texas law of contracts

Texas Law of Contracts

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Law of Contracts COURSE WORKBOOK

CHAPTER 1

Texas Contract Law


After completing this Chapter, you will be able to:

1) Describe at least two requirements under TRELA.

2) Identify at least two actions that would be considered as

unauthorized practice of law.

3) Describe at least two duties of the broker-lawyer committee.

4) List at least three promulgated contract forms and explain when the

forms are used.

5) Describe the main purpose of the DTPA, and give at least one

example of a violation.

NOTES

1.0 Chapter 01 Learning Objectives


0:00 - Introduction

NOTES

1.1 Introduction


0:00 - Texas Real Estate License Act (TRELA)

5:00 - TRELA and contracts

NOTES

1.2 Texas Real Estate License Act


Link to TREC:

https://www.trec.state.tx.us/index.asp

NOTES

1.2.2 Link to TREC


Link to TRELA:

https://www.trec.state.tx.us/formslawscontracts/rules_codes/rela.asp

NOTES

1.2.3 Link to TRELA


0:00 - Unauthorized practice of law

7:00 - Realtor code of ethics

12:15 - Factual statements vs unauthorized practice of law

Ethics - Moral principles that govern a person’s or group’s behavior.

NOTES

1.3 Unauthorized Practice of Law

Key Terms to Know


0:00 - The broker/lawyer committee

NOTES

1.4 The Broker / Lawyer Committee


0:00 - Using the promulgated contract forms

0:40 - Exceptions to using promulgated contract forms

2:40 - Transactions involving the federal government

4:25 - Buyer or seller provides the contract

8:20 - Broker/lawyer committee contracts for special cases

10:00 - Attorney contracts

11:25 - Summary of exceptions regarding the promulgated contract forms

NOTES

1.5 Use of Promulgated Contract Forms


Link to TREC promulgated forms:

https://www.trec.state.tx.us/formslawscontracts/forms/forms-contracts.asp

NOTES

1.5.2 Link to TREC Promulgated Forms


0:00 - Seller disclosures

2:00 - Form OP-H (Optional Seller Disclosure form)

9:00 - When sellers do not have to provide notice (11 exemptions)

NOTES

1.6 Seller Disclosures


Please refer to page 3 of the Law of Contracts – Supporting Documents

booklet.

NOTES

1.6.2 Seller’s Disclosure of Property

Condition


0:00 - Deceptive Trade Practices Consumer Protection Act (DTPA)

Punitive Damages - Damages simply for the purpose of punishment.

NOTES

1.7 Deceptive Trade Practices Consumer

Protection Act (DTPA)

Key Terms to Know


0:00 - Key Terms

1:00 - Broker/lawyer committee

4:00 - Unauthorized practice of law

5:10 - Promulgated contract forms


8:00 - Texas Real Estate Commission (TREC)

8:40 - DTPA

NOTES

1.8 Study Info – Part 1


0:00 - Real estate law

2:10 - Broker/lawyer committee

2:50 - TREC and promulgated forms

3:25 - TREC rules regarding promulgated contract forms

4:00 - Seller disclosures

5:30 - DTPA

NOTES

1.9 Study Info – Part 2


CHAPTER 2

Basics of Real Estate Law



1) Discuss the difference between land, real estate, and real property,

and provide at least one example of each.

2) List at least two physical and economic characteristics of real

property.

3) Describe at least three forms of ownership in real property, and

provide an example of each.

4) List at least three forms of businesses that can own real property.

5) List at least four types of subdivisions.

NOTES



0:00 - Introduction

2:10 - Key terms to know

NOTES

2.1 Real Property and the Law


0:00 - Land

2:25 - Real estate

4:00 - Real property and the bundle of rights

8:00 - Title and deeds

10:30 - Sub-surface, surface, and air rights

Land – The material of the earth, whatever may be the ingredients of which

it is composed, whether soil, rock, or other substance, and includes free or

unoccupied space for an indefinite distance upwards as well as downwards.

Real Estate - Land and everything permanently attached to land.

Real Property – Real estate plus the bundle of rights.

Bundle of Rights - The rights of an owner of a freehold estate to possession,

enjoyment, control, and disposition of real property.

Title - The evidence of right which a person has to the ownership and

possession of land, commonly considered as a history of rights.

Deed - A written document by which ownership of land is transferred from

one party to another.

Mineral Rights – The landowner’s ability to take minerals from the earth or

to sell or lease this right to others.

Air Rights - The rights in real property to the reasonable use of the air space

above the surface of the land.

NOTES

2.2 Land, Real Estate, and the Real Property

Key Terms to Know


Please refer to page 3 of the Law of Contracts – Infographics booklet.

NOTES

2.2.2 Land, Real Estate, Real Property

Infographic


0:00 - Real property vs Personal property

3:00 - Chattels

4:00 - How to test if an item is personal or real property

7:35 - Deed vs Bill of Sale

9:20 - Manufactured housing

12:30 - Plants

14:20 - Fixtures

17:20 - Personal fixtures vs trade fixtures

Personal Property - All property that is not considered to be real property.

That which is movable (not attached to land).

Chattels – Goods or every species of property movable or immovable which

are not real property.

Bill of Sale – A written instrument given to pass title of personal property

from vendor to vendee.

Mobile Home – A structure transportable in one or more sections, designed

and equipped to contain not more than two dwelling units to be used with

or without a foundation system.

Emblements – The crops and other annual plantings considered to be

personal property of the cultivator.

Fixtures – Personal property that has become real property by having been

permanently attached or adapted to real property.

Trade Fixtures – items that are installed by a commercial tenant and are

removable upon termination of the tenancy.

NOTES

2.3 Real Property vs. Personal Property

Key Terms to Know


0:00 - Characteristics of real property

0:25 - Economic characteristics of real property

1:55 - Physical characteristics of real property

NOTES

2.4 Characteristics of Real Property


0:00 - Ownership in real estate

1:00 - Ownership in severalty

1:50 - Tenancy in common

4:05 - Joint tenancy

5:10 - Tenancy by the entirety

6:05 - Community property

7:45 - Trusts

Severalty Ownership - Owned by one person only. Sole ownership.

Tenancy in Common - An estate or interest in land held by two or more

persons, each having equal rights of possession and enjoyment, but without

any right of succession by survivorship between the owners.

Joint Tenancy - Two or more natural persons own that comes with a special

benefit called the right of survivorship.

Undivided ownership of a property interest by two or more persons each of

whom has a right to an equal share in the interest and a right of

survivorship, i.e., the right to share equally with other surviving joint tenants

in the interest of a deceased joint tenant.

Right of Survivorship - The right of a surviving tenant or tenants to succeed

to the entire interest of the deceased tenant; the distinguishing feature of a

joint tenancy.

Tenancy by the Entirety - Ownership by married persons where each owns

the entire estate with the survivor taking the whole estate upon the death

of the other.

NOTES

2.5 Forms of Real Estate Ownership

Key Terms to Know


Community Property - Property acquired by husband and/or wife during a

marriage when not acquired as the separate property of either spouse.

Each spouse had equal rights of management, alienation, and testamentary

disposition of community property.

Trusts – A legal device whereby one person transfers ownership of property

to someone else to hold or manage for the benefit of a third party.

Trustee – One who holds property in trust for another to secure the

performance of an obligation. Third party under a deed of trust.

Trustor – One who borrows money from a trust deed lender, then deeds

the real property securing the loan to a trustee to be held as security until

trustor has performed the obligation to the lender under terms of a deed of

trust.

Beneficiary – One entitled to the benefit of a trust.

NOTES

2.5 Forms of Real Estate Ownership

(continued)

Key Terms to Know


0:00 - Partnerships

1:35 - Corporation

3:05 - Limited Liability Company (LLC)

Partnership – An association of two or more people who operate a business

as co-owners and share in the business profits and losses.

Corporation – An entity established and treated by law as an individual or

unit with rights and liabilities, or both, distinct and apart from those of the

persons composing it. A corporation is a creature of law having certain

powers and duties of a natural person. Being created by law it may

continue for any length of time the law prescribes.

Limited Liability Company (LLC) – A business structure that combines the

pass-through taxation of a partnership or sole proprietorship with the

limited liability of a corporation.

NOTES

2.6 Ownership of Real Estate by Business

Organizations

Key Terms to Know


0:00 - Condominiums

1:10 - Cooperative

2:20 - Time-shares

Condominium – A form of ownership of real property recognized in all

states that consists of individual ownership of some aspects and co-

ownership in other aspects of the property.

Cooperative – A form of ownership in which stock holders in a corporation

occupy property owned by the corporation under a lease.

Time-Share - A license or contractual or membership right of occupancy in a

project which is not coupled with an estate in the real property.

NOTES

2.7 Condominiums, Cooperative,

Townhouses, and Time-Shares

Key Terms to Know



NOTES

2.7.2 Subdivisions Infographic


0:00 - Laws affecting real estate


NOTES

2.8 Laws Affecting Real Estate


0:00 - Overview

NOTES

2.9 Study Info


CHAPTER 3

Introduction to Contracts



1) Discuss the difference between a performance and forbearance

contract, and provide an example of each.

2) Discuss the difference between an express and implied contract.

3) Explain the difference between a valid, void, voidable, and

unenforceable contract.

4) Summarize the essential elements of a valid contract, and provide

an example of each.

5) List at least three ways a contract can be terminated.

NOTES



0:00 - Introduction

1:50 - What is a contract

3:00 - Performance contract

4:10 - Forbearance contract

5:10 - Option contract

Contract – A legally enforceable agreement to do, or not to do something.

Option – An irrevocable right to buy a property at an agreed upon price.

NOTES

3.1 Contracts

Key Terms to Know


0:00 - Express and implied contracts

1:35 - Statute of frauds

2:40 - Implied contracts

Express Contract – A contract that has been put into words, either spoken

or written.

Implied Contract – An agreement that has not been put into words, but is

implied by the actions of the parties.

Statute of Frauds – A State law, based on an Old English statute, requiring

certain contracts to be in writing and signed before they will be enforceable

at law, e.g. contracts for the sale of real property, contracts not be

performed within one year.

NOTES

3.2 Express or Implied Contracts

Key Terms to Know


0:00 - Bilateral contracts

1:05 - Unilateral contracts

2:10 - Independent Contractor Agreement (Bilateral contract)

3:10 - Leases (Bilateral contract)

3:40 - Option to terminate (Unilateral contract)

5:40 - Listing agreements

8:00 - Buyer and tenant representation agreements

Bilateral Contract – A contract in which each party promises to do

something.

Unilateral Contract – When one party promises to do something if the other

party performs a certain act, but the other party does not promise to

perform it; the contract is formed only if the other party does perform the

requested act.

Listing Contract – A contract in which a property owner employs a real

estate broker to market the property described in the contract.

NOTES

3.3 Unilateral or Bilateral Contracts

Key Terms to Know


0:00 - Executed contract

0:35 - Executory contract

Executed Contract – A contract that has been fully performed.

Executory Contract – A contract in which something remains to be done by

one or both of the parties.

NOTES

3.4 Executed or Executory Contracts

Key Terms to Know


0:00 - Essential elements of a valid contract

1:10 - Offer and acceptance

1:45 - Consideration

2:45 - Consent

3:10 - Legal purpose

4:20 - Legally competent parties

5:10 - Statue of frauds (contracts must be in writing)

Consideration - Anything given or promised by a party to include another to

enter into a contract, e.g., personal services or even love and affection. It

may be a benefit conferred upon one party or a detriment suffered by the

other.

NOTES

3.5 Elements of a Valid Contract

Key Terms to Know


0:00 - Valid contracts

0:45 - Void contracts

1:05 - Voidable contracts

1:15 - Unenforceable contracts

1:30 - Voidable contracts and minors

Valid – Having force, or binding force; legally sufficient and authorized by

law.

Void – To have no force or effect; that which is unenforceable.

Voidable – That which is capable of being adjusted void, but is not unless

action is taken to make it so.

NOTES

3.6 Valid, Void, Voidable & Unenforceable

Contracts

Key Terms to Know


0:00 - Terminating of a contract

0:35 - Discharge a contract

1:00 - Assignment

1:35 - Novation

1:50 - Breach of contract

2:15 - Other ways to terminate a contract

2:40 - Partial performance

3:10 - Substantial performance

3:30 - Impossibility of performance

3:50 - Mutual agreement

4:00 - Operation of law

Assignment – A transfer of benefits and obligations within a contract to a 3rd

party who is not originally a party to the contract.

Novation – The substitution or exchange of a new obligation or contract for

an old one by the mutual agreement of the parties.

Breach of Contract – A violation of the terms or conditions of a contract

without a legal excuse.

Rescission of Contract – The abrogation or annulling of contract; the

revocation or repealing of contract by mutual consent by parties to the

contract, or for cause by either party to the contract.

NOTES

3.7 Termination of Contracts

Key Terms to Know


0:00 - Overview

NOTES

3.8 Study Info


CHAPTER 4

Ownership Rights and Limitations



1) List the four governmental powers in real property, and provide an

example of each.

2) Describe at least three types of freehold estates.

3) Describe at least four types of liens.

4) Describe at least three types of easements in detail.

5) Explain the difference between riparian and littoral rights.

NOTES



0:00 - Objectives

2:25 - Key terms to know

NOTES

4.1 Objectives & Key Terms


0:00 - Interest in real estate

NOTES

4.2 Interest in Real Estate


0:00 - Introduction to government powers

5:00 - PETE

6:05 - Police power

13:00 - Eminent domain

17:35 - Taxation

19:40 - Escheat

Police Power – The right of any political body to enact laws and enforce

them, for the order, safety, health, morals and general welfare of the public.

Eminent Domain – A right of the government to acquire property for

necessary public use by condemnation; the owner must be fairly

compensated.

Condemnation – Taking private property for public use, with fair

compensation to the owner; exercising the right of eminent domain.

Escheat – The reversion of the State of property in event the owner thereof

abandons it or dies, without leaving a will and has no distributes to whom

the property may pass by lawful descent.

Taxation – A charge on real estate to raise funds to meet public needs.

Administrator – A person appointed by the probate court to administer the

estate of a deceased person who died intestate.

NOTES

4.3 Governmental Powers

Key Terms to Know



NOTES

4.3.2 PETE - Infographic


0:00 - Freehold estates

1:20 - Fee Simple Estates / Fee Simple Absolute

1:50 - Fee Simple Defeasible estate

3:10 - Life estates

Freehold Estate – An estate of indeterminable duration, e.g., fee simple or

life estate.

Fee Simple Estate – Absolute ownership of real property; a person has this

type of estate where the person is entitled to the entire property with

unconditional power of disposition during the person’s life and descending

to the person’s heirs or distributes.

Fee Simple Absolute – An inheritable estate in land providing the greatest

interest of any form of title.

Fee Simple Determinable – An estate that will end automatically when the

stated event or condition occurs. The interest will revert to the grantor or

the heirs of the grantor.

Remainderman – A person who inherits or is entitled to inherit property

upon the termination of the estate of the former owner.

Life Estate – A freehold estate created for the duration of the life or lives of

certain named persons; a non-inheritable estate.

Life Tenant – The owner of a life estate.

Estate in Reversion – Property or estate ownership that reverts back to the

grantor after a temporary ownership period.

NOTES

4.4 Estates in Land

Key Terms to Know


Estate in Remainder – An estate which vests after the termination of the

prior estate.

Reversionary Interest – The interest which a person has in lands or other

property, upon the termination of the preceding estate. A future interest.

Dower – A wife’s interest in her husband’s real property.

Curtsey – A husband’s interest in the real property of his wife.

NOTES

4.4 Estates in Land (continued)

Key Terms to Know



NOTES

4.4.2 Freehold Estates - Infographic


0:00 - Homestead exemptions

Homestead – A legal life estate in land that is owned and occupied as a

family home.

NOTES

4.5 Homestead

Key Terms to Know


0:00 - Encumbrances

1:00 - Liens

1:38 - Tax liens

2:25 - Mortgage lien

2:50 - Mechanic’s lien

3:25 - Deed restrictions / Covenants, Conditions, & Restrictions (CC&Rs)

4:30 - Easements

5:35 - Easement in gross

6:05 - Easement by necessity

7:50 - Easement by prescription

10:00 - Terminating an encumbrance

11:30 - License

12:35 - Encroachment

Encumbrance – A claim, charge, or liability that attaches to, and is binding

on real estate.

Lien – A claim against a property that provides security for the repayment of

a debt or an obligation of the property owner.

Voluntary Lien – Any lien placed on property with consent of, or as a result

of, the voluntary act of the owner.

Involuntary Lien – A lien imposed against property without consent of an

owner (ex: taxes, special assessments, federal income tax liens, etc..).

Mechanic’s Lien – A specific lien that gives security to persons or companies

who perform labor or furnish material to improve real property.

NOTES

4.6 Encumbrances

Key Terms to Know


Tax Lien – An encumbrance against a property filed by the taxing

jurisdiction for delinquency in paying real property taxes.

Covenants, Conditions, and Restrictions (CC&Rs) – The basic rules

establishing the rights and obligations of owners of real property within a

subdivision or other tract of land in relation to other owners within the

same subdivision or tract and in relation to an association of owners

organized for the purpose of operating and maintaining property commonly

owned by the individual owners.

Easement – A right acquired by one party to use the land of another party

for a special purpose.

Easement in Gross –A right of use in the land of another without the

requirement that the holder of the right own adjoining land.

Easement by Necessity – Exists when a landowner has no access to roads

and is landlocked.

Easement by Prescription – Obtained by use of the land of another for the

legally prescribed length of time.

Servient Tenement – Land encumbered by an easement.

Dominant Tenement – Land benefiting from an easement appurtenant.

Encroachment - An unlawful intrusion onto another’s adjacent property by

improvements to real property; e.g. a swimming pool built across a property

line.

NOTES

4.6 Encumbrances (continued)

Key Terms to Know



NOTES

4.6.2 Easements - Infographic


0:00 - Riparian rights

0:40 - Littoral rights

1:20 - Erosion

1:45 - Accretion

2:15 - Avulsion

2:35 - Doctrine of prior appropriation

Riparian Rights – The rights of a land owner or land occupier to use flowing

water (such as a river) that is adjacent to the land.

Littoral Rights – The right of a property owner whose land borders on a

body of water, such as a lake, ocean or sea, to reasonable use and

enjoyment of the shore and water the property borders on.

Erosion – The eating away of a coastline or land by the action of water, ice,

and/or wind, or wearing away of a surface by corrosion or traffic.

Accretion – The increasing in land area resulting from the deposit of soil by

the natural action of the water.

Avulsion – A sudden and perceptible loss of land by the action of water as

by a sudden change in the course of a river.

NOTES

4.7 Water Rights

Key Terms to Know


0:00 - Mineral rights

Mineral Rights – The landowner’s ability to take minerals from the earth or

to sell or lease this right to others.

NOTES

4.8 Mineral Rights

Key Terms to Know


0:00 - Lead-based paint disclosure

1:20 - Asbestos

Asbestos – A fibrous mineral found in many building materials that when

improperly disturbed, can cause serious lung diseases.

Friable – A quality of some asbestos that causes it to crumble, allowing toxic

particles to escape into the air and lodge in people’s lungs.

NOTES

4.9 Environmental Issues

Key Terms to Know


0:00 - Summary

NOTES

4.10 Study Info


CHAPTER 5

Contracts Used in Real Estate



1) Discuss the difference between a unilateral and bilateral contract,

and provide at least one example of each.

2) List at least three ways a contract can be discharged.

3) Summarize the types of listing contracts used in residential

transactions.

4) Describe at least two ways a listing contract may be terminated.

5) Describe the agency relationship created by a Buyer Agency

Agreement.

6) State at least three types of leases, and provide at least one

example of each.

NOTES



0:00 - Introduction

2:50 - Learning objectives

5:40 - Key terms

NOTES

5.1 Objectives & Key Terms


0:00 - Real estate contracts / TREC website

NOTES

5.2 Real Estate Contracts


0:00 - Contract basics

2:20 - Types of real estate contracts

6:00 - Essential elements of a contract

NOTES

5.3 Contract Law


0:00 - Discharging a contract

0:40 - Fully performed contract

1:15 - Assignment of contract

2:50 - Novation

3:25 - Breach of contract

5:15 - Statute of limitations

7:00 - Partial performance

7:30 - Substantial performance / impossibility to perform

9:00 - Mutual agreement / operation of law

9:35 - Rescission

Statute of Limitations – A law establishing the time period within which

certain lawsuits may be brought.

NOTES

5.4 Discharge of Contracts

Key Terms to Know



NOTES

5.4.2 Discharge of Contracts - Infographic


0:00 - Listing agreements

5:00 - Buyer agency agreement

5:55 - Real estate sales contracts

7:00 - Option agreements

8:55 - Escrow agreements

Listing Contract – A contract in which a property owner employs a real

estate broker to market the property described in the contract.

NOTES

5.5 Listing Agreements, Options & Purchase

Overview

Key Terms to Know


0:00 - Leases

1:30 - Land contracts

2:25 - Contracts and copyrights

NOTES

5.6 Leases, Land and Other Agreements


0:00 - The Listing Agreement

4:30 - Ready, willing, and able buyer

7:00 - Exclusive right to sell agreement

10:50 - Exclusive agency agreement

14:30 - Open listing

Exclusive Agreement (Exclusive Right to Sell Listing Agreement) – A listing

given to only one broker who is entitled to the commission if anyone sells

the property during the term of the listing contract.

Non-Exclusive Listing (Open Listing) – A listing given to one or more brokers

in which the broker procuring a sale is entitled to the commission but

imposes no commission obligation on the owner when the owner sells the

property.

NOTES

5.7.1 Listing Agreement Types – Part 1

Key Terms to Know


0:00 - Open listing / unilateral agreement

3:40 - Provisions in listing agreement / MLS clause

11:00 - Net listing

Multiple Listing Service (MLS) – An association of real estate agents

providing for a pooling of listings and the sharing of commission on a

specified basis.

NOTES

5.7.2 Listing Agreement Types – Part 2

Key Terms to Know


0:00 - Terminating a listing agreement

NOTES

5.8 Listing Agreement Termination



booklet.

NOTES

5.9.1 Residential Real Estate Listing

Agreement Exclusive Right to Sell



booklet.

NOTES

5.9.2 Residential Real Estate Listing

Agreement Exclusive Right to Lease


0:00 - Buyer agency agreement

1:00 - Residential Real Estate Listing Agreement: Exclusive Right to Sell

13:30 - Residential Real Estate Listing Agreement: Exclusive Right to Lease

Buyer Agency Agreement – An employment contract that appoints a

brokerage firm as a buyer’s agent for the purpose of finding a suitable

property for the buyer.

NOTES

5.9.3 Buyer Agency Agreement – Sell and

Lease

Key Terms to Know



booklet.

NOTES

5.10.1 Residential Buyer/Tenant

Representation Agreement


0:00 - Buyer Representation Agreement

NOTES

5.10.2 Buyer Representation Agreement


0:00 - Leasing real estate

1:30 - Leasehold estates

2:20 - Estate for years

2:35 - Estate for period to period

2:45 - Estate at Will / Estate at Sufferance

Lease – A contract between owner and tenant, setting forth conditions

upon which tenant may occupy and use the property and the term of the

occupancy. Sometimes used as an alternative to purchasing property

outright, as a method of financing right to occupy and use real propriety.

Estate for Years – An interest in land by virtue of a contract for the

possession of them for a definite and limited period of time. May be for a

year or less. A lease may be said to be an estate for years.

Estate From Period to Period – An interest in land where there is no

definite termination date but the rental period is fixed at a certain sum per

week, month, or year. Also called a periodic tenancy.

Tenancy at Will – A property tenure that can be terminated at any time by

either the tenant or the owner (landlord). It exists without a contract or

lease, and is unspecific in duration or the exchange of payment.

Estate at Sufferance – An estate arising when the tenant wrongfully holds

over after the expiration of the term. The landlord has the choice of

evicting the tenant as a trespasser or accepting such tenant for a similar

term under the conditions of the tenant’s previous holding. Also called a

tenancy at sufferance

NOTES

5.11 Leasing Real Estate & Leasehold

Estates

Key Terms to Know


0:00 - A lease

2:00 - Statute of frauds

3:40 - Leasehold estates

4:30 - Types of leasehold estates

5:30 - Requirements of a valid lease agreement

Lessor – An owner who enters into a lease agreement with a tenant; a

landlord.

Lessee – One who contracts to rent, occupy, and use property under a lease

agreement; a tenant.





Leasehold Estate – A tenant’s right to occupy real estate during the term of

the lease. This is a personal property interest.

NOTES

5.12.1 Leasing – Part 1

Key Terms to Know



NOTES

5.12.1.2 Less Than Freehold Estates -

Infographic


0:00 - Lease terms

2:15 - Security deposits

6:50 - Accessibility

10:30 - Maintenance of the property

12:20 - Assignment and sub-leasing

13:00 - Options

Security Deposit – A sum of money that the landlord requires of the tenant

prior to the lease; it is to be refunded at the end of the lease based on the

condition of the premises.

Commingling – The illegal mixing of personal funds with money held in trust

on behalf of a client.

Assignment – The transfer of legal rights and obligations by one party to

another.

Sublease – The transfer of only part of a lease term with reversion to the

lessee; a lesser lease estate.

NOTES

5.12.2 Leasing – Part 2

Key Terms to Know


0:00 - Gross lease

2:55 - Net lease

3:30 - Percentage lease

5:25 - Variable lease

6:55 - Ground lease

7:10 - Sandwich lease

7:45 - Oil & gas lease

Gross Lease – A lease in which the lessor pays all costs of operating and

maintaining the property and real property taxes.

Net Lease – A lease requiring a lessee to pay charges against the property

such as taxes, insurance and maintenance costs in addition to rental

payments.

Percentage Lease – Lease on the property, the rental for which is

determined by amount of business done by the lessee; usually a percentage

of gross receipts from the business with provisions for a minimum rental.

Graduated Lease – Lease which provides for a varying rental rate, often

based upon future determination; sometimes rent is based upon result of

periodical appraisals; used largely in long-term leases.

Ground Lease – An agreement for the use of land only, sometimes secured

by improvements placed on the land by the user.

NOTES

5.13 Different Types of Leases

Key Terms to Know



NOTES

5.13.2 Types of Leases - Infographic


0:00 - Discharging a lease / expiration of the lease

0:45 - Agreement between tenant and landlord

7:00 - Operation of law

NOTES

5.14 Lease Termination


0:00 - Options

2:55 - 2 parties to an option

Optionor – A person who gives an option.

Optionee – A person who receives an option.

NOTES

5.15 Options

Key Terms to Know


0:00 - Contract for deed

NOTES

5.16 Contract for Deed



booklet.

NOTES

5.17.1 Residential Lease


0:00 - Residential lease agreement

NOTES

5.17.2 Residential Lease Agreement


0:00 - Review

NOTES

5.18 Study Info


CHAPTER 6

The Sales Contract



1) Explain how and when the One to Four Family Residential Contract

(Resale) is used.

2) Describe the importance of at least three paragraphs of the One to

Four Family Residential Contract (Resale).

3) Describe at least two ways earnest money is used in a transaction.

4) List at least three types of deeds and explain how each is used.

5) Describe at least two actions that may lead to a breach of contract.

NOTES



0:00 - Introduction

NOTES

6.1 Goals & Key Terms


0:00 - The real estate transaction process

0:35 - Making the offer

5:00 - Submitting the contract to the other seller’s broker

8:55 - Accepting the offer

NOTES

6.2 Offer and Acceptance


0:00 - Statute of frauds / parole evidence rule





NOTES

6.3 Statute of Frauds

Key Terms to Know



NOTES

6.3.2 Statute of Frauds - Infographic


0:00 - The sales contract / conditions for closing

3:00 - Offer vs a contract

4:45 - The mailbox rule

6:25 - Parties to the contract

7:30 - Essential elements of a contract

Constructive Notice – Notice of the condition of title to real property given

by the official records of a government entity which does not require actual

knowledge of the information.

Vendor – A seller.

Vendee – a purchaser; buyer.

NOTES

6.4 The Document

Key Terms to Know



NOTES

6.4.2 Essential Elements of a Valid Contract -

Infographic


0:00 - Financing

0:20 - Earnest money deposit

Earnest Money – Down payment made by a purchaser of real estate as

evidence of good faith. A deposit or partial payment.

NOTES

6.5 Financing Information

Key Terms to Know


0:00 - Conveyance of property / deeds

NOTES

6.6 Conveyance of Property


0:00 - Default of contract

Breach of Contract – A violation of the terms or conditions of a contract

without a legal excuse.

NOTES

6.7 Default and Breach of Contract

Key Terms to Know



NOTES

6.7.2 Contract Remedies - Infographic



booklet.

NOTES

6.8.1 One to Four Family Residential

Contract - Resale


0:00 - One to Four Family Residential Contract (Resale) review

0:30 - The parties

2:20 - The property / legal description

3:30 - The improvements / accessories / exclusions

5:00 - Financing

8:00 - Earnest money

9:10 - Title policy

9:50 - The survey

10:30 - Title notices

10:55 - Seller disclosure notice

NOTES

6.8.2 The Sales Contract – Part 1


0:00 - Residential service contract (home warranty)

1:55 - Broker fees

2:10 - The closing

4:25 - Special provisions

5:20 - Settlement

6:00 - Proration

8:00 - Addendum

9:00 - Termination option

10:00 - Attorney consultation

10:30 - Signatures

11:30 - Broker’s information

NOTES

6.8.3 The Sales Contract – Part 2


0:00 - Summary

NOTES

6.9 Study Info


CHAPTER 7

Contingencies, Addenda and Amendments



1) Summarize at least three contingencies commonly found in a sales

contract.

2) Explain the difference between an addendum and an amendment.

3) List at least two types of addenda in a residential contract, and

describe the purpose of each.

NOTES



0:00 - Introduction


2:05 - Key terms

NOTES



0:00 - Contingencies

5:15 - Elements of a contingency

7:15 - Mortgage contingency

13:00 - Appraisal contingency

NOTES

7.2.1 Contingencies – Part 1


0:00 - Appraisal contingency

1:20 - Title contingency

2:15 - Homeowners contingency

3:10 - Inspection contingency

14:00 - Property sale contingency

15:45 - Other contingencies

NOTES

7.2.2 Contingencies – Part 2


Pease refer to page 52 of the Law of Contracts – Supporting Documents

booklet.

NOTES

7.3.1 TREC Amendment


0:00 - Amendments vs addenda

2:30 - Amendment form

NOTES

7.3.2 Amendments


Pease refer to page 53 of the Law of Contracts – Supporting Documents

booklet.

NOTES

7.4.1 Third Party Financing Addendum


0:00 - Addenda forms

2:10 - 3rd Party Financing Addendum form

Addendum – Additional pages of material that are added to and become

part of a contract.

NOTES

7.4.2 Addenda

Key Terms to Know


0:00 - Summary

NOTES

7.5 Study Info


CHAPTER 8

Financing Real Estate



1) Identify the parties to a mortgage, and explain each of their roles in

detail.

2) Identify the parties to a deed of trust, and explain each of their roles

in detail.

3) Explain the difference between judicial and non-judicial foreclosure.

4) Explain the difference between the primary and secondary

mortgage markets.

5) Describe at least two types of loans used in residential transactions.

NOTES



0:00 - Introduction

1:00 - Lesson objectives

2:30 - Key terms

NOTES



0:00 - Mortgage law

1:40 - Title theory states

3:55 - Lien theory states

5:30 - Modified lien theory

Mortgage – An instrument recognized by law by which property is

hypothecated to secure the payment of a debt or obligation; a procedure

for foreclosure in event of default is established by statute.

Mortgagor – One who gives a mortgage on his or her property to secure a

loan or assure performance of an obligation; a borrower.

Mortgagee – One to whom a mortgagor gives a mortgage to secure a loan

or performance of an obligation; a lender or creditor.

NOTES

8.2 Mortgage Law

Key Terms to Know


0:00 - Promissory note

2:20 - Elements of a promissory note

Promissory Note – A borrower’s personal promise to pay a debt according

to the agreed terms.

Usury – On a loan, claiming a rate of interest greater than that permitted by

law.

Prepayment Penalty – The charge payable to a lender by a borrower under

the terms of the loan agreement if the borrower pays off the outstanding

principal balance of the loan prior to its maturity.

NOTES

8.3 Promissory Note

Key Terms to Know


0:00 - Mortgage vs deed of trust

6:30 - Duties of a mortgagor or trustor

Deed of Trust – A legal document by which a borrower pledges certain real

property or collateral as guarantee for the repayment of a loan. It differs

from the mortgage in a number of important respects. For example, instead

of their being two parties to the transaction there are three. There is the

borrower who signs the trust deed and who is called the trustor. There is

the third, neutral party, to whom trustor deeds the property as security for

the payment of the debt, who is called the trustee. And, finally, there is the

lender who is called the beneficiary, the one who benefits from the pledge

agreement in that in the event of a default the trustee can sell the property

and transfer the money obtained at the sale to lender as payment of the

debt.

Trustor – One who borrows money from a trust deed lender, then deeds

the real property securing the loan to a trustee to be held as security until

trustor has performed the obligation to the lender under terms of a deed of

trust.

Beneficiary – The lender on the security of a note and deed of trust.

Trustee – One who holds property in trust for another to secure the

performance of an obligation. Third party under a trust.

NOTES

8.4.1 Mortgage or Deed of Trust – Part 1

Key Terms to Know


Pease refer to page 14 of the Law of Contracts – Infographics booklet.

NOTES

8.4.1.2 Mortgage vs Deed of Trust -

Infographic


0:00 - Duties of a trustor

2:30 - Provision for default / acceleration clause

5:00 - Assignment of mortgage

5:30 - Release of mortgage lien or deed of trust

6:50 - Tax and insurance reserves

8:20 - ‘Subject-to’

9:00 - Assumption

10:30 - Alienation clause

12:00 - Recording the mortgage / deed of trust

13:00 - Priority of mortgage liens

Acceleration Clause – A condition in a real estate financing instrument

giving the lender the power to declare all sums owing lender immediately

due and payable upon the happening of an event, such as sale of the

property, or a delinquency in the repayment of the note.

Assignment – A transfer by a person of that person’s rights under a

contract.

Release Clause – A stipulation that upon the payment of a specific sum of

money to the holder of a trust deed or mortgage, the lien of the instrument

as to a specifically described lot or area shall be removed from the blanket

lien on the whole area involved.

Reserves – An accumulation of funds, collected by the lender from the

borrower as part of each monthly mortgage payment, an amount allocated

to pay property taxes and insurance when they are done.

NOTES


Key Terms to Know


“Subject To” a Mortgage – When a grantee takes title to real property

subject to a mortgage, grantee is not responsible to the holder of the

promissory note for the payment of any portion of the amount due.

Assumption of Mortgage – The taking of a title to property by a grantee

wherein the grantee assumes liability for payment of an existing note

secured by a mortgage or deed of trust against the property, becoming a co-

guarantor for the payment of a mortgage or deed of trust note.

Alienation Clause – A clause in a contract giving the lender certain rights in

the event of a sale or other transfer of mortgaged property.

NOTES


(continued)

Key Terms to Know


0:00 - Land contracts and seller financing

Land Contract – A contract used in a sale of real property whereby the seller

retains title to the property until all or a prescribed part of the purchase

price has been paid.

NOTES

8.5 Land Contracts and Owner Financing

Key Terms to Know


0:00 - Buyer default

0:50 - Judicial foreclosure

1:45 - Non-judicial foreclosure

2:25 - Strict foreclosure

3:35 - Deed in lieu of foreclosure

5:40 - Redemption

Foreclosure – A procedure whereby property pledged as security for a debt

is sold to pay the debt in event of default in payments or terms.

Judicial Foreclosure – A court proceeding requiring that property be sold to

satisfy a mortgage lien.

Deed in Lieu of Foreclosure – A deed to real property accepted by a lender

from a defaulting borrower to avoid the necessity of foreclosure

proceedings by the lender.

Redemption – Buying back one’s property after a judicial sale.

NOTES

8.6 Foreclosures and Short Sales

Key Terms to Know


0:00 - Real estate financing market / Federal Reserve System

1:30 - Primary mortgage market

3:55 - Secondary mortgage market

8:20 - Fannie Mae, Freddie Mac, Ginnie Mae

9:30 - Federal home loan bank

10:00 - Farmer Mac

11:00 - Straight loan (term loan)

13:00 - Principle and interest

14:00 - Interest-only loan

14:30 - Balloon payment

16:00 - Negative amortization loan

18:15 - Fully amortized loan / fixed loans

20:00 - Adjustable rate mortgage (ARM)

22:10 - Reverse mortgage

Federal Reserve System – The federal banking system of the United States

under the control of central board of governors (Federal Reserve System)

involving a central bank in each of twelve geographical districts with broad

powers in controlling credit and the amount of money in circulation.

Primary Mortgage Market – The activity of lenders making mortgage loans

to individual borrowers.

Secondary Mortgage Market – The buying and selling of existing deeds of

trust and promissory notes.

NOTES

8.7.1 The Real Estate Financing Market,

Techniques and Loan Programs -

Part 1

Key Terms to Know


Fannie Mae – The shortened name for the Federal National Mortgage

Association (FNMA), a privately owned corporation that purchases FHA, VA,

and conventional mortgages.

Freddie Mac – A nickname for the Federal Home Loan Mortgage

Corporation (FHLMC), a corporation wholly owned by the Federal Home

Loan Bank System that purchases FHA, VA, and Conventional mortgages.

Ginnie Mae – A nickname for the Government National Mortgage

Association (GNMA), a U.S. government agency that purchases FHA and VA

mortgages.

Straight Loan – Periodic payments of interest that are only for the life of the

loan, with payment of the principle in full at the end of the loan.

Principle – The amount of money borrowed, or the amount of the loan.

Interest – The charge in dollars for the use of money for a period of time.

Balloon Mortgage – A mortgage in which the scheduled payment will not

amortize the loan over the mortgage term; therefore, for the debt to be

fully satisfied, a final payment called a balloon payment, larger than the

uniform payments, is required.

NOTES



Part 1 (continued)

Key Terms to Know


Negative Amortization – Occurs when monthly installment payments are

insufficient to pay the interest accruing on the principal balance, so that the

unpaid interest must be added to the principal due.

Amortization – The liquidation of a financial obligation on an installment

basis.

Fixed-Rate Mortgage – A mortgage in which the interest rate does not

change.

Adjustable Rate Mortgage (ARM) – A mortgage loan which bears interest at

a rate subject to change during the term of the loan, predetermined or

otherwise.

Reverse Annuity Mortgage – Used by older people who need additional

income and want to take advantage of the equity in their homes.

NOTES



Part 1 (continued)

Key Terms to Know



NOTES

8.7.1.2 Primary and Secondary Mortgage

Markets - Infographic



NOTES

8.7.1.3 Types of Loans - Infographic


0:00 - Purchase money mortgage

0:45 - Package loan

2:40 - Construction loans

4:00 - Buy-down

5:25 - Home equity loan

7:00 - Conventional loans

9:20 - Private mortgage insurance

16:30 - FHA insured loans

18:20 - Mortgage insurance premiums

21:35 - VA loans

22:30 - Agricultural loan programs

Purchase Money Mortgage – A mortgage given by a buyer to a seller to

secure payment of all or part of the purchase price.

Conventional Loan – A mortgage securing a loan made by investors without

governmental underwriting, i.e., which is not FHA insured or VA guaranteed.

The type is customarily made by a bank or savings and loan association.

Subsidy Buydown – Funds provided usually by the builder or seller to

temporarily reduce the borrower’s monthly principal and interest payment.

Home Equity Loan – A loan against the equity in a home.

Conforming Loan – Those loans processed on uniform loan forms according

to FNMA/FHLMC guidelines.

NOTES



Part 2

Key Terms to Know


PITI – An acronym denoting that a mortgage payment includes, principal,

interest, taxes, and insurance.

Private Mortgage Insurance (PMI) – Mortgage guaranty insurance available

to conventional lenders on the first, high risk portion of a loan.

FHA-insured Loan – A mortgage loan in which payments are insured by the

Federal Housing Administration.

VA Loan – A loan made to qualified veterans for the purchase of real

property wherein the Department of Veteran’s Affairs guarantees the

lender payment of the mortgage.

NOTES



Part 2 (continued)

Key Terms to Know



NOTES

8.7.2.2 PITI - Infographic


0:00 - Truth-in-Lending Act (Regulation Z)

4:15 - Advertising under TILA

4:55 - Equal Credit Opportunity Act

7:30 - Real Estate Settlement Procedures Act (RESPA)

Truth-in-Lending Act – The name given to the federal statutes and

regulations (Regulation Z) which are designed primarily to insure that

prospective borrowers and purchasers on credit receive credit cost

information before entering into a transaction.

Real Estate Settlement Procedures Act (RESPA) – A federal law requiring

the disclosure to borrowers of settlement (closing) procedures and costs by

means of a pamphlet and forms prescribed by the United States

Department of Housing and Urban Development.

NOTES

8.8 Financing Legislation

Key Terms to Know


0:00 - Computerized loan organization (CLO)

NOTES

8.9 Computerized Loan Organization (CLO)


0:00 - Review

NOTES

8.10 Study Info


CHAPTER 9

Conveyance of Title



1) Identify the parties to a deed, and explain the role of each.

2) Identify the types of deeds used in voluntary alienation.

3) Provide three examples of involuntary alienation.

4) Explain the difference between marketable title and clouded title.

NOTES




2:20 - Key terms

NOTES



0:00 - Title

1:30 - Voluntary alienation

3:30 - Requirements of a valid deed

9:45 - Different types of deeds / general warranty deed

13:35 - Special warranty deed

14:30 - Bargain and sale deed

15:15 - Quitclaim deed

17:55 - Transfer tax stamps

Title – The evidence of right which a person has to the ownership and

possession of land, commonly considered as a history of rights.

Voluntary Alienation – Transfer of title freely by the owner.

Deed – A written document by which ownership of land is transferred from

one party to another.

Grantee – A person who acquires an interest in land by deed, grant, or other

written instrument.

Grantor – A person, who by a written instrument, transfers to another the

interest in land.

General Warranty Deed – A deed used to convey real property which

contains warranties of title and quiet possession, and the grantor thus

agrees to defend the premises against the lawful claims of third persons.

NOTES

9.2 Title and Voluntary Alienation

Key Terms to Know


Special Warranty Deed – A deed in which the seller warrants or guarantees

the title only against defects arising during the period of his or her tenure or

ownership of the property.

Bargain and Sale Deed – Any deed that recites a consideration and purports

to convey the real estate; a bargain and sale deed with a covenant against

the grantor’s act is one in which the grantor warrants that grantor has done

nothing to harm or cloud the title.

Quitclaim Deed – A deed to relinquish any interest in property which the

grantor may have, without any warranty of title or interest.

NOTES

9.2 Title and Voluntary Alienation

(continued)

Key Terms to Know


0:00 - Involuntary alienation

0:35 - Transfer by adverse possession

5:00 - Transfer of title by will

7:05 - Transfer of title by descent

8:25 - Probate proceeding

Involuntary Alienation – Transfer of title to real property as a result of a lien

foreclosure sale, adverse possession, the filing of a petition in bankruptcy,

or condemnation under power of eminent domain or upon the death of the

titleholder, to the State when there are no heirs.

NOTES

9.3 Involuntary Alienation and Conveyance

of Estates

Key Terms to Know


0:00 - Public records

0:30 - Constructive notice

1:25 - Actual notice

2:10 - Ways public records are ordered

3:55 - Chain of title

5:20 - Title search

6:40 - Marketable title

11:00 - Title insurance

12:15 - Eminent domain

Constructive Notice – A fact, imputed to a person by law, which should have

been discovered because of the person’s actual notice of circumstances and

the inquiry that a prudent person would have been expected to make.

Actual Notice – Express or implied knowledge of a fact.

Marketable Title – Title which a reasonable purchaser, informed as to the

facts and their legal importance and acting with reasonable care, would be

willing and ought to accept.

Chain of Title – A term applied to the past series of transactions and

documents affecting the title to a given parcel of land.

Clouded Title – Title that is encumbered or burdened with defects.

NOTES

9.4 Public Records and Proof of Ownership

Key Terms to Know


Title Search – An examination of public records, laws, and court decisions to

disclose the current facts regarding the ownership of real estate.

Abstract of Title – A condensed history, or summary of all transactions

affecting a particular tract of land.

Title Insurance – Insurance against loss or damage resulting from defects or

failure of title to a given parcel of real estate.

NOTES

9.4 Public Records and Proof of Ownership

(continued)

Key Terms to Know


0:00 - Review

NOTES

9.5 Study Info


CHAPTER 10

Transaction Process and Closing



1) Identify at least two documents a lender must provide to a

borrower during the loan approval process, and explain the purpose

of each document.

2) Identify at least two prohibited acts under RESPA.

3) Identify at least three items that are prorated between a buyer and

seller at closing.

NOTES




1:45 - Key terms

NOTES



0:00 - The loan approval process / pre-approval

5:35 - Selection of the property

7:10 - Uniform Residential Loan Application

9:30 - Credit report

13:00 - Clear title

13:40 - The appraisal

15:30 - Insurance

16:10 - The underwriter

16:40 - Final approval

Pre-Approval – A step above prequalification, it involves verifying a

purchaser’s credit, down payment, and employment history.

Good Faith Estimate – The lender’s estimate of the borrower’s settlement

costs; RESPA is required to furnish it to the borrower at the time of the loan

application.

Clear Title – Title which is not encumbered or burdened with defects.

Underwriting – The act of reviewing loan documentation and evaluation the

borrower’s ability and willingness to repay the loan and sufficiency of

collateral value of the property.

NOTES

10.2 Loan Approval Process

Key Terms to Know



booklet.

NOTES

10.2.2 Uniform Residential Loan Application


0:00 - Inspections

5:20 - Resolving contingencies

NOTES

10.3 Inspections


0:00 - Title work

0:40 - Title insurance

1:20 - Preparation for closing / HUD-1 form

5:00 - Change of address

5:30 - Final inspection / walk-through

8:20 - Review GFE vs HUD-1 form

10:55 - Duties of the seller

18:15 - Conducting the closing

22:50 - Mortgage Disclosure Improvement Act

Title Insurance – Insurance against loss or damage resulting from defects or

failure of title to a given parcel of real estate.

HUD Form No. 1 – A standard settlement form required by RESPA.

Debit – In a closing statement, an expense or money received against a

credit.

Credit – In a closing statement, money to be received or credit given for

money or an obligation given.

Escrow Agent – The neutral third party holding funds or something of value

in trust for another or others.

NOTES

10.4 Title Work and Preparation for Closing

Key Terms to Know



booklet.

NOTES

10.4.2 HUD-1 Settlement Statement


0:00 - RESPA

Real Estate Settlement Procedures Act (RESPA) – A federal law requiring

the disclosure to borrowers of settlement (closing) procedures and costs by

means of a pamphlet and forms prescribed by the United States

Department of Housing and Urban Development.

NOTES

10.5 Real Estate Settlement Procedures

Act (RESPA)

Key Terms to Know



booklet.

NOTES

10.5.2 HUD Good Faith Estimate


0:00 - Prorations

3:00 - Closing and funding

Proration – The division of certain settlement costs between a buyer and

seller.

Proration of Taxes – To divide or prorate the taxes equally or

proportionately to time of use, usually between seller and buyer.

NOTES

10.6 Prorations, Closing and Funding

Key Terms to Know


0:00 - Transaction process overview

NOTES

10.7 Transaction Process Overview


0:00 - Review

NOTES

10.8 Study Info


CHAPTER 11

Common Contract Mistakes



1) Identify at least one way to legally describe a property.

2) Define the effective date of a contract, and explain its significance.

3) Provide at least two examples of both real and personal property.

NOTES



0:00 - Learning objections

1:20 - Key terms

NOTES



0:00 - Common issues in contracts / names of the parties

4:00 - Name of the property

5:25 - Check boxes

7:50 - Special provisions

11:05 - Default

NOTES

11.2.1 Common Issues in Contracts – Part 1


0:00 - Signatures & dates

4:45 - E-sign

8:55 - Addenda

NOTES

11.2.2 Common Issues in Contracts – Part 2


0:00 - Real property vs personal property

3:35 - Title

NOTES

11.3 Common Areas of Concern


Please refer to page 18 of the Law of Contracts – Infographics booklet

NOTES

11.3.2 Real Property vs Personal Property -

Infographic


0:00 - Review

NOTES

11.4 Study Info