Texas Real Estate Broker Practice Exam

1. A seller receives a written offer and returns it to the buyer with the price increased and the closing date changed, then signs it. In contract terms, the seller's response is best described as:

• A. An acceptance that binds both parties immediately
• B. A counteroffer that terminates the original offer
• C. A ratification of the buyer's original terms
• D. An option that keeps the original offer open

2. A purchase agreement states that the buyer's obligation to close is conditioned on obtaining mortgage financing within a stated period. This conditional provision is best described as:

• A. A contingency
• B. A counteroffer
• C. An addendum releasing all obligations
• D. A liquidated damages clause

3. A purchase contract provides that if the buyer defaults, the seller may keep the earnest money as a pre-agreed amount of compensation. This provision is an example of:

• A. Liquidated damages
• B. Punitive damages
• C. An assignment
• D. A contingency

4. A contract for the sale of land is fully signed but neither party has yet performed their obligations. This contract is most accurately classified as:

• A. An executed contract
• B. An executory contract
• C. A voidable contract
• D. An unenforceable contract

5. A minor who has not reached the age of majority signs a contract to purchase real property. As to the minor, the contract is generally:

• A. Void from the outset
• B. Voidable at the option of the minor
• C. Fully binding on both parties
• D. Enforceable only by the minor's parents

6. A buyer transfers all of their rights and interest under an existing purchase contract to a third party. This transfer of contractual rights is known as:

• A. Rescission
• B. Assignment
• C. Revocation
• D. Acceptance

7. After signing a purchase agreement, a buyer refuses to close without any legal justification. The seller's ability to sue to force the buyer to complete the purchase is a remedy known as:

• A. Novation
• B. Specific performance
• C. Rescission
• D. Liquidated damages

8. A buyer and seller of residential real property want their signed purchase agreement to be legally enforceable. Which element is essential to form a valid contract between them?

• A. A mutual agreement (offer and acceptance) supported by consideration
• B. Notarization of both signatures before a licensed notary
• C. Recording of the agreement in the county property records
• D. Approval of the terms by a licensed real estate broker

9. Two parties agree to discharge their existing contract and substitute a new party in place of one of the original parties, with everyone's consent. This substitution is called:

• A. Novation
• B. Reformation
• C. Assignment
• D. Ratification

10. A verbal agreement to sell a parcel of real estate is reached over the phone, but nothing is put in writing. Under the Statute of Frauds, this agreement is:

• A. Automatically valid because both parties agreed
• B. Generally unenforceable because contracts for the sale of real estate must be in writing
• C. Void because verbal agreements are illegal
• D. Enforceable only if witnessed by a third party

11. A tenant and landlord orally agree to a lease running for a term of three years. Must this lease be in writing to be enforceable?

• A. Yes, because the Statute of Frauds requires leases longer than one year to be in writing and signed by the party to be charged.
• B. No, because leases are exempt from the Statute of Frauds.
• C. No, because only sales of real estate must be in writing.
• D. Yes, but only because the lease must also be recorded.

12. A buyer emails an offer, and the seller replies, "I accept, but only if you also purchase the detached workshop for an additional sum." Why does no contract form on the original terms?

• A. Because acceptance must be unqualified, and adding a material term operates as a counteroffer that rejects the original offer.
• B. Because an emailed offer cannot satisfy the requirement of mutual assent.
• C. Because the seller may revoke the offer at any time before acceptance.
• D. Because the added term is a contingency that automatically forms the contract.

13. A seller receives a buyer's offer and returns it with the price raised by $5,000, leaving all other terms unchanged. Under contract law, what is the legal effect of the seller's response?

• A. It is a valid acceptance because the essential terms remain the same.
• B. It is a counteroffer that rejects and extinguishes the buyer's original offer.
• C. It is a contingency that suspends the buyer's duty to perform.
• D. It creates a voidable contract the buyer may later disaffirm.

14. A buyer defaults on a signed purchase contract that contains a liquidated damages clause. What is the seller's agreed remedy under that clause?

• A. The seller may compel the buyer to complete the purchase through specific performance.
• B. The seller may retain the earnest money as the agreed measure of the buyer's default.
• C. The seller must return the earnest money and re-list the property.
• D. The seller may declare the entire purchase price immediately due.

15. An oral agreement to sell a parcel of land is fully agreed to by both parties, but nothing is put in writing. The seller then refuses to proceed. Why can the buyer likely not enforce the agreement in court?

• A. Because the buyer failed to record the agreement in the public land records.
• B. Because land-sale agreements require specific performance to form.
• C. Because the Statute of Frauds requires contracts for the sale of real estate to be in writing and signed by the party to be charged.
• D. Because oral contracts are automatically void from the outset.

16. A 16-year-old minor signs a contract to purchase a condominium. Which term best describes this contract's status?

• A. Void, because it never existed legally.
• B. Voidable, because a party such as a minor may disaffirm it.
• C. Unenforceable, because it was not in writing.
• D. Valid and binding, because consideration was exchanged.

17. A prospective buyer signs and hands over a written offer to purchase a house. Before the seller communicates any acceptance, the buyer telephones the seller to withdraw the offer. Is the withdrawal effective?

• A. Yes, because an offer may be revoked at any time before acceptance is communicated.
• B. No, because a written offer becomes irrevocable once it is delivered.
• C. No, because only the seller may terminate a pending offer.
• D. Yes, but only if the buyer forfeits the earnest money as liquidated damages.

18. Which combination lists the essential elements required for a valid real estate contract?

• A. Mutual assent, consideration, legally competent parties, and a lawful object.
• B. Offer, earnest money, recording, and delivery.
• C. Consideration, a granting clause, acknowledgment, and possession.
• D. Mutual assent, a contingency, a title search, and closing.

19. After the parties sign a binding purchase contract, the seller changes her mind and refuses to convey the property. Which remedy is available to the buyer specifically because land is considered unique?

• A. Retention of the earnest money as liquidated damages.
• B. Disaffirmance of the contract.
• C. Specific performance to compel the conveyance.
• D. Revocation of the original offer.

20. A purchase agreement states that the buyer's obligation to close depends on the buyer securing mortgage financing. What is this provision called?

• A. A liquidated damages clause.
• B. A contingency.
• C. A counteroffer.
• D. An acceleration clause.

21. A seller under contract to sell a home dies before closing. Assuming the contract is otherwise valid and enforceable, what generally happens to the obligation to complete the sale?

• A. The contract is automatically voided the moment the seller dies
• B. The buyer automatically forfeits the earnest money regardless of any default
• C. The contract automatically converts into a lease with the seller's estate
• D. The obligation generally survives and passes to the seller's estate, which must still perform

22. A signed purchase contract lists the property address, purchase price, and signatures of both parties, but omits any description of the earnest money terms. Is the contract necessarily invalid for this omission?

• A. Yes, earnest money terms are always legally required to form any valid contract
• B. Not necessarily, the essential elements of a valid contract can still be present even without an earnest money clause
• C. Yes, because every blank on a form contract must be filled in to form a valid contract
• D. No, because contracts never require any form of consideration to be enforceable

23. A real estate sales contract is signed by both parties and fully performed, with the deed delivered and payment made at closing. How is this contract best classified at that point?

• A. Executed contract
• B. Executory contract
• C. Void contract
• D. Unilateral contract

24. A contract for the sale of land is signed by parties who both have full legal capacity, but the subject matter of the agreement is something illegal, such as an arrangement that violates fair housing law. What is the status of this contract?

• A. Voidable at either party's option, but enforceable until challenged
• B. Valid but unenforceable only against the seller, not the buyer
• C. Void, because a contract for an illegal purpose is not enforceable
• D. Automatically converted into an option contract instead of a sale

25. A seller signs a listing agreement with a broker but retains the right to sell the property personally without owing a commission if the seller, not the broker, finds the buyer. What type of listing is this?

• A. Exclusive right to sell listing
• B. Open listing
• C. Exclusive agency listing
• D. Net listing

26. A candidate compares an estate held indefinitely with full ownership rights against a right to use property for the duration of someone's life. Which pairing correctly labels these two interests?

• A. A fee simple estate versus a life estate.
• B. A leasehold versus an easement.
• C. A lien versus an encumbrance.
• D. A fixture versus a chattel.

27. While reviewing forms of ownership, a candidate encounters the term 'bundle of rights.' Which description best captures this concept?

• A. A set of distinct rights an owner holds, such as the rights to possess, use, exclude, and transfer the property.
• B. A single indivisible right that cannot be separated or transferred.
• C. A physical bundle of documents kept at the county office.
• D. A limit on how many properties one person may ever own.

28. In the Property Ownership section, a broker explains the difference between real property and personal property to a new agent. Which characterization best distinguishes the two?

• A. Personal property can never be converted into real property under any circumstances.
• B. Real property is always movable, while personal property is always affixed to land.
• C. Real property includes land and things permanently affixed to it, while personal property is movable and not permanently attached.
• D. Real and personal property are legally identical in every respect.

29. A candidate wants to confirm that meeting the National passing standard does NOT depend on getting every question right. Given the confirmed figures, which statement is consistent with the exam design?

• A. A candidate can pass the National examination by answering 60 questions correctly, which is fewer than the 145 scored questions on the exam.
• B. A candidate must answer all 145 scored questions correctly to pass the National examination.
• C. The passing requirement of 60 correct exceeds the total of 145 scored questions.
• D. The passing requirement and the total question count are the same number.

30. In the Property Ownership section, a client asks about an interest that gives one party the right to cross a neighbor's land to reach a road. Which term best describes this interest?

• A. An easement.
• B. A fee simple absolute.
• C. A personal-property chattel.
• D. A mortgage note.

31. An agent studying the Property Ownership outline reviews the concept of a fixture. Which factor is most commonly used to determine whether an item has become a fixture?

• A. The color of the item regardless of how it is attached.
• B. Whether the item was purchased with cash or credit.
• C. The brand name printed on the item.
• D. The manner and permanence of the item's attachment to the real property.

32. A candidate preparing for the licensing exam wants to know how the Property Ownership section fits into the overall test. Based only on the confirmed exam structure, which statement is accurate?

• A. The Property Ownership items are drawn from a total pool of 145 scored questions on the exam.
• B. The Property Ownership items are the only scored questions on the exam.
• C. The exam contains no scored questions at all.
• D. The exam contains exactly 60 scored questions in total.

33. A study group debates the passing standard for the National portion of the exam. Which statement correctly reflects the confirmed passing requirement?

• A. A candidate must answer 60 questions correctly on the National examination.
• B. A candidate must answer all 145 questions correctly.
• C. A candidate must answer 240 questions correctly.
• D. There is no passing threshold; the exam is ungraded.

34. An owner is uncertain whether she holds any interest at all in a parcel but is willing to transfer whatever interest she may have, without promising anything about the title. Which instrument fits this situation?

• A. A general warranty deed
• B. A quitclaim deed
• C. A deed with covenants of seisin and warranty forever
• D. An easement appurtenant

35. A dominant-tenement owner sells her parcel to a new buyer. What generally happens to an existing easement appurtenant that benefits that parcel?

• A. It is extinguished automatically upon the sale
• B. It runs with the land and continues to benefit the new owner
• C. It converts into a property tax lien on the servient tenement
• D. It must be re-created by a general warranty deed each time the land is sold

36. Why does a purchaser record a deed in the public land records after closing?

• A. Recording converts a quitclaim deed into a general warranty deed
• B. Recording gives constructive notice to the world and establishes priority
• C. Recording is what makes delivery and acceptance unnecessary
• D. Recording is required before the deed can be signed by the grantor

37. A property has three liens: a mortgage recorded in 2019, a mechanic's lien recorded in 2021, and an unpaid property tax lien assessed in 2023. Which generally has priority?

• A. The 2019 mortgage, because it was recorded first
• B. The 2021 mechanic's lien, because it is more recent than the mortgage
• C. The 2023 property tax lien, regardless of when the others were recorded
• D. All three share priority equally by date

38. A seller signs a document intended to transfer real property but never physically hands it over to the buyer and the buyer never accepts it. Under the requirements for a valid deed, what is the effect?

• A. The deed is fully effective once signed by the grantor
• B. The deed is ineffective because delivery and acceptance are required
• C. The deed is effective only if it omits a legal description
• D. The deed is effective because recording substitutes for delivery

39. Two adjoining parcels share a driveway easement: Parcel A benefits from the right to cross Parcel B. In easement-appurtenant terms, how are the parcels described?

• A. Parcel A is the servient tenement; Parcel B is the dominant tenement
• B. Parcel A is the dominant tenement; Parcel B is the servient tenement
• C. Both parcels are servient tenements
• D. Neither parcel is burdened because the easement does not run with the land

40. A cautious buyer wants the broadest possible protection of title, with the grantor standing behind the title against defects arising at any point in the chain of ownership. Which deed should the buyer insist upon?

• A. A quitclaim deed
• B. A general warranty deed
• C. A deed containing no granting clause
• D. A life estate deed

41. Which element is NOT among the requirements for a deed to be effective?

• A. A legal description of the property
• B. A granting clause (words of conveyance)
• C. The signature of the grantee
• D. Delivery and acceptance

42. Grantor conveys property "to Alice for the duration of her life, then to Bob." What best describes Bob's position?

• A. Bob holds a fee simple absolute that vests immediately
• B. Bob is a remainderman who takes title after Alice's death
• C. Bob holds only an easement appurtenant over the parcel
• D. Bob's interest is void because life estates cannot name a future taker

43. A homeowner wants to hold the strongest, most complete ownership interest the law recognizes — one that can be freely passed to heirs and sold without limitation. Which estate best describes this interest?

• A. A life estate
• B. A fee simple absolute
• C. An easement appurtenant
• D. A leasehold estate held under a quitclaim

44. A developer wants to sell individual airspace units within a building while the land, structure, and common areas remain jointly owned by all unit owners through an association. Which form of ownership does this describe?

• A. Cooperative ownership
• B. Tenancy in common
• C. Condominium ownership
• D. Timeshare ownership

45. A property owner grants an oil and gas company the right to enter the land, drill wells, and extract minerals for a set period in exchange for royalty payments. What best describes this arrangement?

• A. A mineral lease
• B. A life estate
• C. An easement appurtenant
• D. A deed restriction

46. A homeowner association enforces a rule requiring all owners in a planned community to pay dues that fund maintenance of common areas like parks and pools, and refusal to pay can result in a lien against the owner's property. What best explains the legal basis for this lien?

• A. It arises automatically from government tax law
• B. It is a form of eminent domain
• C. It is a mechanic's lien for construction work performed on the property
• D. It arises from the recorded restrictive covenants and association bylaws the owner agreed to by purchasing in the community

47. A property borders a flowing river, and the owner's rights to use the water for reasonable purposes are governed by the property's location along the waterway. What category of rights does this describe?

• A. Littoral rights
• B. Subsurface rights
• C. Air rights
• D. Riparian rights

48. A seller wants to convey only whatever interest they might have in a parcel, without making any promise or warranty about the quality or validity of that title. Which conveyance instrument accomplishes this?

• A. General warranty deed
• B. Special warranty deed
• C. Quitclaim deed
• D. Grant deed

49. An owner transfers property to their son, but with the condition that if alcohol is ever sold on the premises, the property reverts back to the owner. What kind of estate has the son received?

• A. Fee simple absolute
• B. Fee simple determinable
• C. Life estate
• D. Leasehold estate

50. A married couple in a common-law property state takes title together with rights of survivorship available only to married spouses, and neither spouse can convey their share without the other's consent. What is this ownership form called?

• A. Tenancy by the entirety
• B. Tenancy in common
• C. Community property
• D. Severalty

51. On the National portion of the examination, what is the minimum number of questions a candidate must answer correctly to pass?

• A. 45 questions
• B. 75 questions
• C. 53 questions
• D. 60 questions

52. A candidate paid the examination fee and did not pass on the first attempt. To sit for the exam a second time, how much must the candidate pay again, assuming the standard published fee applies to each attempt?

• A. $0 — retakes are free
• B. $19
• C. $39
• D. $78

53. Which of the following statements correctly pairs an examination parameter with its published value?

• A. The examination is allotted 145 minutes.
• B. The examination fee is $39.
• C. The examination contains 240 scored questions.
• D. The National passing standard is 145 correct questions.

54. A licensee agrees to represent a seller and, several months after the closing, is asked by a nosy acquaintance to reveal the lowest price the former seller would have accepted. Under the agent's fiduciary duties, what is the licensee's obligation?

• A. The duty ended at closing, so the licensee may share the figure freely.
• B. The licensee must keep the information confidential because that duty survives termination of the agency.
• C. The licensee may disclose it only if the acquaintance is also a client.
• D. The licensee must disclose it to promote honesty and fair dealing.

55. A grantor wants to give a buyer the greatest possible protection of title, warranting against all defects arising at any time. Which deed should be used?

• A. A quitclaim deed.
• B. A general warranty deed.
• C. A life estate deed.
• D. A deed of trust.

56. A buyer defaults on an otherwise valid purchase agreement. The seller refuses to sue for money and instead asks the court to force the buyer to complete the purchase. Which remedy is the seller pursuing, and why is it available for real estate?

• A. Liquidated damages, because the earnest money is forfeited.
• B. Rescission, because the contract can be undone.
• C. Specific performance, because land is deemed unique.
• D. An acceleration remedy, because the balance is due.

57. A broker holds earnest money on behalf of a client. To comply with the accounting duty, where must the broker place those funds?

• A. In the broker's operating account, so long as records are kept.
• B. In a separate trust or escrow account, never commingled with the broker's own funds.
• C. In any interest-bearing account chosen by the broker.
• D. In the seller's personal account until closing.

58. A property manager is engaged to lease units, collect rent, hire vendors, and handle day-to-day operations for an apartment complex over an indefinite period. How is this agent best classified?

• A. A special agent, because leasing is a single type of transaction.
• B. A general agent, because the manager may bind the principal in a range of matters.
• C. A dual agent, because the manager serves both owner and tenants.
• D. A customer, because no fiduciary duties are owed.

59. Two neighbors shook hands on an oral agreement to sell a vacant lot, but nothing was ever written down. When the seller backs out, why can the buyer not enforce the deal in court?

• A. Because the parties were not legally competent.
• B. Because a vacant lot cannot be sold without a survey.
• C. Because oral contracts always lack consideration.
• D. Because the Statute of Frauds requires contracts for the sale of real estate to be in writing and signed by the party to be charged.

60. An agent discourages a family from viewing homes in one neighborhood and steers them toward another based on the family's national origin. Which prohibited practice under the federal Fair Housing Act does this describe?

• A. Blockbusting.
• B. Redlining.
• C. Steering.
• D. A lawful client preference, since national origin is not protected.

61. A parcel has an unpaid property tax lien recorded years after a first mortgage was recorded against the same land. When the property is sold at auction, how do these liens rank in priority?

• A. The mortgage takes priority because it was recorded first.
• B. The two liens share priority equally regardless of type.
• C. The property tax lien takes priority over the mortgage regardless of when it was recorded.
• D. Priority is decided by the size of each debt.

62. A buyer submits a written offer. Before the seller communicates any acceptance, the buyer calls to withdraw the offer. Is the withdrawal effective?

• A. No, because a written offer cannot be withdrawn once submitted.
• B. No, because the seller was still considering the offer.
• C. Yes, because an offer may be revoked any time before acceptance is communicated.
• D. Yes, but only if the buyer forfeits the earnest money.

63. A seller responds to a buyer's offer by returning the document with the price raised by $10,000 and the closing date moved. Legally, what is the effect of the seller's response on the buyer's original offer?

• A. It accepts the offer with minor modifications that the buyer must honor.
• B. It operates as a counteroffer that rejects and extinguishes the original offer.
• C. It has no effect until the buyer signs again.
• D. It creates a binding contract at the original price.

64. A lender refuses to make loans in a specific geographic area primarily because of the racial composition of the neighborhood, regardless of individual applicants' creditworthiness. What is this illegal practice called?

• A. Steering
• B. Blockbusting
• C. Redlining
• D. Puffing

65. A licensed Texas broker is found to have commingled client trust funds with personal operating funds, a violation of license law. Which entity has authority to investigate the complaint and impose discipline such as suspension or revocation?

• A. The local county clerk's office
• B. The Texas Secretary of State
• C. The Texas Real Estate Commission
• D. The buyer's title insurance company

66. A Texas sales agent represents a buyer but also owns a home improvement company that could profit from repairs recommended after an inspection. Under the agent's fiduciary duty of loyalty, what must the agent do regarding this conflict of interest?

• A. Nothing, as long as the referral happens to be convenient for the client
• B. Disclose the conflict of interest to the client and act in the client's best interest, not the agent's own financial interest
• C. Automatically decline to represent the buyer in any transaction going forward
• D. Refer the repair work only to a directly competing company instead

67. A real estate agent tells homeowners in a neighborhood that property values will soon decline because families of a certain protected class are moving in, encouraging panic sales at artificially low prices. What prohibited Fair Housing Act practice does this describe?

• A. Steering
• B. Blockbusting
• C. Redlining
• D. Puffing

68. A title company is preparing to close a Texas residential sale and researches the chain of title to identify any liens, encumbrances, or defects before issuing a policy. What is the primary purpose of the title insurance policy issued at closing?

• A. To insure the physical condition of the structure against future damage
• B. To protect the buyer, and or the lender, against financial loss from title defects, undisclosed liens, or ownership disputes that existed before the policy was issued but were not discovered
• C. To guarantee the buyer a specific resale price for the property in the future
• D. To eliminate any need for a boundary survey of the property

69. A property owner along a navigable Texas waterway wants to understand who generally owns the streambed and holds certain public access rights, versus who holds private rights along the bank. Under Texas water law principles, what generally distinguishes rights in navigable versus non-navigable waterways?

• A. All waterways in Texas are treated as entirely private, with no public rights regardless of navigability
• B. All waterways in Texas are treated as entirely state-owned, with no private riparian rights at all
• C. Navigability has no legal significance to water rights anywhere in Texas
• D. Navigable waterways are generally treated as public, with the state holding the streambed and the public retaining certain access and use rights, while non-navigable waterways are more fully subject to private riparian rights of adjoining owners

70. A Texas broker allows a buyer to make installment payments directly to the seller over several years for a vacant lot, without immediately transferring title, structured as a contract for deed. Under Texas law, why does this type of arrangement receive special statutory scrutiny and protections for the buyer?

• A. Because contracts for deed are entirely prohibited from being used in Texas
• B. Because only licensed attorneys are permitted to act as sellers in these arrangements
• C. Because contract-for-deed buyers historically lacked protections that traditional mortgage buyers had, so Texas law imposes specific disclosure, recording, and conversion requirements to protect them
• D. Because contracts for deed automatically transfer full legal title to the buyer at signing

71. A consumer believes a Texas real estate licensee engaged in a deceptive or unfair practice, such as a false representation about a property's condition, in connection with a sale. Besides filing a complaint with the licensing agency, what other type of legal action might the consumer pursue based on such conduct?

• A. A federal antitrust claim against the licensee
• B. A civil claim under the Texas Deceptive Trade Practices Act
• C. A workers' compensation claim against the licensee
• D. A claim under the Uniform Commercial Code for the sale of goods

72. A Texas sales agent gives a client detailed advice on how to interpret specific legal language in a complex contract clause and drafts custom contractual provisions not found on a standard promulgated form. What risk does this create for the agent?

• A. No risk at all, because agents are automatically authorized to practice law in real estate matters
• B. The agent risks losing only their errors and omissions insurance coverage
• C. The client automatically loses standing to enforce the resulting contract
• D. The agent risks engaging in the unauthorized practice of law, which is outside the scope of a real estate license

73. Before a Texas licensee begins representing a party in a residential transaction, the licensee provides a statutorily required written disclosure explaining the types of representation available. What is this document generally called?

• A. Seller's Disclosure Notice
• B. Closing Disclosure
• C. Information About Brokerage Services notice
• D. Truth in Lending disclosure

74. A newly licensed Texas sales agent wants to operate independently, listing and selling properties directly under their own name without being supervised by a broker. Under Texas license law, is this permitted?

• A. No, a sales agent must be sponsored by and work under the supervision of a licensed broker to legally engage in real estate brokerage activity
• B. Yes, once the agent passes the licensing exam, sponsorship becomes entirely optional
• C. Yes, sales agents automatically qualify to act as brokers after one year of licensure
• D. Yes, but only for transactions involving commercial rather than residential property

75. A Texas broker maintains a separate bank account exclusively for holding client earnest money and other trust funds, apart from the broker's own operating funds. What principle does this practice reflect?

• A. A purely optional bookkeeping preference with no underlying legal basis
• B. A requirement that applies only when trust funds exceed a specific dollar threshold
• C. A rule that applies only to commercial, not residential, real estate transactions
• D. The fiduciary duty to properly account for and safeguard client funds by avoiding commingling

76. Which of the following correctly pairs an exam attribute with its stated value?

• A. Scored questions — 145
• B. Fee — 145 minutes
• C. National passing count — 240
• D. Duration — $39

77. A lender charges 2 discount points on a $200,000 loan. Based on the definition of a discount point, what is the dollar cost of those points, and what is their purpose?

• A. $4,000, paid as prepaid interest to buy down the interest rate
• B. $2,000, refunded to the borrower at closing
• C. $20,000, applied to the loan principal
• D. $400, used to pay the appraisal fee

78. So that borrowers can compare the true cost of credit, which disclosures does the Truth in Lending Act, implemented by Regulation Z, require?

• A. The seller's original purchase price and property tax history
• B. The listing broker's commission split
• C. The annual percentage rate (APR) and the total finance charge
• D. The capitalization rate and net operating income

79. A buyer makes a 10% down payment on a conventional loan. Based on the standard threshold, what is the likely consequence?

• A. Private mortgage insurance will typically be required
• B. The loan automatically converts to a VA loan
• C. No mortgage insurance can ever be required on a conventional loan
• D. The lender must hold legal title until payoff

80. An eligible veteran wants a loan program that is guaranteed by the government and can permit a purchase with no down payment. Which loan type fits?

• A. A VA loan
• B. A conventional loan
• C. An FHA loan
• D. A quitclaim loan

81. A borrower obtains a real estate loan. Which pair of instruments is created in a typical mortgage loan transaction?

• A. A promissory note evidencing the debt and a mortgage or deed of trust pledging the property as security
• B. A general warranty deed and a quitclaim deed
• C. A Loan Estimate and a life estate
• D. A listing agreement and an easement appurtenant

82. A homeowner refinances the mortgage on their principal residence. Under TILA and Regulation Z, what protection may apply to certain such refinances?

• A. A three-day right of rescission
• B. A mandatory acceleration of the old loan
• C. An automatic waiver of the APR disclosure
• D. A guarantee of no down payment

83. Which statement correctly distinguishes conventional and FHA financing?

• A. Conventional loans are not government-backed, while FHA loans are insured by the Federal Housing Administration and allow low down payments
• B. Conventional loans are insured by the FHA, while FHA loans are guaranteed for veterans
• C. FHA loans are not government-backed, while conventional loans require no down payment
• D. Both conventional and FHA loans are guaranteed by the VA

84. After a borrower misses several payments, the lender wishes to demand the full remaining loan balance at once rather than only the overdue installments. Which mortgage clause permits this?

• A. The liquidated damages clause
• B. The confidentiality clause
• C. The substitution clause
• D. The acceleration clause

85. A settlement agent is asked whether a lender may pay an agent an unearned fee simply for referring borrowers. Which federal law addresses this, and what does it require?

• A. RESPA, which prohibits kickbacks and unearned referral fees and requires the Loan Estimate and Closing Disclosure
• B. TILA, which permits referral fees but caps them at one point
• C. The Statute of Frauds, which requires all referral fees to be in writing
• D. The Civil Rights Act of 1866, which exempts referral fees from disclosure

86. In a state that follows the lien theory of mortgages, who holds legal title to the property while the loan is being repaid?

• A. The county recorder holds title in trust
• B. Title is split equally between borrower and lender
• C. The lender holds legal title until the debt is paid
• D. The borrower holds title and the lender holds only a lien

87. A loan's interest rate is fixed for an initial period and then adjusts periodically based on a financial index plus a margin. What type of loan is this?

• A. Fixed-rate mortgage
• B. Balloon mortgage
• C. Graduated payment mortgage
• D. Adjustable-rate mortgage

88. A lender adds up a borrower's total monthly debt obligations, including the proposed housing payment plus car loans, credit cards, and other debts, and compares that total to gross monthly income. What is this broader ratio called?

• A. The debt-to-income (back-end) ratio
• B. The loan-to-value ratio
• C. The housing (front-end) ratio
• D. The capitalization rate

89. A lender denies a loan applicant based on the applicant's marital status rather than the applicant's creditworthiness. Which federal law most directly prohibits this type of lending discrimination?

• A. Real Estate Settlement Procedures Act
• B. Truth in Lending Act (Regulation Z)
• C. Fair Housing Act
• D. Equal Credit Opportunity Act

90. A buyer finances 80% of a home's purchase price with a loan and pays the remaining 20% in cash. What is the loan-to-value ratio in this transaction?

• A. 20%
• B. 80%
• C. 100%
• D. 60%

91. A Texas borrower defaults on a loan secured by a deed of trust, and the lender proceeds to foreclose without going through the court system, following the power-of-sale provision in the deed of trust. What is this foreclosure process called?

• A. Judicial foreclosure
• B. Non-judicial foreclosure
• C. Strict foreclosure
• D. Deed in lieu of foreclosure

92. A settlement agent is reviewing a residential loan closing and wants to confirm compliance with the federal law prohibiting kickbacks and unearned referral fees between settlement service providers. Which federal law governs this?

• A. Truth in Lending Act
• B. Fair Housing Act
• C. Real Estate Settlement Procedures Act
• D. Equal Credit Opportunity Act

93. A lender charges a borrower 2 discount points on a $150,000 loan to lower the interest rate offered. Based on the standard meaning of a discount point, what is the dollar cost of these points?

• A. $1,500
• B. $300
• C. $3,000
• D. $15,000

94. A developer takes out a single loan secured by several separate parcels of land, with a release clause allowing individual parcels to be released from the lien as they are sold. What is this type of loan called?

• A. Wraparound mortgage
• B. Blanket mortgage
• C. Package mortgage
• D. Bridge loan

95. A borrower fully repays a loan secured by a deed of trust. What document is recorded to clear the lien from the property's title records?

• A. A satisfaction of judgment only, with no separate lien release needed
• B. A new deed of trust replacing the original one
• C. A release of lien (or deed of reconveyance)
• D. A quitclaim deed from the lender back to itself

96. A seller finances a portion of a buyer's purchase by carrying a loan that wraps around the buyer's existing or new first mortgage, collecting a single combined payment and forwarding a portion of it to the original lender. What type of financing arrangement is this?

• A. Wraparound mortgage
• B. Assumption financing
• C. Blanket mortgage
• D. Package mortgage

97. A loan requires small periodic payments for a period of time, followed by one large final payment that pays off the remaining balance. What type of loan structure is this?

• A. Balloon mortgage
• B. Adjustable-rate mortgage
• C. Fully amortized fixed-rate mortgage
• D. Graduated payment mortgage

98. A buyer makes a down payment of less than 20% on a conventional loan. Based on standard lending practice, what is the buyer typically required to purchase to protect the lender against default?

• A. Title insurance
• B. Homeowners hazard insurance only, with no additional coverage required
• C. Private mortgage insurance
• D. Flood insurance, regardless of the property's flood zone designation

99. A borrower's loan document contains a clause allowing the lender to demand full payment of the remaining loan balance immediately if the property is sold or title is transferred without the lender's consent. What is this clause called?

• A. Acceleration clause triggered only by missed payments, not by a transfer of title
• B. Due-on-sale clause
• C. Defeasance clause
• D. Subordination clause

100. A borrower's monthly housing payment, including principal, interest, taxes, and insurance, is compared to their gross monthly income to determine loan eligibility. What is this ratio commonly called?

• A. The loan-to-value ratio
• B. The debt-to-income (back-end) ratio
• C. The capitalization rate
• D. The housing (front-end) qualifying ratio