Texas · state portion

Free Texas Contracts & Promulgated Forms practice questions

10 original questions with full explanations. 9 of the 40 scored state-portion questions (about 23%) come from this area.

1. 1

   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
   Show answer & explanation

   Answer: 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).

2. 2

   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
   Show answer & explanation

   Answer: 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.

3. 3

   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
   Show answer & explanation

   Answer: 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.

4. 4

   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
   Show answer & explanation

   Answer: 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).

5. 5

   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
   Show answer & explanation

   Answer: A

   An amendment to the contract is the appropriate document to use when making changes to a signed contract.

6. 6

   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
   Show answer & explanation

   Answer: 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.

7. 7

   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
   Show answer & explanation

   Answer: 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.

8. 8

   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
   Show answer & explanation

   Answer: C

   Not using a promulgated form when required may lead to disputes and challenges, as the contract may not comply with Texas law.

9. 9

   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
   Show answer & explanation

   Answer: 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.

10. 10

    When using the One to Four Family Residential Contract (Resale), what is the primary purpose of the third-party financing addendum?

    • A. To provide an option fee to the seller
    • B. To detail the terms of the buyer's financing
    • C. To negotiate the sales price
    • D. To specify the closing date
    Show answer & explanation

    Answer: B

    The third-party financing addendum is used to detail the terms of the buyer's financing, such as the loan amount and interest rate.