Texas Real Estate Sales Agent Exam flashcards

Regulations set forth by the Texas Real Estate Commission regarding the establishment and operation of branch offices by licensed real estate brokers.

• Must be supervised by a broker or broker associate.
• Broker must file an application and pay a fee for the branch office.
• Broker is responsible for all activities at the branch office.

Memory trick: Brokers must follow TREC's 'Office Oversight' rules.

Real estate agents have a duty to be honest and truthful, avoid making false statements or predictions, and only provide advice within their licensed area of expertise, referring clients to experts for other matters.

• Cannot make guarantees about future property values or market conditions.
• Must disclose all known material facts truthfully.
• Should not provide legal, tax, or financial advice unless also licensed in those fields.

Memory trick: Ethics are 'Honest Handling, Expert Hand-offs'.

A provision in a Buyer Representation Agreement stating that if the commission offered by the seller or listing agent is less than the agreed-upon amount with the buyer's agent, the buyer is responsible for paying the difference.

• Part of a Buyer Representation Agreement
• Buyer pays if seller's commission offer is too low
• Ensures buyer's agent receives agreed compensation

Memory trick: Difference in pay, buyer must make up the way.

Actions performed for another party for compensation that involve the sale, exchange, purchase, or lease of real estate in Texas, as defined by TRELA.

• Involves real estate transactions
• Performed for another party
• Done for compensation or expectation of compensation

Memory trick: If you're paid to help others with property, a license key unlocks the door.

A type of lease where the rental payments are adjusted periodically based on an agreed-upon economic index, such as the Consumer Price Index (CPI).

• Rent fluctuates based on an index
• Common in long-term commercial leases
• Protects landlord against inflation

Memory trick: Index finger points to the CPI for rent changes.

A fundamental obligation under agency law and TRELA for a real estate broker to promptly present all offers, regardless of their terms, to their client, unless the client provides specific, lawful instructions otherwise.

• Applies to all written offers
• Must be prompt
• Only lawful and specific instructions can alter this duty

Memory trick: Every offer is a package: deliver them all, unless the law or clear, lawful client rules say no.

A mandatory requirement for a Texas real estate sales agent to activate their license, where a licensed Texas real estate broker agrees to supervise their activities.

• Required for active status
• Broker is responsible for sales agent's actions
• License remains inactive without sponsorship

Memory trick: To open the sales agent door, find a broker's helping hand.

The Texas Real Estate Commission (TREC) promulgates various addenda to be used with its standard contract forms to address common contingencies and situations in real estate transactions.

• Must be used by licensees for their intended purpose.
• Cover common scenarios like financing, property condition, and sale of other property.
• Prevent the unauthorized practice of law by agents.

Memory trick: When a buyer needs to sell, a TREC addendum is the correct way to compel.

Under the Texas Property Code, a landlord has a legal obligation to make a diligent effort to repair or remedy a condition if it materially affects the physical health or safety of an ordinary tenant, provided the tenant is current on rent and has given proper notice.

• Applies to health/safety issues
• Tenant must give notice and be current on rent
• Landlord generally pays for and arranges repairs

Memory trick: Health and safety repairs are the landlord's duty, not the tenant's bill to front.

An analysis of the prices of recently sold homes that are similar to a subject property in terms of location, size, and features, used to estimate the property's current market value.

• Prepared by real estate agents.
• Provides an opinion of value, not an appraisal.
• Used to help sellers set listing prices and buyers make offers.

Memory trick: CMA's 'M' is for Market, not for Measuring like an Appraiser.

A provision in a Buyer Representation Agreement that entitles the buyer's agent to a commission if the buyer purchases a property previously shown to them by that agent, within a specified period after the agreement expires.

• Protects the agent's commission after the agreement term.
• Applies to properties introduced to the buyer by the agent.
• Requires a specified 'protection period' after the agreement ends.

Memory trick: Safety Secures Sales After Six Months.

Real estate licensees in Texas have an independent duty to disclose any known material facts about a property to all parties, especially defects, regardless of seller's disclosure.

• Applies to all known material facts, not just those from the seller.
• Duty exists even if the seller is exempt from providing a disclosure notice.
• Failure to disclose can lead to disciplinary action by TREC and civil liability.

Memory trick: Agents must 'Reveal Real Defects, Regardless'.

A non-exclusive listing agreement where the owner retains the right to sell the property themselves without paying a commission. Multiple brokers can be involved, but only the broker who procures the buyer earns a commission.

• Non-exclusive agreement
• Seller can sell without commission
• Only procuring cause broker gets paid

Memory trick: Open doors mean anyone can sell, no commission if you do it yourself.

A document provided by a Property Owners' Association (POA) to a seller, who then provides it to a buyer, containing critical information about the association's financial status, assessments, rules, and other relevant details.

• Required disclosure for properties in POAs.
• Includes current budget, assessments, and special assessments.
• Allows buyer to understand financial obligations and rules.
• Buyer has right to terminate if not received timely.

Memory trick: POA Certificate: 'P'ower 'O'f 'A'ssessment, 'C'heck the 'C'ertificate.

The overarching goal of the Texas Real Estate Commission (TREC) is to protect the public by regulating real estate licensees and ensuring compliance with the Texas Real Estate License Act (TRELA).

• Regulates licenses for brokers, sales agents, inspectors, and others.
• Enforces TRELA and TREC Rules.
• Investigates complaints and takes disciplinary action for violations.

Memory trick: TREC is 'The Regulator for Consumer Safety'.

A listing agreement where one broker is authorized to act as the exclusive agent, but the seller retains the right to sell the property themselves without paying a commission.

• Only one broker is designated as the exclusive agent.
• Seller reserves the right to sell the property themselves and avoid commission.
• If the broker or another broker procures the buyer, the listing broker earns the commission.

Memory trick: Every Agent Only Knows Net Listings.

Real estate licensees in Texas are prohibited from drafting legal documents or adding complex provisions to contracts that alter the legal rights or responsibilities of the parties, which constitutes the unauthorized practice of law.

• Licensees can only fill in blanks on TREC-promulgated forms.
• Simple factual statements are permissible in special provisions.
• Complex legal clauses must be drafted by an attorney.

Memory trick: Special provisions needing legal advice, are a sign of unauthorized legal practice.

A provision in a lease agreement that allows for periodic rent adjustments based on changes in a predetermined economic index, such as the Consumer Price Index (CPI).

• Common in long-term commercial leases.
• Protects landlords against inflation.
• Provides a predictable method for rent increases.

Memory trick: Indexes Increase Income for Landlords.

A mandatory statutory notice required in Texas for properties located within a Municipal Utility District, informing buyers about the district's services, tax rates, and bond indebtedness.

• Required by Texas Water Code
• Must be provided before contract execution
• Details MUD taxes, services, and bonded indebtedness

Memory trick: Before you buy, know the hidden truths the law makes visible.

When performing a Comparative Market Analysis, adjustments for differences between the subject property and comparable properties are always made to the comparable properties' sales prices, never to the subject property.

• Adjustments are made to comparables.
• If comparable is superior, subtract value from comparable.
• If comparable is inferior, add value to comparable.

Memory trick: Comparables 'C'ome 'M'atch 'A'll the subject's 'S'tuff, so adjust 'S'ales prices accordingly.

Private agreements that limit the use or appearance of real property.

• Created by developers or HOAs.
• Recorded in the public records and 'run with the land'.
• Enforceable by property owners or the HOA.

Memory trick: Private Property Pledges Protect Planned Places.

The formula used in the income capitalization approach to determine property value: Value = Net Operating Income (NOI) / Capitalization Rate (Cap Rate).

• Value = NOI / Cap Rate
• Cap Rate is expressed as a decimal.
• Used for income-producing properties.

Memory trick: Think 'I' 'R' 'V': 'I'ncome 'R'ate 'V'alue. If you know two, you find the third!

A legal agreement that permanently limits uses of land to protect its conservation values.

• Held by a government agency or land trust.
• Runs with the land, binding all future owners.
• Can provide tax benefits to the landowner.

Memory trick: Encumbrances Entangle Estates, Restricting Rights.

An unauthorized intrusion of a building, fence, or other improvement onto a neighbor's property.

• Requires a survey to confirm.
• Can lead to legal disputes if not resolved.
• May impact title and insurability of the property.

Memory trick: Disputes are Difficult; Discuss, Document, Decide Legally.

In Texas, navigable streams are considered state property, and their use requires a permit from the Texas Commission on Environmental Quality (TCEQ).

• Navigable streams are defined by statute (e.g., 30 feet wide).
• Landowners do not have automatic riparian rights to use water from navigable streams.
• A permit system governs appropriation of state-owned surface waters.

Memory trick: Texas Water: Surface is State, Groundwater is Grounded.

An estate in land that can be terminated (defeated) upon the occurrence or non-occurrence of a specified condition.

• Has conditions attached to ownership
• Can be 'determinable' (automatic reversion) or 'subject to condition subsequent' (grantor must take action)
• Less than Fee Simple Absolute ownership

Memory trick: Fee Simple Defeasible: 'Defeatable' if you don't follow the rules.

A future interest in real estate that becomes a present interest upon the termination of a preceding estate (e.g., a life estate), held by a third party.

• The recipient is called the 'remainderman'.
• Takes effect automatically after the prior estate ends.
• Distinct from a reversion, where property returns to the grantor.

Memory trick: Future Interests Flow, Reversions Return, Remainders Receive.

Rules for distributing community property when a Texas resident dies without a valid will.

• If no descendants or all descendants are also descendants of the surviving spouse, the deceased's share goes entirely to the surviving spouse.
• If there are descendants not shared by the surviving spouse, the deceased's share goes to those descendants, with the surviving spouse retaining their half.
• Community property is property acquired by either spouse during marriage, excluding gifts and inheritances.

Memory trick: No Will? Texas Law Decides Your Property's Path.

The inherent right of the state to regulate to protect public health, safety, morals, and general welfare.

• Includes zoning ordinances, building codes, environmental regulations.
• Does not involve compensation to property owners if property value decreases.
• Basis for many governmental land use controls.

Memory trick: Governments Police with Power for Public Good.

An adjustment made in a CMA or appraisal to account for changes in market values between the sale date of a comparable property and the effective date of the subject property's valuation.

• Crucial in changing markets.
• Accounts for appreciation or depreciation over time.
• Applied to comparable sales prices.

Memory trick: In a 'R'apid 'M'arket, 'T'ime 'M'atters 'M'ost.

When a comparable property has a feature superior to the subject property, the sales price of the comparable property is adjusted downwards to make it equivalent to the subject.

• Adjustments are always made to the comparable property, never the subject.
• If comparable is superior, subtract value from comparable's sales price.
• If comparable is inferior, add value to comparable's sales price.

Memory trick: Comparables get the corrections, never the subject's connections.

An item of personal property attached to rented commercial property by a tenant for use in their business.

• Exception to the fixture rule; remains personal property of the tenant.
• Must be removed by the tenant before the lease expires.
• Tenant is responsible for any damage caused by removal.

Memory trick: Fixtures are Fixed, Trade Fixtures are Transient for Trade.

An appraisal principle holding that the maximum value is realized when a property is in harmony with or conforms to its surroundings.

• Harmony with neighborhood standards.
• Relates to size, style, condition.
• Contributes to maximum property value.

Memory trick: Conform 'C'orrectly to 'C'ommunity 'C'onditions.

The formula for the cost approach to valuation: Estimated Cost to Build New - Accumulated Depreciation + Land Value = Property Value.

• Land is never depreciated.
• Best for new construction or unique properties.
• Depreciation includes physical, functional, and external obsolescence.

Memory trick: New 'C'ost, 'D'educt 'D'epreciation, 'A'dd 'L'and: 'C' 'D' 'A' 'L'

For a Broker's Price Opinion, the most critical factors for comparable selection are typically geographic proximity and recency of sale, allowing for adjustments for property characteristic differences.

• Proximity and recency are key.
• Adjust for differences in features.
• Tax values are not market values.

Memory trick: Location 'L'eads, 'R'ecency 'R'eigns, 'A'djustments 'A'llow.

An item of personal property that has been permanently attached to real property and is now considered part of the real property.

• Attachment: How it's installed (screwed, cemented, etc.).
• Adaptation: How it's customized for the property.
• Intention: The intent of the installer to make it permanent.

Memory trick: Real Property is Rooted, Personal Property is Portable.

In the sales comparison approach, adjustments are made for differences between the subject and comparable properties. Location (e.g., school district, neighborhood quality) often requires the largest dollar adjustments due to its profound impact on property value.

• Location is a primary driver of residential property value.
• School districts significantly influence buyer demand and prices.
• Major adjustments reflect substantial differences in value drivers.
• Adjustments are always applied to the comparable property's sales price.

Memory trick: Location's leverage leads to larger adjustments.

The legal separation of mineral ownership from surface ownership of land.

• Common in Texas, allowing surface and mineral estates to be owned by different parties.
• Mineral estate is considered the dominant estate, meaning mineral owners can use the surface to access minerals.
• Can be conveyed, leased, or reserved independently.

Memory trick: Texas Estates: Surface, Minerals, and Water, Separate or Together.

A form of depreciation caused by negative factors outside the subject property, often incurable, such as a decline in neighborhood desirability or economic changes.

• Caused by factors outside the property.
• Typically incurable by the owner.
• Examples: undesirable external influences, economic downturn.

Memory trick: Depreciation: 'P'hysical wear, 'F'unctional issues, 'E'xternal problems.

The reasonably probable use of property that results in the highest value. The four criteria are legally permissible, physically possible, financially feasible, and maximally productive.

• Fundamental appraisal principle.
• Maximizes property value.
• Must meet four criteria (PPLP).

Memory trick: PPLP: 'P'ossible, 'P'ermissible, 'L'egally 'P'roductive (Financially Feasible).

A form of property ownership where an individual owns a specific unit (air space) and has an undivided interest in the common elements of the property.

• Owner holds fee simple title to their unit
• Shared ownership of common areas (e.g., land, hallways, amenities)
• Governed by a Homeowners Association (HOA) and Covenants, Conditions, and Restrictions (CC&Rs)

Memory trick: Condos are like personal boxes in a shared building.

An appraisal method that estimates the value of income-producing property by converting the net income the property is expected to generate into a present value.

• Used for income-generating properties.
• Converts future income to present value.
• Requires estimation of net operating income and capitalization rate.

Memory trick: Every property has a 'C'ost, 'I'ncome, and 'S'ales 'C'omparison story.

The formal process by which a developer's plans for dividing land into lots and developing infrastructure are reviewed and approved by local government authorities.

• Ensures compliance with zoning, building codes, and environmental regulations
• Required before lots can be sold or construction started
• Involves submission of detailed maps (plats) and plans

Memory trick: Platting is the 'plan-it' step for new communities.

If a comparable property has a feature that is superior to the subject property, the estimated value of that superior feature is subtracted from the comparable's sales price.

• Adjustments are made to comparables.
• Superior feature on comparable means subtract.
• Makes comparable more like the subject.

Memory trick: If the 'C'omparable is 'S'uperior, 'S'ubtract, if 'C'omparable is 'I'nferior, 'I'ncrease.

An easement that grants a specific person or entity the right to use another's land without being tied to an adjoining property.

• Benefits a person or company (e.g., utility company).
• Does not have a dominant estate, only a servient estate.
• Often transferable, especially for commercial easements.

Memory trick: Easements Ease Access: Appurtenant for Adjacent, Gross for Groups.

The inherent right of the government to levy taxes on privately owned property to fund public services.

• Funds public services (schools, roads, etc.)
• Property taxes are ad valorem (based on value)
• Creates a lien on the property if unpaid

Memory trick: PETE: Police Power, Eminent Domain, Taxation, Escheat are government's rights.

A real estate license holder in Texas may provide an opinion of value (e.g., CMA, BPO) for a client, but it must not be represented as an appraisal and cannot be for federally related transactions requiring a licensed appraiser.

• Permitted for prospective buyers/sellers.
• Must not be called an 'appraisal'.
• Not for federally related transactions.

Memory trick: A 'C'MA is 'C'ool, but 'A'n 'A'ppraisal is for 'A'ppraisers.

A form of depreciation resulting from a property's design, features, or layout being outdated, inefficient, or inadequate compared to current market expectations and preferences.

• Caused by factors within the property.
• Relates to design, layout, or features.
• Examples: outdated fixtures, poor floor plan, insufficient number of bathrooms.

Memory trick: Depreciation: 'P'hysical, 'F'unctional, 'E'xternal.

Texas Real Estate Commission (TREC) rules mandate that all advertisements by a licensed sales agent must clearly and prominently display the name of their sponsoring broker or brokerage firm.

• Ensures transparency for consumers.
• Applies to all forms of advertising (online, print, signs).
• Broker's name must be at least half the size of the agent's name, if both are present.

Memory trick: Ads for agents must show the broker's name, or it's a game of shame.

When presenting a Comparative Market Analysis (CMA), a real estate licensee must ethically and legally disclose to the client that the CMA is an opinion of value and not a formal appraisal, which can only be conducted by a licensed appraiser.

• CMA is a marketing tool, not a legal valuation.
• Appraisals are performed by licensed appraisers.
• Disclosure prevents misrepresentation and manages client expectations.

Memory trick: CMA: Compare, Clarify, and be Clear!

In Texas, a licensed real estate sales agent may only receive compensation for real estate brokerage services from their sponsoring broker, not directly from clients.

• Applies to all licensed activities.
• Broker is responsible for disbursing funds to the agent.
• Ensures proper oversight and adherence to TREC regulations.

Memory trick: Agent's pay path: always through the broker's gate.

In Texas, real estate licensees managing rental properties must deposit security deposits into a broker's trust account, separate from personal or operating funds, in accordance with TREC rules.

• Considered client funds.
• Must be held in a separate trust/escrow account.
• Prevents commingling and conversion.

Memory trick: Trust funds: Keep them separate, keep them safe, never integrate!

The Fair Housing Act requires property owners to permit reasonable physical modifications to a dwelling at the expense of the person with a disability, if necessary for them to use and enjoy the premises.

• Applies to existing private housing (single-family and multi-family).
• Modifications must be 'reasonable' and 'necessary'.
• The person with the disability typically pays for the modifications.

Memory trick: Ramps are allowed, but your dime, not mine.

Antitrust laws generally apply to agreements or conduct among different competing entities, not to internal practices or information sharing within a single firm or brokerage.

• Sherman Antitrust Act is the primary federal law.
• Focuses on preventing monopolies and anti-competitive agreements between competitors.
• Internal operations, like sharing listings among agents in one office, are typically exempt.

Memory trick: Antitrust laws watch for rivals, not teammates.

The Americans with Disabilities Act (ADA) requires public accommodations and commercial facilities to be accessible to individuals with disabilities, including removing architectural barriers where readily achievable.

• Applies to commercial facilities and public accommodations.
• Requires removal of architectural barriers in existing buildings.
• New construction and alterations must comply with ADA Standards for Accessible Design.

Memory trick: ADA for access, FHA for home, Section 504 for funded dome.

Steering is the illegal practice of guiding prospective buyers or renters toward or away from certain neighborhoods based on their protected class.

• Prohibited under the Fair Housing Act.
• Can be subtle, such as describing a neighborhood as 'diverse' or 'exclusive'.
• Aims to prevent segregation and ensure equal housing opportunities.

Memory trick: Fair housing means everyone has a fair shot at a home, no steering allowed.

Real estate agents must ensure earnest money is made payable to and delivered to the designated escrow agent (e.g., title company or broker's trust account), never to the agent personally.

• Never made payable to the individual agent.
• Promptly delivered to the correct escrow agent.
• Broker is ultimately responsible for proper handling.

Memory trick: Earnest Money: Direct to Trust, Never to Me!

Providing demographic information to clients that enables them to make housing decisions based on protected characteristics like race or national origin is a form of illegal steering under the Fair Housing Act.

• Agent cannot facilitate discriminatory choices, even if information is public.
• Focus should be on objective property and neighborhood features.
• Intent of the client for the information is crucial in determining if steering occurs.

Memory trick: Demographic data for 'compatibility'? No, that's fair housing's enemy.

Under the Fair Housing Act, service animals and emotional support animals are considered assistance animals for individuals with disabilities and are not subject to typical 'no pets' policies or pet fees.

• Must provide a reasonable accommodation for a person with a disability.
• Animal must perform a service or provide emotional support related to the disability.
• Housing provider cannot charge pet fees for assistance animals.

Memory trick: Service animal's purpose is aid, not just a pet parade.

A Comparative Market Analysis (CMA) prepared by a real estate agent must include a disclaimer that it is not an appraisal, as per TREC regulations.

• CMAs are prepared by real estate agents.
• Appraisals are prepared by licensed appraisers.
• The disclaimer prevents confusion about the document's purpose and legal standing.

Memory trick: Clarity Makes All Real Estate Documents Legally Distinct.