Texas Real Estate Missed Questions

Which covers innocent misrepresentations as well as unfulfilled promises? A) Statutory fraud B) None of these C) Libelous fraud D) Universal fraud

statutory fraud. Whereas common-law fraud is limited to intent to deceive, statutory fraud covers innocent misrepresentations, as well as unfulfilled promises. The Fraud in Real Estate and Stock Transactions statute provides for actual and punitive damages not only against the person making the misrepresentation or promise but also against any person who benefits from the transaction, has actual knowledge of the falsity, and fails to reveal it.

What is an example of where permanence of investment can improve property values? A) Extension of sewer, water, gas, and electric into areas primed for development B) Extension of sewer, water, gas, and electric into areas in which there is no construction demand C) Permanence of investments neither increases nor decreases property attractiveness, but only functions as a standard obligation D) Reconstruction of utilities under new buildings forced by aging water or gas lines

A) The answer is extension of sewer, water, gas, and electric into areas primed for development can raise the value of those areas. It means parcels already are buildable, making them more desirable.

Relative scarcity is what type of land characteristic? A) Metaphysical B) Economic C) Physical D) None of these

Economic Relative scarcity is an economic characteristic of land that recognizes that real estate will be more valuable in areas where land is in short supply. Improvements, permanence of investment, and area preference are also economic characteristics of land. Immobility, indestructibility, and nonhomogeneity describe physical characteristics. Unit 1.

If a borrower or a public official is concerned that a lending institution might be practicing redlining, which law requires a public reporting of economic and ethnic characteristics of neighborhoods served? A) Americans with Disabilities Act (ADA) B) Community Reinvestment Act (CRA) C) Home Mortgage Disclosure Act (HMDA) D) Equal Credit Opportunity Act (ECOA)

The answer is Home Mortgage Disclosure Act (HMDA). The HMDA was passed to stop the process of redlining, in which certain areas of a community were excluded from eligibility for home loans as though red lines were drawn around them. It requires mortgage lenders to collect and report data to assist in identifying possible discriminatory lending practices: the race or ethnicity, sex, and income of mortgage applicants, as well as the type of loan they want, where the property is located by census tract, and whether the application was approved, denied, or withdrawn. Each institution must make its mortgage loan disclosure statement available to the public.

What is a "substantial equivalency" fair housing law? A) A law that permits a white sales agent to be exchanged for a minority sales agent at the discretion of the broker B) A law that requires all minorities to be treated basically the same C) A law that permits brokers to find homes in different neighborhoods that are substantially equivalent to homes in exclusive neighborhoods D) A state or local law that is basically the same as the federal fair housing law

The answer is a state or local law that is basically the same as the federal fair housing law. The state or local law would have the same protected classes and similar fines or other punishments.

What is an insurance endorsement? A) When a celebrity advertises support for an insurance company B) An insurance company's indication of its support for a political candidate or legislative position C) The signature on the back of the insurance policy D) An extension of coverage

The answer is an extension of coverage. Typically an endorsement, which is added to a policy, will cover broken glass, or extraordinary amounts of jewelry or other personal possessions.

Recovery under the DTPA for an act committed knowingly is limited to A) triple economic and mental anguish damages. B) mental anguish damages only. C) economic plus mental anguish damages. D) economic damages only.

The answer is economic plus mental anguish damages. The DTPA permits the recovery of court costs and attorney's fees if a lawsuit is ruled frivolous or harassing. Recovery under the DTPA is limited to economic damages. However, if the defendant is found to have committed the act knowingly, then damages for mental anguish may also be awarded. Additionally, if the defendant is found to have committed the act intentionally, then the economic and mental anguish damages may be tripled.

Under the "Mrs. Murphy" exemption, how many families can live in her house? A) Herself plus one other. B) Herself plus two others. C) Herself plus four others. D) Herself plus three others.

The answer is herself and three other families. She cannot, however, retain the exemption if she attempts to bar families on the basis of race nor if she uses a real estate agent to secure the renters.

A potential purchaser learns that a new expressway overpass is to be constructed within two blocks of one of the houses she is considering. If this fact causes her to reduce the amount she offers for the property, that decision would likely be based on the economic characteristic of A) relative scarcity. B) area preference. C) improvements. D) permanence of investment.

The answer is improvements. Construction of an improvement on one parcel of land can affect the value and use of a particular parcel of land, as well as that of neighboring tracts and whole communities.

The insurance company will pay the actual cash value of the loss or a percentage of the replacement cost if a homeowner has a coinsurance clause and coverage on the property is A) less than the coinsurance clause percentage. B) either more or less than the coinsurance clause percentage. C) more than the coinsurance clause percentage. D) none of these.

The answer is less than the coinsurance clause percentage. If coverage is less than 80% of the replacement cost, the insurance company will pay the larger of (1) the actual cash value of the loss (replacement cost less depreciation) or (2) a percentage of the replacement cost calculated as follows: percentage of coverage carried ÷ percentage of coverage required in the policy × amount of the loss.

Is the sponsoring broker liable for the unauthorized acts of an independent contractor? A) Yes, the chain of liability goes all the way up from the independent contractor to the broker, to the owner of the company and, where appropriate, to the franchise company. B) The sponsoring broker is never responsible for the actions of independent contractors. C) No, in most cases independent contractors are solely responsible for their unauthorized acts. D) Yes, the sponsoring broker always is liable for the actions of independent contractors.

The answer is no, in most cases independent contractors are solely responsible for their unauthorized acts. The sponsoring broker is only responsible for "authorized" actions by independent contractors.

Would it be discriminatory for a buyer agent to decline to accompany a client to an open house for a home in a neighborhood the agent knows the buyer cannot afford? A) No, it is not discriminatory. B) The agent should instruct his buyers that they cannot afford the home and should not attend. C) The agent should prepare paperwork advising the listing agent that the buyers just want to tour the home, but not buy it. D) Yes, the agent is obligated to attend the open house.

The answer is no, it is not discriminatory. Open houses tend to be open to the public, but buyer agents are within their rights to marshal their time in endeavors that are likely to produce business. There typically would be no bar to the browsing buyer walking through the home.

If an independent contractor announces her "farm" will henceforth be the country club crowd, can the sponsoring broker redirect her if someone else in the office already is working the country club scene? A) No, the broker may discuss the difficulties of breaking into the other agent's farm but could not otherwise order the agent to work elsewhere. B) Yes, the sponsoring broker would be obligated to redirect the intruding sales agent. C) The sponsoring broker would access which independent contractor is most likely be successful, and award the farm to that agent. D) No, the sponsoring broker should step in and divide which days the two independent contractors can work the country club set.

The answer is no, the broker may discuss the difficulties of breaking into the other agent's farm but could not otherwise order the agent to work elsewhere. The broker may suggest, or even urge, the intruding agent to go elsewhere but could not enforce that desire.

If a minority individual renting an apartment is charged with the manufacture and distribution of methamphetamine, may the landlord evict the renter? A) No, the drug manufacturer cannot be evicted unless he is convicted. B) No, the renter is a minority and is protected by the Fair Housing Act. C) Yes, fair housing law specifically exempts drug dealers from its protection. D) Yes, the renter can be evicted if the rental agreement is in someone else's name.

The answer is no, the drug manufacturer cannot be evicted unless he is convicted. The law specifically states that action may be only taken against those who have been found guilty.

When a seller, on the advice of the listing agent, reduces the price of the home, are potential buyers entitled to know why? A) Yes, a reason for a reduction must be offered—but sales agents are allowed to fabricate an explanation. B) No, the listing agent is not obligated to volunteer why there has been a price reduction. C) The listing agent and agent for the buyers should decide if the reason should be made known. D) Yes, even if the reduction is a result of financial distress, divorce, or a medical condition, the reason for the reduction must be made public.

The answer is no, the listing agent is not obligated to volunteer why there has been a price reduction. The listing may, however, ask the seller if the reason can be made known. The listing agent cannot lie.

An attorney who is NOT licensed by the Texas Real Estate Commission (TREC) but performs brokerage services in a transaction may A) not receive part of a broker's commission on the sale of a property. B) be given gifts from a broker equal to the amount of commission earned. C) be compensated by a broker in the form of a cash payment. D) not receive a separate commission or fee from the buyer or the seller.

The answer is not receive part of a broker's commission on the sale of a property. A real estate license holder may not pay a commission, fee, or other valuable consideration to a person who is not licensed by TREC. This includes a prohibition against sharing a sales commission with an attorney or giving other valuable consideration (cash, gifts over $50, vacations, bonuses, etc.) to an attorney.

If a Deceptive Trade Practices Act (DTPA) lawsuit is filed against a real estate agent, broker defenses do NOT include A) the impossibility of the broker's knowing that the information was false or inaccurate. B) notice to the consumer before consummation of the sale that the broker is relying on verbal representations given by the seller, the appraisal district, or other providers of information. C) a reasonable offer of settlement within specified time limits. D) written notice to the consumer before consummation of the sale that the broker is relying on written information prepared by others.

The answer is notice to the consumer before consummation of the sale that the broker is relying on verbal representations given by the seller, the appraisal district, or other providers of information. To avoid a finding of guilt in a DTPA lawsuit, a broker should put in writing all information requested by and/or presented to the agent's principal on behalf of the seller, the appraisal district, the mortgage lender, or other providers.

A rarely challenged fair housing exemption is A) occupancy standards. B) familial status. C) racial. D) religious organizations.

The answer is religious organizations. Drug convictions and occupancy standards often are in the news, drug convictions because of their sensationalism and occupancy standards because the number of people living in a single-family home often has a cultural bias, especially for immigrants.

In a deed, which indicates subsurface interests being retained by the seller? A) Qualification B) Reservation C) Hold back D) Exception

The answer is reservation. Reservations in a deed indicate subsurface interests being retained by the seller. Exceptions in a deed reflect interests retained by a previous property owner.

If a listing agent advertises a property as "valued at more $25,000 above similar homes on the same block," does that claim have to be backed up? A) The claim does not have to be proven, but the agent should be prepared to offer some measurement on which the claim is based. B) The claim is an example of puffery and is generally acceptable in advertising real estate and most other industries. C) The claim must be based on an unbiased measurement that should be offered to the potential buyer as part of full disclosure. D) This is an example of the type of clam that has been banned by the federal Consumer Financial Protection Bureau.

The answer is the claim does not have to be proven, but the agent should be prepared to offer some measurement on which the claim is based. Suggestion of a value differential can be viewed as fact-based and, if it is not supported by data, could be construed as misrepresentation.

When advertising that a roof is "new," how "new" does it have to be? A) A "new" roof is one that has been put on within the last 3 years. B) There is no specific definition. C) A "new" roof is one that has been put on while the seller has lived in the home. D) A "new" roof is one that has been put on within the last 12 months.

The answer is there is no specific definition. Advertised statements that a roof is "new" can be considered misleading. To avoid conflict, it would be best to state that the roof is "new" and add the year it was put on.

Texas real estate license holders may be fined and lose their license for advertising in a discriminatory way, but what about private homeowners who are for sale by owners? A) Yes, FSBO owners must comply with fair housing advertising law. B) No, FSBO owners are free to advertise however they'd like as long as their advertisements are truthful and do not subject an individual to public contempt and ridicule. C) No, FSBOs narrowly escape being included in the law because of an obscure clause in Texas property tax law. D) No, FSBOs do not come under fair housing law because they are not license holders.

The answer is yes, FSBO owners must comply with fair housing advertising law. The owner may be exempt from other portions of fair housing law by being a FSBO, but the Court's ruling in United States vs. Hunter found that FSBO owners may not advertise their intent to discriminate.

Would placing a for-rent advertisement that states "kids OK" represent a violation of the Fair Housing Act? A) No because children are now protected under the Act B) Yes, because it could be viewed as expressing a preference for families over seniors and single individuals C) No, but landlords could still bar families with children in the juvenile detention system D) No, as long as the "kids" were under 18 and under the supervision of an adult

The answer is yes, because it could be viewed as expressing a preference for families over seniors and single individuals. The Fair Housing Act is intended to open housing markets to all, meaning that advertising a preference for families would be viewed in the same light as advertising a preference for white renters.

If an undocumented worker asks to be shown a property in a specific neighborhood, would it be discriminatory to refuse? A) Yes, it is illegal to discriminate against noncitizens. B) No, undocumented workers may be trying to establish a foothold in a neighborhood so they can bring in other undocumented workers. C) No, undocumented workers may be in the country illegally, making them criminals. D) No, noncitizens cannot purchase property in the United States.

The answer is yes, it is illegal to discriminate against noncitizens. Fair housing law prohibits discrimination on the basis of national origin. It is not illegal for noncitizens to own property in the United States.

Does the lack of permanence of investment have an impact on development potential for a community? A) Yes, lack of forward-looking infrastructure makes investors leery of committing to projects. B) No, as long as there are basic utilities present, development can proceed. C) No, developers do not consider infrastructure as plans to proceed. D) No, developers simply add the cost of municipal upgrading to their overall cost.

The answer is yes, lack of forward-looking infrastructure makes investors leery of committing to projects. Projects often are built with razor-thin margins and sharing the cost of infrastructure improvements can kill a deal.