TREC Real Estate Brokerage Regulations and Contracts, Exams of Real Estate Management

Download TREC Real Estate Brokerage Regulations and Contracts and more Exams Real Estate Management in PDF only on Docsity! TREC State Exam with 90 Practice questions and answers update 1. TREC has the power to order witnesses to appear and/or produce records of documents for its investigations and hearings. This is called subpoena power. If a license holder fails to respond to a subpoena, what can TREC do? (a) TREC can assess an administrative penalty against the license holder for up to $4,000. (b) TREC can immediately revoke the license of the license holder without a hearing. (c) TREC can file suit with the Attorney General to enforce the subpoena. (d) TREC can file charges of felony against the license holder, based on fraud. - >>>(c) TREC can file suit with the Attorney General to enforce the subpoena. 2. A license holder in violation of the TRELA has received a summons from TREC that a hearing will be held regarding the possible revocation or suspension of his license. The license holder fails to respond to the summons. What will TREC do? (a) Schedule a hearing in the county court where the license holder practices real estate (b) Schedule a hearing at the TREC office in Austin (c) Schedule a hearing in the district court serving the license holder (d) Schedule a hearing at the main office or business address of the license holder - >>>(b) Schedule a hearing at the TREC office in Austin 3. With the knowledge and consent of her broker/employer, an unlicensed assistant is showing property to prospective buyers. What is true about this situation? (a) The broker and unlicensed assistant are both guilty of a third degree felony (b) Both the broker and unlicensed assistant can be fined an administrative penalty of $5,000 per day (c) Only the unlicensed assistant can be fined by TREC for this activity (d) Only the broker can be fined by TREC for this activity - >>>(b) Both the broker and unlicensed assistant can be fined an administrative penalty of $5,000 per day 4. TREC has received an application for a Texas Real Estate Sales License from Mary. Mary has completed all her educational requirements, and passed the state exam. At this point TREC will begin the background check. Which of the following statements is FALSE? (a) TREC has no time limit for determining integrity (b) TREC has 30 days to complete the background check (c) TREC has 30 days to notify Mary of a decision to disapprove her application (d) Mary has 10 days to appeal a denial of her application - >>>(b) TREC has 30 days to complete the background check TREC has no limit on days to review your application or complete your background check. They have 30 days to notify you of their decision and you have 10 days to appeal that decision. (c) Selling real estate by lottery (d) Placing a sign to sell or lease real property with only the verbal consent of the owner - >>>(a) A broker offers a guaranteed buy back of a property for a set price, if the purchaser is not happy with the investment after a two-year period of ownership 10. A sales agent wished to transfer to a new broker. When may he engage in the business? (a) When the new broker receives a license for him from TREC (b) After a waiting period of 48 hours (c) When his fees and sponsorship forms have been mailed to TREC (d) When TREC receives his request for transfer - >>>(c) When his fees and sponsorship forms have been mailed to TREC The moment your forms have been mailed (or e-mailed) to TREC and your license fee has been mailed (or i.e. pay pal) you work for the next broker. Your first broker must have your license the first time only, not for subsequent brokers. There is no waiting period. 11. Which of the following is the responsibility of the broker? (a) The listing advertisements of the sales agents he sponsors (b) The continuing education of the license holders he sponsors (c) The financial opportunities and success of the license holders he sponsors (d) The timely renewal of licenses by the sales agents he sponsors - >>>(a) The listing advertisements of the sales agents he sponsors 12. Without proper authorization, a sales agent may accept a commission directly from: (a) A seller (b) A buyer (c) His broker (d) The title company - >>>(c) His broker 13. A broker has a listed property. The owner mentions that a neighbor is interested in selling. The broker meets with the neighbor and secures a second listing. Both listings sell and the broker earns a commission on each. The broker would like to thank the owner of the first listed property for this referral. How can the broker thank the seller? (a) He can give the seller a gift of $50.00 cash (b) He can give the seller a gift of up to $100.00 in value, not cash (c) He can pay the seller whatever commission amount he agreed to pay for the referral (d) He cannot pay the seller any commission at all - >>>(d) He cannot pay the seller any commission at all 14. May has listed the property at 123 Main St. The sellers have told her that the property has 2,000 sq. ft. May has verified the square footage and entered this information correctly into the MLS. John, a license holder from another firm, shows the property to some buyer customers. He tells them that the property has 2,500 sq. ft. Who is liable for this misrepresentation? (a) May and her broker (b) John and his broker (c) The seller, the listing broker and the selling broker (d) The seller, listing broker and May, selling broker and John - >>>(b) John and his broker 15. In the event of a conflict between the statutory duties of Intermediary and the common law duties of dual agency of a broker, which takes precedence? (a) Common Law Dual Agency (b) Statutory Intermediary (c) Whichever the broker entered into first (d) Whichever the broker and the parties agree to - >>>(b) Statutory Intermediary (b) Brother, sister or child (c) Spouse, child or parent (d) Relative of any kind - >>>(c) Spouse, child or parent 21. John has listed the property at 17 Oak St. The sellers have received and accepted an offer from the buyers. The buyers have received the survey and it shows an encroachment that the sellers did not previously disclose. The buyers are not willing to purchase the property in this condition. What action on the part of the buyers must be taken? (a) Within 10 days, the buyers can notify the sellers that the contract is cancelled and demand the return of their earnest money (b) The buyers can sue the sellers for breach of contract (c) The buyers have the number of days mentioned in the contract to address survey problems with the sellers (d) The buyers must submit the survey to the sellers, checking the box on the survey form, indicating their intent to cancel the transaction - >>>(c) The buyers have the number of days mentioned in the contract to address survey problems with the sellers Paragraph 6D deals with title commitments, exceptions, and the survey as well as the number of days for the buyer to object to these items once received. 22. A buyer is unable to obtain credit approval as described in the Third Party Financing Addendum for Credit Approval. If the buyer provides the seller with written notice within the agreed-to number of days, which of the following is FALSE? (a) The contract is terminated (b) The buyer will lose his earnest money (c) The buyer is entitled to a return of his earnest money and there is no remedy for the seller (d) The buyer is not entitled to a refund of any option fee he paid - >>>(b) The buyer will lose his earnest money 23. According to the TREC One to Four Family Residential Contract, who is responsible for paying the owner policy of title insurance? (a) The buyer (b) The seller (c) The title company named in the contract (d) The party stipulated in the contract - >>>(d) The party stipulated in the contract This is a negotiable item in paragraph 6A. 24. Who is responsible for filling in the effective date of the real estate sales contract? (a) The party accepting the final offer (b) The agent of the party accepting the final offer (c) The broker (d) The seller - >>>(c) The broker 25. Which of the following is NOT found in the TREC 1-4 Family Resale Contract? (a) If the buyer makes an offer prior to receiving the Seller's Disclosure of Property Condition, the buyer will have 7 days to terminate the offer once he receives the disclosure (b) If lender required repairs exceed 20% of the sales price the buyer may terminate the contract (c) If lender required repairs are more than 5% of the sales price the buyer may terminate the contract (d) The contract encourages the parties to agree to mediation for dispute resolution - >>>(b) If lender required repairs exceed 20% of the sales price the buyer may terminate the contract Usually found in VA and FHA financing, if lender required repairs exceed 5% of the sales price, buyer may walk away and receive their earnest money back in paragraph 7E. 26. What TREC promulgated form should be incorporated into the contract when a buyer wants to obtain possession before the closing and funding of the transaction? (c) The buyers can sue John and the real estate brokers involved in the transaction for damages (d) The buyers can file a claim with the Title Insurance Company for loss of property - >>>(b) The state can force the removal of the structure 1. What is the criminal penalty for engaging in the real estate brokerage business in Texas without first becoming licensed by TREC? (a) A fine of up to $5,000 per day (b) Triple damages (c) A fine of not more than $4,000 (d) Imprisonment for up to 2 years - >>>(c) A fine of not more than $4,000 $4000 is the maximum criminal penalty for engaging in real estate without a license, a Class A misdemeanor. $5000 is the TREC administrative penalty, triple damages can be awarded in a civil suit and the maximum prison term for this crime is one year. 2. An individual has successfully sued a license holder in connection with a single transaction and won a judgment for $110,000. The license holder has declared bankruptcy and TREC has agreed to pay out of the recovery trust account on behalf of the license holder. How much will TREC pay? (a) $110,000 (b) $50,000 (c) $100,000 (d) $55,000 - >>>(b) $50,000 $50,000 is the maximum TREC will pay in connection with a single transaction. 3. Which of the following about TREC is FALSE? (a) TREC has 9 members (b) 6 TREC members are public and 3 TREC members are brokers (c) TREC has subpoena power (d) TREC can advise with reference to its rules and the laws that govern license holders - >>>(b) 6 TREC members are public and 3 TREC members are brokers 4. How many properties can an unlicensed investor sell in a year? (a) 0 (b) Unlimited (c) 3 (d) 5 - >>>(b) Unlimited An unlicensed investor can buy and sell his own properties an unlimited number of times per year. 5. All approved CE classes include: (a) 18 hours of legal update (b) 10 hours of legal update (c) 8 hours of legal update (d) 6 hours of legal update - >>>(c) 8 hours of legal update All CE (Continuing Education) classes include Legal 1 (4 hours) and Legal 2 (4 hours). 6. Requirements for obtaining a broker license in Texas include: (a) 5 years of experience and 3600 points (b) 5 years of experience and 9 qualifying classes (c) 4 years of experience out of the past five and 3600 points (d) 4 years of experience out of the past five and 900 points - >>>(c) 4 years of experience out of the past five and 3600 points A Texas broker can pay an out of state broker a commission as long as the other broker does not negotiate in Texas. Preparing an offer and giving advice are not considered acts of negotiation. A referral gift of up to $50 in value, not cash, is given to an unlicensed person who provides a referral. 11. A broker has a verbal listing agreement with a seller. The seller has agreed to sign a written listing agreement but has not done so yet. What is true? (a) The broker's status at this time is that of a volunteer (b) The broker can place his sign on the property at this time (c) The broker has an enforceable employment contract with the seller (d) An oral listing agreement including the seller's promise to sign a written agreement makes the agreement enforceable - >>>(a) The broker's status at this time is that of a volunteer 12. A broker has received a referral from his neighbor. The referral results in a sale and the broker earns a commission on the transaction. How can he thank his unlicensed neighbor for the referral? (a) A gift of $50 cash (b) Any commission he promised (c) No commission (d) A gift of up to $100 in value, not cash - >>>(c) No commission 13. What department of the Federal Government administers the Do Not Call list? (a) NAR (b) CFPB (c) HUD (d) FTC - >>>(d) FTC 14. Disclosure of agency must be given: (a) At first face-to-face meeting (b) At first substantive dialogue (c) At first contact (d) On the TREC promulgated IABS form - >>>(b) At first substantive dialogue 15. A broker sponsors only one associate license holder. He has a listing and a buyer client who wants to purchase that listing. What is true? (a) The broker cannot do Intermediary and must send the buyer to another firm for representation (b) He can do intermediary without appointments (c) He can represent the seller and his associate can be appointed to represent the buyer (d) He cannot do intermediary but can do dual agency - >>>(b) He can do intermediary without appointments 16. A buyer has submitted an offer to purchase a seller's property without receiving the seller's disclosure of property condition. How many days does the buyer have to terminate the offer once he receives the disclosure? (a) 7 (b) 5 (c) 10 (d) Any negotiated number of days - >>>(a) 7 A buyer who has submitted an offer without receiving the seller's disclosure will have 7 days to terminate the offer after he receives the disclosure. 17. A seller's disclosure is not required: (a) When the seller lives in another state (b) On new construction that has not been occupied 22. For which of the following properties does TREC have a promulgated contract form? (a) Co-op (b) Farm and ranch (c) 6 unit apartment building (d) Commercial property no more than $500,000 in value - >>>(b) Farm and ranch 23. According to the TREC contract form, when must the title company deliver the title commitment to the buyer? (a) 21 days from the effective date of the contract (b) 21 days from the receipt of the contract (c) 20 days from the effective date of the contract (d) 20 days from the receipt of the contract - >>>(d) 20 days from the receipt of the contract The title company must deliver the title commitment within 20 days from their receipt of the contract. 24. How long does a broker have to deposit earnest money in an escrow account? (a) A reasonable amount of time as defined by TREC (b) Until the close of the second business day after an offer has been delivered to the offeree (c) Until the close of business of the second business day after the offer was accepted and acceptance was communicated (d) There is no rule about this - >>>(c) Until the close of business of the second business day after the offer was accepted and acceptance was communicated 25. Which of the following statements is FALSE? (a) Real Estate Inspectors are licensed by TREC (b) Real Estate Inspectors must use promulgated inspection forms for all properties (c) Real Estate Inspectors must use promulgated forms for residential inspections (d) TREC Consumer Information Form 1-1 applies to Real Estate Inspectors - >>>(b) Real Estate Inspectors must use promulgated inspection forms for all properties TREC does not have promulgated inspection forms for all properties. They only have forms for residential inspections. 26. Which of the following statements about Earnest Money Deposits and Option Fees is FALSE? (a) Earnest money is not necessary for a contract to be valid (b) Earnest money and option fees can be combined in one check from the buyer (c) An option fee is necessary in order to have an option clause or an option contract (d) An option fee must be paid up front and is never refundable - >>>(b) Earnest money and option fees can be combined in one check from the buyer 27. Which of the following TREC forms does not include the phrase, "time is of the essence"? (a) The Short Sale Addendum (b) The Third Party Financing Addendum (c) The 1-4 Family Resale Contract (d) The Notice Regarding Coastal Area Property - >>>(d) The Notice Regarding Coastal Area Property 28. A broker has several offers on one of his listed properties. What is true? (a) He only has to present offers that he believes are in the seller's best interest (b) He must present all offers in whatever order he chooses (c) He must present all offers in the order in which they were received (a) at midnight on the day mentioned in the contract (b) at 5:00 pm on the third day after the effective date (c) at midnight on the third day after the effective date (d) at 5:00 pm on the day mentioned in the contract - >>>(d) at 5:00 pm on the day mentioned in the contract 4. A broker who has a buyer representation agreement with a buyer decided to rebate part of the commission to the buyer to cover closing costs. The broker should: (a) rebate a gift card to the buyer (b) rebate $50 of the commission (c) rebate an amount on the closing disclosure (CD) (d) write the buyer a check after closing - >>>(c) rebate an amount on the closing disclosure (CD) 5. Who is eligible for a TVLB loan? (a) eligible spouses (b) parents of a veteran (c) any honorably or dishonorably discharged disabled veteran (d) siblings of a veteran - >>>(a) eligible spouses 6. When a broker posts pictures of other brokers' listings on his website, what is required? (a) written permission (b) broker's name on every picture (c) broker's name on the front page of his website only (d) both broker and listing broker's name on all pictures. - >>>(a) written permission 7. A broker's duty consists of updating/notifying agents about: (a) changes to the License Act (b) changes to the promulgated forms (c) the due date for the payment of TREC fees (d) compliance issues - >>>(d) compliance issues 8. Who can a broker pay a referral commission to? (a) an attorney in Texas (b) an attorney in another state (c) an unlicensed assistant (d) a broker license holder in this or any other state - >>>(d) a broker license holder in this or any other state 9. A buyer's agent rebates a portion of their commission to a buyer. Who needs to approve this? (a) no one (b) the buyer (c) the agent (d) the sponsoring broker - >>>(d) the sponsoring broker 10. A foreign broker advertises that he sells houses outside his state for a flat fee. What is true? (a) He must refer this transaction to a resident broker in TX. (b) This is legal in Texas. (c) The buyer can back out within 7 days of the effective date. (d) The buyer cannot back out of the contract. - >>>(b) The buyer can back out during a due diligence or option clause in the contract. 15. An unlicensed person owns an option to purchase real property for a $190,000. He advertises the option for sale for $20,000. This action is: (a) only legal if he uses the service of a licensed broker (b) illegal (c) only legal with full disclosure of the terms of the option (d) legal if the seller owns three options or less - >>>(c) only legal with full disclosure of the terms of the option 16. An agent switched brokers in the middle of a sale where the house is already under contract. What is true? (a) The brokers must split the commission amicably. (b) The agent may select the higher of splits between brokers. (c) The first broker is the primary broker for the transaction. (d) The sale will close under the sponsoring broker at the time of closing. - >>>(c) The first broker is the primary broker for the transaction. 17. An agent is aware of a foundation issue that was not disclosed on the Seller's Disclosure. She discusses it with her broker who advises the agent to let the Seller fill out the Disclosure. Who is in violation of DTPA? (a) There is no violation of the Act. (b) The agent is in violation. (c) Only the broker is in violation. (d) Both the agent and broker are in violation. - >>>(d) Both the agent and broker are in violation. 18. Where should the consumer protection notice be? (a) on every e-mail (b) on every contract offer sent (c) on the website in 10-point font (d) on the broker's office wall - >>>(d) on the broker's office wall 19. Regarding the option fee in the TREC 1-4 Family Resale Contract, what is true? (a) it must be at least $100 (b) it must be at least $200 (c) no money is required if the buyer already paid an earnest money deposit (d) it must be an amount discussed/agreed to by the buyer and seller - >>>(d) it must be an amount discussed/agreed to by the buyer and seller 20. What is an example of something that could be entered in paragraph 11? (a) the information from any TAR addendum (b) the information from any TREC addendum (c) the fact that the seller will pay ½ of the closing costs for the buyer (d) the fact that the seller is a licensed real estate sales person - >>>(c) the fact that the seller will pay ½ of the closing costs for the buyer Rationale: business details - the fact that the seller will pay ½ of the closing costs for the buyer. 21. Where or to whom does the Earnest Money Deposit go? (a) to the title company 26. A property has been listed for sale at $495,000. Several buyers are interested in the property and after a small bidding war the sellers have accepted an offer for $505,000. Included in the offer was the condition that the dining room furniture, washer and dryer be part of the sale. Where can this information be covered to insure that all parties are protected. (a) in the sales contract in paragraph 11 - Special Provisions (b) in the sales contract in paragraph 2. C. - Accessories (c) in an addendum to the sales contract and a Bill of Sale (d) in an addendum to the sales contract and an amendment to the deed - >>>(c) in an addendum to the sales contract and a Bill of Sale Rationale: the transfer of personal property as part of a sale requires a Bill of Sale and an addendum. 27. A buyer has purchased an option on a commercial property for $5 million. The negotiated option fee is $50,000 and the parties have agreed that it will be paid within 5 days. How/where may the option fee be paid? (a) by personal check to the title company (b) by wire transfer to the broker's escrow account (c) by promissory note to the seller (d) by money order to the seller - >>>(d) by money order to the seller Rationale: an option fee is always paid upfront directly to the seller and is not refundable. 28. The primary purpose of TREC is to: (a) make rules and regulations (b) suspend or revoke licenses (c) protect the public (d) promulgate forms - >>>(c) protect the public 29. Through TRELA you may be awarded damages up to: (a) actual damages (b) 3x the amount of money received (c) the negotiated amount between the parties to the transaction (d) up to the limit of the Broker's E&O insurance - >>>(b) 3x the amount of money received 30. An unlicensed assistant may do which of the following? (a) show a home (b) host an open house (c) give an overview of the market to a buyer (d) prepare a CMA - >>>(d) prepare a CMA Rationale: Answer choices a.,b., and c are all activities that are prohibited for an unlicensed person.