining. This act is designed to enhance consumer protection and reduce fraud by ensuring that RMLOs receive training and SAFE areAct licensed or certified. It established the NMLSR. This agency is responsible for enforcing federal consumer financial law and has the authority to oversee banks, credit Consumer unions,Financial and non-bank Protection businesses Bureaurelated to mortgages, payday lenders, and private education lenders. QUIZ A _____ may take place when a seller is unable to sell his or her property at or above what the seller owes the lender. Foreclosure Short sale Second market Adverse possession The _____ exists for the purchase and sale of existing mortgages to investors. Primary market Correspondence market Secondary marketTertiary market In a(n) _____ a mortgage is an actual transfer of ownership from the borrower to the lender. Title theory state Lien theory state Community property Secondary state market A(n) _______ is generally a person, corporation, or firm, not otherwise in banking, that provides its own funds for mortgage Mortgage financing. banker Savings and loan Commercial association bankUnderwriter Conveyance of Title Under this system of title, the purchaser does not receive a physical title. Abstract system A property owner obtains a certificate of title that is recorded in the public records Torrens system The evidence an individual has as to her or his right to possess land. Title Title that a reasonable buyer would accept as clear. Marketable title Any transfer of ownership is called alienation. TRUE FALSE Voluntary alienation happens with documents like a will, power of attorney, or a deed. TRUE FALSE Foreclosure is one example of voluntary alienation. TRUE FALSE Involuntary alienation occurs against the will of the owner. TRUE FALSE The right the government has to acquire ownership from the rightful owner for public use is called condemnation. TRUE FALSE Condemnation requires compensation by the government entity taking the property. TRUE FALSE TRUE FALSE Involuntary alienation requires an absence of force. The process by which the government exercises its right of eminent domain Condemnation The combination of turning two or more properties into one Plottage The process by which a lender exercises its power of sale under a mortgage that is in default Foreclosure Occurs when an individual acquires title from the rightful owner through hostile, actual, and continuous occupationAdverse of the land possession for the statutory period Under this system, a property owner obtains a certificate much like an automobile title that is recorded in the publicTorrens recordssystem The government is the original owner of all land Sovereignty of the soil A limitation placed on the new owner by the grantor Restriction Any change in the ownership of real property Alienation Handwritten wills Holographic The gradual loss of land over time as the land bordering a river or stream washes away Erosion The original conveyance of land by the sovereign is usually done with this document Patent QUIZ Gene made a will naming his oldest daughter as executor. His other children are noted as heirs. In this circumstance, Administrator Gene is referred Beneficiary to as the _____. Devisee The key to determining whether a conveyance is voluntary is the _____. Testator The laws of descent The order of a court Absence of force Type of force used Much to her six children’s dismay, single mom Nancy died without making a will. Who will inherit her estate? Her surviving siblings Her parents Complete history of the title to the property Abstract of title Division of taxes and POA fees between the buyer and the seller Proration Contract between the title company and the insured Title insurance policy Prevents a property owner from collecting on a claim from both the title company and the seller Subrogation clause List of all owners from the first to the current owner Chain of title Her children The state through the right of escheat Chapters Parts Transaction Process and Closing It is best for both the buyer and the seller if the buyer is pre-qualified or pre-approved to purchase the home he/she wants TRUE to purchase. FALSE The time period between the signing of a contract and closing is always 30 to 45 days. TRUE FALSE Once the terms of a contract have been negotiated and agreed to, and the contract has been signed by all parties, the transaction TRUE process FALSE begins Transaction checklists can be used by both the buyer’s and seller’s agents to help keep the transaction on track. TRUE The contract cannot be delivered to the title company by the seller’s agent, only by the buyer’s agent. TRUE The title commitment is broken into sections called Sections FALSE FALSE Schedules The Texas Real Estate License Act requires the _______________to advise the buyers that they should have the Sales title toagent the real estate Escrow verified agent by obtaining Seller an abstractBroker and have the buyer’s own attorney examine it, or obtaining a policy of title insurance. A title company will defend the title in court and pay for actual loss in which situation? A lien created by the A violation buyer's or financing building The ordinance buyer losses is discovered The a portion title company ofafter the land closing missed due toa water judgment, tax or special assessment When a seller provides an existing survey for a buyer, the seller must also provide a Texas Department of Insurance T-47 form affidavit called: The lender’s title policy is called A seller survey affidavit M-80 affidavit The Texas Department of Insurance Rule _______________ addresses the relationship between the title companyP-53 and real estate license T-47 holders. SB 489 An inspector in Texas is licensed by the Texas Department of Insurance. A hold harmless affidavit The owner's title policy The mortgagee's title The policy title commitment The title policy for the lender TRUE TREC rule 535.2 FALSE A deficiency is a condition that, in the inspector’s reasonable opinion, adversely and materially affects the performance TRUE of a system or component FALSE or constitutes a hazard. Because inspectors are licensed through the State Board of Insurance, they may provide warranties for appliances andTRUE systems. FALSE Inspectors must use TREC-promulgated inspections forms to provide for uniformity in inspections. TRUE FALSE Residential inspectors must complete 130 hours of coursework which may be taken at Champions School of Real Estate. TRUE FALSE Trade specialists do not have to be licensed by TREC to give an opinion in their specialty area. FALSE TRUE The major functions of a title company are: Select all that apply Sign a deed of trust Sign a deed Title insurance Authorize payoff of Sign theira loan promissory note When the seller closes, the seller will: Select all that apply Sign a deed of trust Sign a deed Title insurance Authorize payoff of Sign theira loan promissory note When the buyer closes, If the buyer is financing the property, the buyer will: Select all that apply Sign a deed of trust Sign a deed Title insurance Authorize payoff of Sign theira loan promissory note Which of the following transactions is regulated by RESPA? An apartment building A house purchased purchased with A house with financing cash purchased A 30-acre with financing farm purchased with financing Which section of RESPA sets limits on the amounts a lender may require a buyer to put in an escrow account for taxes Section and10insurance? Section 7 The Dodd-Frank Consumer Protection Act directed the Bureau to combine which two disclosures? Section 8 Section 9 TILA-RESPA Seller's disclosureRepresentation and the IABS disclosure Consumer and protection agency disclosure notice and IABS Section 10 Which section of RESPA prohibits kickbacks, unearned fees, and referral fees? Section 8 A lender must provide the Home Loan Toolkit to a borrower within how many days of the loan application? 7 calendar days 5 business days 3 business days 10 business days A loan servicer must acknowledge receipt of a borrower’s inquiry within how many business days? 30 business days 10 business days 15 business days 20 business days Section 7 Section 9 QUIZ Which of the following closings would be covered by RESPA? An office building A mobile home A condominium An industrial facility If someone claims an interest in the purchaser’s property after issuing a title insurance policy, a title company will defend A charge thebytitle property under A mortgage owners which ofor or the condominium deed following A judgment, of trust circumstance? association tax, or Any special of theassessment above The T-47 Affidavit must be signed in the presence of a _____. Broker Notary Surveyor TREC committee advisor Because they are considered an abusive practice, _____ are prohibited by RESPA. Temporary loans Refinance transactions Kickbacks Controlled business arrangements Transactions considered exempt from RESPA include which of the following? Government loansHome equity loans Business loans Manufactured home loans What is due to the seller at closing? The entire loan amount The sale price of the Origination propertycharges Borrower’s existing loan balance Common Contract mistakes The option fee must be delivered to the listing broker or the seller within 3 days of the effective date of the contractTermination option When the contract becomes binding on both parties Effective date The sales agent must inform the other seller if he or she is licensed to practice real estate in Texas License holder disclosure Items that are not conveyed with the property Exclusions Requires the entry of buyers’ and sellers’ contact information Notices Fanola just listed her beautifully appointed home with Angela who took the time to carefully enter all information into the MLS. Among the information in the MLS is that the Sub-Zero Pro-Series refrigerator, which retails for upwards of $7,000, can convey with the property. This was a major selling point for Tandy, who put in an offer after falling in love with the home’s state-of-the-art chef’s kitchen. Tandy’s buyer’s agent draws up the contract, but does not attach the Non-Realty Items Addendum to the contract. When Fanola moves, she takes her fancy refrigerator with her, leaving Tandy in the cold with an expensive hole inFanola the kitchen. is under Since no Fanola no obligation onemust mentioned toreturn return Fanola the the thesub-zero conveyance professional must supply pro-series Tandy ofgrade Tandy thecan refrigerator, to refrigerator with the purchase aproperty refrigerator she because a comparable as simply it's of itentry some took is an refrigerator, into form, itaccessory with thesince her. MLSTandy and and homes means Fanola not ismust a incensed, that built-in must ithave must reimburse improvement refrigerators claiming convey that her withand the since thecost it's property her conveyance agent toldwas her that not mentioned the MLS advertised in the contract the refrigerator as part of the property, it should have been conveyed with the property, regardless of whether it was mentioned in the contract. She insists that the shiny, stainless-steel side-by-side is her property. What is true of this situation? Natalie’s client, Jordan, has submitted an offer on his dream property. He was very excited and emotional when she informed him that the seller accepted his offer from among three other strong offers. While writing up the contract, Natalie enters into Paragraph 11, Special Provisions, that the contract is contingent upon Natalie theshould sale ofnot his Natalie have current written was home correct theasThere contingency Jordan in her is approach no willprecedent into not be paragraph All toable purchase the forto contingency making afford 11 contracts of the two a contract contract for mortgage in the Texas contingent sale because payments already of Jordan's TREC upon contain perexisting the promulgates month. sale language home. of Hisanother house an making It is addendum up property. hasthem tobeen hercontingent specifically This to listed, protect is not andupon the afor has situation best that the generated interest purpose. sale that of the some an ofThis her existing realinterest, could client estate property becommunity but considered he doesencounters unauthorized not yet have with apractice buyer. any frequency What of lawis true of this situation? QUIZ If the agent fails to put a(n) _____ on the contract, there can be disputes over the deadlines for performance. Effective date Notice T-47 Affidavit Sketch of the blueprints Which disclosure in the contract requires the broker or sales agent to inform the other seller if he/she is licensed toFixture practice Leases real estate Disclosure Special in Texas? ProvisionsBroker or Sales Agent Property Disclosure Conditions Disclosure The _____ section of the contract allows the seller to remove and retain any listed improvements or accessories from Exclusions the property. Title Policy Prorations Escrow Escrow service Provide title insurance Escrow service Provide title insurance Escrow service Provide title insurance Questions Option A Option B Option C Option D Option E PROMULGATE CONTRACT FORMS Contract Law Overview An agreement between a buyer and seller giving the buyer the right to purchase a property at a preset price for a given Optionperiod of time A “meeting of the minds” Mutual consent A contract that cannot be enforced due to some flaw or other issue in the contract Unenforceable contract Something given in exchange for a promise Consideration A contract in which only one party is obligated to perform A/n Unilateral contract contract that is one that is binding on the parties, with one or more of the parties having contractual Mutualduties consent that have Fully not executed yet beenExecutory performed. is something given in exchange for a promise. An is an attachment that adds or further describes the rights and duties of the parties. A contract of sale between a buyer and a seller is a/n . A contract that cannot be enforced against one or more of the parties is a/n A contract that lacks mutuality is a/n . . Legal Earnest money Consideration Competent partiesOption Amendment Addendum Bilateral contract Valid contract Valid contract Executed contractUnilateral contractBilateral contract Option Unenforceable contract Voidable contract Void contract Unilateral contractLegal purpose Contracts may be valid, void, voidable, but not unenforceable. TRUE FALSE Though the sale is closed, that does not necessarily mean the contract has been fully executed. TRUE FALSE amendment Void contract Contracts executed by minors are generally voidable at the option of the minor, but may be enforced by the minor against TRUE the adult party.FALSE A contract for an illegal purpose is void, and the law treats the contract as if it were never created. TRUE FALSE Changes to the sales price, down payment or amount financed may not be agreed to by the parties for any reason. TRUE FALSE An addendum to a contract occurs when a new contract is substituted for an existing one. TRUE FALSE An novation to a contract is an attachment that adds or further describes the rights and duties of the parties. TRUE FALSE All oral negotiations are voluntary, and do not become binding until written. TRUE FALSE All states have a limitation of time in which an individual may file suit in court for damages because a party breached a TRUE contract. FALSE Once all the terms of an offer have been agreed to and signed by the parties, and the acceptance communicated to theTRUE offeror, the contract FALSE becomes binding on the parties. QUIZ The five essential elements that must exist for a real estate sales contract to be considered valid and enforceable Signature are legal purpose, of witnesses Incompetent writing parties, Acknowledgment mutual assent,Recording by consideration, a notaryin theand county _____. clerk’s office If a contract has been entered into with a person who has been judged to be incompetent, that contract is considered Executed _____ because Valid that person never Voidable had the capacity Void to enter into it. Tammy is interested in Jolene's property but wants to research the zoning laws before purchasing. She has an agreement Bilateral in which she Oralpaid a fee of $100 Option to keep the property Void available for a preset price for 30 days, during which time Jolene cannot sell the property to another. Tammy, however, can change her mind if she likes. What kind of agreement is this? All oral negotiations are _____. Voluntary Involuntary Executory The _____ assumes primary liability for performance under the contract. Assignee Assignor Broker-Lawyer Committee Title company Mutual consent is completed by the process of _____. Consideration Offer and acceptance Default Binding Fraud Laws, Rules and Regulations is a provision in a lease that gives the tenant the right to purchase the leased property by matching Lease or bettering an offer Contract before the property Right ofwill first berefusal soldLease-purchase to someone else. agreement When inserting provisions into a contract, the license holder should only add The has 13 members. Created in 1949, State bar association TREC was established to administer and enforce the License Act. A TREC promulgated buyer’s or seller’s temporary lease is for The primary duty of TREC is to A and business detailsFactual that arestatements required Agreements for the transaction. Opinion property only. the general public. gives the tenant occupancy in the present time and the right to purchase at a future date. Addenda Broker-Lawyer committee License act TREC State Bar Association Broker-Lawyer committee TRELA Commercial Industrial Residential Residential and commercial Encumber Protect Oversee Regulate Lease-purchase agreement Buyer's temporaryContract residential leaseRight of first refusal The person to whom an offer is made has several options when responding to the offer, which includes doing nothing. TRUE FALSE The Texas Real Estate Commission was created to draft and revise contract forms capable of standardization for use by TRUE real estate license FALSE holders. TREC has promulgated forms for right of first refusals or leases with option to purchase. TRUE FALSE An offer may be withdrawn at any time prior to its acceptance by the offeree. TRUE FALSE Communication is not the same thing as notification. TRUE FALSE The process of offer/counteroffer will continue until an agreement is made or one of the parties grows weary and withdraws. TRUE An offer must be presented no matter how low or ridiculous it might be. TRUE The Texas Real Estate Commission is comprised of six members. TRUE FALSE FALSE FALSE A _______________ reduces the amount of cash needed by the buyer at closing. Lease Seller contributionProvision The _______________ writes residential contract forms. Texas Real EstateState Commission Bar Association TALCB Broker-Lawyer Committee _______________ is comprised of 9 members. The state bar association The broker-lawyerTALCB committee Lease-purchase agreement TREC A _______________ is made when a party changes an offer in some way and communicates the change to the other Contract party. Counter-offer Lease-purchase agreement Withdrawal of offer An offer is presumed to have been delivered to the principal when it is delivered to the agent is a/n _____________. Imputed notice Deferred notice Counter-offer Contract QUIZ Bertha, a law school dropout is a licensed real estate agent who wants to make sure that she is providing her buyers Mortgage with theFraud best representation Conspiracy possible, Unauthorized so she drafts Practice Fair anHousing of iron-clad Law Violations purchase contract for them. Bertha's sponsoring broker is horrified because Bertha is guilty of _____. Which of the following correctly defines a counteroffer? A rejection of the original The party offer to whom coupled The thewith moment offer a new is made when offer The an right offer to is purchase presumedleased to haveproperty been delivered by matching to theorprincipal betteringwhen any offer it is delivered before thebyproperty the agent will be sold to someone else John and Bev made an offer on Fernando’s 3-bed, 2-bath home. When does that offer become a contract? When it is accepted When it is accepted At the andclosing communicated table After closing and funding Parties, Properties and Financing Personal property included in a sale Non-realty items The buyer and seller Parties The location and size of a property Legal description Buyer pays the seller’s existing mortgage as part of a contract for sale Loan assumption Mortgages insured or guaranteed by the U.S. Government Government loans Includes the improvements, such as the house, garage, and other permanently installed and built-in items 2(B) 2(D) 2(C) 2(A) Where do you find the sum of financing? 3(D) 3(A) 3(C) 3(B) Describes accessories, which are commonly conveyed to the buyer in the sale 2(D) 2(A) 2(C) 2(B) Enter the legal description and address of the property to be conveyed or attach the metes and bounds description2(C) to the contract 2(B) 2(D) 2(A) Enter exclusions to the sale with names and locations 2(C) 2(D) 2(A) 2(B) The sum of all financing from all sources 3(A) 2(B) 3(C) 3(B) The Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller’s VA Entitlement is used... To create liability for To release the seller the onseller's a On loanevery liability the buyer transaction on will a loan Toassume release the seller the will seller's pay liability off at closing on a loan the buyer will assume The Loan Assumption Addendum allows for all of the following, except: The buyer to haveThe an outside note holder lender toThe give approve seller consent the to determine buyer for The the assumption buyer the buyer's and thecreditworthiness seller agree what documents will be used to determine the buyer's creditworthiness The Third-Party Financing Addendum is used... For seller financing For cash transactions In every transaction When the buyer is using an outside lender The Third-Party Financing Addendum allows the buyer to terminate the transaction if: The buyer doesn'tThe likeappraisal the interest meets rate Theorproperty exceeds doesn't theThe sales meet terms price the of lender's the loan underwriting in the addendum requirements are available QUIZ Property includes: Land Accessories Improvements All of these are collectively referred to as property In order for a buyer to purchase a property using VA Guaranteed financing, the buyer must receive a(n) _____, which Direct establishes endorsement the Adjustable-rate value of the property. Certificate of Reasonable Loan commitment Value letter Paragraph 4 of the TREC-promulgated contracts addresses the disclosure of _____ affecting the property. Real estate license Property holder relationships owners associations Rollback taxes Leases Which of the following is NOT considered an accessory? Curtains A fireplace screen A mailbox Blinds Covenants, Commitments and Notices A measurement of boundaries and land area required in some sales contracts Survey A change made to a standard insurance policy Endorsement Insurance policy against losses resulting from defects in title Title policy A “deposit” paid upfront by the buyer Earnest money Form stating known facts and defects concerning a property Earnest money is Seller's disclosure notice . Always required Never required The buyer is required to deposit the earnest money with the escrow agent . The escrow agent is always determined by agreement Usually required Within 3 calendar Within days after 3 business the effective The daysday after date theof the contract the effective contract Before is signed date the contract of the contract is signed If the buyer fails to deliver earnest money within the time prescribed by the contract, . The buyer has 15The extra seller daysmay to deliver exercise Thethe seller remedies earnest may double money found The seller the in if requested the amount may contract fine of the buyer earnest $1500 money . The broker of the The seller title companyAn attorney The amount of earnest money is . Option money is delivered to the within three days of the effective date of the contract. Named in the agreement Usually 1% of theNegotiated sales price between the seller $5,000 and the buyer$10,000 Selling broker Either party to the contract may purchase title insurance. The parties to the contract are: Seller Listing broker Escrow agent Buyer and seller Buyer and title company Seller and title company Buyer and buyer's agent Title Insurance covers title defects missed in the investigation of the title by the title company. Title insurance doesLiens not cover: created as part The of standard the financing printed Certain described exception taxes,inas standby the to Allcontract marital of fees the above rights seller and assessments are to determine exceptions thetobuyer's the titlecreditworthiness insurance coverage The contract requires that the _______________ deliver the title commitment to the buyer within the 20 days afterSeller the Title Company Title receives company the contract. Listing agent Buyer's agent The Title Commitment delivery date has an automatic extension of _______________ days if the Title Commitment is not delivered 5 to the buyer within 15 the 20 days 10 prescribed in the contract. 7 Ti Lin, a seller, has offered in negotiations with a buyer, Rosalinda Sanchez, to give Rosalinda a copy of her existing survey so that Rosalinda does not have to purchase a new survey. Rosalinda agrees to accept Ti’s gracious offer. Ti Lin agrees to deliver the survey and the T-47 Affidavit to Rosalinda within 4 days of the effective date of the contract. Rosalinda agrees that if the Title Company or her lender does not accept the survey, she will purchase a new survey. After a few more minor negotiations, Ti Lin and Rosalinda Sanchez enter into a contract. Which paragraph in the One to Four Family Residential Contract (Resale) shows that Ti Lin will provide an existing6.C.(4) survey? 6.C.(1) 6.C.(2) 6.C.(3) What may Rosalinda do if Ti Lin fails to furnish the survey or the affidavit to her within the agreed upon four days?Rosalind may terminate Rosalind themay contract purchase Rosalind and receive a new mustpurchase agive refund Rosalind Ti Lin of at her 7 the may more earnest seller's purchase daysexpense money to furnish anotherthe survey existing at her survey own and expense T-47 affidavit According to their agreement, who will pay for a new survey if Rosalinda’s lender rejects the existing survey? The lender The title companyRosalinda Ti Lin must sign the T-47 Residential Real Property Affidavit in front of: Rosalinda A representative of The thebuyer title company A notary Which of the following is not a choice for the survey paragraph 6C? The seller will payThe for abuyer new will survey payThe for seller a newwill survey provide The lender an existing will pay survey for a new survey _______________ is a deposit paid upfront by a buyer to show that he/she is serious in intent. Security deposit Option fee Ti Lin Earnest money The buyer has _______________ days to object in writing to matters that might prohibit the buyer’s use or activityAofnegotiated the property. number of 5 Down payment 10 7 Martina is representing Charles, who is making an offer of $460,000 on a home. Martina recommends that Charles offer 1% earnest money to demonstrate his level of commitment to the seller. Charles, however, insists on offering $30,000 in earnest money, but he agrees to go as high as $40,000 if the earnest money ends up being a point of disagreement with the seller. They will use XYZ Title Company, which is located at 123 Main St, Anywhere, TX. In Paragraph 5 of the TREC approved sales contract, what information should be listed in the fields for Charles’ initial offer? 5. EARNEST MONEY AND TERMINATION OPTION: A. DELIVERY OF EARNEST MONEY AND OPTION FEE Within 3 days after the Effective Date, Buyer must deliver to . (escrow agent) XYZ title companyLAZY title company Within 3 days after the Effective Date, Buyer must deliver Earnest Money and Option Fee at Earnest Money is . (address) 321 Anywhere Str.123 Main Main TX str. Anywhere, TX . Option Fee is . Buyer shall deliver additional earnest money of to Escrow Agent. Additional Earnest Money will be delivered within $0 $10,000 $0 $1,000 $30,000 $0 days after Effective Date of the contract. $0 Charles wants the seller to pay for the title policy. He prefers to use the seller’s existing survey, but he doesn’t mind paying for a new one if the existing survey is found to be unacceptable. He wants to receive the survey within 7 days. In Paragraph 6. C, what will the Survey portion of the Contract look like to reflect this information? C. SURVEY: The survey must be made by a registered professional land surveyor acceptable to the Title Company and Buyer's lender(s): Charles wants to receive the Survey within days after the Effective Date of the contract. After the Effective Date and the determined period, Charles will receive 3 7 10 The seller's existing A new survey survey and at a T-47 his A new own affidavit survey expense at the seller's expense If the existing survey or affidavit is not acceptable, Charles will obtain a new survey . At his own(the buyer's) At the expense seller's expense The property Charles is making an offer on was built in 1970, and there was a signed seller’s disclosure in the documents Inform Charles sectionabout ofAdvise thethe multiple Charles risks of listing moving ofAdvise his service, right forward Charles tobut getwith there an that All inspection an was moving ofoffer the noabove and Lead-Based forward and make are terminate with actions sure Paint anhe the offer that has Addendum. contract before Martina received receiving within can Martina thetake 14 pamphlet the days hassigned not if and lead-based been addendum signed ablethe paint to get could addendum orthe lead-based be signed very risky addendum paint hazards from are the listing present agent, and Charles has indicated that he would like to move forward with making an offer. Martina could: A buyer has a signed sales contract that has box 7D.(2) checked with 4 days in the blank for the number of days the seller has after the effective date of the contract to deliver the completed Seller’s Disclosure Notice. The seller fails to deliver the notice to the buyer within the agreed upon 4 days. What may the buyer do? The buyer may sue The thebuyer sellermay for specific sue The thebuyer performance sellermay for monetary terminate The buyer damages thehas contract no remedies and receive a refund of the buyer's earnest money A buyer has a signed sales contract that has box 7D.(2) checked with 4 days in the blank for the number of days the seller has after the effective date of the contract to deliver the completed Seller’s Disclosure Notice. The seller delivers the Seller’s Disclosure Notice to the buyer within the agreed upon 4 days. What are the buyer’sThe options? buyer may sue The thebuyer sellermay for monetary terminate The buyer damages themay contract sue The the within buyer seller 7 has days for no specific ofremedies receipt performance of the notice and receive a refund of the buyer's earnest money Paragraph 7E of the sales contract allows the buyer to terminate the contract and receive a refund of earnest money if lender required 5% repairs exceed 10% _______________ 7% of the sales 3%price. All of the following sellers are exempt from providing a Seller’s Disclosure Notice, except: A co-owner in the An sale investor to another whoco-owner has A builder never of lived a new in the Ahome fiduciary property thatinhas thenot course beenoflived administration in of a descendant's estate A residential dwelling built prior to _______________ may expose a buyer to lead found in the paint. 1970 1968 1972 When a property is listed for sale, the _______________ generally prepares a Seller’s Disclosure Notice. Seller Inspector Seller is to permit the buyer to perform _______________ provided they are performed at reasonable times. An Appraisal Title investigation Inspections Seller's agent 1978 Buyer Survey QUIZ Paragraph 7D(1) indicates that the buyer: Accepts the property HasAs-Is been advisedHas of the notpresence received of All thewetlands of Seller’s these in Disclosure the area Notice The Seller’s Disclosure Notice should be completed by _____. The agent The _____ has promulgated nine exceptions to title insurance policies. Texas DepartmentTexas of Insurance Real EstateTexas Commission REALTORSConsumer Financial Protection Bureau Who is responsible for furnishing a commitment to the buyer for title insurance? Broker The seller The buyer Title company The title company Selling agent Seller Closing, Possession and More In the One to Four Family Residential Contract (Resale), the buyer and seller agree to a closing date that is _______________. On or before the date Named specified at a later date Time is of the essence Determined when all the documents are ready At closing, according to the One to Four Family Residential Contract (Resale), the seller will deliver a _______________ Generaldeed. warranty Special warranty Quitclaim Bargain and sale According to the contract, the buyer is to bring ________________ to closing. A pen Good funds If the property is subject to a residential lease, the seller shall transfer _________________ to the buyer, if any. The One to Four Family Residential contract stipulates the buyer is to receive In a closing, are described as a cashier’s check or wire transfer. Consideration Temporary Residential Leases, promulgated by TREC, allow for temporary possession of the property for up to The Special Provisions paragraph allows agents to add The A deed Cash A cashier's check Security deposit Earnest money All rent of the property on closing Possession and fundingTitle or according to aOwnership temporary lease.Proration to the contract. date is agreed upon by the buyer and the seller. Escrows 60 days. Prorations 30 Good funds 14 90 Addenda Amendment Business details Lawful agreement Lease Closing Executory Funding Paragraph 12.A.(1)(b) includes _______________ expenses that will be paid at closing by the seller Buyer Title company Listing agent Seller All of the following expenses are typical seller expenses, except: Release of existing Preparation liens of loan Preparation documentsof deed Tax statement or certificate All of the following expenses are typical buyer expenses, except: Loan application fee Credit report The buyer may not pay charges prohibited by FHA, VA, or _______________. The title companyConventional lenders Texas Veteran's Land The buyer's Board agent _______________ is the process of dividing ongoing expenses between the seller and the buyer at closing. Amendment Appraisal fee Cooperative Prepayment penalties Possession Proration The _______________ is not a party to the contract and has no liability for the performance of either party. Party Seller Buyer Escrow agent At closing, earnest money is applied first to the __________ cash down payment and then to expenses. Title company Listing agent Buyer Seller Any party who wrongfully fails or refuses to sign a release of earnest money acceptable to the escrow agent withinReasonable 7 days of the attorney request Damages fees will be liableThe to the earnest other money partyAll for:of the above If Buyer fails to comply with the terms of the contract the Buyer will be in _______________. Expenses Default Trouble Termination A fire or other _______________ does not release the buyer or seller from the contract. Issue Casualty loss Damage Serious issue In a casualty loss, the seller must restore the property to its previous condition as soon as reasonably possible, butClosing in any date event by the Termination _______________. optionAmended date date Agreed upon date If the buyer is in default, the seller’s remedies include all of the following except: Specific performance Monetary damages Treble damages Liquidated damages If any _______________ of Seller in this contract is untrue on the Closing Date, Seller will be in default. Representation Notice Lien Tax requirement Seller must comply with federal tax requirements regarding residency in the United States or the _______________ Escrow must agent withhold sales Party proceeds to Broker satisfy the tax law.Buyer Notices are effective when _______________. Mailed Hand-delivered Electronically transmitted All of the above are effective QUIZ What is TRUE of the Special Provisions paragraph in the TREC-promulgated forms? License holders must License insert holders legal statements must License insert holders into statements themay All paragraph. of only regarding these insert statements additional leases, addenda, are informational true. or amendments items. into the paragraph. Failure to meet a contractual deadline is _____. Casualty loss Annexation Default Mediation Buyer Dale defaulted on a sales contract when he failed to apply for financing within the time period specified in the Specific document. Performance As the Liquidated injured party, damages Seller Monetary Ling can damages choose Mediation to accept Dale’s earnest money as _____. The TREC-promulgated _____, if signed by both parties, becomes a change to the existing contract. Option Fee Receipt Amendment Earnest Money Receipt Seller's Disclosure Notice The Remaining Promulgated Form Used for the sale of properties with no existing structures Unimproved property contract Tax assessed when a property no longer has an agricultural exemption Rollback taxes Contains provisions for surface leases related to a property Farm and ranch contract Method for evaluating tax burden of properties used for agriculture Agricultural use exemption Contains provisions for various concerns regarding new construction New home contract Rollback Taxes are the responsibility of... The assessment district The seller Included as Farm and Ranch Improvements in paragraph 2 of the Farm and Ranch Contract are... Farm equipmentsPortable buildingsWindmills The party that changed The buyer the use of the property Trucks If the parties to the Farm and Ranch Contract agree to an Adjustment to the Sales Price due to a discrepancy in the survey, either 25%party may terminate 5% the contract 15% if the adjustment 10% is more than... Seller’s Disclosure in paragraph 7 of the Farm and Ranch Contract includes the residential Seller’s Disclosure andWetlands a disclosure regarding... Environmental hazards Flooding Exclusions Reservations for oil, gas, and other minerals is found in... A separate addendum Paragraph 2 of the A unimproved bill of sale property Paragraph contract 6 of the unimproved property contract Surveys may be paid for by... Either seller or buyer Neither seller or buyer Buyer Addenda to the contract should be noted in paragraph _______________ The New Home Contracts give a place for the seller to disclose... Land All of these conditions are addressed Which of the following is detailed in Paragraph 2 of the Unimproved Property Contract? 4 2 Accessories Seller 21 22 Distance betweenPrevious wall studs use of the Proximity propertyto fire hydrants Thickness of insulation Paragraph 7 Property Condition of the New Home Incomplete Construction contract gives detail about all of the following Cost adjustments except.. Broker's fees A decrease in selection costs resulting from change orders will... Improvements Completion Buyer selections Reduce construction Be credited time to theDelay buyerbuilding at closing permits Reduce the sales price QUIZ All of the TREC-promulgated contracts were drafted with identical provisions to the _____. Farm and Ranch Contract Condominium Contract One to Four Family New Residential Home Contract Contract (Incomplete Construction) Which statement regarding earnest money is INCORRECT? There is no standard In Texas, amount earnest prescribed, Earnest moneybut ismoney set is often at is 6% Earnest 1% not ofof athe legal the money sale sale requirement price. price. is a deposit of apaid contract. upfront by the Buyer to show seriousness in intent. _____ are implemented when property operating under an exemption has its usage changed. Rollback taxes Agricultural use valuations Exemptions Taxing authorities The _____ must be prepared by the condominium owners association no more than 3 months prior to the date theCondominium completed certificate Resale LoanCertificate isAssumption delivered to Certificate Addendum the buyer.of Reasonable Title Commitment Value Letter Promulgated Addenda, Notices and Other Forms Used when a property is already under contract to a buyer and another buyer wants to enter into a contract that would Addendum become foreffective backup ifcontract the first contract fails to close Completed by the property owners association or POA’s management company to disclose the regular assessment Subdivision the property information owner is responsible form to pay to the POA Used when the buyer must make the contract subject to the sale and funding of another property he/she currently Addendum owns for sale of other property Used when personal property is included in a sale Non-realty items addendum Used when the seller is unable to sell the property at or above what he/she owes the lender Short sale addendum Corina is selling her home and would like to purchase another home to move into as soon as her current home sells. When she finds a home she would like to purchase, her buyer’s agent submits an offer on her behalf. To make the contract subject to the sale and funding of Corina’s current residence, he also submits an Addendum for Sale of Other Property. What will happen if Corina’s home does not sell? The seller will have The to contract wait for Corina will terminate The to contract comeautomatically upmay withThe be theterminated contract money and theanother will seller if both terminate will way parties keep automatically sign the earnest the release and money the of contract earnest within money10 will days be refunded to Corina If the seller receives and accepts an offer during the contingency period, and Corina declines to waive the contingency: The contract will terminate She is stilland under her contract The earnest contract to money purchase willwill terminate None be the refunded ofproperty these and the areseller correct will keep the earnest money If Corina waives the contingency and then fails to close and fund due to non-receipt of proceeds from the sale of her Seeking home,specific which of performance Filing the following a lawsuitremedies and Accepting seeking are Corina's monetary NOT available Filing earnest damages a DTPA tomoney the lawsuit seller? as "liquidated against Corina damages " and taking no further action against her Ownership of real property can be divided among three separate estates: surface, air rights, and subsurface rights. TRUE FALSE The Non-Realty Addendum is used when a seller is unable to sell property at or above what the seller owes the lender.TRUE FALSE The Subdivision Information Form is completed by the property owners association or the management company representing TRUE the association. FALSE The Addendum for Property Located Seaward of the Gulf Intracoastal Waterway is actually a disclosure notice for purchasers TRUE of propertyFALSE in the affected area. When property is sold, the Seller often reserves some if not all of the mineral estate. TRUE FALSE The Addendum For Coastal Area Property is used when a property abuts any tidally influenced waters of Texas. TRUE FALSE The Addendum For Sale of Other Property By Buyer is used when a property is already under contract to a buyer, and another TRUE buyer wants FALSE to enter into a contract that would become effective if the first contract fails to close. House Bill 2352 amends the Utilities Code to establish standards for oil and gas distribution system retailers. TRUE FALSE The management of a condominium project does not prepare promulgated resale certificates. TRUE FALSE Addenda are forms used to expand the scope of a TREC-promulgated contract, to be used when the circumstances of a transaction require it. Having addenda forms that are only used in certain transactions allows for the standard contract forms to be smaller in size than they would be if they had to cover every possible contingency. Consider each of the following scenarios, then determine which form would be used in each situation: Han is a license holder in Texas who is preparing an unimproved property contract. He knows that the seller is going Non-realty to reserve item alladdendum ofUnimproved the mineralsproperty in the Addendum sale. contract He for canreservation accomplish Addendum ofthis for oil, a by gas property using and other the in _________________. a minerals propane gas system service area Luke, a buyer, wants to make an offer on a property. The contract is subject to the sale of the buyer’s existing property. Third-party Whichfinancing TREC-promulgated Consumer addendum protection should Notice notice Luke of buyer's use? termination Addendum for of contract sale of other property by buyer Lando, a buyer, needs to terminate a contract because of his inability to obtain credit approval. The correct form to use is ___________________. Third-party financing Seller addendum financing addendum Buyer financing addendum Notice of buyer's termination of contract Steve, a license holder in Texas, is dealing with his current buyer Peggy. She wants to write a contract on a property Buyer's that istemporary already Notice under leasecontract to prospective to Addendum another buyer buyer for to sale ensure Addendum of other thatproperty she for back-up will by have buyer contract a valid contract in place if the existing contract fails. Being the buyer’s agent, Steve will use the ___________________ form. Seller Rey needs to sell property at a price that is less than her existing mortgage balance. In order to accomplish Seller's this, shedisclosure will needNotice notice the ____________________. of seller's termination Short sale addendum of contract Seller financing addendum QUIZ Sean's loan balance on his mortgage is $175,000. Since he purchased his home in 2006, property values in his neighborhood Addendum for have Back-Up Deed dropped in Contract lieu precipitously, of foreclosure Short and Salemarket Addendum Buyer's value onTermination his propertyForm is now $120,000. Sean's lender has agreed to accept less than what is owed on his property. What addendum should be filled out when purchasing Sean's property? By default, TREC-promulgated contract forms _____. Convey all of the mineral Convey estate none ofowned the Convey mineral by the one-half estate seller of owned Stipulate the mineral bythat the Buyer estate seller is owned to be by conveyed the seller all of the mineral estate House Bill 2532 establishes notice requirements for a homeowner who proposes to sell or convey real property located Intracoastal in a(n)waterway _____. Coastal area Mandatory Property Propane Owners Gas Association System Service Area Other Real Estate Matters Fraudsters use forgery to obtain new liens on a property Equity theft An attempt to induce panic selling in a given neighborhood Blockbusting Property where a murder or alleged haunting has occurred Stigmatized Also known as channeling Steering A person used to buy property in order to conceal the actual owner Straw buyer occurs when a property is refinanced or resold immediately after purchase for an artificially inflated Churning value. The excessive selling/lending activity for the purpose of generating fees and commissions is referred to as A person who is used to buy property in order to conceal the actual owner is referred to as Property flipping Foreclosure rescue Chunking scam Property .flipping Straw buyer occurs when fraudsters forge a deed transfer or satisfaction of lien and then obtain new liens on the Equity property theft . Straw buyer Churning Chunking Property flipping Foreclosure rescue Straw scam buyer Equity theft Foreclosure rescue Chunking scam occurs when a fraudster promises to show investors how to get rich by investing in the real estateEquity markettheft with the fraudster Property taking flippinga significant Straw buyer portion Chunking of loan amounts as fees and never leasing the properties. The selling broker may pay one fee to a broker who is a buyer’s representative, and another fee to a broker who is a subagent TRUE of the listing FALSE broker. The standard rate of commission is 3% per side of the transaction TRUE FALSE The Sherman Anti-Trust Act says commission rates are always negotiable. TRUE FALSE Customarily, commission is a percentage of the final sales price. TRUE FALSE Fee splitting arrangements between brokers may be found in the Code of Ethics. TRUE FALSE If HUD has determined that a state or local agency has the same fair housing powers as HUD, HUD will handle the investigation TRUE themselves. FALSE In 1968, in the case of Jones v. Alfred H. Mayer Company, the U.S. Supreme Court ruled that the 1866 law prohibits discrimination TRUE on the FALSE basis of race or color, without exception. Steering is any attempt to induce panic selling in a neighborhood for financial gain. TRUE FALSE A landlord may not refuse to allow a tenant to make reasonable modifications to a dwelling or common use areas, at theTRUE expense of the FALSE tenant, if necessary for the disabled person to use the housing. In addition to the Federal Fair Housing Act, Texas passed the Texas Fair Housing Act in 1989, which closely parallels the TRUE federal law. FALSE Taking buyers or renters to, or away from, a particular area based on the race, religion, etc. of the buyer or renter is called TRUE blockbusting. FALSE Any attempt to induce panic selling in a neighborhood for financial gain is called channeling. TRUE FALSE Used to insulate pipes, in chimneys, in roofs, flooring materials, and siding Asbestos USTs Radon UFFI A property where there has been a murder or alleged haunting Latent fact Statue fact Material fact Stigmatized ________________ is a federal law requiring all states to release information to the public about known convictedLatent sex offenders. defect law Texas Fair Housing Statue Law law Meagan's law ________________ is pumped into walls as a foam where it hardens and insulates. Radon Asbestos UFFI USTs ________ is a naturally occurring, colorless, and odorless gas produced by the decay of radioactive materials in rocks UFFIunder the ground. Farming herbicideAsbestos Old rusty or leaking containers found on both commercial and residential properties Radon Landfills UFFI Waste disposal sites USTs Which of the following was added to federal fair housing laws as a protected class in 1974? Race Profession Religion The actual fee split agreement between the brokers is by virtue of the _____. Multiple listing services Broker informationAmendment section of the for One Broker’s Addendum to Four Fees Family for Backup Residential Contract Sales Contract QUIZ The practice of taking buyers or renters to or away from a particular area based on a protected class is known as _____. Chasing Churning Channeling Sex Chaining Practice Makes Perfect Using what you have learned throughout the course so far, read the scenarios provided below on unlawful practices and answer each question by selecting the best response: Velma Stitch is a sales agent license holder at the real estate firm A to Z Realty. Bob Stout is Velma’s sponsoring broker. Velma listed the home of Ann and Richard Collingsworth and was pleased when the property went under contract after only 30 days on the market. In the negotiations, the sellers wanted to make it clear that they were going to take all of the swimming pool equipment, No violation such as brushes This isand a violation, the vacuum This because with is a violation, them. the pool Velma, because equipment usingthe her should seller pen,have should drewbeen ahave linelisted through added as the an “swimming exclusion removal pool ofinthe paragraph equipment pool equipment 2 and property maintenance to paragraph as an exclusion accessories” 11 special provisions in Paragraph 2.C. Within a few days, the title company delivered the commitment. The buyer discussed with Velma his concern about Violation, a pipeline because easement Violation, the on agent the because should property No have a license and violation referred the holder possibility theshould buyer thatnever client it would to give her limit anbroker the opinion use to answer of to the property. sufficiency the question The of title buyer asked Velma if he should discuss this concern with an attorney. She advised him that most properties have easements and that the easement did not represent a title problem to him. She furthermore advised the buyer that hiring an attorney would add unnecessary expense and complexity to the transaction. The sellers had previously told Velma that they needed two days after closing to move out of the property. In complying Violation, withbecause this request, Violation, the agent she because inserted shouldViolation, the have the following agent justbecause had could into thehave No Paragraph the possession violation agent used ashould 11: seller date “Possession coincide have temporary referred with will residential the be thedelivered closing buyer lease to date an totoBuyer in attorney accommodate paragraph at closing to draft 9 the and a short seller's funding term need plus lease to48remain hours.”in the property after closing date Velma, being a very punctual person, and believing that everything in a transaction should be done on time, inserted Violation, the words because “timeViolation, TREC is of the have because essence” promulgated No changing inviolation Paragraph addendum the legal 11. effect to useoftothe create contract time by is of a license the essence, holdercalled is engaging addendum in thefor unlawful determining practice performance of law Contract terms were finally agreed to, and Velma delivered the contract to the title company. She noticed that the contract Violation,did because not have Violation, allthe contracts effective because must date Violation, the have filled buyer anin, because effective must but assumed fill No the date inviolation the seller that effective must would fill date not in the be effective an issue date because she had inserted “time is of the essence” in Paragraph 11. Four days later, with so much going on, she remembered that she had forgotten to collect the option fee from the buyer. Violation, becauseViolation the contract because stipulates No theviolation contract that thestipulates buyer Violation must thatdeliver because the option thethe option money contract money must stipulates be to the delivered buyer's that the tobroker option the title within money company three must within days be delivered three business to the title days company within three days QUIZ In the case study titled “FHA Case Study,” the sellers wanted to keep all of the potted plants on the patio. What should Writethe “Seller agent todo retain Mark to ensure allout of “shrubbery” the thatpotted theAttach sellers plants andthe get “landscaping” onNon-Realty to the keep patio” Write their into in Items “Seller Paragraph plants? Paragraph Addendum to retain 2B11. all Property toSpecial of the the contract. potted Provisions. plants on the patio” into Paragraph 2D Exclusions. In the FHA Case Study, the listing broker represented both sides of the transaction. In Texas, we call this _____. Dual agency A cooperative saleAn in-house sale/Intermediary Single agency In the VA Case Study, the buyers paid a $200 option fee for a 10-day option. According the contract, what happensIt to is the returned optiontofee the Itatis buyer. closing? credited to theThe sales seller price keeps itIt goes toward the broker’s commission. In the case study titled “Assumption Case Study,” the buyer Maggie Phillips is a licensed real estate agent. Into which Paragraph paragraph 1 Parties should Paragraph the agent 4 Leases enter Paragraph this information? 8 Broker Paragraph or Sales 11 Agent Special Disclosure Provisions Question Option A Option B Option C Option D Option E Real Estate Finance The Nature and Cycle of Real Estate Finance Sending monthly payment statements and collecting monthly payments, maintaining payment records and following upServicing on delinquencies The process of creating a new mortgage loan Origination The process of collecting information about a borrower in order to build a loan file that will be used to make an underwriting Loan decision processing The process of transferring funds to a title or escrow company for disbursement Funding The process of evaluating a borrower’s loan application to determine the risk involved for the lender Underwriting Which of the following is not a benefit of homeownership? Tax benefits Which of the following is not a role of the agent in regards to the buyer’s financing? Providing buyers with Scheduling a list of the potential appraisal Preparing lendersthe contract Arranging with all forterms pre-qualification/pre-approval of the sale, including financing of buyers conditions The Four Cs of Good Lending include: Collateral Pride of ownership Paying a mortgage Security Contact Capital Character The yield on a loan is determined by the rate of interest charged on the loan and the _____________ charged by the lender Credit at points closing. Discount points Par points A _______________ is a middleman between a borrower and a lender. Capacity Creation Origination points Loan processor Correspondent lender Mortgage broker Mortgage banker The ______________ collects the monthly payment, maintains records of payments and balances, collects and pays taxes, Servicer remits fundsProcessor to the note holder, Loan andoriginator follows up Underwriter on delinquencies. What is the number one determinant for demand? Personal preference Building codes Construction costsEmployment At the national level, the value of residential real estate is affected by what factor? Availability of employment The monetary policies Localofgovernment the Federal Population policy Reserve trends What is the primary determinant of real estate value? Employment Federal tax policy that affects demand for real estate includes all of the following except: Deductibility of mortgage The supply interest of money payments Exemptions from Deductibility capital gains of taxation real property taxes When was the FHA created? Interest rates 1912 Who funds the FHA? The FED What is the largest denomination Federal Reserve note ever issued for public circulation? Personal preference Supply and demand 1929 The FHA itself $500 1934 2008 The American taxpayers Fannie Mae $10,000 $50,000 $1,000 According to the website below, who determines the prime rate? The interest rate is The determined interest rate by the is The determined Federal interestReserve rate by the is The determined president interest rate ofbythe individual is United determined States banks by congress According to the site, who provides VA home loans? FHA Private lenders The Single Family Housing Direct Home Loan is also known as: Program 101 Section 8 programSection housing 502 directNone loan of program these is correct The VA itself All of these QUIZ _____ is the consummation of a contractual real estate transaction in which all appropriate documents are signed, andServicing the mortgage loan Underwriting proceeds are disbursed Funding by the lender. Closing The primary determinants of real estate values are supply and _____. Cost Personal preference Demand Taxation _____ is something of value that can be pledged as security for repayment of a loan. Capital Collateral Character Capacity Money and the Monetary System Relates to federal government spending Fiscal policy Policy that deals with interest rates and the supply of money in the US economy. Monetary policy Buying or selling government securities by the Federal Reserve. Open-market operations Set by the board of directors of the Federal Reserve Banks, subject to approval by the Board of Governors Discount rate When there is an excess of money supply in the market Monetary inflation The sum of currency held by the public and transaction deposits at depository institutions is referred to as: Precious metals Fiat money M1 M2 __________ is currency that is not backed by any precious metals at all. Fiat money Cash M1 Faith money M1 plus savings deposits, small-denominations time deposits, and retail money market mutual fund shares is __________. Fiat money _____________ relates to government spending. Cash Monetary policy Money The maintenance of a stable money supply that provides growth in the economy while keeping inflation in check is ______________. M2 M2 M1 Fiscal policy Open market operations Monetary policy Fiat money Open market operations An excess in money supply causes __________. Appreciation in the Interest real estate ratesmarket to decrease Monetary inflationThe need to print more money At the national level, the value of residential real estate is affected by what factor? The monetary policies Localofgovernment the federalAvailability policy reserve of employment Population trends All of the following are primary monetary policy tools the Fed uses to influence the cost and availability of credit except:Fiscal policy Open market operations Reserve requirements The discount rate The Fed uses open market operations for buying or selling of ___________. Tax credits Government securities Stocks Discount rates Raising the reserve requirements _______________ the availability of funds for lending. Reduces Doubles Increases Slows ___________ was created in September 2008 to restore the nation’s financial stability and restart economic growth. The Federal Deposit TheInsurance Troubled Asset Corporation The Relief U.S Treasury ProgramThe U.S Mint The United States Treasury is responsible for all of the following except: Raising funds to finance Applying operations monetary Implementing ofpolicy the government to manage economic Advising the growth sanctions the president of the against economy onforeign economic threats and financial issues The Department of Treasury is organized into two main components: the departmental office and ____________. Operating bureaus Management department Organizational offices Cabinet positions ___________ was a federal law enacted in 2008 to promote the stability and liquidity of the financial system through the Emergency authorization Economic ofInternal TARP. Stabilization Revenue Office Act Service of the comptroller Fannie of Mae the currency The _______________ charters, regulates, and supervises all national banks, federal savings associations, federal branches, Internal Revenue and agencies US Service treasury of foreign banks. US mint The Single Family Housing Direct Home Loan is also known as: Program 101 The FDIC was created in... Office of the comptroller of the currency Section 8 programSection housing 502 directNone loan of program these is correct 1930 1932 1933 1929 The FDIC receives its funding from... Congressional appropriations Federal government Tax dollars The FDIC examines banks for compliance with all of the following consumer protection law, except... Fair Credit Reporting Emergency Act Economic TruthStabilization In Lending Act Community Act Reinvestment Act The FDIC insures deposits in banks and thrift institutions for up to... Premiums that banks and thrift institutions pay $500,000 $250,000 $1,000,000 2 12 10 20 1938 1929 1934 1932 There are ____________ Federal Home Loan Banks. The FHLB was created by Congress in... $100,000 The primary goal of the Federal Home Loan Bank System is to... Provide credit andOversee other services the banking toProvide fund industry housing guidance to and protect Fund toother banks consumers development loans across in the thecommunity grants U.S for foreconomic large institutions development Through which avenue does the U.S. Treasury promote economic growth and job opportunities? Legislating tax cuts Bytopromoting stimulate conditions theGiving economy grants to enable to government economic All of these growth enterprises are ways and the stability U.S treasury at home promotes and abroad economic growth Which of the following is NOT a function of the Department of the Treasury? Campaign financeCurrency refund and coinage Enforcing federal Supervising finance and national tax laws banks and thrift institutions According to the Taxpayer Bill of Rights, taxpayers have the right to: Be informed Which of the following is one of the FHFA's strategic goals? Ensure safe and sound Manage regulated Fannie Mae entities Ensure and liquidity, Freddie stability, Mac's All of ongoing these and are access conservatorship strategic in housing goals finance of FHFA According to the site, which of the following is an FHFA value? Disclosure Inclusion Integrity Fidelity An excess supply of money in the market results in monetary _____. Recession Depression Deflation Inflation Which agency insures deposits in banks and thrift institutions for up to $250,000? The Department of The Housing Federal and Reserve Urban The Development Federal Deposit TheInsurance Office of the Corporation Comptroller of the Currency Pay no more thanPrivacy the correct amount All of of tax these QUIZ The _____ is the interest rate a reserve bank charges eligible financial institutions to borrow funds on a short-term basis. Basis point Index rate Consumer price index Discount rate Additional Government Influence A loan underwritten based upon the home’s appraised value and the loan term of the owner Reverse mortgage The industry term for residential loan originators, as mandated by the SAFE Act Residential mortgage loan originators Loans that are collateralized by a non-purchase money mortgage or deed of trust on the borrower’s principal residenceHome equity loan The practice of refusing to provide financing in a particular area because of location Redlining Payments in excess of the reasonable value of goods provided or services rendered Kickback All of the following are HUD’s major programs except... Community Development Consumer Block Financial Grants Section Protection 8 housing Bureau Federal Housing Administration Which of the following is NOT a protected class under Federal Fair Housing? Sex Race Color The Interstate Land Sales Full Disclosure Act was passed in 1968 to protect consumers from ______________ in the sale Discrimination or lease of land. Developers Fraud Builders The Interstate Land Sales Full Disclosure Act requires developers to file a property report with... HUD HAMDA CFPB HUD’s Community Development Block Grant Program funds are used to meet all of the following goals except... Preventing or eliminating Meetingslum an urgent or blight Aiding need conditions low that and threatens moderate Developing health income and shopping safety persons centers and other commercial areas Age The Federal Housing Administration provides mortgage insurance on all of the following purchases except... Multi-family homes Manufactured homes Single-family homes Timeshares FHA Sylvia, a real estate license holder, decides to prospect for new customers by handing out flyers which highlight her qualifications and also provide information about special loan programs. She works in a metropolitan area where the housing market continues to grow, and many new homes are being built in an area where zero-down USDA financing can be used. Victor, an RMLO, volunteers to pay for the flyers and take care of all of the printing and set up if the flyers can be co-branded in order to help them both generate new business at the same time. Sylvia had some ideas about what she wanted the flyers to say about loans, but Victor assures her that he can do an excellent job at writing the information for that section of the flyer. Which of the following should Sylvia and Victor avoid adding to their advertising flyers because it is considered a trigger "Monthly by Truth-In-Lending? payments "Financing $300" available "No" down payment "Low " down payment" How can Sylvia ensure that Victor is properly licensed as an RMLO? She can look him She up on can NMLSR look him She up on can TREC's ask him website to None prove of these it are correct Can Sylvia work with Victor, giving his name to her buyers? No. Real estate license Yes. Sylvia holders caninwork Texas Yes.exclusively Sylvia are forbidden canwith distribute None from Victor, ofproviding flyers these insisting with arebuyers that correct Victor, allwith of buther the she buyers names should use of provide RMLOs him if her theybuyers want to with do the business nameswith of ather least three RMLOs to consider Agricultural lending is different from residential lending because buyers may be seeking financing on unimproved propertiesTRUE that lack utilities.FALSE A common appraisal issue on an agricultural property could include that the property served only by a volunteer fire department. TRUE FALSE A Section 205 loan is an USDA Rural Development Guaranteed Housing Loan Program. TRUE FALSE The USDA Rural Development Guaranteed Housing Loan program, Section 502 loan is for a farm or ranch. TRUE FALSE The Section 502 loan is for loans up to 90% loan to value. TRUE FALSE To qualify for a Section 502 loan a borrower may only have up to 115% of the median income of the area where the property TRUE is located. FALSE The Farm Service Agency is an agency of the FHA. TRUE FALSE FSA loans include farm ownership loans, operating loans, and emergency loans. TRUE FALSE The Office of Consumer Credit Commissioner regulates all of the following real estate transactions except... Home equity loans Secondary mortgage Property tax lien lenders Purchase mortgages The Texas Department of Savings and Mortgage Lending... Administers the real Regulates estate license the manufactured act Oversees banks home Licenses industry or registers RMLOs in the state of Texas The TDHCA is responsible for all of the following except... The manufacturedHousing-related home industry community Affordable service housing RMLOs programs The Texas Veterans Land Board’s Home Loan Program is for... The parents of a Texas All honorably veteran discharged All Texas veterans veteransDisabled Texas veterans only The TVLB Land Loan Program is for land ____________. Up to an acre The Texas Reverse Mortgage is for older homeowners who are described as ____________. New immigrants to Disabled Texas Of at least an acreInside or outside of With Texas a sales price of over $200,000 This section of RESPA prohibits the seller from directly or indirectly requiring the buyer to purchase title insurance fromSection a specific 7 title company: Section 10 RESPA Section 8 requires the disclosure of... Lenders Well-invested House-rich and cash-poor Section 8 Section 9 Title companies Affiliated businessTrigger arrangements terms This section of RESPA places limits on the amounts that a lender may require a borrower to put into an escrow account Section for the8purpose Section of paying 9 taxes and Section hazard 10insurance... Section 7 RESPA regulates closing on _______________ with federally related financing. 25 acres or more 1 to 4 family residential Commercial transactions transactions Temporary loans This section of RESPA prohibits kickbacks and unearned fees: Section 7 Section 8 Section 9 Section 10 The Real Estate Settlement Procedures Act is administered by who? FHA The CFPB The OCCC The Federal Reserve An application for a loan includes all of the following, except... Loan amount Survey Property address Estimated value A mortgage loan originator who receives an application for a federally related mortgage loan is required to provide the Title borrower commitment this document Closingwithin disclosure threeSeller's business disclosure days ofLoan the loan estimate application: The RESPA – TILA Integrated Disclosure Rule mandates the use of two disclosures: the Loan Estimate and the _______________. Trigger terms of aClosing loan disclosureTitle commitment Survey A borrower must receive the Closing Disclosure from the lender no later than ______________ before closing. 3 business days 5 calendar days 3 calendar days 5 business days The servicer of a loan must submit an annual statement for each _______________ within 30 days of the completion of Closing the computation disclosureNotice year. of transfer Loan estimate The loan amount will be found in the _______________ section of the Loan Estimate. Loan terms Escrow account Closing costs details Costs at closing Projected payments The _______________ section has costs associated with the loan that the buyer may not choose the provider of the services. Services you cannot Services shop for you can Origination shop for charges Other costs Calculating Cash to Close _________________. Is a summation ofIssections a summation E, F, Gofand Issections unknown H onlyA, to B the andIsbuyer Caonly summation until closing of sections A, B, C, E, F, G and H True or False - Signing the Loan Estimate locks the borrower into the loan described in the LE form. TRUE FALSE All of the following are part of the section called Due From Borrower at Closing on page 3 of the Closing Disclosure except... Closing costs paidSales at closing price of the Sales property price of anySeller's property loan payoff The borrower receives a credit on the disclosure for which of the following? Seller's loan payoff Loan amount The seller receives a credit at closing for all of the following except... The sales price ofThe the sales property price ofUnpaid any personal property property taxes A balance in the seller's reserve account The seller is debited at closing for: Pay-off of the firstThe mortgage sales price ofPre-paid the property HOA fees Pre-paid taxes Pre-paid property The taxes sales price QUIZ Which of the following transactions is exempt from RESPA? Loans intended for Loans sale in forthe manufactured secondary Temporary market homes loans Loans made in connection with a HUD program Under the _____, the use of certain terms in an advertisement triggers the need for full disclosure of lending terms. Truth in Lending Act Consumer Protection Fair Act Credit Reporting Equal ActCredit Opportunity Act The Dodd-Frank Wall Street Reform and Consumer Protection Act established the _____. Office of Consumer Consumer Credit Commissioner Financial Community Protection Development Bureau Department Block of Grant Housing and Urban Development Which of the following programs is NOT administered by HUD? Federal Housing Administration Consumer Financial Community Protection Development Bureau Ginnie Mae Block Program The Secondary Mortgage Market Holds mortgages in trust for the benefit of investors REMIC Return on an investment Yield Encompasses the purchase and sale of existing mortgages to investors Secondary mortgage market The act of moving funds from one investment arena to another Disintermediation Adheres to Fannie Mae and Freddie Mac requirements for purchase of a mortgage Conforming loans The _______________ exists for the purchase and sale of existing mortgages to investors. Primary market Yield Secondary marketDisintermediation The secondary market is designed to provide greater _______________ to the residential real estate mortgage marketDistribution by providing for Liquidity a steady supply ofInterest funds from rate investors. Yield The process of moving savings funds from one arena to another is called what? Conservatorship Disintermediation The primary market Interest rate The Federal National Mortgage Association is also known as... Freddie Mac Ginnie Mae Fannie Mae Conservatorship A loan that is originated adhering to Fannie Mae or Freddie Mac’s standards so it may be sold in the secondary marketConforming is called a(n)... loan Portfolio loan Fannie Mae loan Collateralized mortgage obligation In addition to Freddie Mac and Fannie Mae, Wall Street is a source of funds in the secondary market through the sale High of... interest rate Portfolio loans loans Collateralized mortgage Conforming obligation loans To be sold into Fannie Mae or Freddie Mac in the secondary market, loans adhere to all of the following standards, except... The buyer's income Loans and must creditbe profile held The must informs portfolios conform usedfirst to toThe originate theproperty standards themust loans for conform the must loan conform to program the standards to Fannie for Mae the and loan Freddie program Mac's being requirements used Loans that are not sold to investors in the secondary market are called what? Interest rate loansPrimary market loans Portfolio loans _______________ is a federally chartered corporation established as the Federal Home Loan Mortgage Corporation in FHFA 1970. Fannie Mae began as an agency of the U.S. government in _______________. Freddie Mac 1934 USDA 1968 High yield loans Ginnie Mae 1938 1970 _______________ is a wholly-owned government association that operates the mortgage-backed securities program designed Ginnie Mae to facilitate FHFA the flow of capital Farmer into Mac the housing Freddie industry. Mac Fannie Mae operates exclusively in the _______________ and provides support to mortgage lending institutions in theU.S primary department market.ofDepartment agriculture of housing Impoverished and urban areas development Secondary of the country market To raise money for the purchase of loans, Freddie Mac sells its own _______________. Collateralized mortgages Bonds _______________ is a government-sponsored enterprise with the mission of providing a secondary market for agricultural FHA real estate mortgage Farmer Mac loans. Fannie Mae works to accomplish all of the following housing objectives except... Securities Loans VA Ginnie Mac It allows lenders to It originate addresses loans imbalances for It funds sale of rather loans mortgage for than credit It for standardizes credit portfolio poor among areas investments mortgage regions ofloans the U.S Due to the financial crash of 2007, the _______________ placed Freddie Mac and Fannie Mae into conservatorship. Federal Reserve Government sponsored Housing enterprises Economic Federal Recovery Housing Act Finance Agency The _______________ was enacted in July of 2008 creating the Federal Housing Finance Agency. Office of Housing Housing Enterprise and Oversight Economic Home Recovery Equity Conversion Act Farmer Mac Program The two largest issuers of REMICS are Freddie Mac and _______________. Fannie Mae A Real Estate Mortgage Investment Conduit allows for the _______________ investment in mortgages through the sale Tax-free of securities. In a REMIC, the repayment of principal and interest is channeled through to the _______________. Ginnie Mae USDA The U.S government Quickest Direct Indirect Servicer of the loan Federal National Mortgage Investors Association Originator of the loan QUIZ The secondary mortgage market was designed to provide greater liquidity to the residential real estate market, primarily The bysale _____. of mortgage Loaning loans money as investments toCharging primary market additional lenders Funding interest savings to borrowers institutions in areas experiencing regional shortages Loans originated to adhere to Fannie Mae, Freddie Mac, and Ginnie Mae requirements for purchase are called _____.Conventional loans Conforming loansCombo loans Which of the following housing objectives does Fannie Mae address? Jumbo loans Regional imbalances The of origination available of mortgage The mortgages standardization credit for sale Fannie of mortgage Mae addresses loans all of these housing objectives Sources of Funds Investment vehicle created by Congress in 1960 Real estate investment trust An instrument of corporate or governmental debt Bonds Member-owned depository institutions Credit union Someone who processes, underwrites, closes and funds their own files in their name and then sells the loans to other Correspondent mortgage lenders lender Typically specialize as middlemen between borrowers and lenders Commercial banks, credit unions, mortgage companies, and savings and loans are all part of the are not-for-profit organizations that exist to serve its members. Mortgage brokers . Mortgage market USDA Primary market Bonds market Life insurance companies Savings and Loans Commercial banks Credit unions are a person, corporation, or firm not otherwise in banking that provides its own funds for mortgage financing. Correspondent lenders Life insurance companies Credit unions Mortgage bankers A is an entity or person that processes, underwrites, closes, and funds its own mortgage loans throughMortgage a warehouse banker lineCorrespondent of credit, selling lender Primary the loans market to another lender Mortgage lender broker once the loan is closed. A specializes as the middleman between the borrower and the lender. Primary market lender Mortgage broker Mortgage banker Life insurance companies are funded by premiums paid by those insured Life insurance companies Mortgage brokersPension and retirement Correspondent programslenders are fed by client investment funds. Pension and retirement Mortgage programs brokersPrimary markets Credit unions Sources of income for a Real Estate Mortgage Trust include all of the following, except... Origination fees Interest Gain from buying Rent and selling mortgages A _______________ is an investment vehicle created to allow small investors to invest in larger commercial properties. Real Estate Investment Commercial Trust lenders Real Estate Mortgage Mortgage Trust bankers A _______________ invests in mortgages or mortgage-backed securities. Equity estate REIT Real Estate Mortgage Congressional Trust trust Apartment REIT An Equity Estate REIT purchases all of the following except... Mortgages Office buildings Apartment buildings Self-storage facilities A owns a share of the corporation. Bond holder Corporate manager Investor Stock holders A is a debt instrument used to lend money to a firm of government entity. REIT Bond Purchase mortgage Stock holders Board of directorsInvestors Bond holders Maturity Dividend Appreciation Interest Government entityOrganization Corporation Mortgage company Yield Capital Return A corporation is obligated to repay the . Stockholders anticipate receiving a A(n) , which is profit that is distributed to the stockholders. sells municipal bonds to fund major capital investments. A bond is rated according to its . Risk Stock Sellers may be interested in financing a property because... The secured noteThe mayproperty be a good being investment The sold buyer maymay be ahave type All of credit that these isissues difficult are reasons that to finance prevent a seller through financing may regular befrom interested regular mortgage inmortgage seller lenders financing sources but may still be a reasonable risk Seller financing may be referred to as a _______________. A large risk Fraudulent transactions Seller carryback Mortgage banker Private lenders can create novel and unique _______________ products. Broker Loan Seller Borrower Seller financing is the _______________ common form of mortgage financing. Second-most Most Second-least Least Black Primary Secondary Tertiary QUIZ The _____ mortgage market is made up of the businesses that lend to borrowers for the purchase of real estate. A(n) _____ is a person, corporation, or firm not otherwise in banking that provides its own funds for mortgage financingMortgage purposes. broker Savings and loan Mortgage association banker Commercial banker Which act increased the insurance coverage on all federally insured credit union accounts up to $250,000? Community Reinvestment Equal Credit Act Opportunity SAFE Act Act What type of property might an Equity Estate REIT purchase? Office buildings Apartments A _____ is a debt instrument. Corporate bond Savings account Share of stock Instruments of Real Estate Finance A sales contract in which the buyer agrees to make regular payments to the seller for equitable title Contract for deed Debt instrument which attaches to all the property of the debtor not exempt from forced sale General lien Dodd-Frank Wall Street Reform Act Self-storage facilities All of these types of properties are purchased by Equity Estate REITs Checking account Second and third mortgages Subordinate instruments A claim, lien, charge, or liability attached to and binding real property Encumbrance The legal procedure whereby the secured property may be sold to satisfy the unpaid promissory note Foreclosure All of the following are examples of liens except: Tax liens An example of a lien that would be considered a desirable encumbrance is: Ingress/egress onto Utility another easement property A lien A claim The _______________ pledges the property as security for a debt. Lien Judgement Mortgage Encumbrance The _______________ is the person who pledges the property as security for a debt. Mortgagor Mortgage Mortgagee Pledgor The _______________ is the person or entity that receives the pledge as security for a debt. Mortgagee Mortgagor Pledgor Mortgage Lender's Seller's Mortgagee's Mechanics and Materialman's Mortgages and liens trust Property deedsliens The promissory note is the _______________ unconditional promise to repay. Borrower's The promissory note includes all of the following except: Payment amount Amount borrowedPledge of the property Interest rate The legal process whereby the property is sold to satisfy the unpaid promissory note is called _______________. Default Real estate owned Foreclosure Mortgage A deed of trust is a three-party instrument whose parties include all of the following except: Trustee Lender Seller The trustee in a deed of trust has a _______________ with the lender. Juridical relationship Fiduciary relationship Intermediary Non-judicial relationship A typical deed of trust contains a _______________ allowing for a non-judicial foreclosure. Lien Power of sale clause Mortgage Default clause A non-judicial foreclosure is a _______________ foreclosure than a judicial foreclosure. Slower Quicker Friendlier Borrower More legal Common occurrences that can result in foreclosure in all of the following except: Failure to follow aFailure deed restriction to pay property Failure taxes to keep the Payment propertydelinquency properly maintained The most common cause of mortgage foreclosure is: Failure to keep the Payment propertydelinquency properly Failure maintained to pay property Failure taxes to maintain the mortgaged property The contract for deed is a type of seller financing that allows for _______________ by the seller. Foreclosure In a contract for deed, the seller promises to _______________ to the buyer when all payments have been made. Assume the loan Release the lien Stop the foreclosure Convey process legal title A contract for deed is also known as a(n) ____________. Land contract A contract for deed is risky for the buyer because: All are risks for the Anbuyer unscrupulous in contractseller Allformoney deed couldupmortgage to default The seller the onproperty the could contract be without incapable for deed the buyer's of is delivering considered knowledge clear renttitle and not equity A Carryback loan is a form of a purchase-money loan from the seller. A(n) is an instrument subordinate to the primary mortgage. Mortgaging Title retention Lifting clause Both a land contract and an installment contract Subordinate loan Primary mortgage Second mortgagePrimary finance instruments Equity pledge The states that in the event of default on the primary instrument, the secondary instrument automatically Equity defaults. pledge The the borrower has built up over time may be used to obtain a subordinate finance instrument, usingSubordinate the propertyfinance as collateral. Primary instruments mortgageLifting clause The interest rate on a subordinate instrument is typically Loan payoff Installment contract Mortgage Lifting note Subordinate finance Lifting instruments clause Cross-default clause Equity the market rates for primary instruments due Higher to increased than risk on Equal the to part of the Similar lender. to Lower than This is also known as a "Due on Sale" clause... Release clause Lock-in clause Nonrecourse clause Alienation clause In commercial lending, this provides that the borrower is not personally liable for repayment of a loan: Assumption clause Escalation clauseNonrecourse clause Acceleration clause This means that the junior mortgage will continue in its position and will not become a first mortgage: Prepayment clause Exculpatory clause Alienation clause Subordination clause This clause limits the borrower’s personal liability in the event of a default on a loan, protecting other property from becoming Acceleration collateral: clause Alienation clause Exculpatory clause Release clause This clause states that in the event of default, the entire amount of the principal becomes due and payable: Assumption clause Acceleration clause Alienation clause Subordination clause This clause prohibits prepayment of the loan prior to a certain date: Nonrecourse clause Exculpatory clause Lock-in clause This clause allows the lender to raise the existing interest rate: Assumption clause Release clause Escalation clauseAlienation clause This clause allows a new borrower to take over the payments on an existing loan: Alienation clause Lock-in clause This refers to when the lender charges the borrower if he/she pays the loan off early: Release clause Assumption clause Exculpatory clause Prepayment penalty Prepayment penalty Assumption clause Subordination clause This clause allows for a portion of the loan to be paid in exchange for the lender releasing part of the property from theAlienation mortgage:clause Nonrecourse clause Release clause Acceleration clause QUIZ An easement for ingress and egress is known as a(n) _____. Encumbrance Lien Debt Judgment Which of the following types of liens is one that is freely given, usually as collateral for a loan? Voluntary lien Involuntary lien Specific lien Statutory lien Under a(n) _____, when the final payment is made to the seller, title transfers to the buyer. Residential contract Tax lien Contract for deedSpecial warranty deed Loan Types, Terms and Issues A loan which covers more than one piece of property Blanket mortgage Excessive selling/lending activity for the purpose of generating fees and commissions Churning Percentages based on the amount of the loan Points Partially-amortized loan with a substantially larger final payment Balloon loan Conventional loans that conform to FNMA/ FHLMC standards Conforming loan What will the annual interest be for a loan of $5,000 at 9% interest? $450 What will the quarterly interest payments be for a loan of $10,000 at 8%? $200 What is the interest rate if the loan is $55,000, and the annual interest owed is $6,500? 11.80% What was the amount borrowed if the annual interest rate is 9 1/2%, and the interest paid was $4,500? $47,368.42 Mr. Brown will close on his new home on June 23, 2010. He will close on a 30-year fixed-rate mortgage with an interest rate of $-% and a principal balance of $120,000.00. What is the amount of interim interest he will pay at closing? Jill’s loan balance on March 1st was reported as $119,670. The regular monthly payment of principal and interest is $896.45, and the rate of interest is 5%. A) When Jill makes her April 1st payment, how much interest will be due? $498.63 B) After the April 1st payment has been applied, what will be her new loan balance? $119,272.18 Bob is interested in purchasing a home for $245,000. He will be paying 25% down and will be obtaining a loan for 15-years at a 4% Interest Rate. The Loan Factor is 7.40. Annual Taxes are $8,500, and Annual Insurance is $2,600. Approximately how much are the monthly taxes on the home? (Round to the nearest tens.) $8,500.00 How much is Bob putting down on the house? $220.00 $51,450 What is the Total Monthly PITI payment for this property? $850.00 $9,800 $2,284.75 $710.00 $16,333 $1,359.75 $61,250 $1,575.75 $2,757.25 A _______________ is a loan that has an interest rate that remains the same throughout the term of the loan. Blanket mortgageFixed-rate mortgage Construction to permanent Adjustablemortgage rate mortgages Sometimes the _______________ is willing to finance the buyer. Underwriter A _______________ may be beneficial to a borrower who is planning to move prior to the last payment of the loan. Budget mortgage Reverse mortgageBalloon loan A(n) _______________ includes both real and personal property in the same loan. Seller financing Fixed-Rate mortgage Package mortgage Open-End mortgage A(n) _______________ is a loan with an interest rate that fluctuates as the market changes. Reverse mortgageBlanket loan Trustee Borrower A homeowner who is at least 62 years old may want to use a(n) _______________ to borrow against the equity in theirWraparound property. mortgage Initial rate loan Advantages of ARM loans include all of the following, except: Confusion In Texas, the minimum withdrawal on a HELOC is: Seller Closed-end mortgage Construction to permanent ARM loan Reverse mortgageClosed-end mortgage Falling interest rate Lower interest rate Higher loan amounts $10,000 $4,000 $25,000 $15,000 All of the following are disadvantages of ARM loans, except: Confusion Lower than market Unpredictable initial interestmortgage rate Need for payments early financing A refinance is the Forgiveness Forbearance of an existing loan with the proceeds of a new loan to the same borrower. Payoff Short sale In a refinance the borrower pays off an existing loan with the proceeds of the new mortgage on the same Cash-out property but draws Reverse equity out ofPayoff the property. Regular In a refinance the borrower pays off an existing loan with the proceeds of the new mortgage on the same Closed-end property. Regular Payoff Cash-out The Homeowners Protection Act (HPA) requires that borrower-paid PMI be cancelled once the borrower has paid down the loan to75% an LTV of The loan-to-value ratio is the percentage of the of the appraised value or sales price that the lender will Greater lend. On a 90% LTV, fixed rate mortgage, investors require 80% 35% and the LTV. . 78% 50% 30% 20% Lesser MI coverage. The down payment is the difference between the Loan amount 25% Sales price Appraisal district value PMI The reach and effect of abusive practices by predatory lenders increased along with the dramatic growth of the subprime industry in the early 2000s. In this exercise, you will be given a scenario of common predatory lending practice involving borrowers and lenders. Using your existing Real Estate knowledge, see if you can determine the correct predatory lending practice involved. After each scenario, read through the Feedback for a more detailed look at the practice and how it is carried out in real estate transactions. A couple with limited English speaking skills were convinced to refinance their mortgage and take a cash-out of aroundSingle $9,500. premium To do so, credit Charging theyinsurance were higher charged interest Financing $10,368 rates excessive inthan lender a borrower fees fees,into plus credit loans another warrants $927 in third party fees, which totaled around 8% of their loan amount of $145,259. They are now struggling to make their monthly payments, which, unlike their previous loan, do not include taxes and insurance. Which Predatory Lending Practice is this an example of? A husband and wife with FICO scores of 721 and 693, respectively (even higher ratings from other credit bureaus), were Loans not looking for over to 100% refinance; Balloon LTV paymentsCharging however, they were higher distracted interestbyrates the recent than adeath borrower of a credit granddaughter, warrants and the loan officer made a strong sales pitch. Over $14,000 in fees and a $5,271 single-premium credit insurance policy were financed into their loan, which they are locked into by a five-year prepayment penalty for over $10,000. Despite their excellent credit record, they were given an interest rate of 13.0% on their mortgage. A mortgage lender solicited a homeowner for a second mortgage to consolidate his debt. The new loan had a 13.4% interest Charging andhigher a monthly interest Making payment rates loansthan of without $612, Prepayment a borrower regards leavingcredit to him penalties the with warrants borrower's a total housing ability to payment pay of $1,257 a month. At the time that he received the loan, he was working at a plastic company and had gross earnings of $1,600 a month, meaning that his housing payment was 79% of his income. As would be expected, he has fallen behind on both of his payments and is facing foreclosure. A couple wanted to lower the monthly payment on their two mortgages and were looking to refinance. A loan officer told Home themimprovement he could save Prepayment scams them $200 penalties toSingle-premium $300 a month, and credit they insurance went ahead with the refinance. They ended up with two mortgages, a first for $133,000 at 10.5% interest and a second for $10,000 at 21.7, which gave them a total monthly payment of $1,501 - $125 more than before. Their new first mortgage also included almost $10,000 in fees. They had very good credit. When they looked into refinancing in order to receive a better interest rate, they found out that both of their l A single mother bought a house for her three kids and soon started receiving solicitations to refinance her debts from aLoans lender. forWhen over 100% she Balloon eventually LTV loansagreed Prepayment to do so, her penalties loan amount was inflated to $156,000 – compared to the house’s value of $145,000 - by well over $12,000 in financed fees and a financed single-premium credit-life insurance policy for $3,491. Her interest rate jumped to 12.2%, and she was locked into the high rate with a five-year prepayment penalty of nearly $10,000 that no one told her about. Now she is prevented from refinancing out of her high-interest rate of 12.2% A couple moves into a house with both sets of their parents and four children. While finances are tight, they are both able Home to work improvement and make Negative scams ends amortization meet toLoan take care flipping of their children and parents. Right after moving into the home, a contractor comes by one day offering a repair they had said the previous owner had agreed to, offering to knockdown a wall and open the living area for a quote of $8,000. The couple, while apprehensive, agree in part because the contractor offers a financing option. After securing the loan through a lender the contractor suggests, he completes the project but doe An elderly man who has several medical issues, including diabetes, Crohn's disease, and Parkinson's, is recommended Property by an acquaintance flipping Loan to flipping get coverage Single-premium for his home credit loan ininsurance case he becomes ill and is no longer able to pay hos monthly mortgage. The man decides to do this, and meets with an agent to discuss policies. The agent, seeing an opportunity to take advantage of the man, sells him a policy where the sum is paid up front all at once. Knowing he cannot pay it, the sum will become added into a loan with interest, increasing the amount due on the policy. A lender offers a couple with lower credit a Subprime, Fixed-Rate Mortgage Loan in which after half of the life of the loan Loans the for remaining over 100% sum Balloon LTV of $100,000 paymentsbecomes Loan flipping due. A homeowner with good credit received a $64,000 loan through a mortgage broker. The broker told her the loan wouldCharging have an interest higher interest rate Single-premium of 5.5% rates and thancredit aNegative amonthly borrower insurance amortization payment credit warrants of $363. However, she was not told that this was only a “teaser rate” and that the interest rate would increase and soon rise to 8.4%. Her monthly payment of $363, which was based on the teaser interest rate, remained the same even after the interest rate increased and so did not cover all of the interest due. Even when she made her full payment, her principal amount increased. The homeowner was unaware that her A lender convinced an elderly couple to refinance their mortgage to a new loan amount of around $93,000, which included Property overflipping $10,000Loan in refinanced flipping fees Prepayment and a single-premium penalties credit-life insurance policy for close to $6,000. Two years later, the same lender convinced the couple to refinance again (without paying off any other debts) a fixed interest rate of 11.5%, financing into their loan what looks like over $2,200 in fees plus a credit insurance policy for over $10,000. Another year later, the same lender refinanced them again at an 11.5% interest rate without any discernible benefit while th Jim and Cathy are first time home-buyers that are moving to Texas from out of state. They are trying to purchase a home Property as soon flipping as possible Loan flipping since they are Financing both starting excessive new fees jobs into and loans need a place to live in their new state. They have been dealing with an agent virtually, who has seemed very helpful and accommodating. They believe they have found their dream home, so they are approved for a mortgage and sign the sales contract. When moving day comes and they arrive in Texas, they are shocked to find that the inside of their new home has many unfinished repairs, incomplete flooring Taking advantage of a consumer’s lack of knowledge regarding lending practices is called _______________. Subprime lendingMortgage fraud Capacity lending Predatory lending More than two-thirds of subprime loans have _______________. Prepayment penalties Predatory clausesCredit scoring Mortgage fraud _______________ loans are risk-based financing. Prepayment Subprime _______________ occurs when the borrower’s payment does not cover all of the interest due each month. Balloon payment Predatory lendingNegative amortization Loan flipping Predatory Flipping _______________ is a scam where unsuspecting buyers are sold homes in extreme states of disrepair for prices far above Mortgage whatfraud the houses Property are flipping actually Balloon worth. paymentsLoan flipping A loan with a _______________ has a final payment that is much greater than the amount of the other monthly payments. Balloon paymentsSubprime payments Prepayment penalty Credit insurance _______________ is a practice in which a lender encourages repeated refinancing by existing customers tacking thousands Property of flipping dollars inLoan additional flippingfees or Excessive other charges fee charging toPredatory the loan each charging time. A _______________ occurs when a contractor targets owners of homes in need of repair referring the homeowner to lenders Subprime encouraging loan Loan theflip homeowner Single-premium to refinance to credit cover Homeinsurance the improvement repair costs. scam Predatory lending typically affects all of the following groups of people except: Senior citizens Low-income The potential negative impact of mortgage fraud is on _______________. Borrowers Homeowners Lenders Challenged credit borrowers Financial institutions Low-income households _______________ is a misrepresentation and/or concealment made by a borrower or other party in order to qualify forChunking a mortgage loan.Fraud for profit Fraud for housingChurning Excessive selling/lending activities to generate fees and commissions is called _______________. Equity theft Fraud for profit All of the following are mortgage fraud red flags, except: Down payment in Employer's some form address other Lack than is cash aofpost accumulation office Upgrading of assets to acompared larger home to income A _______________ is a person used to buy a property to conceal the actual buyer. Straw buyer Straw buyer Employer blockerFraudster _______________ occurs when a fraudster promises to show investors how to get rich by buying investment properties. Churning Money laundering through the purchase of real estate is an example of: Equity theft Investor Foreclosure rescue Mortgage scam fraud Fraud for profit An installment sale is a sale of property in which the seller receives at least one payment after the tax year of the sale. TRUE Churning Property flipping Chunking Criminal purposes beyond fraud FALSE A participation loan is when two or more builders share in the construction of a large commercial building TRUE FALSE The gain or loss on the sale of real estate is a simple calculation of the sales price minus the original purchase price. TRUE FALSE An individual may have a tax-free capital gain on the sale of real property up to $250,000 if the property were his or her principal TRUEresidence for FALSE at least two of the last five years. A married couple has a capital gain exemption if the property has been their primary residence for more than 1 year. TRUE FALSE A shared appreciation mortgage allows the lenders to share in the profitability of the property when it is sold. TRUE FALSE A homeowner can deduct property taxes and interest on a mortgage from their income for federal tax purposes. TRUE FALSE The owner of a single-family home can depreciate the property for tax purposes. TRUE Land is never depreciated. TRUE FALSE FALSE QUIZ The basic formula for interim interest is _____. I = PRT Interest / PrincipalPrincipal x InterestPrincipal Rate / 365 x Rate x # of / 4days until the end of the month Semi-annual interest is calculated _____. Every 3 months Twice per year Every 4 months Every month Ailene and Arnold are on a fixed income. They want to buy a home and are researching different loan options. Which type A fixed-rate of loan would mortgage An be adjustable-rate a poor choice Seller for mortgage them? financing A package mortgage Government Loans The ratio of the borrower’s total recurring monthly debts: Back ratio Insurance cost based on the loan-to-value ratio Annual premium Commonly known as the GI Bill of Rights Servicemen's readjustment act Direct loans for construction or improvement on Federal Trust Land Native American direct loan A veteran’s entitlement to VA home loan benefits, based on military service Eligibility Bob and Sarah decided to purchase their first home. They have decent credit and have some longevity in their respective jobs. The big issue for them is that they have not saved up enough for a substantial downpayment on a home. The home that they want to purchase is in the range of $150,000. Bob’s parents have offered to loan them up to $6000 to help them with the downpayment. Sarah’s parents have offered to give them, as a gift, up to $10,000. Neither Bob nor Sarah have any military experience, eliminating a VA loan as a possibility. Bob and Sarah are hoping to put a minimum downpayment on the home with the hope of buying a bit of furniture and landscaping after they move in. What is the best type of loan for Bob and Sarah? FHA loans Given a $150,000 sales price and a minimum downpayment, what will their downpayment be on an FHA loan? Construction to permanent ARM loan $5,250 $7,500 Package loan $0 $15,000 Can Bob and Sarah borrow the downpayment from Bob’s parents? Yes, Bob and Sarah No,can theborrow down payment theNo, down it can must payment only be abewithout gift Yes, borrowed but restrictions only from in non-relatives form of a check What will Bob and Sarah need from her parents to show that the money for downpayment is a gift? A bank statement A loan letter What type of mortgage insurance will be paid at closing by Bob and Sarah? Annual mortgage PMI insurance premium UFMIP A gift letter A check A guarantee fee What will the lender require Bob and Sarah to pay along with the monthly principal and interest on their loan? 1/12th of annual mortgage 1/12th of annual insurance homeowners 1/12th of annual insurance property All thesetaxes will be required When will the Annual Mortgage Insurance be removed from the loan? Once Bob and Sarah When have Bobcompleted and Sarah Once two have Bob years paid andofSarah $10,000 on-time Never have in payments MIP a loan balance of only 78% of the value of their home Retirees, Mark, 75 years of age, and Cindy, 72, have a tight monthly budget, leaving little left over at the end of each month for recreation or travel. They have amassed over $25,000 in credit card debt over the last year due to taxes and medical bills, and even though they are paying $1,000 per month to pay down their cards, the interest rates are high, and it seems to be taking forever to bring down the balances. Marl and Cindy owe $50,000 on their mortgage. Their property has appreciated since they bought it 10 years before, and is currently worth $300,000. Since they are both retired, their monthly income comes from their Social Security at $3,000 per month and from an IRA at $700 per month before taxes. The couple is interested in a reverse mortgage to pay off their mortgage so that they can have more money each month and not rely on credit cards. Do the couple meet the borrower age requirements? Yes Cindy does, but Mark No, neither does not do Mark does, but Cindy does not If Mark and Cindy want equal payments for as long as at least one of them is alive and stays in the house, occupying itTenure as his/her principal Lineresidence, of credit which Modified payment term plan would Term be best for them? Mark and Cindy would like to change their plan, will they be allowed to do so? Yes. Mark and Cindy Yes.can They change can change their No. payment Once their apayment plan planisYes. option chosen, plan The option forcouple ita is fee at in any place maytime change until with thethe no property penalty plan , but isorno they fee longer mustthe reapply principal andresidence come out of pocket for closing costs and fees Doug is interested in purchasing a new home. He is a veteran of the U. S. Army, and previously owned a home that he had financed using a VA loan. The loan was paid off when he sold the home five years ago. Doug has good credit and some available cash. Because he plans to do some remodeling after closing, he wants to minimize his downpayment, preserving his cash for future projects. The home he is looking at is in the $200,000 range. What is likely the best type of loan for Doug? VA Conventional Given a $200,000 sales price and a minimum downpayment, what will his downpayment be under the proposed loan? 5% FHA ARM 20% 0% 3.50% Will the lender require taxes, insurance, and other assessments be paid into an escrow (impound) account? Yes Will this loan require any on-going mortgage insurance premiums? Yes, until the end Yes, of hisuntil 5th he year has of built No payments 22% equity inYes, the property for the life of the loan No With few exceptions, the law requires that the VA be paid a(n) _______________ on guaranteed loans. Residual Funding fee Concession Gift VA loans are made by a _______________, such as a mortgage company, savings and loan, or a bank. Home financer Military bank Lender Borrower _______________ income is the amount of money left over each month after all of the borrower’s major expenses areHard paid – including housing, Residual taxes, and Gross debt payments.Net _______________ is the veteran’s entitlement to a VA home loan benefits under the law, based on military service. Endorsement Qualification Eligibility Concession Any seller _______________ which exceeds 4% of the established reasonable value of the property is considered excessive Participation and unacceptable Funding for feeVA-guaranteed Endorsement loans. Concession _______________ funds are acceptable and may be used for the entire down payment on an FHA loan. Borrowed Gift Loan Cash The FHA provides mortgage insurance on single-family, multifamily, and _______________ homes throughout the United Manufactured States and itsCommercial territories. apartments Cooperatives Earth-berm Under FHA’s Direct _______________ program, approved lenders may underwrite and close mortgage loans without FHA’s Eligibility prior reviewConcession or approval. Term Endorsement HECMs have five payment plans, tenure, term, line of credit, modified tenure, and modified _______________. Fee Term ARM Gift Parent Real estate agentSeller QUIZ An FHA borrower can use gift funds from a(n) _____ as funds for a downpayment. Real estate broker Edmund served two tours of duty in the United States Marine Core. He and his spouse want to purchase a home for their An FHA family. loan Which A loan conventional program would loan A VA allow loanEdmund A toseller-financed purchase a home loanwith a downpayment of $0? A cash-out refinancing loan is a loan guaranteed by the _________ which refinances any type of lien against a secured FHA property. VA USDA The VA partial _____ on a real estate loan reduces lenders’ risk. Line of credit Guarantee Direct endorsement Insurance Government loans are divided into three categories, FHA, VA, and _____. Conventional Balloon USDA NADL FDA Lender Loan Processes The most probable price a property should bring on the open market Market value The consummation of a contractual real estate transaction in which all appropriate documents are signed and the proceeds Closing of the mortgage loan are then disbursed by the lender Form lenders use to obtain borrower balance information Verification of deposit Rita and Henry have been told that the Monthly Payment of PITI on the home that they have selected to purchase is $1,507. If area lenders are qualifying at 28%, what Gross Monthly Income must they show to qualify? $421.96 An essential component of the underwriting process is determining the _______________ of the borrower. Eagerness $5,382.14 $4,598.67 Creditworthiness Income $1,507 Down payment The systematic process that uses statistical models to assess an individual’s creditworthiness based on their credit history Backand ratiocurrent credit Front accounts ratio is called Credit _______________. scoring Monthly payments All of the following affect the borrower’s credit score except: Length of credit history Current level of indebtedness Income ratios Payment history All of the following will hurt a credit score except: Excessive shopping On-time for credits monthly payments Credit cards at capacity Moving balances from one revolving credit card to another Garth is representing Mr. and Mrs. Wu who have just decided to buy a home. Garth advised the couple to get prequalified A blank before check viewing from There any the lender more is no homes. specific that the Form Mr. form Wus B and that conditional will Mrs. they fill out Wu will Form for approval trust receive the AGarth conditional down ifletter they and payment want are pre-qualification pre-approved to ondo a home their own for letter research a mortgage and get Garth’s advice before talking to a loan originator. They are disheartened by the realization that closing costs are typically more than they had thought, so they are considering pursuing an FHA loan, so that they can make a smaller down payment. However, they do not like the fact that the MIP makes the house payments higher. Mr. and Mrs. Wu have a combined gro If the Wus buy the home that they want, their house payments would be approximately $2,700 per month. If they go with a conventional $2,520 loan, the $2,800 front ratio of their$2,750 house payment (PITI) $3,000 cannot exceed $ _______ or 28% of their gross monthly income. If the Wus decide to purchase a $250,000 home with an FHA loan, what is the minimum amount of money that they would be required $3,750 to put down? $8,750 The Fannie Mae 1003 Application is used to collect pertinent information of the _______________ so the loan may beBorrower properly underwritten. Lender $25,250 $10,000 Loan processor Seller To save time, the loan officer can gather information over the phone and run the loan through an _______________, reducing Amortization the documentation calculator Automatedthe Underwriting borrower Loan calculator has System to gather Loan before system the initial qualifier meeting. All of the following are acceptable sources of the borrower’s downpayment, except: Stocks Gift from seller In Section III of the Fannie Mae 1003, the borrower will provide information regarding all of the following, except: Income Full name of the borrower(s) Social Security number(s) Age(s) of the borrower(s) Section X of the Fannie Mae 1003 is used to qualify the borrower for the loan. TRUE Gift from relative Earnest money deposit FALSE The Declarations section of the Fannie Mae 1003 must be completed with the borrower answering every question in the section. TRUE FALSE Which is acceptable proof of income in section V Monthly Income and Combined Housing Expense Information? Bank deposit slip Bank statement Employment verification W-2 form The Request for Verification of Deposit is commonly called Statement Balance Balance Verification at Close VOD Document . The Request for Verification of Deposit is used by the lender to verify The VOE is completed by the borrower’s information of the borrower’s accounts. Term . The Verification of Employment will be sent to current employers and any previous employers within the last Once a mortgage has been approved and the borrower has signed the mortgage documents, a Lender Deposit verification Balance Personal Loan Processor Lender Bank Employer Two Seven Three years. Five verification Formal of employment Verbal is conducted with Written all current employers. Secondary Agent Sidney is representing an investor buyer Alfonso who is looking at a single-family home to purchase. Alfonso wishes to lease the property after purchasing it and has asked Sidney to analyze the price of the property. Sidney believes, after careful analysis, that the property will lease for $1400 a month. Similar homes in the neighborhood have sold for $225,000 and typically lease for $1250 a month. What is the GRM for similar homes in this neighborhood? Using the GRM, what price should the investor offer for the purchase of this property? $1,250 $1,400 1.12 180 $300,000 $252,000 $275,000 $225,000 On the appraisal report, an estimate of how the neighborhood’s parcels are currently improved and developed is called: Neighborhood boundaries Shape The appraisal report has a section that describes the neighborhood’s geographical boundaries, called: Present land use L %ot dimension Neighborhood boundaries Neighborhood description Area The _______________ of the appraisal report is a narrative entry that includes a general discussion of the type of homes Neighborhood in a neighborhood. description Area Demand/supply Market conditionsMarketing time The appraiser should indicate in the section titled _______________ the best use for the property. Zoning clarification Highest and best Off-site use for the improvements property Area The appraiser describes and evaluates the condition of the kitchen equipment in this section of the appraisal. Describe the condition Typical of improvements the property Appliances and physical deficiencies Additional features The appraiser sites any easements, encroachments, zoning problems, or other adverse or positive characteristics of the View property being Adverse appraised conditions in the section Highesttitled: and best General use for the descriptions property The three approaches to appraisal are all of the following, except: Cost approach The appraiser will list the improvements that are normal for similar properties in the section of the appraisal titled: Typical improvements Present land use G %eneral description Site Income approachCondition approach Sales comparison approach Which of the following is a document that the buyer would sign at closing? Certificate that there Promissory are no outstanding note Authorization charges to or have liens Deed on thethe titleproperty company payoff the existing lien on the property The finalization or closing of the real estate transaction is called: Lien determinationConsummation The possession date for the buyer is stipulated in the _____________. Closing instructions Promissory note TREC promulgated Deed contract Buyers and sellers both sign a document called _______________ certifying that he or she is who they claim to be. Funding directive Affidavit of Technology Affidavit of identityTitle insurance The _______________ should join the buyer or the seller at the closing table to be available to answer questions. Appraiser Termination Real estate agentInspector Commission payment Abstractor Joe and Thelma Morlock are purchasing their first home. Being new to the home buying process, they are unaware of all of the hurdles they face in getting qualified for a loan. Fortunately for them, they have good jobs, good credit, and a stable employment record. Joe’s gross annual income is $43,000. Thelma’s annual income is $44,500. Homes in the neighborhood that they are interested in sell for about $150,000. They think that they can handle a house payment, but are a bit short on the downpayment. Thelma’s parents have offered to help with the downpayment. The couple has car payments totaling $825 per month, student loan payments totaling $275 per month, and some furniture financed with a payment of $125 per month. The home that they are interested in buying is listed at $218,000. They would like to purchase the property for $210,000 and obtain a 95% conventional loan for 30 years at 5%. Taxes are estimated to be $6,300 per year, and insurance is $1,800 per year. While shopping, Joe, and Thelma found a home in a neighborhood that they like and feel is within their price range. The house is for sale at $150,000. Annual taxes are estimated to be $4,500 and insurance is $1,200. What will the total PITI be for this home? $1,591.00 What is Joe and Thelma’s combined Gross Monthly Income? With a 95% conventional loan for 30 years at 5%, will they qualify on the front ratio? $6,599.14 No What will Joe and Thelma qualify for on the back ratio? With the proposed monthly house payment included, will they qualify on the back ratio? $1,874.82 $1,012.15 $1,240.23 $5,739.67 $7,291.67 $87,500 $765.23 $2,041.67 $1,240 $125 $825 $275 Yes $2,625.83 $1,225 What is Joe and Thelma’s total recurring monthly debt without the proposed house payment? Yes No Joe and Thelma will be getting assistance for the downpayment from her parents. Assuming that they purchase a home A bank with assistance statement Afrom credit Thelma’s application parents, A gift fromletter what Thelma's from will the Thelma's parents A credit lenderreport parents require from as documentation Thelma's parents for the downpayment assistance? QUIZ The sales comparison approach focuses on _____ or recent sales of similar properties, to determine value. Incomparables Comparables Appraisers commonly refer to the property being appraised as the _____. Sales property Property in question Subject property Seller’s property The sales price divided by the monthly rent calculates the _____. Depreciation Gross rent multiplier Income capitalization Chronological age Reconciliations Inspections Defaults and Foreclosure The unpaid balance of a foreclosed mortgage, payable by court order Deficiency judgment Breach or nonperformance of the terms of a note or covenants of a mortgage Default Legal procedure by which secured property may be sold to satisfy an unpaid note Foreclosure Also known as a statutory foreclosure Power of sale The re-amortizing of a mortgage Recasting Default-related services include all of the following, except: Property preservation Foreclosure costsPurchase costs Property inspections Default of the terms of the loan may cause damage to the _______________ and could lead to loss of the property through Property foreclosure.Servicer If a borrower is in default, the _______________ may start the foreclosure process. Underwriter is the process of re-amortizing a mortgage. Lender Mortgage ServicerSeller A lender may seek a deficiency judgment when the _______________ at the foreclosure auction is less than what is owed Assessed on thevalue property. Market value Sales price Recasting Forbearance Default Deed in Lieu of Foreclosure Forbearance Default Borrower's credit score Borrower Appraisal value Foreclosure In a the borrower voluntarily deeds the property to the lender. In a plan, the borrower pays part of the delinquency each month along with the borrower’s regular monthly Recasting installment. Deed in Lieu of Foreclosure Forbearance Default The offers rural homeowners to lower their monthly mortgage payment to no more than 31% of their verified HAMP monthly gross HAFA income. USDA’s Special Loan Servicing The offered delinquent borrowers the opportunity to prevent foreclosure by working with lenders to refinance SMP their existing USDA’s loan. Special Loan HAMP Servicing HAFA The allowed the Treasury to work with loan providers to refinance existing loans to achieve a 31% front-end SMP ratio. HAMP The program was designed for borrowers who cannot afford their current mortgage and need to transition SMPto more inexpensive HAMP housing. USDA’s Special Loan HAFA Servicing USDA’s Special Loan HAFA Servicing Modification In a , the lender files a lawsuit of the homeowner that is in default. In a , the lender files suit with the judicial system and the borrower receives a note in the mail demanding Statutory payment. Foreclosure Strict ForeclosureJudicial Foreclosure Power of Sale In a , the mortgage contains a power of sale clause. A Power of Sale is a . Power of Sale SMP Power of Sale Judicial Foreclosure Strict ForeclosureStatutory Foreclosure Statutory Foreclosure Strict ForeclosureJudicial Foreclosure Judicial Foreclosure Strict ForeclosureStatutory Foreclosure Sale of Power Under the Texas Constitution, before lenders commence foreclosure, they must give the borrower time to do one of theRemedy following, theexcept: condition Convey creating the homestead the ground File suit property for against foreclosure tothe Pay thelender lender the debt inby court secured deed in lieu by the of foreclosure homestead property Which of the following must be a judicial foreclosure in Texas? A home equity lienA mechanic and materialman's A refinance mortgage lien A purchase lien mortgage lien At any time prior to the foreclosure, the borrower has the right to step in and pay what is owed. This is called _______________. Equity of redemption Non-judicial foreclosure Strict notice Deficiency A non-judicial foreclosure may occur when a _______________ exists in a mortgage. Power of sale Reverse mortgage lien 14 days 30 days Home equity tax lien Line of credit A notice of sale must be given at least _______________ before the date of a foreclosure sale in a non-judicial foreclosure. 21 days 10 days The allows taxpayers to exclude income from the discharge of debt on their principal residence. Mortgage Debt Relief Deficiency Act of 2007 Judgment Texas DepartmentForm of Savings 1099-Cand Mortgage Lending A(n) loan is exempt from a deficiency judgment. FHA Conventional When the price at auction on a foreclosed property is insufficient to cover the unpaid balance of the loan, the lender may Deficiency sue for aJudgment Debt Relief. VA Conforming Guarantee Foreclosure Judgment QUIZ Default can lead to a number of negative consequences for the defaulting party, including _____. Damage to credit Default-related score fees Foreclosure A ______ cannot be accepted from borrowers who can financially afford their mortgage payments Short sale Refinance HECM The type of foreclosure that involves the lender filing a lawsuit on the homeowner that has defaulted is known as _____. Judicial foreclosure Strict foreclosure Power of sale Default can lead to any or all of these negative consequences Deed in lieu Statutory foreclosure Which statement is TRUE? In Texas, lenders In must Texas, foreclose lenders onIn must deeds Texas, foreclose oflenders trust or onThe must mortgages deeds right foreclose ofof trust in redemption default or onmortgages deedsfor offoreclosure trust in default or mortgages using in Texas a in non-judicial if default two years. using foreclosure either a judicial processor non-judicial foreclosure process. Which agency oversaw the Home Affordable Modification Program (HAMP)? USDA United States MintFHFA HUD and the Department of the Treasury All types of foreclosure require _____ to be issued and all parties to be notified regarding the proceedings. Warrants Public notices Guarantees When do public auctions on foreclosed properties take place in Texas? Every Tuesday Monday through Friday The first excepting Tuesdayholidays The of each second month Sunday of each month Bonds