Texas Principles of Real Estate 1 Final Exam|
Questions and Verified Answers| Grade A|
2023/ 2024 Update
Q: An insurance policy protecting against a variety of hazards is referred to as a…?
Homestead Policy
Individual Policy
Homeowners Policy
Package Policy
Answer:
Homeowners Policy
Q: Which of the following is an advantage to owning a home…?
Tax benefits
Pride of ownership
Potential for asset appreciation
All of the above
Answer:
All of the Above
Q: An individual is exempt from paying taxes on capital gains for up to how much in profit if
he/she lived in the house for at least 2 of the last 5 years…?
$100,000
$250,000
$500,000
$1,000,000
Answer:
$250,000
Q: An individual who has not owned real property for at least the previous two years is known
as a…?
First-time homebuyer
Conventional homebuyer
Exempt homebuyer
Vacant homebuyer
Answer:
First-Time Homebuyer
Q: When a real estate broker represents a buyer in a transaction, the broker and buyer are bound
by which of the following contracts…?
Buyer Representation Agreement
Listing Agreement
All of the above
Purchase Agreement
Answer:
Buyer Representation Agreement
Q: A contract in which a property owner employs a real estate broker to market the property
described in the contract is referred to as the….?
Exclusive Contract
Purchase Contract
Listing Contract
Agency Contract
Answer:
Listing Contract
Q: The ‘L’ in the acronym C.O.A.L.D. stands for which fiduciary duty…?
Loyalty
Litigation
Listing
License
Answer:
Loyalty
Q: The employer of an agent is referred to as the…?
Principal
Partner
Customer
Fiduciary
Answer:
Principal
Q: An agency relationship created by oral or written agreement between the principal and the
agent is known as…?
General Agency
Brokerage
Implied Agency
Express Agency
Answer:
Express Agency
Q: Which of the following acronyms summarizes the fiduciary duties a broker owes to his/her
principal…?
C.O.A.L.D.
O.L.D.C.A
W.B.V.A.
C.A.T.T.L.
Answer:
C.O.A.L.D.
Q: The Deceptive Trade Practices Act discourages agent from which of the following acts…?
Puffing
Exclusive agency
Indemnification
All of the above
Answer:
Puffing
Q: Real estate brokers have a ………………. relationship with the principal?
Universal
Fiduciary
Special
General
Answer:
Fiduciary
Q: As a seller’s agent in a transaction, the agent is required to do which of the following…?
Answer to the seller
Present all offers to the seller
Inform the seller of any material information
All of the above
Answer:
All of the Above
Texas Principles of Real Estate 1 (2023/ 2024)
Exam| Questions and Verified Answers|
Grade A
Q: Under subchapter E of TRELA the commission has a responsibility to make information
available about the commission and its duties in the interest in:
Answer:
The general public
Q: In a real estate transactions who may a licensee represent?
Answer:
A client
Q: What type of real estate market occurs when both supply and demand are low?
Answer:
Stagnant Market
Q: Assume you are a licensee in Texas who has recently entered into an agreement with a seller
to represent their interest in a real estate transaction at what point are you required to make your
agency disclosure to a potential buyer
Answer:
At the time of your substantive dialog
Q: Of the nine total members of TREC, how many are members of the public?
Answer:
Three
Q: Cultivated crops are called?
Answer:
Emblements and are considered personal property.
Q: Severance occurs when an item that was real property becomes personal property by?
Answer:
Detaching it from land
Q: Ad valorem taxes are calculated based on?
Answer:
The appraised value of the property being taxed.
Q: To calculate property taxes, multiply tax rate by what?
Answer:
Assessed value
Q: Annexation occurs when:
Answer:
Personal property is attached to real property, making it a fixture
Q: A lien may be voluntary or:
Answer:
involuntary
Q: Property tax liens take priority over other liens; if homeowners dont pay their property taxes
what can happen?
Answer:
They can lose their property
Q: A grant of land from an owner to a school “on the condition that” the property be used for
educational purposes is:
Answer:
Fee simple subject to a condition subsequent.
Q: Pur autre vie life estates are what type of life estates:
Answer:
For the life of another
Q: A homestead may suffered forced sale for payment of mortgages where the loan proceeds
were used to do which of the following:
Answer:
Purchase the residence, refinance the residence, improve the residence
Q: An encroachment of long standing may result in an easement by:
Answer:
Prescription
Q: What is the same as sole ownership?
Answer:
Ownership in severalty
Q: Under community property laws, property owned before marriage is considered:
Answer:
Separate property
Q: A limited partnership includes:
Answer:
both general and limited partners
Q: In a cooperative, any taxes, maintenance expenses, and mortgage liens are placed against the
Answer:
Cooperative
Q: Which shows only the location and dimensions of a parcel of land
Answer:
Texas Principles of Real Estate 1 (2023/ 2024)
Exam | Guide with Questions and Verified
Answers| 100% Correct
Q: curtsey rights
Answer:
right a husband has to his wifes estate upon her death
Q: fee simple defeasable
Answer:
a gift of land by a person or GRANTOR
Q: Life Estate
Answer:
an estate in land for the duration of someones life (always a gift of land/ real estate)
Q: Homestead
Answer:
Texas is a Homestead State. The property that you own and live in. It is a constitutional right that
cannot be waived.
Q: Urban homestead
Answer:
homestead limited to 10 acres
Q: rural homestead
Answer:
limited to 200 acres for a married couple 100 for a single person
Q: easement
Answer:
right of one person to use the property that belongs to another
Q: types of easements
Answer:
gross
necessity
perscription
appurtenant
Q: easement by necessity
Answer:
easement given when one property is landlocked and needs to be given access to from someone
elses land
Q: Easement in gross
Answer:
is a utility easement
Q: easement by prescription
Answer:
easement granted after dominant estate has used the property in a constant continuous and open
manner for a prescribed number of years
Q: Easement appurtenant
Answer:
used between two lots to allow the owner of one lot to cross the others property
Q: deed restrictions/covenents
Answer:
put into place by developer and are a private control of property
Q: Encroachments
Answer:
something that extends across a property line onto the property of another
Q: Liens
Answer:
legal claim on someones property as a security for a debt
Q: Types of liens
Answer:
mortgage, property tax lien, mechanics lien, judgement and can be voluntary or involuntary and
are either specific or general
Q: License
Answer:
personal priviledge given to someone to use land-not an estate or right to land
Q: Estate of Severalty
Answer:
sole ownership of property-not part of community property
Q: Joint tenancy
Answer:
ownership in property where owners own equal shares and has right of suvivorship-cannot be
passed on to others upon their death, cannot be sold or given away either-last surviving owner
takes property in severalty
Q: right of suvivorship
Answer:
in joint tenancy if one partner dies his share goes to the remaining partners
Q: conditions upon which a joint tenancy can be made
Texas Principles of Real Estate II (2023/
2024) Exam| Questions and Verified Answers|
100% Correct
Q: According to value
a. Police power
b. Ad valorem
c. Taxation
d. Escheat
e. Condemnation
Answer:
B
Q: The government retains the following rights in lands, EXCEPT:
a. Eminent domain
b. Allodial
c. Police Power
d. Taxation
Answer:
B
Q: If a landowner sues the government in order to force it to buy his or her land, this is called:
a. Reverse condemnation
b. Forward condemnation
c. Inverse condemnation
d. Ad valorem
Answer:
C
Q: There is a _ right of redemption of homestead property sold at auction in Texas.
a. One year
b. Two year
c. Three year
d. Four year
Answer:
B
Q: The Interstate Land Sales Full Disclosure Act provides for:
a. The protection of the government from land owners filing suit against eminent domain cases
b. The protection of developers from homeowners’ associations
c. The reimbursement of individuals whose land has been condemned by the government
d. The protection of consumers from fraud in the sale or lease of land
Answer:
D
Q: Under the Interstate Land Sales Full Disclosure Act, developers are required to provide each
purchaser in a subdivision or condominium with a Property Report.
a. True
b. False
Answer:
A
Q: Authority for cleanup of hazardous substances under CERCLA is granted to all of the
following, EXCEPT:
a. States’ natural resource agencies
b. Federal natural resource agencies
c. Homeowners’ associations
d. Native American tribes
Answer:
C
Q: A broker is not required to advise a sponsored sales agent of the scope of the sales agent’s
authorized activities under the License Act.
a. True
b. False
Answer:
B
Q: REO stands for real estate owned.
a. True
b. False
Answer:
A
Q: Auctioneers who call at an auction that includes real estate auction must have a real estate
license.
a. True
b. False
Answer:
B
Q: Property managers are only found in commercial real estate.
a. True
b. False
Answer:
B
Q: A short sale is one in which a property is sold by an owner/borrower at a price that is
sufficient to pay off the existing mortgage.
a. True
b. False
Answer:
B
Q: The CHMS designation is a designation for:
a. License holders specializing as a residential buyer’s agent
b. License holders specializing as a residential seller’s agent
c. Commercial brokers specializing in the sale of industrial properties
d. REO property specialists
Answer:
B
Q: The ABR designation is especially useful for:
a. Residential buyer’s agents
b. Commercial property managers
c. Foreclosure specialists
d. Industrial property specialists
Answer:
Texas Principles of Real Estate II Final
Exam| Questions and Verified Answers|
Grade A| 2023/ 2024 Update
Q: a lease for one year or less
Answer:
the only contract that does not have to be in writing to be enforceable
Q: Attorney in Fact
Answer:
a person holding a power of attorney
Q: substitution of a contract with another contract ie. counteroffer
Answer:
Novation
Q: when one party fails to perform the duties of the contract-they can be asked by judge to
partially perform or substatially perform
Answer:
breached
Q: money offered to seller to entice seller to go under contract
Answer:
earnest money
Q: gives buyer the right to demand legal title to the property when the purchase price is paid
Answer:
equitable title
Q: seller financing and buyer does not get deed until the property has been paid for in full
Answer:
contract for deed/installment contract
Q: that the property may contain lead based paint-Federal Law
Answer:
if property was built before 1978 seller must disclose
is the principle that the more similar properties there are on the market, the lower the
price will be driven.
Answer:
Competition
Q: A is made when a property is sold for more than the original price.
Answer:
Profit
Q: A _ is the bottom number of a fraction. Answer: Denominator Q: A is the top number of a fraction.
Answer:
Numerator
Q: A is a ratio that compares two quantities.
Answer:
Rate
Q: A 20-unit apartment building sells for $5 million. The property can bring in $400,000 in
annual gross income. What is the gross income multiplier (GIM)?
Answer:
12.5
Q: A form of depreciation or loss in value caused by defects in design is called __.
Answer:
Functional obsolescence
Q: A licensee must understand risks and provide disclosure of known environmental issues. A
licensee must also do which of the following?
Answer:
Know when to ask questions.
Q: A loss in value caused by an undesirable or hazardous influence offsite is which type of
depreciation?
Answer:
External depreciation
Q: A property appraises at $320,000. If the assessment rate is 100% and the tax rate is $1 per
$100, what are the semi-annual property taxes?
Answer:
$1,600
Q: A property generates $30,000 in net operating income and has a 15% cap rate. Using the
income approach, what is its value?
Answer:
$200,000
Q: A real estate transaction has a closing date of April 20. The seller, who’s responsible for
closing costs up to and including the day of settlement, has already paid property taxes of $1,447
for the calendar year. If proration is based on a statutory calendar, the buyer will be_______ on
the closing statement.
Answer:
Debited $1,005 – The buyer will be debited $1005 because the buyer owes the seller this amount
for taxes the seller already paid. $1,447 ÷ 360 = $4.02, and $4.02 × 250 days = $1005.
Texas Principles of Real Estate II (2023/
2024) Exam | Guide with Questions and
Verified Answers| 100% Correct
Q: Principle of Contribution?
Answer:
A component part of a property is valued in proportion to its contribution to the value of the
whole. Holds that maximum values are achieved when the improvements on a site produce the
highest (net) return, commensurate with the investment.
Q: Principle of Competition?
Answer:
Holds that profits tend to breed competition and excess profits tend to breed ruinous completion.
Q: Principle of Change?
Answer:
Holds that it is the future, not the past, which is of prime importance in estimating value. Change
is largely the result of cause and effect.
Q: Reconciliation?
Answer:
taking values indicated by the various approaches used and reconciliating into one single value
Q: Comparative Market Analysis(CMA)?
Answer:
An analysis of the competition in the marketplace that a property will face upon sale attempts.
Q: Sellers net return?
Answer:
seller profit once closing costs, commissions, and other fees have been subtracted. The amount
the seller walks away with after a sale.
Q: Appraisal Process?
Answer:
1) State the problem – What is the appraised being done for; new home purchase, refinance,
home equity loan or other purpose
2) List the data needed and the sources of the data
3) Gather, record, and verify all the necessary data in step 2 – very time consuming
4) determining the highest and best use of the property
5) value estimated from each of three appraisal methods
6) Reconciliation – takes all three approaches and values and reconciles it into one single value.
After all steps are completed, appraiser takes what he has learn and conveys that to the client.
Where he gives his opinion and how he came to the appraisal value.
Q: Appraisal reporting – information actually sent to client?
Answer:
1) Opinion of value and date it was recorded
2) The purpose on which the appraisal was done
3) Description of the neighborhood and surrounding areas of the subject property – demographics
4) Factual data with respect to each of the three appraisal methods; sales of recently sold similar
properties
5) Analysis and interpret the data collected
6) Presentation with enough detail to state and prove his final number, with supporting
documents and data points.
Q: Insured Value?
Answer:
The cost of replacing a structure completely destroyed by an insured hazard.
Q: Book Value?
Answer:
The current value for accounting purposes of an asset expressed as original cost plus capital
additions minus accumulated depreciation.
Q: Assessed Value?
Answer:
A valuation placed upon a piece of property by a public authority as a basis for levying taxes on
the property.
Q: Market Price?
Answer:
The price paid regardless of pressures, motives or intelligence.
Q: IRV?
Answer:
Income * Rate = Value
Q: List at least three examples of lenders who offer financing to residential buyers.?
Answer:
Convential, FHA, VA
Q: Explain the difference between a balloon mortgage and term mortgage.?
Answer:
Balloon is interest only to defer the principal until final payment is to be made. Term is fixed for
length and generally has an amortization set over the life of the loan.
Q: Explain the concept of negative amortization and why it is risky for borrowers.?
Answer:
Occurs when monthly installment payments are insufficient to pay the interest accruing on the
principal balance, so that the unpaid interest must be added to the principal due.
Q: Identify at least three participants in the secondary mortgage market.?
Answer:
Fannie Mae, Freddie Mac, Ginnie Mae
Q: Mortgage Banker?
Answer:
A person whose principal business in the originating, financing, closing, selling and servicing of
loans secured by the real property for institutional lenders on a contractual basis.
Q: Mortgage Broker?
Texas Principles of Real Estate II Exam|
Complete with Questions and Verified
Answers| Grade A+| 2023/ 2024 Newly
Updated
Q: Tim and Sue have the smallest home in a sought-after neighborhood. The value of their
home is increased because of the higher value of the other homes in the neighborhood. This is an
example of what principle?
Answer:
progression
Q: What aspects of a property site should a licensee consider when collecting information about
a seller’s property for analysis?
Answer:
Shape
Landscape
Position and orientation
Q: What is an example of a pitfall of overpricing?
Answer:
A home failing to sell and becoming an expired listing
Q: What are the most reliable comparables to collect for a CMA?
Answer:
Sold homes that are most similar to the seller’s property
Q: A licensee has a listing with very close matching pending sale compara- bles. Using the
comparables what should a licensee do to see if they have a good price for the listing?
Answer:
Contact the listing agent on the pending sale for price and sale information
Q: When an appraiser is looking for comparables that have recently sold, they should look at
similar properties that have sold within the last how many months?
Answer:
Three (3) to six (6) months
Q: When doing a CMA, what is the minimum number of sold properties that should be
included?
Answer:
three
Q: Why should a licensee keep in mind that the information on pending sales is not as reliable
as on sold homes?
Answer:
The sale price could even be lower or higher than the listing price.
Q: Where can a licensee find most of the information they need to do a good analysis?
Answer:
From the multiple listing service (MLS)
Q: For recently sold properties, the licensee should also be concerned with what?
Answer:
Date of the sale Financing TermsSale conditions
Q: If a licensee has prepared a CMA, they make a comparison based on loca- tion, physical
characteristics sale date and financing terms. The licensee will use the differences in these factors
to make small adjustments to what?
Answer:
Sale price or the listing price.
Q: When completing the CMA a licensee has a comparable that has a feature the seller’s
property does NOT have—for example, an extra bedroom—what adjustment must be made on
the comparable?
Answer:
If a comparable has a feature that the seller’s property does not have, subtract the value of that
feature from the price of the comparable.
Q: There are several factors that determine the value of a home at any given point in time,
including
Answer:
Location
Property condition Improvements Supply and demand Financing terms
Q: Appraisal.
Answer:
An opinion or estimate of value performed by a licensed appraiser.
Q: Comparative Market Analysis.
Answer:
Process a listing agent performs similar to an appraisal to give the seller an idea of the sales
prices of similar homes in the area.
Q: Principle of substitution.
Answer:
A buyer won’t pay more for a property than they would pay for a property that is similar in
characteristics and amenities.
Q: Frontage
Answer:
The measurement of the length along the front boundary of a property either along a street or
along a lake, river, or body of water.
Q: Pending sales.
Answer:
Homes whose offers have been accepted by the sellers, but the sales haven’t closed and the titles
have not transferred.
Q: Expired listings.
Answer:
Homes comparable to the seller’s home that were listed but ultimately did not sell.
Q: Cash equivalent sale
Answer:
When a buyer uses a conventional loan to purchase a property