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Final Exam Prep > Chapter 5 Quiz Promulgated Contract Forms > Flashcards

Chapter 5 Quiz Promulgated Contract Forms Flashcards

1
Q 
1. A contract is described as:
A. Mutually binding
B. Legally enforceable
C. An agreement between two or more parties to do or not do something.
D. All of the above
A

The correct answer is D.

A contract is an agreement between two or more parties to do or not do
something. It is mutually binding and legally enforceable.

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2
Q
  1. In a real estate transaction, the legal description is NOT:
    A. Lot and block
    B. Metes and bounds
    C. A street address
    D. A description of the property from a surveyor’s field notes
A

The correct answer is C.

The legal descriptions in Texas are: Lot and block, and metes and bounds
(sometimes also called surveyor’s field notes). A street address is NOT a legal description.

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3
Q 
3. Earnest money:
A. Constitutes the consideration
B. Is used to make the offer more enticing to the seller
C. Is required in the contract
D. Always equals 1% of the sales price
A

The correct answer is B.

Earnest money is a gesture of good faith and is used to make the offer more
enticing to the seller. It can be any amount that the Buyer wishes to offer, and the Seller is willing to
accept.

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4
Q
  1. Standard forms of TREC must be used unless:
    A. A broker or salesperson wishes to use a different form.
    B. A principal in the transaction requests a different form to be used.
    C. The listing broker disagrees with certain language in the contract.
    D. A lender requires a different form to be used.
A

The correct answer is B.

Standard TREC forms must be used in real estate transactions. However, a principal in the transaction can request a different form be used. A principal is considered to be either
Buyer, Seller, Landlord, or Tenant. Builders (as Sellers) typically use their own contact form

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5
Q
  1. Any changes to the original contract once it is finalized and receipted must be done:
    A. At the title company on the original contract
    B. Using the Amendment
    C. On the Third-Party Financing Addendum
    D. On a real estate change form
A

The correct answer is B.

Once a contract has been signed and agreed to by all parties, and receipted
by the escrow agent, any and all changes must be done using an Amendment. The original contract
stays with the escrow agent.

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6
Q
  1. Time is of the essence means that certain items in the contract must be performed:
    A. As specified in the contract
    B. As verbally agreed between buyer and seller
    C. As verbally agreed between the sales agents representing buyers and sellers
    D. None of the above
A

The correct answer is A.

Time is of the essence refers to any specific time that is inherent in the
contract – i.e. number of days in an option period or the specific closing date written into the contract.

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7
Q
  1. Once a contract is finalized and receipted:
    A. It cannot be changed.
    B. It can be amended only one time.
    C. It can be amended multiple times if all parties agree.
    D. It can only be amended by the buyer.
A

The correct answer is C.

There is no limit to the number of amendments that can be used in a
transaction. A party can amend a previous amendment as well as the contract.

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8
Q
  1. The TREC promulgated Seller Financing Addendum states that if the buyer does not furnish the
    required qualifying documentation within the time limit allowed:
    A. Seller may terminate the contract and keep the earnest money.
    B. Seller may terminate the contract but must return the earnest money.
    C. Seller must tell Buyer why he is terminating.
    D. Buyer will be liable for the cost of the credit report.
A

The correct answer is A. I

n a Seller Financed contract, the Seller acts as the bank. Seller can ask for
the same qualifying documents to be provided that a bank or mortgage company requires. If the Buyer
agrees to furnish these documents and fails to do so in the allotted time, the Seller can end the contract
is allowed to keep the earnest money (per the terms of the contract).

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9
Q
  1. How does the Texas Real Estate License Act define the first face-to-face meeting which requires
    agency disclosure?
    A. When a licensee first meets a prospect
    B. When a prospect is ready to sign an agreement
    C. Only when a specific property is being shown
    D. When substantive dialogue about a specific real property occurs
A

The correct answer is D.

Once a prospect enquires about a specific real property, the agent is required
to inform the prospect who represents whom in a transaction (Agency law). The easiest way to do so is
to use the Information About Brokerage Services form which describes the agency representation
available to each party.

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10
Q
  1. In Texas:
    A. Dual agency is legal.
    B. An agent may represent both buyer and seller without any agreement from either.
    C. A Broker may represent both buyer and seller under signed intermediary agreements.
    D. A Broker may not, under any circumstance, represent both Buyer and Seller.
A

The correct answer is C.

There is no dual agency in the State of Texas. However, it is possible for a
Broker to represent both the buyer and seller under intermediary. Agreement from the parties needs to
be in writing for Intermediary to be allowed.

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11
Q
  1. Intermediary requires:
    A. Disclosure of who represents whom in a transaction
    B. Written agreement by both seller and buyer
    C. Involvement of only one company
    D. All the above
A

The correct answer is D. Intermediary requires involvement of only one company with written
agreement from all parties, and a disclosure of who represents whom in the transaction. Buyer and
Seller in a sales transaction; Landlord and Tenant in a lease transaction.

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12
Q 
12. The Information About Brokerage Services (IABS) states the broker may represent:
A. The owner
B. The buyer
C. Both owner and buyer as intermediary
D. All the above
A

The correct answer is D.

n a transaction the IBS (Information About Brokerage Services) states that a
Broker may represent the Owner, the Buyer, and both the owner and buyer in an Intermediary position.

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13
Q
  1. According to The Real Estate License Act of Texas (TRELA), which one of the following actions
    is a fair and impartial act for an Intermediary?
    A. Appointing associated licensees to work with the parties
    B. Appointing subagents to work with the parties
    C. Agreeing to represent only the owner
    D. Agreeing to represent only the buyer
A

The correct answer is A.

The Texas Real Estate Licensing Act states that to be fair and impartial the
Broker may appoint a licensee associated with the Broker to represent the Seller and a different
associated licensee to represent the Buyer.

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14
Q 
14. Chapter 531 Canons of Professional Ethics and Conduct includes:
A. Fidelity
B. Integrity
C. Competency
D. All of the above
A

The correct answer is D. Fidelity,

Integrity and Competency are all a part of Canons of Professional
Ethics.

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15
Q 
15. In the Buyer Agreement, Intermediary is in Paragraph 8. The paragraph is the same in the Buyer
Agreement and in the:
A. Listing Agreement
B. Sales contract
C. Inspecting report
D. Seller’s Disclosure
A

The correct answer is A.

The written agreements that allow intermediary are the Buyer/Tenant agency
agreement on the buyer’s side, and the Listing Agreement on the seller’s side.

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16
Q
  1. A broker may not disclose any confidential information unless:
    A. The broker is given permission in writing by the client.
    B. It is required by law.
    C. Confidentially is not required in real estate.
    D. Both A and B
A

The correct answer is D.

Confidential information received from a client to their agent may not be disclosed unless the agent has been given written permission to disclose, or if the disclosure is
required by law.

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17
Q
  1. If an Agent receives confidential information from a Client while the agency agreement is in force,
    that agent may:
    A. Share that information once the agreement expires
    B. Share that information if the Client authorizes the agent to share it
    C. Never share the information with another client
    D. Share the information, but only to another agent
A

The correct answer is B.

An example of confidential information is when a Seller informs the agent that
they are willing to accept any reasonable offer but asks the agent not to share it. The confidentiality
extends beyond the expiration of the listing agreement unless, at that time, the Seller gives written permission to share it.

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18
Q
  1. A Buyer/Tenant Representation Agreement is:
    A. Only available through the Texas Real Estate Commission (TREC)
    B. Only available through the Texas Association of REALTORS® (TAR)
    C. Sometimes available through local REALTOR® Boards
    D. Available to the public on the TREC website
A

The correct answer is C.

The Texas Real Estate Commission does not have a promulgated form for Buyer/Tenant Representation Agreement. Those are available from TAR or also can be available
through the agent’s local REALTOR® board.

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19
Q
  1. In Paragraph 3B of the sales contract, the ‘sum of all financing:”
    A. Includes the earnest money deposited at the time the contract is executed
    B. Includes the closing costs
    C. Excludes any loan funding fee or mortgage insurance premium
    D. All the above
A

The correct answer is C.

The sum of all financing applies to the amount of the loan. It does not include
any closing costs. The FHA mortgage insurance and the VA funding fee are part of the closing costs
and can be financed, but these are handled separately by the loan company.

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20
Q 
20. The sales price in Paragraph 3:
A. Is determined by adding the down payment (3A) and the loan amount (3B)
B. Does not include closing costs
C. Can be all cash
D. All the above
A

The correct answer is D.

The sales price is the cash down payment plus the loan amount (which does
not include any closing costs). 3A (down payment) + 3B (loan amount, if any) = 3C (sales price). If the
offer is all cash, then 3B will be zero because there will be no loan involved.

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21
Q
  1. The Seller contracts to furnish the buyer an existing survey, but neglects to furnish an “affidavit”
    within the time specified. The lender requests a new survey be furnished. Who pays for the new
    survey?
    A. If the existing survey is rejected, then whoever is stated in the contract pays.
    B. The title company can approve the existing survey and override the lender.
    C. The buyer
    D. The seller
A

The correct answer is D.

When the Seller is furnishing the existing survey, the survey must be
accompanied by the Real Property Affidavit which is signed in front of a notary. The affidavit states that
since the survey was performed (date on survey) there have been no changes. Any changes will be
noted by the seller on the affidavit. If the Seller fails to provide the affidavit, then the Seller will pay for a
new survey.

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22
Q 
22. Within \_\_\_\_ days after the title company receives a copy of the contract, Seller shall furnish to
Buyer a Commitment for title insurance.
A. 10
B. 5
C. 20
D. 30
A

The correct answer is C.

On behalf of the Seller, the escrow office will issue a title commitment within
20 days after receiving a copy of the finalized contract. The title commitment contains information about the property’s title, plus will list any issues that must be cleared before they can provide a title policy
insuring a clear title for the purchaser.

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23
Q
  1. According to the TREC 1-4 Residential Contract (Resale), who is responsible for paying the
    owner policy of title insurance fee?
    A. The buyer
    B. The seller
    C. The title company named in the contract.
    D. The party stipulated in the contract.
A

The correct answer is D.

The party stipulated means the party that is named in the contract to complete
the item required by the contract. In this case, it is the party who will pay for the owners’ title policy.

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24
Q
  1. Which of the following is NOT promulgated by TREC?
    A. Unimproved Property Contract
    B. Residential Lease Contract
    C. Farm and Ranch Contract
    D. New Home Contract (Complete Construction)
A

The correct answer is B.

The residential lease contract is not promulgated by TREC. That means the
tenant and landlord can use any form they choose to agree to the terms of the lease. A Residential
Lease Contract is available through Texas Association of REALTORS® and also many Boards of
REALTORS®. Also, a real estate attorney can draw up a lease agreement between Landlord and
Tenant.

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25
Q
  1. When a “fixture” in a property does not remain for the buyer, how do we inform the buyer of that
    fact and make sure the item does not convey with the property?
    A. List the item as not included in the Listing Agreement
    B. List the item on the “Seller’s Disclosure Notice”
    C. List the item on the “Residential Contract”
    D. List the item on the “Amendment” form
A

The correct answer is C.

Paragraph 2D of the 1-4 Family Residential Contract allows the Seller to list any items that are considered “fixtures” (attached to the property) to exclude those items from the sale.
It MUST be listed on the contract itself to avoid any confusion about what doesn’t remain in the
property.

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26
Q
  1. The Third-Party Financing Addendum allows the buyer:
    A. To finance his/her closing costs
    B. A certain number of days to obtain loan approval
    C. The right to terminate the contract at any time prior to closing
    D. To have automated underwriting for the loan
A

The correct answer is B.

The Third-Party Financing addendum allows a certain number of days to
obtain loan approval. If that deadline is passed, then the contract is no longer subject to the buyer
obtaining financing.

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27
Q
  1. What is the status of a contract if the seller does not make the buyer aware of a property being
    located within a municipal utility district?
    A. The contract is voidable by the buyer.
    B. The contract is void.
    C. The contract is voidable by the seller.
    D. The contract is voidable by the buyer or the seller.
A

The correct answer is A.

The Seller is obligated to inform the buyer that the subject property is located
within a MUD (municipal utility district). MUDs have the power to impose taxes plus create certain
restrictions or obligations for properties within their boundaries. The buyer must be informed of such.

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28
Q
  1. If there is an existing survey on the property, what does the seller take to the title company and
    the lender?
    A. The existing survey
    B. The existing survey and a notarized affidavit stating if there have been any changes in
    the survey since the time the existing survey was completed
    C. A copy of the deed and the existing survey
    D. The seller’s appraisal and a copy of the survey
A

The correct answer is B.

Both the lender and the title company, as well as the buyer, need to know if
there have been any changes since the provided survey was done (date on the survey). Any change to
the surveyed property may affect the loan and also the title and may delay or prevent the closing.

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29
Q
  1. If the Buyer does not give notice to the Seller that he/she cannot obtain credit approval within the
    number of days stated in the contract:
    A. The contract will no longer be subject to the buyer’s credit approval.
    B. The contract will automatically terminate.
    C. The property is no longer subject to property approval by the lender.
    D. The time limit automatically extends 5 days.
A

The correct answer is A.

Buyer must give notice to Seller that they cannot obtain the loan they are
seeking within the number of days stated in the contract. If they don’t, then the contract is no longer
subject to credit approval.

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30
Q
  1. Failure on the part of the broker/sales associate to advise the purchaser in writing to have an
    abstract of title examined by an attorney or obtain a title insurance policy:
    A. Is not a violation of the Texas Real Estate License Act
    B. Is the normal practice in Texas
    C. May be cause to have the agent’s license suspended or revoked, and precludes
    receiving any commissions or agreed fees associated with the sale
    D. Is the correct action as this is clearly a legal matter
A

The correct answer is C.

Broker/Agent must inform the buyer that they have the right to a title policy or
an abstract of title. Failure to do so has consequences.

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31
Q
  1. If a Seller has furniture he would like to sell, and the buyer would like to purchase, how should
    this be handled?
    A. This information should be written in Paragraph #11, Special Provisions.
    B. A list should be given to the title company and they will draw up a document to address the
    sale.
    C. Simply attach a list of the items and the price to be paid to the original contract.
    D. Use the Non-Realty Item Addendum to address the sale.
A

The correct answer is D.

Any personal property that the Seller intends to leave behind with or without
compensation from the buyer, should be listed in detail on the Non-Realty Item addendum.

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32
Q
  1. In Paragraph #14 of the Residential Contract (Casualty Loss), if a seller cannot complete the
    repairs within the time limit, the buyer has the option of:
    A. Terminating the contract
    B. Extending the closing
    C. Accepting the property in the damaged condition with an assignment of insurance proceeds
    D. Any of the above
A

The correct answer is D. If required repairs are not completed before closing, then the Buyer has the
right to terminate, extend the closing, accept the condition of the property without the repairs, accept
any insurance proceeds if damage was insurable, or be able to come to an agreement for the repairs to
be done after closing.

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33
Q
  1. Broker’s fees are:
    A. Included in the One to Four Family Residential Contract (Resale) between the Buyer and the
    Seller
    B. Determined by writing in the Information About Brokerage Services
    C. Determined by writing in the Listing Agreement
    D. Both B and C
A

The correct answer is C. Broker fees are agreed in the listing agreement between the Seller and the
Broker. The Broker has the ability to share those fees with an agent from an outside company who
works with a buyer.

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34
Q
  1. Broker’s fees are:
    A. Included in the One to Four Family Residential Contract (Resale) between the Buyer and the
    Seller
    B. Determined by writing in the Information About Brokerage Services
    C. Determined by writing in the Listing Agreement
    D. Both B and C
A

The correct answer is C.

Broker fees are agreed in the listing agreement between the Seller and the
Broker. The Broker has the ability to share those fees with an agent from an outside company who
works with a buyer.

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35
Q
  1. If a Buyer wants the Seller to pay some or all their closing costs, it should be added to the One to
    Four Family Residential Contract (Resale) in:
    A. Paragraph #11 (Special Provisions)
    B. Paragraph #12 (Seller Participation in Buyer’s Costs)
    C. Third-Party Financing Addendum
    D. All the above
A

The correct answer is B.

Paragraph 12A.(1)(b) allows a seller to pay a portion of the buyers’ closing
costs.

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36
Q 
36. On the Seller’s default, what should happen to the earnest money?
A. It belongs to the Broker.
B. It should be returned to the Buyer.
C. The Seller should retain it.
D. The title company should keep it.
A

The correct answer is B.

If a Seller defaults on the contract, the earnest money should be returned to
the Buyer. The buyer also has the right to sue for specific performance or for compensatory damages.

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37
Q
  1. All the following are covered by home warranty’s basic coverage EXCEPT:
    A. Exhaust fans
    B. Heating and electrical system components
    C. Roof
    D. Sump pump
A

The correct answer is C.

A Home Warranty covers the systems (HVAC, water heater, electric,
plumbing, etc.) but not the structure.

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38
Q
  1. In the event of buyer’s default, the seller may:
    A. Terminate the contract
    B. Receive the earnest money as liquidated damages
    C. Enforce specific performance
    D. Any of the above
A

The correct answer is D.

If Buyer defaults on the contract, the Seller has the right to terminate and
receive the earnest money, or sue for specific performance, or sue for compensatory damages.

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39
Q
  1. When electing to use the option paragraph of the contract, the buyer may, within the time
    specified in the paragraph, do any of the following EXCEPT:
    A. Complete the repairs himself before the end of the option period
    B. Terminate the contract
    C. Do nothing and proceed to closing
    D. Amend the contract waiving the right to terminate
A

The correct answer is A.

The option money and time period give the buyer the right to terminate, to do
nothing and proceed to closing, or to amend the contract.

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40
Q 
40. A voluntary dispute resolution is called:
A. Litigation
B. Mandatory arbitration
C. Mediation
D. Civil argument
A

The correct answer is C.

Residential real estate contracts call for mediation (a voluntary dispute
resolution). If parties agree to mediation, it does not take away their right to sue.

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41
Q 
41. A title commitment spells out:
A. The terms and conditions on which the title insurance underwriter will issue the title
insurance
B. The name of the underwriter
C. The option paragraph
D. Both A and C
A

The correct answer is A.

The commitment just says that if all these conditions and terms are met, then
we will agree to insure the title against any defects in the title

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42
Q
  1. A suit for specific performance is:
    A. To force the buyer not to default on the contract
    B. To force the seller not to default on the contract
    C. To force either the buyer or the seller to perform on the terms of the contract
    D. A lawsuit against the inspection company
A

The correct answer is C.

Either a buyer or a seller may sue the other party to force performance under
the terms of the signed and agreed contract.

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43
Q
  1. The right to terminate per Paragraph 23:
    A. Is available to the seller as well as the buyer
    B. Does not expire until the contract is closed
    C. Requires a fee for a specified time
    D. Is not available in the Condominium contract
A

The correct answer is C.

In order for the buyer to have the right to terminate under Paragraph 23, both
blanks must be filled out – dollar amount and number of days.

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44
Q
  1. Even though a buyer and/or seller agree to mediate:
    A. They cannot do so within the promulgated contract.
    B. They have agreed to mandatory arbitration.
    C. They are not giving up their right to pursue relief through the courts.
    D. The party who requested mediation will pay for the cost of the mediator.
A

The correct answer is C.

In other words, if seller/buyer cannot come to terms in mediation, they still
have the right to sue.

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45
Q 
45. Who is designated as responsible for promptly sending a copy of the contract to any attorneys
who are named in the contract?
A. The title company
B. The lender
C. The broker
D. The buyer
A

The correct answer is C.

It is the Broker’s responsibility to send a copy of the contract to any attorneys
named in the contract so that the attorney can accept or decline the job of reviewing the contract.

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46
Q 
46. The statutory limit for statutory fraud is \_\_\_\_\_\_ years.
A. 4
B. 10
C. There is no limit.
D. 20
A

The correct answer is A.

The limit for statutory fraud is 4 years.

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47
Q
  1. In the Buyer’s Temporary Lease, who pays the utilities?
    A. Seller because it is still their home.
    B. The listing agent
    C. Buyer and seller will prorate at closing.
    D. Buyer
A

The correct answer is D.

TREC promulgated Buyer’s Temporary Lease prior to closing requires the
buyer-occupant to pay for the utilities.

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48
Q
  1. Use of the TREC promulgated One to Four Family Residential Contract (Resale):
    A. Is allowed on the sale of a residential condominium
    B. Can be used for a vacant residential lot
    C. Covers single family, duplex, triplex, and fourplex transactions
    D. All the above
A

The correct answer is C.

The TREC One to Four Family Residential Contract (Resale) covers single
family, duplex, triplex, and fourplex transactions.

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49
Q
  1. The Residential Condominium Contract Resale:
    A. Allows a limit to the amount a Buyer will pay for Association transfer fees
    B. Can be used for new condominium construction
    C. Can be used on a residence with a Lot and Block legal description
    D. Does not address any parking assignments
A

The correct answer is A.

The limit a buyer must pay for transfer fees in a condominium is limited in the
contract.

50
Q 
50. Your buyers have signed a contract to buy a new home. The contract is subject to the sale of
their present home. This is called a:
A. Chattel
B. Contingency
C. Cooperation
D. Coinsurance
A

The correct answer is B.

A Subject to Sale of Other Property addendum creates a contingent contract –
in other words the contract cannot move forward until the contingency requiring the buyer to receive
funds from a house they are selling is removed.

51
Q
  1. The Texas Real Estate Commission (TREC) promulgates an addendum to be used in a short
    sale. This Short Sale Addendum is to be signed by:
    A. The listing agent
    B. The buyers’ agent
    C. The lien holder
    D. The buyer and seller
A

The correct answer is D.

Even though a short sale requires the loan company’s agreement, they do not
sign the actual purchase contract. The contract and the Short Sale Addendum are signed by the Buyer
and the Seller

52
Q
  1. Which contract cannot be used for new construction?
    A. TREC promulgated contract for New Home (Incomplete Construction)
    B. TREC promulgated contract for New Home (Completed Construction)
    C. Builder’s contracts
    D. Residential Condominium Contract (Resale)
A

The correct answer is D.

The TREC Residential Condominium Contract is used for resale only but not
new condo construction. The Texas Association of REALTORS® has a Condominium (New
Construction) contract that may be used, or, in many cases, the builder furnishes the contract for newly
constructed condos.

53
Q
  1. If a property has a “Sale of Other Property” contingency contract on it, Seller:
    A. Cannot accept another offer
    B. Must take the property off the market
    C. Can ask the original buyer to remove the contingency if the Seller has accepted another offer as a back-up
    D. None of the above
A

The correct answer is C.

The Sale of Other Property addendum allows the Seller to seek other offers,
and if the Seller accepts one of the offers and signs it as a back-up, the Seller can ask the first buyer to
either remove the contingency or to terminate their contract.

54
Q 
54. A TREC promulgated Farm and Ranch Contract can include:
A. Buildings
B. Crops
C. Equipment
D. All the above
A

The correct answer is D.

The Farm and Ranch contract can include a house, other buildings, farm
equipment, and crops, if applicable.

55
Q 
55. All are protected classes under the Texas Fair Housing Act EXCEPT:
A. Religion
B. Sex
C. Age
D. National origin
A

The correct answer is C.

Age is not one of the protected classes under the Texas Fair Housing Act.

56
Q 
56. Fraud is:
A. A crime
B. A civil law violation
C. Both A and B
D. Only B
A

The correct answer is C.

Fraud can be prosecuted as a crime. Fraud charges also can go through the
courts as civil law violation

57
Q
  1. Transfer of personal property in a real estate transaction:
    A. Is not allowed
    B. Should be agreed between buyer and seller outside of the sale
    C. Can be done on the Non-Realty Items Addendum
    D. Can only be done if the personal property matches something in the real property
A

The correct answer is C.

Any personal property that the Seller agrees to leave with the property can be
handled by listing it on the Non-Realty Items Addendum.

58
Q 
58. Federal Fair Housing Laws forbids discriminatory practices by parties including:
A. Owners of properties
B. Lenders
C. Real estate brokers
D. All the above
A

The correct answer is D.

Discriminatory practices are NOT allowed in any transaction.

59
Q
  1. Steering is:
    A. Illegal
    B. Described as channeling a minority to or away from an area
    C. Usually intended to change the character of a neighborhood
    D. All of the above
A

The correct answer is D.

Steering, described as channeling a minority to or away from an area and
usually intended to change the character of a neighborhood, is illegal.

60
Q 
60. What is the number one reason for lawsuits with contracts?
A. Misrepresentation
B. Non-disclosure
C. Property condition issues
D. Title problems
A

The correct answer is B.

The largest number of lawsuits regarding contracts concerns non-disclosure,
whether of something in the property or failing to disclose which party or parties an agent/broker
represents.

61
Q 
61. The Third- Party Financing Condition Addendum is used for all the following financing options
EXCEPT:
A. Seller financing
B. Reverse mortgage loans
C. Conventional loans
D. USDA government financing
A

The correct answer is A.

Seller financing and assumptions have their own addendums.

62
Q
  1. The option period allows buyers ___________________.
    A. The unrestricted right to terminate the contract within a certain time period.
    B. The right to terminate under certain conditions spelled out in Paragraph 23.
    C. 10 days to provide the seller a list of all repairs requested by the buyer.
    D. 15 days from the date of the end of the option period to close the transaction.
A

The correct answer is A.

When there is a fee paid for a specific time period for the option, the buyer
can terminate for any reason. All other rights of the buyer to terminate depend on something that has
been done, or not done, according to the terms of the contract.

63
Q 
65. Paragraph 6 of the Seller's Temporary Residential Lease gives information about:
A. Term of the lease
B. Utilities
C. Pets
D. Deposit
A

The correct answer is B. Paragraph 6 of the Seller’s Temporary Residential Lease (where the Seller
remains in the property after closing) deals with who pays for the utilities.

64
Q
  1. TREC is a nine-member commission. Six are brokers and three are not licensed by the
    commission. The three unlicensed members must:
    A. Have experience in the real estate market
    B. Have a degree in real estate
    C. Have no financial interest in real estate, except as consumers
    D. All of the above
A

The correct answer is C.

Of the nine-member TREC commission, the three unlicensed members must
not have a financial interest in real estate except as a consumer.

65
Q 
65. Paragraph 6 of the Seller's Temporary Residential Lease gives information about:
A. Term of the lease
B. Utilities
C. Pets
D. Deposit
A

The correct answer is B.

Paragraph 6 of the Seller’s Temporary Residential Lease (where the Seller
remains in the property after closing) deals with who pays for the utilities.

66
Q
  1. The “Closing Disclosure” form replaces the ___________ and the ______________.
    A. Truth-in-Lending Act and the HUD-1 Settlement Statement
    B. Real Estate Settlement Procedures Act and the loan application
    C. loan application and the HUD-1
    D. The appraisal and the credit report
A

The correct answer is A.

The Closing Disclosure form replaces two forms previously used by the lender
and the title company – truth-in-lending and the HUD-1 settlement form.

67
Q
  1. The agent is not practicing law if the agent:
    A. Uses a form adopted by the Commission.
    B. Uses a form prepared by an attorney licensed in Texas.
    C. Uses a form prepared by the property owner.
    D. All of the above
A

The correct answer is D.

An agent is not practicing law if the agent uses a form adopted by the
Commission, a form prepared by an attorney, or a form prepared by the property owner.

68
Q 
68. In the sales contract, under Broker Information, the “Other Broker firm” is given a choice of who
they represent. What are the choices?
A. Buyer only as Buyer's Agent
B. Seller and Buyer as an intermediary
C. Seller as Listing Broker's subagent
D. Both A and C
A

The correct answer is D.

On page 9 of the sales contract, the “other broker” (not the listing broker) is
checked that either the agent is representing the buyer as the buyer’s agent or representing the seller
as the listing broker’s subagent.

69
Q 
69. Closing costs could include:
A. Origination Fee.
B. Loan Application Fee.
C. Discount Points.
D. All of the above
A

The correct answer is D.

Closing costs can include an origination, loan application, discount points as
well as other lender fees and title company charges.

70
Q
  1. The language in the One-to-Four Family contract makes _____________ mandatory.
    A. Mediation
    B. An amendment to the contract
    C. Leaving all fireplace tools
    D. Conveying personal property with the real property
A

The correct answer is A.

In the TREC contracts, mediation is mandatory. However, agreement to
mediate does not take away the right to sue.

71
Q
  1. A residential survey includes:
    A. An official and permanent official record of land placement, property lines, easements, and
    boundaries
    B. Protects against property line disputes
    C. Provides a point of reference in determining land value
    D. All the above
A

The correct answer is D.

A survey is different from a plat. A plat only shows the property lines. A survey
places buildings, if any, on the land. It will also show building lines, easements, fences, and contains
other information pertinent to the land

72
Q
  1. A license holder must disclose if he is a party to the transaction, or acting on behalf of a spouse,
    parent, child, business entity in which the license holder owns more than 10%. This is done in
    Paragraph _____ of the One to Four Family Residential Contract (Resale).
    A. 4
    B. 7
    C. 19
    D. 25
A

The correct answer is A.

Paragraph 4 of the One to Four Family Residential Contract, allows the agent
to disclose if they are a party in the contract (as required by law), or if they have any close family
relationship to the buyer (or the seller).

73
Q 
73. If a buyer makes an offer on a property and the seller counters the offer (makes changes), the
counter is considered to be:
A. A reflection
B. A rescission
C. A rejection
D. A resentment
A

The correct answer is C.

A counter offer is a rejection of the buyer’s offer. If the seller counters, the
buyer has no obligation to proceed with the contract.

74
Q
  1. A Municipal Utility District (MUD):
    A. Has the authority to impose taxes
    B. Is a political subdivision of the State of Texas
    C. Provides water, sewage, drainage, and other services
    D. All the above
A

The correct answer is D.

A Municipal Utility District (MUD) has taxing authority, plus provides water, sewage, and other services to properties in its jurisdiction.

75
Q
  1. In Paragraph 2 of the standard residential contract form, which of the following would NOT be
    included in the sale unless otherwise provided for?
    A. Ceiling fan
    B. Chandelier
    C. Flat screen TV
    D. Window shades
A

The correct answer is C.

A flat screen TV is considered personal property and would not convey with
the sale unless otherwise agreed in writing.

76
Q
  1. If you understand all the facts, you can:
    A. Give legal advice to a client
    B. Interpret a survey for the client showing setback and building lines and utility easements
    C. Explain the real estate terms in a title policy
    D. Advise the client they have the right to receive a title policy or abstract of title
A

The correct answer is D.

This is something that is pre-printed on the TREC residential contracts;
however, the agent needs to be aware that it is their responsibility to tell the buyer

77
Q
  1. If there is no time limit specified in a contract, then the time limit would be:
    A. Determined to be “time is of the essence”
    B. Within a reasonable time
    C. Determined by the lender
    D. Three weeks
A

The correct answer is B.

If a time limit is not specified in the contract, then the task must be performed
within a ‘reasonable time.’

78
Q
  1. A license holder who gives advice or opinion as to the legal effect of a contract or gives opinions
    concerning the status or validity of title to real estate:
    A. Is allowed to do this if they are a broker
    B. Is practicing law
    C. May give legal opinions to a client but not to a customer
    D. May give legal opinions if they have been a broker for four years
A

The correct answer is B.

You cannot give legal advice — period. If you do give legal advice to a buyer
or seller, you could have your license suspended or revoked.

79
Q 
79. The special warranty deed guarantees no liens or encumbrances against the property:
A. From the sovereignty of the land
B. During the seller’s ownership
C. From the Spanish land grants
D. Forever
A

The correct answer is B.

A special warranty deed only guarantees that during their ownership there
have been no liens or other encumbrances placed on the property.

80
Q
  1. If there are unusual circumstances surrounding a transaction, the client should:
    A. Not close on the property
    B. Ask the owner to finance the property
    C. Seek the advice of an attorney
    D. Make his agent responsible for removing any problems
A

The correct answer is C.

An agent should suggest to their client to consult an attorney if there are any
unusual circumstances in a transaction. The agent cannot give legal advice.

81
Q
  1. If the property is subject to any lease to which the seller is a party, the seller will deliver the lease
    to the buyer within 7 days after the:
    A. Purchasers submit the offer to the seller.
    B. Buyers have gone to loan application and have pending approval for their loan.
    C. Effective date of the contract
    D. Survey is complete.
A

The correct answer is C.

The seller must provide to the buyer any lease on the property, if applicable,
within 7 days of the effective date of the contract.

82
Q 
82. Leases for less than \_\_\_\_ days are exempt from security devices statutes.
A. 30
B. 60
C. 180
D. 90
A

The correct answer is D.

TREC promulgated leases where the buyer moves in prior to closing or the
seller stays in the property after closing are effective for 90 days. If the rental lasts beyond 90 days,
then the lease must be converted to another type of lease.

83
Q
  1. By law, a Seller must disclose anything they know about the property. To do this, they must use:
    A. A TREC promulgated disclosure form
    B. A form provided by the local REALTOR® Board
    C. The Seller Disclosure form from the Texas Association of REALTORS® or The Texas Real
    Estate Commission
    D. Any form they choose
A

The correct answer is D.

By law, a seller must disclose anything they know about the property. They do
not have to use any particular form to do so.

84
Q
  1. Under Property Condition (Paragraph 7 in the One to Four Family Residential Contract), if a
    buyer checks item 7D (1) accepting the property “As Is:”
    A. The buyer cannot negotiate for repairs.
    B. The buyer has opted not to have the property inspected.
    C. It does not preclude any rights of the Buyer including the right to amend the contract.
    D. The buyer does not need to ask for a “Seller Disclosure.”
A

The correct answer is C.

Accepting the property “as is” does not preclude the Buyer from having the
property inspected and amending the contract at a later time.

85
Q
  1. The “effective” date of a contract:
    A. Is filled in by the agent when the last person initials all changes and signs the contract
    B. Occurs when the contract and earnest money are delivered to the title company
    C. Happens when the buyer has made the offer to the seller
    D. Is when the transaction goes to closing
A

The correct answer is A.

The person responsible for dating the contract to determine the effective date
is the agent who has the contract after the last party signs and initials the contract. However, that does
not prevent the other agent from dating the contract.

86
Q 
86. If either party withdraws their offer before it is accepted by the other party, it is called:
A. Rejection
B. Rescission
C. Reflection
D. A withdrawal symptom
A

The correct answer is B.

If either party withdraws their offer or counteroffer before it is accepted by the
other party, it is known as recession

87
Q 
87. An item that is attached to and remains with the property is called:
A. A fixture
B. An improvement
C. Permanently installed
D. All of the above
A

The correct answer is D.

Any item that is permanently installed or attached to the property is called a
fixture or improvement.

88
Q
  1. An agent must provide Information About Brokerage Services:
    A. Even if the prospect is already under contract on the property
    B. Unless the prospect will be leasing a property for less than a year
    C. At the time of the first substantive dialogue about a specific real property
    D. At the first face-to-face meeting
A

The correct answer is C.

An agent must provide the Information About Brokerage Services (IABS)
when a member of the public wants information about a specific real property. The best and safest way
to provide this information is to use the form provided (but not required) by TREC.

89
Q
  1. The updated Information About Brokerage Services must list the following license holder contact
    information EXCEPT:
    A. Licensed broker’s firm name
    B. Designated broker of firm
    C. Sales associate’s name and license number
    D. Sales associate’s or broker’s website
A

The correct answer is D.

On the updated IABS (Information About Brokerage Services) there are
places to list the contact information (phone number, email, license number but NOT a web site) for the
Broker’s Firm Name, Designated Broker, Licensed Supervisor, and the Agent.

90
Q
  1. Items that must be completed in Paragraph 23 are:
    A. The dollar amount of the options money
    B. The number of days for the option
    C. What happens to the option money at closing
    D. All the above
A

The correct answer is D.

Paragraph 23 covers the buyer’s option. In order for the option to be valid,
both blanks in the paragraph must be filled out (requires a fee for a specified period of time) or the
buyer will not have an option to terminate during that period. There is also a check box to specify if the
option fee will be credited to the buyer at closing, or not be credited.

91
Q
  1. Failure on the part of the broker to advise the purchaser in writing to have an abstract examined
    by an attorney or obtain a title policy:
    A. Is in no way a violation of the Texas Real Estate License Act
    B. Is the normal practice in Texas
    C. May be cause for an agent to have their license suspended or revoked, and precludes
    the receipt of any commissions paid at the sale
    D. Is the correct action as this is clearly a legal matter
A

The correct answer is C.

Even though this is pre-printed in the TREC Residential contracts, an agent
should be aware that it is their responsibility to tell the buyer that they have a right to a title policy or an
abstract of title showing the status of the title on the property.

92
Q
  1. In Paragraph 6E (2) regarding Membership in a Property Owner’s Association, the buyers are
    notified that they must pay the HOA assessments and if they do not, the HOA has the authority to
    ________________.
    A. Foreclose
    B. Assess additional fines
    C. Assess late fees and fines
    D. Not do anything. The HOA has no authority to enforcer HOA assessments.
A

The correct answer is A.

A buyer must be made aware that if the property they are purchasing is in a
Mandatory Home Owner’s Association, the Association has the right to foreclose on the property for
unpaid dues and/or assessments.

93
Q
  1. In the late 1960s and the early 1970s, the ___________ and the __________ attempted to
    resolve the dispute by agreeing to several earnest money contracts that would be acceptable for
    real estate practitioners to use in their daily business.
    A. Texas State Bar Association —– Texas Association of REALTORS®
    B. The Broker Committee —– local board
    C. Texas Real Estate Licensing Act —– TAR
    D. The Multiple Listing Service —– State Association of Commercial Brokers
    T
A

he correct answer is A.

In the late 60’s and early 70’s these two associations agreed to several
earnest money contracts that would be acceptable for use by real estate practitioners. This was to
avoid those in the real estate business from practicing law without a license.

94
Q
  1. If a bonus is offered by an owner or owner’s agent, the Buyer’s broker:
    A. Must always share the bonus with the buyer
    B. May retain the additional compensation
    C. Does not need to disclosure to the buyer that there is a bonus offered
    D. Must, by law, refuse the additional compensation
A

The correct answer is B.

Since commissions are paid to the Broker, the Broker may retain any bonus
that may be offered by the owner or owner’s agent. Or they may split with their agent according to the
written agreement between Broker and Agent

95
Q 
95. What type of deed is used in a foreclosure sale?
A. General warranty deed
B. Special warranty deed
C. Quitclaim deed
D. Deed of trust
A

The correct answer is B.

When a buyer purchases a bank or HUD foreclosure, the buyer is typically
furnished a special warranty deed instead of a general warranty deed.

96
Q
  1. The Protect Your Family from Lead in Your Home booklet states that “Lead is especially
    dangerous to children under the age of _____.”
    A. 6
    B. 8
    C. 10
    D. 12
A

The correct answer is A.

The Protect Your Family from Lead in Your Home booklet states that children
under the age of 6 are particularly susceptible to lead.

97
Q
  1. If a seller wants to remain in the property after closing:
    A. It can be agreed verbally between the buyer and the seller.
    B. A lease agreement sold by an office supply company can be used.
    C. A TREC promulgated temporary residential lease agreement should be used.
    D. There does not need to be an agreement. The Seller can just stay in the home if they wish.
A

The correct answer is C.

If a Seller wants to remain in the property after closing or a buyer wants to
move in prior to closing, the TREC promulgated temporary lease should be used. It is designed to
create a legal relationship (Landlord/Tenant) between the buyer and seller and outlines the terms and
conditions under the lease.

98
Q
  1. Required attachments in a Resale Certificate are all of these EXCEPT:
    A. Rules of the Association
    B. Current Operating Budget
    C. Certificate of Insurance for the common areas and facilities
    D. Names of all the existing members of the Association
A

The correct answer is D.

A Resale Certificate outlines the current health of the Association (budget,
insurance, reserve funds, and other pertinent information) and should also include copies of the rules
and regulations of the Association.

99
Q
  1. Addendum for Lead-Based Paint Disclosure requires:
    A. That any home built prior to 1978 needs a disclosure
    B. Owner to check either knowledge of lead-based paint in the home or that he has no knowledge
    of the existence of lead-based paint
    C. Buyer to acknowledge receipt of Protect Your Family from Lead in Your Home pamphlet
    D. All the above
A

The correct answer is D.

The addendum for Lead-Based paint is required for homes built prior to 1978,
and discloses presence of lead, if any, any reports, if any, regarding this, and also the Buyer needs to
acknowledge that they have received this information, plus receipt of the Protect Your Family from
Lead in the Home pamphlet.

100
Q 
100. If a contract has a correct street address but an incorrect legal description, the contract is:
A. Legal and binding
B. Irrevocable
C. Voidable
D. Irrefutable
A

The correct answer is C.

A contract must include the correct legal description which can be lot and
block, building and unit, or metes and bounds. A street address is not a legal description.

101
Q
  1. If the seller backs out of a contract for a reason not covered by the contract contingencies, the
    buyer has the option of:
    A. Suing for specific performance
    B. Charging the sellers for any fees the buyer incurred
    C. Buying another home at a lower price and requiring the seller to make the down payment
    D. The buyer is not allowed to sue.
A

The correct answer is A.

A suit for specific performance forces either party to perform according to the
terms of the contract.

102
Q
  1. Earnest money must be deposited with the title company or attorney by:
    A. 24 hours from date of executed contract
    B. The end of the third business day after the contract is signed by all parties
    C. One week after effective date
    D. 72 hours after effective date
A

The correct answer is B.

TREC requires that earnest money must be deposited with the title company
or closing attorney by the end of the third working day after the effective date of the contract. (This
was a change made with the new TREC contracts effective in 2018.)

103
Q
  1. All changes from the original contract once it is receipted by the title company are completed on
    the _________________:
    A. Termination notice
    B. Amendment
    C. Third-Party Financing addendum
    D. Original contract that agent requests back from the title company
A

The correct answer is B. Once the escrow company has receipted a contract, it remains in place. Any
changes must take place on an amendment, signed by all parties, and dated.

104
Q
  1. The Disclosure of Relationship with Residential Service Company is required if:
    A. The Seller orders a Home Warranty.
    B. The coverage is optional.
    C. The buyer has requested additional coverage above the standard.
    D. The agent and/or the agent’s company receives any type of compensation from the
    Residential Service Company.
A

The correct answer is D.

Any gift or compensation that an agent or broker receives from any vendor
(inspector, title company, lender, etc.) must be disclosed to the clients.

105
Q
  1. All changes from the original contract once it is receipted by the title company are completed on
    the _________________:
    A. Termination notice
    B. Amendment
    C. Third-Party Financing addendum
    D. Original contract that agent requests back from the title company
A

The correct answer is B.

Once the escrow company has receipted a contract, it remains in place. Any
changes must take place on an amendment, signed by all parties, and dated.

106
Q
  1. The seller is providing the buyer notice that water adjoining the subject property fluctuates for all
    the following reasons EXCEPT:
    A. Because an entity is lawfully exercising its right to use the water
    B. Because diversions can occur with water flow
    C. Drought
    D. Flooding
A

The correct answer is B.

Seller will provide the Buyer a notice that water levels adjoining the property
can fluctuate because of drought, flood, or because another party is exercising their right to use the
water.

107
Q
  1. In addition to the unrestricted right to terminate during option period, the buyer can terminate the
    contract:
    A. If the property does not satisfy the lender’s underwriting requirements
    B. If the Seller has failed to provide the Seller Disclosure
    C. If the property does not meet the buyer’s “use of property” requirements written in Paragraph
    6D
    D. Any of the above
A

The correct answer is D.

The buyer has many legal options to terminate and receive their earnest
money back. Some of these are: a) the unrestricted right to terminate during the option period, b) the
property does not satisfy the lender’s underwriting requirements, c) Seller has failed to provide
necessary disclosures on the property; plus, others.

108
Q
  1. A clock hour has been set for either the buyer or the seller to terminate the contract. What time is
    that?
    A. Noon local time where the property is located
    B. 5:00 p.m. local time where the property is located
    C. Midnight local time where the property is located
    D. 9:00 p.m. local time where the property is located
A

The correct answer is B.

TREC has established a clock hour deadline for purposes of the ability to
terminate. It must be done before 5:00 p.m. local time on the due date.

109
Q
  1. Wetlands have many important functions that benefit people and wildlife including:
    A. Providing a habitat for a variety and number of wildlife and plants
    B. Filter, clean, and store water and collect and hold flood water
    C. Absorb wind and tidal forces
    D. All the above
A

The correct answer is D.

Functions of wetlands consist of providing a habitat for certain wildlife and
plants, filtering and storing clean water, collecting and holding flood waters, plus other functions.

110
Q
  1. Who is charged with the responsibility of promptly sending a copy of the contract to any attorneys
    named in the contract by buyer or seller?
    A. The broker
    B. The title company
    C. The buyer who named the attorney
    D. The seller
A

The correct answer is A.

If a buyer or the seller or both name an attorney in the contract, it is the
Broker’s responsibility to deliver the contract to the named attorney.

111
Q
  1. Which of the following would NOT be covered by title insurance?
    A. A mistake in the legal description
    B. Fraud
    C. Delinquent taxes
    D. One of your trees falls through your neighbor’s roof
A

The correct answer is D.

Title insurance insures the title, not the property.

112
Q
  1. In Paragraph 3B of the sales contract, the ‘sum of all financing:’
    A. Includes the earnest money deposited at the time the contract is executed
    B. Includes the closing costs
    C. Excludes any loan funding fee or mortgage insurance premium
    D. All the above
A

The correct answer is C.

Although the VA funding fee and/or the FHA mortgage insurance premium
can be added to the loan and financed, it is not included in the ‘sum of all financing’ in Paragraph 3 of
the contract.

113
Q
  1. In the Residential Condominium Contract (Resale):
    A. The Seller pays all fees associated with the transaction.
    B. The Buyer will pay a set amount for the transfer fees and the seller will pay the difference.
    C. The Seller will pay a set amount for the transfer fees and the buyer will pay the difference.
    D. If any expense exceeds the amount in the contract, the excess will be split evenly between
    buyer and seller.
A

The correct answer is B.

The Residential
Condominium Contract spells out exactly who pays for what in the transaction.

114
Q
  1. A Farm and Ranch Contract can include:
    A. Any buildings, including a house or barn
    B. Farm/ranch accessories such as equipment
    C. Crops
    D. All the above
A

The correct answer is D.

A Farm and Ranch Contract can include buildings (farm house, barn, sheds,
etc.) equipment, crops and other items related to the property.

115
Q
  1. If a Buyer wants to write a “Back-Up” offer to an existing contract, the buyer will need to include
    all of these EXCEPT:
    A. Option money as the buyer would like an option period
    B. A “Back-Up” contract addendum
    C. A closing date
    D. A buyer’s walk through and acceptance form
A

The correct answer is D.

When a buyer makes an offer as a Back-Up, the buyer is required to include
option money (if they desire an option period), a Back-Up addendum, earnest money, and an estimated
closing date. They would only do a walk-through if and when their contract moves into primary position.
116
Q
  1. If a buyer needs to receive the funds from the sale of another property, they will need to do all of
    these EXCEPT:
    A. Attach a “Sale of Other Property” addendum creating a contingency contract
    B. Attach a Non-Realty Items addendum
    C. Offer an additional earnest money amount that allows the buyer to waive the contingency
    D. Place a closing date on the addendum that does not exceed the closing date in the contract
A

The correct answer is B.

If the buyer needs funds from a home they are selling in order to complete a
sale, they would attach a “sale of other property” addendum, offer additional earnest money if they
desire to waive the contingency, and place a closing date on the addendum that does not exceed the
closing date in the contract.

117
Q
  1. Additional disclosures that may be required in a transaction include:
    A. An agent’s relationship with the prospective buyers or sellers
    B. Any deficiencies in the property not otherwise named on a seller’s disclosure
    C. The buyer’s intention to resell the property at a profit
    D. All of the above
A

The correct answer is D.

A contract may require several disclosures. Some of those would be
disclosure of property condition, a buyer’s intention to resell the property at a profit, agent’s relationship
with one of the principals in the transaction, among others.

118
Q
  1. Other required disclosures include all of these EXCEPT:
    A. Disclosure of possible annexation
    B. Any environmental hazards (mold, asbestos, etc.)
    C. Zoning ordinances
    D. Non-smoking ordinances
A

The correct answer is D.

A non-smoking ordinance, if any, is not one of the required disclosures in a
transaction.

119
Q
  1. What is someone buying when they purchase a condominium?
    A. Land and the unit
    B. Air space within the unit and a percentage of the common area
    C. The interior and exterior of the unit plus a parking space
    D. All improvements
A

The correct answer is B.

A condo buyer is purchasing the air space within the condo unit (what is
sometimes referred to as ‘wallpaper to wallpaper,’ plus an undivided interest in the land and any
common areas.

120
Q
  1. The Non-Realty Items Addendum contains all of the following information EXCEPT:
    A. Seller shall convey to Buyer at closing the following personal property.
    B. Seller will receive payment for the items in 6 monthly installments.
    C. Seller represents and warrants that Seller owns the personal property clear of all
    encumbrances.
    D. Seller does not warrant or guarantee the condition of the personal property.
A

The correct answer is B.

The non-realty items addendum includes the price, if any, the buyer is offering to pay for the items. Payment of such can be agreed between buyer and seller. If the seller plans to leave the items at no cost, then the amount in the addendum will be $-0-. The addendum clearly states that the seller does not warrant or guarantee the condition of the items.

Final Exam Prep (9 decks)

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