Texas State Portion Real Estate Study Questions And
Answers 2025/2026
1. A property is encumbered by a first lien mortgage and a second lien home equity line of credit.
The borrower defaults, and the first lien holder initiates a non-judicial foreclosure under a power
of sale clause. At the foreclosure sale, the property is sold to a third party for an amount sufficient
to satisfy the first lien but not the second. Which of the following statements best describes the legal
status of the second lien after the foreclosure sale?
A. The second lien is automatically extinguished because the foreclosure sale transfers the property free and
clear of all subordinate liens.
B. The second lien remains attached to the property because the foreclosure sale did not satisfy the full debt, and
the second lien holder can redeem the property within 90 days.
C. The second lien is extinguished only if the second lien holder was joined as a party to the foreclosure
proceeding.
D. The second lien is converted into a personal judgment against the borrower, but the lien on the property is
extinguished.
Answer: A
Rationale: In Texas non-judicial foreclosures under a power of sale, the foreclosure sale of the property
extinguishes all junior liens, regardless of whether the sale proceeds satisfy those liens. The property
transfers to the purchaser free and clear of subordinate liens. The second lien holder's recourse is
against the borrower personally, but the lien on the property is extinguished. Texas does not provide a
statutory right of redemption after a non-judicial foreclosure (except for homestead property in limited
circumstances), so option B is incorrect. Option C is incorrect because junior lien holders are not
required to be joined. Option D is partially correct regarding the personal judgment but incorrectly
states the lien is extinguished only if the sale proceeds satisfy the debt.
2. A Texas real estate broker enters into a listing agreement with a seller for a commercial
property. The broker finds a ready, willing, and able buyer who submits an offer that meets all the
seller's terms. The seller verbally accepts the offer but later refuses to sign the written contract.
The broker demands a commission. Which of the following is the most accurate statement
regarding the broker's entitlement to a commission under Texas law?
A. The broker is entitled to a commission because the broker procured a buyer ready, willing, and able on the
seller's terms, regardless of a signed contract.
B. The broker is not entitled to a commission because there was no written agreement signed by the seller
authorizing the broker to earn a commission.
C. The broker is entitled to a commission only if the broker can prove that the seller acted in bad faith by
refusing to sign.
D. The broker is not entitled to a commission because the buyer did not actually purchase the property.
Answer: A
Rationale: Under Texas law, a broker earns a commission when they produce a buyer who is ready,
willing, and able to purchase on the seller's terms, even if the seller subsequently refuses to close. The
Page 1
,Texas Real Estate License Act does not require a written agreement for the broker to earn a commission,
though TREC rules require listing agreements to be in writing. However, the common law rule applies: if
the broker performs, the commission is earned. Option B is incorrect because while TREC requires
written agreements for enforcement, the broker can still claim the commission if the oral agreement is
proven. Option C is incorrect because bad faith is not required. Option D is incorrect because actual
purchase is not necessary if the seller prevents closing.
3. A developer plans to create a residential subdivision in Texas and wants to impose deed
restrictions that will run with the land for 50 years. Which of the following is the most effective
method to ensure that the restrictions are enforceable against all subsequent purchasers?
A. Record a declaration of covenants, conditions, and restrictions (CC&Rs) in the county deed records before
any lots are sold, and include a reference to the declaration in each deed.
B. Include the restrictions in the initial deed to the first purchaser and rely on the doctrine of notice by
possession.
C. File the restrictions with the Texas Real Estate Commission and obtain approval for the subdivision plat.
D. Post signs at the subdivision entrance listing the restrictions and include them in the sales contracts.
Answer: A
Rationale: To create enforceable deed restrictions that run with the land, Texas law requires a recorded
declaration (CC&Rs) that provides notice to all subsequent purchasers. Recording in the county deed
records gives constructive notice. Including the restrictions in each deed also works, but the most
effective method for a subdivision is a recorded declaration with a reference in each deed. Option B is
insufficient because restrictions in the first deed may not bind later purchasers if not properly
referenced. Option C is incorrect because TREC does not approve subdivision restrictions; the county
approves plats. Option D does not provide constructive notice and is ineffective for binding successors.
4. Under the Texas Real Estate License Act (TRELA), which of the following activities would
require a person to hold a valid real estate broker license?
A. An attorney licensed in Texas who negotiates the sale of a client's property as part of legal representation.
B. A property manager who, for a fee, negotiates a lease for an apartment unit on behalf of the owner, but does
not handle any rent or security deposits.
C. An auctioneer who sells real estate at auction on behalf of a seller, where the auctioneer's compensation is a
flat fee not contingent on the sale price.
D. A person who, as a regular business, lists and sells timeshare interests for others.
Answer: D
Rationale: Under TRELA, a real estate broker license is required for any person who, for another and for
compensation, lists, sells, or leases real property. Timeshare interests are considered real property, so
selling them as a business requires a broker license. Option A is an exception: attorneys licensed in
Texas are exempt when acting within the scope of their practice. Option B is not exempt; property
management activities generally require a license unless the person is an on-site manager of an
apartment complex (specific exemption). Option C: auctioneers are exempt only if they do not negotiate
the sale; here the auctioneer is selling real estate, which typically requires a license unless they are
merely conducting the auction without negotiating.
Page 2
,5. A Texas real estate agent is representing a buyer in the purchase of a residential property. The
seller's disclosure notice indicates that the property had a roof leak two years ago, which was
repaired. During the option period, the buyer's inspector discovers that the roof currently leaks.
The agent knows that the seller's disclosure was accurate at the time it was made, but the agent
also knows that the seller had a second, unrepaired roof leak that was not disclosed. Which of the
following actions is the agent obligated to take under the Texas Real Estate Commission (TREC)
Canons of Professional Ethics and Conduct?
A. The agent must disclose the known undisclosed defect to the buyer immediately, even though it may
jeopardize the transaction.
B. The agent must advise the buyer to hire a specialist to inspect the roof further, but cannot disclose the
specific known defect because it is confidential information obtained from the seller.
C. The agent must first obtain the seller's permission to disclose the defect; if the seller refuses, the agent must
withdraw from the representation.
D. The agent has no duty to disclose because the seller's disclosure was accurate when made, and the agent is
not required to investigate beyond the disclosure.
Answer: A
Rationale: TREC's Canons of Professional Ethics and Conduct require that an agent treat all parties
honestly and disclose all known facts that materially affect the property's value or desirability. The
agent's knowledge of the unrepaired leak is a material fact that must be disclosed to the buyer,
regardless of the seller's wishes. Option B is incorrect because confidentiality does not extend to
material defects; the duty of confidentiality is subordinate to the duty of honesty. Option C is incorrect
because the agent cannot simply withdraw; they must disclose. Option D is incorrect because the agent's
actual knowledge triggers a duty to disclose.
6. A Texas real estate broker is acting as an intermediary in a transaction where the broker has
appointed two different licensees to represent the buyer and the seller. During negotiations, the
buyer's appointed licensee learns that the seller is willing to accept a price $10,000 below the listed
price. The buyer's licensee shares this information with the buyer. The seller later discovers this
and files a complaint with TREC. Which of the following best describes the legality of the licensee's
actions?
A. The licensee acted properly because in an intermediary relationship, each appointed licensee owes full
fiduciary duties to the party they represent, including disclosing material information.
B. The licensee violated the duty of confidentiality owed to the seller because the seller's minimum price is
confidential information that cannot be disclosed without the seller's consent.
C. The licensee acted improperly because the intermediary broker must maintain strict confidentiality and
cannot allow appointed licensees to share any information between parties.
D. The licensee acted properly because the information was not confidential; the seller's willingness to accept a
lower price is a negotiation strategy, not a material fact.
Answer: A
Rationale: Under Texas law, when a broker acts as an intermediary with appointed licensees, each
licensee owes fiduciary duties to the party they represent, including the duty to disclose material
information that benefits their client. The seller's willingness to accept a lower price is material
information for the buyer. However, the seller's minimum price is not confidential if it was disclosed
during negotiations; the duty of confidentiality applies to information the seller explicitly designates as
confidential or that would harm the seller if disclosed. In this scenario, the seller's willingness to
Page 3
, negotiate is not confidential. Option B is incorrect because the information is not inherently
confidential. Option C is incorrect because appointed licensees can share information that benefits their
client, subject to confidentiality limits.
7. A Texas real estate licensee is preparing a residential lease agreement for a landlord. The
landlord wants to include a provision that waives the tenant's right to a jury trial in any dispute
arising from the lease. Which of the following is correct regarding the enforceability of such a
provision under Texas law?
A. The provision is unenforceable because Texas law prohibits waiver of jury trial rights in residential leases.
B. The provision is enforceable if it is conspicuous and the tenant knowingly and voluntarily agrees to it.
C. The provision is enforceable only if the lease is for a term of one year or longer.
D. The provision is unenforceable unless the tenant is represented by an attorney.
Answer: B
Rationale: Texas law generally allows parties to contractually waive the right to a jury trial, provided the
waiver is knowing, voluntary, and conspicuous. For residential leases, there is no statutory prohibition
against jury trial waivers. However, courts scrutinize such waivers for unconscionability. The waiver
must be clear and prominent. Option A is incorrect because there is no such prohibition. Option C is
incorrect because the lease term does not affect enforceability. Option D is incorrect because attorney
representation is not required.
8. A Texas real estate broker is hired by a seller to sell a commercial property. The broker enters
into a listing agreement that includes an automatic renewal clause. After the initial term expires,
the broker continues to market the property without a new agreement. Three months later, the
broker procures a buyer and the property sells. The seller refuses to pay a commission, arguing
that the listing agreement had expired. Which of the following is the most likely outcome under
Texas law?
A. The broker is entitled to a commission because the automatic renewal clause is valid and the broker
continued to perform.
B. The broker is not entitled to a commission because the automatic renewal clause is unenforceable unless the
broker provided the seller with a written notice of the renewal option at least 30 days before expiration.
C. The broker is entitled to a commission only if the broker can prove that the seller acquiesced to the continued
marketing.
D. The broker is not entitled to a commission because the listing agreement must be in writing and signed by the
seller for any extension.
Answer: B
Rationale: Under TREC rules, a listing agreement with an automatic renewal clause must contain a
provision requiring the broker to give the seller written notice of the renewal option at least 30 days
before the expiration of the initial term. If the broker fails to provide such notice, the renewal clause is
unenforceable. Here, the broker did not provide notice, so the agreement did not renew. The broker's
continued marketing does not create a new agreement. Option A is incorrect because the renewal clause
is unenforceable. Option C is incorrect because acquiescence does not create a binding contract without
a writing. Option D is incorrect because the issue is not the lack of a writing but the failure to comply
with the notice requirement.
Page 4
Answers 2025/2026
1. A property is encumbered by a first lien mortgage and a second lien home equity line of credit.
The borrower defaults, and the first lien holder initiates a non-judicial foreclosure under a power
of sale clause. At the foreclosure sale, the property is sold to a third party for an amount sufficient
to satisfy the first lien but not the second. Which of the following statements best describes the legal
status of the second lien after the foreclosure sale?
A. The second lien is automatically extinguished because the foreclosure sale transfers the property free and
clear of all subordinate liens.
B. The second lien remains attached to the property because the foreclosure sale did not satisfy the full debt, and
the second lien holder can redeem the property within 90 days.
C. The second lien is extinguished only if the second lien holder was joined as a party to the foreclosure
proceeding.
D. The second lien is converted into a personal judgment against the borrower, but the lien on the property is
extinguished.
Answer: A
Rationale: In Texas non-judicial foreclosures under a power of sale, the foreclosure sale of the property
extinguishes all junior liens, regardless of whether the sale proceeds satisfy those liens. The property
transfers to the purchaser free and clear of subordinate liens. The second lien holder's recourse is
against the borrower personally, but the lien on the property is extinguished. Texas does not provide a
statutory right of redemption after a non-judicial foreclosure (except for homestead property in limited
circumstances), so option B is incorrect. Option C is incorrect because junior lien holders are not
required to be joined. Option D is partially correct regarding the personal judgment but incorrectly
states the lien is extinguished only if the sale proceeds satisfy the debt.
2. A Texas real estate broker enters into a listing agreement with a seller for a commercial
property. The broker finds a ready, willing, and able buyer who submits an offer that meets all the
seller's terms. The seller verbally accepts the offer but later refuses to sign the written contract.
The broker demands a commission. Which of the following is the most accurate statement
regarding the broker's entitlement to a commission under Texas law?
A. The broker is entitled to a commission because the broker procured a buyer ready, willing, and able on the
seller's terms, regardless of a signed contract.
B. The broker is not entitled to a commission because there was no written agreement signed by the seller
authorizing the broker to earn a commission.
C. The broker is entitled to a commission only if the broker can prove that the seller acted in bad faith by
refusing to sign.
D. The broker is not entitled to a commission because the buyer did not actually purchase the property.
Answer: A
Rationale: Under Texas law, a broker earns a commission when they produce a buyer who is ready,
willing, and able to purchase on the seller's terms, even if the seller subsequently refuses to close. The
Page 1
,Texas Real Estate License Act does not require a written agreement for the broker to earn a commission,
though TREC rules require listing agreements to be in writing. However, the common law rule applies: if
the broker performs, the commission is earned. Option B is incorrect because while TREC requires
written agreements for enforcement, the broker can still claim the commission if the oral agreement is
proven. Option C is incorrect because bad faith is not required. Option D is incorrect because actual
purchase is not necessary if the seller prevents closing.
3. A developer plans to create a residential subdivision in Texas and wants to impose deed
restrictions that will run with the land for 50 years. Which of the following is the most effective
method to ensure that the restrictions are enforceable against all subsequent purchasers?
A. Record a declaration of covenants, conditions, and restrictions (CC&Rs) in the county deed records before
any lots are sold, and include a reference to the declaration in each deed.
B. Include the restrictions in the initial deed to the first purchaser and rely on the doctrine of notice by
possession.
C. File the restrictions with the Texas Real Estate Commission and obtain approval for the subdivision plat.
D. Post signs at the subdivision entrance listing the restrictions and include them in the sales contracts.
Answer: A
Rationale: To create enforceable deed restrictions that run with the land, Texas law requires a recorded
declaration (CC&Rs) that provides notice to all subsequent purchasers. Recording in the county deed
records gives constructive notice. Including the restrictions in each deed also works, but the most
effective method for a subdivision is a recorded declaration with a reference in each deed. Option B is
insufficient because restrictions in the first deed may not bind later purchasers if not properly
referenced. Option C is incorrect because TREC does not approve subdivision restrictions; the county
approves plats. Option D does not provide constructive notice and is ineffective for binding successors.
4. Under the Texas Real Estate License Act (TRELA), which of the following activities would
require a person to hold a valid real estate broker license?
A. An attorney licensed in Texas who negotiates the sale of a client's property as part of legal representation.
B. A property manager who, for a fee, negotiates a lease for an apartment unit on behalf of the owner, but does
not handle any rent or security deposits.
C. An auctioneer who sells real estate at auction on behalf of a seller, where the auctioneer's compensation is a
flat fee not contingent on the sale price.
D. A person who, as a regular business, lists and sells timeshare interests for others.
Answer: D
Rationale: Under TRELA, a real estate broker license is required for any person who, for another and for
compensation, lists, sells, or leases real property. Timeshare interests are considered real property, so
selling them as a business requires a broker license. Option A is an exception: attorneys licensed in
Texas are exempt when acting within the scope of their practice. Option B is not exempt; property
management activities generally require a license unless the person is an on-site manager of an
apartment complex (specific exemption). Option C: auctioneers are exempt only if they do not negotiate
the sale; here the auctioneer is selling real estate, which typically requires a license unless they are
merely conducting the auction without negotiating.
Page 2
,5. A Texas real estate agent is representing a buyer in the purchase of a residential property. The
seller's disclosure notice indicates that the property had a roof leak two years ago, which was
repaired. During the option period, the buyer's inspector discovers that the roof currently leaks.
The agent knows that the seller's disclosure was accurate at the time it was made, but the agent
also knows that the seller had a second, unrepaired roof leak that was not disclosed. Which of the
following actions is the agent obligated to take under the Texas Real Estate Commission (TREC)
Canons of Professional Ethics and Conduct?
A. The agent must disclose the known undisclosed defect to the buyer immediately, even though it may
jeopardize the transaction.
B. The agent must advise the buyer to hire a specialist to inspect the roof further, but cannot disclose the
specific known defect because it is confidential information obtained from the seller.
C. The agent must first obtain the seller's permission to disclose the defect; if the seller refuses, the agent must
withdraw from the representation.
D. The agent has no duty to disclose because the seller's disclosure was accurate when made, and the agent is
not required to investigate beyond the disclosure.
Answer: A
Rationale: TREC's Canons of Professional Ethics and Conduct require that an agent treat all parties
honestly and disclose all known facts that materially affect the property's value or desirability. The
agent's knowledge of the unrepaired leak is a material fact that must be disclosed to the buyer,
regardless of the seller's wishes. Option B is incorrect because confidentiality does not extend to
material defects; the duty of confidentiality is subordinate to the duty of honesty. Option C is incorrect
because the agent cannot simply withdraw; they must disclose. Option D is incorrect because the agent's
actual knowledge triggers a duty to disclose.
6. A Texas real estate broker is acting as an intermediary in a transaction where the broker has
appointed two different licensees to represent the buyer and the seller. During negotiations, the
buyer's appointed licensee learns that the seller is willing to accept a price $10,000 below the listed
price. The buyer's licensee shares this information with the buyer. The seller later discovers this
and files a complaint with TREC. Which of the following best describes the legality of the licensee's
actions?
A. The licensee acted properly because in an intermediary relationship, each appointed licensee owes full
fiduciary duties to the party they represent, including disclosing material information.
B. The licensee violated the duty of confidentiality owed to the seller because the seller's minimum price is
confidential information that cannot be disclosed without the seller's consent.
C. The licensee acted improperly because the intermediary broker must maintain strict confidentiality and
cannot allow appointed licensees to share any information between parties.
D. The licensee acted properly because the information was not confidential; the seller's willingness to accept a
lower price is a negotiation strategy, not a material fact.
Answer: A
Rationale: Under Texas law, when a broker acts as an intermediary with appointed licensees, each
licensee owes fiduciary duties to the party they represent, including the duty to disclose material
information that benefits their client. The seller's willingness to accept a lower price is material
information for the buyer. However, the seller's minimum price is not confidential if it was disclosed
during negotiations; the duty of confidentiality applies to information the seller explicitly designates as
confidential or that would harm the seller if disclosed. In this scenario, the seller's willingness to
Page 3
, negotiate is not confidential. Option B is incorrect because the information is not inherently
confidential. Option C is incorrect because appointed licensees can share information that benefits their
client, subject to confidentiality limits.
7. A Texas real estate licensee is preparing a residential lease agreement for a landlord. The
landlord wants to include a provision that waives the tenant's right to a jury trial in any dispute
arising from the lease. Which of the following is correct regarding the enforceability of such a
provision under Texas law?
A. The provision is unenforceable because Texas law prohibits waiver of jury trial rights in residential leases.
B. The provision is enforceable if it is conspicuous and the tenant knowingly and voluntarily agrees to it.
C. The provision is enforceable only if the lease is for a term of one year or longer.
D. The provision is unenforceable unless the tenant is represented by an attorney.
Answer: B
Rationale: Texas law generally allows parties to contractually waive the right to a jury trial, provided the
waiver is knowing, voluntary, and conspicuous. For residential leases, there is no statutory prohibition
against jury trial waivers. However, courts scrutinize such waivers for unconscionability. The waiver
must be clear and prominent. Option A is incorrect because there is no such prohibition. Option C is
incorrect because the lease term does not affect enforceability. Option D is incorrect because attorney
representation is not required.
8. A Texas real estate broker is hired by a seller to sell a commercial property. The broker enters
into a listing agreement that includes an automatic renewal clause. After the initial term expires,
the broker continues to market the property without a new agreement. Three months later, the
broker procures a buyer and the property sells. The seller refuses to pay a commission, arguing
that the listing agreement had expired. Which of the following is the most likely outcome under
Texas law?
A. The broker is entitled to a commission because the automatic renewal clause is valid and the broker
continued to perform.
B. The broker is not entitled to a commission because the automatic renewal clause is unenforceable unless the
broker provided the seller with a written notice of the renewal option at least 30 days before expiration.
C. The broker is entitled to a commission only if the broker can prove that the seller acquiesced to the continued
marketing.
D. The broker is not entitled to a commission because the listing agreement must be in writing and signed by the
seller for any extension.
Answer: B
Rationale: Under TREC rules, a listing agreement with an automatic renewal clause must contain a
provision requiring the broker to give the seller written notice of the renewal option at least 30 days
before the expiration of the initial term. If the broker fails to provide such notice, the renewal clause is
unenforceable. Here, the broker did not provide notice, so the agreement did not renew. The broker's
continued marketing does not create a new agreement. Option A is incorrect because the renewal clause
is unenforceable. Option C is incorrect because acquiescence does not create a binding contract without
a writing. Option D is incorrect because the issue is not the lack of a writing but the failure to comply
with the notice requirement.
Page 4
