PRINCIPLES OF REAL ESTATE II
PRACTICE TEST QUESTIONS AND
ANSWERS
1. An owner's agent is showing a buyer an apartment building. The buyer notices water stains on the
ceiling, and informs the agent. The agent's best course of action is to - d) inform the seller.
2. An agent owes customers several duties. These may be best described as - d) honesty, diligence, and
skill.
3. An agent fails to discover flood marks on the walls in the basement of a property. The agent sells the
property, and the buyer later sues the agent for failing to mention the problem. In this case, the agent -
b) has an exposure to a charge of negligent misrepresentation.
4. An agent informs a buyer that a clause in a contract is standard language. After explaining the clause,
the agent assures the buyer that the clause does not mean anything significant. If something goes wrong
with the transaction, the agent could be liable for - c) intentional misrepresentation.
5. An outside broker locates a seller for a buyer representative's client but is also representing the buyer.
In this instance, the outside broker is acting as - c) a subagent.
6. To be valid, a listing agreement - b) may be oral or written.
7. A broker is hired to procure a customer for a client. In order to earn compensation, the agent must
procure a customer who - b) is ready, willing, and able to transact.
8. One of the most important actions an owner's agent is authorized to perform under an exclusive
listing agreement is - a) showing the property.
9. A listing agent's performance of due diligence concerning a listing can best be described as - c)
ascertaining the facts about the client and the property at the onset of the listing period.
10. The amount of a real estate broker's commission is - b) established through negotiation with clients.
11. The statute of limitations requires that parties to a contract who have been damaged or who
question the contract's provisions - a) must act within a statutory period.
12. The purpose of the statute of frauds is to - b) require certain conveyance-related contracts to be in
writing.
13. A seller immediately accepts a buyer's offer but waits eight days before returning the accepted
document to the buyer. Meanwhile, the offer has expired. Which of the following is true? - b) The buyer
has no obligations to the seller whatsoever.
, 14. A buyer agrees to all terms of a seller's offer except price. The buyer lowers the price by $1,000, signs
the form, and mails it back to the seller. At this point, the seller's offer - a) is void.
15. A buyer submits an offer to a seller. Two hours later, the buyer finds a better house, calls the first
seller, and withdraws the offer. Which of the following is true? - c) If the seller accepted the offer, the
buyer must perform.
16. A due-on-sale clause in a mortgage loan puts parties on notice that - b) any loans surviving closing
become immediately payable.
17. A sale contract may specifically deal with tax withholding responsibility if the seller is a foreigner.
What is this responsibility? - a) The buyer must withhold 10% of the purchase price at closing for the
seller's capital gain tax payment.
18. An important legal characteristic of an option-to- buy agreement is that - b) the optionor must
perform if the optionee takes the option, but the optionee is under no obligation to do so.
19. A tenant has an option-to-purchase agreement with the landlord that expires on June 30. On July 1,
the tenant frantically calls the landlord to exercise the option, offering the apology that she was busy
with a death in the family. Which of the following is true? - d) The option is expired, and the tenant has
no rightful claim to money paid for the option.
20. A tenant exercises an option to buy a condominium. The landlord agrees, but raises the agreed price
by $3,000, claiming financial distress. The landlord does, however, offer the tenant two months of free
rent before closing as an offset. Which of the following is true? - a) The tenant can force the sale at the
original terms.
21. Mrs. Jones bought a house for $47,000 and deposited $2,700 earnest money with the listing broker.
She got a 90% loan. If she has to pay 1% in attorney's fees based on the sale price, receives a credit of
$400 for taxes, and the bank charges 4 points on the loan amount, how much should she take to closing?
- d) $4,762
22. The process of securing a loan by pledging a property without giving up ownership of the property is
called: - a) Hypothecation.
23. In a deed of trust transaction: - b) The trustor conveys title to a trustee in exchange for loan funds
from the beneficiary.
24. States that use title-theory: - b) Regard the mortgage document as a conveyance of ownership from
the mortgagor to the mortgagee.
25. Which Texas Veterans Land Board program lends eligible Texas veterans up to $25,000 for up to 20
years on a fixed-rate note to make substantial repairs to their existing primary residence? - d) Veterans
Home Improvement Loan Program.
26. A distinctive feature of a promissory note is that - c) it is a negotiable instrument.
27. When the terms of the mortgage loan are satisfied, the mortgagee - d) may be required to execute a
release of mortgage document.
PRACTICE TEST QUESTIONS AND
ANSWERS
1. An owner's agent is showing a buyer an apartment building. The buyer notices water stains on the
ceiling, and informs the agent. The agent's best course of action is to - d) inform the seller.
2. An agent owes customers several duties. These may be best described as - d) honesty, diligence, and
skill.
3. An agent fails to discover flood marks on the walls in the basement of a property. The agent sells the
property, and the buyer later sues the agent for failing to mention the problem. In this case, the agent -
b) has an exposure to a charge of negligent misrepresentation.
4. An agent informs a buyer that a clause in a contract is standard language. After explaining the clause,
the agent assures the buyer that the clause does not mean anything significant. If something goes wrong
with the transaction, the agent could be liable for - c) intentional misrepresentation.
5. An outside broker locates a seller for a buyer representative's client but is also representing the buyer.
In this instance, the outside broker is acting as - c) a subagent.
6. To be valid, a listing agreement - b) may be oral or written.
7. A broker is hired to procure a customer for a client. In order to earn compensation, the agent must
procure a customer who - b) is ready, willing, and able to transact.
8. One of the most important actions an owner's agent is authorized to perform under an exclusive
listing agreement is - a) showing the property.
9. A listing agent's performance of due diligence concerning a listing can best be described as - c)
ascertaining the facts about the client and the property at the onset of the listing period.
10. The amount of a real estate broker's commission is - b) established through negotiation with clients.
11. The statute of limitations requires that parties to a contract who have been damaged or who
question the contract's provisions - a) must act within a statutory period.
12. The purpose of the statute of frauds is to - b) require certain conveyance-related contracts to be in
writing.
13. A seller immediately accepts a buyer's offer but waits eight days before returning the accepted
document to the buyer. Meanwhile, the offer has expired. Which of the following is true? - b) The buyer
has no obligations to the seller whatsoever.
, 14. A buyer agrees to all terms of a seller's offer except price. The buyer lowers the price by $1,000, signs
the form, and mails it back to the seller. At this point, the seller's offer - a) is void.
15. A buyer submits an offer to a seller. Two hours later, the buyer finds a better house, calls the first
seller, and withdraws the offer. Which of the following is true? - c) If the seller accepted the offer, the
buyer must perform.
16. A due-on-sale clause in a mortgage loan puts parties on notice that - b) any loans surviving closing
become immediately payable.
17. A sale contract may specifically deal with tax withholding responsibility if the seller is a foreigner.
What is this responsibility? - a) The buyer must withhold 10% of the purchase price at closing for the
seller's capital gain tax payment.
18. An important legal characteristic of an option-to- buy agreement is that - b) the optionor must
perform if the optionee takes the option, but the optionee is under no obligation to do so.
19. A tenant has an option-to-purchase agreement with the landlord that expires on June 30. On July 1,
the tenant frantically calls the landlord to exercise the option, offering the apology that she was busy
with a death in the family. Which of the following is true? - d) The option is expired, and the tenant has
no rightful claim to money paid for the option.
20. A tenant exercises an option to buy a condominium. The landlord agrees, but raises the agreed price
by $3,000, claiming financial distress. The landlord does, however, offer the tenant two months of free
rent before closing as an offset. Which of the following is true? - a) The tenant can force the sale at the
original terms.
21. Mrs. Jones bought a house for $47,000 and deposited $2,700 earnest money with the listing broker.
She got a 90% loan. If she has to pay 1% in attorney's fees based on the sale price, receives a credit of
$400 for taxes, and the bank charges 4 points on the loan amount, how much should she take to closing?
- d) $4,762
22. The process of securing a loan by pledging a property without giving up ownership of the property is
called: - a) Hypothecation.
23. In a deed of trust transaction: - b) The trustor conveys title to a trustee in exchange for loan funds
from the beneficiary.
24. States that use title-theory: - b) Regard the mortgage document as a conveyance of ownership from
the mortgagor to the mortgagee.
25. Which Texas Veterans Land Board program lends eligible Texas veterans up to $25,000 for up to 20
years on a fixed-rate note to make substantial repairs to their existing primary residence? - d) Veterans
Home Improvement Loan Program.
26. A distinctive feature of a promissory note is that - c) it is a negotiable instrument.
27. When the terms of the mortgage loan are satisfied, the mortgagee - d) may be required to execute a
release of mortgage document.
