Texas Real Estate Broker Exam — All Questions

When may a Texas license holder use a contract form other than the one TREC promulgates for that transaction?

• a.When the buyer and seller both sign a waiver of the promulgated form
• b.When the license holder's broker keeps a copy of the substitute form
• c.When the property owner requires a form drafted by an attorney✓
• d.When the sale will close without a lender or a title company

22 TAC § 537.11(a) requires mandatory-use forms "with the following exceptions: transactions in which the license holder is functioning solely as a principal, not as an agent; transactions in which an agency of the United States government requires a different form to be used; transactions for which a contract form has been prepared by the property owner or prepared by an attorney and required by a property owner; or transactions for which no contract form has been approved for mandatory use by the Commission." Occupations Code § 1101.155(b) says the same at statute level. The exceptions are drawn by who prepared the form and who requires it, so the parties cannot waive the requirement between themselves — the rule exists to protect them from a license holder drafting instruments. Keeping a copy is a records duty under 22 TAC § 535.2(h), not an authorization to depart from the form. And how the sale is financed or closed has nothing to do with which form is mandatory.

Business and Commerce Code § 26.01, the Texas statute of frauds, makes which of these unenforceable unless it is written and signed?

• a.An oral lease of commercial space for a term of three years✓
• b.An oral month-to-month lease of a single-family house
• c.An oral agreement between two brokers to split a commission
• d.An oral agreement to pay a broker a fee for finding a tenant

Section 26.01(a) makes a listed promise "not enforceable unless the promise or agreement, or a memorandum of it, is (1) in writing; and (2) signed by the person to be charged," and (b)(5) lists "a lease of real estate for a term longer than one year." A three-year lease is longer than a year and falls squarely inside it, whether the space is commercial or residential. A month-to-month term is not longer than one year, so § 26.01(b)(5) does not reach it. Commission-splitting between license holders appears nowhere in § 26.01(b) — the only commissions the statute of frauds covers are those at (b)(7) for an oil or gas lease, an oil or gas royalty, minerals or a mineral interest — and Occupations Code § 1101.806(a)(1) expressly excludes agreements to share compensation among license holders. A fee for finding a tenant is a real-estate commission, and Texas does require that promise to be written and signed, but by § 1101.806(c) of TRELA rather than by this statute.

Which Texas seller must deliver the § 5.008 Seller's Disclosure Notice?

• a.An executor selling the decedent's house during administration
• b.A lender selling a house it took back at a foreclosure sale
• c.An owner selling the single-family house she has lived in for years✓
• d.A builder selling a brand-new house never previously occupied

Property Code § 5.008(a): "A seller of residential real property comprising not more than one dwelling unit located in this state shall give to the purchaser of the property a written notice as prescribed by this section." Subsection (e) then lifts the duty from the other three. It does not apply to a transfer "(4) by a mortgagee or a beneficiary under a deed of trust who has acquired the real property at a sale conducted pursuant to a power of sale under a deed of trust," which covers the lender's foreclosed house; nor "(5) by a fiduciary in the course of the administration of a decedent's estate, guardianship, conservatorship, or trust," which covers the executor; nor "(10) of a new residence of not more than one dwelling unit which has not previously been occupied for residential purposes," which covers the builder. The exemptions share a logic — each of those sellers has never lived in the house. Subsection (d) adds that a seller who does not know an answer says so on the notice and "by that act is in compliance with this section."

A Texas buyer signs a contract without having received the Seller's Disclosure Notice, and the seller delivers it eleven days later. The buyer may:

• a.Terminate at any time before closing, for any reason at all
• b.Terminate only if the notice reveals a defect she did not know of
• c.Recover the earnest money only by suing the seller for the breach
• d.Terminate for any reason within seven days after receiving it✓

Property Code § 5.008(f): "The notice shall be delivered by the seller to the purchaser on or before the effective date of an executory contract binding the purchaser to purchase the property. If a contract is entered without the seller providing the notice required by this section, the purchaser may terminate the contract for any reason within seven days after receiving the notice." Paragraph 7B(2) of TREC No. 20-19 carries the same clock and adds the money: the open-ended right — terminate at any time before closing, earnest money refunded — belongs to the case where the notice never arrives at all, and it is replaced by the seven-day window once the seller delivers. The right does not depend on what the notice says, because the statute grants it "for any reason." And no suit is needed to get the deposit back: a termination inside the window refunds the earnest money under the contract's own terms.

A seller needs to remain in the house for ten days after closing. Which TREC-promulgated form covers that arrangement?

• a.Buyer's Temporary Residential Lease, TREC No. 16-7
• b.Seller's Temporary Residential Lease, TREC No. 15-7✓
• c.Addendum Regarding Residential Leases, TREC No. 51-1
• d.Amendment to Contract, TREC No. 39-11

22 TAC § 537.26 adopts by reference "standard contract form TREC No. 15-7 ... Seller's Temporary Residential Lease," which is the form for the seller staying on as a tenant after the buyer takes title. Its mirror image is adopted at § 537.27: TREC No. 16-7, the Buyer's Temporary Residential Lease, for the opposite case where the buyer occupies before closing — the two forms differ in who is the tenant, which is the whole question here. The Addendum Regarding Residential Leases, TREC No. 51-1, is adopted separately at § 537.58 and is a different instrument, not the post-closing occupancy form. And the Amendment to Contract, TREC No. 39-11, adopted at § 537.46, changes terms of the contract itself; it creates no tenancy, and occupancy by someone who is not the owner needs a lease, not an amendment.

A distinctive feature of Texas real estate practice is that license holders generally must:

• a.Draft each contract from scratch for every client
• b.Use the appropriate TREC-promulgated form✓
• c.Have every contract written by the buyer's lender
• d.Avoid using written contracts entirely

TREC promulgates standard contract forms, and Texas license holders are generally required to use the appropriate promulgated form for a transaction rather than drafting their own. Using the standard forms protects consumers and keeps licensees from practicing law, which is exactly why building a contract from scratch for each client is not open to a license holder, since original drafting of legal instruments is lawyers' work. Having the buyer's lender write the contract is no better, because the lender is one side's financing source rather than a neutral drafter of the agreement between buyer and seller. And going without written contracts would leave the parties no reliable record of their terms, the opposite of what the promulgated forms exist to provide.

When completing a TREC-promulgated contract form, a Texas license holder may:

• a.Add custom clauses that change the legal effect of the contract
• b.Give legal advice about whether the contract is enforceable
• c.Complete the blanks with the parties' agreed business terms✓
• d.Sign the contract for the client without written authority

A license holder may complete the blanks on a promulgated form to record the parties' agreed business terms but may not add clauses or draft language that changes the contract's legal effect. 22 TAC § 537.11(b) says a license holder may not "practice law," "give advice or opinions as to the legal effect of any contract forms," or "draft or recommend language to be included in a contract form defining or affecting the rights, obligations, or remedies of the principals of a real estate transaction, including escalation, appraisal, or contingency clauses." That single subsection disposes of two of the wrong answers at once: writing a custom clause and opining on enforceability are both named in it. What the rule does permit is § 537.11(c)(2), "explaining to the license holder's principals the meaning of informational items or choices in a contract form, as long as the license holder does not practice law." Signing for a client is a different failing altogether — not practicing law but acting without authority, which no license confers.

A Texas broker's supervisory role with respect to contract forms includes:

• a.Guaranteeing that none of the firm's contracts is ever disputed
• b.Checking that agents use the current promulgated forms and addenda✓
• c.Preparing a written legal opinion on each executed contract
• d.Choosing forms TREC no longer promulgates, to keep them familiar

The broker's supervisory duty includes seeing that sponsored agents use the correct current promulgated forms and addenda and that agreed changes are documented by amendment. 22 TAC § 535.2(i)(4) requires the broker's written policies to ensure each sponsored sales agent is given, before the effective date of the change, "notice of any change to the Act, Commission rules, or Commission promulgated contract forms" — which is exactly why reaching for a superseded form inverts the duty rather than satisfying it, familiarity notwithstanding. The duty is one of process, not of outcome: no broker can promise a contract will never be disputed, because disputes turn on the parties and on events after signing. And writing legal opinions on each contract would carry the broker across the line § 537.11(b)(3) draws, which forbids giving "advice or opinions as to the legal effect of any contract forms." Supervising the use of the forms is brokerage; opining on them is not.