Your FREE Texas Real Estate Practice Test 2026 – 160+ Q&A

Correct answer: The bundle of rights can be separated, so individual rights may be transferred independently

The bundle of rights concept explains that the various rights of ownership, such as possession, use, and disposition, are separable, so an owner can lease away the right to possess while keeping title and the remaining rights. Possession and ownership are not identical, leasing conveys only possession rather than title, and private owners, not only the government, may separate and transfer individual sticks in the bundle.

Correct answer: Accretion

Accretion is the gradual addition of land caused by the slow deposit of soil and sediment by moving water, and the new soil, called alluvion, belongs to the riparian owner. Erosion is the gradual loss of land, reliction is land exposed when water permanently recedes, and avulsion is the sudden removal or addition of land, so none of those describes the slow depositing process.

Correct answer: The owner generally owns the land to the center of the streambed

Under the riparian doctrine for a non-navigable waterway, an adjoining owner generally owns the underlying land out to the center, or thread, of the stream. Owners of land along navigable waters typically own only to the water's edge, but for non-navigable streams the bed is split among bordering owners, so the streambed is not entirely the government's nor automatically the downstream owner's.

Correct answer: Police power

Police power is the government's authority to enact regulations such as building codes, zoning, and safety requirements to protect the public health, safety, morals, and general welfare, and it does not require compensating owners. Eminent domain takes property with compensation, escheat returns property to the state when an owner dies without heirs, and taxation raises revenue, so none of those authorizes safety regulations of this kind.

Correct answer: Police power regulates property use without compensation, while eminent domain takes property and requires just compensation

The central distinction is that police power regulates how owners may use property to protect the public welfare without paying compensation, while eminent domain actually takes the property and constitutionally requires just compensation. Neither power generally requires the owner's consent, and eminent domain applies to real property as well, so the compensation difference is the defining contrast.

Correct answer: An easement in gross

This is an easement in gross because it benefits a particular person or entity, such as a utility company, rather than a dominant parcel of land, and there is no adjoining benefited estate. An easement appurtenant requires a dominant and servient parcel and runs with the land, a deed restriction limits use rather than granting a use right, and a life estate is a form of ownership, not a use easement.

Correct answer: An easement by necessity

An easement by necessity may be created when a landlocked parcel has no access to a public road, allowing the owner to cross neighboring land out of necessity. A license is merely revocable permission rather than an enforceable access right, an easement in gross to a stranger would not address landlocking, and a profit a prendre is the right to remove resources such as minerals, not a right of access.

Correct answer: Deed restrictions

Recorded covenants, conditions, and restrictions are deed restrictions, private controls placed by a developer or association that limit how owners may use their property. Zoning ordinances and police power regulations are public controls imposed by government, and an eminent domain taking is a government acquisition of property, so the privately created CC&Rs fall under deed restrictions.

Correct answer: The more restrictive of the two generally controls the owner's use

When a deed restriction and a zoning ordinance conflict, the more restrictive provision generally governs, because the owner must comply with both the public and the private limitation. Neither one automatically voids the other, and the property is certainly not free of all limits, so the controlling rule is that the stricter requirement prevails.

Correct answer: A fee simple determinable

The city holds a fee simple determinable because ownership continues only so long as a stated condition, use as a public park, is met, and it automatically reverts to the grantor if that condition is violated. A fee simple absolute carries no such condition, a life estate is measured by a life rather than a use condition, and a leasehold conveys only possession for a term rather than a defeasible fee.

Correct answer: A reversion

The grantor's future interest that brings the property back to the grantor at the end of a life estate is a reversion. A remainder is the future interest when the property passes instead to a named third party, an easement is a nonpossessory right to use land, and an encroachment is a physical intrusion across a boundary, so a reversion is the interest that returns ownership to the grantor.

Correct answer: Lot and block referencing a recorded plat

The lot and block method is best for a platted subdivision because once the plat is recorded, each lot can be identified simply by its lot and block numbers, making deeds short and precise. Metes and bounds requires lengthy directional calls, a narrative of physical features is imprecise, and surveying each small lot from a principal meridian would be unnecessarily cumbersome for a recorded subdivision.

Correct answer: As a fixture that transfers with the real property

The built-in oven is most likely a fixture that transfers with the real property because it is permanently attached to the cabinetry and adapted to the home with the intent that it remain. Fixture status turns on annexation, adaptation, and intent. It is no longer the seller's personal property once installed, it is not a trade fixture (which applies to commercial tenant equipment), and it is not an emblement, which refers to annual crops.

Correct answer: As trade fixtures the tenant may remove before the lease ends

Items a commercial tenant installs to conduct business are trade fixtures, which the tenant generally may remove before the lease ends, provided any damage from removal is repaired. They are not treated as permanent fixtures belonging to the landlord, they are not emblements (which are annual crops), and they do not become the landlord's real property upon installation, since the trade-fixture exception protects the business tenant's equipment.

Correct answer: A homeowner whose lot borders a lake builds a dock and uses the shore

Littoral rights belong to an owner whose land borders a stationary body of water such as a lake, allowing reasonable use of the shore and water, which the dock-building homeowner illustrates. The scenarios involving a river, creek, or flowing stream concern riparian rights, which attach to moving watercourses, so only the lakefront example demonstrates the littoral right tied to non-flowing water.

Correct answer: A legal nonconforming use

The factory continues as a legal nonconforming use, a use that was lawful before the zoning change but no longer conforms to current zoning, which is typically allowed to remain rather than be immediately shut down. An easement appurtenant is a use right over another parcel, a fee simple determinable is a defeasible ownership estate, and a variance is a forward-looking permission for a new deviation, none of which describes a grandfathered prior use.

Correct answer: An undisclosed recorded mechanic's lien existed against the property at the time of conveyance

An undisclosed recorded lien at the time of conveyance breaches the covenant against encumbrances because that covenant promises the property is free of liens, easements, or other burdens except those disclosed, and a hidden lien is exactly such an undisclosed encumbrance. A suit by a stranger with no valid claim implicates quiet enjoyment or warranty, a refusal to fix a description error implicates the covenant of further assurance, and a grantor who never owned the property breaches the covenant of seisin.

Correct answer: Request an extended-coverage policy or endorsements that remove or insure over certain standard exceptions

The buyer should request extended coverage or endorsements because a standard owner's policy carves out common exceptions, and the insurer can often remove or insure over some of them, frequently after a current survey, in exchange for additional premium, broadening the protection. These exceptions are not necessarily permanent or uninsurable. A quitclaim deed from the seller does not change what the insurer chooses to cover, and a quiet title action addresses ownership disputes, not the terms of an insurance contract.

Correct answer: Subrogation

Subrogation is correct because it is the insurer's right, after paying a covered loss, to succeed to the insured's claims and pursue the third party responsible for the title defect to recover the amount paid. It allows the insurer to shift the loss to the truly responsible party. Reconveyance is the release of a deed of trust when a loan is paid, estoppel prevents a party from asserting a position inconsistent with prior conduct, and reformation is a court's correction of a written instrument to reflect the parties' true intent.

Correct answer: No, because the deed was never delivered with present intent to pass title

Title did not pass because a valid conveyance requires delivery of the deed with the grantor's present intent to transfer title, and merely signing, acknowledging, and storing the deed without delivering it shows no such present intent. The grantor retained control and intended to act only later. Signing and acknowledgment alone do not complete a transfer, naming a grantee is not delivery, and recording is for notice and priority rather than being an absolute requirement for a deed's effectiveness between the parties.

Correct answer: A competent grantor with legal capacity who signs the deed

A valid deed requires a competent grantor with legal capacity who signs the instrument, because the grantor is the one conveying title and must have the legal ability and intent to do so. The grantee generally need not sign the deed, the stated consideration need not be the actual full purchase price and full payment is not an element of a valid deed, and witness requirements vary by state and are not a universal element, unlike the grantor's competent signature.

Correct answer: Probate

Probate is correct because it is the court-supervised process that validates a will, settles the decedent's debts and claims, and authorizes the transfer of the decedent's real and personal property to the heirs or devisees. Until probate is completed, title to devised real estate is generally not clear for conveyance. Partition divides co-owned property, condemnation is the government's exercise of eminent domain, and foreclosure enforces a lien against a defaulting borrower.

Correct answer: Escheat

Escheat is correct because it is the doctrine under which property reverts to the state when there is no lawful owner to claim it, whether that is real estate of a person who dies intestate without heirs or unclaimed personal property whose owner cannot be found. The unifying idea is that property should not remain ownerless. Eminent domain is a compensated taking for public use, adverse possession transfers title through long unauthorized occupation, and dedication is a private gift of land for public use.

Correct answer: It can shorten the statutory period required or strengthen the claim under 'color of title' provisions in many states

Occupying under a defective written instrument, known as color of title, and paying taxes can shorten the required statutory period or otherwise strengthen an adverse possession claim in many states, because the law rewards a claimant who appears to hold under a genuine, if flawed, claim of ownership. It does not eliminate the need for actual possession, it does not convey instant title upon recording the defective deed, and it does not remove the requirement that the possession still be hostile and the other elements be met.

Correct answer: Because government-owned public land is generally immune from adverse possession

The claim fails because land owned by the government and held for public use is generally immune from adverse possession, so no amount of open, hostile occupation can ripen into title against the public's land. This public-land exception is a well-established limit on the doctrine. Open occupation is in fact a required element rather than a bar, recording a self-made deed cannot manufacture ownership, and statutory periods do exist and are finite for private land.

Correct answer: Inquiry notice arising from the occupants' visible possession

The buyer had inquiry notice because visible possession by someone other than the record owner is a fact that should prompt a reasonable buyer to investigate, and the law charges the buyer with whatever a reasonable inquiry would have revealed. The buyer is bound by the occupants' rights despite the lack of recording. Constructive notice comes specifically from the recorded documents, actual notice requires genuine personal knowledge of the lease, and it is wrong to say there was no notice, since the open possession itself triggered the duty to inquire.

Correct answer: The second buyer must take without notice of the prior deed and record before the first buyer does

Under a race-notice statute the second buyer prevails only by both taking the deed without notice of the earlier conveyance and being the first of the two to record, combining the notice requirement and the race-to-record requirement. Recording first alone is not enough if the buyer had notice, having actual notice of the prior deed defeats protection rather than securing it, and paying a higher price is not a condition of priority under recording acts.

Correct answer: Marketable title, free from reasonable doubt and the risk of litigation

These record items prevent delivery of marketable title because marketable title must be reasonably free from doubt and from the threat of litigation, and an undisclosed easement, a pending ownership suit, and an unsatisfied mortgage are clouds that expose a buyer to dispute. A buyer is generally entitled to refuse a title burdened by such defects. The defects do not concern providing a boundary survey, transferring personal property, or furnishing an association estoppel certificate, which are separate matters.

Correct answer: Because a forged deed is generally void and conveys no title, so the entire later chain may be defective

A forged deed is an especially serious cloud because forgery generally renders a deed void from the outset, meaning it conveys no title at all, so every conveyance that depends on that forged link in the chain can be defective no matter how innocent later buyers were. Recording does not cure or validate a forgery, it does not transform a forged deed into a valid quitclaim, and the defect reaches well beyond the forger because it undermines the title every successor claims through that deed.

Correct answer: A condominium

The first arrangement is a condominium because the owner receives fee title to an individual unit together with an undivided interest in the common elements such as hallways, roof, and grounds. That combination of separate unit ownership plus shared common elements defines condominium ownership. The second arrangement, with corporate stock and a proprietary lease, describes a cooperative, while a timeshare divides use by time periods and a leasehold for years grants only a temporary tenant interest rather than ownership.

Correct answer: It provides market-based context from comparable sales to support a reasonable offer

The comparative market analysis provides market-based context from comparable sales so the buyer can frame a reasonable, well-supported offer. It is an informal pricing aid, not a legal price ceiling on the seller, and it does not substitute for the lender's independent appraisal during underwriting. Because the market can shift and offers are negotiated, it cannot guarantee the buyer avoids overpaying.

Correct answer: The cost approach

The appraiser will rely on the cost approach, which is most appropriate for new or special-purpose properties like a library where comparable sales are scarce and the property does not generate income. The sales comparison approach needs comparable sales that do not exist here, and both the income capitalization approach and gross rent multiplier require rental income that a public library does not produce.

Correct answer: Land is considered to last indefinitely and does not physically wear out the way improvements do

Land value is added in undepreciated because land is regarded as permanent and indestructible and does not physically deteriorate the way a building does, so only the improvements are subject to depreciation. Land is not always worth more than its building, it is properly included in appraisals, and its value is unrelated to the building's replacement cost, which measures construction expense rather than site worth.

Correct answer: $1,200,000

The indicated value is $1,200,000. Net operating income equals effective gross income of $150,000 minus operating expenses of $54,000, which is $96,000. Dividing the $96,000 net operating income by the 8% capitalization rate gives $1,200,000. The other answers come from capitalizing gross income without deducting expenses, dividing expenses or an incorrect figure by the rate, or otherwise misapplying the income-divided-by-rate formula.

Correct answer: Vacancy and collection losses plus operating expenses

To reach net operating income, the appraiser deducts vacancy and collection losses and the property's operating expenses from gross income. Debt service is deliberately excluded because net operating income reflects the property's earning power independent of financing, the owner's personal income taxes are not a property operating expense, and tax depreciation is an accounting deduction that does not belong in the appraisal's operating statement.

Correct answer: $240,000

The indicated value is $240,000, found by multiplying the monthly rent of $1,500 by the gross rent multiplier of 160. The gross rent multiplier method estimates value as gross rent times the market-derived multiplier. The other answers result from misplacing a decimal, dividing rent by the multiplier instead of multiplying, or using an incorrect rent figure.

Correct answer: Small rentals have comparable, predictable rents and minimal expense variation, while large commercial properties need detailed expense analysis

Appraisers favor the gross rent multiplier for small residential rentals because those properties have comparable, predictable rents and similar, modest operating expenses, making a simple rent-based factor reasonably reliable, whereas large commercial properties have varied expenses that demand the detailed net-income analysis of full capitalization. The multiplier is not illegal for commercial use, commercial properties do produce income, and the method requires rent-paying tenants to function.

Correct answer: Values rise because dividing the same income by a lower rate produces a higher value

Values rise, because with net operating income unchanged, dividing that income by a smaller capitalization rate yields a larger value, since value equals income divided by rate. Lower cap rates generally signal stronger demand and higher prices, so they do not reduce value, value does respond to rate changes rather than income alone, and value can still be estimated using the existing income and the new lower rate.

Correct answer: $1,200,000

The indicated value is $1,200,000, calculated by dividing the net operating income of $84,000 by the required capitalization rate of 0.07. The income approach uses value equals income divided by rate. The other answers result from multiplying income by the rate, computing only a portion of the income, or dividing by an incorrect rate rather than the stated 7%.

Correct answer: Legally permissible under current zoning and regulations

The appraiser first confirms the use is legally permissible under current zoning and regulations, since a use that violates the law cannot qualify as highest and best use no matter how profitable. The four tests are legal permissibility, physical possibility, financial feasibility, and maximum productivity. The lowest construction cost, neighbors' preferences, and similarity to the current use are not the screening criteria for highest and best use.

Correct answer: The land as a vacant commercial site, treating the existing house as not contributing to value

The highest and best use is the land as a vacant commercial site, with the existing house treated as not contributing, because when the value of the land for a permitted higher use exceeds the value of the property as improved, the improvement adds nothing and may even need removal. Continuing the residential use, minimizing taxes, and honoring the owner's preference do not reflect the use that maximizes the property's value.

Correct answer: Curable physical deterioration

Peeling paint, a worn roof, and an aging furnace are curable physical deterioration, the ordinary wear and tear on a property's components that is economically practical to repair. Physical deterioration originates within the property and is often deferred maintenance. Functional obsolescence stems from defective design rather than wear, and external or economic obsolescence is caused by influences outside the property's boundaries, not by repairable component wear.

Correct answer: External obsolescence

The loss from the new highway is external obsolescence, a decline in value caused by negative influences outside the property's own boundaries that the owner cannot fix from within the site. Curable physical deterioration and deferred maintenance involve on-site wear the owner can repair, and functional obsolescence arises from the property's own outdated design, whereas the highway is an off-site nuisance beyond the owner's control.

Correct answer: Buy the $310,000 home because it is the lower-priced equally desirable substitute

Under the principle of substitution, the rational buyer purchases the $310,000 home because it is the lower-priced of two equally desirable substitutes, and an informed buyer will not pay more than necessary for comparable utility. A higher price does not automatically signal greater value when the homes are identical, averaging the prices ignores the cheaper substitute, and the price difference itself gives no reason to walk away from both.

Correct answer: The principle of conformity

This reflects the principle of conformity, which holds that property values are maximized and best protected when properties in an area are reasonably similar in size, style, quality, and use, so that homogeneity supports stable values. Anticipation ties value to future benefits, contribution measures a feature's added value, and substitution caps price at the cost of an alternative, none of which explains why neighborhood uniformity sustains value.

Correct answer: Assemblage and plottage

Combining the lots into one site is assemblage, and the resulting increase in value, here the $90,000 by which the $450,000 combined site exceeds the $360,000 separate total, is plottage. Accretion and reliction describe land changes from water, reconciliation and contribution are appraisal reasoning and feature-value concepts, and severalty and progression refer to sole ownership and a value boost from grander neighbors, not combined-parcel value.

Correct answer: A net listing

A net listing pays the broker any amount the property sells for above the seller's specified net, an arrangement many states prohibit or discourage because it creates a conflict between the broker's pay and the seller's interest in the highest price. An open listing pays only the procuring broker, an exclusive agency lets the owner sell commission-free, and an exclusive right-to-sell guarantees the broker a commission on any sale during the term.

Correct answer: A buyer touring the home without making an offer

A buyer simply touring the home without making an offer does not terminate the listing, because showings are ordinary marketing activity that the listing contemplates. By contrast, the death of the seller, destruction of the property, and the mutual agreement of broker and seller to cancel are all events that end a listing agreement before its scheduled expiration.

Correct answer: The owner, who may sell it personally commission-free

In an exclusive agency listing, only the listing broker is engaged among brokers, but the owner reserves the right to sell the property personally without paying a commission. A cooperating broker would work through the listing broker rather than independently, the buyer's lender has no selling right, and it is incorrect that no one but the broker may sell, since the owner's personal-sale right is the defining feature of this listing.

Correct answer: Under exclusive right-to-sell the broker earns a commission even if the owner finds the buyer, whereas exclusive agency lets the owner sell commission-free

The defining difference is that an exclusive right-to-sell listing entitles the broker to a commission on any sale during the term, including one the owner arranges, while an exclusive agency lets the owner sell personally without owing the broker. Both are written agreements, neither guarantees a particular commission rate, and exclusive right-to-sell engages a single broker rather than multiple brokers.

Correct answer: The broker represents the buyer as the buyer's agent in locating and negotiating a purchase

A buyer agency agreement creates a relationship in which the broker represents the buyer as the buyer's agent, owing the buyer fiduciary duties while helping locate properties and negotiate a purchase. It is not an arrangement where the broker represents the seller, where the buyer waives representation, or where the listing broker automatically becomes the buyer's subagent.

Correct answer: The buyer pays the broker directly per the buyer agency agreement

Because the buyer agency agreement is a contract between the buyer and broker, the buyer can compensate the broker directly when the seller will not pay a buyer-broker fee, honoring the agreement the buyer signed. The broker is not required to work for free, no listing service automatically pays the fee, and a seller cannot be legally forced to pay a buyer's broker absent an agreement to do so.

Correct answer: A good-faith deposit showing the buyer's serious intent to perform the contract

Earnest money is a good-faith deposit a buyer submits to demonstrate a serious intent to perform the purchase contract, giving the seller assurance the buyer will follow through. It is not a non-refundable broker fee, not a loan origination fee charged by a lender, and not a county tax, all of which serve different purposes than signaling contractual commitment.

Correct answer: The seller may pursue the deposit as damages for the buyer's breach

When a buyer defaults without a valid contingency, the seller generally may pursue the earnest money as damages for the breach, since the deposit exists to compensate the seller if the buyer fails to perform. The buyer does not automatically recover the deposit after defaulting, the funds are not split with the broker by law, and the deposit is not forfeited to the state.

Correct answer: A condition that must be satisfied or waived before a party is obligated to perform

A contingency is a condition, such as obtaining financing or a satisfactory inspection, that must be met or waived before a party is required to complete the contract. It is not an automatic penalty at signing, does not transfer ownership before closing, and is not a guarantee of value, but rather a conditional limit on the duty to perform.

Correct answer: It gives the buyer more ways to cancel the contract without penalty, reducing the seller's certainty of closing

Each contingency creates a condition that, if unmet, lets the buyer cancel without penalty, so accepting many contingencies gives the buyer more exit points and lowers the seller's certainty that the deal will close. Contingencies do not increase the likelihood of closing, do not raise the purchase price, and do not remove the need for earnest money.

Correct answer: A liquidated damages clause

A clause stating that the seller's sole remedy on the buyer's default is to keep the earnest money is a liquidated damages clause, fixing in advance the damages for breach. A specific performance clause concerns forcing completion of the sale, a subordination clause reorders lien priority, and an acceleration clause concerns demanding full loan repayment on default.

Correct answer: It provides certainty by fixing the damages amount in advance, avoiding the need to prove actual losses

A liquidated damages clause benefits the parties by establishing the damages amount ahead of time, providing certainty and sparing the non-breaching party the burden of proving actual losses, which can be difficult in real estate. It does not guarantee a higher price, does not compel the breaching party to buy, and does not exempt the contract from the statute of frauds writing requirement.

Correct answer: Because each parcel of land is considered unique, so money damages may not adequately substitute

Specific performance fits real estate because every parcel of land is regarded as unique, meaning money damages often cannot adequately replace the particular property a party bargained for. The remedy is not chosen because land is inexpensive, because brokers prefer it, or because it is faster, but because the uniqueness of land makes monetary relief insufficient.

Correct answer: Specific performance

By asking the court to order the seller to deliver the deed and complete the agreed sale, the buyer is seeking specific performance, the equitable remedy that compels a party to perform the contract. Rescission would cancel the contract, liquidated damages would award a preset money sum, and novation would substitute a new party, none of which forces the seller to convey the property.

Correct answer: To prevent fraudulent claims based on alleged oral agreements about land

The statute of frauds requires real estate contracts to be in a signed writing chiefly to prevent fraudulent or mistaken claims based on disputed oral agreements concerning land. It does not set commission rates, require that every contract be recorded, or guarantee that the buyer will obtain financing.

Correct answer: A month-to-month lease for a short period

A short-term lease, such as a month-to-month tenancy that can be performed within one year, is generally enforceable even if oral and does not run afoul of the statute of frauds. A contract to sell a house, a 30-year lease, and a contract conveying a vacant lot all create or transfer interests in land for more than a year and must be in a signed writing.

Correct answer: To keep the offer to sell open and irrevocable for the option period

In exchange for the option consideration, the optionor is obligated to keep the offer to sell open and irrevocable during the option period, giving the optionee time to decide whether to buy. The optionor is not obligated to buy the property, to finance the optionee's purchase, or to pay the optionee's closing costs.

Correct answer: A purchase contract creates a mutual obligation to buy and sell, while an option only gives the optionee a right, not a duty, to buy

A purchase contract binds both parties to buy and sell, whereas an option contract gives the optionee the right but not the obligation to buy within the option period. It is incorrect that an option obligates the buyer, that an option requires no consideration, or that only purchase contracts must be in writing, since both involving interests in land generally fall under the statute of frauds.

Correct answer: At or before a specified early point, such as first substantive contact or before confidential information is exchanged

Agency disclosure laws generally require the licensee to disclose the agency relationship in writing at an early point, such as first substantive contact or before confidential information is shared, so consumers know whom the licensee represents. Waiting until closing or until after the contract is signed would defeat the purpose, and disclosure is not optional.

Correct answer: An agency disclosure

A form provided to a prospective buyer explaining whom the salesperson represents is an agency disclosure, satisfying the requirement to inform consumers of the agency relationship. It is not a listing agreement, which engages a broker to market a seller's property, not a liquidated damages clause, which sets preset damages, and not a buyer agency agreement, which would create representation of the buyer.

Correct answer: Puffing, a non-actionable statement of opinion

Saying a buyer will love the area and calling it the best in the city is puffing, an exaggerated statement of opinion that a reasonable person would not treat as a verifiable fact. It is not a material misrepresentation or fraud, which require false statements of fact, and it is not a disclosure of a latent physical defect in the property.

Correct answer: The consumer recently sold a home through that brokerage, creating an established business relationship

An established business relationship, such as having recently transacted with the brokerage within the prior 18 months, is a recognized exception that allows a call to a registered number for a limited time. A mere belief that the consumer might sell does not create an exception. Calling before 8 a.m. is itself prohibited under telemarketing rules (permitted hours are 8 a.m. to 9 p.m. local time). Blocking caller ID does not create an exception and may itself violate the rules.

Correct answer: Advertising rules requiring the supervising broker or brokerage be identified

Advertising rules generally require disclosure of the supervising broker or brokerage so the public understands the licensee acts under a broker, which a sign showing only the agent's name violates. Trust-account rules govern client funds, the lead-based paint rule governs pre-1978 housing disclosures, and antitrust law governs competitor collusion, none of which addresses sign attribution.

Correct answer: It reflects the law allowing reasonable modifications by a disabled tenant, generally at the tenant's expense

This reflects the Fair Housing Act provision permitting a tenant with a disability to make reasonable physical modifications, generally at the tenant's own expense and with restoration where appropriate. Disability is in fact a protected class, the situation is not blockbusting because no panic selling is involved, and it is not commingling because no trust funds are mixed.

Correct answer: Perfect for a young Christian couple, no children please

The phrase signals a preference based on religion and excludes children, expressing bias against the federally protected classes of religion and familial status, in violation of the Fair Housing Act's prohibition on discriminatory advertising. Describing bedrooms, transit access, renovations, or lease flexibility refers to property features and availability, which are permissible because they do not indicate a protected-class preference.

Correct answer: It generally allows calls to a registered number for a limited period despite registry listing

An established business relationship generally permits contacting a consumer on the registry for a limited period — up to 18 months after the last transaction or 3 months after an inquiry — recognizing a legitimate ongoing relationship. It does not grant permanent or unlimited exemption, does not impose re-registration duties on the consumer, and does not become irrelevant because the registry contains broad exceptions including this one.

Correct answer: Illegal price fixing under antitrust law

An agreement among competing firms to commit to a uniform commission rate is illegal price fixing under antitrust law, because commission rates must be set independently by each firm. It is not lawful coordination, is unrelated to fair-housing steering, and is not merely an advertising matter, since the harm is the collusive agreement on price among competitors.

Correct answer: Recording each client's deposit and disbursement in a reconciled trust-account ledger separate from operating funds

Maintaining a reconciled trust-account ledger that tracks each client's deposit and disbursement separately from operating funds is the strongest protection, because it keeps client money segregated and fully accountable. Combining deposits with personal funds or routing them to an agent's checking account is itself commingling, and holding cash in an office safe fails to provide the required segregation and traceability.

Correct answer: Disability

Disability is the protected class directly implicated, because refusing to rent based on the applicant's use of a wheelchair is discrimination on the basis of disability, which the Fair Housing Act prohibits. Familial status concerns children in the household, national origin concerns ancestry or birthplace, and religion concerns faith, none of which is the basis for this refusal.

Correct answer: Blockbusting

Blockbusting is the prohibited practice, because the flyer urges owners to sell quickly by stoking fear that a protected group is moving in and that values will drop. Steering directs buyers among neighborhoods rather than pressuring owners to sell, redlining is a lender or insurer denial of service by area, and puffing is harmless sales exaggeration unrelated to inducing panic selling.

Correct answer: Discriminatory advertising under fair housing and a violation of truthful-advertising standards

The post raises both discriminatory advertising under the Fair Housing Act, by signaling exclusion of certain groups, and a breach of truthful-advertising standards, by using misleading and biased characterizations. The post does not involve competitor price collusion, trust-fund handling, telemarketing calls, lead-based paint disclosure, or proration math, so those pairings do not fit.

Correct answer: Avoiding solicitation calls to consumers who have opted out of telemarketing

Scrubbing numbers against the registry meets the objective of avoiding solicitation calls to consumers who have chosen not to be contacted by telemarketers. It has nothing to do with verifying protected-class status, documenting commission splits, or confirming a legal description, which belong to fair-housing, contract, and title functions rather than telemarketing compliance.

Correct answer: The conduct is steering, because the agent limited housing choices based on national origin

The most sound conclusion is that the conduct is steering, because the agent restricted the buyer's housing options based on national origin, regardless of any well-meant motive. It is not lawful, because intent does not excuse the limitation; it is not blockbusting, which targets owners with panic selling; and it is not redlining, which is a lender or insurer denial of service rather than an agent's showing choices.

Correct answer: It lets licensees follow up with consumers who have already engaged with the firm without violating registry rules

The exception exists so licensees can follow up with consumers who have already done business with or inquired of the firm, recognizing a legitimate ongoing relationship. It does not authorize cold calling strangers, does not require calling registered numbers, and does not relieve the firm of maintaining company-specific opt-out records.

Correct answer: In a designated trust or escrow account separate from the company's general operating funds

Tenant security deposits should be held in a designated trust or escrow account kept separate from the company's operating funds, ensuring the money remains identifiable and protected. Placing them in an owner's investment account, the payroll account, or the manager's personal savings account would constitute commingling and risk loss or misuse of the funds.

Correct answer: The no-hire pact and the refusal to cooperate with rebate firms are both antitrust violations

Both parts are antitrust violations, because an agreement among competitors not to hire each other's employees is an illegal no-poach agreement and a collective refusal to deal with rebate firms is an illegal group boycott. They are not lawful independent judgment calls because they are concerted, and they are antitrust rather than fair-housing matters since no protected class is involved.

Correct answer: Direct the buyer to the publicly available state registry where that information can be searched

The correct answer is to direct the buyer to the publicly available state registry where that information can be searched. Megan's Law makes registered sex-offender information publicly accessible, and the accepted practice is to refer interested parties to the official registry rather than research, guarantee, or vouch for the data. Refusing entirely, personally guaranteeing the area, or claiming the seller must compile the list each misstates how the public-registry framework works.

Correct answer: It establishes public notification and registry access regarding sex offenders so the public can obtain that information

The correct answer is that it establishes public notification and registry access regarding sex offenders so the public can obtain that information. Megan's Law statutes require that information about registered sex offenders be made publicly available so buyers and the community can look it up. It does not deal with environmental remediation, does not create a uniform federal property-condition form, and does not set the lead-based paint cutoff date, which is a separate federal rule.

Correct answer: The natural breakdown of uranium in soil and rock beneath the foundation

The correct answer is the natural breakdown of uranium in soil and rock beneath the foundation. Radon is a naturally occurring radioactive gas produced as uranium decays in the ground, and it migrates upward into structures through cracks and openings in the foundation. Carpet off-gassing, lead solder in pipes, and circulating mold spores are distinct indoor concerns that do not produce radon.

Correct answer: Elevated radon is present and mitigation should be considered or performed

The correct answer is that elevated radon is present and mitigation should be considered or performed. A reading above the EPA action level signals that radon has accumulated to a level where reducing it through a mitigation system is advisable. A high reading does not automatically void the sale under building code, does not require demolition and rebuilding, and does not force the buyer to waive inspection rights.

Correct answer: When its fibers are disturbed and become airborne so they can be inhaled

The correct answer is when its fibers are disturbed and become airborne so they can be inhaled. Asbestos becomes dangerous primarily once it is friable or disturbed and releases microscopic fibers that people breathe in, leading to respiratory disease. Intact, undisturbed, sealed, or merely sun-exposed asbestos that is not releasing fibers presents far less immediate risk.

Correct answer: Older buildings constructed before asbestos was largely phased out of building products

The correct answer is older buildings constructed before asbestos was largely phased out of building products. Asbestos was widely used in insulation, tiles, and other materials in older construction, so it is most commonly found in those structures rather than newer ones. Brand-new homes are unlikely to contain it, it is not limited to commercial buildings, and its presence is tied to construction era and materials rather than to coastal flood zones.

Correct answer: Releases of petroleum or hazardous substances that contaminate soil and groundwater

The correct answer is releases of petroleum or hazardous substances that contaminate soil and groundwater. Underground storage tank regulation targets the leakage of stored fuels and chemicals that can corrode out of buried tanks and pollute the surrounding soil and water supply. Property tax assessment, riparian water rights, and boundary encroachments are unrelated matters not addressed by underground storage tank rules.

Correct answer: To identify potential contamination and limit exposure to costly cleanup liability before purchasing

The correct answer is to identify potential contamination and limit exposure to costly cleanup liability before purchasing. Environmental assessments on sites with suspected underground tanks help a buyer detect existing contamination and avoid inheriting expensive remediation obligations. Confirming square footage, verifying marketable title, and checking lead-based paint compliance are separate concerns addressed through different processes, not an environmental site assessment.

Correct answer: A permit, because altering regulated wetlands is restricted under environmental law

The correct answer is a permit, because altering regulated wetlands is restricted under environmental law. Filling or dredging protected wetlands generally requires a permit, and approval may be limited or denied to protect the wetland's ecological functions. Ownership does not grant unrestricted authority to alter regulated wetlands, no new deed is required to change a water boundary, and a title insurance endorsement does not authorize physical alteration of the land.

Correct answer: Because they provide ecological functions such as wildlife habitat and water filtration

The correct answer is because they provide ecological functions such as wildlife habitat and water filtration. Wetlands are protected for their environmental value, including supporting wildlife and naturally filtering and storing water, which is why their development is regulated. Protection is not about zeroing out assessed value, granting tax exemption, or conveying littoral rights, none of which is the basis for wetland regulation.

Correct answer: A psychological stigma attached to the property

The correct answer is a psychological stigma attached to the property. A stigma arises from a non-physical event, such as a notorious crime, that makes some buyers view the property as less desirable even though nothing is physically wrong. Functional obsolescence concerns physical or design shortcomings, a latent defect is a hidden physical problem, and a recorded encumbrance is a title matter, none of which captures reputation-based stigma.

Correct answer: No, because the federal lead-based paint disclosure applies only to target housing built before 1978

The correct answer is that no disclosure is required because the federal lead-based paint rule applies only to target housing built before 1978. A 1981 home falls outside the pre-1978 cutoff, so the disclosure form and EPA pamphlet are not federally mandated. The rule is not triggered by every rental, does not hinge on whether the tenant has young children, and does apply to both sales and leases of qualifying older housing.

Correct answer: The EPA-approved lead hazard information pamphlet given to the buyer

The correct answer is the EPA-approved lead hazard information pamphlet given to the buyer. Federal law requires that buyers of pre-1978 housing receive the EPA pamphlet on protecting families from lead, along with the disclosure form and any known records. A radon soil report, a Closing Disclosure, and a wetlands delineation map address entirely different issues and do not fulfill the lead-based paint information requirement.

Correct answer: To prevent lenders from holding excessive borrower funds beyond what is needed to pay taxes and insurance

The correct answer is to prevent lenders from holding excessive borrower funds beyond what is needed to pay taxes and insurance. The Real Estate Settlement Procedures Act limits the escrow cushion a lender may require so borrowers are not forced to over-fund their impound accounts. The rule does not guarantee a lower interest rate, does not affect whether title insurance is needed, and does not set the loan-to-value ratio, so those choices misstate the consumer-protection purpose of the escrow limit.

Correct answer: A new three-business-day review period is triggered before consummation

The correct answer is that a new three-business-day review period is triggered before consummation. When certain significant changes occur, such as the annual percentage rate exceeding tolerance, a change in the loan product, or the addition of a prepayment penalty, a corrected Closing Disclosure must be issued and a fresh three-business-day waiting period restarts. The closing cannot simply proceed without that wait, the borrower does not forfeit earnest money because of a lender change, and the appraisal is not required to be redone, so those alternatives are incorrect.

Correct answer: As credits to the buyer

The correct answer is as credits to the buyer. On a settlement statement, amounts that reduce what the buyer must pay, such as the new loan proceeds and the earnest money already deposited, appear as credits to the buyer, while costs the buyer owes appear as debits. They are not debits, which increase the buyer's obligation, they are not seller commissions, and they are not discount points, so those classifications misidentify items that lower the buyer's cash to close.

Correct answer: Private mortgage insurance

The correct answer is private mortgage insurance. Private mortgage insurance is charged on conventional loans with less than a 20 percent down payment to protect the lender, and under federal rules it can generally be canceled once the loan balance is paid down to a set percentage of the property's original value. A loan origination fee is a one-time charge for processing the loan, a documentary transfer tax is a one-time government charge on conveyance, and a homeowners association assessment funds the community, none of which is the cancelable lender-protection premium on a low-down-payment conventional loan.

Correct answer: Private mortgage insurance applies to conventional loans and can generally be removed as equity grows, whereas some government-loan mortgage insurance lasts the life of the loan

The correct answer is that private mortgage insurance applies to conventional loans and can generally be removed as equity grows, whereas some government-loan mortgage insurance lasts the life of the loan. Private mortgage insurance is tied to conventional financing with low down payments and may be canceled once sufficient equity accumulates, unlike certain government-loan insurance premiums that can remain for the loan's term. It is paid by the borrower to protect the lender, it is required on low rather than high down payments, and it does not replace the promissory note, so those statements are inaccurate.

Correct answer: It declines to zero by the end of the term

The correct answer is that it declines to zero by the end of the term. In a fully amortized loan, each level payment covers the interest due and reduces principal, so the balance steadily falls until it is completely paid off at the end of the term. The balance does not grow toward a balloon, which describes a partially amortized loan, it does not stay unchanged, which describes interest-only or term loans, and it does not move with an index, which describes an adjustable-rate loan, so those choices misdescribe amortization.

Correct answer: An interest-only loan in which principal is not reduced during that period

The correct answer is an interest-only loan in which principal is not reduced during that period. An interest-only loan requires payments that cover just the interest for an introductory period, so the principal balance stays the same until amortization or a balloon begins. It is not negatively amortizing, where unpaid interest is added to the balance, it is not fully amortized, which steadily reduces principal, and it does not pay itself off, so those alternatives mischaracterize an interest-only structure.

Correct answer: The margin

The correct answer is the margin. On an adjustable-rate mortgage, the margin is the fixed percentage the lender adds to the movable index to determine the fully indexed rate at each adjustment, and it stays constant for the life of the loan. The index is the published economic indicator that moves, a cap limits how far the rate can rise, and a point is prepaid interest paid at closing, so none of those is the constant amount added to the index.

Correct answer: A teaser rate

The correct answer is a teaser rate. A teaser rate is an artificially low introductory rate on an adjustable-rate mortgage, set below the fully indexed rate to attract borrowers, after which the rate adjusts toward the index plus margin. A par rate is the standard market rate with no adjustments, a lifetime cap limits total increases over the loan, and a discount point is prepaid interest, none of which describes the temporary below-market introductory rate.

Correct answer: It permits a lower minimum down payment than most conventional loans and requires mortgage insurance premiums

The correct answer is that it permits a lower minimum down payment than most conventional loans and requires mortgage insurance premiums. An FHA-insured loan is designed to expand access to financing with a low minimum down payment and more flexible qualifying, but it requires both an upfront and an annual mortgage insurance premium. The no-down-payment, veterans-only description fits a VA loan, the above-conforming-limit description fits a jumbo loan, and FHA rules allow limited seller contributions toward closing costs, so those statements are incorrect.

Correct answer: An acceleration clause

The correct answer is an acceleration clause. An acceleration clause allows the lender, upon a borrower's default, to demand the full unpaid balance at once rather than waiting for each scheduled payment, and it is what makes foreclosure for the entire debt possible. A subordination clause changes lien priority, a defeasance clause cancels the security instrument once the debt is paid, and a habendum clause defines the extent of ownership in a deed, so none of those grants the lender the right to call the whole balance due on default.

Correct answer: $335,000

The value used was $335,000. When the loan and the LTV ratio are known, divide the loan by the ratio: $268,000 / 0.80 = $335,000. Dividing the loan amount by the loan-to-value percentage recovers the underlying property value.

Correct answer: $5,760

The annual property tax is $5,760. A mill equals $0.001 per dollar of assessed value, so 18 mills is $0.018 per dollar; multiply the assessed value by that rate: $320,000 $\times$ 0.018 = $5,760. Converting mills into a decimal before multiplying prevents place-value errors.

Correct answer: 15 mills

The required rate is 15 mills. Divide the revenue needed by the total assessed value: $9,000,000 / $600,000,000 = 0.015, which equals 15 mills since one mill is 0.001. Translating the resulting decimal into mills requires multiplying by 1,000.

Correct answer: $704

The transfer tax is $704. Divide the price into $500 increments: $640,000 / $500 = 1,280 increments, then multiply by the per-increment rate: 1,280 $\times$ $0.55 = $704. The price must be broken into the taxable units before applying the rate.

Correct answer: $575,000

The sale price was $575,000. Each $1,000 of price carries $2.00 of tax, so the number of $1,000 units equals $1,150 / $2.00 = 575 units, and 575 $\times$ $1,000 = $575,000. Working the per-thousand formula backward converts the tax paid into the sale price.

Correct answer: $1,440

The seller is debited and the buyer credited $1,440. The daily tax is $4,380 / 365 = $12 per day, and the seller owned the property for 120 days of the unpaid taxes: 120 $\times$ $12 = $1,440. Because the taxes are unpaid (in arrears), the seller's share becomes a credit to the buyer who will pay the full bill.

Correct answer: $720

The buyer is credited $720. The daily rent is $2,400 / 30 = $80 per day, and the buyer owns the property for the 9 remaining days (the 22nd through the 30th): 9 $\times$ $80 = $720. Pre-collected rent for days after closing belongs to the new owner.

Correct answer: $1,280,000

The investor should pay no more than $1,280,000. In the IRV relationship, Value equals Income divided by Rate: $96,000 / 0.075 = $1,280,000. Dividing net operating income by the desired cap rate produces the supportable purchase price.

Correct answer: $135,000

The implied net operating income is $135,000. In the IRV relationship, Income equals Value multiplied by Rate: $1,500,000 $\times$ 0.09 = $135,000. When value and rate are known, multiplying them isolates the income figure.

Correct answer: $6,375

The cost of the points is $6,375. Each discount point is 1% of the loan, so 1.5 points equal 1.5% of $425,000: $425,000 $\times$ 0.015 = $6,375. Points are computed as a percentage of the loan amount, converted to a decimal before multiplying.

Correct answer: 150 feet

The tract is about 150 feet wide. One half acre equals 43,560 / 2 = 21,780 square feet, and width equals area divided by depth: 21,780 / 145 = 150.2 feet, which rounds to 150 feet. Dividing the known area by the known dimension recovers the missing dimension.

Correct answer: The Texas Real Estate Commission (TREC)

TRELA (Texas Occupations Code Chapter 1101) creates the Texas Real Estate Commission (TREC) and gives it authority to license and regulate real estate brokers and sales agents. TDLR regulates many other occupations but not real estate licensees; TAR is a private trade association.

Correct answer: Nine members appointed by the Governor

Texas Occupations Code Sec. 1101.051 provides that TREC consists of nine members appointed by the Governor with the advice and consent of the Senate: six members must be licensed brokers and three must be members of the public not regulated by the Commission.

Correct answer: Sponsored by an active Texas-licensed broker

Under TRELA Sec. 1101.351 and TREC rules, a sales agent's license is inactive until the agent is sponsored by an active Texas-licensed broker. A sales agent may not work independently and must act on behalf of and be supervised by the sponsoring broker.

Correct answer: 180 hours

TREC requires 180 classroom hours of qualifying education for a sales agent license, consisting of six 30-hour courses: Principles of Real Estate I, Principles of Real Estate II, Law of Agency, Law of Contracts, Promulgated Contract Forms, and Real Estate Finance. (270 hours is the broker requirement of additional qualifying education.)

Correct answer: Principles of Real Estate I and II, Law of Agency, Law of Contracts, Promulgated Contract Forms, and Real Estate Finance

TREC's qualifying education for a sales agent license consists of six 30-hour courses: Principles of Real Estate I, Principles of Real Estate II, Law of Agency, Law of Contracts, Promulgated Contract Forms, and Real Estate Finance. Legal Update I and II are continuing education (CE) courses, not pre-license qualifying courses.

Correct answer: After three failed attempts (30 additional classroom hours per failed portion)

Under TREC rules, after three failed attempts on the national and/or state portion of the exam, an applicant must complete an additional 30 classroom hours of qualifying real estate education for each failed portion before being allowed to register for re-examination.

Correct answer: A national portion and a Texas state-law portion, each scored separately

The TREC exam (administered by Pearson VUE) has two separately scored sections: a national/general portion and a Texas-specific state-law portion. Both must be passed; a passing result on one section is valid for one year if the applicant must retake the other.

Correct answer: At the time of the first substantive communication with the party about a specific property

TRELA Sec. 1101.558 requires a license holder to provide the written IABS notice (TREC No. IABS 1-0) at the time of the first substantive communication with a party relating to a proposed transaction about specific real property.

Correct answer: A residential lease of less than one year where a sale is not being considered

Under TRELA Sec. 1101.558, the IABS notice is not required when: (1) the transaction is a residential lease of less than one year and no sale is being considered; (2) the license holder meets with a party already represented by another license holder; or (3) the communication occurs at an open house and concerns only that property.

Correct answer: An intermediary relationship

Texas does not recognize 'dual agency.' Under TRELA Sec. 1101.559, a broker who represents both parties in a transaction acts as an 'intermediary.' Dual agency is illegal terminology in Texas; the statutorily correct relationship is the intermediary relationship.

Correct answer: Obtain written consent from both parties, with the consent stating who pays the broker

Under TRELA Sec. 1101.559, a broker may act as intermediary only if the broker obtains written consent from each party to the transaction, and the written consent states the source of any expected compensation to the broker. The IABS form and a written listing/buyer-representation agreement are typically used to obtain this consent.

Correct answer: Different associated license holders to communicate with, advise, and carry out instructions of each party

Under TRELA Sec. 1101.560, with the written consent of the parties, an intermediary broker may appoint different associated license holders to each party so each appointee can communicate with, carry out instructions of, and provide opinions and advice to the party to whom they are appointed. The same license holder cannot be appointed to both parties.

Correct answer: That the seller will accept a price less than the asking price

Under TRELA Sec. 1101.651(d), an intermediary may not disclose that the seller will accept a price less than the asking price, that the buyer will pay more than the offered price, the motivations of a party, or confidential information unless authorized in writing. The broker must still disclose known material defects.

Correct answer: The Texas Real Estate Broker-Lawyer Committee

Under TRELA Sec. 1101.155, the Broker-Lawyer Committee (six brokers appointed by TREC and six attorneys appointed by the State Bar) drafts and revises standard contract forms, which the Commission then adopts by rule (22 TAC Chapter 537).

Correct answer: Use the promulgated form as written and only fill in blanks (not draft new contract language)

Under TRELA Sec. 1101.654 and TREC rule 22 TAC 537.11, a license holder must use the appropriate TREC-promulgated form and may only complete the blanks. Drafting contract language constitutes the unauthorized practice of law; license holders may not add provisions or make blank-form changes outside narrow permitted additions.

Correct answer: The One to Four Family Residential Contract (Resale)

The TREC One to Four Family Residential Contract (Resale), TREC No. 20-series, is the standard promulgated form for resale of an existing one-to-four-unit residential dwelling. New construction, condos, and farm/ranch transactions use their own dedicated promulgated forms.

Correct answer: The seller of residential real property comprising not more than one dwelling unit

Texas Property Code Sec. 5.008 requires the SELLER of residential real property of not more than one dwelling unit to give the buyer a written Seller's Disclosure Notice of the seller's knowledge of the property's condition. It is the seller's disclosure, not the broker's or inspector's.

Correct answer: A transfer pursuant to a court order or foreclosure sale

Property Code Sec. 5.008(e) exempts certain transfers from the Seller's Disclosure Notice, including transfers under a court order or foreclosure, transfers by a trustee in bankruptcy, transfers to a spouse or relative, and transfers between co-owners, among others. Routine arm's-length residential sales are NOT exempt.

Correct answer: Provide the buyer a statutory MUD notice disclosing the district, its tax rate, and bonded indebtedness before the contract is final

Texas Water Code Sec. 49.452 requires the seller of property in a MUD to give the buyer a prescribed written notice describing the district, its standby fees, tax rate, and bonded indebtedness before the buyer is obligated under the contract. A similar notice is required for property in a Public Improvement District (PID) under Property Code Sec. 5.014.

Correct answer: 100-year floodplain or has had flooding/flood-damage history (per Property Code Sec. 5.008 notice)

The Texas Seller's Disclosure Notice (Property Code Sec. 5.008) includes specific questions about flooding, including whether the property is in a 100-year floodplain, a flood pool, or a reservoir, and whether the property has flooded or has had flood insurance claims. Texas expanded these flood-disclosure questions effective September 1, 2019.

Correct answer: The federal lead-based paint disclosure and the EPA pamphlet

Federal law (the Residential Lead-Based Paint Hazard Reduction Act / 42 U.S.C. 4852d) requires sellers of target housing built before 1978 to disclose known lead-based paint, provide the EPA pamphlet, and give a 10-day opportunity to test. TREC's Addendum for Seller's Disclosure of Information on Lead-Based Paint (TREC OP-L) is used to comply.

Correct answer: In a designated trust or escrow account, separate from the broker's operating funds

TREC rule 22 TAC 535.146 requires a broker who holds money belonging to others to maintain it in a trust or escrow account separate from the broker's own funds. Commingling trust money with the broker's operating funds is prohibited and is grounds for disciplinary action.

Correct answer: No; a sales agent must turn all money received over to the sponsoring broker

TREC rule 22 TAC 535.146(b)(2) prohibits a sales agent from maintaining a trust or escrow account. A sales agent must immediately deliver any money received in a transaction to the agent's sponsoring broker, who is accountable for the funds.

Correct answer: Four years from the date the document is received or created by the broker

TREC rule 22 TAC 535.146(c) and 535.2 require a broker to maintain trust/escrow and transaction documents for four years from the date the document is received or created by the broker (the period is longer if litigation occurs).

Correct answer: Commingling, which is a violation of TRELA and TREC rules

Commingling, mixing money belonging to others with the broker's own funds, violates TRELA Sec. 1101.652(b)(11) and TREC rule 22 TAC 535.146. It is grounds for disciplinary action including suspension or revocation of the license.

Correct answer: 18 hours, including 4 hours Legal Update I, 4 hours Legal Update II, and 3 hours contract-related coursework

TREC requires 18 hours of CE per two-year renewal: 4 hours Legal Update I, 4 hours Legal Update II, 3 hours of contract-related coursework, and 7 hours of electives. (First-time renewing sales agents must instead complete 90 hours of Sales Agent Apprentice Education, or SAE.)

Correct answer: 90 hours of Sales Agent Apprentice Education (SAE)

For the first license renewal, TREC requires a sales agent to complete 90 hours of Sales Agent Apprentice Education (SAE). Effective October 1, 2023, this 90 hours must include an approved 30-hour Real Estate Brokerage course, along with Legal Update I and II.

Correct answer: Two years

Under TRELA and TREC rules, a real estate sales agent (and broker) license is issued for a two-year term and must be renewed every two years, with the corresponding CE/SAE requirements completed before renewal.

Correct answer: Suspending or revoking a license and imposing an administrative penalty

Under TRELA Sec. 1101.701-702 and 1101.652, TREC may reprimand, suspend, or revoke a license, deny a license, and impose administrative penalties (up to a statutory maximum per violation per day). Criminal penalties and civil damages are handled by the courts, not the Commission.

Correct answer: Making a material misrepresentation or failing to disclose a known latent defect

TRELA Sec. 1101.652 lists prohibited conduct that subjects a license holder to discipline, including making material misrepresentations, failing to disclose a latent structural defect, commingling funds, acting negligently or incompetently, and engaging in dishonest dealing or fraud.

Correct answer: Reimburse aggrieved persons who obtain a court judgment against a license holder for certain violations and cannot collect

Under TRELA Subchapter M (Sec. 1101.601 et seq.), the Real Estate Recovery Trust Account reimburses members of the public who obtain a final court judgment against a license holder for fraud, misrepresentation, or other prohibited acts and are unable to collect, subject to statutory caps per transaction and per license holder.

Correct answer: Familial status (presence of children under 18 in a household)

The federal Fair Housing Act and the Texas Fair Housing Act (Property Code Chapter 301) prohibit discrimination based on race, color, religion, sex, national origin, disability, and familial status. The Texas Fair Housing Act largely mirrors the federal classes and is enforced by the Texas Workforce Commission Civil Rights Division.

Correct answer: The Texas Workforce Commission, Civil Rights Division

The Texas Fair Housing Act (Property Code Chapter 301) is administered and enforced by the Texas Workforce Commission Civil Rights Division. TREC may separately discipline a license holder for fair-housing violations, but the Act itself is enforced by the TWC.

Correct answer: Directing prospective buyers toward or away from neighborhoods based on a protected characteristic

Steering, channeling prospects toward or away from particular areas based on race, color, religion, sex, national origin, disability, or familial status, is prohibited under the federal and Texas Fair Housing Acts and subjects a license holder to discipline under TRELA.

Correct answer: Community property owned equally by both spouses

Under Texas Family Code Sec. 3.002-3.003, property acquired by either spouse during marriage is presumed community property. Separate property (Family Code Sec. 3.001) is property owned before marriage or acquired during marriage by gift, devise, or descent.

Correct answer: The joinder (signature) of both spouses, even if title is held in only one spouse's name

Texas Family Code Sec. 5.001 provides that whether the homestead is separate or community property, one spouse may not sell, convey, or encumber the homestead without the joinder of the other spouse, except in limited circumstances. Both spouses must sign the conveyance.

Correct answer: Forced sale by most general creditors

Under the Texas Constitution (Art. XVI, Sec. 50) and Property Code Chapter 41, the homestead is protected from forced sale for the claims of most general creditors. Exceptions include purchase-money liens, property taxes, mechanic's/materialman's liens with proper consent, and home-equity loans meeting constitutional requirements.

Correct answer: Not more than 10 acres

Texas Property Code Sec. 41.002 limits an urban homestead to not more than 10 acres (one or more contiguous lots) with improvements. A rural homestead is limited to 200 acres for a family or 100 acres for a single adult.

Correct answer: Not more than 200 acres

Texas Property Code Sec. 41.002(b) limits a rural homestead to 200 acres for a family and 100 acres for a single adult (not part of an urban homestead), used for the purposes of a home or to support the family.

Correct answer: The escrow agent generally cannot release contested funds without written agreement of the parties or a court order

Under the TREC contract and Texas Property Code Sec. 5.077-related principles, an escrow agent faced with conflicting demands generally may not disburse contested earnest money without the written agreement of both parties or a court order, to avoid liability. TREC does not adjudicate earnest money disputes between the parties.

Correct answer: An unrestricted right to terminate the contract within the negotiated option period

Paragraph 23 of the TREC One to Four Family Residential Contract provides for an option fee that gives the buyer the unrestricted right to terminate the contract within a specified option period (commonly used for inspections). It is distinct from earnest money.

Correct answer: Prohibited from drafting legal instruments, as that is the unauthorized practice of law

Under TRELA Sec. 1101.654 and 22 TAC 537.11, a license holder may not draft legal documents (such as deeds or notes) or otherwise practice law. License holders may only complete the blanks on TREC-promulgated forms; drafting instruments is the unauthorized practice of law.

Correct answer: The name of the broker or the brokerage (license holder identification)

TREC rule 22 TAC 535.155 prohibits 'blind ads.' Advertising by a license holder must include the broker's name (or the licensed broker/brokerage), so the public can identify the responsible broker. A sales agent must advertise under the supervision and in the name of the sponsoring broker.

Correct answer: The license holder must disclose in writing that he or she is a licensed real estate agent acting on the agent's own behalf

TRELA Sec. 1101.652(b)(13) and TREC rules require a license holder buying or selling property for the license holder's own account (or for a relative or business in which the license holder has an interest) to disclose in writing that the person is a licensed real estate agent.

Correct answer: Disclose the known material defect; license holders cannot hide latent defects from a party

Under TRELA Sec. 1101.652(b)(3), failing to disclose a latent structural defect or other material defect known to the license holder is grounds for discipline. Even an intermediary's confidentiality duties do not permit concealing known material defects.

Correct answer: A listing agreement must be in writing and signed to be enforceable for the broker to collect a commission

Under TRELA Sec. 1101.806(c), a person may not maintain an action to recover a commission unless the agreement (or a memorandum) is in writing and signed by the party to be charged. TREC rule 22 TAC 535.148 also requires written agreements to include a definite termination date. TREC does not promulgate listing forms (those are usually TAR forms).