Contract Law in Texas

Which of the following statements about separate property is TRUE? A) A house gifted by parents to one spouse as a wedding gift could be held separately. B) Any income earned from one person's second occupation is considered separate property. C) Separate property can only be conveyed with both spouse's signatures. D) All of these are true.

A) A house gifted by parents to one spouse as a wedding gift could be held separately.

Under the DTPA, which statement is FALSE? A) A real estate agent may be sued under the DTPA for giving bad advice related to a real estate transaction. B) A real estate agent can be liable for fraud. C) A real estate agent can be liable for misrepresentation. D) A real estate agent can be liable for failing to disclose factual information.

A) A real estate agent may be sued under the DTPA for giving bad advice related to a real estate transaction.

Paragraph 2 of the TREC Amendment to Contract addresses which of the following issues? A) Additional repairs not listed in the contract B) None of these C) Extension of the closing date D) Extension of the option period

A) Additional repairs not listed in the contract

Under the Truth in Lending Act, which of the following is NOT a trigger term? A) Annual percentage rate B) Down payment C) Monthly payment D) Term of the loan

A) Annual percentage rate

Which of the following is a fire-resistant mineral? A) Asbestos B) Azimuth C) Mold D) Radon

A) Asbestos

Who fills in the effective date on TREC-promulgated forms? A) Broker B) Buyer C) Seller D) Title officer

A) Broker

A buyer wanted to move in early before closing. Which TREC-promulgated addendum should be used? A) Buyer's Temporary Residential Lease B) Addendum for Maximum 90-Day Residential Lease C) Addendum for Buyer's Move-in Pre-Closing D) Lease Prior to Closing Addendum

A) Buyer's Temporary Residential Lease

Most closings involve the division of financial responsibility between the buyer and seller for which of the following items? A) Condominium fees B) Credit life insurance C) Mediation fees D) Cable bill

A) Condominium fees

What type of title does the buyer get in a land sales contract? A) Equitable title B) Quitclaim title C) Legal title D) The buyer will not receive title until the lien is paid in full

A) Equitable title

RESPA regulations apply to which of the following loans? A) Federally related loans B) All loans C) Conventional loans D) Title loans

A) Federally related loans

Which of the following forms should be used if the sale closes, but possession does not occur at closing? A) TREC Temporary Residential Lease form B) An appropriate addendum C) Notice of Buyers Termination of Contract form D) TREC Amendment Form

A) TREC Temporary Residential Lease form

The sellers want to stay in the house for 48 hours after closing and funding. The agent writes this request in the Special Provisions paragraph of the TREC-promulgated contract, and the seller accepts the offer. Which of the following is TRUE? A) The agent violated TREC rules because TREC promulgates a form for this purpose. B) This is a business detail and should be written out completely in special provisions. C) The seller would never stay in the house after closing and funding. D) The contract is voidable.

A) The agent violated TREC rules because TREC promulgates a form for this purpose.

The buyer and seller are negotiating an offer. During the final stages of negotiations, the buyer crosses out part of the paragraph that states the seller has the right to continue to show the property and receive, negotiate, and accept back-up offers, and the seller agrees. What are the implications? A) The change should be initialed in the margin by the buyer prior to the presentation to the seller. B) The broker will need to have a separate written agreement drawn up for the parties. C) This is illegal; only a real estate attorney can do this. D) This can only take place on an amendment form.

A) The change should be initialed in the margin by the buyer prior to the presentation to the seller.

Which of the following is TRUE about the good-faith estimate of settlement costs? A) The estimate must contain the exact language specified by the CFPB. B) The language in the estimate can be of the lender's choice as long as the content is legally congruent. C) The estimate must be at least five pages in length. D) There is no requirement to use a good-faith estimate whenever the transaction involves government financing.

A) The estimate must contain the exact language specified by the CFPB.

With community property, which of the following is FALSE? A) Title can be conveyed by one party without the approval of the other party. B) Each spouse has an equal interest in the property. C) Each spouse can will their half of the property to anyone else. D) Each spouse has an undivided interest in the property.

A) Title can be conveyed by one party without the approval of the other party.

What is the main purpose of the Texas Real Estate Commission? A) To protect the public B) All of these C) To protect REALTORS® D) To draft and revise contracts

A) To protect the public

A situation in which a seller is retaining title to the property until full payment is made by the buyer is A) a land contract. B) a For Sale by Owner. C) an owelty contract. D) a contract to own.

A) a land contract.

Real estate brokers who are members of the Broker-Lawyer Committee become members by being A) appointed by the Texas Real Estate Commission. B) elected in a public election. C) appointed by the president of the State Bar of Texas. D) appointed by the governor.

A) appointed by the Texas Real Estate Commission.

Once a contract has been agreed upon and signed by all parties, A) changes must be addressed through the use of an amendment. B) no changes will be allowed. C) the broker will write up an exhibit to the contract to address changes. D) any changes are to be addressed in the Special Provisions paragraph.

A) changes must be addressed through the use of an amendment.

Where water is plentiful, states may rely on the simple parameters set by the A) common-law doctrines of riparian and littoral rights. B) Wetlands Act. C) Environmental Protection Act. D) Coastal Waters Act.

A) common-law doctrines of riparian and littoral rights.

The process whereby the government acquires privately owned property for public use is A) condemnation. B) escheat. C) police power. D) eminent domain.

A) condemnation.

RESPA is a federal law that was enacted to protect consumers from all of the following in the settlement process EXCEPT A) excessive broker commissions. B) excessive escrow account deposits. C) referral fee requirements. D) kickbacks.

A) excessive broker commissions.

The recordation of a warranty deed A) gives constructive notice of an individual's interest. B) provides defense against adverse possession. C) gives actual notice of the grantee's rights. D) prevents claims of parties in possession.

A) gives constructive notice of an individual's interest.

The right of way a utility company has to cross over land is an easement A) in gross. B) appurtenant. C) by prescription. D) by necessity.

A) in gross.

Which act created the Consumer Financial Protection Bureau (CFPB), an independent agency within the Federal Reserve Board, with oversight authority over many of the major federal financial consumer protection laws? A) The Dodd-Frank Act B) The Truth in Lending Act (TILA) C) The Mortgage Disclosure Improvement Act (MDIA) D) The Fair and Accurate Credit Transactions Act

A) The Dodd-Frank Act

Which of the following items typically is NOT leased? A) Attached garage B) Security system C) Cable service D) Water softener system

Attached garages are always real property and part of the original construction. Any leased equipment to be transferred to the new owner needs to be identified (i.e., security system, cable service, water softener system).

What type of committee is the Broker-Lawyer Committee? A) Rule making B) Advisory C) Temporary D) Under-secretary

B) Advisory

When is the seller to provide the required HOA restrictions to the buyer? A) At the time of the contract B) At a time agreed upon by both parties C) At the time of the listing D) At the time of the offer

B) At a time agreed upon by both parties

Which of the following are private controls of land? A) Building codes B) Deed restrictions C) Eminent domain D) Special assessments

B) Deed restrictions

Which of the following is not covered by an extended policy? A) Certain unrecorded liens B) Defects and liens listed in the policy C) Rights of parties in possession D) Defects that may be discovered by an inspection

B) Defects and liens listed in the policy

What does the Broker-Lawyer Committee do? A) Promulgates contracts B) Drafts contracts C) All of these D) Publishes forms for mandatory use

B) Drafts contracts

Which of the following could be written in Special Provisions? A) The buyer's legal rights if the seller does not leave the bookcase in the living room B) Factual statements for which no contract addendum has been promulgated by TREC C) Factual statements for which a contract addendum has been promulgated by TREC D) Business details for which a form has been promulgated by TREC

B) Factual statements for which no contract addendum has been promulgated by TREC

Which of the following is NOT a legal life estate? A) Curtsy B) Fee simple C) Homestead D) Dower

B) Fee simple

What should the lender do to institute a nonjudicial foreclosure? A) Sell the property on the courthouse steps B) Give a demand notice C) Keep the property in the lender's portfolio D) Allow for a short sale

B) Give a demand notice

Which of these statements about community property is FALSE? A) All of these are true. B) In Texas, if a spouse dies without a will and two common heirs, the property will go to the heirs in a trust. C) Any conveyance requires the signatures of both spouses. D) Spouses can will their half of the community property.

B) In Texas, if a spouse dies without a will and two common heirs, the property will go to the heirs in a trust.

Which of the following properties is NOT subject to real estate taxes? A) Condo B) Public library C) Housing for the elderly D) Town home

B) Public library

Which of the following phrases means for the life of another? A) Caveat emptor B) Pur autre vie C) Joie de vivre D) Lis pendens

B) Pur autre vie

If a seller gave a letter to the listing agent with instructions not to deliver any offers for less than $250,000, and the listing agent receives an offer for $249,500, should he deliver it? A) The TREC states that license holders must present all offers without exception. B) The TREC allows the listing agent to reject this offer because the seller has given written approval. C) According to the agency laws of Texas, the listing agent has the right to act for and on behalf of the client. The agent has the right to reject any offer he thinks is not in the best interest of the client. D) Present it to the seller without regard to the seller's written instructions to the contrary.

B) The TREC allows the listing agent to reject this offer because the seller has given written approval.

What type of information is not included in the Seller Financing Addendum? A) Method and time of payment B) The amount of earnest money C) Taxes and assessments D) Credit terms

B) The amount of earnest money

A buyer and seller enter a contract for the sale of a three-bedroom residential property. Shortly after the contract is in place, the buyer has an inspection done. As a result of the inspection, the buyer wants the seller to fix the fence and replace the garage door opener. The seller agrees. How should the parties proceed? A) The parties must document this agreement in the Special Provisions paragraph of the contract. B) The parties must use an amendment form. C) They have to proceed under the terms of the current contract; because the parties are already under contract, no further negotiations are allowed. D) The broker must contact his attorney to get advice.

B) The parties must use an amendment form.

Which type of lien is the deed of trust on a property? A) Voluntary, general B) Voluntary, specific C) Involuntary, general D) Involuntary, specific

B) Voluntary, specific

Which of the following is an exception to using TREC-promulgated contract forms? A) When a license holder is not representing either party in the transaction B) When the license holder is acting as a principal and not as an agent C) When the license holder is solely leasing property D) All of these

B) When the license holder is acting as a principal and not as an agent

All of the following may be used to prove ownership EXCEPT A) title insurance. B) a deed. C) a Torrens certificate. D) a certificate of title.

B) a deed.

A landowner in Texas has not taken action to force the removal of an encroachment in the past 10 years (the period required by Texas law), therefore, the encroachment may continue through A) an easement by necessity. B) an easement by prescription. C) a right by prior appropriation. D) a license.

B) an easement by prescription.

The loan contingency protects A) the buyer. B) both the seller and the buyer. C) the seller. D) the lender.

B) both the seller and the buyer.

An up-front premium is charged on FHA loans used to purchase all of these EXCEPT A) one- to four-family property. B) condominium. C) farm and ranch property. D) unimproved property.

B) condominium.

Texas Real Estate Commission (TREC) Form OP-H, Seller's Disclosure of Property Condition A) is a promulgated form. B) is an approved form for voluntary use. C) contains additional information not found on the Texas Association of REALTORS® (TAR) Seller's Disclosure of Property Condition. D) is a mandatory form.

B) is an approved form for voluntary use.

A man is interested in purchasing a home but has credit issues that prevent him from getting a mortgage. A seller decides to provide owner's financing to allow the buyers to purchase the home now while the man cleans up his credit. Under the terms in the contract, the seller will deliver title to the man once the contract has been paid in full. This is a A) mortgage contract. B) land contract. C) lease purchase contract. D) voidable contract.

B) land contract.

As compared to any other type of civil action, in a Deceptive Trade Practices Act (DTPA) action, a plaintiff A) may be awarded actual damages only. B) may be awarded treble damages. C) may not be awarded court costs. D) may not be awarded attorney's fees.

B) may be awarded treble damages.

A real estate listing agent receives an offer on one of his listings; the seller agrees to the offer and signs the sales contract. The contract is A) an executory contract. B) not enforceable. C) valid. D) an executed contract.

B) not enforceable.

All of the following are affected by advertising regulations in Regulation Z EXCEPT A) radio. B) open houses. C) signs. D) financing terms.

B) open houses.

Financing is defined as A) purchasing. B) providing funds. C) acquiring money. D) loaning money.

B) providing funds.

A will can be altered by the A) devisees. B) testator. C) heirs. D) executor.

B) testator.

A 15-year-old boy recently inherited several parcels of real estate from his late father and has decided to sell one of them. If the boy entered into a deed conveying his interest in the property to a purchaser, such a conveyance is A) valid. B) voidable. C) void. D) invalid.

B) voidable.

Which of the following is considered an artificial person? A) Severalty B) Corporation C) LLC D) Sole proprietorship

B) Corporation

What is the maximum urban homestead for a family in Texas? A) 200 acres B) 20 acres C) 10 acres D) 100 acres

C) 10 acres

What must be in the documents regarding a homeowners' or condominium association? A) Interior colors of paint that are permitted B) Association dues, repairs, and addresses of all the residents C) Any fees, how high the grass can be, and the materials used for repairing a shed D) Who to contact in an emergency, amount of dues, and parking regulations

C) Any fees, how high the grass can be, and the materials used for repairing a shed

Which of the following statements is not allowable in special provisions? A) The buyer is to do a final walk through three hours prior to closing. B) The seller is to leave the refrigerator located in the kitchen: Hamilton brand, model number 679808, beige in color. C) Buyer has the right to terminate this contract if the property has termites. D) The seller is a licensed real estate sales agent.

C) Buyer has the right to terminate this contract if the property has termites.

Of the different types of loans, which is viewed as the most secure? A) VA B) Texas VA C) Conventional D) FHA

C) Conventional

What is the definition of codicil? A) Court's decision regarding a will B) Distribution of a will C) Document that modifies a will D) Heirs' rights in a will

C) Document that modifies a will

Which type of deed is used to transfer property by a court order or will? A) Special warranty deed B) Reconveyance deed C) Executors' deed D) General warranty deed

C) Executors' deed

Which act is administered by the CFPB and was designed to expand consumer access to credit, enhance the accuracy of consumers' financial information, and help fight identity theft? A) Regulation Z B) Real Estate Settlement Procedures Act (RESPA) C) Fair and Accurate Credit Transactions Act D) Truth in Lending Act (TILA)

C) Fair and Accurate Credit Transactions Act

Which act requires that a licensed or certified appraiser perform any appraisal used in connection with a federally related transaction of $250,000 and above? A) Uniform Standards of Professional Appraisal Practice Act (USPAP) B) Secure and Fair Enforcement for Mortgage Licensing Act C) Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) D) Texas Appraiser Licensing and Certification Act

C) Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA)

Of the choices below, which one requires a Short-Sale Addendum? A) Ginnie Mae B) National Association of REALTORS® C) Freddie Mac D) Federal Housing Administration

C) Freddie Mac

The words of conveyance are found in which clause? A) Habendum clause B) Reservations clause C) Granting clause D) Acceleration clause

C) Granting clause

A property sells for $25,000, and the dwelling built thereon is only valued at $2,500. What does Section 5.008 of the Texas Property Code say about this situation? A) It does not require the seller to provide a written notice of the property's condition. B) It does not address the value of a dwelling in relation to value of the property. C) It requires the seller to provide a written notice of the property's condition. D) It requires the seller to provide a written notice of the property's condition only if requested by the buyer.

C) It requires the seller to provide a written notice of the property's condition.

Six months after they bought the property, Barbara, another friend, says she wants to become part of the company and the ownership of the property. Can Barbara become a joint tenant with the other three owners? A) Yes, and the percentage of ownership for each will be reduced to 25%. B) Yes, but she will have limited possession. C) No, a joint tenancy has to be created all at one time, with one document. D) Yes, but her ownership interest cannot exceed 10%.

C) No, a joint tenancy has to be created all at one time, with one document.

Which EPA-approved pamphlet must sellers and landlords provide to prospective buyers or tenants? A) The Dangers of Lead B) How to Detect Lead in Your Home C) Protect Your Family from Lead in Your Home D) Federal Lead Disclosure

C) Protect Your Family from Lead in Your Home

Section 9 of RESPA prohibits sellers from doing which of the following? A) Selling the property to different buyers without terminating the first contract B) Misrepresenting the property C) Requiring buyers to purchase title insurance from a particular company D) All of these

C) Requiring buyers to purchase title insurance from a particular company

What type of interest goes back to the original owner upon the end of a life estate? A) Fee simple B) Pur autre vie C) Reversionary interest D) Remainderman interest

C) Reversionary interest

What should not be written into special provisions? A) Business details B) Factual statements C) Rights and remedies D) A single personal property item

C) Rights and remedies

An option to purchase binds which of the following parties? A) Neither the buyer or seller B) Both the buyer and seller C) Seller only D) Buyer only

C) Seller only

What is the make-up of the Broker-Lawyer Committee? A) Six brokers, six lawyers, and three members of the general public B) Three brokers, three lawyers, and three members of the general public C) Six brokers, six lawyers, and one member of the general public D) Six brokers and six lawyers

C) Six brokers, six lawyers, and one member of the general public

A seller agrees to fix a fence before closing on a contract. After closing, the buyer notices that the fence was not fixed. The seller now refuses to repair the fence. Which of the following lawsuits would, if won, require the seller to fix the fence? A) Suit for default B) Suit for money damages C) Suit for specific performance D) Suit for liquidated damages

C) Suit for specific performance

Which of the following is TRUE? A) The Broker-Lawyer Committee promulgates forms for mandatory use by license holders. B) The Texas Real Estate Commission drafts and revises contract forms for use by real estate license holders. C) The Broker-Lawyer Committee develops forms and recommends their adoption, but it is the TREC that promulgates the forms for mandatory use. D) The Broker-Lawyer Committee has rule-making authority, but the Texas Real Estate Commission does not.

C) The Broker-Lawyer Committee develops forms and recommends their adoption, but it is the TREC that promulgates the forms for mandatory use.

A buyer applied for an FHA 203(b) loan with a 3.5% down payment, and when he made an offer, he placed the appropriate financing information in the Third Party Financing Addendum for Credit Approval. The seller accepted his offer, but the buyer later found out that he did not qualify for the FHA 203(b) loan. So to be able to purchase the home with a conventional loan, he needs to put 20% down. The buyer cannot afford a 20% down payment; what should he do? A) The buyer has a contract with the seller and as such must make the additional down payment or face default. B) The buyer could terminate it but would lose his earnest money. C) The buyer could terminate the contract because he could not get the financing that was written in the contract. He would receive his earnest money back. D) The seller is required to pay the difference in down payment because the seller accepted the terms and at no fault of the buyer, the buyer can't perform.

C) The buyer could terminate the contract because he could not get the financing that was written in the contract. He would receive his earnest money back.

Which of the following is TRUE with a contract for deed? A) The seller must execute and deliver the deed to make the agreement valid. B) Because Texas is a lien theory state, the seller must transfer the deed upon closing. C) The buyer generally could get a new mortgage loan and pay off the contract. D) The seller retains possession until the terms of the contract have been satisfied.

C) The buyer generally could get a new mortgage loan and pay off the contract.

For which of the following actions may the Texas Real Estate Commission NOT suspend a license holder? A) All of these are violations and are subject to suspension. B) The license holder drafts an instrument (other than a form promulgated by TREC) that transfers an interest in real property. C) The license holder explains to the principals the meaning of the factual statements or business details contained in the contracts. D) The license holder used a TREC-promulgated purchase agreement that was specifically designed to work for a different type of transaction.

C) The license holder explains to the principals the meaning of the factual statements or business details contained in the contracts.

A license holder uses a TREC-promulgated residential contract to create a contract for deed. Which statement is TRUE? A) The license holder will have a valid contract for deed, but the buyer may not like the format. B) The license holder is at risk for criminal prosecution. C) The license holder is at risk of having his license suspended or revoked for engaging in the unauthorized practice of law. D) The license holder is following the proper legal procedure for creating a contract for deed.

C) The license holder is at risk of having his license suspended or revoked for engaging in the unauthorized practice of law.

An owner decides to sell his property and discovers that there is a lien on his title for a swimming pool he paid off ten years ago. The pool company is out of business. What is the owner to do? A) None of these will happen. B) He will not be able to sell his property. C) The seller could seek a suit for quiet title. D) The buyer will have to pay off the lien.

C) The seller could seek a suit for quiet title.

Which act requires escrow agents, title companies, and other persons involved in real estate closings and settlements to establish anti-money-laundering policies and procedures? A) Fair and Accurate Credit Transactions Act B) Foreign Investment in Real Property Tax Act (FIRPTA) C) USA PATRIOT Act D) Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA)

C) USA PATRIOT Act

A qualified buyer may assume an existing VA loan only if the A) buyer is also a veteran and has the same or higher amount in their certificate of eligibility. B) VA issues a release of liability. C) VA approves the borrower, and the loan was made on or after March 1, 1988. D) original veteran borrower agrees to remain personally liable for the repayment of the loan.

C) VA approves the borrower, and the loan was made on or after March 1, 1988.

Which of the following statements about assignment and subleasing is FALSE? A) When a tenant transfers less than all the leasehold interests by leasing them to a new tenant, the original tenant has subleased the property. B) When a tenant transfers all leasehold interests to another person, the lease has been assigned, and the new tenant is obligated for all the promises in the lease. C) When the property has been sublet, the original tenant is not responsible for any damages by the new tenant during the term of the lease. D) Assignment and subleasing should be in writing and are only allowed when a lease specifically permits them.

C) When the property has been sublet, the original tenant is not responsible for any damages by the new tenant during the term of the lease.

Real estate brokers who are members of the Broker-Lawyer Committee become members by being A) elected in a public election. B) appointed by the president of the State Bar of Texas. C) appointed by the Texas Real Estate Commission. D) appointed by the governor.

C) appointed by the Texas Real Estate Commission.

For a will to be valid, it must be A) recorded. B) involuntarily made. C) executed. D) written by an attorney.

C) executed.

When a person dies, ownership of real estate A) must go through probate. B) passes upon notice to all the devisees in a will. C) passes immediately. D) passes via the laws of decent and distribution.

C) passes immediately.

The government's authority to appoint local citizens to serve on boards to set zoning standards and building codes for their communities is an example of A) eminent domain. B) rule of law. C) police power. D) escheat.

C) police power.

The Real Estate Settlement Procedures Act prohibits all of the following EXCEPT A) unearned fees for services not actually performed. B) fee-splitting for referrals of settlement services. C) referral fees to out-of-state brokers. D) kickbacks.

C) referral fees to out-of-state brokers.

A restaurant owner has selected a new site to open a restaurant. He has signed a long-term ground lease and contracted with a builder to build the restaurant. The construction of the site is complete and has the restaurant for business. The restaurant owner sells the restaurant to an investor and leases back the restaurant. This type of lease is a A) sandwich lease. B) lease purchase agreement. C) sale-and-leaseback. D) ground lease.

C) sale-and-leaseback.

A special type of addendum that has become popular due to current difficult times in the real estate market is a A) seller financing addendum. B) exclusion from listing agreement addendum. C) short sale addendum. D) backup offer addendum.

C) short sale addendum.

A broker should discuss all of the following issues with a buyer before signing a buyer representation agreement EXCEPT A) the rights of the parties under each type of agency. B) the services to be provided to the buyer. C) the source of compensation determines the agency relationship. D) the different forms of agency available.

C) the source of compensation determines the agency relationship.

What sets forth the powers of a corporation? The A) state in which the corporation is formed. B) proclamation. C) charter. D) declaration.

C) Charter

What is the maximum rural homestead for a family in Texas? A) 10 acres B) 150 acres C) 100 acres D) 200 acres

D) 200 acres

What is specific performance? A) The parties are returned to their original positions before the contract was made. B) None of these. C) The parties agree on a certain amount of money that will compensate the non-breaching party. D) A court forces the other party to go through with the sale as previously agreed.

D) A court forces the other party to go through with the sale as previously agreed.

Which of the following is a TREC-promulgated form? A) Seller's Disclosure Notice B) Information About Brokerage Services Addendum C) Non-Realty Items Addendum D) Addendum for Sale of Other Property by Buyer

D) Addendum for Sale of Other Property by Buyer

If a TREC-promulgated contract form is used, who is responsible for depositing the earnest money with the escrow agent? A) Seller's agent B) Seller C) Buyer's agent D) Buyer

D) Buyer

Which of the following is FALSE regarding underground storage tanks? A) State and federal laws impose strict requirements on landowners whose property contains underground storage tanks. B) A contingency requiring inspection or removal of any underground storage tanks by the seller before closing could save the purchaser from a great deal of later expense for detection, removal, and cleanup of surrounding contaminated soil. C) Some states have adopted laws that are even more stringent than the federal laws. D) EPA regulations apply to tanks that contain hazardous substances or liquid petroleum products that store at least 25% of their volume underground.

D) EPA regulations apply to tanks that contain hazardous substances or liquid petroleum products that store at least 25% of their volume underground.

Which act stipulates that if the seller is a foreign person, the buyer must withhold 15% of the sales proceeds and pay that amount to the IRS? A) USA PATRIOT Act B) Secure and Fair Enforcement for Mortgage Licensing Act C) Equal Credit Opportunity Act (ECOA) D) Foreign Investment in Real Property Tax Act (FIRPTA)

D) Foreign Investment in Real Property Tax Act (FIRPTA)

Where is it necessary to define or explain in the deed the ownership to be enjoyed by the grantee? A) Legal description B) Considerations C) Exceptions and reservations D) Habendum clause

D) Habendum clause

Which of these is an example of a bilateral contract? A) Open listing agreement B) Option to purchase C) All of these D) Independent contractor agreement

D) Independent contractor agreement

Why are accurate dates in notes essential? A) It is a HUD requirement; noncompliance could result in jail time. B) All of these make accurate dates essential. C) The Texas Real Estate Commission imposes a $500 fine for each inaccurate date in a note. D) It is important to establish priority rights.

D) It is important to establish priority rights.

Which of the following concerns led to the Texas Real Estate License Act prohibiting license holders from practicing law? A) All of these B) Individuals using contracts that are not promulgated by TREC C) Contracts for the sale of a business that do not include a real property interest D) License holders giving counsel regarding the validity of an instrument that addresses real property rights

D) License holders giving counsel regarding the validity of an instrument that addresses real property rights

Which of the following is not a category of fees according to the rules regarding tolerances? A) 10% tolerance (can increase up to 10%) B) No tolerance (cannot increase) C) None of these D) Limited tolerance (can increase up to 4%)

D) Limited tolerance (can increase up to 4%)

What type of a will is conveyed by orally dictating the individual's desires? A) Curtsey B) Codicil C) Probate D) Nuncupative

D) Nuncupative

Which of the following would automatically terminate a residential lease? A) Sale of the property B) Death of the tenant C) Failure of the tenant to pay rent as agreed D) Operation of law

D) Operation of law

Which of the following statements is FALSE regarding use of reproduced forms approved or promulgated by TREC? A) The business name or logo of a broker, organization, or printer may appear at the top of a form outside the border. B) The form must be reproduced on the same size paper used by TREC. C) The broker's name may be inserted in any blank provided for that purpose. D) The form may be reproduced on any size paper at least as large as the size used by TREC.

D) The form may be reproduced on any size paper at least as large as the size used by TREC.

Which of the following circumstances would NOT terminate a listing? A) Either the broker or the seller dies or becomes incapacitated. B) The broker and the seller mutually agree to cancel the listing. C) Title to the property is transferred by operation of law, as in the case of the owner's bankruptcy or foreclosure. D) The sales agent transfers to another firm.

D) The sales agent transfers to another firm.

A buyer obtains possession of a property under a contract, and the seller is not obligated to execute and deliver a deed to the buyer until the terms of the contract have been satisfied. This is A) a novation contract. B) a subrogation contract. C) a sales contract. D) an installment contract.

D) an installment contract.

Standard title insurance protects the buyer from A) unrecorded liens not known by the policyholder. B) defects known to the buyer. C) all of these. D) defects found in public records.

D) defects found in public records.

When a person dies testate, title to real property transfers to the A) testator. B) descendant. C) deceased person's heirs. D) devisee.

D) devisee.

All of the following are requirements of a valid lease EXCEPT A) capacity to contract. B) offer and acceptance. C) consideration. D) legal conjecture.

D) legal conjecture.

The rights granted to property owners whose land borders commercially navigable lakes, seas, and oceans are called A) coastal rights. B) riparian rights. C) wetlands rights. D) littoral rights.

D) littoral rights.

Local communities passing environmental protection laws is an example of A) condemnation. B) private restrictions. C) eminent domain. D) police power.

D) police power.

Every deed must be executed by A) the mortgagor. B) the grantee. C) both the grantee and grantor. D) the grantor.

D) the grantor.

The borrower's personal promise is called A) the interest. B) the obligation. C) their word. D) the note.

D) the note.

For residential property, some jurisdictions may mandate A) comprehensive inspections for hazardous substances to include asbestos, radon, carbon monoxide, mold, lead-based paint, and contaminated groundwater. B) acceptable carbon monoxide levels in children's rooms. C) proper ventilation on all new buildings so that radon is not an issue. D) the placement of carbon monoxide detectors.

D) the placement of carbon monoxide detectors.

A contract with a person under duress is A) void. B) valid. C) enforceable. D) voidable.

D) voidable.

Which of the following is a legal entity that exists independently of its members? A) Partnership B) Limited liability company C) Corporation D) All of these

D) All of these

True or False. A license holder selling her house on her own behalf is required to use TREC-promulgated forms in the transaction.

False

True or False. A contract entered into with a minor is valid as long as the minor entered into the contract willingly.

False - a contract with a minor is voidable

The rules of TREC have the full force of the _____ ?

Law

Normal borrower costs on an FHA loan include all of the following EXCEPT A) discount points. B) MIP. C) PMI. D) impound fees.

PMI (private mortgage insurance) is associated with conventional loans, not with FHA. MIP (mortgage insurance premium) is charged at closing and can be financed into the loan.

Who appoints the lawyers to the Broker-Lawyer Committee?

President of the state bar

In the Seller Financing Addendum TREC NO. 26-7, does the buyer or the seller have the option to terminate?

Seller may terminate. Text that makes contract voidable: "If the credit documentation is timely delivered, and Seller determines in Seller's sole discretion that Buyer's credit is unacceptable, Seller may terminate this contract by notice to Buyer within 7 days after expiration of the time for delivery and the earnest money will be refunded to Buyer."

TREC is a ____ agency?

State

The Broker-Lawyer Committee drafts and edits contract forms for use by real estate license holders, and WHO approves and promulgates them?

TREC

The Texas Real Estate License Act (TRELA) and the TREC Rules are enforced by:

Texas Real Estate Commission (TREC)

Who drafts and edits contract forms for use by real estate license holders?

The Broker-Lawyer Committee

TREC has _____ public members?

Three

True or False. A registration agreement is used when an owner agrees to pay a fee to the license holder, should the seller end up selling the property to the license holder's buyer.

True

True or False. The bundle of legal rights includes the right of possession, right of enjoyment, and right of disposition.

True

Unilateral Contract vs Bilateral Contract

Unilateral - one promise; bilateral - exchange of promises

How many commissioners are on the Texas Real Estate Commission? A) 13 B) 6 C) 12 D) 9

d) 9

true or false. The Uniform Residential Appraisal Report lists all assets and liabilities of the borrower in order to determine the applicant's net worth.

false

True or False. Changing the closing date on a contract from October 29 to November 7 requires an addendum.

false. A change like this requires an amendment to the contract.

True or False. Legal life estates are created voluntarily by owners of property.

false. A legal life estate is a form of life estate established by state law. It becomes effective automatically when certain events occur. Dower, curtesy, and homestead are the legal life estates currently used in some states.

true or false. During probate proceedings, public records are examined to determine whether any defects exist in the chain of title.

false. A title search is an examination of all of the public records to determine whether any defects exist in the chain of title.

True or False. Acceptance occurs at the point one party to a transaction accepts the other party's offer.

false. An offer is not considered accepted until the person making the offer has been notified of the other party's acceptance.

true or false Chain of title includes liens and encumbrances.

false. Chain of title is the record of a property's ownership. It does not include liens and encumbrances or any other document not directly related to ownership.

True or False. Nonjudicial foreclosure is sometimes called a friendly foreclosure because it is carried out by mutual agreement rather than by lawsuit.

false. Deed in lieu of foreclosure is sometimes called a friendly foreclosure.

True or False. Eminent domain and condemnation are police powers.

false. Eminent domain is a governmental power just as is police power. Condemnation is the process by which the government exercises eminent domain.

True or False. Freehold estates include fee simple estates and leasehold estates.

false. Leasehold estates are non-freehold estates. Non-freehold estates are those for which the length of time can be determined.

True or False. Mortgages are three-party instruments, and deeds of trust are two-party instruments.

false. Mortgages are two-party instruments (borrower and lender), and deeds of trust are three-party instruments (borrower, lender, and trustee).

True or False. The Texas Property Code requires sellers of most residential property to disclose to the buyer the property's condition through the use of TREC Form OP-H, Seller's Disclosure of Property Condition.

false. Most sellers are required to provide the property disclosure, but the TREC form is not a required form. The TREC form includes the language required by the Texas Property Code and is available for optional use.

True or False. Ownership in severalty occurs when property is owned by two or more individuals.

false. Ownership in severalty occurs when property is owned by one individual or corporation.

true or false. RESPA rules apply to loans on properties of 100 acres and more.

false. RESPA does not apply loans on large properties (more than 25 acres).

True or False. The Broker-Lawyer Committee promulgates forms for mandatory use by license holders.

false. The Broker-Lawyer Committee drafts and edits the forms; the Texas Real Estate Commission promulgates them for mandatory use by license holders.

True or False Any addenda that are included as part of the contract just need to be signed and dated by the parties and attached to the contract.

false. The addenda that are part of the contract need to be identified in paragraph 22 of the TREC-promulgated contracts.

True or False. In a lien theory state, the borrower gives legal title to the lender, and the borrower retains equitable title.

false. The borrower retains both legal and equitable title. The lender simply has a lien on the property as security for the debt. If the borrower defaults, the lender must go through a formal foreclosure proceeding to obtain legal title.

True or False. Earnest money deposits are based on a percentage (usually around 3%) of the sales price of the property.

false. The deposit amount is a matter to be agreed on by the parties.

True or False. Inspection contingencies require the full resolution of any findings or the contract will become void.

false. The parties will reach an agreement regarding any needed repairs. They may choose to resolve all issues, some of them, or none at all.

True or False. Financing information is generally not covered in a sales contract.

false. The purchase price and how the purchaser intends to pay for the property, including earnest money deposits, additional cash from the purchaser, and the conditions of any mortgage financing are all important elements of the financing portion of the contract.

True or False. The purpose of the Texas Real Estate License Act (TRELA) is to protect Texas real estate license holders.

false. The purpose of the TRELA is to protect the public through regulation of licensed real estate brokerage practitioners, real estate inspectors, residential service companies, and entities offering timeshare interests.

true or false When a person dies testate, real estate and personal property pass to the decedent's heirs according to the state's statute of descent and distribution.

false. This happens when a person dies without a will (intestate).

True or False. An amendment is additional material that is part of the original agreement.

false. This is an addendum.

True or False. An easement that is created when an owner sells a parcel of land that has no access to a street or public way EXCEPT over the seller's remaining land is an easement by prescription.

false. This is an easement by necessity.

True or False. A homeowner offers to pay a commission to a broker to find a buyer for a property. Under the contract, the broker is not obligated to find a buyer and makes no other promises. The property owner is only obligated to pay a commission to the broker who finds a buyer. This is a bilateral contract.

false. This is an example of a unilateral contract. In this case, the broker is not legally obligated to act, but if the broker does find a buyer, the homeowner is obligated to pay a commission to the broker.

True or False. A growing tree is considered real estate until the owner cuts it down. This is an example of annexation.

false. This is an example of severance.

True or False. Land is defined as land at, above, and below the earth's surface, plus all things permanently attached to it, whether natural or artificial.

false. This is the definition of real estate.

True or False. The statute of frauds limits the time during which parties to a contract may bring legal suit to enforce their rights in the event of a breach of contract.

false. This refers to the statute of limitations.

true or false It is common in real estate transactions for buyers to search public records for evidence of title.

false. Title companies, attorneys, and lenders generally conduct the searches.

Which of the following is an economic indicator? A) Payment caps B) Rate caps C) Index D) Margin

index. The index is an economic indicator that is used to adjust the interest rate in an adjustable-rate mortgage.

The Deceptive Trade Practices Act (DTPA) protects consumers from:

license holders who engage in false, misleading, or deceptive acts or practices.

TREC has _____ authority?

rule making

TREC has ____ broker members?

six

Real estate in Texas is governed by:

state law

true or false. RESPA prohibits the payment of kickbacks, or unearned fees, in any real estate settlement service.

true

True or False. Acceptance is sufficient if it is communicated to the party's agent.

true. As an agent of a party to the transaction, the agent is a valid representative of the party and therefore communicating acceptance to the party's agent is sufficient.

True or False. Prepayment penalties are charges to the borrower for any mortgage payments made ahead of schedule.

true. If the borrower repays the loan before the end of the term, the lender collects less than the anticipated interest. For this reason, some mortgage notes contain a prepayment clause.

True or False. The Special Provisions paragraph of the TREC-promulgated contracts is meant only for factual statements and business details applicable to the sale.

true. License holders should not use this area for legal rights or remedies. In addition, TREC rules prohibit license holders from adding factual statements or business details for which a contract addendum, lease or other form has been promulgated by TREC for mandatory use.

true or false Constructive notice is the legal presumption that information may be obtained by an individual through due diligence.

true. Properly recording documents in the public record serves as constructive notice to the world of an individual's rights or interest.

How many title policies are typically issued at a closing?

two