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35 Cards in this Set
- Front
- Back
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Earnest Money Contracts To be valid in Texas, must: (5 things) |
1. Be in writing 2. Be signed by all parties 3. Be evidence of intent to convey an interest 4. Have identifiable grantor and grantee 5. Legally identify property to be conveyed |
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Texas real estate agent must use standardforms promulgated by |
TREC - forms available at www.TREC.state.tx.us |
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“Time is of the Essence” The time limits set by the contract must befaithfully observed or |
the contract is voidable by the non-defaulting party Neither buyer nor seller should expectextensions of time to fulfill their obligations |
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Amendatory Language Clause: |
Buyer securing FHA or VA loan may terminatecontract if appraisal is significantly below agreedpurchase price |
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Insulation Disclosure: |
FTC requires sellers / builders of new houses to citethe characteristics of insulation installed |
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Disclosures: Rollback taxes |
Contract selling vacant landmust disclose potential liability for 5 years ofrollback taxes if there is an ag exemption,religious use or open space use |
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Disclosures: Pipelines |
Residential seller must discloselocation of transportation pipelines |
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Disclosures: Water districts |
Seller must disclose ifproperty is in MUD or other drainage area |
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Lead-Based Paint in HousingDisclosure - What % of housing before 1978 contains some lead-based paint? |
75% |
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(In regards to lead-based paint) Federal law requires seller or landlord to: (2 things) |
- Disclose possibility of lead-based paint hazards – Provide available reports and the pamphlet,“Protect Your Family From Lead in Your Home” |
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Disclosures: Annexation |
Seller of property outside city limitsmust disclose possibility of annexation |
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Disclosures: Property Owner’s Association |
HOA / POA mustprovide current copies of rules, bylaws, etc. toseller within 10 days of written request |
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Property Located in a Certificated Service Area ofUtility Service Provider |
Seller disclosure thatbuyer may have special charges for water andsewer hook-ups |
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Installment Contracts - Other names for them |
Land contract, conditional salescontract, contract for deed, agreement of sale |
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Installment Contracts: When does title transfer? What's the title called until it transfers? When are these types of contracts used? |
Buyer given right of use and possession, butdoes not receive F&C title until all or most ofprice is paid Buyer is promised that title will be delivered upon pay-off - buyer holds "Equitable title” Used when buyer cannot obtain a loan and/orhad insufficient capital |
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Installment Contracts: Who does it favor? 3 reasons why |
Favors sellers far more than buyers: – Upon default, seller avoids costly foreclosurebecause he already has title – Seller keeps all payments and retakes possession – Seller may not be able or willing to deliver title |
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Texas provides some relief to defaulting buyer: (2 ways how) |
– Allowed to cure default within 60 days – Default after 48 months or 40% + repayment - seller must follow general foreclosure laws |
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Lease with Option to Buy - AKA? And define |
Lease-Purchase Agreement Seller gives tenant option to buy at a statedprice for a stated time period |
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Lease with Option to Buy - when are they popular? 3 caveats about the purchase price when tenant is leasing with option to buy |
Popular during sluggish buyer markets Part of monthly rent applied to purchase price – Caveat: only payment in excess of FMV can applyto purchase price – Caveat: tax consequences should be handled bytax professional, only – Caveat: contract should be recorded to protectall parties |
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Right of First Refusal - 3 points |
Owner gives tenant first right to purchase,should a third party want to buy RE Tenant can match offer or allow owner toaccept third party offer Caveat: often slows down the closing processbecause two unrelated parties are involved |
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IRC Sec. 1031 Exchange - Define |
Investors swap “like-kind” properties, ratherthan buy-sell |
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5 facts about IRC Sec. 1031 Exchanges |
•Not available to owner-occupants • Allows deferral of capital gain tax on oldproperty, by reducing basis in new property • No capital gains tax until future property sells • Sell outright when in lower marginal taxbracket • “Boot” is assets used to balance the equities |
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Listing Agreement |
A written employment contract between theowner/seller and broker |
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3 facts about Listing Agreements |
•Creates special agency relationship betweenbroker (agent) and seller (principal) • Agent is authorized to represent principal’s REfor sale, solicit offers and submit offers • Amount of compensation the owner agrees topay the broker is negotiable |
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Listing Types (4) |
1. Exclusive right to sell 2. Exclusive agency 3. Open listing 4. Net listing |
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1. Exclusive Right to Sell (3 points) |
•One broker is appointed as sole agent andgiven exclusive right to represent the RE • The listing broker is entitled to a commission,no matter who sells the property during thelisting period (even if seller finds buyer) • Most common type of listing |
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2. Exclusive Agency (4 points) |
• One broker is appointed as sole agent and givenexclusive right to represent the RE • Similar to the exclusive right to sell, except theowner may sell the property himself during thelisting period and not owe a fee to the broker • Listing broker is paid, even if another broker sellsthe property • Broker may be less enthusiastic under this formof listing |
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3. Open Listing (5 points) |
•Seller retains right to employ any number of brokers • There are no exclusive rights • Whoever sells the property will earn the fee • If seller finds buyer, no fee is due a broker (unlessbroker is procuring cause) • Brokers are reluctant to develop a sales effort |
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4. Net Listing (3 points) |
•Owner states price he wants to NET for theproperty and agrees to pay the broker theexcess as commission • Illegal in many states (legal in TX) • Concern that broker violates fiduciary duty toclient to obtain highest price possible |
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Buyer Representation (5 points) |
• Exclusive Authority to Purchase – agreementwhere broker works for buyer as his client • A.k.a., a “finder's agreement” • Primary responsibility is to buyer as principal • Buyer owes commission to buyer-broker! • Seller is just a customer - owed honest and fairdealing |
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MLS(4 points) |
•Service among Realtor® members to poollistings • Offer compensation to other member-brokerswho sell your listing • Increases exposure for listed property • MLS data on listings and sales available tomembers |
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Broker Compensation (3 points - Third point has 3 points) |
• Specified in listing or finder’s agreement • Commission earned when “ready, willing andable buyer” is prepared to buy on seller’sterms and deed is delivered • Entitled to commission if three events occur:– Procuring cause of sale - one whose effortsoriginated procurement of sale (up to 24 months) – Licensed by TREC – Employed by seller (listing agreement) or buyer(finder’s agreement) |
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TRELA Requirements for RE Fee (4 points) |
• Must be licensed RE broker • Must have written agreement • Agreement must be signed by parties • must advise purchasers in writingthey should get abstract or title policy |
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Terminating the Listing Contract (6 points) |
• Fulfillment of purpose • Expiration of listing period • Breach of contract (abandonment) • Mutual agreement • Death or legal incompetence of agent or principal • Destruction or change in property by outsideforces |
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Bargain Brokers (3 types, and definitions) |
•Flat-Fee Broker: charge low fixed fee and offerselect services, especially MLS posting • Discount Broker: list / sell property for less than standard rate (e.g., 4% vs. 6%) • Variable Rate: Listing broker discounts hiscommission rate, but pays full rate to sellingbroker |
