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Texas Real Estate Practice Exam

120 questions · National portion pass mark 56/80 · Texas state portion pass mark 28/40 · portions scored independently

Free from agentexamcoach.com — original practice questions, not real exam items.

1. A homeowner permanently installs a chandelier in the dining room. The chandelier is now best described as:
- A. Personal property
- B. A fixture
- C. A trade fixture
- D. An emblement
2. Which physical characteristic of land means no two parcels are exactly alike?
- A. Immobility
- B. Indestructibility
- C. Non-homogeneity
- D. Scarcity
3. A property owner installs a new, built-in oven in their kitchen. What type of property is the oven considered?
- A. Personal property
- B. Real property
- C. Fixture
- D. Trade fixture
4. Which of the following is an example of a public land-use control?
- A. Covenants, Conditions & Restrictions (CC&Rs)
- B. Easement
- C. Zoning ordinance
- D. Lien
5. A farmer plants crops on their land, which are considered _____.
- A. Fixtures
- B. Emblements
- C. Trade fixtures
- D. Personal property
6. What is the purpose of a metes and bounds description in a property deed?
- A. To identify the property's location using GPS coordinates
- B. To describe the property's boundaries using reference points and distances
- C. To list the property's amenities and features
- D. To specify the property's zoning classification
7. A property is being taken by the government through eminent domain. What is the primary consideration for determining just compensation?
- A. The property's highest and best use
- B. The property's current market value
- C. The property's original purchase price
- D. The property's tax-assessed value
8. Which of the following is a type of private land-use control?
- A. Zoning ordinance
- B. Eminent domain
- C. CC&Rs
- D. Escheat
9. A free-standing refrigerator in a rental property is considered _____.
- A. A fixture
- B. A trade fixture
- C. Personal property
- D. Real property
10. What is the primary purpose of a title search?
- A. To determine the property's value
- B. To identify any liens or encumbrances on the property
- C. To verify the property's zoning classification
- D. To obtain a mortgage loan
11. A built-in oven is considered what type of property?
- A. Personal property
- B. Real property
- C. Fixture
- D. Intangible property
12. Which freehold estate provides the most complete ownership rights?
- A. Life estate
- B. Fee simple absolute
- C. Estate for years
- D. Fee simple defeasible
13. Recording a deed in the public records provides:
- A. Actual notice
- B. Constructive notice
- C. A guarantee of marketable title
- D. Title insurance
14. What is the primary purpose of recording a deed?
- A. To transfer title to the buyer
- B. To provide constructive notice to potential buyers
- C. To pay off the mortgage
- D. To collect property taxes
15. What type of estate is created when a landlord leases a property to a tenant for a specific period of time?
- A. Freehold estate
- B. Leasehold estate
- C. Fee simple estate
- D. Life estate
16. What is the purpose of a title search?
- A. To determine the value of the property
- B. To identify any encumbrances or title defects
- C. To prepare the deed for recording
- D. To collect property taxes
17. A buyer purchases a property and receives a general warranty deed from the seller. What type of protection does this deed provide to the buyer?
- A. Protection against encumbrances only
- B. Protection against defects in title and encumbrances
- C. Protection against defects in title only
- D. No protection
18. What is the difference between a freehold estate and a leasehold estate?
- A. A freehold estate is a type of ownership, while a leasehold estate is a type of rental agreement
- B. A freehold estate is a type of rental agreement, while a leasehold estate is a type of ownership
- C. A freehold estate is for a fixed period, while a leasehold estate is for an indefinite period
- D. A freehold estate is for an indefinite period, while a leasehold estate is for a fixed period
19. A property owner sells their property to a buyer, but the deed is not recorded. What is the effect on the buyer's title?
- A. The buyer has no title to the property
- B. The buyer's title is invalid
- C. The buyer's title is valid, but not protected against later purchasers
- D. The buyer's title is valid and protected
20. What type of notice is provided to potential buyers when a deed is recorded?
- A. Actual notice
- B. Constructive notice
- C. Implied notice
- D. No notice
21. Which appraisal approach is generally most reliable for an owner-occupied single-family home in an active market?
- A. Cost approach
- B. Income approach
- C. Sales comparison approach
- D. Gross rent multiplier
22. A modest home's value rises because it sits among larger, higher-value homes. This illustrates the principle of:
- A. Regression
- B. Progression
- C. Substitution
- D. Conformity
23. A commercial property's market value is determined by which of the following?
- A. The sales comparison approach only
- B. The cost approach only
- C. The income approach only
- D. A combination of the sales comparison, cost, and income approaches
24. What type of depreciation occurs when a property's design or layout is no longer functional or efficient?
- A. Physical depreciation
- B. Functional depreciation
- C. External depreciation
- D. Economic depreciation
25. A broker price opinion (BPO) is most commonly used for which of the following purposes?
- A. To determine the market value of a property for a lender
- B. To provide a detailed appraisal report for a buyer
- C. To estimate the value of a property for a potential seller
- D. To settle an estate
26. Which approach to value estimates the cost to replace or reproduce a property, minus depreciation?
- A. Sales comparison approach
- B. Cost approach
- C. Income approach
- D. Hybrid approach
27. What is the term for the principle that a property's value is highest and best when it is used for its most profitable purpose?
- A. Highest and best use
- B. Most valuable use
- C. Greatest and best use
- D. Optimum use
28. Appraiser independence is important because it ensures that the appraiser's opinion of value is
- A. Based on the client's desired outcome
- B. Influenced by the client's interests
- C. Unbiased and objective
- D. Subject to revision by the client
29. The principle of conformity states that a property's value is maximized when it is similar in design, age, and condition to neighboring properties.
- A. This statement is true
- B. This statement is false, as it describes the principle of progression
- C. This statement is false, as it describes the principle of regression
- D. This statement is false, as it is not a recognized principle of value
30. What is the primary difference between market value and price?
- A. Market value is the price paid at a foreclosure sale, while price is the amount agreed upon by the buyer and seller
- B. Market value is an opinion of value, while price is the actual amount paid
- C. Market value is the value of the property after depreciation, while price is the original purchase price
- D. Market value is an estimate of what a property would sell for, while price is the amount actually paid
31. The principle of substitution states that:
- A. The value of a property is determined by its replacement cost
- B. The value of a property is determined by its highest and best use
- C. A buyer will pay no more for a property than they would for a similar property of equal utility
- D. The value of a property is determined by its original purchase price
32. A buyer's offer states it is open for acceptance until Friday. On Wednesday the seller responds with a higher price. The buyer's original offer is now:
- A. Still open until Friday
- B. Terminated by the counteroffer
- C. Automatically accepted
- D. Voidable by the seller
33. A buyer makes an offer on a property with a contingency for financing. The seller responds with a counteroffer that changes the price. What happens to the original offer?
- A. It is accepted
- B. It is rejected
- C. It remains open for acceptance
- D. It is terminated
34. A buyer's agent has a fiduciary duty to disclose all known facts about a property to their client. What does this duty require the agent to do?
- A. Disclose only the facts that are favorable to the buyer
- B. Disclose all known facts, whether favorable or unfavorable
- C. Keep all known facts confidential
- D. Disclose only the facts that are required by law
35. A seller's agent is working with a buyer who is interested in purchasing a property. What is the agent's duty to the buyer in this situation?
- A. To represent the buyer's interests
- B. To disclose the seller's confidential information
- C. To treat the buyer honestly and fairly
- D. To persuade the buyer to purchase the property
36. What type of agent is authorized to bind the principal to a contract?
- A. Special agent
- B. General agent
- C. Universal agent
- D. Limited agent
37. A buyer and seller enter into a contract with an earnest money provision. If the buyer breaches the contract, what can the seller do with the earnest money?
- A. Return it to the buyer
- B. Keep it as liquidated damages
- C. Use it to pay the commissions
- D. Apply it to the purchase price
38. What is the primary purpose of the earnest money deposit in a real estate contract?
- A. To secure the buyer's financing
- B. To demonstrate the buyer's good faith
- C. To pay the seller's commissions
- D. To cover the seller's closing costs
39. A buyer makes an offer to purchase a house, and the seller responds with a counteroffer. What happens to the original offer?
- A. It remains open for acceptance
- B. It is rejected and a new offer is made
- C. It is terminated and replaced by the counteroffer
- D. It becomes a contract
40. A seller lists their property with a broker, granting the broker the authority to market and show the property. What type of agent is the broker in this scenario?
- A. Special agent
- B. General agent
- C. Universal agent
- D. No agency relationship exists
41. A buyer and seller enter into a contract, but the buyer fails to perform. What is the seller's remedy?
- A. Specific performance
- B. Rescission
- C. Damages
- D. All of the above
42. What is the effect of a buyer's inspection contingency in a real estate contract?
- A. It requires the buyer to purchase the property regardless of the inspection results
- B. It allows the buyer to terminate the contract if the inspection reveals defects
- C. It requires the seller to repair any defects found during the inspection
- D. It requires the buyer to pay for any repairs
43. How is an agency relationship typically created in a real estate transaction?
- A. By a written agreement
- B. By an oral agreement
- C. By the agent's actions and conduct
- D. By the parties' intentions and expectations
44. A buyer makes an offer on a property, but the seller responds with a counteroffer. What is the effect on the original offer?
- A. The original offer is still valid
- B. The original offer is terminated
- C. The seller must accept the original offer
- D. The buyer must accept the counteroffer
45. What is the primary purpose of the earnest money deposit in a real estate transaction?
- A. To pay for inspections and appraisals
- B. To secure the buyer's financing
- C. To demonstrate the buyer's good faith and commitment to the purchase
- D. To pay for closing costs
46. A buyer hires a real estate agent to represent them in a transaction. What is the agent's fiduciary duty of obedience?
- A. To act in the best interest of the seller
- B. To follow the instructions of the buyer
- C. To negotiate the highest price possible
- D. To disclose all known defects in the property
47. A seller lists their property with a real estate agent, but does not provide a written agreement. What type of agency is created?
- A. Special agency
- B. General agency
- C. Universal agency
- D. No agency is created
48. Under the federal Fair Housing Act, which of the following is a protected class?
- A. Occupation
- B. Familial status
- C. Student status
- D. Credit score
49. Inducing homeowners to sell by predicting that people of a particular protected class are moving into the neighborhood is:
- A. Blockbusting
- B. Redlining
- C. Steering
- D. Puffing
50. What is the primary purpose of the Federal Fair Housing Act?
- A. To regulate the pricing of residential properties
- B. To prohibit discrimination in housing-related transactions
- C. To establish standards for residential construction
- D. To provide financing for low-income homebuyers
51. What is the term for the practice of directing buyers to or away from certain neighborhoods based on their race or other protected characteristics?
- A. Redlining
- B. Steering
- C. Blockbusting
- D. Discriminatory marketing
52. A real estate agent creates an advertisement that excludes certain protected classes from a property listing. What law is the agent likely violating?
- A. Americans with Disabilities Act
- B. Fair Housing Act
- C. RESPA
- D. Do-Not-Call Registry
53. What is the purpose of the Real Estate Settlement Procedures Act (RESPA)?
- A. To regulate the interest rates charged by lenders
- B. To provide financing for low-income homebuyers
- C. To prohibit kickbacks and referral fees in residential transactions
- D. To establish standards for residential construction
54. A real estate agent is handling trust funds on behalf of a client. What is the agent's primary responsibility?
- A. To commingle the funds with the agent's own money
- B. To deposit the funds into a non-interest-bearing account
- C. To maintain the funds in a separate, escrow account
- D. To use the funds for business expenses
55. A real estate agent is contacted by a consumer who is on the Do-Not-Call Registry. What should the agent do?
- A. Call the consumer to discuss a new property listing
- B. Send a mailer to the consumer with property information
- C. Respect the consumer's request and not contact them
- D. Call the consumer to confirm their registration on the Registry
56. Which federal law requires that handicapped individuals have equal access to commercial facilities and public accommodations?
- A. Fair Housing Act
- B. Americans with Disabilities Act
- C. Equal Credit Opportunity Act
- D. Civil Rights Act
57. A real estate agent is found to have engaged in price-fixing with other agents in the area. This is a violation of which federal law?
- A. Sherman Antitrust Act
- B. Federal Trade Commission Act
- C. Real Estate Settlement Procedures Act
- D. Truth in Lending Act
58. Federal lead-based paint disclosure requirements apply to residential property built before:
- A. 1968
- B. 1978
- C. 1988
- D. 1992
59. A seller tells the listing agent the roof leaks during heavy rain. Regarding this defect, the agent must:
- A. Disclose the known material defect
- B. Stay silent unless a buyer asks
- C. Rely on caveat emptor
- D. Require repairs before listing
60. A seller of a pre-1978 home must provide the buyer with a specific disclosure regarding a potential environmental hazard. What is the primary purpose of this disclosure?
- A. To disclose the presence of asbestos
- B. To disclose the presence of lead-based paint
- C. To disclose the presence of mold
- D. To disclose the presence of radon
61. A property is located in a flood zone, but the seller does not disclose this information to the buyer. What is the buyer's recourse if they discover the property is in a flood zone after closing?
- A. The buyer can sue the seller for damages
- B. The buyer can rescind the sale
- C. The buyer can require the seller to purchase flood insurance
- D. The buyer has no recourse
62. What is the primary difference between a material defect and a stigmatized property?
- A. A material defect is a physical problem, while a stigmatized property has a psychological impact
- B. A material defect is a psychological issue, while a stigmatized property has a physical problem
- C. A material defect is only relevant to the property's value, while a stigmatized property is relevant to the buyer's personal preferences
- D. A material defect is disclosed by the seller, while a stigmatized property is not
63. A buyer is purchasing a property that was formerly used as a gas station. What is the buyer's primary concern regarding environmental hazards?
- A. Asbestos
- B. Radon
- C. Underground storage tanks
- D. Mold
64. What is the purpose of the CERCLA law?
- A. To provide funding for the cleanup of contaminated sites
- B. To regulate the use of underground storage tanks
- C. To disclose the presence of lead-based paint
- D. To require sellers to disclose material defects
65. A seller is required to disclose the presence of which environmental hazard if it is known to exist on the property?
- A. Asbestos
- B. Radon
- C. Mold
- D. All of the above
66. What is the consequence of a seller's failure to disclose a material defect, such as a leaky roof, to the buyer?
- A. The buyer can rescind the sale and recover their earnest money
- B. The buyer can sue the seller for damages
- C. The buyer can require the seller to repair the defect
- D. All of the above
67. Which mortgage clause lets the lender demand full repayment if the property is sold?
- A. Acceleration clause
- B. Alienation (due-on-sale) clause
- C. Defeasance clause
- D. Subordination clause
68. On a conventional loan, private mortgage insurance is typically required when the loan-to-value ratio exceeds:
- A. 70%
- B. 75%
- C. 80%
- D. 90%
69. A borrower signs a promissory note with a 20% down payment. What is the primary purpose of this note?
- A. To secure the loan with the property as collateral
- B. To evidence the debt and promise to repay
- C. To transfer title to the lender
- D. To disclose loan terms to the borrower
70. A loan has an alienation clause, also known as a due-on-sale clause. What does this clause do?
- A. Allows the borrower to sell the property without penalty
- B. Requires the borrower to pay a penalty for early repayment
- C. Gives the lender the right to accelerate the loan if the property is sold or transferred
- D. Permits the borrower to assume the loan without lender approval
71. A borrower puts down 10% on a home purchase. What is the likely consequence of this low down payment?
- A. The borrower will pay a lower interest rate
- B. The borrower will avoid paying private mortgage insurance (PMI)
- C. The borrower will pay PMI due to the high loan-to-value ratio
- D. The borrower will receive a larger loan amount
72. What is the purpose of the Truth-in-Lending Act (TILA) and Regulation Z?
- A. To regulate the appraisal process
- B. To disclose loan terms and costs to the borrower
- C. To ensure the lender's compliance with state laws
- D. To provide financing options for borrowers with poor credit
73. What is the main purpose of the Closing Disclosure form?
- A. To provide a detailed accounting of the loan's interest rate and terms
- B. To disclose the property's condition and any known defects
- C. To summarize the transaction's costs and terms for the borrower
- D. To transfer title to the property
74. A home sells for $250,000 with a 6% commission split evenly between the listing and selling brokerages. Each brokerage receives:
- A. $7,500
- B. $15,000
- C. $3,750
- D. $30,000
75. A property valued at $180,000 is assessed at 25% of value. The tax rate is $2.50 per $100 of assessed value. The annual tax is:
- A. $1,125
- B. $4,500
- C. $2,812.50
- D. $562.50
76. A home sells for $500,000 with a 7% commission split evenly between the listing and selling brokerages. How much does each brokerage receive?
- A. $35,000
- B. $17,500
- C. $40,000
- D. $19,250
77. How many square feet are in a 0.25-acre parcel? (1 acre = 43,560 sq ft)
- A. 10,890 sq ft
- B. 5,445 sq ft
- C. 21,780 sq ft
- D. 10,913 sq ft
78. Annual property taxes are $9,300. Using a 365-day year, the seller is responsible for 216 days. What is the seller's prorated share?
- A. $5,580.00
- B. $3,796.44
- C. $5,503.56
- D. $6,267.95
79. A property valued at $300,000 is assessed at 40% of value. The tax rate is $2.50 per $100 of assessed value. What is the annual tax?
- A. $300
- B. $30,000
- C. $7,500
- D. $3,000
80. A home sells for $460,000 with a 5% commission and no other closing costs. What does the seller net?
- A. $460,000
- B. $432,400
- C. $437,000
- D. $23,000
81. The primary purpose of the Texas Real Estate Commission is to:
- A. Maximize license holders' income
- B. Protect the public
- C. Set commission rates
- D. Operate the MLS
82. Members of the Texas Real Estate Commission are:
- A. Appointed by the governor
- B. Elected by license holders
- C. Hired by TREC staff
- D. Chosen by the Texas REALTORS® association
83. What is the primary purpose of the Texas Real Estate Commission (TREC)?
- A. To promote the real estate industry
- B. To protect the interests of real estate brokers
- C. To protect the public in transactions involving real estate
- D. To regulate mortgage lenders
84. To be eligible for a Texas sales agent license, an applicant must be at least:
- A. 16 years old
- B. 18 years old
- C. 21 years old
- D. 25 years old
85. A Texas sales agent may receive compensation for a real estate transaction only from:
- A. The buyer directly
- B. The seller directly
- C. Their sponsoring broker
- D. The title company
86. To be eligible for a Texas real estate sales agent license, an applicant must be at least:
- A. 18 years old
- B. 21 years old
- C. 25 years old
- D. 30 years old
87. Which act by a Texas license holder is grounds for TREC disciplinary action?
- A. Declining an overpriced listing
- B. Commingling client funds with personal funds
- C. Working under a single broker
- D. Including the broker's name in ads
88. Advertising by a Texas sales agent must always include:
- A. The agent's home address
- B. The sponsoring broker's name
- C. The agent's license number
- D. The property's appraised value
89. A sales agent is found to have converted client funds for personal use. What is the most likely outcome?
- A. Temporary suspension of license
- B. Mandatory additional education
- C. Revocation of license
- D. Written warning
90. What is required to be included in all advertising by a real estate broker?
- A. The broker's phone number
- B. The broker's email address
- C. The broker's name
- D. The broker's physical address
91. A sales agent allows an unlicensed assistant to show properties to clients. What is the most likely consequence?
- A. The assistant will be required to obtain a license
- B. The sales agent will receive a warning
- C. The sales agent's license will be suspended
- D. The broker's license will be revoked
92. A broker commingles client funds with personal funds. What is the primary concern?
- A. The broker's personal finances will be affected
- B. The client's funds will be at risk
- C. The broker's reputation will be damaged
- D. The transaction will be delayed
93. A sales agent fails to disclose a known defect in a property. What is the most likely consequence?
- A. The buyer will sue the seller
- B. The sales agent will be sued by the buyer
- C. The transaction will be cancelled
- D. The sales agent's license will be revoked
94. What is required of a sales agent when handling client trust funds?
- A. To commingle them with personal funds
- B. To use them for business expenses
- C. To deposit them into a separate trust account
- D. To keep them in a safe deposit box
95. A sales agent fails to disclose a known defect in a property to a potential buyer. This action is a violation of which TREC canon?
- A. Fidelity
- B. Integrity
- C. Competency
- D. All of the above
96. In Texas, a broker who facilitates a transaction between a buyer and seller the brokerage represents, with written consent of both, acts as:
- A. An intermediary
- B. A subagent
- C. A dual agent by default
- D. A transaction facilitator with no duties
97. The Information About Brokerage Services (IABS) notice must be provided:
- A. At the first substantive communication with a party
- B. Only at closing
- C. Only if the party asks
- D. After the contract is executed
98. What is required for a broker to act as an intermediary in a Texas real estate transaction?
- A. Written consent from both parties
- B. Verbal consent from both parties
- C. Written notice to one party
- D. No consent is required
99. When must a broker provide the Information About Brokerage Services (IABS) form to a potential client?
- A. At the signing of a listing agreement
- B. At the first substantive contact
- C. When a sales contract is executed
- D. At the closing of a transaction
100. What type of agreement allows a buyer to be represented by a broker in a Texas real estate transaction?
- A. Listing agreement
- B. Buyer/tenant representation agreement
- C. Exclusive right to sell agreement
- D. Subagency agreement
101. What is the primary purpose of a listing agreement in Texas?
- A. To establish a buyer/tenant representation agreement
- B. To grant a broker the authority to market a property for sale
- C. To create a subagency relationship
- D. To provide a broker with a commission advance
102. Which of the following is a characteristic of a subagency relationship in Texas?
- A. The subagent represents the buyer
- B. The subagent is a buyer's agent
- C. The subagent represents the seller and owes a fiduciary duty to the seller
- D. The subagent is not required to disclose their role to the buyer
103. What is the responsibility of a broker in supervising sponsored agents in Texas?
- A. To ensure compliance with all applicable laws and regulations
- B. To provide training on sales techniques only
- C. To review and approve all sales contracts
- D. To conduct regular performance evaluations only
104. What is the consequence of a broker failing to provide the IABS form to a potential client at the first substantive contact?
- A. The broker is not liable for any damages
- B. The broker's license is automatically suspended
- C. The broker may be subject to disciplinary action by TREC
- D. The broker is required to pay a fine to the client
105. A Texas broker is working with a buyer who is interested in purchasing a property listed with the broker's firm. What must the broker do to comply with Texas law?
- A. Obtain written consent from the buyer to represent them as an intermediary
- B. Obtain written consent from the seller to represent them as an intermediary
- C. Obtain written consent from both the buyer and seller to represent them as an intermediary
- D. Disclose the potential for dual agency to the buyer and seller
106. At what point must a Texas broker provide the Information About Brokerage Services (IABS) form to a potential client?
- A. At the signing of a listing agreement
- B. At the closing of a transaction
- C. At the first substantive contact with the potential client
- D. At the time of contract execution
107. Texas license holders must use TREC promulgated contract forms:
- A. Whenever an appropriate promulgated form exists for the transaction
- B. Never — any form is acceptable
- C. Only in commercial transactions
- D. Only when a party requests one
108. Under the TREC One to Four Family Residential Contract, paying the option fee gives the buyer:
- A. The unrestricted right to terminate during the option period
- B. A guarantee of financing
- C. Free title insurance
- D. An automatic repair credit
109. What is the primary purpose of the Third-Party Financing Addendum in a Texas residential real estate transaction?
- A. To provide financing to the buyer
- B. To inform the seller of the buyer's financing plans
- C. To add a co-borrower to the loan
- D. To modify the sales price
110. A buyer is using the One to Four Family Residential Contract (Resale) form and wants to negotiate the option fee. What is the broker's role in this situation?
- A. To draft a custom option fee agreement
- B. To fill in the option fee amount in the contract
- C. To advise the buyer on the best option fee amount
- D. To refuse to participate in the negotiation
111. A seller and buyer have signed a contract using the One to Four Family Residential Contract (Resale) form. Later, they agree to change the closing date. What document should they use to make this change?
- A. An amendment to the contract
- B. A new contract with the updated closing date
- C. A termination of the contract
- D. A backup contract
112. What is the purpose of the termination-option period in a Texas residential real estate contract?
- A. To allow the buyer to terminate the contract for any reason
- B. To give the seller time to find a backup buyer
- C. To provide the buyer with an opportunity to conduct due diligence
- D. To extend the closing date
113. A broker is working with a buyer who wants to use a custom contract form instead of the One to Four Family Residential Contract (Resale) form. What should the broker advise the buyer?
- A. To use the custom form as long as it is approved by the seller
- B. To use the promulgated form to avoid potential disputes
- C. To negotiate the terms of the custom form with the seller
- D. To refuse to work with the buyer if they insist on using the custom form
114. What is the effect of not using a promulgated form when required by the Texas Real Estate Commission?
- A. The contract is not enforceable
- B. The contract is only enforceable against the seller
- C. The contract may be subject to disputes and challenges
- D. The contract is automatically terminated
115. A buyer and seller have signed a contract using the One to Four Family Residential Contract (Resale) form. The buyer now wants to add a clause that requires the seller to make repairs to the property. What should the broker do?
- A. Draft a custom clause and add it to the contract
- B. Use an amendment to the contract to add the new clause
- C. Advise the buyer to terminate the contract and negotiate a new one
- D. Refuse to participate in the negotiation
116. The Texas Veterans Land Board program provides eligible Texas veterans with:
- A. Land, home, and home-improvement loan programs
- B. Free homestead property
- C. Exemption from all property taxes
- D. A waiver of licensing requirements
117. Texas homestead protections primarily:
- A. Shield the homestead from forced sale by most creditors
- B. Eliminate property taxes entirely
- C. Transfer title automatically to heirs
- D. Waive HOA assessments
118. The Texas Veterans Land Board offers financing for
- A. purchase of a primary residence with no down payment
- B. home improvements up to $50,000
- C. raw land for commercial development
- D. all of the above
119. Which of the following best describes a key feature of the Texas Veterans Land Board's land loan program?
- A. Low, fixed interest rate for the life of the loan
- B. 20% minimum down payment requirement
- C. Financing available for both primary residences and investment properties
- D. Three-year loan term with a large balloon payment
120. To qualify for a Texas Veterans Land Board home loan, an applicant must
- A. be on active duty in any branch of the US military
- B. have been discharged with a service-connected disability
- C. be a resident of Texas and have served in the US military
- D. have bought a home within the past 12 months

Answer key

1. B 2. C 3. C 4. C 5. B 6. B 7. B 8. C 9. C 10. B 11. C 12. B 13. B 14. B 15. B 16. B 17. B 18. D 19. C 20. B 21. C 22. B 23. D 24. B 25. A 26. B 27. A 28. C 29. A 30. D 31. C 32. B 33. D 34. B 35. C 36. B 37. B 38. B 39. C 40. A 41. D 42. B 43. A 44. B 45. C 46. B 47. A 48. B 49. A 50. B 51. B 52. B 53. C 54. C 55. C 56. B 57. A 58. B 59. A 60. B 61. A 62. A 63. C 64. A 65. D 66. D 67. B 68. C 69. B 70. C 71. C 72. B 73. C 74. A 75. A 76. B 77. A 78. C 79. D 80. C 81. B 82. A 83. C 84. B 85. C 86. A 87. B 88. B 89. C 90. C 91. C 92. B 93. B 94. C 95. B 96. A 97. A 98. A 99. B 100. B 101. B 102. C 103. A 104. C 105. C 106. C 107. A 108. A 109. B 110. B 111. A 112. C 113. B 114. C 115. B 116. A 117. A 118. B 119. A 120. C

Explanations

1. B — Attachment converts personal property into a fixture, which is part of the real property. Trade fixtures belong to business tenants; emblements are cultivated crops.
2. C — Non-homogeneity (uniqueness) means every parcel is different, if only by location. Immobility and indestructibility are the other two physical characteristics; scarcity is economic.
3. C — The oven is considered a fixture because it is a built-in appliance attached to the real property.
4. C — Zoning ordinances are a type of public land-use control that regulates the use of land within a particular area.
5. B — Emblements refer to crops or other products of the land that are considered personal property, even though they are attached to the real property.
6. B — A metes and bounds description is used to describe the property's boundaries using reference points and distances, providing a detailed and accurate description of the property's location and size.
7. B — Just compensation in eminent domain cases is typically determined by the property's current market value, which takes into account its highest and best use.
8. C — CC&Rs are a type of private land-use control that restricts the use of land within a particular development or subdivision.
9. C — A free-standing refrigerator is considered personal property because it is not attached to the real property.
10. B — A title search is conducted to identify any liens, encumbrances, or other issues that may affect the property's title, ensuring that the buyer receives clear title to the property.
11. C — A built-in oven is attached to the property and is therefore considered a fixture, which is a type of real property.
12. B — Fee simple absolute is the highest form of ownership — the full bundle of rights, indefinitely. A life estate ends at a life; defeasible estates carry conditions; an estate for years is leasehold.
13. B — Recording gives constructive (legal) notice to the world of the claim. Actual notice requires direct knowledge; recording alone guarantees neither marketability nor insurance.
14. B — Recording a deed provides constructive notice to potential buyers that the property has been sold and who the new owner is, protecting the buyer's priority.
15. B — A leasehold estate is created when a landlord leases a property to a tenant for a specific period of time, giving the tenant the right to use and occupy the property.
16. B — A title search is conducted to identify any encumbrances or title defects that may affect the buyer's ownership of the property.
17. B — A general warranty deed provides the buyer with protection against defects in title and encumbrances, giving the buyer the greatest protection.
18. D — A freehold estate is an estate that is held for an indefinite period, while a leasehold estate is an estate that is held for a fixed period.
19. C — The deed is valid between the parties, but recording is necessary to protect the buyer's title against later purchasers.
20. B — Recording a deed provides constructive notice to potential buyers, putting them on notice of the buyer's interest in the property.
21. C — With plentiful comparable sales, the sales comparison (market data) approach best reflects what buyers actually pay. Cost suits new/special-use buildings; income suits investment property.
22. B — Progression: a lesser property is pulled up in value by superior neighbors. Regression is the reverse; substitution caps value at the cost of an equivalent alternative.
23. D — The market value of a commercial property is typically determined by considering all three approaches to value: sales comparison, cost, and income.
24. B — Functional depreciation occurs when a property's design or layout is no longer functional or efficient, such as an outdated floor plan.
25. A — A BPO is often used by lenders to determine the market value of a property, particularly in situations where a full appraisal is not necessary.
26. B — The cost approach estimates the cost to replace or reproduce a property, minus depreciation, to determine its value.
27. A — The principle of highest and best use states that a property's value is highest and best when it is used for its most profitable purpose, which is also legally permissible, physically possible, and financially feasible.
28. C — Appraiser independence is crucial to ensure that the appraiser's opinion of value is unbiased and objective, free from any external influence or pressure.
29. A — The principle of conformity states that a property's value is maximized when it is similar in design, age, and condition to neighboring properties, which helps to maintain property values and avoid negative externalities.
30. D — Market value is an estimate of what a property would sell for in a normal market transaction, while price is the actual amount paid
31. C — The principle of substitution states that a buyer will pay no more for a property than they would for a similar property of equal utility
32. B — A counteroffer is a rejection of the original offer and terminates it — the seller cannot later 'accept' the original offer without the buyer reviving it.
33. D — A counteroffer terminates the original offer, allowing the seller to propose new terms.
34. B — The duty of disclosure requires the agent to disclose all known facts about the property, whether favorable or unfavorable, to their client.
35. C — Although the agent represents the seller, they still have a duty to treat the buyer honestly and fairly.
36. B — A general agent has the authority to bind the principal to a contract, whereas a special agent has limited authority.
37. B — If the buyer breaches the contract, the seller can keep the earnest money as liquidated damages, but this is not always the case and depends on the contract terms.
38. B — The earnest money deposit demonstrates the buyer's good faith and commitment to the purchase.
39. C — A counteroffer terminates the original offer, replacing it with a new proposal.
40. A — The broker is a special agent, authorized to perform specific tasks on behalf of the seller, such as marketing and showing the property.
41. D — The seller may pursue specific performance, requiring the buyer to complete the purchase, or rescission, canceling the contract, or seek damages for the buyer's breach.
42. B — The inspection contingency allows the buyer to terminate the contract if the inspection reveals defects, providing a way for the buyer to exit the contract if the property's condition is unacceptable.
43. A — An agency relationship is typically created by a written agreement, such as a listing agreement or a buyer's representation agreement, which outlines the scope of the agent's authority and the terms of the relationship.
44. B — A counteroffer terminates the original offer, as it is a new proposal that replaces the original one.
45. C — The earnest money deposit demonstrates the buyer's good faith and commitment to the purchase, and is typically held in escrow until the transaction is completed.
46. B — The agent's fiduciary duty of obedience requires them to follow the lawful instructions of the buyer, as long as they are within the scope of the agency agreement.
47. A — A special agency is created when a seller lists their property with a real estate agent, even if there is no written agreement, as the agent is authorized to perform a specific task on behalf of the seller.
48. B — The federal protected classes are race, color, religion, national origin, sex, disability, and familial status.
49. A — Blockbusting (panic selling) is illegally prompting sales with demographic-change predictions. Redlining is area-based lending discrimination; steering channels buyers to or away from areas.
50. B — The Federal Fair Housing Act aims to prevent discrimination in housing-related transactions based on protected classes such as race, color, religion, sex, national origin, disability, and familial status.
51. B — Steering refers to the practice of guiding buyers towards or away from certain neighborhoods based on their race or other protected characteristics, which is prohibited by the Federal Fair Housing Act.
52. B — The Fair Housing Act prohibits discriminatory advertising in housing-related transactions, including excluding certain protected classes from property listings.
53. C — RESPA aims to prohibit kickbacks and referral fees in residential transactions, ensuring that consumers are not subjected to unnecessary and inflated costs.
54. C — The agent's primary responsibility is to maintain the trust funds in a separate, escrow account, ensuring that the funds are kept secure and separate from the agent's own money.
55. C — The agent should respect the consumer's request and not contact them, as the consumer has opted out of receiving telemarketing calls by registering on the Do-Not-Call Registry.
56. B — The Americans with Disabilities Act requires that handicapped individuals have equal access to commercial facilities and public accommodations.
57. A — The Sherman Antitrust Act prohibits price-fixing and other anti-competitive practices.
58. B — The federal lead-based paint disclosure rule covers housing built before 1978, when residential lead paint was banned.
59. A — Known material defects must be disclosed to prospective buyers; concealment is misrepresentation regardless of whether anyone asks.
60. B — The seller of a pre-1978 home must provide the buyer with a lead-based paint disclosure, as required by federal law, to inform the buyer of the potential presence of lead-based paint and the risks associated with it.
61. A — If the seller fails to disclose that the property is located in a flood zone, the buyer may be able to sue the seller for damages, as this is a material fact that could affect the property's value or desirability.
62. A — A material defect refers to a physical problem with the property, such as a structural issue or needed repair, while a stigmatized property has a psychological impact, such as a history of murder or other traumatic event, that may affect its desirability but not its physical condition.
63. C — The buyer's primary concern regarding environmental hazards when purchasing a property that was formerly used as a gas station is the potential presence of underground storage tanks, which could have leaked hazardous substances into the soil or groundwater.
64. A — The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) is a federal law that provides funding for the cleanup of contaminated sites and holds responsible parties liable for the costs of cleanup.
65. D — The seller is required to disclose the presence of environmental hazards, including asbestos, radon, and mold, if they are known to exist on the property, as these can pose health risks to occupants and affect the property's value.
66. D — If the seller fails to disclose a material defect, such as a leaky roof, the buyer may be able to rescind the sale and recover their earnest money, sue the seller for damages, or require the seller to repair the defect, depending on the circumstances and the terms of the sale.
67. B — The alienation or due-on-sale clause triggers on transfer of the property. Acceleration triggers on default; defeasance cancels the lien at payoff.
68. C — Above 80% LTV (less than 20% down), conventional lenders typically require PMI to cover the added default risk.
69. B — The promissory note is a promise to repay the loan and evidences the debt, while the deed of trust or mortgage secures the loan with the property as collateral.
70. C — An alienation clause, or due-on-sale clause, gives the lender the right to accelerate the loan if the property is sold or transferred without the lender's consent.
71. C — With a down payment of less than 20%, the borrower will likely be required to pay private mortgage insurance (PMI) due to the high loan-to-value ratio.
72. B — TILA and Regulation Z require lenders to disclose loan terms and costs to the borrower, including the annual percentage rate (APR) and finance charges.
73. C — The Closing Disclosure form summarizes the transaction's costs and terms for the borrower, including the loan amount, interest rate, and closing costs.
74. A — $250,000 × 6% = $15,000 total; split evenly, each brokerage gets $7,500.
75. A — Assessed value = $180,000 × 25% = $45,000. $45,000 ÷ 100 = 450; 450 × $2.50 = $1,125.
76. B — Total commission = $500,000 × 7% = $35,000. Split evenly, each brokerage gets $17,500.
77. A — 0.25 × 43,560 = 10,890 sq ft.
78. C — Daily tax = $9,300 ÷ 365 = $25.48. Seller's share = $25.48 × 216 = $5,503.56.
79. D — Assessed = $300,000 × 40% = $120,000. Tax = ($120,000 ÷ 100) × 2.5 = $3,000.
80. C — Commission = $460,000 × 5% = $23,000. Net = $460,000 − $23,000 = $437,000.
81. B — TREC exists to protect consumers of real estate services; it neither sets commission rates nor runs MLS systems.
82. A — TREC's nine members are appointed by the governor with senate confirmation — six broker members and three public members.
83. C — TREC's primary purpose is to protect the public in transactions involving real estate.
84. B — TREC requires applicants to be at least 18, a U.S. citizen or lawfully admitted alien, and a Texas resident (with limited exceptions).
85. C — Sales agents act only through a sponsoring broker and may be compensated only by that broker — never directly by a party to the transaction.
86. A — The Texas Real Estate Commission requires applicants to be at least 18 years old to apply for a sales agent license.
87. B — Commingling trust money with personal or operating funds violates TRELA and TREC rules and is a classic disciplinary trigger.
88. B — TREC advertising rules require the broker's name (or assumed name) in all advertising so the responsible brokerage is identifiable.
89. C — Conversion of client funds is a serious violation of TREC standards and can result in license revocation.
90. C — TREC rules require that a broker's name be included in all advertising to ensure transparency and accountability.
91. C — Allowing an unlicensed assistant to perform duties that require a license can result in disciplinary action against the sales agent.
92. B — Commingling client funds with personal funds puts the client's funds at risk of being used for personal expenses or lost in the event of the broker's financial insolvency.
93. B — Failing to disclose known defects can lead to legal action against the sales agent and damage to their professional reputation.
94. C — Client trust funds must be deposited into a separate trust account to maintain their integrity and prevent commingling with personal funds.
95. B — Integrity requires honesty in dealings, and failing to disclose known defects is a breach of this principle.
96. A — Texas replaced common-law dual agency with statutory intermediary status — requiring written consent from both parties, typically in the listing/representation agreements.
97. A — License holders must give the IABS form at first substantive communication about a specific property with a party they don't represent.
98. A — A broker must obtain written consent from both parties to act as an intermediary, replacing the common-law concept of dual agency.
99. B — The IABS form must be provided at the first substantive contact between a broker and a potential client, which is typically the initial meeting or conversation.
100. B — A buyer/tenant representation agreement allows a buyer to be represented by a broker, outlining the terms and scope of the representation.
101. B — A listing agreement grants a broker the authority to market a property for sale, outlining the terms and conditions of the listing, including the commission rate and duration.
102. C — In a subagency relationship, the subagent represents the seller and owes a fiduciary duty to the seller, not the buyer.
103. A — A broker is responsible for ensuring that sponsored agents comply with all applicable laws and regulations, including those related to agency, contracts, and ethics.
104. C — A broker who fails to provide the IABS form to a potential client at the first substantive contact may be subject to disciplinary action by TREC, including fines or other penalties.
105. C — In Texas, a broker must obtain written consent from both parties to act as an intermediary, which replaces the common-law concept of dual agency.
106. C — The IABS form must be provided to potential clients at the first substantive contact, which is the initial meeting or discussion about a specific property or transaction.
107. A — When TREC has promulgated a form appropriate to the transaction, license holders are required to use it (with narrow exceptions such as forms prepared by a party's attorney).
108. A — The option fee buys an unrestricted right to terminate within the negotiated option period — the buyer can walk away for any reason and keep only the earnest money at risk otherwise.
109. B — The Third-Party Financing Addendum is used to inform the seller of the buyer's financing plans and to outline the terms of the financing.
110. B — The broker has limited authority to fill in blanks in the promulgated forms, including the option fee amount in the One to Four Family Residential Contract (Resale).
111. A — An amendment to the contract is the appropriate document to use when making changes to a signed contract.
112. C — The termination-option period is a time period during which the buyer can conduct due diligence and terminate the contract if they are not satisfied with the results.
113. B — The broker should advise the buyer to use the promulgated form to avoid potential disputes and ensure that the contract complies with Texas law.
114. C — Not using a promulgated form when required may lead to disputes and challenges, as the contract may not comply with Texas law.
115. B — The broker should use an amendment to the contract to add the new clause, as this is the appropriate way to make changes to a signed contract.
116. A — The VLB offers below-market financing programs for land purchases, homes, and home improvements to eligible Texas veterans.
117. A — The Texas homestead is protected from forced sale by most creditors — with exceptions such as purchase-money liens, property taxes, and home-equity loans.
118. B — The Texas Veterans Land Board offers financing for home improvements, among other programs, but details such as loan limits may apply.
119. A — The Texas Veterans Land Board's land loan program is known for offering low, fixed interest rates for the life of the loan, among other benefits.
120. C — To qualify for a Texas Veterans Land Board home loan, an applicant must be a resident of Texas and have served in the US military, among other possible requirements.