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The ultimate guide for the TEXAS salesman license

Terms in this set (205)

Which of these is an appropriate use of Paragraph 11. Special Provisions?
The insertion of a lengthy legal description of the property being sold would be a permissible use of the paragraph.

The proper use of Paragraph 11. Special Provisions would include such things as the insertion of facts and business details, but not anything that would change the meaning or terms of the contract. Nor should it be used to include anything for which a promulgated addenda or amendment already exists.
What type of tenancy does a holdover tenant have?
tenancy at sufferance
Which law prohibits price fixing?
Sherman Anti-Trust Act
Under CERCLA, a landowner may be liable for cleanup when contamination exists:
Under CERCLA, a landowner may be liable for cleanup when contamination exists regardless of whether the contamination is the result of the landowner's actions or those of others.
Which law made it illegal for advertisements to express a preference regarding the familial status of buyers and tenants?
Federal Fair Housing Law

Advertising property to a certain protected class (or excluding a protected class) is a violation of the federal Fair Housing Act. Race, color, national origin, gender, familial status, religion, and disability are all protected classes under the Federal Fair Housing Act.
Which type of lien will most likely be paid off first?
Tax liens are prioritized over other kinds of liens and will therefore be paid off first in the event of foreclosure.
Carl's county and state charged a transfer tax, to be split equally between them, on the sale of his home. The transfer tax rate is set at $0.50 per $500 of the final sales price. Carl's home sold for $200,000. How much will the county get from this transaction?
100
To solve for the county's portion of the transfer tax collected, begin by dividing the sales price of $200,000 by $500 to get $400. Then multiply $400 by $0.50 to get the total transfer tax amount of $200. Divide that by half to get the county's portion of $100.
The substitution of one contract for another is called a(n):
novation

Novation is a new contract substituting the obligations of an original contract.
According to RESPA, a seller may NOT require a borrower to do this as a condition of sale:
uses a specific title insurance company.

According to RESPA (Real Estate Settlement Procedures Act), the seller may not require as a condition of sale that the borrower uses a specific title insurance company.
What is ownership in severalty?
undivided ownership of an estate, with an interest that is exclusive from other owners
Which of these best describes a balloon mortgage?
Raul loan has fixed payments for seven years, then the entire remaining balance of his loan will come due.

A balloon mortgage has payments like an amortized loan for a fixed period of time, then the entire loan comes due. The homeowner can either sell, pay, or refinance at that time.
If a property was constructed prior to 1978, a buyer must be given a disclosure form addressing:
The Lead-Based Paint Disclosure states that disclosure of known lead-based paint must be presented to buyers of all residential property built prior to 1978.
What is the difference between MIP and PMI?
MIP applies to FHA loans, and PMI applies to conventional loans.

They are both mortgage insurance
When TREC "approves" a form for use, this means:
License holders MAY use the form

When TREC "approves" a form for use, this means license holders MAY use the form, but it is NOT required (as a promulgated form would be).
After a breach of contract, a court orders all parties to carry out the promises stipulated in the original contract. What is this called?
specific performance

Specific performance involves a court order requiring all parties to carry out the promises stipulated in a contract. This is a court enforcement of the original contract.
Which of the following are required for joint tenancy?
Unity of interest, time, title, and possession are required for joint tenancy.
Which method of legal land description utilizes latitude and longitude lines?
The rectangular survey system
What type of agency does a broker have with a seller client?
special agency
In a contract, what does lawful objective prohibit?
the requirement of any illegal activities

To be valid, a contract must have a lawful objective. This means that the contract cannot require any illegal activities or outcomes.
Errors and omissions insurance is NOT likely to cover:
fair housing violations

While errors and omissions insurance is available for both brokers and their agents, E&O normally covers mistakes and not violations of public law. It normally offers no protection in discrimination lawsuits.
What are the characteristics of value?
DUST
Demand
Utility
Scarcity
Transferability
A debit to the seller has what effect on charges made to the parties involved in the transaction?
decreases the amount the seller receives at closing.
In order to be valid, what MUST a deed have?
granting clause
Which of these is a protected class under the federal Fair Housing law?
familial status
The most common type of agency between brokers and their sales agents is:
general agency.
What will a lender typically require of a borrower in order to protect the collateral for the loan?
purchase homeowners insurance.
Broker Bill receives a commission from someone other than his client or the cooperating broker in the transaction. In what instance would this be considered a violation of TREC rules?
if he failed to get his clients consent first

Broker Bill shouldn't accept commissions, rebates, or fees from anyone other than their client without informing that client and getting their consent. (This does not apply to referral fees paid by one license holder to another.) So, if Bill accepts a commission from someone other than his client, he must get his client's consent first.
Tom's annual homeowner association dues are $324. He sold his house in early spring and agreed to pay a prorated amount based on the 100 days he would be in possession of the house. How much of the bill will Tom be responsible for? Use a 360-day calendar to calculate your answer.
90

To find Tom's prorated amount of the annual homeowner association dues, you will start by dividing $324 by 360 days to get to the $0.90 daily cost. Then, you multiply that figure by the number of days for which Tom is responsible (100) to arrive at $90, which is the total prorated amount he owes.
The buyer can terminate the contract for any reason within how many days after receiving the Seller's Disclosure Notice?
seven

If the seller does not give the notice as required before signing the contract, the Texas Property Code allows the buyer to terminate the contract for any reason within seven days after receiving the notice or before closing, whichever is earlier.
Which of the following environmental hazards must be disclosed by way of an addendum to the sales contract?
lead-based paint

The Lead-Based Paint Disclosure is a federally-required addendum that must be presented to buyers of all residential property built prior to 1978. TREC has provided a promulgated addendum just for that purpose.
In addition to describing the types of real estate license holders and how a license holder can represent a party in a real estate transaction, the IABS informs consumers of:
a brokers minimum duties required by law

In addition to informing consumers about the types of real estate license holders and how a license holder can represent a party in a real estate transaction, the IABS also describes a broker's minimum duties required by law.
If either party to a contract partially or completely fails to fulfill their contractual obligations, it is referred to as a(n):
breach of contract
Michael is a listing agent in an agency agreement where the seller has agreed to give him any money he receives in the sale of the house that is over $200,000. Which of the following BEST describes which agency agreement this is an example of?
net listing

This is an example of a net listing, which is an agency agreement where a seller agrees to pay a listing agent in compensation any amount that is over a certain limit.
Alejandro buys an investment property for a little more than its current market value, because he knows a new corporate headquarters is being built nearby. What principle of value is at work here?
principle of anticipation

The principle of anticipation is the idea that present value of a property is affected by the anticipated income or utility.
Which of the following would be a ramification of a license holder failing to inform the buyer, in writing and before closing, that they should have an attorney review the abstract or obtain a title insurance policy?
loss of the right to receive payment or recover commission

In order to receive payment or recover any commission, the license holder must have informed the buyer, in writing and before closing, that they should either have an attorney review the abstract or obtain a title insurance policy.
Most of the smaller, older homes on Ridgedale Street have been majorly renovated or torn down and replaced with high-value homes. 15320 Ridgedale St. is now the smallest, shabbiest home on the block, but it recently appraised for more than a similar home in a less-upgraded neighborhood. What principle of value explains this?
The principle of progression

The principle of progression states that a subject property situated in the midst of higher-value homes will experience an upward pull on its own value.
The price for which a property will theoretically sell under typical conditions is called:
market value

The price for which a property will theoretically sell under typical conditions is the market value.
All licenses have a status of:
active, inactive, or expired.
Ashley is transgender. She alleges that Ray, a landlord, refused to rent to her and her husband on that basis. Has Ray violated the Fair Housing Act?
The federal Fair Housing Act does NOT explicitly include sexual orientation or gender identity as protected classes. However, some court cases have found that discrimination under sexual orientation or gender identity can be prosecuted under the Fair Housing Act under one of its seven protected classes. For example, if a landlord sexually harasses a woman who is transgender, he may have violated the Fair Housing Act's prohibition against sex discrimination.
Which of these would most likely represent the unauthorized practice of law by a licensee?
advise a client not to order an abstract of title because title appears to be clear

Giving legal advice (such as the recommendation not to order an abstract of title) is considered the unauthorized practice of law.
Helen manages an apartment building with 25 units. The rent for each unit is $1,200 per month. The building has an occupancy rate of 60%. What is the effective gross income for Helen's building?
18000

Effective gross income is the amount of money a property generates after taking into account other factors such as vacancy losses and additional revenue from sources other than rent. So, let's first see how many units are actually occupied: 25 units x 0.6 = 15 units. Let's next multiply the number of units by the monthly rent. 15 units x $1,200/month = $18,000. The effective gross income is $18,000.
Misrepresentation is best defined as a statement, written or spoken, that is:
false or misleading.
Which of these best describes revocation of a contract?
one party initiates the termination of the agreement for just cause

The term for when the client or broker initiates the termination of the agency agreement is known as revocation.
What kind of agency relationship does a broker have with their sponsored agent?
general agency relationship.
Melissa is purchasing her first home using an FHA loan. What will be required?
appraisal
Earnest money is paid:
by the buyer to the seller
Earnest money must be deposited by:
the close of business the second business day after the effective date of the contract
What does a general warranty deed include?
(covenants of seisin, quiet enjoyment, warranty forever, further assurance, and covenant against encumbrances)
How many square feet are in an acre?
43,560
Which of these seller behaviors would provide the buyer the right to terminate the contract and get a return of earnest money at any time prior to closing?
failing to provide the buyer with a seller disclosure notice

If the Seller's Disclosure Notice is not provided to the buyer at any time prior to closing, the buyer may terminate the contract at any time before closing and the earnest money will be returned.
A legitimate complaint for a performance failure related to a valid contract will not be considered if:
statute of limitations has expired.

A legitimate complaint for a performance failure related to a valid contract will not be considered if the statute of limitations has expired.
What is a court order requiring all parties to carry out the promises stipulated in a contract?
specific performance

Suing for specific performance results in a court order requiring all parties to carry out the promises stipulated in a contract. This is a court enforcement of the original contract.
If the contract form has been prepared by a seller's attorney and is required by the seller, then the seller's agent:
may use non-promulgated contract.

If the contract form has been prepared by a seller's attorney and is required by the seller, then the seller's agent may use non-promulgated contract.
Cammy takes out a fully-amortized, fixed-rate loan for her new vacation home on Lake Placid. When Cammy's mother asks her to fly to Singapore for their family vacation, Cammy tells her mother she doesn't know if she can afford it, as her loan payments could fluctuate. Analyze if Cammy is correct.
Cammy is NOT correct, she has a fully amortized, fixed rate loan, so she knows exactly how much her monthly payments will be
Which of these is the amount of money being loaned compared to the value of the property?
loan-to-value ratio

The amount of money being loaned compared to the value of the property is the loan-to-value ratio.
Which of these is an individual with whom a license holder has no agency relationship nor fiduciary duties but to whom fairness and honesty are still required?
customer

An individual with whom a license holder has no agency relationship nor fiduciary duties but to whom fairness and honesty are still required is a customer.
Mutual rescission occurs when:
both parties mutually agree to end an agency relationship

When both parties involved in an agency agreement agree to end the agreement early, it is called mutual rescission.
Which federal act is also known as the Superfund?
CERCLA

The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) is also known as the Superfund.
A broker in an open listing only gets a commission if:
the brokers activities bring about the sale

An open listing provides a commission to the broker only if their activities bring about a sale.
Fidelity, integrity, and competency are part of:
TREC's Canons of Professional Ethics and Conduct
With respect to the handling of a client or customer's money by a broker or sales agent, what is meant by "conversion"?
the use of a client or customers money for the broker or agent own purpose

The use by a broker or sales agent of a client or customer's money for the license holder's own purposes is called "conversion," as in they are converting the funds for something for which it was not intended.
Which of these is the best example of the statute of frauds?
tommy and bob sign a written contract in which one agrees to purchase a house from the other

The statute of frauds requires that contracts be in writing in order to be enforceable.
Which of these contain the list of the higher (fiduciary) duties license holders owe to their clients that can be remembered by the acronym mnemonic device "OLD CAR"?
obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care.
Anna and Lasha own apartments that are the same in size and quality. However, Lasha's apartment has a much higher market value than Anna's because it is located in a desirable neighborhood near the city center. Which characteristic of land does this illustrate?
situs

Lasha's downtown apartment may be similar to Anna's, but it's worth more because it's in a desirable location. This is the economic characteristic of situs at work.
A married couple bought a home (their primary residence) several years ago for $300,000. Their neighborhood has rapidly grown in popularity, and they were able to sell their home this year for $825,000. How much of that money will they be required to pay capital gains tax on?
25000

A married couple gets a $500,000 capital gains tax exemption. $825,000 - $300,000 = $525,000 in gains. $25,000 of that is over the amount of their $500,000 exemption, and will eligible to be taxed.
Fixed-rate mortgages are advantageous because:
Monthly payments stay the same, allowing for easier budgeting.

Fixed-rate mortgages are advantageous because monthly payments stay the same, allowing for easier budgeting.
Conventional conforming loans are:
neither insured nor guaranteed by the government

conventional loan is any loan that is neither insured by the government nor guaranteed by the government.
An advertisement reads, "Lively senior citizen community. No families with small children, please." Evaluate the ad.
usually, terms like no kids, are discriminatory advertising. But when advertising a specific senior community, the phrases are acceptable

In general, terms like "adults only" and "no kids" count as discriminatory advertising. But when advertising a specific senior community, the phrases are fine and acceptable.
What is a protected class that applies to any family when at least one person under 18 years of age lives with at least one parent or legal guardian?
familial status

A protected class that applies to any family with at least one person under 18 years of age who lives with at least one parent or legal guardian is familial status.
The Statute of Limitations claim for suit brought for a violation of the DTPA is:
two years

The Statute of Limitations claim for suit brought for a violation of the DTPA is two years.
What does TREC rely on to carry out their mission to reimburse members of the public who have been financially damaged by brokers or salespeople in real estate transactions?
The Real Estate Recovery Trust Account

TREC uses the Real Estate Recovery Trust Account to reimburse members of the public who have been financially damaged by brokers or salespeople in real estate transactions.
Which of these individuals has equitable title?
Chases offer to buy a house was accepted and the closing is in a few days.

Chase has equitable title. When a seller accepts an offer from a buyer to purchase a property and begins to enter a sales contract, the buyer holds equitable title in that property.
The contract forms that are approved and promulgated by TREC are:
required for license holder use

The Texas Real Estate Commission has promulgated and approved many forms for license holder use.
Before receiving compensation from any source other than their sponsoring broker, what must a sales agent first do?
obtain written consent from their sponsoring broker

Per TREC Rule §535.3, before receiving compensation from any source other than their sponsoring broker, a sales agent must first obtain written consent from their sponsoring broker.
Henri's loan will be for $225,000 after putting a 25% down payment towards the home purchase. He'll also be paying a 1-point origination fee and a 1-point discount fee. Based solely on this information, how much cash to closing will Henri need?
79500

Henri's $225,000 loan is based on a $300,000 sales price ($225,000 ÷ .75 = $300,000). From that, we can solve for the 25% down payment ($300,000 x .25 = $75,000). Since we know that a point equals 1% of the loan, we can add the 2 points ($4,500) to the down payment ($75,000) to get a total cash to closing amount of $79,500.
What must the seller of a residential property complete?
Sellers disclosure notice

The seller of residential property, with very few exceptions, must fill out the Seller's Disclosure Notice.
A building has an NOI of $450,000 and a property value of $6,000,000. What is the cap rate?
7.5%

The cap rate is found by dividing the NOI by the property value. In this case, the answer is 7.5%.
A landowner gives a nonprofit permission to host a series of fundraising concerts on the owner's property every summer. However, the owner is selling the land, and the nonprofit will no longer be guaranteed use of the land. This is an example of a(n):
license

This is an example of a license. A license is a right to use the land of another that can be granted as well as terminated by the property owner. These rights typically do not run with the land or transfer with the transfer of deed or title. The license is temporary and can be withdrawn at any time, upon the sale of the property to someone else, or when one of the parties dies.
Which term describes the fact that a broker is responsible for the actions of agents they supervise?
vicarious liability

A broker is responsible for their own actions and the actions of agents they supervise. This is called vicarious liability.
A property is sold for $350,000. The buyer has paid $12,000 in earnest money and is obtaining a 70% loan. Based on the information provided, how much additional cash will the buyer have to bring to the closing day?
93000

The buyer will need to bring an additional $93,000 to the closing. First, calculate the loan amount using the formula for solving for part: Total x Percentage = Part. ($350,000 x 0.70 = $245,000). Then, subtract the earnest money and the loan amount from the purchase price: $350,000 - $12,000 - $245,000 = $93,000
Can a landowner sell the subsurface (mineral) rights to their land and retain ownership of the property?
Yes, subsurface rights can be sold separately from the surface rights.
Which factor determines whether something is real property or personal property?
whether or not it is attached to the land or building

The factor that determines whether something is real property or personal property is whether or not it is attached to the land or building. Attached items are real property, and unattached items are personal property.
If a broker represents both the buyer and the seller in one transaction, Texas law says that must be done as a(n) __________.
intermediary

The Information About Brokerage Services form outlines how a brokerage is to act as an intermediary — one who represents both the buyer and the seller in a transaction.
Which kind of agent has the broadest authority?
Universal Agent

Universal agency gives agents the broadest scope of power. It empowers agents to make decisions on behalf of their principals
Seller Matt tells his listing agent, Jamie, that there has never been flooding in his house. However, there is visible water damage in the home. Jamie accepts Brian's claim and goes on to tell prospective buyers that the home has never flooded. What did Jamie engage in?
negligent misrepresentation

This is an example of negligent misrepresentation, which occurs when an agent fails to disclose significant property flaws out of ignorance. It involves the agent misrepresenting some aspect of a property that the average agent would reasonably be expected to possess knowledge of.
Land's physical characteristics are immobility, non-homogeneity, and:
indestructibility

Land's physical characteristics are immobility, non-homogeneity, and indestructibility.
Which of the following is NOT a government-sponsored entity (GSE)?
Ginnie Mae

Ginnie Mae is wholly government-owned, meaning it does not qualify as a GSE.
The four types of estates include freehold, leasehold, equitable, and ____.
Concurrent

The four types of estates include freehold, leasehold, equitable, and concurrent.
What is consideration?
something of value that each party exchanges in order to demonstrate that they agree to the contracts terms

Consideration is something of value that each party exchanges in order to demonstrate that they agree to the contract's terms.
What must a listing agreement contain?
legal land description

A listing agreement must contain a legal land description, which specifies the location of the property to be sold.
Which type of listing is an agreement between a broker and a seller in which the seller retains the right to sell their property while the broker may market the property as well?
exclusive agency

Exclusive agency is a listing agreement between a broker and a seller in which the seller retains the right to sell their property while the broker may market the property as well.
What form does the Canons of Professional Ethics and Conduct say must be on display in a readily noticeable location in each of the real estate brokers places of business?
Consumer Protection Notice 1-2

Each real estate inspector or active real estate broker licensed by the Texas Real Estate Commission shall display Consumer Protection Notice 1-2 in a readily noticeable location in each place of business the broker or inspector maintains.
A listing agreement should be in writing so that it:
is enforceable in court.
Administering and enforcing the Texas Real Estate License Act (TRELA), is the primary function of:
the Texas Real Estate Commission

The main function of the Texas Real Estate Commission is to administer and enforce the Texas Real Estate License Act (TRELA).
Seller Sam agreed to a closing date in early June as long as the buyer would allow Sam to stay in the home until the end of that month. To facilitate this request, the listing agent should:
If the seller is going to occupy the property for less than 90 days after closing, the listing agent should complete the TREC promulgated Seller's Temporary Residential Lease and attach it to the original sales contract.
Which law states that most commercial real estate, as well as all government offices and facilities, must be accessible to people with disabilities?
Americans with Disabilities Act

The ADA addresses discrimination in employment, public services, public accommodations, commercial facilities, and telecommunications. Under the ADA, most commercial real estate, as well as all government offices and facilities, must be accessible to people with disabilities.
Which statement is TRUE regarding flood insurance?
Only flood insurance policies cover floods.
The provisions of the Americans with Disabilities Act are MOST likely to apply to owners of:
grocery stores

The ADA governs commercial and public properties. Therefore, it is most likely to apply to the owners of grocery stores.
What are underground storage tanks (USTs)?
Underground storage tanks (USTs) are tanks located in the ground underneath properties that store chemicals, fuels, toxic wastes, and other potentially harmful substances.
"Foreign broker" refers to any broker located:
outside the state of Texas.
If a seller doesn't want to disclose a defect, what should the agent do?
Tell the seller that they are obligated by statue to make the disclosure
Bill is married to his second wife, Susan. Bill has a daughter from his first marriage. If Bill dies without a will (intestate), how will their community property be divided?
Susan keeps her half and the daughter gets the other half.

If a spouse dies without a will and has a child or children outside of the marriage, the spouse will keep their 50% of the community property and the deceased person's child(ren) will get the other 50%.
What do onsite apartment managers, homeowners selling their own property, auctioneers taking bids on a property, and licensed attorneys have in common with respect to TRELA's requirement for licensure to practice real estate?
They are exempt from TRELA requirement for licensure to practice real estate

Onsite apartment managers, homeowners selling their own property, auctioneer taking bids on a property, and licensed attorneys are all exempt from TRELA's requirement for licensure to practice real estate.
Landlords must return a tenant's security deposit within:
30 days of the tenant moving out
What is an acceleration clause?
A clause in a mortgage that makes the entire debt due immediately in the case of borrower default
The Seller's Disclosure Notice meets the requirement of the:
Texas Property Code

Every buyer should receive a completed Seller's Disclosure Notice, which fulfills the requirements of the Texas Property Code. Proactive listing agents get seller clients to complete that form when the property is first listed for sale.
With whom are Texas brokers prohibited from fee splitting?
A Texas broker can split fees or commissions with the broker's own sales agents, cooperating brokers licensed in the state, and foreign (out-of-state) cooperating brokers — as long as the transaction is handled by the Texas broker or one of their sponsored license holders. A broker may not, however, share a commission or fees with any person who engages in acts for which a license is required but is not actively licensed as a broker or salesperson.
Which of the following is true regarding the statute of limitations?
All claims must be filed prior to the statutory deadline or the legal right to press a claim is barred.
What is an example of a disclosure a license holder is prohibited from making?
disclosing a potential buyers HIV status

If the buyer asks if the seller has AIDS or HIV, the agent's response should be to give some type of notification that the question might be a violation of the Fair Housing Act.
Which of TREC's Canons of Professional Ethics and Conduct has to do with the obligation of a real estate agent to be knowledgeable and informed as a real estate brokerage practitioner?
competency

Competency is the TREC Canon of Professional Ethics and Conduct that has to do with the obligation of a real estate agent to be knowledgeable and informed as a real estate brokerage practitioner.
If a foreclosure sale does not generate enough money to pay off the loan and cover the costs of the foreclosure, the lender might seek a ______.
deficiency judgment

If a foreclosure sale does not generate enough money to pay off the loan and cover the costs of the foreclosure, the lender might seek a deficiency judgment.
In addition to onsite apartment managers, homeowners selling their own property, and licensed attorneys in the state, which of the following would also be exempt from TRELA's requirement for licensure to practice real estate?
an auctioneer taking bids on a property

An auctioneer taking bids on a property is not required by TRELA to have a real estate license.
What is the purpose of the TREC promulgated form Amendment to Contract?
to make a change to a term that was originally agreed to in the signed contract

Once a contract is accepted and executed, the proper way to make any change is with the use of an amendment. An agent should never change the original document after it has been accepted.
The purpose of a trust account is to:
hold money for the benefit of a client
Which of the following is a requirement for a broker to be eligible for compensation in Texas?
the broker must be licensed in texas
Which of the following would constitute the unauthorized practice of law and/or be a violation of TRELA?
Adding or striking things from preprinted contract forms

Adding or striking things from preprinted contract forms without instruction from the principals to the transaction is considered the unauthorized practice of law and is a violation of the Texas Real Estate License Act.
Which of the following is NOT an exception to the rules requiring that promulgated forms be used by the license holders?
The broker prepares and approves the forms for agents to fill in the blank

Unless authorized to practice law in the state of Texas, a broker cannot prepare and approve a form for an agent to use.
What does TRELA require a license holder to provide at the first "substantive dialogue" they have with a potential client?
The IABS form must be given at the first substantive dialogue.
What is the purpose of the Real Estate Recovery Trust Account?
reimburse members of the public who have been financially damaged by brokers or salespeople in real estate transactions.
Which fiduciary duty prevents the listing agent from telling a potential buyer that the sellers are in the process of getting a divorce?
confidentiality
What is the statute of limitations for the submission of consumer complaints to the Texas Real Estate Commission?
four years
Real estate brokers in Texas can be sued under which of the following acts if they are found guilty of committing an unconscionable act, misrepresentation of a material fact, or a failure to disclose with the intention of inducing a consumer into a transaction?
Texas Deceptive Trade Practices Act (DTPA)

Real estate brokers in Texas can be sued under the Texas Deceptive Trade Practices Act (DTPA) if they are found guilty of committing an unconscionable act, misrepresentation of a material fact, or a failure to disclose with the intention of inducing a consumer into a transaction.
Which law serves to help eliminate fraud by requiring that all contracts involving the transfer of real estate be in writing?
The statute of frauds

The statute of frauds requires all contracts involving the transfer of real estate to be in writing.
An agent had a check made payable to the title company for earnest money. He held the check while the parties negotiated. On Monday, the 15th of the month, they reached an agreement and finalized the contract.
The check has to be deposited with the escrow agent by the close of business on the:
17TH

TREC rules say that the agent must deposit the earnest money check with the escrow agent by the close of business on the 2nd working day after the contract is fully executed, which in this case, would be Wednesday (the 17th).
Which of the following regarding forms promulgated by the Texas Real Estate Commission is TRUE?
Agents are required to use them
When is a borrower most likely to seek a short sale?
Short sales are often sought when the borrower owes more than the current market value of the property.
Unless given written consent from their sponsoring broker, which of these people can a salesperson receive payment from?
their sponsoring broker.
What legal concept requires that all real estate contracts be in writing?
The Statute of Frauds

requires all real estate agreements to be in writing and signed by the party to be charged to be enforceable by a licensee.
Agent Carey is overwhelmed with appointments today. Which of the following CAN'T she ask her unlicensed assistant to take off of her plate?
showing a home to a couple who were interested after an open house

Unlicensed assistants cannot do anything for which a real estate license is required, such as showing a property.
If the buyer asks if the seller has AIDS or HIV, the agent's response should be:
to give notification that the question might be a violation of the Fair Housing Act

If the buyer asks if the seller has AIDS or HIV, the agent's response should be to give some type of notification that the question might be a violation of the Fair Housing Act.
TREC's Canons of Professional Ethics and Conduct are:
not laws but rules of conduct

TREC's Canons of Professional Ethics and Conduct are are the ethical and professional standard for the Texas real estate industry, published by the Secretary of State in the Texas Administrative Code. These are not laws but rules for the conduct of license holders in the practice of real estate.
What must a broker do prior to accepting commissions, rebates, or fees from someone other than their client?
inform their clients and get their clients consent

A broker should inform their client and get their consent prior to accepting commissions, rebates, or fees from anyone other than their client.
What happens to a salesperson's license when their relationship with their sponsoring broker is terminated?
When a salesperson and a broker terminate their relationship, the broker must return the salesperson's license to the commission, and it becomes inactive.
A debit to the buyer has what effect on charges made to the parties involved in the transaction?
increases the amount due from the buyer at closing.
Emmy just bought a house. To purchase the house, she got a loan for $300,000 with 4 discount points. How much did she pay for the discount points?
One discount point costs 1% of the loan amount; therefore, 1 discount point costs $3,000 in Emmy's case. Emmy paid $12,000 for 4 discount points.
What type of permission allows an individual property to deviate from a specific provision of a zoning ordinance?
variance
Listing agreements are between a broker and a(n):
seller
What is the defining feature of an estate for years?
It has a definite ending period and there is no automatic renewal

An estate for years has a definite ending period and there is no automatic renewal. It is a type of leasehold estate that lasts for a specific time frame, which does not have to be years.
In terms of contract validity, what does mutual consent mean?
All parties to a contract agree to the terms of the contract

Mutual consent occurs when all parties to a contract agree to the terms of the contract. It's a necessary element of a valid contract.
Who can require a buyer to purchase homeowners insurance?
lender
A buyer representation agreement establishes an agency relationship between a buyer and a:
broker

A buyer representation agreement establishes an agency relationship between a buyer and a broker, creating a fiduciary relationship.
What type of listing provides a commission to the broker ONLY if their activities bring about a sale?
Open
Stigmatized properties are properties:
with suppressed market value unrelated to their physical condition or features
Which term describes the transfer of property from the current owner to another party by sale or gift?
Voluntary alienation

Voluntary alienation describes the transfer of property from the current owner to another party by sale or gift.
The Americans with Disabilities Act applies to:
privately owned or government-owned public accommodations
Which of these scenarios does NOT violate fair housing law?
An agent advertises a senior citizen community with the phrase "no children allowed"
In a verbal agreement, Jesse said that he would sell his house to Giorgio for $200,000. Jesse later decided that he would like to keep his house instead. Giorgio can't enforce their verbal contract because it did not meet which of these requirements for validity?
Statute of frauds

The statute of frauds requires that contracts be in writing in order to be enforceable.
Sabrina accepted Rebecca's offer to purchase her house, and the closing date is in a few weeks. Until then, what does Rebecca have?
equitable title

Rebecca has equitable title. When a seller accepts an offer from a buyer to purchase a property and begins to enter a sales contract, the buyer holds equitable title in that property.
Which of the following is a participant in the secondary mortgage market?
FNMA (Fannie Mae)

Fannie Mae is part of the secondary mortgage market. Commercial banks, credit unions, and private lenders are participants in the primary mortgage market.
Which ownership rights can be sold separately from a property's surface rights?
It's important to understand that the four different rights — subsurface, surface, air, and water — may be sold together OR separately.
John submitted an offer to buy a condo, but he can only carry out the purchase if the bank approves his request for a loan. For this reason, the contract must contain a:
The contract must contain a financing contingency to account for the fact that John will only be able to make the purchase if he obtains the loan.
Negligent misrepresentation violates the fiduciary duty of:
Negligent misrepresentation violates the fiduciary duty of reasonable care
There are no exceptions for discrimination based on:
There are no exceptions for discrimination based on race. That's thanks to the Civil Rights Act of 1866.
Liability for others by mandate of law or by express agreement is called:
Liability for others by mandate of law or by express agreement is called vicarious liability.
Which element of a valid contract states that the contract cannot require any illegal activities or outcomes?
To be valid, a contract must have a lawful objective. This means that the contract cannot require any illegal activities or outcomes.
In the sales comparison approach to property valuation, what does the principle of substitution state?
In the sales comparison approach to property valuation, the principle of substitution states that the value of a property is only what a consumer would pay to acquire a comparable property.
Which of these is an example of a general agency relationship?
A broker and a sponsored agent is an example of a general agency relationship.
Which of the following statements may represent the unauthorized practice of law?
An agent saying, "You should proceed without ordering a new abstract - this title is clear" would be considered giving legal advice. This is the unauthorized practice of law.
Which appraisal method would an appraiser be most likely to use on an owner-occupied residential home?
The sales comparison approach is the most commonly used approach to value for appraisers to use on single-family homes.
What is a report from a licensed appraiser that sums up a property's market value based on collected data called?
An appraisal report is a report from a licensed appraiser that sums up a property's market value based on collected data.
In most cases, broker compensation, as a percentage of home price, falls somewhere between:
Compensation is negotiable and is determined by how brokerages charge property buyers and sellers. In most cases, broker compensation falls somewhere between 5 to 7% of the home's price, with an average commission of 6% of the home's sales price.
Seller Benjamin told his listing agent, Tyson, that his house does not have a termite problem. Tyson doesn't see any visible evidence of pests. Tyson then relays this information to a buyer, citing Benjamin as his source. The buyer later finds out the home has a termite infestation. What did Agent Tyson engage in?
Tyson engaged in innocent misrepresentation. He made an inaccurate statement to the buyer, but he answered their question in good faith based on what the seller told him. Since termite damage was not apparent, a real estate agent could not be expected to know that the seller's claim was false.
Deanna wants to sue her real estate agent, but finds out that she has no legal recourse because too many years have passed since the offending incident. What is this an example of?
This is an example of the statute of limitations, which is a legal concept that has to do with state and federal laws establishing a time limit for bringing certain kinds of legal action.
The party responsible for paying the origination fee when obtaining conventional financing is:
The borrower is the party responsible for paying the origination fee.
Which law requires a lender to give a buyer an estimate of closing costs?
RESPA (Real Estate Settlement Procedures Act) requires lenders to give buyers an estimate of closing costs.
What does a standard title insurance policy do?
protects against any defects discovered in the title after closing
Which part of the mortgage contract requires a borrower to repay the entire debt when the property is sold?
An alienation clause would require a borrower to pay the mortgage debt in its entirety upon the property being sold.
Ben manages an apartment complex that has an effective gross income of $100,000. Operating expenses were $60,000. What is the net operating income of the property?
Effective gross income - Operating expenses = Net operating income. $100,000 - $60,000 = $40,000.
When a property management agreement is signed, it creates:
When a property management agreement is signed, it creates a general agency relationship between the owner and the property manager.
An unmarried Texas couple purchased real estate together. How would the deed identify how they hold their interests if they specify they want them passed to the survivor in case of death?
The deed would identify the interests of the owners as joint tenants with the right of survivorship.
Which federal law amended the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)?
In 1986, six years after CERCLA became law, it was amended by the Superfund Amendments and Reauthorization Act, or SARA. SARA designated more money to the Superfund trust, and established new environmental laws and regulations.
A metes and bounds legal description always returns to:
A metes and bounds legal description always returns to the point of beginning (POB).
Brenda and her husband are interested in buying a house that was constructed in 1971 that has all the original paint, windows, and flooring.
What is required from the listing agent in this situation?
Because the house is a residential property built before 1978, the agent needs to furnish the buyers with a Lead-Based Paint Disclosure prior to closing.
Suppose that a borrower has a gross monthly income of $3,000 and wants to qualify for a conforming loan (total debt service ratio of 36%) with a monthly PITI payment of $800. What is the maximum amount of additional long-term obligations this borrower may have after PITI?
Monthly income x Debt-to-income ratio - Monthly payment = Other debt. $3,000 x 0.36 = $1,080 total allowable debt. $1,080 - $800 = $280 leftover after PITI .
Personal property MUST be transferred via:
Personal property is transferred via bill of sale. On the other hand, real property ownership is transferred via deed.
Which of the following is an example of an agreement that lacks consideration?
Consideration is something valuable that each party exchanges in order to demonstrate that they agree to the contract's terms. It can be a promise, money, property, forbearance, or services.
If a contract specifies a legal land description, it is most likely a(n):
If a contract specifies a legal land description, it is most likely a listing agreement.
The Fair Housing Act covers:
residential transactions only
What is the purpose of RESPA?
RESPA is designed to educate consumers about closing and settlement services.
In order to be valid, what MUST a deed have?
A valid deed must contain a legal description.
Allie cannot depreciate her investment property for a tax deduction. What kind of property is it?
The owners of rental homes can find tax relief in depreciating (lowering the value of) the property. But keep in mind that only the improvements to the land such as structures and buildings can be depreciated. The land itself cannot be depreciated.
Under federal Fair Housing law, which of the following acts is illegal?
Advertising property for sale only to married couples is a violation of the Fair Housing Act. Race, color, national origin, gender, familial status, religion, and disability are all protected classes under the Federal Fair Housing Act.
Who provides flood insurance to homeowners?
Flood insurance can be purchased only from the National Flood Insurance Program (NFIP).
In general, a broker is responsible for:
A broker is responsible for their own actions and the actions of agents they supervise.
Which statement BEST defines the term contingency?
Contingencies are stipulations that must be satisfied before the contract can be performed.
Hans bought an investment property for $5,250,000. The NOI of this property is $367,500. At what cap rate did he purchase this property?
He purchased the property at a 7% cap rate. The cap rate is found by dividing the NOI by the property value.
Which of these is a set of regulations pertaining to building design, materials, safety, sanitation, and structure?
Building code is a set of regulations pertaining to building design, materials, safety, sanitation, and structure.
Molly and Jeff are currently in the process of paying off a loan. Each month they pay the same amount, which contributes to both the principal and interest. Which type of loan is this an example of?
This is an example of an amortized loan, in which the same monthly amount contributes to both the principal and interest.
A buyer offers additional consideration to add a 10-day option period to the sales contract. During this period, the buyer can:
During the option period, the buyer has the right to terminate the contract for any reason.
Arturo is buying a house for $400,000. He will be making a down payment of 5%. He already submitted a check for $2,000 as earnest money, which will be applied to the purchase. How much will Arturo need to pay on closing day?
5% of $400,000 is $20,000, so that's Arturo's down payment. He has already paid $2,000 in earnest money, which will be subtracted from his down payment due. He will need $18,000 on closing day.
A potentially valid contract in which at least one party has the option to rescind is described as:
A potentially valid contract in which at least one party has the option to rescind is described as voidable.
A new contract substituting the obligations of an original contract is a(n):
A new contract substituting the obligations of an original contract is a novation.
What is attached to an original contract before it is signed?
Addenda are attached to an original contract before it is signed.
Which of these is the best example of stigmatized property?
Property is described as stigmatized when its value may be reduced by things that occurred on the property, such as death, crime, or paranormal activity. These things may be undesirable to buyers, but they do not affect the physical condition of the property.
Which survey system is most commonly used in urban areas?
The lot and block system is the most commonly used survey system in urban areas.
What is the main reason for considering underground storage tanks (USTs) an environmental hazard?
When USTs start to leak (either from rust, age, or poor construction), the hazardous material can enter the groundwater and contaminate wells and pollute the soil.
How does errors and omissions insurance (E&O) affect the defendants in fair housing cases?
While errors and omissions insurance is available for both brokers and their agents, E&O normally covers mistakes and not violations of public law. It normally offers no protection in discrimination lawsuits.
If a borrower is behind on payments, the acceleration clause gives the lender the ability to:
The acceleration clause gives lenders the ability to ask for the remainder of the mortgage.
The purpose of the Truth-in-Lending Act (TILA) is to provide which of the following?
The purpose of TILA is to provide meaningful disclosure of credit terms to the borrower.
What is the difference between a bill of sale and a deed?
Personal property is transferred via bill of sale. On the other hand, real property ownership is transferred via deed.
To determine the value of a highly specialized building, like a museum, an appraiser would most likely use and heavily weight which of the following appraisal methods?
The cost approach is a great approach to value for appraisers to use on new construction and highly specialized buildings, such as public libraries or museums.
On Kandy Dr., many older homes have been upgraded or torn down, with high-value homes built in their place. 201 Kandy Dr. is now the smallest, shabbiest home on the block, but it recently appraised for more than a similar home in a less-upgraded neighborhood. What principle of value explains this?
The principle of progression states that a subject property situated in the midst of higher-value homes will experience an upward pull on its own value.
Which type of deed includes the five implied warranties (covenants)?
A grantor is implicitly obligated to the five warranties (covenants of seisin, quiet enjoyment, warranty forever, further assurance, and covenant against encumbrances) in a general warranty deed.
Mary has a loan whose payments and interest rate will stay the same throughout the life of the loan (not including the cost changes caused by insurance and tax rates). What kind of loan does Mary have?
With fixed-rate mortgages that are fully amortized, the payment amount and interest rate will stay the same.
An investor has purchased a one-family home that they plan to rent as an investment. Which of these statements accurately describes how it can be depreciated?
Residential investment properties are depreciated over 27.5 years.
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