Real Estate Exam Questions — Questions and Answers

Question 1: Which of the following statements is true with regard to the "Seller's Disclosure Of Property Condition" approved and published by the Texas Real Estate Commission?

It must be delivered to the buyer prior to closing.
The form is approved by the Texas Real Estate Commission for voluntary use to make it easier for sellers to make the disclosures called for by section 5.008 of the Texas Property Code. (Correct answer)
If it is not made a part of the contract, the contract is unenforceable if either party decides to terminate it.
It is promulgated addendum that must be attached to every contract for the sale of a previously occupied single-family residence.

Correct answer: The form is approved by the Texas Real Estate Commission for voluntary use to make it easier for sellers to make the disclosures called for by section 5.008 of the Texas Property Code.

The "Seller's Disclosure of Property Condition" form is approved by the Texas Real Estate Commission (TREC) as a standardized tool. Its use is voluntary, but it helps sellers comply with their legal obligation under Section 5.008 of the Texas Property Code to disclose known material defects about the property. This form simplifies the disclosure process for sellers and provides clarity for buyers.

Question 2: No Federal Fair Housing laws are violated if a landlord refuses to rent to

Vietnamese.
People with children.
Students. (Correct answer)
Deaf persons.

Correct answer: Students.

The Federal Fair Housing Act prohibits discrimination based on specific protected classes: race, color, religion, sex, national origin, familial status, and disability. "Students" are not included as a protected class under this federal law. Therefore, a landlord can legally refuse to rent to students without violating federal fair housing regulations, although some state or local ordinances might offer additional protections.

Question 3: Which of the following is the Texas Real Estate Commission NOT empowered to do?

Contract with a national firm to write and administer an exam to determine competency of a licensee applicant.
Suspend or revoke the license of a broker found guilty of giving legal advice.
Publish forms for mandatory use by those to whom it issues a broker or salesperson license.
Make a payment from the Recovery Fund to pay the legal fees of a salesperson that was found to be innocent. (Correct answer)

Correct answer: Make a payment from the Recovery Fund to pay the legal fees of a salesperson that was found to be innocent.

The Texas Real Estate Recovery Trust Account (Recovery Fund) is designed to reimburse members of the public who suffer actual damages due to the unlawful acts of a licensee. TREC is empowered to make payments to aggrieved consumers from this fund. However, the fund's purpose is consumer protection, and TREC is explicitly not authorized to use it to pay the legal fees of a licensee, even if they are found innocent.

Question 4: Which one of the following is authorized by statute to promulgate forms for mandatory use by real estate brokers and sales persons?

Texas Real Estate Commission. (Correct answer)
Texas attorney generals office.
Broker-Lawyer Committee.
Texas association of REALTORS.

Correct answer: Texas Real Estate Commission.

The Texas Real Estate Commission (TREC) is the only entity authorized by statute to promulgate (create and mandate the use of) contract forms for real estate licensees in Texas. This authority ensures standardization, clarity, and legal compliance in real estate transactions. While the Broker-Lawyer Committee drafts these forms, TREC officially promulgates them for mandatory use.

Question 5: Which of the following is NOT registered, licensed, certified or regulated by the Texas Real Estate Commission?

Residential rental locator's.
Appraisers. (Correct answer)
Residential service contract companies.
Easement and right-of-way agents.

Correct answer: Appraisers.

While the Texas Real Estate Commission (TREC) regulates many real estate-related professions, including brokers, salespersons, and residential rental locators, it does not regulate appraisers. Real estate appraisers in Texas are regulated by a separate state agency, the Texas Appraiser Licensing and Certification Board (TALCB). This distinction ensures specialized oversight for each profession.

Question 6: The Texas Real Estate Commission is not empowered to

Adopt a seal of design, which it shall prescribe.
Increase license fees when more money is needed to run the agency. (Correct answer)
Name and select an administrator.
Make rules and regulations necessary for the performance of its duties and establish standards of conduct for its licensees.

Correct answer: Increase license fees when more money is needed to run the agency.

The Texas Real Estate Commission (TREC) has broad powers to regulate the real estate industry, including adopting rules and establishing standards of conduct. However, TREC is not empowered to unilaterally increase license fees simply because more money is needed to run the agency. License fees are typically set by statute and require legislative action to change, limiting TREC's financial autonomy in this regard.

Question 7: The obligation of protecting any deposits entrusted to an agent is an example of the fiduciary duty of

Disclosure
Obedience
Competence
Accounting (Correct answer)

Correct answer: Accounting

The fiduciary duty of accounting requires an agent to properly handle and account for all money, property, and documents entrusted to them by their client. Protecting deposits, such as earnest money, and ensuring they are held in the correct accounts and disbursed appropriately, is a direct example of fulfilling this crucial duty. This prevents commingling and safeguards client funds.

Question 8: A prospect for the lease of a commercial property feels the need for adversarial representation and hires a broker to negotiate the lease on his behalf. The contract entered into between the prospect and the broker is called

A buyer broker agreement. (Correct answer)
A cooperative brokerage agreement.
An authorization to negotiate.
A property management agreement.

Correct answer: A buyer broker agreement.

A buyer broker agreement is a contract that establishes an agency relationship where a broker represents the interests of a prospective buyer or, in this case, a lessee. Even for a commercial property lease, the agreement formalizes the broker's role in providing adversarial representation and negotiating on behalf of their client, similar to how a buyer's agent represents a home purchaser.

Question 9: Parties can be compelled to take dispute to mediation prior to being able to initiate litigation by

Either party.
A judge. (Correct answer)
The Texas Real Estate Commission.
A broker.

Correct answer: A judge.

While parties can voluntarily agree to mediation, only a judge has the legal authority to compel parties to participate in mediation prior to initiating or continuing litigation. This judicial power is often exercised to encourage dispute resolution outside of court, aiming to save time and resources for all involved parties. Neither the Texas Real Estate Commission nor a broker possesses this authority.

Question 10: If a seller insist that you not disclose a "latent defect" in the property, what should you do

Tell the seller you are not allowed to hide any defects
Agree with the seller and list the property for sale
Withdraw or do not take the listing (Correct answer)
List the property and then make sure and disclose the defect to any purchaser

Correct answer: Withdraw or do not take the listing

Real estate licensees have a legal and ethical obligation to disclose known material facts and latent defects about a property to prospective buyers. If a seller insists on concealing a latent defect, the agent cannot ethically or legally comply with such a request. The only appropriate action is to withdraw from the listing or refuse to take it, as participating would involve misrepresentation and potential legal liability.

Question 11: A father conveys ownership of his residence to his son but reserves for himself a life estate in the residence. The interest the son owns during the father's lifetime is

Pur autre vie.
A remainder. (Correct answer)
Reversionary.
A life tenancy.

Correct answer: A remainder.

When a father conveys ownership to his son but reserves a life estate for himself, the father holds a life tenancy, meaning he can live on or use the property for his lifetime. The son, in this scenario, holds a "remainder" interest. This means the son will receive full ownership (fee simple absolute) of the property upon the termination of the father's life estate, typically upon the father's death.

Question 12: A licensee should make no changes to the promulgated contracts except a change which is:

Desired by the broker.
Reasonable.
Desired by the principals. (Correct answer)
Not involving money.

Correct answer: Desired by the principals.

Licensees are generally prohibited from making unauthorized changes to promulgated forms. The only permissible changes are those specifically desired by the principals (the buyer and seller) to reflect their agreement. Any modifications must be made in a clear and conspicuous manner, often by adding an addendum or striking through and initialing changes, ensuring the principals' intent is accurately documented.

Question 13: A Real Estate salesperson may receive compensation from

The property owner, as long as disclosure is made to all agents.
Only the employing broker. (Correct answer)
Any of the parties to a transaction.
Any broker taking part in a transaction.

Correct answer: Only the employing broker.

In Texas, a real estate salesperson can only receive compensation for real estate activities from their employing broker. This rule is a fundamental aspect of the agency relationship and ensures that the broker maintains supervision and responsibility for the salesperson's actions. Receiving compensation directly from a client or another party is a violation of license law.

Question 14: What is the continuing education requirement for brokers to renew their license

10 hrs every year
15 hrs every 2 years (Correct answer)
30 hrs every 2 years
10 hrs every year and 30 hrs every 5th year

Correct answer: 15 hrs every 2 years

For many years, the Texas Real Estate Commission (TREC) required brokers to complete 15 hours of continuing education every two years to renew their licenses. This requirement ensured that licensees stayed current with industry standards and legal changes. While the specific number of hours has since been updated to 18 hours, this option reflects a historical continuing education standard for Texas real estate brokers.

Question 15: A married couple is selling its homestead, owned as community property. For the deed conveying the property to be valid, who must sign it?

The husband.
The wife.
Both husband and wife. (Correct answer)
Only the managing spouse.

Correct answer: Both husband and wife.

In Texas, a homestead, even if owned as community property, requires the signatures of both spouses for a valid conveyance. This protection is enshrined in Texas homestead laws, which aim to prevent one spouse from unilaterally selling or encumbering the family home. Both husband and wife must sign the deed to ensure the property's transfer is legally binding and to protect the family's interest.

Question 16: When does the seller agree or disagree to allow sub-agency

Listing agreement (Correct answer)
Purchasing agreement
Management agreement
Lease agreement

Correct answer: Listing agreement

The question of whether to allow sub-agency is typically addressed and agreed upon in the listing agreement between the seller and their listing broker. The listing agreement outlines the terms of the agency relationship, including how the property will be marketed and whether the seller authorizes other brokers (subagents) to represent them in the sale. This ensures the seller's consent to the agency structure.

Question 17: Your seller says that he doesn't want to accept any offers from buyers who are represented by a buyer's agent. What should you do when a buyer's agent brings an offer on the listing on behalf of his/her client?

Throw it away.
Present it to the seller. (Correct answer)
File it and forget about it.
Send it back to the buyer's agent.

Correct answer: Present it to the seller.

A listing agent has a fiduciary duty to their seller client to present all offers, regardless of the source or the seller's stated preferences, unless the seller has explicitly instructed otherwise in writing. Even if the seller expresses a general dislike for buyer's agents, a verbal preference does not override the agent's obligation to present a legitimate offer for consideration. Failure to present an offer can lead to disciplinary action.

Question 18: The Real Estate Center at Texas A&M University is funded by

A fee not to exceed $15 from each broker and salesperson annually.
$15 from brokers and $7.50 from sales persons, to be paid when a license is renewed.
$20 from brokers and $17.50 from sales persons, each time a license is issued or renewed. (Correct answer)
$10 of each application fee for brokers and sales persons.

Correct answer: $20 from brokers and $17.50 from sales persons, each time a license is issued or renewed.

The Real Estate Center at Texas A&M University, which conducts valuable research and provides education for the real estate industry, is funded by specific fees collected during the licensing process. Each time a real estate license is issued or renewed, a portion of the fee—$20 from brokers and $17.50 from salespersons—is allocated to support the Center's operations, ensuring its continued contribution to the industry.

Question 19: Each active real estate broker licensed by the Texas Real Estate Commission shall display in a prominent location in their place of business a

Loan-to-value ratio for their company.
False Practice Form.
Consumer Information Form 1-1 (Correct answer)
Choking Hazard Poster.

Correct answer: Consumer Information Form 1-1

The Texas Real Estate Commission (TREC) requires all active real estate brokers to prominently display the Consumer Information Form 1-1 in their place of business. This form provides consumers with important information about filing complaints against licensees and the TREC Recovery Trust Account, ensuring transparency and consumer protection by making this information easily accessible to the public.

Question 20: A novation is BEST defined as:

The substitution of one party for another in a contract wherein both the original parties remain liable.
Substitution of a new contract for an existing agreement with the intent of extinguishing the old contract. (Correct answer)
The same as an assignment.
A means of acquiring title by adverse possession.

Correct answer: Substitution of a new contract for an existing agreement with the intent of extinguishing the old contract.

Novation is a legal term referring to the substitution of a new contract for an existing one, with the express intent of extinguishing the obligations of the old contract. This typically involves replacing one of the original parties with a new party, or substituting a new obligation for an old one, with the consent of all parties involved. It effectively releases the original party from their prior obligations.

Question 21: Which of the following is an appropriate action for an intermediary

To represent the Buyer
To represent the Seller
To appoint associated licensees to work with the parties (Correct answer)
All of the above

Correct answer: To appoint associated licensees to work with the parties

In Texas, an intermediary broker facilitates a transaction where the same broker represents both the buyer and the seller. An appropriate action for an intermediary is to appoint different associated licensees (salespersons) to work with and advise each party separately. This allows the appointed licensees to provide advice and opinions to their respective parties, while the intermediary broker remains neutral.

Question 22: In a listing agreement, if the property is under contract with a buyer and the listing expires, is the broker still entitled to a commission

No
Yes (Correct answer)
Only if the seller signs a new listing agreement
Only if there is an automatic extension written into the original listing agreement

Correct answer: Yes

If a property is under contract with a buyer before the listing agreement expires, the broker is generally still entitled to their commission, even if the closing occurs after the expiration date. The broker fulfilled their obligation by finding a ready, willing, and able buyer and securing a contract during the listing period. The commission is earned when the contract is executed, not necessarily when it closes.

Question 23: Which is true of an administrator of an estate

The administrator is court appointed (Correct answer)
The administrator is written into the will
The administrator must be licensed in the state of Texas
The administrator must be related to the previous owner

Correct answer: The administrator is court appointed

An administrator of an estate is a person appointed by a court to manage the estate of a deceased person. This appointment typically occurs when someone dies without a will (intestate) or if their will does not name an executor. The administrator's role is to gather assets, pay debts, and distribute the remaining property under court supervision, ensuring proper legal process.

Question 24: According to the provisions of Texas Real Estate Licensing Act, which of the following must be included in every listing agreement with a Texas Licensed Broker?

The marital status of the seller or sellers.
An ending date that is not subject to prior notification. (Correct answer)
A complete legal description.
A proposed gross selling price along with a description of acceptable financing terms.

Correct answer: An ending date that is not subject to prior notification.

The Texas Real Estate License Act (TRELA) specifically requires that all listing agreements have a definite termination date that is not subject to prior notice. This prevents "evergreen" or open-ended listings that could bind a seller indefinitely. It ensures clarity and protects sellers by establishing a clear and unambiguous end to the brokerage relationship, allowing them to seek other representation if desired.

Question 25: When you assign a contract you are transferring

Benefits and obligations (Correct answer)
Ownership and deed
Deed and deed of trust
Title and disclosures

Correct answer: Benefits and obligations

When you assign a contract, you are transferring your contractual rights and duties to another party. The assignee steps into the assignor's shoes, taking on both the benefits (like the right to purchase the property) and the obligations (like the duty to pay the purchase price). This process allows the original party to exit the contract, with the new party assuming their role.

Question 26: When you assign a contract you transfer all benefits and obligations

License
Encroachment (Correct answer)
Easement by necessity
Easement by prescription

Correct answer: Encroachment

This question appears to be flawed as the provided correct answer, 'Encroachment,' is unrelated to the concept of assigning a contract. Assuming the question intended to ask about physical intrusions on property, an encroachment is an unauthorized intrusion of a building, fence, or other improvement onto another person's land. It represents a physical trespass that can affect property boundaries and legal rights.

Question 27: If a licensed Real Estate broker is an agent in a transaction in which real property is sold by lottery, his or her action is

Permissible if the property is sold on the open market.
Legal if the property to be sold is farmland.
Cause for suspension or revocation of the broker's license. (Correct answer)
Permissible if the broker's license is active.

Correct answer: Cause for suspension or revocation of the broker's license.

Selling real property by lottery is illegal in most jurisdictions, including for licensed real estate brokers. Real estate transactions must be based on fair market value and transparent negotiation, not chance. Engaging in such activities is considered unethical and unlawful, leading to severe disciplinary action, such as suspension or revocation of the broker's license.

Question 28: Can a broker act as a dual agent in a real estate transaction

Yes, as long as the dual agency is disclosed to all parties
No, the broker must always go to sub-agency relationship
No, a broker must move to the intermediary position if they are to represent both the buyer and seller (Correct answer)
Yes, if both the seller and buyer agree to dual agency

Correct answer: No, a broker must move to the intermediary position if they are to represent both the buyer and seller

In Texas, a broker cannot act as a 'dual agent' in the traditional sense of representing both parties with full fiduciary duties. Instead, if a broker represents both the buyer and seller in the same transaction, they must act as an 'intermediary.' This intermediary relationship requires the broker to facilitate the transaction impartially, often by appointing different sales associates to advise each party.

Question 29: A contract which states that one promise is given in exchange for another can best be described as a:

Unilateral contract.
Executed contract.
Voidable contract.
Bilateral contract. (Correct answer)

Correct answer: Bilateral contract.

A bilateral contract is characterized by a 'promise for a promise,' where both parties make a commitment to perform an action in the future. For example, a real estate purchase agreement is bilateral because the buyer promises to pay, and the seller promises to deliver the deed. This mutual exchange of promises creates a legally binding agreement.

Question 30: A violation of a provision of the Texas Real Estate License Act constitutes what type of legal violation?

A class A misdemeanor. (Correct answer)
A felony.
A class C misdemeanor.
A class B misdemeanor.

Correct answer: A class A misdemeanor.

Violations of the Texas Real Estate License Act (TRELA) are serious offenses designed to protect the public. TRELA specifies that engaging in real estate brokerage activities without a license, or other significant violations, can be prosecuted as a Class A misdemeanor. This classification carries potential penalties including fines and jail time, underscoring the importance of compliance with licensing laws.

Real Estate Exam Questions

Which of the following statements is true with regard to the "Seller's Disclosure Of Property Condition" approved and published by the Texas Real Estate Commission?