Texas Real Estate Sales Agent — All Questions

A lease in which the tenant pays a fixed rent and the landlord pays most property expenses such as taxes and insurance is a:

• a.Ground lease
• b.Net lease
• c.Percentage lease
• d.Gross lease✓

In a gross lease, the tenant pays a flat rent and the landlord covers most operating expenses, common in residential rentals. In a net lease, the tenant pays some or all of those expenses in addition to base rent.

A 'percentage lease' is most commonly used for:

• a.Single-family homes
• b.Government office buildings only
• c.Vacant agricultural land
• d.Retail stores, where rent is partly based on sales✓

A percentage lease charges base rent plus a percentage of the tenant's gross sales, aligning the landlord's income with the tenant's business performance. It is typical in shopping centers and retail settings.

The Americans with Disabilities Act (ADA) generally requires that:

• a.Only new construction comply with any rules
• b.Landlords pay for tenants' medical care
• c.All homes be wheelchair accessible
• d.Public accommodations remove barriers and provide reasonable accessibility✓

The ADA requires places of public accommodation, such as commercial and business facilities, to be accessible and to remove barriers where readily achievable. Separate fair housing rules address reasonable accommodations in residential housing.

Depreciation caused by outdated design, poor floor plan, or obsolete features within the property is called:

• a.Appreciation
• b.Physical deterioration
• c.Functional obsolescence✓
• d.Economic (external) obsolescence

Functional obsolescence is a loss in value from features that are outdated or poorly designed, such as a two-bedroom house with one tiny closet. It arises from conditions within the property rather than external forces.

Loss in property value caused by negative factors outside the property, such as a new highway creating noise, is called:

• a.Physical deterioration curable by repair
• b.External (economic) obsolescence✓
• c.Accrued appreciation
• d.Functional obsolescence

External or economic obsolescence is a loss in value from factors outside the property boundaries, such as nearby nuisances or a declining local economy. It is generally considered incurable by the owner because the cause is off-site.

A comparative market analysis (CMA) prepared by a sales agent to help price a listing is:

• a.An estimate of value based on comparable sales, not a formal appraisal✓
• b.A legally certified appraisal
• c.Required by federal law for every sale
• d.A guarantee of the final sales price

A CMA uses recent comparable sales and market data to help an agent and seller set a competitive list price, but it is not a formal appraisal. Only a licensed or certified appraiser can perform an appraisal for lending purposes.

A home sells for $350,000 with a total commission of 6%. How much is the total commission in dollars?

• a.$24,000
• b.$15,000
• c.$21,000✓
• d.$18,000

Multiply the sales price by the commission rate: $350,000 x 0.06 = $21,000. This total is then typically split between the listing and buyer's brokerages.

A property sells for $420,000 with a 6% commission. The listing and selling brokerages split it 50/50, and the listing agent keeps 60% of their brokerage's share. How much does the listing agent earn?

• a.$25,200
• b.$15,120
• c.$12,600
• d.$7,560✓

Total commission is $420,000 x 0.06 = $25,200; each brokerage gets half, or $12,600. The listing agent's 60% share is $12,600 x 0.60 = $7,560.

A buyer pays $280,000 for a home and puts 15% down. How much is the down payment?

• a.$56,000
• b.$4,200
• c.$28,000
• d.$42,000✓

Multiply the price by the down payment percentage: $280,000 x 0.15 = $42,000. The remaining $238,000 would be financed.

A lot measures 150 feet by 200 feet. What is its area in square feet?

• a.350 sq ft
• b.3,500 sq ft
• c.35,000 sq ft
• d.30,000 sq ft✓

Area of a rectangle is length times width: 150 x 200 = 30,000 square feet. To convert to acres, divide by 43,560.

One acre contains 43,560 square feet. How many acres are in a parcel of 87,120 square feet?

• a.1 acre
• b.3 acres
• c.2 acres✓
• d.4 acres

Divide the total square footage by 43,560: 87,120 / 43,560 = 2 acres. Memorizing that an acre is 43,560 square feet is essential for land math.

Annual property taxes of $4,800 are paid in arrears. At a closing on July 1 (with the year split evenly into two halves), what is the seller's share for the first half of the year using a 360-day proration?

• a.$800
• b.$1,200
• c.$4,800
• d.$2,400✓

With taxes paid in arrears, the seller owes for the portion of the year they owned the property. From January 1 to July 1 is half the year, so the seller's share is $4,800 x 6/12 = $2,400.

A home appreciates from $250,000 to $300,000. What is the percentage of increase in value?

• a.50%
• b.25%
• c.20%✓
• d.15%

The increase is $300,000 minus $250,000, or $50,000. Divide the increase by the original value: $50,000 / $250,000 = 0.20 or 20%.

A loan of $200,000 carries a 6% annual interest rate. How much is the interest for the FIRST month (simple interest)?

• a.$1,200
• b.$100
• c.$12,000
• d.$1,000✓

Annual interest is $200,000 x 0.06 = $12,000. Divide by 12 months to get the first month's interest: $12,000 / 12 = $1,000.

A property is assessed at $180,000 and the tax rate is $2.50 per $100 of assessed value. What is the annual property tax?

• a.$1,800
• b.$450
• c.$4,500✓
• d.$2,500

Divide the assessed value by 100 to get the number of taxable units: $180,000 / 100 = 1,800. Multiply by the rate: 1,800 x $2.50 = $4,500.

An investor's rental property produces net operating income (NOI) of $24,000 per year. Using a capitalization rate of 8%, what is the indicated value?

• a.$1,920,000
• b.$300,000✓
• c.$32,000
• d.$192,000

The income approach value equals NOI divided by the cap rate: $24,000 / 0.08 = $300,000. A lower cap rate would produce a higher value for the same income.

A seller wants to net $190,000 after paying a 5% commission (and no other costs). What must the sales price be, rounded to the nearest dollar?

• a.$180,500
• b.$200,000✓
• c.$199,500
• d.$209,000

The seller keeps 95% of the price, so price = $190,000 / 0.95 = $200,000. Checking: $200,000 x 5% = $10,000 commission, leaving $190,000.

A rectangular house has exterior dimensions of 40 feet by 50 feet. If construction costs $120 per square foot, what is the estimated construction cost?

• a.$96,000
• b.$24,000
• c.$2,400,000
• d.$240,000✓

The area is 40 x 50 = 2,000 square feet. Multiply by the cost per square foot: 2,000 x $120 = $240,000.

A buyer obtains a loan with an 80% loan-to-value ratio on a $325,000 purchase. How much is the loan amount?

• a.$162,500
• b.$260,000✓
• c.$32,500
• d.$65,000

Multiply the price by the LTV: $325,000 x 0.80 = $260,000. The remaining 20%, or $65,000, would be the down payment.

Monthly rent is $1,500 and the annual gross rent multiplier (GRM) for comparable properties is 12 times ANNUAL rent. What is the indicated property value?

• a.$216,000✓
• b.$1,800,000
• c.$150,000
• d.$18,000

Annual rent is $1,500 x 12 = $18,000. Multiply annual rent by the GRM: $18,000 x 12 = $216,000.

A legal description that identifies a parcel by starting at a point of beginning and following directions and distances around the boundary is known as the:

• a.Lot and block system used in recorded subdivision plats
• b.Rectangular (government) survey system of ranges and townships
• c.Metes and bounds description✓
• d.Street address and tax parcel identification number

Metes and bounds describes land by measured distances (metes) and directional boundaries (bounds), beginning and ending at a defined point of beginning. Texas relies heavily on metes and bounds and original land-grant abstracts rather than the rectangular survey system used in many other states.

A property described as 'Lot 7, Block C, Whispering Oaks Addition' is being identified using the:

• a.A metes and bounds description that traces each boundary by course and distance
• b.Lot and block (recorded plat) system✓
• c.The rectangular survey system that divides land into six-mile-square townships
• d.An informal reference that has no legal standing for conveying title

The lot and block system refers to a lot and block number on a subdivision plat recorded in the county map records. It is the most common method for describing platted urban and suburban lots.

In the rectangular (government) survey system, one section of land contains how many acres?

• a.43,560 acres, the same figure as square feet in an acre
• b.36 acres, one for each section in a township
• c.640 acres✓
• d.160 acres, which equals one quarter-section

A section is one square mile and contains 640 acres, and 36 sections make up a township. Texas mostly uses metes and bounds rather than this system, but the section-acre relationship is commonly tested.

Under the Texas Constitution, an urban homestead for a family is limited to a maximum of:

• a.1 acre, regardless of where the home is located
• b.200 acres of contiguous rural land
• c.10 acres✓
• d.100 acres, the limit that applies only to a single adult

An urban homestead is limited to 10 acres (in one or more contiguous lots) with improvements. A rural family homestead may be up to 200 acres, and a single adult's rural homestead up to 100 acres (Tex. Const. art. XVI, sec. 51).

Under Texas homestead law, a rural homestead for a family may include up to:

• a.640 acres, an amount equal to one section
• b.an unlimited number of acres as long as it is used for agriculture
• c.200 acres✓
• d.10 acres located within a city's limits

A rural homestead for a family may include up to 200 acres; for a single adult the limit is 100 acres. Urban homesteads are capped at 10 acres (Tex. Const. art. XVI).

Texas homestead protection shields a home from forced sale by most creditors, but it does NOT protect against a forced sale for:

• a.unpaid medical bills owed by the homeowner
• b.unpaid property taxes, a purchase-money loan, or a valid home-improvement lien✓
• c.a personal loan borrowed from a family member
• d.an unsecured judgment obtained by a credit card company as a matter of long-standing real estate custom and common-law tradition

Homestead protection has constitutional exceptions, including purchase-money (mortgage) liens, ad valorem property taxes, owelty of partition, valid mechanic's/home-improvement liens, home-equity loans, and reverse mortgages. General unsecured debts cannot force a homestead sale.

The Texas homestead exemption primarily protects a homeowner by:

• a.guaranteeing that the property can never be sold under any circumstances
• b.shielding the home from forced sale by most unsecured creditors✓
• c.providing a state grant that covers the homeowner's monthly mortgage payments
• d.eliminating the homeowner's duty to pay any property taxes on the residence

The homestead exemption protects a primary residence from forced sale by most unsecured creditors and also reduces the home's taxable value. It does not eliminate valid secured debts such as the mortgage or property taxes.

In Texas, property that one spouse owned before marriage or received during marriage by gift or inheritance is classified as:

• a.abandoned property that automatically passes to the state
• b.homestead property that is fully exempt from all taxes
• c.community property that is owned equally by both spouses
• d.separate property✓

Separate property includes what a spouse owned before marriage and anything received during marriage by gift, devise, or inheritance. It remains that spouse's own property and is not split equally like community property.

During a Texas marriage, wages earned by one spouse and deposited into a joint account are generally presumed to be:

• a.the separate property of the non-earning spouse
• b.exempt homestead property owned by neither spouse individually
• c.community property✓
• d.the separate property of the spouse who earned the wages

Texas presumes that property acquired by either spouse during the marriage, including earnings, is community property owned equally. The presumption can be overcome only by clear and convincing evidence that an asset is separate property.

In Texas, for community property to pass automatically to a surviving spouse with a right of survivorship, the spouses generally must:

• a.record a new deed within thirty days of the marriage
• b.obtain a court order before either spouse dies
• c.sign a written community property survivorship agreement✓
• d.do nothing, because survivorship is automatic for every married couple

Unlike joint tenancy, community property in Texas does not carry an automatic right of survivorship. Spouses must sign a written survivorship agreement for community property to pass to the survivor without probate (Texas Estates Code).

Two unrelated investors take title with no survivorship language, and each may leave their share to their own heirs. They most likely hold title as:

• a.tenants in common✓
• b.joint tenants with a right of survivorship
• c.community property owners with survivorship rights
• d.life tenants for the life of the older investor

Tenancy in common lets co-owners hold undivided interests that pass to their own heirs, with no survivorship. It is the default form of co-ownership when survivorship is not expressly created.

The right of an owner whose land borders a flowing river or stream to make reasonable use of that water is called:

• a.riparian rights✓
• b.littoral rights, which apply to land bordering an ocean, sea, or lake
• c.prior appropriation rights that are granted only by federal permit
• d.percolating rights, which are limited strictly to underground water

Riparian rights attach to land bordering a flowing watercourse such as a river or stream. Littoral rights, by contrast, belong to land abutting a static body of water such as a lake or the sea.

An owner whose property borders a lake or the ocean holds which type of water-related rights?

• a.Riparian rights, which are tied to flowing streams and rivers
• b.Prior appropriation rights that must be claimed from the state
• c.Prescriptive water rights acquired through long adverse use
• d.Littoral rights✓

Littoral rights belong to land bordering a static body of water such as a lake, sea, or ocean. Riparian rights, by contrast, apply to land along a flowing watercourse.

In Texas, when the mineral estate has been severed from the surface estate, the mineral estate is generally treated as:

• a.property that is automatically owned by the state of Texas
• b.subordinate to the surface estate in every case
• c.valueless unless the surface owner grants written permission each year
• d.the dominant estate, with an implied right to use the surface to extract minerals✓

In Texas the severed mineral estate is the dominant estate and carries an implied right to make reasonable use of the surface to explore for and produce minerals. This is a distinctive and heavily litigated feature of Texas property law.

A farmer sells standing timber to be cut and removed. Once it is severed from the land, the cut timber becomes:

• a.part of the mineral estate under the surface
• b.personal property✓
• c.a fixture belonging permanently to the buyer of the land
• d.an appurtenance that continues to pass with the real property

Severance converts real property (growing timber, which is part of the land) into personal property once it is detached. The reverse, annexation, can turn personal property into real property when it is permanently attached.

A right or benefit that belongs to and passes with the land, such as an easement benefiting the parcel, is called a(n):

• a.appurtenance✓
• b.trade fixture installed by a tenant to run a business
• c.chattel that the owner may remove from the property at will
• d.emblement, meaning an annually harvested cultivated crop

An appurtenance is a right or improvement that runs with the land and transfers with it, such as an easement appurtenant or water rights. It is distinct from personal property, which does not automatically pass with the real estate.

Annually cultivated crops that a tenant farmer has planted are known as emblements, meaning the tenant generally has the right to:

• a.re-enter and harvest the crop even after the lease ends✓
• b.claim ownership of the underlying farmland itself
• c.convert the crop into a permanent fixture of the real estate
• d.prevent the landlord from ever selling the farm

The doctrine of emblements lets a tenant who planted annual crops return to harvest them even after the tenancy ends, because the crops result from the tenant's labor. It applies to cultivated annual crops (fructus industriales), not to naturally growing vegetation.

Which of the following is a freehold estate?

• a.An estate for years created by a written one-year lease
• b.A fee simple estate✓
• c.A periodic tenancy that renews from month to month
• d.A tenancy at sufferance held by a holdover tenant

Freehold estates, such as fee simple and life estates, involve ownership of indefinite or lifetime duration. Leasehold estates, including estates for years and periodic tenancies, give possession for a limited time but not ownership.

A lease with a definite beginning and ending date, such as a 12-month apartment lease, creates a(n):

• a.tenancy at will that either party may terminate at any moment
• b.periodic tenancy that automatically renews until proper notice is given
• c.estate for years✓
• d.tenancy at sufferance that arises when a tenant wrongfully holds over

An estate for years has a fixed, definite term and ends automatically on the stated date without further notice. It does not have to last a year despite its name; the defining feature is a specified beginning and end.

A tenant whose lease has expired but who remains in possession without the landlord's permission holds a:

• a.tenancy at will that may be ended by mutual agreement
• b.periodic tenancy that renews automatically each month
• c.estate for years that continues under a fixed term
• d.tenancy at sufferance✓

A tenancy at sufferance arises when a tenant who once had lawful possession holds over after the lease ends without the landlord's consent. The landlord may treat the holdover as a trespasser or accept rent and create a new tenancy.

In a life estate, the person who receives full ownership of the property after the life tenant dies is the:

• a.creditor of the life tenant who holds a priority lien
• b.trustee who holds legal title on behalf of a lender
• c.grantor who had reserved a reversion interest for himself
• d.remainderman✓

A remainderman is named to take ownership when the life estate ends. If instead the property returns to the original grantor, that future interest is called a reversion.

A life estate that is measured by the life of someone other than the life tenant is called a life estate:

• a.in reversion that returns to the grantor
• b.in severalty that is owned by one person alone
• c.in remainder that passes to a named third party
• d.pur autre vie✓

A life estate pur autre vie is measured by the life of a person other than the holder. For example, a grant 'to A for the life of B' gives A a life estate that ends when B dies.

A judgment lien that attaches to all of a debtor's real property in a county is an example of a:

• a.voluntary lien that the owner intentionally created
• b.general lien✓
• c.specific lien that attaches only to one identified parcel
• d.mechanic's lien for unpaid construction work on one property

A general lien, such as a judgment or IRS tax lien, attaches to all of a debtor's property rather than one item. A specific lien, such as a mortgage or mechanic's lien, attaches only to a particular parcel.

A contractor who is not paid for labor and materials used to improve a property may file a:

• a.general judgment lien against all of the owner's assets everywhere
• b.deed of trust that conveys title of the property to the contractor
• c.lis pendens that immediately ends the underlying lawsuit
• d.mechanic's (constitutional or statutory) lien against the improved property✓

A mechanic's lien secures payment for labor or materials that improved a specific property. Texas recognizes both a constitutional mechanic's lien and a statutory lien with recording and notice requirements.

Among liens against a property, which generally takes priority regardless of when it was recorded?

• a.A mechanic's lien filed by an unpaid subcontractor
• b.A judgment lien arising from a separate lawsuit
• c.Property (ad valorem) tax liens✓
• d.The first mortgage lien that was recorded on the property

Ad valorem property tax liens are generally superior to other liens no matter when they attached, which is why unpaid taxes must be cleared at closing. Most other liens follow the 'first in time, first in right' recording rule.

A recorded notice that a lawsuit affecting title to a specific property is pending is called a:

• a.writ of execution that orders a sheriff's sale of the property
• b.subordination agreement that changes the priority of liens
• c.satisfaction of mortgage that releases the existing lien
• d.lis pendens✓

A lis pendens ('litigation pending') is a recorded notice warning that a pending lawsuit may affect title to the property. It gives constructive notice so that anyone acquiring an interest takes it subject to the outcome.

A landlocked parcel with no access to a public road may be granted a right of passage over a neighboring parcel through an easement by:

• a.necessity✓
• b.estoppel based on a spoken promise that was later denied
• c.prescription, acquired through open and hostile use over many years
• d.express grant that is recorded in a written deed only

An easement by necessity arises when a parcel would otherwise be landlocked, typically where a single tract was divided leaving one part without access. The law implies the easement so the land can be used.

An easement acquired by using another's land openly, continuously, and without permission for the period set by law is an easement by:

• a.condemnation that is exercised by a public utility company
• b.express reservation that is stated in the deed itself
• c.prescription✓
• d.necessity, which is created when a parcel becomes landlocked

A prescriptive easement is gained through open, notorious, continuous, and hostile (unpermitted) use for the statutory period. It creates a right to use, but not to own, another's land.

Permission to use another's land that is personal, revocable, and does not create an interest in the land is a:

• a.license✓
• b.fee simple determinable estate that may end on a stated event
• c.easement appurtenant that runs with the land to new owners
• d.profit that grants the right to remove resources from the land

A license is mere personal permission to do something on another's land and can be revoked at any time. Unlike an easement, it does not create a lasting interest in the land and does not transfer with the property.

In an easement appurtenant, the parcel that is burdened by and subject to the easement is the:

• a.life estate that is measured by the current owner's life
• b.leasehold estate that is held by a tenant
• c.dominant estate that benefits from the easement
• d.servient estate✓

The servient estate is the parcel burdened by the easement, while the dominant estate is the parcel that benefits from it. An easement appurtenant runs with the land and passes to future owners of both parcels.