TREC TREC Contract Forms 1 — Questions and Answers
Question 1: Which entity promulgates the standard real estate contract forms used in Texas?
- Texas Association of Realtors
- Texas Real Estate Commission (TREC) (Correct answer)
- Texas Department of Housing
- National Association of Realtors
Correct answer: Texas Real Estate Commission (TREC)
TREC promulgates mandatory contract forms that licensees must use when representing parties in real estate transactions.
Question 2: What is the name of the TREC form used for the purchase of a residential property with an existing structure?
- TREC Form 1-4 (Correct answer)
- TREC Form 9-13
- TREC Form 20-15
- TREC Form 30-12
Correct answer: TREC Form 1-4
TREC Form 1-4 (One to Four Family Residential Contract – Resale) is the standard form for purchasing existing residential properties.
Question 3: Under TREC rules, when is a licensee permitted to use a form NOT promulgated by TREC?
- When the client requests it
- When an attorney-drafted form is provided for a specific transaction (Correct answer)
- Whenever the licensee prefers
- For commercial transactions only
Correct answer: When an attorney-drafted form is provided for a specific transaction
A non-promulgated form may be used only when it is prepared by a licensed attorney and provided for a specific transaction.
Question 4: In a TREC contract, the 'Third Party Financing Addendum' is used when:
- The buyer pays cash
- The seller carries the note
- The buyer obtains a conventional, FHA, or VA loan (Correct answer)
- A lease option is involved
Correct answer: The buyer obtains a conventional, FHA, or VA loan
The Third Party Financing Addendum is attached when the buyer plans to finance the purchase through a conventional, FHA, or VA loan.
Question 5: What does the 'Option Period' in a Texas TREC contract allow the buyer to do?
- Lock in the purchase price for 30 days
- Terminate the contract for any reason within an agreed timeframe (Correct answer)
- Extend the closing date automatically
- Negotiate a lower earnest money deposit
Correct answer: Terminate the contract for any reason within an agreed timeframe
During the option period, the buyer pays an option fee for the unrestricted right to terminate the contract for any reason.
Question 6: How must earnest money be handled after a TREC contract is executed?
- Held by the listing agent personally
- Deposited with the title company or escrow agent within the time stated in the contract (Correct answer)
- Given directly to the seller
- Held in the buyer's bank account
Correct answer: Deposited with the title company or escrow agent within the time stated in the contract
Earnest money must be deposited with an authorized escrow agent or title company within the timeframe specified in the contract.
TREC TREC Contract Forms 1
Which entity promulgates the standard real estate contract forms used in Texas?