Texas Real Estate Sales Agent — All Questions

Which state agency licenses and regulates real estate sales agents and brokers in Texas?

• a.The Texas Real Estate Commission (TREC)✓
• b.The Texas Department of Housing and Community Affairs
• c.The Texas Association of Realtors (TAR)
• d.The Texas Real Estate Research Center

TREC is the state agency created to administer the Real Estate License Act and regulate license holders. Private trade groups such as the Texas Association of Realtors set membership rules but do not issue licenses. Specifics of TREC rules can change over time.

A sales agent in Texas may lawfully perform real estate brokerage activity only when:

• a.Sponsored by and acting for a licensed Texas broker✓
• b.She is a member of a local Realtor association
• c.Working as an independent contractor for any client
• d.She holds a college degree in real estate

In Texas a sales agent's license must be sponsored by an active broker, and the agent works on behalf of that broker. An unsponsored agent may hold a license but cannot perform brokerage activity for compensation.

The bundle of rights associated with real property ownership generally does NOT include the right to:

• a.Sell or transfer the property
• b.Possess and occupy the property
• c.Exclude others from the property
• d.Use the property in violation of valid zoning laws✓

Ownership conveys rights of possession, control, enjoyment, exclusion, and disposition, but these are always subject to lawful government limits such as zoning. No owner has the right to use land in a way that breaks valid public regulations.

Which of the following is generally considered real property rather than personal property?

• a.A homeowner's area rug
• b.A built-in kitchen cabinet permanently attached to the wall✓
• c.Patio furniture on the deck
• d.A freestanding refrigerator plugged into an outlet

Items permanently affixed to the structure, called fixtures, are treated as real property and typically transfer with the land. Movable items that are not attached, such as a rug or freestanding appliance, remain personal property unless the contract states otherwise.

The legal test used to decide whether an item is a fixture or personal property considers all of the following EXCEPT:

• a.The adaptation of the item to the real estate
• b.The intention of the party who installed it
• c.The method of attachment to the property
• d.The original purchase price of the item✓

Courts weigh the method of annexation, adaptation to the property, and the intent of the person who installed the item. The dollar amount originally paid for the item is not part of the standard fixture test.

An encumbrance that gives a lender a security interest in real property as collateral for a debt is a(n):

• a.Easement
• b.Lien✓
• c.Deed restriction
• d.Encroachment

A lien is a financial encumbrance securing payment of a debt, such as a mortgage or tax lien. An easement is a right to use land, and an encroachment is an unauthorized physical intrusion onto another's property.

A right to use another person's land for a specific purpose, such as a shared driveway, is called a(n):

• a.Easement✓
• b.Freehold
• c.Lien
• d.Estate

An easement is a nonpossessory right to use land owned by someone else for a defined purpose. Unlike an estate, it does not give ownership or the right to possess the property.

Which type of easement is created for the benefit of a neighboring parcel and transfers automatically when that parcel is sold?

• a.Easement appurtenant✓
• b.License
• c.Prescriptive easement terminated at sale
• d.Easement in gross

An easement appurtenant benefits an adjoining parcel (the dominant estate) and runs with the land, passing to new owners automatically. An easement in gross benefits a person or company rather than a parcel of land.

The highest and most complete form of ownership interest in real property is:

• a.An estate for years
• b.A leasehold estate
• c.A fee simple absolute estate✓
• d.A life estate

Fee simple absolute is the most complete ownership, lasting indefinitely and freely transferable. A life estate and leasehold interests are more limited in duration or scope.

A life estate is BEST described as an ownership interest that:

• a.Lasts forever and passes to the owner's heirs
• b.Lasts for the duration of a specified person's life✓
• c.Automatically converts to a fee simple after 21 years
• d.Can never be transferred during the holder's lifetime

A life estate lasts only for the life of a named measuring person, after which title passes to a remainderman or reverts to the grantor. The life tenant may use and even lease the property during the measuring life but cannot pass fee ownership to heirs.

When two or more people own property as joint tenants with right of survivorship, what happens when one owner dies?

• a.The state takes the deceased owner's share
• b.The deceased owner's share passes to their heirs by will
• c.The surviving joint tenants automatically absorb the deceased owner's interest✓
• d.The property is automatically sold and proceeds split

Right of survivorship means a deceased joint tenant's interest passes automatically to the surviving joint tenants, not through probate or a will. This is a defining difference from a tenancy in common.

Texas is a community property state, which generally means that property acquired by either spouse during marriage is:

• a.Presumed to be owned equally by both spouses✓
• b.Exempt from any creditor claims
• c.Automatically owned by the spouses' children
• d.Always owned solely by the spouse who earned the money

In a community property state, most assets acquired during marriage are presumed owned equally by both spouses regardless of whose income paid for them. Property owned before marriage or received by gift or inheritance is generally separate property.

Which document is the primary legal instrument used to transfer title to real property from one party to another?

• a.A promissory note
• b.A listing agreement
• c.A deed✓
• d.A title insurance policy

A deed is the written instrument that conveys title from a grantor to a grantee. A promissory note is a promise to repay a loan, and title insurance protects against defects but does not transfer ownership.

Which type of deed offers the grantee the greatest protection because the grantor warrants title against defects arising at any time in the property's history?

• a.Quitclaim deed
• b.Deed of trust
• c.General warranty deed✓
• d.Special warranty deed

A general warranty deed provides the broadest protection, with the grantor guaranteeing title against all defects, even those predating the grantor's ownership. A special warranty deed covers only defects arising during the grantor's ownership, and a quitclaim conveys only whatever interest the grantor may have.

A quitclaim deed is BEST described as an instrument that:

• a.Conveys only whatever interest the grantor may have, with no warranties✓
• b.Is required for all sales of residential property in Texas
• c.Guarantees clear and marketable title to the grantee
• d.Automatically pays off all existing liens

A quitclaim deed transfers only the interest, if any, that the grantor holds and makes no warranties about the quality of title. It is often used to clear clouds on title, such as removing a possible claim, rather than for arm's-length sales.

For a deed to be valid and effective to convey title, it generally must be:

• a.Signed by both the grantor and the grantee
• b.In writing, signed by the grantor, and delivered to the grantee✓
• c.Recorded at the county courthouse within 30 days
• d.Notarized by a licensed real estate broker

A valid deed must be in writing, name a grantee, be signed by the grantor, and be delivered and accepted. Recording gives public notice and protects priority but is not required to make the deed valid between the parties.

The main purpose of recording a deed in the county real property records is to:

• a.Transfer possession of the property
• b.Give constructive (public) notice of the ownership interest✓
• c.Satisfy the buyer's mortgage obligation
• d.Make the deed legally valid between grantor and grantee

Recording provides constructive notice to the world of the interest and establishes priority among competing claims. The deed is already valid between the parties upon delivery; recording protects the grantee against later claims.

Title insurance protects the insured party against:

• a.Losses from defects in title that existed before the policy date✓
• b.A decline in the property's market value
• c.Future physical damage to the structure
• d.The cost of routine repairs and maintenance

Title insurance indemnifies against covered losses from title defects, liens, or encumbrances that existed but were unknown at the time the policy was issued. It does not cover future events like physical damage or market value changes.

The process by which the government can take private property for public use, upon payment of just compensation, is:

• a.Escheat
• b.Adverse possession
• c.Eminent domain✓
• d.Estoppel

Eminent domain is the government's constitutional power to take private property for a public purpose in exchange for just compensation, exercised through condemnation. Escheat is when property passes to the state when an owner dies with no heirs.

When a person dies owning property with no valid will and no locatable heirs, the property may pass to the state through:

• a.Escheat✓
• b.Eminent domain
• c.Police power
• d.Prescription

Escheat transfers ownership to the state when an owner dies intestate with no heirs, preventing property from being ownerless. It is distinct from eminent domain, which involves a taking for public use with compensation.

Zoning ordinances, building codes, and health regulations are all examples of the government's:

• a.Right of survivorship
• b.Police power✓
• c.Right of escheat
• d.Power of eminent domain

Police power is the government's authority to regulate land use to protect public health, safety, and welfare, and it underlies zoning and building codes. Unlike eminent domain, exercising police power generally does not require compensating the owner.

A physical intrusion of a structure, such as a fence or roof overhang, onto a neighboring property is a(n):

• a.Encroachment✓
• b.Life estate
• c.Deed restriction
• d.Easement in gross

An encroachment is an unauthorized physical intrusion of an improvement onto adjoining land, and it can cloud title or reduce marketability. A survey is commonly used to detect encroachments before closing.

Private restrictions placed in a deed or subdivision documents that limit how owners may use their lots are commonly called:

• a.Deed restrictions or restrictive covenants✓
• b.Police power regulations
• c.Easements in gross
• d.Mechanic's liens

Deed restrictions, also called restrictive covenants, are private limitations on land use imposed by a developer or prior owner and enforced by other owners or an HOA. They are separate from public zoning, and the more restrictive of the two typically controls.

Which of the following BEST describes the economic characteristic of real estate known as 'scarcity'?

• a.Land improvements never wear out
• b.Land can be moved to where demand is highest
• c.All parcels of land are exactly alike
• d.The total supply of land is limited relative to demand✓

Scarcity refers to the limited supply of land relative to population and demand, which supports its economic value. Physical characteristics of land include immobility, indestructibility, and uniqueness (non-homogeneity).

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.