Free TREC Consumer Protection Questions and Answers — Questions and Answers
Question 1: A buyer purchases a furnished condominium apartment as an investment. The document that evidences the buyer's ownership of the furniture is a?
- Bill of sale (Correct answer)
- Adverse possession
- Deed of trust
- Agreement of sale
Correct answer: Bill of sale
A bill of sale is a legal document that serves as proof of transfer of ownership for personal property. In the context of a furnished condominium, the furniture is considered personal property, not real property. Therefore, a bill of sale would be used to evidence the buyer's ownership of the furniture, separate from the deed which transfers ownership of the real estate.
Question 2: The appropriate time for a selling broker to explain the agency relationship to a prospective buyer is?
- at the time of licensee's first contact
- both parties
- at their initial meting (Correct answer)
- terminate the purchase contract with the seller
Correct answer: at their initial meting
In Texas, real estate licensees are required to provide the "Information About Brokerage Services" (IABS) form at the first substantive dialogue with a prospective buyer, seller, landlord, or tenant. This initial meeting is the appropriate time to explain the agency relationship, ensuring the client understands the roles and responsibilities of the agent and the various types of agency available before any confidential information is exchanged or specific services are provided.
Question 3: A lot was purchased as an investment for $10,500 and sold a year later at a loss of 20%. If the owner paid a 10% commission, what was the owner's net loss on the sale
- $2,940 10500x.30= 2,100 8400x.10=840 2,100+840=2,940
- $2,940 10500x.20= 2,100 8400x.0=840 2,100+840=2,940
- $2,940 1050x.20= 2,100 8400x.10=840 2,100+840=2,940
- $2,940 10500X.20= 2,100 8400X.10=840 2,100+840=2,940 (Correct answer)
Correct answer: $2,940 10500X.20= 2,100 8400X.10=840 2,100+840=2,940
To calculate the net loss, first determine the loss on sale: $10,500 * 20% = $2,100. The sale price was then $10,500 - $2,100 = $8,400. Next, calculate the commission paid on the sale price: $8,400 * 10% = $840. Finally, the total net loss is the sum of the loss on sale and the commission: $2,100 + $840 = $2,940.
Question 4: A license holder is showing a home built in 1972 to buyers who notice paint flaking on the woodwork. How should the license holder proceed
- recommend repainting the woodwork immediately
- suggest the buyers do a termite inspection instead
- ignore the paint flaking issue
- advise the prospective buyers to get a lead based paint inspection (Correct answer)
Correct answer: advise the prospective buyers to get a lead based paint inspection
Homes built before 1978 are presumed to have lead-based paint, which can pose significant health risks, especially to children. The presence of flaking paint in a home built in 1972 strongly suggests the potential for lead-based paint. A license holder has a responsibility to advise buyers of this potential hazard and recommend a lead-based paint inspection or risk assessment, as required by federal law (HUD/EPA disclosure rules).
Question 5: The commission earned by a listing broker on a sale of property is established by?
- Property tax assessment
- Market conditions
- Agreement between the seller and the broker (Correct answer)
- State law regulations
Correct answer: Agreement between the seller and the broker
Real estate commissions are not set by law, market conditions, or property tax assessments. Instead, they are always negotiable and established through a mutual agreement between the seller (or buyer, depending on the representation agreement) and their real estate broker. This agreement is typically outlined in a listing agreement or buyer representation agreement.
Free TREC Consumer Protection Questions and Answers
A buyer purchases a furnished condominium apartment as an investment.
The document that evidences the buyer's ownership of the furniture is a?