Unit 2

Question 1

Which of the following is NOT a TREC promulgated addendum?:

Reverse Mortgage Financing Addendum

Addendum for Back-Up Contract

Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller’s VA Entitlement

Seller’s Temporary Residential Lease

Answer 1

Reverse Mortgage Financing Addendum

Response Feedback:
The answer is Reverse Mortgage Financing Addendum. The Reverse Mortgage Financing Addendum is not a TREC promulgated addendum; it was approved for voluntary use for a time but no longer exists. Learning Objective 2.4

Question 2

What law specifically prohibits license holders from practicing law?:

Real Estate Settlement Procedures Act (RESPA)

Texas Real Estate Commission (TREC)

Texas Real Estate License Act (TRELA)

Deceptive Trade Practices Act (DTPA)

Answer 2

Texas Real Estate License Act (TRELA)

Response Feedback:
The answer is Texas Real Estate Licensing Act (TRELA). The TRELA specifically prohibits license holders from practicing law. Learning Objective 2.2

Question 3

An offer to purchase by a potential buyer is considered accepted when the:

seller signs the contract.

buyer is notified that the seller has accepted the offer.

seller notifies the listing broker.

seller initials any changes.

Answer 3

buyer is notified that the seller has accepted the offer.:

Response Feedback:
The answer is buyer is notified that the seller has accepted the offer. In today’s electronic world, there may be a question as to when an acceptance, rejection, or counteroffer has been made and accepted. A standard contract may state that electronic transmissions are valid. Learning Objective 2.5

Question 4

An offer is not considered accepted until the person making the offer has been notified of the other party’s:

acceptance.

rejection.

counter.

escrow notice.

Answer 4

acceptance

Response Feedback:
The answer is acceptance. Agents should transmit all offers, acceptances, or other responses as soon as possible to avoid any questions about proper communication. Learning Objective 2.5

Question 5

Which of the following is legal for the license holder to draw up?:

Deed

Note

Contract

None of these

Answer 5

None of these

Response Feedback:
The answer is none of these. The TRELA clearly establishes that it is illegal for the license holder to draw a deed, note, deed of trust, will, or other written instrument that transfers or may transfer an interest in or title to real property. However, the act goes on to give permission for a license holder to complete a contract form that may bind the sale, exchange, option, lease, or rental of any interest in real property as long as the forms used have been prepared by or are required by the property owner or have been provided by the real estate commission, prepared by an attorney licensed by the State of Texas, and approved by that attorney for a particular type of transaction. Learning Objective 2.2

Question 6

Which of the following concerns lead to the Texas Real Estate License Act prohibiting license holders from practicing law?:

Contracts for the sale of a business that do not include a real property interest

License holders giving counsel regarding the validity or an instrument that addresses real property rights

Individuals using contracts that are not promulgated by TREC

All of these

Answer 6

License holders giving counsel regarding the validity or an instrument that addresses real property rights

Response Feedback:
The answer is license holders giving council regarding the validity or an instrument that addresses real property rights. The TRELA specifically prohibits license holders from practicing law by giving opinions or counsel regarding the validity or legal sufficiency of an instrument that addresses real property rights or as to the status of title to real estate. Learning Objective 2.2

Question 7

What type of committee is the Broker-Lawyer Committee?:

Rule making

Temporary

Advisory

Under-secretary

Answer 7

Advisory

Response Feedback:
The answer is advisory. One of the advisory committees that exists under the statutes of the TRELA is the Broker-Lawyer Committee. Learning Objective 2.3

Question 8

A license holder is purchasing property for himself. A TREC promulgated contract is appropriate for this purchase, but the license holder decides to be creative and draft his own contract from what he has learned in his real estate classes. Which of the following is most likely to be TRUE?:

The license holder could be held as practicing law and could have his license suspended or revoked by TREC.

If the other party signed it, it would be voidable by the other party.

The license holder has the right to draft his own contract.

This is a violation of Section 1-1a of the TRELA.

Answer 8

The license holder has the right to draft his own contract.

Response Feedback:
The answer is the license holder has the right to draft his own contract. TREC promulgated forms are not required in transactions in which the license holder is functioning solely as a principal, not as an agent. Learning Objective 2.1

Question 9

Real estate brokers who are members of the Broker-Lawyer Committee become members by being:

appointed by the governor.

appointed by the president of the State Bar of Texas.

elected in a public election.

appointed by the Texas Real Estate Commission.

Answer 9

appointed by the Texas Real Estate Commission.

Answer Feedback:
The answer is appointed by the Texas Real Estate Commission. The committee is composed of six Real Estate Commission appointees (who are licensed real estate brokers); six lawyers, appointed by the president of the State Bar of Texas; and one public member, appointed by the governor. They serve staggered six-year terms. Learning Objective 2.3

Question 9

Which of the following is NOT a TREC promulgated contract?:

Unimproved Property Contract

One to Four Family Residential Contract

New Home Contract

Contract for Deed

Answer 9

Contract for Deed

Response Feedback:
The answer is contract for deed. The other forms mentioned are three of the six promulgated contracts. Learning Objective 2.4

Question 10

A real estate broker modifies a 1992 TREC promulgated contract form and updates it to fit a particular transaction. Which of the following could happen?:

The transaction closes; as long as each party signs, then it is a valid and enforceable contract.

The broker could charge an additional fee to cover the cost of this additional service.

The broker could have his license suspended or revoked for practicing law.

The broker should use current promulgated forms, but this type of revision is allowed under section 1105.145 of the Texas Real Estate License Act.

Answer 10

The broker could have his license suspended or revoked for practicing law.

Response Feedback:
The answer is the broker could have his license suspended or revoked for practicing law. TREC rule 537.11 addresses the use of standardized forms for mandatory use by a license holder when the form fits a particular transaction. Learning Objective 2.4

Question 10

Which of the following is TRUE?:

The Texas Real Estate Commission drafts and revises contract forms for use by real estate license holders.

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

The Broker-Lawyer Committee has rule-making authority, but the Texas Real Estate Commission does not.

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

Answer 10

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

Response Feedback:
The answer is the Broker-Lawyer Committee develops forms and recommends their adoption, but it is the TREC that promulgates the forms for mandatory use. The Broker-Lawyer Committee drafts and revises contract forms. This Broker-Lawyer Committee does not promulgate, or publish, forms. Learning Objective 2.3

Question 11

If the offer is acceptable to the seller, the offer is signed and dated and returned to the buyer. It is now a contract for sale. If the offer is rejected, the offer is returned to the buyer marked:

“thanks, but no thanks.”

“as is.”

“return to sender.”

“rejected.”

Answer 11

“rejected.”

Response Feedback:
The answer is “rejected.” The offer should be returned and marked as rejected by the seller to let the buyer know that the seller did not accept the offer. Learning Objective 2.5

Question 12

If a seller gave a letter to the listing agent with instructions not to deliver any offers for less than $250,000 and the listing agent receives an offer for $249,500, should he deliver it?

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

The TREC states that license holders must present all offers without exception

Present it to the seller without regard to the seller’s written instructions to the contrary.

According to the agency laws of Texas, the listing agent has the right to act for and on behalf of the client. The agent has the right to reject any offer he thinks is not in the best interest of the client.

Answer 12

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

Response Feedback:
The answer is the TREC allows the listing agent to reject this offer because the seller has given written approval. The TREC permits license holders to reject an offer if they have instructions in writing from the client, but it might be wise for listing agents to present all offers to limit their liability. Learning Objective 2.5

Question 12

Which of the following forms of advice can a license holder give to an unrepresented buyer?:

Advice on what price to offer

Advice on having the abstract examined by an attorney

Advice regarding the legal sufficiency of a paragraph of the contract

Advice on asking for repairs

Answer 12

Advice on having the abstract examined by an attorney

Response Feedback:
The answer is advice on having the abstract examined by an attorney. The TRELA specifically prohibits license holders from practicing law by giving opinions or counsel regarding the validity or legal sufficiency of an instrument that addresses real property rights or as to the status of title to real estate. Throughout the act, it is clearly established that, prior to signing a purchase contract, the license holder must give a buyer written advice to have the abstract covering the property examined by an attorney of the buyer’s selection or to obtain an owner’s title insurance policy prior to closing. Failure to do so may result in disciplinary action by the TREC. Learning Objective 2.2

Question 12

Which of the following is an exception to using TREC promulgated contract forms?:

When a license holder is not representing either party in the transaction

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

When the license holder is solely leasing property

All of these

Answer 12

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

Response Feedback:
The answer is when the license holder is acting as a principal and not as an agent. One of the exceptions for when a license holder must use a TREC promulgated contract form is in transactions in which the license holder is functioning solely as a principal, not as an agent. Learning Objective 2.1

Question 13

Which of the following is an exception to using a TREC promulgated contract form?:

Transactions in which a United States government agency requires a different form to be used

Transactions which are under $50,000 total sales price

Transactions in which the property will only be held for less than three years

None of these

Answer 13

Transactions in which a United States government agency requires a different form to be used

Response Feedback:
The answer is transactions in which a United States government agency requires a different form to be used. When a United States government agency requires a specific form to be used, a TREC promulgated form does not need to be used. Learning Objective 2.1

Question 14

A buyer wanted to move in early before closing. Which TREC promulgated addendum should be used?:

Lease Prior to Closing Addendum

Buyer’s Temporary Residential Lease

Addendum for Buyer’s Move-in Pre-Closing

Addendum for Maximum 90-Day Residential Lease

Answer 14

Buyer’s Temporary Residential Lease

Response Feedback:
The answer is Buyer’s Temporary Residential Lease. The Buyer’s Temporary Residential Lease is a TREC promulgated addendum. The other addenda listed do not exist. Learning Objective 2.4

Question 15

For which of the following actions may the Texas Real Estate Commission NOT suspend a license holder’s license?:

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

The license holder used a TREC promulgated purchase agreement that was specifically designed to work for a different type of transaction.

The license holder drafts an instrument (other than a form promulgated by TREC) that transfers an interest in real property.

All of these are violations and are subject to suspension.

Answer 15

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

Response Feedback:
The answer is the license holder explains to the principals the meaning of the factual statements or business details contained in the contracts. License holders are free to explain to principals the meaning of factual statements or business details contained in contracts as long as no legal advice is offered or given. Learning Objective 2.2

Question 16

Which of the following is a TREC promulgated contract?:

Fine Homes and Estates Contract

Agricultural Property Contract

Residential Condominium Contract

Lake Property Contract

Answer 16

Residential Condominium Contract

Response Feedback:
The answer is Residential Condominium Contract. The Residential Condominium Contract is one of six TREC promulgated contracts. Learning Objective 2.4

Question 16

How many members are on the Broker-Lawyer Committee?:

9

12

13

15

Answer 16

13

Response Feedback:
The answer is 13. The committee is composed of 6 Real Estate Commission appointees (who are licensed real estate brokers) and 6 lawyers, appointed by the president of the State Bar of Texas, and 1 public member, appointed by the governor. They serve staggered six-year terms. Learning Objective 2.3

Question 17

Which of the following is NOT a promulgated TREC form?:

Unimproved Property Contract

Bill of Sale

Buyer’s Temporary Lease

Addendum for Coastal Area Property

Answer 17

Bill of Sale

Response Feedback:
The answer is bill of sale. A bill of sale transfers personal property rights. TREC only governs real property rights. Learning Objective 2.4

Question 18

Once presented an offer from a prospective buyer, the seller can do any of the following EXCEPT:

accept it.

reject it.

make a counteroffer.

accept it after making a counteroffer.

Answer 18

accept it after making a counteroffer.

Response Feedback:
The answer is accept it after making a counteroffer. A counteroffer is a rejection of the initial offer. The initial offer no longer exists; therefore, it can no longer be accepted. Learning Objective 2.5

Question 18

A license holder is representing a buyer in a transaction and creates an addendum for a purpose for which TREC has already promulgated an addendum. Which of the following is TRUE regarding the license holder’s actions?:

The agent could face disciplinary actions because TREC has an addendum that would work in this transaction.

This is permissible because the license holder is just fulfilling contractual duties to the client.

This is a violation of the Real Estate Settlement Procedures Act (RESPA).

This is an exception to TREC’s rules.

Answer 18

The agent could face disciplinary actions because TREC has an addendum that would work in this transaction.

Response Feedback:
The answer is the agent could face disciplinary actions because TREC has an addendum that would work in this transaction. License holders are required to use forms promulgated by TREC unless one of the exceptions applies to the transaction. Learning Objective 2.1

Question 19

Who promulgates contracts for mandatory use by license holders?: Broker-Lawyer Committee Real Estate License Act Texas Contract Adoption Committee Texas Real Estate Commission

Answer 19

Texas Real Estate Commission Response Feedback: The answer is Texas Real Estate Commission. The Broker-Lawyer Committee develops forms and recommends their adoption, but it is TREC that promulgates the forms for mandatory use. Learning Objective 2.3

Question 20

An offer or counteroffer may be withdrawn at any time before it has been: rejected. accepted. evaluated. rectified.

Answer 20

accepted. Response Feedback: The answer is accepted. This is often a point of confusion when either the buyer or seller has made a counteroffer that has not been accepted and the offering party wishes to withdraw the counter. Learning Objective 2.5

Question 21

Which of the following is a TREC promulgated form?: Lead-Based Paint Addendum Addendum for Sale of Other Property by Buyer Seller's Disclosure of Property Condition Non-Realty Items Addendum

Answer 21

Addendum for Sale of Other Property by Buyer Response Feedback: The answer is Addendum for Sale of Other Property by Buyer. The Addendum for Sale of Other Property by Buyer is a TREC promulgated addendum; the other choices are TREC approved forms. Learning Objective 2.4

Question 21

A license holder who completes a contract for the sale of real property is not engaged in the unauthorized practice of law if the license holder uses a form that is: adopted by the commission for the type of transaction for which the form is used. prepared by an attorney licensed in Texas and approved by the attorney for the type of transaction for which the form is used. prepared by the property owner or by an attorney and required by the property owner. all of these.

Answer 21

all of these. Response Feedback: The answer is all of these. Notwithstanding any other law, a license or certificate holder who completes a contract form for the sale, exchange, option, or lease of an interest in real property incidental to acting as a broker is not engaged in the unauthorized or illegal practice of law in this state if the form was (1) adopted by the commission for the type of transaction for which the form is used; (2) prepared by an attorney licensed in this state and approved by the attorney for the type of transaction for which the form is used; or (3) prepared by the property owner or by an attorney and required by the property owner. Learning Objective 2.2

Question 22

Which of the following is an exception to the TREC rules on contract use?: When the agent is representing a family member When the buyer requires another form to be used If the buyer intends to demolish and remove the fixtures including the house All of these

Answer 22

When the buyer requires another form to be used Response Feedback: The answer is when the buyer requires another form to be used. According to Section 537.11(a)(3), transactions for which a contract form has been prepared by a principal to the transaction are an exception to the rule that TREC promulgated forms must be used. Learning Objective 2.1

Question 23

A license holder representing a seller is asked by that seller, "What does paragraph 5 of this TREC promulgated contract mean to me?" What is the best answer by that agent?: "I'm not an attorney, but here is what it means..." "I'm not an attorney, so I can't answer that." "You are asking something I am not allowed to answer. I think you should seek out legal counsel." "That paragraph is no big deal, so let's just move on."

Answer 23

"I'm not an attorney, but here is what it means..." Response Feedback: The answer is "I'm not an attorney, but here's what it means..." The license holder is free to explain to the principals the meaning of the factual statements or business details contained in the contracts as long as no legal advice is offered or given. Learning Objective 2.2

Question 24

With respect to promulgated forms, a license holder: may add or strike matters as directed by the principal. may not fill in blanks but may advise the buyer on what changes to make to the contract form. should always advise the client against having the form reviewed by an attorney. may fill in blanks but not add or strike matters.

Answer 24

may fill in blanks but not add or strike matters. Response Feedback: The answer is may fill in blanks but not add or strike matters. The rule does not permit the license holder to direct a principal on how to alter the contract and also clearly states that a license holder may not discourage any principal from employing a lawyer. Learning Objective 2.1

Question 25

When should an offer be presented?: At a reasonable time, so if the client is at work then the agent has the right to postpone the presentation Immediately After waiting to see if a better offer will come in When the client agrees to pay the agent's commission

Answer 25

Immediately Response Feedback: The answer is immediately. All offers should be in writing and presented to the property owner as quickly as is reasonably practical. The TREC rules call for immediate presentation. Learning Objective 2.5

Question 25

Which of the following committees is responsible for drafting and revising contract forms?: Committee on Promulgation of Contracts Standards of Conduct Committee Broker-Lawyer Committee TREC Contract Committee

Answer 25

Broker-Lawyer Committee Response Feedback: The answer is Broker-Lawyer Committee. The Broker-Lawyer Committee drafts and revises contract forms for use by real estate license holders. The purpose is to expedite real estate transactions and reduce controversies while protecting the interests of the parties involved. Learning Objective 2.3

Question 26

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

Answer 26

Six brokers, six lawyers, and one member of the general public Response Feedback: The answer is six brokers, six lawyers, and one member of the general public. The committee is composed of six Real Estate Commission appointees (who are licensed real estate brokers) and six lawyers, appointed by the president of the State Bar of Texas, and one public member, appointed by the governor. They serve staggered six-year terms. Learning Objective 2.3

Question 27

Which of the following addenda are promulgated by TREC?: Seller Financing Addendum Addendum for Coastal Area Property Addendum for Property Located Seward of the Gulf Intracoastal Waterway All of these

Answer 27

All of these Response Feedback: The answer is all of these. All of these are TREC promulgated addenda. Learning Objective 2.4

Question 27

How many promulgated contracts does TREC issue? Four Six Eight Nine

Answer 27

Six Response Feedback: The answer is six. TREC promulgates the following six contracts: Unimproved Property Contract; One to Four Family Residential Contract (Resale); New Home Contract (Incomplete Construction); New Home Contract (Completed Construction); Farm and Ranch Contract; and Residential Condominium Contract. Learning Objective 2.4

Question 28

A seller wants to close using a contract for deed. Which of the following is MOST correct?: The listing agent, with her broker's permission, could use a TREC promulgated purchase agreement to handle this type of transaction. The listing agent must use the TREC promulgated Contract for Deed Contract. The listing agent would be in violation for attempting this type of transaction because contract for deeds are not legal by federal statute. The listing agent could continue helping the seller, but this type of contract must be drafted by an attorney.

Answer 28

The listing agent could continue helping the seller, but this type of contract must be drafted by an attorney. Response Feedback: The answer is the listing agent could continue helping the seller but this type of contract must be drafted by an attorney. The listing agent could continue to help the seller, but the contract for deed must be drawn up by an attorney licensed to practice law in Texas. Learning Objective 2.1

Question 29

Who appoints the lawyers to the Broker-Lawyer Committee? Elected by other real estate lawyers Texas Real Estate Commission President of the state bar Governor

Answer 29

President of the state bar Response Feedback: The answer is president of the state bar. According to Section 1101.252, the six lawyers on the Broker-Lawyer Committee are appointed by the president of the state bar. Learning Objective 2.3

Question 29

Once the offer has been accepted, each of the parties are to receive a(n): congratulatory letter. escrow acceptance letter. copy of the final signed contract. demand for earnest money from the buyer.

Answer 29

copy of the final signed contract. Response Feedback: The answer is copy of the final signed contract. In some states, a contract is not considered to be fully in force until a final signed copy is physically delivered to both parties. Learning Objective 2.5

Question 30

License holders are required to use a promulgated form: as long as it is prepared by the seller of the property. as long as it is prepared by the buyer of the property. if a promulgated form suitable for the transaction exists. unless they obtain a waiver from TREC for use of a different form.

Answer 30

if a promulgated form suitable for the transaction exists. Response Feedback: The answer is if a promulgated form suitable for the transaction exists. An agent is required to use a promulgated form if a suitable form is available for the transaction that is being contemplated. There are exceptions to this general rule, but the agent is required to use the form unless one of the exceptions applies. Learning Objective 2.1

Question 31

Which of the following is NOT an exception to the rule requiring use of promulgated contract forms in Texas?: Custom form prepared by licensed broker with a minimum of five years' experience Use of form prepared by property owner Use of form prepared by attorney for property owner and required by property owner Transaction in which license holder is acting solely as a principal

Answer 31

Custom form prepared by licensed broker with a minimum of five years' experience Response Feedback: The answer is custom form prepared by licensed broker with a minimum of five years' experience. The whole point of the promulgated form rules is that a broker, regardless of expertise or number of years of experience, is required to use a promulgated form if one is applicable. Learning Objective 2.1

Question 32

A Texas license holder is selling his own custom-built home to the FBI (a government agency) to use as a "safe" house in which to lodge government witnesses before major trials. He has managed to negotiate a commission from the government in addition to the purchase price of the property. Because of the unusual nature of the transaction, the FBI requires the use of a contract form prepared by its attorney. Can the agent allow this without violating the TREC-promulgated contract rules?: Yes, because it is a U.S. government agency that is requiring a different form. No, the license holder is acting as an agent (commission is being received) and therefore a promulgated form is required. Yes, because the license holder's broker said it's okay. No, a promulgated form is available that covers the transaction and must therefore be used.

Answer 32

Yes, because it is a U.S. government agency that is requiring a different form. Response Feedback: The answer is yes, because it is a U.S. government agency that is requiring a different form. The promulgated contract is not required because an agency of the U.S. government is requiring a different form. Learning Objective 2.1

Question 33

Although TREC-promulgated forms are loaded onto my firm's computer system, I just discovered that the form I need (the most recent TREC version) is not there. I am in a hurry and must get the completed contract printed in the next 30 minutes. I should: go to the TREC site to download the most recent form. use the form on the firm's computer system until a newer form is downloaded by the system administrator. ask the client which form she would prefer to use. ask the seller's broker to prepare the form using the newer form.

Answer 33

go to the TREC site to download the most recent form. Response Feedback: The answer is go to the TREC site to download the most recent form. It is important to get the most recent TREC form off the website and use that one. License holders are always required to use the most recent form. Learning Objective 2.1

Question 33

A Texas license holder is selling his own custom-built home. Due to the complexity of the contract, he has elected to prepare his own contract to be sure all of the inclusions and exclusions are properly identified. Promulgated forms exist that would adequately document the deal. Does he run the risk of penalties from TREC as a result of not using a promulgated form?: Yes, the license holder is required to use promulgated forms when they are available. No, because he is acting as a principal in the transaction and not as an agent. Yes, unless he can convince the buyer to require a custom form. No, so long as he has the buyer's attorney prepare the contract.

Answer 33

No, because he is acting as a principal in the transaction and not as an agent. Response Feedback: The answer is no, because he is acting as a principal in the transaction and not as an agent. The license holder does not face a penalty for failing to use a promulgated form. One of the exceptions to the rule is that a license holder acting as a principal (in this case as seller) is not required to use a promulgated form. Learning Objective 2.1

Question 34

The seller is concerned about some of the unusual requirements for the contract being made by the buyer and wonders if she should hire an attorney. The license holder assures her that his 25 years of experience and negotiating skill make that expense unnecessary. Is this a problem?: No, the license holder is providing a valuable service by saving the client the expense of a lawyer. Yes, the license holder is practicing law. Yes, a license holder should not discourage any principal from hiring a lawyer. No, a license holder with more than 10 years of experience in the business is qualified to give this sort of advice.

Answer 34

Yes, a license holder should not discourage any principal from hiring a lawyer. Response Feedback: The answer is yes, a license holder should not discourage any principal from hiring a lawyer. The rules prohibit a license holder from in any manner discouraging a principal to a real estate transaction from employing a lawyer. Learning Objective 2.1

Question 35

What can a license holder add to a promulgated form?: Factual statements Statements creating legal obligations for either party Statements defining what the buyer means by a legally acceptable title A statement waiving her client's right to legal counsel

Answer 35

Factual statements Response Feedback: The answer is factual statements. All the other choices have to do with establishing or defining legal obligations, and such items are specifically excluded as within the rights of a license holder to place in a promulgated form. Learning Objective 2.1

Question 36

TREC may NOT prohibit a license holder from using a contract form: that is prepared by the property owner. that is not a promulgated form but is prepared by the license holder's managing broker that has been approved by the National Association of Realtors® advisory committee. promulgated by another state.

Answer 36

that is prepared by the property owner. Response Feedback: The answer is that is prepared by the property owner. TREC may not prohibit a license holder from using a contract prepared by the property owner. Approval by NAR® is not relevant to the promulgated form requirement. Learning Objective 2.1

Question 36

Which of the following is NOT an exception to the promulgated form requirement?: Transaction in which license holder is functioning solely as a principal Transaction in which the seller is a licensed attorney Transaction in which contract has been prepared by a principal to the transaction Transaction in which an agency of the U.S. government requires a different form

Answer 36

Transaction in which the seller is a licensed attorney Response Feedback: The answer is transaction in which the seller is a licensed attorney. The fact that the seller is a licensed attorney is relevant only if the seller is preparing the contract, which the question does not state or assume. Learning Objective 2.1

Question 37

Your neighbor asks if you, as a licensed broker, have access to a form he could use to write up a contract for the sale of vacant land to his brother. He has heard of promulgated forms but doesn't know how or where to find them. Your reply should be: that only licensed brokers can use promulgated forms. that you can direct him to the TREC website, where promulgated forms can be downloaded and printed. that you will print the form for him but he must have an attorney complete it. that you will print the forms for him but only if you receive a commission for the sale.

Answer 37

that you can direct him to the TREC website, where promulgated forms can be downloaded and printed. Response Feedback: The answer is that you can direct him to the TREC website, where promulgated forms can be downloaded and printed. The other three choices are either inaccurate or likely unethical. Members of the public can use promulgated forms, and an attorney is not required to complete the form. You would be well advised not to demand a commission for directing the neighbor to a publicly available website for forms the public is free to use. Learning Objective 2.1

Question 38

Which of the following would NOT be considered the unauthorized practice of law by a real estate license holder?: Completing blanks in a promulgated contract form In a promulgated form, deleting phrases that change the legal relationship between buyer and seller Writing a lease option to purchase real estate Altering the content and meaning of a TREC-promulgated form

Answer 38

Completing blanks in a promulgated contract form Response Feedback: The answer is completing blanks in a promulgated contract form. All the other actions described involve either drafting a document with legal consequences or altering a document in such a way as to alter the legal relationship between the parties. While completing the blanks in a promulgated form could be argued to be practicing law, it is an action that is specifically authorized by TREC. Learning Objective 2.2

Question 39

The buyer and her broker noticed a large crack in the unfinished basement floor, and the seller assured her it was many years old, had not increased in size, and would not be a problem, but that he would fix it later if it did become an issue. She trusts the seller but asks you as her broker to insert in the contract the representations the seller made, as well as the agreement to fix the crack later if it becomes an issue. You say: that you cannot insert that sort of agreement and that she should have her lawyer draw up or insert the appropriate language. that you would be glad to do so. that you would be glad to do so but would prefer if the seller's broker inserted this language. that she should require an escrow to protect her rights with respect to the cracked basement floor.

Answer 39

that you cannot insert that sort of agreement and that she should have her lawyer draw up or insert the appropriate language. Response Feedback: The answer is that you cannot insert that sort of agreement and that she should have her lawyer draw up or insert the appropriate language. If you or the seller's broker accommodate her request, you are likely practicing law without a license. Advising her as to her legal rights is also the unauthorized practice of law. Learning Objective 2.2

Question 40

When faced with a client who is in a hurry to have the contract drafted and signed and who wants the agent to do the drafting and get the deal underway, the agent should: do as the client requests and then have the resulting document reviewed by the brokerage's attorney after it is signed. do as the client requests and then have the client sign a statement acknowledging that all actions the agent took were at the express direction and wish of the client. get another client. complete the promulgated form insofar as possible and have the client take the other issues to her attorney.

Answer 40

complete the promulgated form insofar as possible and have the client take the other issues to her attorney. Response Feedback: The answer is complete the promulgated form insofar as possible and have the client take the other issues to her attorney. If an agent drafts contract language that he shouldn't be drafting, it doesn't matter whether it is later reviewed by an attorney, and having the client acknowledge the activity in a statement only emphasizes that the agent knew he should not be drafting the agreement. Learning Objective 2.2

Question 41

The morning of the closing, your buyer-client calls to say he has changed his mind and wants out of the deal. His reading of the contract is that he can forfeit the earnest money and have no further liability. He asks for your advice. The correct response is,: "I believe you are correct; however, I can't advise of the legal consequences of your decision. Please try to contact your attorney right away." "I believe you are correct; I will notify the sellers right away and tell them to keep the earnest money." "I believe you are incorrect; if you don't close, you will get sued for specific performance." "I believe you are correct; however, let's postpone the closing and then see if we can get the seller to return at least a portion of the earnest money."

Answer 41

"I believe you are correct; however, I can't advise of the legal consequences of your decision. Please try to contact your attorney right away." Response Feedback: The answer is "I believe you are correct; however, I can't advise of the legal consequences of your decision. Please try to contact your attorney right away." Advising the client to cancel the closing and to forfeit the earnest money is giving legal advice. It may be the ultimate result, but that is not the agent's call to make. Aside from being inaccurate, telling the client his interpretation of the contract is wrong is likewise practicing law. Postponing the closing has legal consequences and should also not be the province of the agent. Learning Objective 2.2

Question 41

Which of these items does NOT constitute the unauthorized practice of law?: A license holder drafting a real estate sales contract for her client A license holder telling her client that the title to a property is free of defects when the client expresses concern A license holder drafting a deed for her client A license holder using a contract for a transaction that was written by an attorney and required by the owner

Answer 41

A license holder using a contract for a transaction that was written by an attorney and required by the owner Response Feedback: The answer is a license holder using a contract for a transaction that was written by an attorney and required by the owner. License holders may not: 1) draft instruments that transfer or otherwise affect an interest in real property, or 2) advise a person regarding the validity or legal sufficiency of an instrument or the validity of title to real property. Learning Objective 2.2

Question 42

Of the 13 members on the Broker-Layer Committee, the breakdown is: 6 brokers, 5 lawyers and 2 public members. 6 brokers, 6 lawyers and 1 public member. 5 brokers, 5 lawyers and 3 public members. 8 brokers, 4 lawyers and 1 public member.

Answer 42

6 brokers, 6 lawyers and 1 public member. Response Feedback: The answer is 6 brokers, 6 lawyers and 1 public member. The 13 members of the committee serve staggered 6-year terms. Learning Objective 2.3

Question 42

The agent says to his client, "Don't tell anyone I said this, but I think the seller's statements about having a right-of-way across the adjoining property is a lie, and you will probably be able to sue for misrepresentation after the closing." Is this a problem? Why or why not?: No, because the statement is just the agent's belief. Yes, because the agent should ask the seller about the issue. No, because the agent is not suggesting a lawsuit, just saying there might be a claim. Yes, because the agent is expressing an opinion about the status of title, as well as about the client's legal rights as a result of a perceived misrepresentation.

Answer 42

Yes, because the agent is expressing an opinion about the status of title, as well as about the client's legal rights as a result of a perceived misrepresentation. Response Feedback: The answer is yes, because the agent is expressing an opinion about the status of title, as well as about the client's legal rights as a result of a perceived misrepresentation. The fact that this is the agent's "belief" is irrelevant; she is still expressing a legal opinion, as well as advising the client about the client's legal rights. While it is true the agent should suggest asking the seller about the possible problem, failure to do so is not unauthorized practice, just foolish and perhaps showing incompetence. The fact that the agent is not suggesting a lawsuit is also irrelevant. Telling the client that he may have a legal claim is practicing law. The comment also violates the caution in the material that one should never say something one would not want to admit to in a courtroom. Learning Objective 2.2

Question 43

At the closing, the buyer raises a question about whether the special warranty deed offered by the seller has the sort of warranties that she, as the buyer, should be receiving under the contract, which calls for a general warranty deed. Her broker should: tell her the contract calls for a general warranty deed, which the seller is not providing. tell her the contract calls for a general warranty deed but that the special warranty deed is sufficient. tell her the contract calls for a general warranty deed and that she should sue for breach of contract. tell her the contract is now void and that she can leave the closing.

Answer 43

tell her the contract calls for a general warranty deed, which the seller is not providing. Response Feedback: The answer is tell her the contract calls for a general warranty deed, which the seller is not providing. The broker is providing a statement of fact and is not giving legal advice on what the impact of the special warranty deed is, what the impact is on the contract, or what sort of legal steps the client should take. Learning Objective 2.2

Question 44

Despite clear language in the contract that they are included in the sale, a few days before closing, the seller advises the buyer that certain items were included by mistake and there is no way he will include them or provide a bill of sale for them. The items will be removed before the buyer takes possession of the property. Which of the following is NOT an appropriate comment by the buyer's agent?: "The contract is clear that these items are included." "Here is what you should do with this seller . . ." "Your attorney should review the contract and advise on your best course of action. " "That is frustrating because I know you really are counting on those items being included."

Answer 44

"Here is what you should do with this seller . . ." Response Feedback: The answer is "Here is what you should do with this seller . . ." The agent should not begin with "here is what you should do." This is clearly a legal dispute and advising about what action to take in light of the dispute. If the comment were followed by "contact your attorney," it would have been appropriate. The other comments either do suggest legal counsel or else express a fact, not a legal opinion, and are therefore appropriate. Learning Objective 2.2

Question 45

The client asks, "What does specific performance mean?" What should the agent answer?: "Generally speaking, it means a court can order someone to perform the terms of a contract rather than just awarding damages for breach of contract. However, you should speak with your attorney about how this might affect you." "Generally speaking, it means a court can order someone to perform the terms of a contract rather than just awarding damages for breach of contract." "I can't advise you about legal terms." "There is no such thing as specific performance doctrine in Texas."

Answer 45

"Generally speaking, it means a court can order someone to perform the terms of a contract rather than just awarding damages for breach of contract. However, you should speak with your attorney about how this might affect you." Response Feedback: The answer is "Generally speaking, it means a court can order someone to perform the terms of a contract rather than just awarding damages for breach of contract. However, you should speak with your attorney about how this might affect you." Without the additional reminder to check with the lawyer, the agent is giving legal advice. Learning Objective 2.2

Question 46

As the buyer and her agent are In the process of completing the promulgated form to make an offer on the property, the buyer gives the agent a list of furniture, light fixtures, window coverings, and artwork that she wants included. Fearful of having the offer rejected if these items are included, the agent assures the buyer that "that sort of stuff is always included anyway; let's not make this any more complex than we have to" and convinces her to omit this list. Is the agent practicing law or just giving the client a better chance to have the offer accepted?: Practicing law Not practicing law because the personal property has no impact on the title to the property Practicing law because the agent is making a legal judgment about what the seller may or may not do Not practicing law because this is just negotiating advice, not legal advice

Answer 46

Practicing law Response Feedback: The answer is practicing law. While you can argue that the agent is giving negotiating advice, that advice included a statement about this sort of personal property "always" being included, which is not only not true, but in the context of this situation is practicing law. The agent is advising about the legal effect of including the items or not. Learning Objective 2.2

Question 47

The Broker-Lawyer Committee consists of how many members?: 13 14 16 15

Answer 47

13 Response Feedback: The answer is 13. There are 13 members: 6 brokers, 6 lawyers and 1 member of the public. Learning Objective 2.3

Question 48

The Broker-Layer Committee ____________ for use by Texas brokers.: drafts and revises forms promulgates forms publishes forms writes a user manual

Answer 48

drafts and revises forms Response Feedback: The answer is drafts and revises forms. TREC promulgates (publishes) the forms and is the rule-making body for Texas license holders. Learning Objective 2.3

Question 49

Which of these is TRUE regarding the brokers on the Broker-Lawyer Committee?: They are appointed by the governor. They are appointed by the State Bar of Texas. They are required to have been licensed for at least two years before appointment. There are six brokers on the committee.

Answer 49

There are six brokers on the committee. Response Feedback: The answer is there are six brokers on the Broker-Lawyer Committee. Those brokers are appointed by the governor. Learning Objective 2.3

Question 50

The forms drafted and revised by the Broker-Lawyer Committee are to be: a minimum of seven pages. translated into at least five languages. capable of being standardized. susceptible to being understood by those with no more than a sixth-grade education.

Answer 50

capable of being standardized. Response Feedback: The answer is capable of being standardized. The goal is to expedite real estate transactions and to minimize controversy. Learning Objective 2.3

Question 51

Members of the Broker-Lawyer Committee serve: simultaneous six-year terms. staggered six-year terms. concurrent five-year terms. staggered five-year terms.

Answer 51

staggered six-year terms. Response Feedback: The answer is staggered six-year terms. The terms of two commission appointees and two Texas Bar appointees expire every two years, and the public member's term expires every six years. Learning Objective 2.3

Question 52

How long shall a member of the Broker-Lawyer Committee hold office?: Until a successor is appointed Four years Five years Two years

Answer 52

Until a successor is appointed Response Feedback: The answer is until a successor is appointed. While the terms are six years, the statute provides that members hold office until a successor is appointed. Learning Objective 2.3

Question 53

If a member of the Broker-Lawyer Committee does not complete her term, who appoints someone to fill the unexpired term?: The entity making the original appointment The governor The State Bar of Texas TREC

Answer 53

The entity making the original appointment Response Feedback: The answer is the entity making the original appointment. That could be the governor or the State Bar, but the most complete correct answer is the entity making the original appointment. Learning Objective 2.3

Question 54

Which of the following persons would be eligible for appointment to the Broker-Lawyer Committee?: An African American woman A Latino man A priest All of these

Answer 54

All of these Response Feedback: The answer is all of these. So long as they otherwise met either the broker, lawyer, or member of the public standard, all of the persons are eligible for appointment. The statute is clear that appointments must be made without regard to race, creed, sex, religion, or national origin. Learning Objective 2.3

Question 55

Which of these describes the Non-Realty Items Addendum?: Promulgated addendum Promulgated amendment Promulgated contract Approved addendum

Answer 55

Approved addendum Response Feedback: The answer is approved addendum. This addendum is approved by TREC for voluntary use, and the top of the form states: ("APPROVED BY THE TEXAS REAL ESTATE COMMISSION (TREC) FOR VOLUNTARY USE"). Mandatory addenda are promulgated by TREC, and those forms state at the top, "PROMULGATED BY THE TEXAS REAL ESTATE COMMISSION (TREC)." Learning Objective 2.4

Question 56

How many resale certificate forms are promulgated by TREC?: 2 3 6 19

Answer 56

2 Response Feedback: The answer is 2. There are two resale certificate forms promulgated by TREC: the Condo Resale Certificate and the Subdivision Information, Including Resale Certificate for Property Subject to Mandatory Membership in an Owner's Association. Learning Objective 2.4

Question 57

Which of the following is NOT a promulgated form?: One to Four Family Residential Contract Disclosure of Relationship with Residential Service Company Amendment to Contract Seller's Disclosure Notice

Answer 57

Seller's Disclosure Notice Response Feedback: The answer is Seller's Disclosure Notice. The property condition disclosure is not a promulgated form. It is an approved form, but its use is not required. Although the information contained in the form must be provided, there is no requirement that the specific form approved by TREC be used. Learning Objective 2.4

Question 58

All of these are approved or recommended forms except the: Seller's Disclosure Notice. One to Four Family Residential Contract. Lead-Based Paint form. Non-Realty Items Addendum.

Answer 58

One to Four Family Residential Contract. Response Feedback: The answer is One to Four Family Residential Contract. The One to Four Family Residential Contract is a required form. All the others are optional/voluntary use forms. Learning Objective 2.4

Question 59

How might you identify that a form is provided by TREC for voluntary use by license holders?: It indicates "promulgated" at the top of the form. It indicates "approved" at the top of the form. It is identified by a number (e.g., 20-16). You don't need to identify the form because they're all voluntary use forms.

Answer 59

It indicates "approved" at the top of the form. Response Feedback: The answer is it indicates "approved" at the top of the form. Voluntary use forms indicate at the top that they are "approved by the Texas Real Estate Commission" and have form letters (e.g., OP-M) instead of form numbers (e.g., 20-16). Learning Objective 2.4

Question 60

The Seller's Temporary Residential Lease is: an approved optional/voluntary use form. a promulgated amendment. a promulgated notice. a promulgated addendum.

Answer 60

a promulgated addendum. Response Feedback: The answer is a promulgated addendum. The Seller's Temporary Residential Lease is an addendum. We know this addendum is promulgated because the top of the form states, "PROMULGATED BY THE TEXAS REAL ESTATE COMMISSION (TREC)." Learning Objective 2.4

Question 61

The Subdivision Information, Including Resale Certificate for Property Subject to Mandatory Membership in an Owners Association form is: a promulgated amendment. an approved optional/voluntary use form. a promulgated addendum. a promulgated notice.

Answer 61

a promulgated amendment. Response Feedback: The answer is a promulgated amendment. Learning Objective 2.4*

Question 61

The Seller's Disclosure Notice is: a voluntary use form. not a TREC form. a promulgated amendment. a promulgated addendum.

Answer 61

a voluntary use form. Response Feedback: The answer is a voluntary use form. Even though the information in the property condition disclosure is required, the form on the TREC website is not promulgated, only voluntary. Learning Objective 2.4

Question 62

The property is in a propane gas system service area, which means you would use: the promulgated amendment to address this. a text to inform the buyer of this. the approved/voluntary use form created for this purpose. the promulgated addendum created for this purpose.

Answer 62

the promulgated addendum created for this purpose. Response Feedback: The answer is the promulgated addendum created for this purpose. In this situation, it's appropriate to use the Addendum for Property in a Propane Gas System Service Area. It is not a voluntary form, as it indicates at the top of the form, "PROMULGATED BY THE TEXAS REAL ESTATE COMMISSION (TREC)." Learning Objective 2.4

Question 63

The buyer's broker has given you an offer that is $10,000 lower than the minimum offer your client told you to entertain. You have decided not to even tell her about it. Which of these is TRUE in this instance?: This is okay as long as you have your client's instructions in writing. This is okay because you're not required to submit offers that are more than $5,000 less than the asking price. You will likely face negative consequences for this because you must submit all offers, regardless of the client's wishes. Your license will be immediately revoked because of this action.

Answer 63

This is okay as long as you have your client's instructions in writing. Response Feedback: The answer is this is okay as long as you have your client's instructions in writing. Agents are generally required to submit all offers unless they have instructions from the client no to do so, and for purposes of self-protection, the agent should have that instruction in writing. Learning Objective 2.5

Question 64

A variable commission is: a commission that changes in amount/percentage depending on whether it comes from within or from outside the listing broker's office. a commission that changes depending on the contingencies being required by competing buyers. a commission that can increase if the agent is able to convince the buyer to close earlier than the contract requires. a commission that can be negotiated down if a competing brokerage offers to list the property for a lower rate than it is currently listed.

Answer 64

a commission that changes in amount/percentage depending on whether it comes from within or from outside the listing broker's office. Response Feedback: The answer is a commission that changes in amount/percentage depending on whether it comes from within or from outside the listing broker's office. While the other statements may be true as matters of fact in a competitive market, they are not the definition of a variable commission. Learning Objective 2.5

Question 64

A client (the seller) directs the broker to tell buyer A that the seller will accept the offer if the buyer will remove the home inspection contingency, and to tell buyer B that the seller will accept the offer if the buyer will offer $10,000 more than the asking price. The agent should: decline to do so and explain that the same information must be provided to all bidders. agree to do so and try to squeeze the best deal available out of each bidder. terminate the listing. tell the buyers exactly the same thing.

Answer 64

decline to do so and explain that the same information must be provided to all bidders. Response Feedback: The answer is decline to do so and explain that the same information must be provided to all bidders. Telling bidders different things is clearly an ethical violation. Given the ethical obligations brokers have toward buyers, sellers, and their fellow license holders, the best practice is to voice understanding of what the client would like to accomplish, but to make it clear that it would be unethical to give different information to the bidders. Proceeding to tell the buyers exactly the same thing against the client's explicit instructions could result in a complaint to TREC. Learning Objective 2.5

Question 64

What is a recommended alternative to an outright rejection or counteroffer to an unacceptable offer to purchase?: An invitation to submit a new offer Ignoring the offer completely Having the listing broker tell the bidder that the offer was an insult and the seller is no longer interested in talking to them Suggesting to the buyer's broker that the offer should be increased by a minimum of 50%

Answer 64

An invitation to submit a new offer Response Feedback: The answer is an invitation to submit a new offer. This approach has the benefit of keeping open the possibility of a transaction without committing the seller to accept the new offer. Ignoring the offer leaves things in limbo and the bidder does not know whether to try again or walk away. Suggesting that the amount be increased by 50% might be viewed as a counteroffer, which is what the seller is trying to avoid. Learning Objective 2.5

Question 65

The phrase "highest and best" refers to: the request that the competing bidders make their best offer initially and not expect counteroffers. the practice of listing property at least 15% above its estimated market value so as to induce higher offers for the seller. the strategy of having all bidders meet at the same time and place to conduct an auction for the property. a homebuilder's technique of using only the best appliances and HVAC systems in a new home so as to solicit the highest offers for the property.

Answer 65

the request that the competing bidders make their best offer initially and not expect counteroffers. Response Feedback: The answer is the request that the competing bidders make their best offer initially and not expect counteroffers. The other choices may be techniques that are used by brokers or builders, but they do not refer to the phrase being defined. Learning Objective 2.5

Question 66

What sort of offer indicates a willingness to pay a stated amount greater than any other offer the seller receives?: Escalation clause Sharp offer Open-ended bid Desperate offer

Answer 66

Escalation clause Response Feedback: The answer is escalation clause. These clauses are not permitted in Texas because, among other reasons, they can lead to uncertainty, disputes, and misunderstanding. Agents are discouraged from using this approach. Learning Objective 2.5

Question 67

The seller reviews and signs the offer at 6:00 pm Saturday. She texts her acceptance to her broker. The broker does not read the text until 7:00 am Sunday, and then immediately forwards it to the buyer's broker. Meanwhile, the buyer changes her mind and texts a withdrawal of the offer directly to the seller. A few minutes later, the seller's broker texts the original notice of acceptance to the seller. Is there a binding contract?: No, because the withdrawal of the offer was made and communicated to the seller before the buyer was notified of the acceptance. Yes, because acceptance sent to the buyer's broker is the same as acceptance communicated directly to the buyer. No, because the acceptance had to go directly to the buyer, not the buyer's broker. Yes, because the contract was "formed" immediately upon the seller's acceptance.

Answer 67

No, because the withdrawal of the offer was made and communicated to the seller before the buyer was notified of the acceptance. Response Feedback: The answer is no, because the withdrawal of the offer was made and communicated to the seller before the buyer was notified of the acceptance. For the contract to be effective and become a contract, the acceptance must be communicated to the other party, in this case the buyer. However, the buyer notified the seller of withdrawal of the offer before the buyer received notice of the acceptance, so there was no completion of the acceptance. Learning Objective 2.5

Question 68

The client has received offers from four different buyers, and against the advice of his broker, decides to accept them all to be sure at least one of the deals goes through. Which buyer will be deemed to have the first offer accepted?: The buyer whose offer is accepted and whose acceptance is communicated to that buyer first The buyer whose offer is dated the earliest The buyer whose offer is accepted first The buyer whose contract most closely matches the terms required by the listing agreement

Answer 68

The buyer whose offer is accepted and whose acceptance is communicated to that buyer first Response Feedback: The answer is the buyer whose offer is accepted and whose acceptance is communicated to that buyer first. We know that in order to form the contract, the acceptance must be communicated to the person making the offer (in this case, the buyer). The date on an offer, the time of acceptance and the terms of the offer are irrelevant when it comes to contract acceptance and formation. Effective communication of the acceptance determines the time the offer becomes a binding contract. Learning Objective 2.5

Question 69

As the seller's agent, you believe one of the three offers received for the property is by far the most beneficial to your client. Realizing your duty to always put the client's interests first, you should: present all offers, but explain why you prefer one of the offers over all others. present the best offer first, and if the client accepts it, write "rejected" on the other offers and return them to the respective buyers' agents. while your client is considering the "best" offer, return the others to the other agents and suggest their clients try to do better. refuse to present the less-desirable offers.

Answer 69

present all offers, but explain why you prefer one of the offers over all others. Response Feedback: The answer is present all offers, but explain why you prefer one of the offers over all others. The rules clearly require you to present all offers to the seller. You can certainly explain why you think one offer is better than the others, but the ultimate decision on what to accept or reject is the client's. Learning Objective 2.5