Champions School of Real Estate-Law of
Contracts Exam 1 Questions and
Complete Solutions Graded A+
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Default of Contract - Answer: When a party to a contract fails to perform under the contract, also known
as breach of contract.
Buyer Default(Remedies) - Answer: In the event of default by the buyer, the seller may have several
options which include:
-Liquidated Damages
-Monetary Damages
-Specific Performance
Liquidated Damages - Answer: The seller can choose to accept the buyer's earnest money as liquidated
damages, releasing all parties from any further obligation under the contract. Liquidated damages are
damages that are established in the contract.
Monetary Damages - Answer: In addition to specific performance, the injured party may "seek such
other relief as may be provided by law." This would be an award of monetary damages by the court.
Because monetary damages are awarded by the court, one never knows what they will be until the
court rules.
Specific Performance - Answer: The injured party files a court action seeking an order of the court
directing the defaulting party to perform according to the terms of the contract. Specific performance is
the only remedy that would possibly result in the full execution (closing) of the transaction.
Buyer Default - Answer: In the event of default by the buyer, the seller may have several options which
include:
-Liquidated Damages
-Monetary Damages
-Refund of Earnest Money
,Refund of Earnest Money - Answer: The buyer's acceptance of an earnest money refund terminates the
contract, releasing both parties from any further obligation under the contract. Because this is a refund
of the buyer's earnest money, this cannot be considered liquidated damages.
TREC has only two promulgated lease forms: - Answer: 1. Buyer's Temporary Residential Lease
2. Seller's Temporary Residential Lease
Buyer's Temporary Residential Lease - Answer: For use when the buyer occupies the property for
no more than 90 days prior to closing.
Seller's Temporary Residential Lease - Answer: For use when the seller occupies the property for no
more than 90 days after closing.
Right of First Refusal - Answer: Gives the tenant the right to purchase the leased property by matching
or bettering any offer before the property will be sold to someone else.
-TREC does not have promulgated forms for this.
Lease-Purchase Agreement - Answer: Gives the tenant occupancy in the present time and the right to
purchase at a future date. In an option to purchase, the price is set when the lease agreement is
negotiated, which is advantageous to the tenant-buyer.
-TREC does not have promulgated forms for this.
TVLB (Texas Veteran's Loan Program) - Answer: To participate in the program, the veteran obtains an
FHA, VA, or conventional loan from a participating lender. The qualification process is the same as for
any other FHA, VA, or conventional loan. The difference is that the loan is sold to the Texas Veterans
Land Board (VLB), as opposed to a secondary market purchaser such as Fannie Mae or Freddie Mac. The
primary benefit to the veteran is that the rate on the Veterans Land Board loan is often up to one
percent below prevailing market rates.
Physical Characteristics of Land - Answer: 1. Indestructibility or durability
2. Immobility
3. Nonhomogeneity
, Economic Characteristics of Land - Answer: 1. Scarcity
2. Modification
3. Fixity
4. Stitus
Indestructibility or Durability - Answer: Refers to the fact that land cannot be destroyed
Immobility - Answer: Refers to the fact that land cannot be moved.
Nonhomogeneity - Answer: Refers to the fact that no two parcels of land are the same.
Scarcity - Answer: Comes from the theory of supply and demand. When there is a shortage of something
that individuals want, the price goes up.
Modification - Answer: Refers to the fact that value is affected by man-made changes to the land.
Fixity - Answer: Refers to the fact that land, and additions to the land, such as buildings, take long
periods to pay for themselves.
Stitus - Answer: Refers to the location of the property or land from an economic, not geographic view
point.
Responsibility of Agents when Receiving an Offer - Answer: A license holder has a duty to communicate
or submit offers to his or her client. The communication or submission of an offer should be done
promptly because the license holder's duty is to keep the principal or client informed at all times of
material information.
An Offer can be Communicated by: - Answer: - Phone
- Fax
- E-mail
- Letter
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