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TEXAS REAL ESTATE EXAM PREP
(FROM PEARSONVUE AND & CHAMPIONS NATIONAL EXAM PREP)
EXAM QUESTIONS WITH CORRECT ANSWERS
"A listing agent went to inspect a seller's property hoping to list it for sale. The seller told the listing agent that his neighbor's satellite dish trespasses on his property. This is an example of: a) annexation b) encroachment c) appurtenance
d) license - CORRECT ANSWER b) encroachment"
"A father gives his son a life estate on a property. The son leases the property. The tenant dies. What happens to the property? a) it reverts to the father b) it goes to the remainderman c) it goes back to the son until he dies
d) it goes to the son's heirs - CORRECT ANSWER c) it goes back to the son until he dies"
"Under what right can the government change property use from commercial to residential only? a) Police Power b) Eminent Domain c) Taxation
d) Escheat - CORRECT ANSWER a) Police Power"
"After defaulting on a real estate loan, a borrower is able to pay off the loan prior to the foreclosure sale. This is called: a) right of first refusal b) right of redemption c) deed in lieu of foreclosure
d) an equitable estate - CORRECT ANSWER b) right of redemption"
"Your clients will be able to qualify for financing for a property they wish to purchase in about six months, after they have had an opportunity to reduce their consumer debt. They have found a property that they would like to purchase now. What type of agreement can they enter into with a seller that will allow them to occupy the property now and purchase it within the six months? a) sale and leaseback b) right of first refusal c) lease with an option to buy
d) graduated lease - CORRECT ANSWER c) lease with an option to buy"
"A geographic region in which similar properties compete with the subject property for potential buyers is called a: a) municipality b) political district c) market area
d) demand unit - CORRECT ANSWER c) market area"
"The agency that is charged with enforcing the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) in the case of an owner who allows the dumping of wastes on a property is the: a) Housing and Urban Development b) Federal Emergency Management Agency c) Environmental Protection Agency
d) Occupational Safety and Health Administration - CORRECT ANSWER c) Environmental
Protection Agency" "A percentage lease would MOST often be used for tenants in: a) an apartment complex b) a shopping center c) industrial warehouses
d) doctors' offices - CORRECT ANSWER b) a shopping center"
"A license holder is showing a home built in 1972 to buyers who notice paint flaking in the woodwork. How should the license holder proceed? a) advise the prospective buyers to get a lead-based paint inspection b) Contact the listing agent for direction before taking the next step c) Talk with the broker about how to repair the damage
d) Suggest that the prospective buyers speak to the sellers about reducing the price - CORRECT
ANSWER a) advise the prospective buyers to get a lead-based paint inspection"
"A lot was purchased as an investment for $10,500 and sold a year later at a loss of 20%. If the owner paid a 10% commission, what was the owner's net loss on the sale? a) $2, b) $2, c) $2,
d) $3,150 - CORRECT ANSWER c) $2,940"
d) Advertising property for sale only to members of a specific national origin - CORRECT
ANSWER d) Advertising property for sale only to members of a specific national origin"
"A loan that provides for increases and decreases in the interest rate during its term is known as a(n): a) equity sharing mortgage b) graduated-payment mortgage c) reverse mortgage
d) adjustable-rate mortgage - CORRECT ANSWER d) adjustable-rate mortgage"
"The right of local government officials to acquire title to real estate for public purpose by condemnation is based on the power of: a) taxation b) escheat c) eminent domain
d) land-use planning - CORRECT ANSWER c) eminent domain"
"The price for which a property will sell of offered openly under normal conditions is known as: a) cash value b) mortgage loan value c) market value
d) assessed value - CORRECT ANSWER c) market value"
"The condition which allows a property owner to convey a right to another party while retaining full legal title is a(n): a) covenant b) easement c) encroachment
d) ordinance - CORRECT ANSWER b) easement"
"The acquisition of another's title to real property by means of open, notorious, and continuous use is known as an: a) easement by prescription b) easement in gross c) adverse possession
d) eminent domain - CORRECT ANSWER c) adverse possession"
"The commission earned by a listing broker on a sale of property is established by: a) The local Multiple Listing Service (MLS) b) Local custom c) Agreement between the buyer and the broker
d) Agreement between the seller and the broker - CORRECT ANSWER d) agreement between
the seller and the broker" "If a free-standing appliance is sold separately from a real estate transaction, the seller should furnish the buyer with a: a) trust deed b) bill of sale c) transfer of equity
d) quitclaim deed - CORRECT ANSWER b) bill of sale"
"In order for a brokerage to be able to represent both the buyer and seller in a real estate transaction, the brokerage needs to have the permission of: a) both parties b) the lender c) the buyer only
d) the property owner only - CORRECT ANSWER a) both parties"
"Who can pay money to a licenses salesperson to perform sales activities for a house a broker has listed for sale? a) The seller under the listing b) Any licensed broker involved in the transaction c) The salesperson's sponsoring broker and no one else
d) The related entities in the sale, the title company, or the mortgage company - CORRECT
ANSWER c) The salesperson's sponsoring broker and no one else"
"According to The Real Estate License Act of Texas, which one of the following actions is a fair and impartial act for an intermediary? a) Appointing associated licenses to work with the parties b) Appointing subagents to work with the parties c) Agreeing to represent an owner
d) Agreeing to represent a buyer - CORRECT ANSWER a) appointing associated licenses to
work with the parties" "As a marketing promotion, a real estate salesperson offers property for sale by lottery. This practice is: a) lawful since the adoption of the Texas State Lottery b) prohibited unless authorized by the owner in writing c) grounds for suspension or revocation of license
d) lawful if a real estate lottery license has been issued - CORRECT ANSWER c) grounds for
suspension or revocation of license"
b) disclosure by the seller of defects in the property c) Rights of the consumer filing a complaint with the TREC
d) Rights of the consumer filling a suit to be paid out of the recovery fund - CORRECT
ANSWER a) duties of the broker representing one of the parties or acting as an intermediary"
"A single woman dies intestate. In regards to her surviving heirs, her property will: a) escheat to the State of Texas b) be distributed according to her will c) go to her parents, if they have survived her
d) be distributed according to the law of descent and distribution - CORRECT ANSWER d) be
distributed according to the law of descent and distribution" "What are the requirements/criteria for real estate to have value? a) Demand, Utility, Scarcity, Transferability b) Demand, Utility, Supply, Taxability c) Demand Usury, Scarcity, Taxability
d) Deed, Usury, Supply, Transferability - CORRECT ANSWER a) Demand, Utility, Scarcity,
Transferability" "What principle of value defines the most important factor for appraisal? a) Conformity b) Competition c) Highest and Best Use
d) Substitution - CORRECT ANSWER c) Highest and Best Use"
"Your client is an investor who would like to have the right to purchase a commercial tract for $ million within the next six months. What type of contract should he enter into with the seller? a) an earnest money contract b) an option contract c) a bilateral contract
d) a right of first refusal - CORRECT ANSWER b) an option contract"
"A signed sales contract that has not yet gone to closing is: a) fully executed b) executory c) unilateral
d) voidable - CORRECT ANSWER b) executory"
"When does an offer become a contract? a) when it is accepted and acceptance is communicated b) when it is accepted c) when it is closed
d) at closing and funding - CORRECT ANSWER a) when it is accepted and acceptance is
communicated" "What is the difference between replacement cost and market value? a) land cost b) depreciation c) functional obsolescence
d) reproduction costs - CORRECT ANSWER b) depreciation"
"Economic life is defined as: a) economic obsolescence b) functional obsolescence c) physical depreciation
d) years of profitable use - CORRECT ANSWER d) years of profitable use"
"A high rise condominium property is advertised as having the "Most beautiful view of the city". This ad is best described as: a) reasonable exaggeration b) puffing c) fact
d) misrepresentation - CORRECT ANSWER b) puffing"
"Which of the following facts about a listed property must be disclosed? a) death due to structural defects b) death due to HIV c) suicide on the property
d) a sex offender lives next door - CORRECT ANSWER a) death due to structural defects"
"A lead paint disclosure is required for all properties built before: a) 1968 b) 1972 c) 1978
d) 1995 - CORRECT ANSWER c) 1978"
"Which of the following statements about lead is NOT true? a) the lead paint disclosure is required for all properties built before 1978 b) the lead paint disclosure allows an inspection for 10 days after the date of the contract c) the lead paint disclosure allows a buyer to waive the right to an inspection
"A condominium owner's policy will most likely cover the owner if: a) someone drowns in the condominium pool b) there is a fire in the elevator c) a guest slips in the owner's kitchen
d) someone gets hurt in the hallway - CORRECT ANSWER c) a guest slips in the owner's
kitchen" "A condominium complex has liability insurance. This is least likely to cover: a) a unit owner's carpet damaged by a broken water pipe b) faulty equipment in the gym results in an injury to a resident c) a car accident in the parking lot hurts a visitor to the complex
d) a resident has a heart attack in the lobby - CORRECT ANSWER a) a unit owner's carpet
damaged by a broken water pipe" "Accurate record keeping is the responsibility of all brokers. If a broker's computers are stolen, what steps could have been taken to protect records? a) offsite or cloud storage b) data encryption c) an alarm system
d) an armed security guard - CORRECT ANSWER a) offsite or cloud storage"
"A license holder has just attended a training seminar about technology in real estate and is excited about using social media with her clients. Which of the following statements about social media in real estate is NOT true? a) an agent advertising client property on social media needs written permission from the client b) an agent advertising on social media must comply with all the same laws and rules as print and broadcast advertising c) an agent with permission to advertise a property on social media does not have to worry about protecting confidential information about the client
d) the use of social media in real estate advertising is growing - CORRECT ANSWER c) an
agent with permission to advertise a property on social media does not have to worry about protecting confidential information about the client" "A sales agent is showing a property. He trips in the house and causes major damage to property of the owner. What type of insurance will cover this accident? a) broker E&O insurance b) liability insurance c) title insurance
d) a FEMA policy - CORRECT ANSWER b) liability insurance"
"Prior to its amendments, the Civil Rights Act of 1968 prohibited discrimination based on: a) AIDS
b) national origin c) sexual preference
d) age - CORRECT ANSWER b) national origin"
"An agent working with immigrant buyers must be careful: a) because the buyers might not speak English well b) because the agent may not speak the buyer's language c) not to steer the buyers to a neighborhood based on the language they speak
d) because the buyers might want to use contracts in their own language - CORRECT
ANSWER c) not to steer the buyers to a neighborhood based on the language they speak"
"An agent is accused of discrimination. What will HUD do? a) fine the agent $50, b) try mediation followed by a lawsuit if mediation fails c) revoke the agent's license
d) send the agent to jail for one year - CORRECT ANSWER b) try mediation followed by a
lawsuit if mediation fails" "A mobility impaired tenant has leased an apartment in a complex with unassigned parking. He has requested an assigned reserved space near to his unit. What is true? a) the landlord does not have to provide a special space for this tenant b) the landlord only has to provide an assigned space if the tenant requests it before the apartment c) the landlord must provide an assigned reserved space for the tenant d) the landlord must provide an assigned reserved space for the tenant near to the tenant's unit
CORRECT ANSWER d) the landlord must provide an assigned reserved space for the tenant
near to the tenant's unit" "An investor has 15 rent houses. He has hired an agent to lease the houses. Which of the following actions by the agent would NOT be in violation of fair housing laws? a) refusing to show the houses to anyone over 75 years old b) refusing to show the houses to any unmarried pregnant women c) refusing to show the houses to any single parents with children
d) refusing to show the houses to any Hispanic couples - CORRECT ANSWER a) refusing to
show the houses to anyone over 75 years old" "Which of the following would NOT be an operating expense included in the property manager's operating budget? a) property taxes b) mortgage payments c) insurance
d) reserves for repairs - CORRECT ANSWER b) mortgage payments"
"A property manager notices that the building stucco needs repair. He notifies the landlord and recommends a contractor. The landlord uses the contractor who does not do a good job. The new stucco leaks and mold grows. The tenant becomes ill from the mold. Who is responsible? a) the landlord b) the property manager c) the contractor
d) the tenant - CORRECT ANSWER a) the landlord"
"An apartment building owner has renovated and modified several units to be handicapped accessible. Can he advertise this accommodation? a) no - it violates fair housing b) no - it violates ADA c) Yes
d) only if all the units are accessible - CORRECT ANSWER c) yes"
"Another term used to describe wetlands is: a) greyfields b) navigable waters c) littoral rights land
d) mire - CORRECT ANSWER d) mire"
"What is the purpose of a property management trust account? a) to hold collected rents b) to hold reserve funds for maintenance and repairs c) to hold tenant security deposits
d) to hold funds escrowed for taxes and insurance - CORRECT ANSWER c) to hold tenant
security deposits" "Regulation Z applies to: a) all real estate loans b) a $26,000 loan c) all luxury car loans
d) real estate loans on residential property only - CORRECT ANSWER a) all real estate loans"
"The main purpose of Regulation Z is: a) to equalize credit b) to notify borrowers of the true cost of credit c) to punish bad mortgage brokers
d) to create zoning rules - CORRECT ANSWER b) to notify borrowers of the true cost of
credit"
"What is a requirement of the CFPB? a) Lenders must provide borrowers with the LE form at the time of or within three business days of application b) Lenders must provide borrowers with a good faith estimate of closing costs c) Lenders must provide borrowers with a CD form at the time of loan application or within three days of application d) The updated CD must be made available to the borrower at least one business day before
closing. - CORRECT ANSWER a) Lenders must provide borrowers with the LE form at the
time of or within three business days of application" "Which of the following closings would be covered by RESPA? a) a mobile home b) a retail shopping center c) an apartment complex
d) a condominium - CORRECT ANSWER d) a condominium"
"When does the buyer under contract for deed get title to the property? a) when the contracts are signed and delivered b) when the final loan payment is made c) when the buyer takes occupancy of the property
d) when the seller dies - CORRECT ANSWER b) when the final loan payment is made"
"What is another name for Contract for Deed? a) installment contract b) real estate sales contract c) deed of trust
d) non-conforming loan - CORRECT ANSWER a) installment contract"
"What department of the government oversees the FHA insurance program? a) HUD b) CFPB c) EPA
d) VA - CORRECT ANSWER a) HUD"
"A buyer is aware that interest rates should go down over the next few months. What type of loan should he get to enable him to buy now and take advantage of declining rates in the future? a) term loan b) Reverse Annunity Mortgage c)ARM
d) balloon loan - CORRECT ANSWER c) Reverse Annunity Mortgage"
"Which of the following will NOT harm or negatively impact a seller's credit score?
"A seller has received $225,000.00 for the sale of his home. This represents a 20% profit. What did he pay for the house when he purchased it? a) $180, b) $187, c) $175,
d) $205,000 - CORRECT ANSWER b) $187,000"
"A seller wants to net $185,000 on the sale of his property. He must pay a loan balance of $180, and closing costs of $10,000. The commission to the listing broker will be 6%. What is the lowest price the property can sell for to accomplish this? a) $375, b) $398, c) $395,
d) $399,500 - CORRECT ANSWER d) $399,500"
"An Appraiser uses the cost approach to determine the value of a two-story building 128' x 97' at $120/sq.ft., with $10,000 in depreciation and a $27,500 lot, what is his estimate of value of the property? a) $2,997, b) $3,007, c) $1,507,
d) $2,979,840 - CORRECT ANSWER a) $2,997,340"
"Mark purchased a home for $150,000 He had an 80% LTV. He has paid off $42,000 of his purchase mortgage. He is selling the house for $179,000. How much equity does he have? a. $71, b. $59, c. $101,
d. $78,000 - CORRECT ANSWER c) $101,000"
"Maria is planning to buy a house for $200,000. The lender has indicated that he will charge 3 points plus an origination point. Maria is considering the difference between an 80% LTV and a 75% LTV. How much will she save on points if she chooses the 75% LTV? a) 5% b) $ c) $
d) $400 - CORRECT ANSWER d) $400"
"An office space is 24 feet long and 27 feet wide with 10-foot ceilings. The owner wants to carpet the office. How many square yards of carpet does he need?
a) 72 b) 216 c) 648
d) 1944 - CORRECT ANSWER a) 72"
"A property is listed for $399,500. It sells for $396,000. The negotiated commission is 6% and will be split evenly between the selling broker and the listing broker. The selling broker pays his sales associate 60% of the broker's commission. How much does the selling broker earn? a) $11, b) $4, c) $7,
d) $5,940 - CORRECT ANSWER b) $4,752"
"A developer has 2,178,000 sq.ft. of property. He sells 80% of it for $5,000 an acre. What is the total sale price? a) $200, b) $100, c) $250,
d) $125,000 - CORRECT ANSWER a) $200,000"
"An office building has a potential gross rent of $20,000 per month. It has a vacancy rate of 15%. Yearly expenses for the property total $115,000. If the owner is earning a 10% rate of return, what is the value of the building? a) $204, b) $240, c) $890,
d) $1,250,000 - CORRECT ANSWER c) $890,000"
"What is the minimum monthly income your buyers need to qualify for a $200,000 loan at 6% for 30 years if lenders are qualifying at 28%? (The loan factor is $6.00). Monthly taxes and insurance will be $900. a) $7, b) $6, c) $4,
d) $7,686 - CORRECT ANSWER a) $7,500"
"A sale is closing on June 15th and the annual property tax bill has not been paid. The house is assessed at $350,000 and the tax rate is $2.50 per $100. Using a 360-day year, how much will the seller owe for taxes at closing (to the nearest dollar) and how will this be shown on the CD? a) $4375 debit the seller/credit the buyer b) $4375 credit the seller/debit the buyer c) $4010 debit the seller/credit the buyer
"A commercial tenant is aware that his lease will expire at the end of the month. He has begun to disassemble his display cabinets and shelves. Which of the following statements about this is true? A) he cannot take them without first obtaining written permission from the landlord. b) if the landlord wants them, he can pay the tenant and the tenant must leave them c) The tenant can take these as they are trade fixtures
d) he must disclose to the landlord that he plans to take them - CORRECT ANSWER c) the
tenant can take these as they are trade fixtures" "A seller is attending the closing on his property. The title company has discovered an unsatisfied M&M lien on the property. Which of the following is the most likely reason for the lien? a) a workman on the property left tools behind b) unpaid personal property taxes c) plumbing work that was completed but never paid for
d) a judgment - CORRECT ANSWER c) plumbing work that was completed but never paid
for" "A man leaves his second wife a life estate in their home after which the property goes to his children from his first marriage. The children: a) are remaindermen b) have fee simple determinable c) have a life estate
d) have a dominant interest in the property - CORRECT ANSWER a) are remaindermen"
"Which of the following statements about an easement is true? a) an easement is a benefit to the servient property owner b) an easement is an encroachment c) an easement is a benefit to the dominant property owner
d) an easement in gross belongs to or passes with the land - CORRECT ANSWER c) an
easement is a benefit to the dominant property owner" "P, Q, and R are joint tenants, P wants to sell the property, but Q and R do not. What can P do? a) file an injunction against the other owners b) seek a writ of execution c) file a suit for partition
d) get a release - CORRECT ANSWER c) file a suit for partition"
"A, B and C are joint tenants. C dies. B sells his share to D. What type of ownership do A and D have? a) joint tenants b) tenants by the entirety c) tenants in common
d) tenants in severalty - CORRECT ANSWER c) tenants in common"
"Ownership of the common areas of condominiums is most likely to be: a) joint tenancy b) tenancy by the entirety c) tenancy in common
d) sole ownership - CORRECT ANSWER c) tenancy in common"
"What should a buyer do to ensure that he is getting the best title to real property? a) get an attorney's opinion of title b) get title insurance c) get a special warranty deed
d) get a general warranty deed - CORRECT ANSWER d) get a general warranty deed"
"Which covenant in a deed guarantees that the owners will not suffer or be disturbed by any claims in the property? a) the covenant of seizen b) the covenant against encumbrances c) the covenant of quiet enjoyment
d) the covenant of warranty forever - CORRECT ANSWER c) the covenant of quiet
enjoyment" "Excess money at a foreclosure sale goes to: a) the borrower b) the lender c) the courts
d) the trustee - CORRECT ANSWER a) the borrower"
"The required distance between buildings and a federally protected endangered species wetlands, two incompatible uses, is an example of: a) space determined by deed restrictions b) Condemnation c) a buffer zone
d) space determined by zoning - CORRECT ANSWER c) a buffer zone"
"A couple purchased a condominium. The complex has an exercise room for all residents. The couple does not use the exercise room and does not want to pay the monthly fee for the use of the facility. What can they do to avoid this fee? A) they can deduct the appropriate amount from their monthly condo fees b) they can have an attorney send a letter to the homeowner's association stating their intention to not pay and then stop paying the fee. C) they must pay the fee as they have a tenancy in common interest in all common areas.
D) they can lease their condo as the landlords they would not have to pay the fee. - CORRECT
ANSWER c) they must pay the fee as they have a tenancy in common interest in all common
areas"
