Texas Real Estate Sales Agent License, Practice Exams

A seller's broker, without charging the buyer, offers to help the buyer complete and submit a loan application, then carelessly misses the lender's deadline. What is the broker's position?

1. Free of liability, having charged the buyer nothing
2. Liable only to the seller, its sole principal
3. Liable, as a gratuitous agent, for lack of care ✓
4. Liable only if a written agency agreement exists

Why: Reference Book chapter 10 states that a broker who undertakes, without charge, to help the buyer process a loan application is a gratuitous agent of the buyer for that purpose, and a failure to use reasonable care in that capacity can make the broker liable. Lack of payment does not remove the duty of care once the task is taken on.

An advertisement for home loans says only: 'Just 5% down!' Under Regulation Z, what else must the ad state?

1. Nothing more, as a down payment is not a trigger term
2. The lender's license number and a toll-free number
3. The note rate and an estimate of total closing costs
4. The repayment terms and the annual percentage rate ✓

Why: 12 CFR 1026.24(d)(1) makes the amount or percentage of any down payment a triggering term, and 1026.24(d)(2) then requires the ad to state the down payment, the terms of repayment and the annual percentage rate, using that term. A toll-free number is an option only for radio and television ads under 1026.24(g).

Land is worth $90,000 as if vacant. The improvements have a replacement cost new of $360,000, an effective age of 12 years and a total economic life of 60 years. What value does the cost approach indicate, using the age-life method?

1. $360,000
2. $378,000 ✓
3. $450,000
4. $468,000

Why: Reference Book chapter 15's cost approach: value the land as if vacant, estimate cost new of the improvements, deduct accrued depreciation, and add the land. Twelve of 60 years is 20%, so depreciation is $72,000, the improvements are worth $288,000, and adding the $90,000 land gives $378,000. Land is not depreciated, which is why $360,000 is wrong.

A seller knew of lead paint in the attic but never told her listing agent, who had informed her of her disclosure duties under the rule. The buyer later finds the paint. Is the agent liable for the nondisclosure?

1. Yes, as the agent must personally test for lead
2. No, having informed the seller of her obligations ✓
3. Yes, since agents are strictly liable for any omission
4. No, because only the seller signs the lead attachment

Why: 40 CFR 745.115(b) states that if the agent has informed the seller of her obligations under 745.107, 745.110 and 745.113, the agent is not liable for failing to disclose lead-based paint known by the seller but not disclosed to the agent. The agent does sign the attachment (745.113(a)(7)), and nothing requires an agent to test.

The holder of a first mortgage forecloses and the property is sold. What happens to a second mortgage recorded after the first?

1. It moves up into first position
2. The sale buyer takes subject to it
3. Its lien on the property is wiped out ✓
4. It survives until its holder consents

Why: Reference Book chapter 12 explains that a foreclosure by the holder of a first deed of trust or mortgage extinguishes junior deeds of trust, mortgages and other later-recorded liens, except super liens such as property taxes. The junior holder is then a sold-out junior, whose lien no longer burdens the land.

The recovery trust account pays a claim on a license holder's behalf. When must TREC revoke the license?

1. If not repaid within 30 days of notice. ✓
2. Immediately, whether or not the holder repays.
3. Only if a second claim is later paid.
4. Only if a court orders the revocation.

Why: Occupations Code 1101.655(a) provides that THE COMMISSION SHALL REVOKE a license if it makes a payment from the recovery trust account and THE HOLDER DOES NOT REPAY THE FULL AMOUNT BEFORE THE 31ST DAY AFTER THE DATE THE COMMISSION PROVIDES NOTICE. The order may be probated, and no new license issues until repayment with interest.

A recorded option expires without being exercised. What happens to it, and what should the optionee do?

1. It ends on its own; a quitclaim deed clears the record ✓
2. It renews for a like term unless the owner objects in writing
3. It becomes a right of first refusal for the optionee
4. It stays in force until the owner goes to court to cancel it

Why: Reference Book chapter 6 states that an option terminates automatically when the time specified expires without exercise, and that time is of the essence in an option and strictly construed. If the option was recorded and not exercised, the optionee should remove it from the records by recording a quitclaim deed.

What offense does a person commit by acting as a broker or sales agent without a license?

1. A Class A misdemeanor. ✓
2. A state jail felony.
3. A Class C misdemeanor.
4. No offense; only a civil penalty applies.

Why: Occupations Code 1101.758 provides that A PERSON COMMITS AN OFFENSE IF THE PERSON ACTS AS A BROKER OR SALES AGENT WITHOUT HOLDING A LICENSE, and that the offense IS A CLASS A MISDEMEANOR. Civil penalties under 1101.753 and 1101.754 apply in addition.

An applicant passes the national part of the exam in March but fails the state part. How long does the national pass remain good?

1. Until her third failure of the state part.
2. Two years from the date the application was filed.
3. One year from the date she passed it. ✓
4. Six months from the date she passed it.

Why: 22 TAC 535.57(d) provides that results for the national part and state part are each valid for one year from the date that part is passed. Occupations Code 1101.401(f) separately requires the examination requirement to be satisfied within one year after the application is filed.

What does a quitclaim deed carry with it?

1. Implied warranties but no after-acquired title
2. No warranties and no after-acquired title ✓
3. After-acquired title but no warranties
4. Full warranties and any after-acquired title

Why: Reference Book chapter 7 states that a quitclaim deed carries no implied warranties, guarantees nothing about the grantor's ownership, and does not convey any after-acquired title. It passes only the interest the grantor has when it is executed, if any.

A listing broker presents an offer and tells the seller he is also acting for the buyer. He does not mention that the buyer is an investor planning a quick resale through him, and he advises the seller not to counter. What is the best view?

1. Disclosing the dual agency alone did not satisfy his duty ✓
2. His duty was met once he disclosed the dual agency
3. The buyer's resale plans were confidential and not his to tell
4. A dual agent owes the seller only honesty, not full disclosure

Why: Reference Book chapter 10 describes a case on these facts holding that the broker did not discharge his duty merely by disclosing the dual agency; he had to disclose all material facts that might affect the seller's decision, including the buyer's investment purpose and his own stake. A disclosed dual agent still owes each party full disclosure of material facts.

May an unlicensed assistant unlock a listed house for a buyer, or host an open house?

1. Yes, both, if the broker authorizes it.
2. No; both are showing, which needs a license. ✓
3. Only the open house.
4. Only unlocking, if the buyer is accompanied.

Why: 22 TAC 535.4(c) provides that UNLESS EXEMPTED, A PERSON MUST BE LICENSED TO SHOW A PROPERTY, and that to show INCLUDES CAUSING OR PERMITTING THE PROPERTY TO BE VIEWED, UNLOCKING OR PROVIDING ACCESS for a prospective buyer or tenant, AND HOSTING AN OPEN HOUSE.

A broker marketing a developer's lots offers entry in a prize draw to anyone who buys a lot. What does the Act say?

1. It is allowed if the prize is under $1,000.
2. Selling real property by lottery is a ground for discipline. ✓
3. It is allowed if TREC is notified first.
4. It is allowed if every buyer receives a prize.

Why: Occupations Code 1101.652(b)(14) makes it a ground for discipline to SOLICIT, SELL, OR OFFER FOR SALE REAL PROPERTY BY MEANS OF A LOTTERY, and (b)(15) BY MEANS OF A DECEPTIVE PRACTICE.

A buyer signs an agreement only for showings under section 1101.562. What limits apply to it?

1. It must be exclusive and last at least 30 days.
2. It may run for up to one year.
3. It must be recorded in the county records.
4. Non-exclusive, and 14 days at most. ✓

Why: Occupations Code 1101.563(e) provides that a written agreement for SHOWING REAL PROPERTY UNDER SECTION 1101.562 MAY NOT BE AN EXCLUSIVE AGREEMENT or STATE A TERMINATION DATE MORE THAN FOURTEEN DAYS from the date it is entered into. Further brokerage acts need a separate agreement under (d).

A broker delegates supervision for an expected six months. By when must TREC be told the supervisor's name?

1. Within 30 days of the delegation ✓
2. Within 10 days of the delegation
3. At the broker's next renewal
4. Only if the supervisor is a sales agent

Why: 22 TAC 535.2(e) requires the broker to PROVIDE THE NAME OF EACH DELEGATED SUPERVISOR TO THE COMMISSION WITHIN 30 DAYS OF ANY SUCH DELEGATION THAT HAS LASTED OR IS ANTICIPATED TO LAST MORE THAN THREE CONSECUTIVE MONTHS, and to notify again within 30 days after it ends.

A deed describes a parcel as Lot 14, Block B of a named subdivision, citing the book and page of the recorded map. Which method of description is this?

1. Metes and bounds
2. Recorded map, or lot and block ✓
3. Rectangular government survey system
4. Informal street reference

Why: Reference Book chapter 4 names three common methods: recorded map, government section and township, and metes and bounds. A recorded-map description identifies the lot, the block and the map on file, with the city, county and state.

A lender asks a sales agent, who holds no appraiser license, for an appraisal of a home to support a loan. What may she do?

1. Give a price opinion, not called an appraisal. ✓
2. Appraise it, if her broker signs the appraisal.
3. Appraise it, as a sales agent may value homes.
4. Give nothing at all on the home's likely price.

Why: 22 TAC 535.17(a) provides that a license holder may not perform an appraisal of, or provide an opinion of value for, real property unless licensed or certified under Occupations Code Chapter 1103. Occupations Code 1101.002 treats a written price analysis that is not referred to as an appraisal as brokerage, and 535.17(b) requires it to carry the statement that it is not an appraisal.

An owner holds a standard-coverage title policy. A claim later arises from a forged deed buried in the chain of title. Is the loss covered?

1. No; forgery is an off-record risk the policy excludes
2. Yes; standard coverage includes forgery in the chain ✓
3. No, unless the owner bought an extended-coverage policy
4. Only if the forged deed was recorded after the policy

Why: Reference Book chapter 5 lists off-record hazards such as forgery, impersonation and lack of capacity among the risks the standard policy protects against, in addition to risks of record. Its exclusions are matters such as unrecorded easements and the rights of parties in possession, which inspection or survey would reveal.

By when must a seller deliver the Seller's Disclosure Notice?

1. By the effective date. ✓
2. At closing, with the deed.
3. Within 10 days after the contract.
4. Before the first showing.

Why: Property Code 5.008(f) provides that THE NOTICE SHALL BE DELIVERED BY THE SELLER TO THE PURCHASER ON OR BEFORE THE EFFECTIVE DATE OF AN EXECUTORY CONTRACT, and that if it is not, THE PURCHASER MAY TERMINATE THE CONTRACT FOR ANY REASON WITHIN SEVEN DAYS AFTER RECEIVING THE NOTICE.

Under a race-notice statute, an owner gives Bank B a mortgage dated June 1 and recorded June 20, and Bank C a mortgage dated June 10 and recorded June 15. Bank C knew nothing of Bank B's loan. Whose mortgage has priority?

1. Bank C's, recorded first without notice ✓
2. Bank B's, because its mortgage was signed first
3. Neither; the banks share the proceeds pro rata
4. Bank B's, as long as it recorded within 30 days

Why: Reference Book chapter 5 gives this example and concludes that Bank C's mortgage is superior only if C did not have notice of B's mortgage on or before June 15. Under a race-notice statute the party who records first without notice wins; the date of signing does not control. Recording statutes differ from state to state.

Transfer tax is $2.20 per $500 of price or fraction of $500, and deed recording is a flat $95; the seller pays both. The price is $389,250. What do the two cost the seller?

1. $953
2. $1,713.80
3. $1,807.70
4. $1,808.80 ✓

Why: Reference Book chapter 26's rate formula applies: $389,250 / $500 = 778.5, and a fraction counts as a whole unit, so 779 x $2.20 = $1,713.80, plus the $95 fee = $1,808.80. Not rounding up gives $1,807.70; leaving out the fee gives $1,713.80.

A sales agent, for a fee, drafts a custom deed for a client's transfer. What follows under the Act?

1. TREC must suspend or revoke the license. ✓
2. Nothing, if the deed is later reviewed by a title company.
3. Nothing, if the client signs a waiver of legal advice.
4. A warning only, on the first occasion.

Why: Occupations Code 1101.654(a) requires the commission to SUSPEND OR REVOKE the license of a holder who is not a Texas attorney and who, for consideration, DRAFTS AN INSTRUMENT, OTHER THAN A FORM DESCRIBED BY SECTION 1101.155, THAT TRANSFERS OR OTHERWISE AFFECTS AN INTEREST IN REAL PROPERTY, or ADVISES ON THE VALIDITY OF TITLE.

For how long do Texas Real Estate Commission members serve?

1. Four-year terms
2. Staggered six-year terms ✓
3. Two-year terms
4. At the pleasure of the governor

Why: Occupations Code 1101.055(a) provides that COMMISSION MEMBERS SERVE STAGGERED SIX-YEAR TERMS, WITH THE TERMS OF THREE MEMBERS EXPIRING JANUARY 31 OF EACH ODD-NUMBERED YEAR. Only the presiding officer's role as presiding officer is at the governor's pleasure.

Two months into a six-month exclusive right-to-sell listing, a seller revokes it without cause. Which statement is accurate under general agency law?

1. The revocation is void until the listing term runs out
2. The revocation ends the agency, but she may owe damages ✓
3. The revocation is valid and frees her of all liability
4. The agency survives because the broker has a commission interest

Why: Reference Book chapter 10 states that the principal has an absolute power to revoke an agency at any time unless it is coupled with an interest, but not necessarily the right, and may be liable for breach of contract. A broker's right to earn a commission is not an interest that prevents revocation.

What is the most TREC may impose as an administrative penalty?

1. $1,000 for each violation, however long it continues
2. $10,000 for each violation
3. $5,000 in total for all violations in one case
4. $5,000 per violation, per day ✓

Why: Occupations Code 1101.702(a) provides that AN ADMINISTRATIVE PENALTY MAY NOT EXCEED $5,000 FOR EACH VIOLATION, and that EACH DAY A VIOLATION CONTINUES OR OCCURS MAY BE CONSIDERED A SEPARATE VIOLATION.

A seller under contract agreed in writing that no further offers be submitted. A new offer arrives. Must the agent present it?

1. No; there is no such duty after acceptance. ✓
2. Yes; every offer must be presented until closing.
3. Yes, if it is higher than the accepted offer.
4. No, unless the buyer's agent insists in writing.

Why: 22 TAC 535.156(a) requires a license holder to CONVEY TO THE PRINCIPAL ALL KNOWN INFORMATION affecting offers, but provides that IF THE PRINCIPAL HAS AGREED IN WRITING THAT OFFERS ARE NOT TO BE SUBMITTED AFTER entering a contract, THE LICENSE HOLDER SHALL HAVE NO DUTY TO SUBMIT OFFERS after the principal has accepted one.

A borrower and her lender believe the lot securing a new loan was wrongly placed in a special flood hazard area. What review does federal law provide?

1. The borrower alone may sue the lender to have the requirement lifted
2. The lender may waive the requirement if it disagrees with the map
3. They may jointly ask FEMA for a review, with technical support ✓
4. None, because a lender's flood hazard determination is never reviewable

Why: 42 U.S.C. 4012a(e)(5) lets the borrower and lender jointly request the Administrator (of FEMA, 4003(a)(6)) to review whether the building is in a special flood hazard area, supported by technical information; within 45 days the Administrator sends a letter, and the determination is final. A letter finding the building outside the area relieves the obligation to require insurance for the period it states.

Which of these is a general lien rather than a specific lien?

1. A mortgage on the owner's home
2. A mechanic's lien on a single building
3. A money judgment against the owner ✓
4. A special assessment on one lot

Why: Reference Book chapter 5 explains that a specific lien affects only a particular property, such as a trust deed or a mechanic's lien, while a general lien affects all property of the owner not exempt by law, such as a money judgment or a lien for overdue income taxes. The glossary (chapter 27) defines a general lien as a lien on all the property of a debtor.

In 2024 a developer buys a closed factory site it knows is contaminated, after making all appropriate inquiries. All dumping happened before the purchase, and the developer gives the required notices, takes reasonable care and cooperates with the cleanup. What is its status?

1. It may qualify as a bona fide prospective purchaser ✓
2. It is liable, as it bought knowing of contamination
3. It is an innocent landowner, having made inquiries
4. It is excluded as a contiguous property owner

Why: 42 U.S.C. 9601(40) defines a bona fide prospective purchaser as one who acquires after January 11, 2002 and proves the listed criteria, including disposal before acquisition, all appropriate inquiries, notices, appropriate care, cooperation and no affiliation with a liable party, and 9607(r)(1) limits its liability as owner. Knowledge is no bar: 9607(q)(1)(C) says a person who knew may still qualify, whereas the innocent landowner route requires no reason to know.

Under an installment sales contract (land contract), who holds legal title while the buyer makes payments?

1. The buyer, from the day the contract is signed
2. The seller, until the contract terms are met ✓
3. A trustee named by the buyer's mortgage lender
4. The county recorder, until the final payment

Why: The Reference Book chapter 27 glossary defines a land contract as one in which the seller retains title until all or a prescribed part of the price has been paid, and an installment sales contract as one where the price is paid in installments and title is retained by the seller. Reference Book chapter 13 calls the seller the vendor and the buyer the vendee.

The Reference Book groups a broker's price opinion with list, offer and contract prices. What does that grouping say a BPO expresses?

1. A value, the appraiser's defined opinion.
2. A price, the measure brokers focus on. ✓
3. A cost, the measure builders speak in.
4. An appraisal developed under USPAP.

Why: Reference Book chapter 15: "Generally speaking, a broker or salesperson will focus on price. Examples include list price, offer price, contract price, and broker's price opinion (BPO). Those providing a service or product normally speak in terms of cost." Appraisers consider prices and costs in developing a value opinion.

When may a license holder use a contract form other than a TREC form?

1. Whenever the agent prefers a shorter form.
2. Whenever the buyer's lender approves it.
3. Only for commercial property.
4. If the owner drafted it, or requires an attorney's form. ✓

Why: Occupations Code 1101.155(b) provides that TREC MAY NOT PROHIBIT A LICENSE HOLDER FROM USING a form THAT IS PREPARED BY THE PROPERTY OWNER, OR PREPARED BY AN ATTORNEY AND REQUIRED BY THE PROPERTY OWNER.

What are the minimum services a broker representing a party must provide?

1. Hold an open house every month.
2. Arrange the party's financing.
3. Order a survey and inspection.
4. Answer questions and present offers. ✓

Why: Occupations Code 1101.557(b)(3) provides that a broker representing a party SHALL, AT A MINIMUM, ANSWER THE PARTY'S QUESTIONS AND PRESENT ANY OFFER TO OR FROM THE PARTY, and (b)(2) requires the broker to INFORM THE PARTY of material information, including the RECEIPT OF AN OFFER.

A new regulation denies an owner all economically beneficial use of her land. What may she claim?

1. Nothing, since regulation is never a taking
2. A taking, through inverse condemnation ✓
3. Escheat of the land back to the state
4. A nonconforming use of the land

Why: Reference Book chapter 17 says regulation that merely lowers value is usually not a taking, but where regulation denies all economically beneficial or productive use of the land it constitutes a taking requiring compensation, which the owner may pursue as inverse condemnation.

While a seller is traveling, her listing broker receives a full-price offer and signs the purchase contract as agent for the seller. The listing gives the broker no power of attorney. What is the effect?

1. The seller is bound, since the offer met the list price
2. The seller is bound, as the listing is an exclusive right to sell
3. The contract is binding once the buyer's deposit is received
4. The seller is not bound unless she ratifies it ✓

Why: Reference Book chapter 10 states that a listing, even an exclusive right to sell, conveys no power to sell: it authorizes the broker to find a buyer, not to contract to convey title. A broker is a special agent who must obtain the principal's ratification of agreements with third parties.

A broker keeps a client's rent in the brokerage's ordinary business account for convenience. Which is correct?

1. It is allowed if the money is recorded separately.
2. It is allowed for up to 30 days.
3. It is commingling, which the rules forbid. ✓
4. It is allowed if the client consents orally.

Why: 22 TAC 535.146(b) provides that the broker SHALL NOT COMMINGLE TRUST MONEY WITH THE BROKER'S PERSONAL MONEY OR OTHER NON-TRUST MONEY, OR DEPOSIT OR MAINTAIN TRUST MONEY IN A PERSONAL ACCOUNT OR ANY KIND OF BUSINESS ACCOUNT. Occupations Code 1101.652(b)(10) makes commingling a ground for discipline.

A distant heir may have a claim to a lot. The title company asks her to sign a deed releasing whatever interest she has, with no warranties. What deed is used?

1. A quitclaim deed ✓
2. A special warranty deed
3. A bargain and sale deed
4. A gift deed

Why: Reference Book chapter 7 describes the quitclaim deed as transferring only whatever interest the grantor has, with no express or implied warranty, and says it is generally used to clear a cloud on the title. The heir is not selling a warranted title; she is releasing a possible claim.

A spouse recovers a personal injury settlement during the marriage. Which part of it is community property?

1. The part for her pain and suffering
2. None; the whole recovery is her separate property
3. The part for lost earning capacity during marriage ✓
4. All of it, since she received it during the marriage

Why: Family Code 3.001(3) makes a spouse's recovery for personal injuries sustained during marriage separate property, except any recovery for loss of earning capacity during marriage. That excepted part falls into the community under 3.002; the pain and suffering award stays separate.

Buyer and seller have signed a purchase contract, and closing is set for 30 days later. How is the contract classified by extent of performance?

1. Executed, since the deposit has been paid
2. Unilateral, until the buyer pays the price
3. Executory; performance is still to come ✓
4. Void, until the deed has been recorded

Why: Reference Book chapter 6 explains that in an executory contract something remains to be done by one or both parties, while in an executed contract both have completely performed. A contract of sale is executory until the deed is signed and delivered, when it becomes executed.

If the sale closes, what happens to the option fee paid to the seller?

1. It is kept by the seller as extra.
2. It is refunded to the buyer.
3. It is paid to the brokers.
4. It is credited to the price. ✓

Why: Paragraph 5A(4) of TREC No. 20-19 provides that THE OPTION FEE WILL BE CREDITED TO THE SALES PRICE AT CLOSING, and authorizes the escrow agent to release it to the seller at any time without further notice.

A neighbor has driven across an owner's field for many years, always with the owner's express permission. Has the neighbor gained an easement by prescription?

1. Yes, once the statutory period has run
2. Yes, because the use was open and known
3. No, unless the neighbor paid the taxes
4. No; permitted use is not hostile ✓

Why: Reference Book chapter 5 lists as requirements of prescription that the use be hostile and adverse, that is, without license or permission from the owner, as well as open, continuous and under a claim of right. Use by permission never qualifies, however long it runs, and payment of taxes is generally not required.

A party wrongfully refuses to sign an earnest money release for 10 days after the request. What is that party liable for?

1. Damages, earnest money and fees. ✓
2. Nothing, as signing is voluntary.
3. A fine payable to TREC.
4. The option fee only.

Why: Paragraph 18D of TREC No. 20-19 provides that ANY PARTY WHO WRONGFULLY FAILS OR REFUSES TO SIGN A RELEASE WITHIN 7 DAYS OF RECEIPT OF THE REQUEST WILL BE LIABLE TO THE OTHER PARTY FOR DAMAGES, THE EARNEST MONEY, REASONABLE ATTORNEY'S FEES, AND ALL COSTS OF SUIT.

An inspection finds dry rot and termite damage in a house's framing. Which category of depreciation does this represent?

1. Outmoded design.
2. Economic obsolescence.
3. Physical deterioration. ✓
4. Superadequacy.

Why: Reference Book chapter 15 lists physical deterioration as resulting from wear and tear, negligent care, "damage by dry rot, termites, etc.," or severe changes in temperature. Functional obsolescence comes from design and utility defects, and economic (external) obsolescence from influences outside the property.

What is the first step of the appraisal process as USPAP Standard 1, summarized in the Reference Book, lays it out?

1. Collecting and analyzing market data.
2. Applying the three approaches to value.
3. Determining the scope of work.
4. Defining the appraisal problem. ✓

Why: Reference Book chapter 15 summarizes Standard 1: (A) define the appraisal problem, identifying the client, intended use, type of value, effective date and relevant characteristics; (B) determine the scope of work; (C) collect and analyze data; (D) apply the approaches; (E) reconcile to a final opinion. Scope of work follows once the problem is defined.

An FHA borrower reads about the Homeowners Protection Act and asks whether its cancellation rights apply to her FHA mortgage insurance. What is the answer?

1. Yes, it ends at 78% of original value, just as it does on other loans
2. Yes, but only on a written request once she reaches 80% of value
3. Only if the FHA loan was a refinance rather than a purchase loan
4. No; the Act's PMI excludes insurance under the National Housing Act ✓

Why: 12 U.S.C. 4901(13) defines private mortgage insurance as mortgage insurance other than insurance under the National Housing Act, title 38 or title V of the Housing Act of 1949, which removes FHA, VA and USDA loans. The 78% and 80% rules of 4902 therefore do not reach FHA mortgage insurance.

When must TREC investigate a license holder on a complaint?

1. On a signed complaint giving reasonable cause. ✓
2. Whenever any person telephones with a concern.
3. Only when the complainant is a party to a transaction.
4. Only after a court has found the licensee liable.

Why: Occupations Code 1101.204(b) requires the commission to INVESTIGATE THE ACTIONS AND RECORDS OF A LICENSE HOLDER IF A PERSON SUBMITS A SIGNED, WRITTEN COMPLAINT AND the complaint and evidence PROVIDE REASONABLE CAUSE FOR AN INVESTIGATION. The commission or staff may also file a complaint itself.

After signing the resale contract, may the seller keep showing the house?

1. No; all showings must stop.
2. Yes, unless barred in writing. ✓
3. Only with the buyer's written consent.
4. Only after the option period ends.

Why: Paragraph 19 of TREC No. 20-19 provides that UNLESS EXPRESSLY PROHIBITED BY WRITTEN AGREEMENT, SELLER MAY CONTINUE TO SHOW THE PROPERTY AND RECEIVE, NEGOTIATE AND ACCEPT BACK UP OFFERS. TREC No. 11-9 is the addendum for a back-up contract.

A listing broker, with no authority from the seller to delegate, brings in another broker to help find a buyer. The second broker is:

1. A subagent of the seller, because the seller benefits from the help
2. The agent of the listing broker, not a subagent of the seller ✓
3. A dual agent of both the seller and any buyer it later locates
4. An agent of no one, as a broker cannot delegate any of its duties

Why: Reference Book chapter 10 states that where the listing broker appoints another broker without the consent of the principal, the second broker becomes the agent of the listing broker and not the subagent of the principal. Delegation itself is not barred: an agent may generally delegate unless the principal forbids it.

A listing agent, with no basis for it, assures a buyer that a house is "in perfect shape." The roof leaks. How has an appellate court described such a statement?

1. As a representation of a material fact ✓
2. As harmless sales talk that binds no one
3. As an opinion the buyer had to check
4. As a promise enforceable only in writing

Why: Reference Book chapter 10 reports that a broker's statement that a house was "in perfect shape," while obviously not literally true, has been described by an appellate court as a representation of a material fact. It also notes that a positive assertion not warranted by the information of the person making it can be actual fraud even without evil intent.

At a local association meeting, several competing brokers agree that from now on none of them will take a listing for less than a 6% commission. How does federal antitrust law treat the agreement?

1. As a conspiracy in restraint of trade, which the Sherman Act bans ✓
2. As lawful, because the agreed rate only reflects the local market custom
3. As lawful, since each broker remains free to charge more
4. As lawful unless the association itself puts it in writing

Why: 15 U.S.C. 1 (Sherman Act section 1) declares illegal every contract, combination or conspiracy in restraint of trade and makes it a felony. An agreement among competitors to fix the commission they will charge is such a combination; the Reference Book confirms that commissions are not fixed by law but set by each broker individually.

A buyer compares four home loans. Which of them is a nonconventional loan?

1. A VA-guaranteed loan made by a mortgage banker ✓
2. A bank loan at 95% of value carrying private mortgage insurance
3. A savings bank loan at 80% of value held in its own portfolio
4. A credit union loan that is later sold to Freddie Mac

Why: Reference Book chapter 27 defines a conventional mortgage as one securing a loan made without governmental underwriting, that is, not FHA insured or VA guaranteed, and defines private mortgage insurance as coverage available to conventional lenders. So a VA-guaranteed loan is nonconventional whoever originates it, while PMI, portfolio lending or a sale to Freddie Mac leaves a loan conventional.

For how long does TREC issue or renew a license?

1. 12 months
2. 24 months ✓
3. 36 months
4. 48 months

Why: Occupations Code 1101.451(a) provides that THE COMMISSION MAY ISSUE OR RENEW A LICENSE FOR A PERIOD OF 24 MONTHS, and may stagger expiration dates through the year.

An investor buys a $250,000 property with $50,000 down. NOI is $19,000 and annual debt service $14,400. What is the cash-on-cash return on the investor's equity?

1. 1.84%
2. 2.3%
3. 7.6%
4. 9.2% ✓

Why: Reference Book chapter 12 measures return against the owner's equity, and chapter 26's percentage formula gives Rate = Part / Base. Cash flow is $19,000 - $14,400 = $4,600, and $4,600 / $50,000 = 9.2%. $19,000 / $250,000 = 7.6% is the overall cap rate, not the return on equity.

An agent signs a contract in the principal's name, believing she has authority. In fact she has none, and the principal refuses to ratify. What claim may the third party have against the agent?

1. None, since the contract names the principal
2. Specific performance of the sale against the agent
3. None, since the agent acted in good faith
4. Breach of an implied warranty of authority ✓

Why: Reference Book chapter 10 states that when an agent acts without authority or in excess of it, the agent may be held liable for resulting damages for breach of the agent's implied warranty of authority. The principal is not bound, and naming the principal or acting in good faith does not shield the agent from that claim.

A home is in a community with mandatory owners' association membership. What must the seller give?

1. A copy of the association's tax return.
2. Nothing, if the buyer can read the deed restrictions.
3. A notice of owners' association membership. ✓
4. A certificate from the county clerk.

Why: Property Code 5.012(a) requires A SELLER OF RESIDENTIAL REAL PROPERTY THAT IS SUBJECT TO MEMBERSHIP IN A PROPERTY OWNERS' ASSOCIATION, of not more than one dwelling unit, to give A WRITTEN NOTICE that the purchaser IS OBLIGATED TO BE A MEMBER and that restrictive covenants are recorded.

When may a license holder disburse money from a custodial or trust account deposit?

1. Whenever the broker needs to pay expenses.
2. As soon as the option period ends.
3. Whenever the seller asks for it.
4. Only on completion or termination. ✓

Why: Occupations Code 1101.652(b)(31) makes it a ground for discipline to DISBURSE MONEY DEPOSITED IN A CUSTODIAL, TRUST, OR ESCROW ACCOUNT BEFORE THE COMPLETION OR TERMINATION OF THE REAL ESTATE TRANSACTION, and (b)(30) requires such money to be deposited within a reasonable time with a Texas title company or bank.

Which of these is NOT required for a deed to be valid between the parties?

1. A granting clause with words of conveyance
2. The grantor's signature
3. Recording in the public records ✓
4. Delivery and acceptance

Why: Reference Book chapter 7 lists the essentials of a valid deed: a writing, parties properly described and competent, an adequate property description, a granting clause, the grantor's signature, and delivery and acceptance. It adds that a deed need not be recorded; recording protects the grantee against later claimants but is not an element of validity.

The buyer defaults under the TREC resale contract. What may the seller do?

1. Keep the earnest money and also sue for all of its losses.
2. Only keep the option fee, as the seller's sole remedy.
3. Only sue for actual damages, never for specific performance.
4. Seek specific performance, or terminate and keep the earnest money. ✓

Why: Paragraph 15 of TREC No. 20-19 lets the seller, on the buyer's default, (a) ENFORCE SPECIFIC PERFORMANCE, SEEK SUCH OTHER RELIEF AS MAY BE PROVIDED BY LAW, OR BOTH, or (b) TERMINATE AND RECEIVE THE EARNEST MONEY AS LIQUIDATED DAMAGES, releasing both parties.

Which does the Reference Book say a written property management agreement should set out?

1. The term, the policies, the fees, and the manager's powers ✓
2. Only the fee, since agency law supplies all other terms
3. The tenants' names and the rent each tenant has to pay
4. The owner's income tax position and plans for the property

Why: Reference Book chapter 22 says it is good business practice to have a written contract with the owner that clearly sets forth the responsibilities of both parties, including the terms and period of the contract, the policies for managing the premises, management fees, and the authority and powers given by the owner to the agent.

TREC sues in its own name to enjoin a violation of the Act. What need it NOT prove to obtain the injunction?

1. That irreparable damage would follow the violation. ✓
2. That the defendant's conduct violates the Act.
3. That a violation of a commission rule has occurred.
4. That the defendant is the person committing the violation.

Why: Occupations Code 1101.751(b) provides that to obtain an injunction the commission is not required to allege or prove that an adequate remedy at law does not exist or that substantial or irreparable damage would result from the continued violation. It must still show the violation of the chapter or a commission rule that 1101.751(a) lets it enjoin.

For a fee, an unlicensed consultant advises a homeowner on negotiating a short sale with her lender. How does the Occupations Code treat this?

1. As brokerage, which needs a license ✓
2. As legal advice, which only lawyers give
3. As exempt, being a service to the lender
4. As lawful, if the owner signs a waiver

Why: Occupations Code 1101.002(1)(A)(xii) includes in the definition of broker a person who, for consideration, advises or offers advice to an owner of real estate concerning the negotiation or completion of a short sale. Doing it without a license is unlicensed brokerage; an owner's waiver does not change the definition.

A sales agent wants to rebate part of her commission to her buyer client. What is needed?

1. Nothing; rebates to parties are always allowed.
2. Approval from the lender and the title company.
3. Written consent of her sponsoring broker and her client. ✓
4. TREC's prior written approval.

Why: 22 TAC 535.147(d) lets a license holder REBATE OR PAY A PORTION OF THE FEE OR COMMISSION TO A PARTY WHEN THE SALES AGENT HAS THE WRITTEN CONSENT OF THE SALES AGENT'S SPONSORING BROKER AND THE PARTY REPRESENTED, but not in a way that MISLEADS A BROKER, LENDER, TITLE COMPANY, OR GOVERNMENTAL AGENCY.

Under the nondisclosure rule the Reference Book states, when does the seller's broker have a duty to disclose a fact materially affecting the property's value?

1. Only when the buyer asks the broker a direct question about it
2. When the buyer is unaware of it and it's beyond diligent inspection ✓
3. Only when the fact appears in the public records for the parcel
4. Only when the seller gives written consent to the disclosure

Why: Reference Book chapter 10 states that the seller and the seller's broker have a duty to disclose facts materially affecting the value, desirability or intended use of the property if the broker knows the buyer is unaware of them and they are not within the buyer's diligent attention, including inspection. The duty does not wait for a question, and the seller cannot license the broker to conceal a material fact.

In a sale financed with a consumer mortgage loan, by when must the settlement agent give the seller the seller's Closing Disclosure?

1. At least three business days before closing
2. Within three business days of the contract
3. No later than the day of consummation ✓
4. Within 30 days after the loan is funded

Why: 12 CFR 1026.19(f)(4) requires the settlement agent to give the seller the disclosures relating to the seller's transaction no later than the day of consummation. The three-business-day advance receipt rule of 1026.19(f)(1)(ii) protects the borrower, not the seller.

A veteran wants a VA-guaranteed loan to buy a house he will rent to tenants and never live in. May the loan be guaranteed?

1. Yes; the guaranty follows the veteran, whatever the use
2. Yes, provided the house has no more than four units
3. No; he must certify he will occupy it as his home ✓
4. Yes, provided he lived in an earlier VA-financed home

Why: 38 CFR 36.4303(g) bars VA from issuing evidence of guaranty on a loan to buy residential property unless the veteran, or the spouse of one on active duty, certifies an intention to occupy the property as his or her home. A property of up to four units can qualify, but only with that occupancy.

An older owner with modest retirement income asks what the size of an FHA-insured reverse mortgage (HECM) would be based on. What is the answer?

1. Her retirement income and her credit score
2. Her home equity, not her income or credit ✓
3. Her life expectancy alone, whatever the value
4. The balance on her existing loan, which it doubles

Why: Reference Book chapter 12 states that HECM borrowers qualify for a maximum amount that can be sustained by the equity in the property, not by their retirement income, credit worthiness or financial standing. Life expectancy and expected rates enter the analysis, and any existing loan must be paid off from the proceeds.

A buyer's complaint names only the sales agent, not her sponsoring broker, and concerns her conduct as the broker's agent. How does 22 TAC 535.141 treat the broker?

1. As outside the complaint, since the broker is not named.
2. As a respondent, to review the broker's own involvement. ✓
3. As fully liable for any penalty imposed on the sales agent.
4. As a witness only, who must give TREC the agent's records.

Why: 22 TAC 535.141(a) provides that a complaint naming a sales agent but not the sponsoring broker is a complaint against the broker sponsoring the agent at the time, for the limited purposes of determining the broker's involvement and whether the broker fulfilled the broker's professional responsibilities. It does not make the broker automatically liable for the agent's penalty.

May the representation disclosure to another party be made orally?

1. No; it must be in writing.
2. Yes; orally or in writing. ✓
3. Only in a lease transaction.
4. Only if later confirmed by the broker.

Why: Occupations Code 1101.558(b) requires the disclosure of representation ORALLY OR IN WRITING at first contact. The separate information notice under (b-1), describing brokerage services, must be WRITTEN.

A seller's written offer says, "If I hear nothing from you by Friday, I will take your silence as acceptance." The buyer never replies. Is there a contract?

1. No; silence is generally not acceptance ✓
2. Yes; it generally forms at the deadline
3. Yes, unless the buyer rejected in writing
4. No, but the seller is bound until Friday

Why: Reference Book chapter 6 states that silence is generally not regarded as acceptance, because the offeror cannot force the offeree to make an express rejection. Silence binds only where the circumstances or a prior course of dealing put the offeree under a duty to act, and nothing like that appears here.

By what time on the last day must a buyer's notice of termination under the option be given?

1. Midnight local time
2. Noon local time
3. The close of the title company's business day
4. 5:00 p.m. local time where the property is ✓

Why: Paragraph 5B of TREC No. 20-19 provides that NOTICES UNDER THIS PARAGRAPH MUST BE GIVEN BY 5:00 P.M. (LOCAL TIME WHERE THE PROPERTY IS LOCATED) BY THE DATE SPECIFIED, and paragraph 5E makes TIME OF THE ESSENCE with STRICT COMPLIANCE required.

A surveyor finds that the point of beginning in an old metes and bounds description was stated wrongly. What is the effect on the description?

1. Only the first course is void
2. The county recorder corrects it
3. The street address controls instead
4. The whole description is worthless ✓

Why: Reference Book chapter 4 says a metes and bounds description starts at a fixed point of beginning and follows the boundaries back to it, and that if a mistake is made at the point of beginning, the description is worthless. Every later course is measured from that point.

A rental is bought for $540,000, of which $135,000 is land. Using straight-line depreciation over a stated 27.5-year recovery period, what is the annual deduction?

1. $1,227.27
2. $4,909.09
3. $14,727.27 ✓
4. $19,636.36

Why: Reference Book chapter 16: land is not included, as it does not depreciate. Chapter 15's straight-line method takes an equal share each year: ($540,000 - $135,000) / 27.5 = $405,000 / 27.5 = $14,727.27. Depreciating the whole price gives $19,636.36.

A 40-unit building averaged 34 occupied units over the year. What was its vacancy rate?

1. 15% ✓
2. 17.6%
3. 85%
4. 117.6%

Why: Reference Book chapter 26: Rate = Part / Base, with all 40 units as the base. 6 vacant / 40 = 15%. Dividing by the 34 occupied units gives 17.6%, and 85% is the occupancy rate.

A farm field is 660 feet wide and 1,320 feet deep. How many acres does it contain?

1. 5 acres
2. 10 acres
3. 20 acres ✓
4. 40 acres

Why: Reference Book chapter 26 gives area as length x width and an acre as 43,560 square feet. 660 x 1,320 = 871,200 square feet, and 871,200 / 43,560 = 20 acres, half of a 40-acre quarter-quarter section.

An owner dies without a will and with no heirs capable of inheriting. By what process does the land pass to the state?

1. Eminent domain
2. Dedication
3. Escheat ✓
4. Adverse possession

Why: Reference Book chapter 27 defines escheat as the reverting of property to the state when heirs capable of inheriting are lacking. Eminent domain is a paid taking for public use, dedication is an owner's voluntary gift of land to public use, and adverse possession passes title to a private possessor, not to the state.

An agent persuades a buyer under contract on one house to back out so the agent can sell him a different one. What does the Act say?

1. It is allowed if the new house suits the buyer better.
2. It is allowed if the buyer pays the first seller's damages.
3. It is allowed if the first contract had no financing clause.
4. Inducing a breach to substitute a contract is prohibited. ✓

Why: Occupations Code 1101.652(b)(21) makes it a ground for discipline to INDUCE OR ATTEMPT TO INDUCE A PARTY TO A CONTRACT OF SALE OR LEASE TO BREAK THE CONTRACT FOR THE PURPOSE OF SUBSTITUTING A NEW CONTRACT.

To which sales does the Seller's Disclosure Notice in Property Code 5.008 apply?

1. All residential property up to four units.
2. Only new homes sold by builders.
3. All real property, including land.
4. A home of one dwelling unit. ✓

Why: Property Code 5.008(a) requires A SELLER OF RESIDENTIAL REAL PROPERTY COMPRISING NOT MORE THAN ONE DWELLING UNIT LOCATED IN THIS STATE to give the purchaser the written notice prescribed, or one substantially similar containing all its items.