TREC TREC Contract Forms 3

Question 1

What happens to the earnest money if a buyer defaults under a TREC contract?

Accepted Answer

It may be retained by the seller as liquidated damages

Answer

If the buyer defaults, the seller may be entitled to retain the earnest money as liquidated damages under the terms of the contract.

Question 2

The TREC Addendum for Back-Up Contract is used when:

Accepted Answer

A secondary offer is accepted contingent on the failure of a prior contract

Answer

The Back-Up Contract Addendum establishes a secondary contract that becomes primary only if the existing contract terminates.

Question 3

Under TREC promulgated forms, who typically pays the title policy premium in a Texas residential resale transaction?

Accepted Answer

The seller pays by default, but it is negotiable

Answer

In Texas, it is customary for the seller to pay for the owner's title insurance policy, though this is negotiable in the contract.

Question 4

What must a licensee do if a TREC promulgated form does not contain a provision needed for a transaction?

Accepted Answer

Use a Special Provisions paragraph or attach an attorney-drafted addendum

Answer

Licensees may use the Special Provisions paragraph for factual statements or attach an attorney-drafted addendum for additional terms.

Question 5

The TREC Farm and Ranch Contract is used for:

Accepted Answer

Properties used for agricultural purposes, including farm/ranch land

Answer

The Farm and Ranch Contract is a TREC promulgated form designed specifically for agricultural properties and ranch land transactions.

TREC - Texas Real Estate Commission Practice Test