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Texas Real Estate Practice Exam
Questions With Real Verified Solutions
Latest Top Score 2025
A farmer temporarily installs produce coolers in a leased farm stand in order to prevent spoilage. The coolers would be considered which of the following? a) Trade fixtures that are real property. b) Trade fixtures that are personal property. c) Temporary real property. d) Emblements. - correct answerb) Trade fixtures that are personal property. Property can be converted from real to personal property and from personal property to real property by means of which processes respectively? a) Assemblage and plottage. b) Application and dissolution. c) Severance and affixing. d) Planting and harvesting. - correct answerc) Severance and affixing. The highest form of ownership interest one can acquire in real estate is the: a) legal life estate. b) Conventional life estate. c) Defeasible fee simple estate. d) Absolute fee simple estate. - correct answerd) Absolute fee simple estate. The distinguishing feature of a defeasible fee simple estate is that: a) It could be passed onto heirs. b) It has no restrictions on use. c) The estate may revert to a grantor or heirs if the prescribed use changes. d) It is of unlimited duration. - correct answerc) The estate may revert to a grantor or heirs if the prescribed use changes. Maria acquires a property from her uncle Alfonso. When Maria dies the estate will pass to Alfonso's other niece Serena. The type of estate that Maria has in the property is:
a) conventional life estate. b) Legal life estate. c) Fee simple defeasible estate. d) Tenancy by the entirety's. - correct answera) conventional life estate. One difference between a cooperative estate and a condominium estate is that: a) a condominium owner owns a unit of air space whereas the co-op owner owns a proprietary lease. b) A condominium sale adversely affects other unit owners. c) The co-op owner owns stock and a freehold real estate interest whereas the condominium owner simply a proprietary lease. d) The condominium owner owns the common elements and the air space whereas the co-op owner only owns the apartment. - correct answera) a condominium owner owns a unit of air space whereas the co-op owner owns a proprietary lease. Who are the essential parties involved in an estate and trust? a) Owner trustor, and lawyer. b) Owner, trustor, and trustee. c) Trustee, title company, and beneficiary. d) Trustor, trustee, and beneficiary. - correct answerd) Trustor, trustee, and beneficiary. A condominium owner enjoys a: a) share in an association that owns one's apartment. b) Tenancy in common interest in air space and common areas of the property. c) Fee simple ownership of the airspace in a unit and an undivided share of the entire property's common areas. d) The simple ownership of a pro rata share of the entire property. - correct answerc) Fee simple ownership of the airspace in a unit and an undivided share of the entire property's common areas. With various types of junior liens, the order of payment priority is generally established according to: a) the date of recordation. b) What form of tax is in question. c) The order of disbursement. d) Whether the lien was subordinated. - correct answera) the date of recordation. What is a lien theory state in contrast to a title theory state? a) A state in which liens are given priority over other encumbrances
d) Retailer's gross lease. - correct answerc) Percentage lease. An owner lease has a property to a business in exchange for rent and the tenant is required to pay all operating expenses as well. This is an example of a _______. a) Proprietary lease. b) Percentage lease. c) Gross lease. d) Net lease. - correct answerd) Net lease. A lease automatically terminates under which of the following circumstances? a) The tenant fails to pay rent. b) The leased property is foreclosed. c) The tenant goes out of business. d) The landlord canceled the lease. - correct answerb) The leased property is foreclosed. A county or municipal authority usually grants a certificate of occupancy for new construction only after: a) all contractor's work has been inspected. b) All work has been completed for at least 60 days. c) The construction conforms to building codes. d) The tax assessor has valued the improvement. - correct answerc) The construction conforms to building codes. A property owner is precluded by the restriction from developing a 30-foot boat dock. The limitation prompts the owner to sell to another party. The new owner: a) is free to build the dock since the next-door neighbor built a similar dock two weeks later. b) Takes title subject to the same restriction. c) Can build a dock with special permission from the zoning board. d) May build, since the restriction is extinguished by the sale. - correct answerb) Takes title subject to the same restriction. Emily sells Ryan a property containing a deed restriction. The condition stipulates that the forested portion of the property must never be razed for development. Three months later Ryan proceeds to harvest the trees and turn the area into an executive golf course. What recourse, if any, does Emily have under the deed restriction? a) She has the right to repossess the property because the grantee has violated that condition. b) The condition has ceased to apply because she allowed the violation to continue for a certain period of time.
c) She can claim the proceeds from the harvested trees. d) She can force Ryan to sell the property to a new owner who agrees to comply with the condition. - correct answera) She has the right to repossess the property because the grantee has violated that condition. What is the essential purpose of legal descriptions of real property? a) To create a consistent, unchanging standard for uniquely locating a property. b) To enable courts and attorneys to calculate property size accurately. c) To comply with common law for real property. d) To eliminate cumbersome metes and bounds description. - correct answera) To create a consistent, unchanging standard for uniquely locating a property. Which of the following characterizes a metes and bounds description? a) They use meridians and baselines. b) They identify an enclosed area, beginning and ending at the same point. c) They use lot and block numbers. d) They incorporate elevation into the descriptions. - correct answerb) They identify an enclosed area, beginning and ending at the same point. A buyer agrees to all terms of a seller's offer except the length of time for a contingency to procure financing. The buyer extends the financing period in the offer by one week, signs the form, and mails it back to the seller. At this point, the seller's offer: a) is void. b) Becomes an executory contract. c) Becomes a counteroffer. d) Has been accepted, since the modification was a contingency. - correct answera) is void. Real estate contracts that are not personal service contracts: a) May be assigned. b) Are not assignable. c) Must be in writing. d) Are exempt from the statute of frauds. - correct answera) May be assigned. Which of the following contracts must be in writing to be enforceable? a) A parol contract. b) A six month lease. c) A two year lease. d) An executory contract. - correct answerc) A two year lease.
b) The client may be liable for compensation commission and marketing expenses. c) The agent can sue the client for a specific performance even if no customer had been located. d) The agent must except the revocation without the possibility of the possibility of damage recovery. - correct answerb) The client may be liable for compensation commission and marketing expenses. A protection period clause in an exclusive listing provides that: a) The owner is protected from all liabilities arising from the agent's actions performed within the agent's scope of duties. b) The agent has a claim to a commission if the owner sells or leases to a party within a certain time following the listing's expiration. c) Agents are entitled to extend a listing agreements term if a transaction is eminent. d) An owner is not liable for a commission if a prospective customer delays in completing an acceptable offer. - correct answerb) The agent has a claim to a commission if the owner sells or leases to a party within a certain time following the listing's expiration. Real estate advertising must conform to regulatory standards and requirements. One requirement is a) A broker may only place blind ads in social media outlets. b) A broker must have all advertising approved by the local real estate board. c) The advertising must not be deceptive. d) Sales agents may only advertise in their own name. - correct answerc) The advertising must not be deceptive. The three principal brokerage firms in a market agree to pay sales agents 15% more than any other competitor currently in practice. This is an example of a) Collusion. b) Price-fixing. c) Allocation of markets. d) Steering. - correct answera) Collusion. Two leading agencies jointly agreed to raise commissions charge to residential sellers to 7.5% of the sales price. Which of the following is true? a) This is a perfectly legitimate business practice. b) The brokers have illegally fixed prices. c) The brokers have allocated markets. d) The brokers have engaged in legal collusion. - correct answerb) The brokers have illegally fixed prices.
A sale contract contains an open-ended financing contingency: if the buyer cannot obtain financing within a reasonable time the deal is off. Six months later the buyer still cannot secure financing. Which of the following is true? a) The seller may cancel the contract since it can be ruled invalid. b) The buyer can continue indefinitely to seek financing, and the seller's property must remain off the market since "reasonable" is not defined. c) The escrow agent is entitled to the buyer's deposit. d) The seller can force a lender to commit to a loan under fair financing laws. - correct answera) The seller may cancel the contract since it can be ruled invalid. In the event of a buyer's default a provision for liquidated damages in a sale contract enables the seller to: a) sue the buyer for a person specific performance. b) Force the buyer to quitclaim equitable title. c) Sue the buyer for the broker's marketing expenses. d) Claim the deposit as compensatory damages for the buyer's failure to perform. - correct answerd) Claim the deposit as compensatory damages for the buyer's failure to perform. Which of the following is true of an option to buy agreement? a) The potential buyer, the optionee, is obligated to buy the property once the option agreement is completed. b) The optionor must perform if the optionee takes the option, but the optionee is under no obligation to do so. c) The contract can be executed at no cost to the optionee. d) It is a bilateral agreement. - correct answerb) The optionor must perform if the optionee takes the option, but the optionee is under no obligation to do so. If a manufacturer that is the major employer in a small city moves its operations to another city, it is reasonable to expect: a) a fall in housing demand, but no other changes in the real estate market. b) A decline in demand for all types of real estate in the real estate market. c) An immediate fall in the demand for industrial real estate, but no other changes in the real estate market. d) An immediate decline in the prices for industrial and office real estate, but no impact on the residential market. - correct answerb) A decline in demand for all types of real estate in the real estate market. If a commercial real estate market is under supplied, it is likely that: a) rental prices in that market will fall. b) Rental prices in that market will rise.
a) $100,000. b) $400,000. c) $1 million. d) $4 million. - correct answerb) $400,000. The key feature of an adjustable-rate mortgage loan is that a) The interest rate may vary. b) The monthly payment increases over the life of the loan. c) The principal balance does not amortize. d) The loan term can be shortened or lengthened. - correct answera) The interest rate may vary. Why is a wraparound mortgage loan potentially interesting to a home seller as an investment? a) It is a senior loan that can be easily subordinated for additional debt. b) A wraparound lender can profit when the interest rate of the wraparound exceeds that of the underlying mortgage. c) The underlying loan is retired early. d) The second mortgage borrower may make payments directly to the first mortgage lender. - correct answerb) A wraparound lender can profit when the interest rate of the wraparound exceeds that of the underlying mortgage. A builder is required to secure a loan with mortgages on three properties. This is an example of a) A participation mortgage loan. b) A blanket mortgage loan. c) A permanent mortgage loan. d) A bridge loan. - correct answerb) A blanket mortgage loan. Which of the following is true of a loan with negative amortization? a) The interest rate on the loan increases as the principal balance decreases. b) Payments are not sufficient to retire the loan. c) The loan balance is diminishing or going negative. d) Additional interest as being added to the monthly payment. - correct answerb) Payments are not sufficient to retire the loan. A loan to value ratio is used as an underwriting mechanism because a) The LTV determines the profitability of the loan. b) The loan amount needs to be less than the property's value. c) Borrowers tend to inflate the true value of the property.
d) A full price loan over finances the borrower. - correct answerb) The loan amount needs to be less than the property's value. In the past, borrowers were often surprised by unexpected or undisclosed borrowing fees and expenses at closing. This phenomenon has been largely corrected through disclosure requirements mandated by which of the following laws? a) Equal Credit Opportunity Act. b) Truth in Lending Laws. c) National Disclosure Procedures Act. d) Federal Fair Housing Laws. - correct answerb) Truth in Lending Laws. Which of the following is an important function of the secondary mortgage market? a) Participants borrow funds from banks so the banks can make more loans. b) Participants issued tax certificates and sell them to primary lenders. c) Participants purchase pools of defaulted loans from lenders to keep them solvent. d) Participants sell mortgage-backed securities in order to buy pools of loans. - correct answerd) Participants sell mortgage-backed securities in order to buy pools of loans. Cash flow is a measure of how much pre-tax or after-tax cash an investment property generates. To derive cash flow it is therefore necessary to exclude a) Cost recovery expense. b) Interest expense. c) Loan principal payments. d) Net operating income. - correct answera) Cost recovery expense. The method for deriving an investor's return on investment, or ROI, is by a) Dividing net operating income by cash flow. b) Multiplying the required yield times after-tax cash flow. c) Dividing net income by the price paid for the property. d) Multiplying cash flow times the price paid for the property. - correct answerc) Dividing net income by the price paid for the property. Which of the following items would affect a homeowner's adjusted basis? a) Installing a higher capacity air conditioning and purifying system. b) Replacing a washing machine. c) Stripping and staining hardwood floors. d) Replacing a broken picture window. - correct answera) Installing a higher capacity air conditioning and purifying system. Which of the following is true with respect to real property taxation by the federal government?
a) A broker having any business relationship with an insurance company that is involved in the broker's transaction. b) A broker pre-qualifying a buyer for a mortgage loan. c) A lender requiring a deposit from a borrower for a tax and insurance escrow account. d) A lender paying a fee to a broker for referring a borrower to the lender. - correct answerd) A lender paying a fee to a broker for referring a borrower to the lender. Which of the following communication records must (as opposed to should) be kept? a) Notes on every conversation. b) Copies of required communications to principles. c) Notes from company training sessions. d) Business cards of licensees one meets at open houses. - correct answerb) Copies of required communications to principles. To minimize the risk of violating fair housing laws, a licensee should a) Refuse to use terms that refer to or describe any of the classes of persons protected by the laws. b) Avoid working in neighborhoods that are predominantly occupied by a single ethnic group. c) Make discriminatory or derogatory remarks in conversation only, never in writing. d) Give better service to members of a protected class then is standard for other clients or customers. - correct answera) Refuse to use terms that refer to or describe any of the classes of persons protected by the laws. What are tenant improvements? a) Modifications to a rental suite to conform to a tenant usage specification. b) Marketing programs that yield a higher quality of tenant. c) Increased revenue resulting from a rise in rental rates. d) Increased occupancy resulting from a population increase in the market area. - correct answera) Modifications to a rental suite to conform to a tenant usage specification. For the proper handling of client and owner monies, a property manager is generally required to a) Deposit all funds every month in the management firm's central operating account. b) Employ a notary to witness and record every deposit or payment received. c) Maintain a special trust account and a qualified financial depository. d) Disperse all funds to their legal owners on a weekly basis. - correct answerc) Maintain a special trust account and a qualified financial depository.
Jennifer advised her clients that they needed to paint their living room before showing the property. The walls of these rooms were all 8 feet high. The wall lengths were 14 feet, 18 feet, 16 feet, and 18 feet. If a gallon of paint covers 200 ft.², how many whole gallons would the home sellers have to buy? a) One. b) Two. c) Three. d) Six. - correct answerc) Three. An investor just purchased a rectangular 2 acre lot for $250 a frontage foot. If she paid $100,000 total what was the depth of the lot? a) 400 feet. b) 250 feet. c) 871 feet. d) 218 feet. - correct answerd) 218 feet. Andra can afford to spend $5000 in closing cost to refinance her home. The lender quotes closing costs of $800 +2 points. The house appraised out at $240,000 and she can get an 80% loan. Can Andra afford to refinance? a) No she is short by $64. b) No she is short by $1600. c) Yes with $360 left over. d) Yes she in fact breaks even. - correct answerc) Yes with $360 left over. A lender offers an investor a maximum of 70% LTV loan on the appraised value of a property. If the investor pays $230,000 for the property, and this is 15% more than the appraised value, how much will the investor have to pay as a down payment? a) $93,150. b) $79,350. c) $90,000. d) $69,000. - correct answerc) $90,000. A house is being appraised using the sales comparison approach. The house has three bedrooms, two bathrooms, and a patio. The appraiser selects a comparable house that has three bedrooms, 2 ½ bathrooms, and no patio. The comparable house just sold for $100,000. A half bath is valued at $5000 and a patio at $1000. Assuming all else is equal what is the adjusted value of the comparable? a) $100,000. b) $104,000. c) $96,000. d) $106,000. - correct answerc) $96,000.
d) To ensure brokers exercise care and skill in developing regulations for their practices.
- correct answerc) To protect the public and to promote licensee competence. Which of the following is a bona fide characteristic of TREC's disciplinary procedures? a) TREC issues a notice of violation and penalty to a licensee once it has concluded that the violation has occurred. Therefore, the violator has 60 days to request a hearing. b) If a suspension is eminent, the licensee is entitled to a hearing conducted by the TREC judiciary committee. c) Complaints are always investigated if the initial evidence warrants reasonable cause. d) Complaints may be investigated whether the complaint is identified or remains anonymous. - correct answerc) Complaints are always investigated if the initial evidence warrants reasonable cause. Which of the following is not a brokerage activity requiring licensure? a) Auctioning real estate. b) Offering to exchange real estate. c) Selling an option to a buyer that the buyer refuses. d) Advertising one's principal residence for sale. - correct answerd) Advertising one's principal residence for sale. Which of the following parties does not have to have a real estate license to operate legally? a) A hostess at an open house who explains how the property's price was identified. b) Answering questions to confirm the terms of advertised property. c) An operator of a real estate rental agency. A person who supervises licensees. - correct answerb) Answering questions to confirm the terms of advertised property. Which of the following is true regarding license procurement in Texas? a) The applicant must be 18 years old and a United States citizen. b) Active or veteran military personnel must meet education requirements but are exempted from passing the exam. c) An application need not be an American citizen. d) Applications are terminated if all requirements are not completed within six months of the filing date. - correct answera) The applicant must be 18 years old and a United States citizen. What is the Texas continuing education requirement in the subsequent renewal periods following completion of the post license requirements? a) Six hours for salespersons and 15 hours for brokers. b) Nine hours for salespersons and 15 hours for brokers.
c) 15 hours for brokers and salespersons including a three-hour broker responsibility course. d) 18 hours for both salespersons and brokers, including four hours of legal updates and four hours of ethics. - correct answerd) 18 hours for both salespersons and brokers, including four hours of legal updates and four hours of ethics. Which of the following is a violation of license law? a) Disclosing confidential information. b) Having one's broker compensate a licensed party for a referral after the closing has occurred. c) Informing a buyer that the seller client will take a 95% offer even if authorized by the seller. d) A sponsoring broker paying a licensed applicant a referral fee. - correct answerd) A sponsoring broker paying a licensed applicant a referral fee. A sales agent becomes aware of a material defect in a property septic field. Disclosing this fact would be detrimental to the client's interest. What should the agent do? a) Inform the seller that it would be preferable to include the septic field issue in the property condition report. b) Disclose the defect since it is a material fact concerning the properties condition. c) Consider the defect since it violates the agent's fiduciary duty of promoting the client's best interest. d) Conceal the defect since it is something that an agent would not normally know about. - correct answerb) Disclose the defect since it is a material fact concerning the properties condition. Which of the following is a required disclosure to be completed in writing prior to closing? a) That the buyer is well-advised to obtain an appraisal prior to closing. b) That the seller should obtain an inspection. c) That the buyer should have an attorney examine the title abstract or get title insurance. d) That the buyer should obtain a preapproval for a loan sufficient in an amount to qualify for a given price range. - correct answerc) That the buyer should have an attorney examine the title abstract or get title insurance. Which of the following is a listing requirement without which subjects licensees to license suspension? a) Specifications of a termination date. b) A complete legal description. c) The specific financial penalty for failure to complete a sale.
d) A dual agent within a single brokerage who owes fiduciary duties to both parties. - correct answerc) A licensee who facilitates a buyer and seller in consummating a transaction without becoming involved as an agent to either party. The central purpose of the Information About Brokerage Services brochure is a) To inform consumers just what it is that agents do to earn their commission. b) To shed light on the advantages and disadvantages of the exclusive listing versus selling or buying without representation. c) To explain to prospects the types of relationships they may choose with licenses, and what services they get for each alternative. d) To explain to consumers why it is far preferable legally and economically to list with agents, and the many ways they can do that successfully. - correct answerc) To explain to prospects the types of relationships they may choose with licenses, and what services they get for each alternative. There are several requirements for establishing an intermediary relationship. Which of the following is not a requirement? a) Each party to the agreement must give written consent. b) The agreement must stipulate the duty of confidentiality to either buyer or seller. c) How and who will compensate the agent must be set forth. d) The duties of the intermediary must be clearly identified. - correct answerb) The agreement must stipulate the duty of confidentiality to either buyer or seller. Which of the following accurately characterizes the relationship between brokers and sponsored sales agents? a) The sales agent is required to identify and abide by a loyal commitment to the broker. b) The sales agent must stipulate what license activities here she will commit to, and over what period of time. c) The broker is obligated to identify and communicate the sales agents authorized activities. d) The broker must delegate all responsibility for delineated activities to be conducted by sponsored sales agents. - correct answerc) The broker is obligated to identify and communicate the sales agents authorized activities. Licensees must be compensated according to certain regulations. One of the most important regulations regarding compensation is that a) The sales agent may only receive compensation from the sponsoring broker. b) The sales agents must abide by the standard rate of commission prevalent in the local market. c) Sales agents cannot receive compensation from sales agents or principals - only other brokers.
d) Sales agents and brokers comply with commission guidelines promulgated by the TREC. - correct answera) The sales agent may only receive compensation from the sponsoring broker. Which of the following is an exception to the "must-use" rule concerning promulgated contracts? a) In transactions where there is no promulgated form, licensees can use a form approved by the Texas Real Estate Broker Lawyer Committee. b) In sales transactions where both principal parties insist on using a previously used form. c) In transactions where the principal or principals immediate family member is a licensee. d) There are no exceptions to the "must-use" rule. - correct answera) In transactions where there is no promulgated form, licensees can use a form approved by the Texas Real Estate Broker Lawyer Committee. Which of the following is a violation of license law? a) Discouraging a seller from hiring an attorney. b) An attorney advising a client on real estate matters without a real estate license. c) Using a promulgated contract for a suited purpose even though it may not be necessary. d) Refusing to rewrite a contract clause requested by a buyer who couldn't understand it. - correct answera) Discouraging a seller from hiring an attorney. What is the essential purpose of a Texas Homestead law? a) To give families a tax break on portions of the value of their principal residence. b) To protect a family's residence from the unilateral conveyance by one party or a forced sale to collect a debt. c) To give a family immunity from the collection of debts. d) To prevent husbands from gambling away all interest in the property. - correct answerb) To protect a family's residence from the unilateral conveyance by one party or a forced sale to collect a debt. Deceptive trade practices, as codified in the Deceptive Trade Practices Act, are strictly prohibited in real estate practice. Three of the following instances are examples, but one is acceptable. Which one is it? a) Telling a buyer that a property's price has been drastically reduced. b) Bragging about a warranty that doesn't apply to a given claim. c) Disparaging competitors with non-factual innuendos. d) Telling a buyer that an air conditioner will easily last another five years. - correct answera) Telling a buyer that a property's price has been drastically reduced.
