Texas Promulgated Contracts – Exam Test Questions and Correct Answers Study Guide

Texas Promulgated Contracts – Champions EXAM
TEST QUESTIONS AND CORRECT ANSWERS
(VERIFIED ANSWERS) PLUS RATIONALES 2026
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1. Which of the following contracts is promulgated by the
Texas Real Estate Commission (TREC) for residential
transactions?
A. Commercial Contract (CP)
B. One to Four Family Residential Contract (Resale)
C. Farm and Ranch Contract
D. Option Fee Agreement
Correct Answer: B. One to Four Family Residential Contract
(Resale)
Rationale: TREC promulgates standard contracts for residential
resale transactions, ensuring compliance with Texas real estate
law.


2. In a TREC One to Four Family Residential Contract, who is
responsible for completing the Seller’s Disclosure Notice?
A. Buyer
B. Seller
C. Listing agent
D. Lender

,Correct Answer: B. Seller
Rationale: The Seller must complete the Seller’s Disclosure
Notice to disclose known property defects.


3. What is the primary purpose of the Option Fee in a TREC
contract?
A. To serve as earnest money
B. To allow the buyer unrestricted access to the property
C. To grant the buyer a limited option period to terminate the
contract
D. To pay for closing costs
Correct Answer: C. To grant the buyer a limited option period to
terminate the contract
Rationale: The Option Fee compensates the Seller for taking the
property off the market during the option period.


4. In a TREC contract, which section typically covers repairs
and inspection obligations?
A. Paragraph 1 – Parties and Property
B. Paragraph 7 – Property Condition
C. Paragraph 3 – Sales Price, Financing
D. Paragraph 23 – Default
Correct Answer: B. Paragraph 7 – Property Condition
Rationale: Paragraph 7 outlines inspections, repairs, and the
obligations of both parties regarding property condition.

,5. How is Earnest Money handled in TREC contracts?
A. It is optional and always refundable
B. It is deposited with the Title Company or Broker and applied
to the purchase price
C. It is returned directly to the seller
D. It is never refundable under any circumstance
Correct Answer: B. It is deposited with the Title Company or
Broker and applied to the purchase price
Rationale: Earnest Money shows buyer’s intent and is held in
escrow, applied toward closing if the contract proceeds.


6. When must a buyer deliver the Option Fee under a TREC
contract?
A. Within the option period
B. By the effective date of the contract
C. Before closing
D. It is delivered after inspections
Correct Answer: B. By the effective date of the contract
Rationale: The Option Fee must be paid according to the
contract’s deadlines to secure the option period.


7. If a buyer terminates a TREC contract during the option
period, what happens to the Option Fee?
A. It is refunded in full

, B. It is credited to the seller
C. It is retained by the seller
D. It must be split between buyer and seller
Correct Answer: C. It is retained by the seller
Rationale: The Option Fee compensates the seller for taking the
property off the market, even if the buyer terminates.


8. Which TREC contract clause addresses default and
remedies?
A. Paragraph 7 – Property Condition
B. Paragraph 11 – Special Provisions
C. Paragraph 15 – Default
D. Paragraph 23 – Default
Correct Answer: D. Paragraph 23 – Default
Rationale: Paragraph 23 specifies remedies available to either
party in the event of default.


9. What is the role of the TREC promulgated “Addenda” in
contracts?
A. They replace the main contract
B. They provide additional terms not covered in the base
contract
C. They are optional and never enforceable
D. They are only for commercial contracts