Download Texas Real Estate Practice Exam 2025: Full-Length Practice Test with Detailed Answer and more Exams Real Estate Management in PDF only on Docsity!
Texas Real Estate Practice Exam 2025: Full-Length
Practice Test with Detailed Answer Explanations
for Real Estate License Success
Question 1: A farmer temporarily installs produce coolers in a leased farm stand in order to prevent spoilage. The coolers would be considered which of the following? a) Trade fixtures that are real property. b) Trade fixtures that are personal property. c) Temporary real property. d) Emblements. Correct Answer: b) Trade fixtures that are personal property. Rationale: Trade fixtures are items of personal property that a tenant installs in a commercial property for the purpose of conducting their business. Because the farmer installed the coolers for their business (selling produce) and intends to remove them at the end of the lease, they are considered personal property, even though they are temporarily affixed to the real estate. Real property is permanent and immovable. Emblements are annually cultivated crops, which are also considered personal property, but these are fixtures used in the business, not the crops themselves. Question 2: Property can be converted from real to personal property and from personal property to real property by means of which processes respectively? a) Assemblage and plottage. b) Application and dissolution. c) Severance and affixing. d) Planting and harvesting. Correct Answer: c) Severance and affixing. Rationale: Severance is the act of separating an item from the real property, thereby converting it to personal property (e.g., cutting down a tree). Affixing (or annexation) is the act of attaching personal property to real property, making it a fixture and thus part of the real property (e.g., installing a built-in dishwasher). Assemblage and plottage
refer to the increase in value resulting from combining adjacent parcels of land. Application and dissolution are not relevant terms in this context. Planting and harvesting relate to emblements. Question 3: The highest form of ownership interest one can acquire in real estate is the: a) legal life estate. b) Conventional life estate. c) Defeasible fee simple estate. d) Absolute fee simple estate. Correct Answer: d) Absolute fee simple estate. Rationale: A fee simple absolute estate represents complete ownership of real property with no limitations or conditions, and it has unlimited duration. It can be freely passed on to heirs. Life estates (legal or conventional) are limited to the lifetime of a specific person. Defeasible fee simple estates are subject to certain conditions that could cause the ownership to revert to a previous owner or their heirs. Question 4: The distinguishing feature of a defeasible fee simple estate is that: a) It could be passed onto heirs. b) It has no restrictions on use. c) The estate may revert to a grantor or heirs if the prescribed use changes. d) It is of unlimited duration. Correct Answer: c) The estate may revert to a grantor or heirs if the prescribed use changes. Rationale: The key characteristic of a defeasible fee simple estate is that the ownership is subject to a condition. If that condition is violated or not met, the estate can be lost, potentially reverting back to the grantor or their heirs (fee simple determinable or fee simple subject to a condition subsequent). While defeasible fees can be passed to heirs (a) and might be of unlimited duration if the condition is never violated (d), the defining feature is the potential for the estate to be lost due to a change in the prescribed use or another specified condition. They do have restrictions on use (b) related to the condition. Question 5:
also incorrect; condominium owners own their unit's airspace and a share of common elements, while co-op owners have a lease to their unit. Question 7: Who are the essential parties involved in an estate and trust? a) Owner trustor, and lawyer. b) Owner, trustor, and trustee. c) Trustee, title company, and beneficiary. d) Trustor, trustee, and beneficiary. Correct Answer: d) Trustor, trustee, and beneficiary. Rationale: A trust involves three essential parties: the trustor (or grantor), who creates the trust and conveys property to it; the trustee, who holds legal title to the property and manages it according to the terms of the trust; and the beneficiary, who benefits from the trust. The "owner" is often the trustor. A lawyer may be involved in setting up the trust, and a title company might be involved if real estate is transferred into the trust, but they are not essential parties to the ongoing existence of the trust itself. Question 8: A condominium owner enjoys a: a) share in an association that owns one's apartment. b) Tenancy in common interest in air space and common areas of the property. c) Fee simple ownership of the airspace in a unit and an undivided share of the entire property's common areas. d) The simple ownership of a pro rata share of the entire property. Correct Answer: c) Fee simple ownership of the airspace in a unit and an undivided share of the entire property's common areas. Rationale: Condominium ownership entails holding fee simple title to the individual unit, which includes the airspace within its walls. Additionally, each unit owner owns an undivided share (as a tenant in common with other unit owners) of the common areas of the property, such as hallways, lobbies, and amenities. Option a describes a cooperative. Option b is partially correct about the tenancy in common in common areas but incorrect about owning airspace as tenancy in common. Option d is an oversimplification and doesn't accurately reflect the ownership structure.
With various types of junior liens, the order of payment priority is generally established according to: a) the date of recordation. b) What form of tax is in question. c) The order of disbursement. d) Whether the lien was subordinated. - - correct ans- - a) the date of recordation. What is a lien theory state in contrast to a title theory state? a) A state in which liens are given priority over other encumbrances b) A state in which a mortgage retains title to the property when a mortgage lien is created. c) A state in which the holder of a mortgage lien receives title to the mortgage and property until the debt is satisfied. d) A state in which liens must be recorded to be enforceable. - - correct ans- - b) A state in which a mortgage retains title to the property when a mortgage lien is created. A property owner has an easement appurtenant on her property. One day the property is sold to another party who is opposed to the easement. Following the closing, this particular form of easement: a) terminates. b) Transfers with the property. c) Transfers with the owner to a new property. d) Becomes a license on the property. - - correct ans- - b) Transfers with the property. What fundamental legal purpose is fulfilled by title records? a) Keeping the county apprised of tax payments.
An owner lease has a property to a business in exchange for rent and the tenant is required to pay all operating expenses as well. This is an example of a _______. a) Proprietary lease. b) Percentage lease. c) Gross lease. d) Net lease. - - correct ans- - d) Net lease. A lease automatically terminates under which of the following circumstances? a) The tenant fails to pay rent. b) The leased property is foreclosed. c) The tenant goes out of business. d) The landlord canceled the lease. - - correct ans- - b) The leased property is foreclosed. A county or municipal authority usually grants a certificate of occupancy for new construction only after: a) all contractor's work has been inspected. b) All work has been completed for at least 60 days. c) The construction conforms to building codes. d) The tax assessor has valued the improvement. - - correct ans- - c) The construction conforms to building codes. A property owner is precluded by the restriction from developing a 30-foot boat dock. The limitation prompts the owner to sell to another party. The new owner: a) is free to build the dock since the next-door neighbor built a similar dock two weeks later.
b) Takes title subject to the same restriction. c) Can build a dock with special permission from the zoning board. d) May build, since the restriction is extinguished by the sale. - - correct ans- - b) Takes title subject to the same restriction. Emily sells Ryan a property containing a deed restriction. The condition stipulates that the forested portion of the property must never be razed for development. Three months later Ryan proceeds to harvest the trees and turn the area into an executive golf course. What recourse, if any, does Emily have under the deed restriction? a) She has the right to repossess the property because the grantee has violated that condition. b) The condition has ceased to apply because she allowed the violation to continue for a certain period of time. c) She can claim the proceeds from the harvested trees. d) She can force Ryan to sell the property to a new owner who agrees to comply with the condition. - - correct ans- - a) She has the right to repossess the property because the grantee has violated that condition. What is the essential purpose of legal descriptions of real property? a) To create a consistent, unchanging standard for uniquely locating a property. b) To enable courts and attorneys to calculate property size accurately. c) To comply with common law for real property. d) To eliminate cumbersome metes and bounds description. - - correct ans- - a) To create a consistent, unchanging standard for uniquely locating a property. Which of the following characterizes a metes and bounds description? a) They use meridians and baselines. b) They identify an enclosed area, beginning and ending at the same point.
Agent Bob who works for Broker Bill obtains an owner listing to lease a building. Bill's other agent, Sue, locates a tenant for Bob's listing. Broker Bill in this instance is: a) An employed agent. b) A dual agent. c) A single agent. d) A sub agent. - - correct ans- - b) A dual agent. A transaction broker should disclose his or her agency relationship to prospective buyers and sellers: a) Upon first substantive communication. b) Upon completion of the listing agreement. c) Immediately following completion of any offer. d) Immediately prior to closing. - - correct ans- - a) Upon first substantive communication. A transaction facilitator in a residential transaction represents: a) The seller. b) The buyer. c) Both seller and buyer. d) Neither seller nor buyer. - - correct ans- - d) Neither seller nor buyer. A principal instructs an agent to inform minority buyers that the property for lease was just leased an hour ago and is no longer available. The agent refuses to comply. In this case: a) The agent should not exercise caution until the listing expires, then decline to renew it.
b) The principal has proposed an illegal act, which the agent should not obey. c) The agent is liable for breaching the listing terms. d) The agent may sue the principal for discrimination and misrepresentation. - - correct ans- - b) The principal has proposed an illegal act, which the agent should not obey. The amount of a real estate broker's commission is established by: a) Agreement among competing buyers. b) Negotiation with clients. c) The local Board of Realtorsâ. d) State real estate license law. - - correct ans- - b) Negotiation with clients. A client revoked an exclusive right to sell listing two months prior to expiration. The reason stated: the client is too busy to meet with the agent. In this case: a) The client is criminally liable for negligence. b) The client may be liable for compensation commission and marketing expenses. c) The agent can sue the client for a specific performance even if no customer had been located. d) The agent must except the revocation without the possibility of the possibility of damage recovery. - - correct ans- - b) The client may be liable for compensation commission and marketing expenses. A protection period clause in an exclusive listing provides that: a) The owner is protected from all liabilities arising from the agent's actions performed within the agent's scope of duties. b) The agent has a claim to a commission if the owner sells or leases to a party within a certain time following the listing's expiration. c) Agents are entitled to extend a listing agreements term if a transaction is eminent.
A sale contract contains an open-ended financing contingency: if the buyer cannot obtain financing within a reasonable time the deal is off. Six months later the buyer still cannot secure financing. Which of the following is true? a) The seller may cancel the contract since it can be ruled invalid. b) The buyer can continue indefinitely to seek financing, and the seller's property must remain off the market since "reasonable" is not defined. c) The escrow agent is entitled to the buyer's deposit. d) The seller can force a lender to commit to a loan under fair financing laws. - - correct ans- - a) The seller may cancel the contract since it can be ruled invalid. In the event of a buyer's default a provision for liquidated damages in a sale contract enables the seller to: a) sue the buyer for a person specific performance. b) Force the buyer to quitclaim equitable title. c) Sue the buyer for the broker's marketing expenses. d) Claim the deposit as compensatory damages for the buyer's failure to perform. - - correct ans- - d) Claim the deposit as compensatory damages for the buyer's failure to perform. Which of the following is true of an option to buy agreement? a) The potential buyer, the optionee, is obligated to buy the property once the option agreement is completed. b) The optionor must perform if the optionee takes the option, but the optionee is under no obligation to do so. c) The contract can be executed at no cost to the optionee. d) It is a bilateral agreement. - - correct ans- - b) The optionor must perform if the optionee takes the option, but the optionee is under no obligation to do so.
If a manufacturer that is the major employer in a small city moves its operations to another city, it is reasonable to expect: a) a fall in housing demand, but no other changes in the real estate market. b) A decline in demand for all types of real estate in the real estate market. c) An immediate fall in the demand for industrial real estate, but no other changes in the real estate market. d) An immediate decline in the prices for industrial and office real estate, but no impact on the residential market. - - correct ans- - b) A decline in demand for all types of real estate in the real estate market. If a commercial real estate market is under supplied, it is likely that: a) rental prices in that market will fall. b) Rental prices in that market will rise. c) Rental prices will remain stable until equilibrium is reached. d) Construction will increase to the point of equilibrium. - - correct ans- - b) Rental prices in that market will rise. The amount of available property that becomes occupied over a period of time is called: a) vacancy. b) Absorption. c) Equilibrium. d) Occupation. - - correct ans- - b) Absorption. The roof of a property cost $20,000. The economic life of a roof is 20 years. Assuming the straight-line method of depreciation, what is the depreciated value of the roof after three years?
If net income on a property is $40,000 and the cap rate is 10%, the value of the property using the income capitalization method is a) $100,000. b) $400,000. c) $1 million. d) $4 million. - - correct ans- - b) $400,000. The key feature of an adjustable-rate mortgage loan is that a) The interest rate may vary. b) The monthly payment increases over the life of the loan. c) The principal balance does not amortize. d) The loan term can be shortened or lengthened. - - correct ans- - a) The interest rate may vary. Why is a wraparound mortgage loan potentially interesting to a home seller as an investment? a) It is a senior loan that can be easily subordinated for additional debt. b) A wraparound lender can profit when the interest rate of the wraparound exceeds that of the underlying mortgage. c) The underlying loan is retired early. d) The second mortgage borrower may make payments directly to the first mortgage lender. - - correct ans- - b) A wraparound lender can profit when the interest rate of the wraparound exceeds that of the underlying mortgage. A builder is required to secure a loan with mortgages on three properties. This is an example of
a) A participation mortgage loan. b) A blanket mortgage loan. c) A permanent mortgage loan. d) A bridge loan. - - correct ans- - b) A blanket mortgage loan. Which of the following is true of a loan with negative amortization? a) The interest rate on the loan increases as the principal balance decreases. b) Payments are not sufficient to retire the loan. c) The loan balance is diminishing or going negative. d) Additional interest as being added to the monthly payment. - - correct ans- - b) Payments are not sufficient to retire the loan. A loan to value ratio is used as an underwriting mechanism because a) The LTV determines the profitability of the loan. b) The loan amount needs to be less than the property's value. c) Borrowers tend to inflate the true value of the property. d) A full price loan over finances the borrower. - - correct ans- - b) The loan amount needs to be less than the property's value. In the past, borrowers were often surprised by unexpected or undisclosed borrowing fees and expenses at closing. This phenomenon has been largely corrected through disclosure requirements mandated by which of the following laws? a) Equal Credit Opportunity Act. b) Truth in Lending Laws. c) National Disclosure Procedures Act.
b) Replacing a washing machine. c) Stripping and staining hardwood floors. d) Replacing a broken picture window. - - correct ans- - a) Installing a higher capacity air conditioning and purifying system. Which of the following is true with respect to real property taxation by the federal government? a) It imposes ad valorem property taxes and capital gain tax. b) It may not impose property taxes or tax liens. c) There are no federal ad valorem taxes on real property. d) It imposes ad valorem tax but not capital gain tax. - - correct ans- - c) There are no federal ad valorem taxes on real property. Ad valorem taxes are based on a) The replacement value of property. b) The assessed value of property. c) The millage value of property. d) The broker's estimate of value. - - correct ans- - b) The assessed value of property. A retirement facility prohibits ownership of any unit by persons under 55 years of age. The association claims it has made the prohibition properly. Which of the following is true? a) They are violating the Civil Rights Act of 1866. b) They are violating the Fair Housing Amendments Act of 1988. c) They are guilty of age discrimination. d) The prohibition maybe legal if performed correctly. - - correct ans- - d) The prohibition maybe legal if performed correctly.
An agent received a full price offer from a minority party. The agent presents the offer to the seller and discloses the buyer's minority status. The seller at that point instructs the agent to inform the buyer that the property has just gone under contract. The agent duly complies telling the offeror that the home has just been temporarily removed from the market and is unavailable, but may be available soon as the contract falls through. Which party or parties, if any, have violated fair housing laws? a) The agent only. b) The owner only. c) The agent and the owner. d) Neither agent nor owner. - - correct ans- - c) The agent and the owner. Which of the following are examples of closing items not prorated between buyer and seller? a) Taxes. b) Inspection fees. c) Utilities. d) Condominium assessments. - - correct ans- - b) Inspection fees. Which of the following activities is not allowed under the Real Estate Settlement and Procedures Act? a) A broker having any business relationship with an insurance company that is involved in the broker's transaction. b) A broker pre-qualifying a buyer for a mortgage loan. c) A lender requiring a deposit from a borrower for a tax and insurance escrow account. d) A lender paying a fee to a broker for referring a borrower to the lender. - - correct ans- - d) A lender paying a fee to a broker for referring a borrower to the lender.
