Standards of Conduct Practice Questions

Every question explained

Prefer to study at your own pace? Here are all 15 questions. Read each one and pick your answer, then reveal the correct answer, the reasoning, and the trap that catches most candidates.

1. 1. A listing agent prefers a quick cash offer because it will close easily, so the agent withholds a higher offer with financing from the seller. Which professional standard is most directly violated?

   • A.Fidelity, because the agent placed personal convenience above the client's interest
   • B.Competency, because every financed offer requires an attorney
   • C.Advertising, because the offer was not public
   • D.No standard, because the agent may screen offers
   ▸Show answer and explanation

   Correct answer: A. Fidelity, because the agent placed personal convenience above the client's interest

   Why A is correct: The fidelity canon makes the client's interest the license holder's primary duty and bars putting a personal interest above it. Withholding an offer for the agent's convenience violates that duty. Separate minimum-services rules also require presentation of offers.

   Trap: Do not confuse an agent's convenience with the client's interest. The seller decides which offer is preferable.

   Source: 22 TAC §531.2; fidelity

2. 2. A sales agent who has handled only urban homes accepts a remote ranch listing without learning the local market or the property's specialized characteristics. Which canon is most directly involved?

   • A.Fidelity only
   • B.Competency
   • C.Advertising
   • D.Fee splitting
   ▸Show answer and explanation

   Correct answer: B. Competency

   Why B is correct: Rule 531.4 requires knowledge of the local market, industry developments, sound judgment and skill, and the characteristics of the specific property type being brokered. A license alone does not establish competence for every market and property.

   Trap: The question is not whether the agent may ever handle a ranch. It is whether the agent is competent for this assignment.

   Source: 22 TAC §531.4; competency

3. 3. A license holder knows that a listed house has a serious latent foundation defect but tells a potential buyer that the structure has no known problems. This conduct is

   • A.permitted if the seller requested silence
   • B.a material misrepresentation and a ground for discipline
   • C.mere puffing
   • D.outside TREC's authority because the defect is physical
   ▸Show answer and explanation

   Correct answer: B. a material misrepresentation and a ground for discipline

   Why B is correct: TRELA §1101.652(b)(3) makes a material misrepresentation about a known significant defect a ground for discipline. Subsection (b)(4) separately covers failure to disclose that known defect.

   Trap: A seller's instruction does not authorize a false statement or concealment of a known significant defect.

   Source: TRELA §1101.652(b)(3)-(4); known significant defects

4. 4. A license holder is buying a home for the license holder's own account. Before entering the sales contract, the license holder must

   • A.hide the license to avoid influencing the seller
   • B.disclose in writing that the buyer is a licensed broker or sales agent acting on the buyer's own behalf
   • C.obtain TREC approval for the purchase
   • D.become the seller's agent
   ▸Show answer and explanation

   Correct answer: B. disclose in writing that the buyer is a licensed broker or sales agent acting on the buyer's own behalf

   Why B is correct: Rule 535.144 requires written disclosure of license status in the contract, rental agreement, or another writing provided before the parties enter the agreement. The rule also applies to specified transactions involving close family members, certain entities, and trusts.

   Trap: Acting as a principal removes the agency role, not the written license-status disclosure.

   Source: 22 TAC §535.144(b); license holder acting as principal

5. 5. A buyer wants an unusual contingency that no TREC addendum covers. The sales agent writes a new clause defining the buyer's termination right. The agent has

   • A.added an informational item
   • B.engaged in unauthorized practice of law by drafting language that affects legal rights
   • C.acted properly because the buyer requested the clause
   • D.acted properly if the sponsoring broker approves
   ▸Show answer and explanation

   Correct answer: B. engaged in unauthorized practice of law by drafting language that affects legal rights

   Why B is correct: Rule 537.11 bars a license holder from drafting or recommending language that defines or affects a party's rights, obligations, or remedies. A custom contingency is one of the examples named in the rule. The buyer should obtain legal advice and attorney-drafted language.

   Trap: Client instruction and broker approval do not give a sales agent authority to invent legal wording.

   Source: 22 TAC §537.11(b)(5); unauthorized practice of law

6. 6. A seller gives a license holder an exact written instruction to strike a sentence from an authorized contract form. The license holder makes the deletion conspicuous and gives no advice about its effect. Under Rule 537.11, this act is

   • A.always unauthorized practice of law
   • B.not itself the practice of law under the rule's narrow written-instruction provision
   • C.allowed only if the license holder rewrites the sentence
   • D.allowed only after the license holder explains the legal consequences
   ▸Show answer and explanation

   Correct answer: B. not itself the practice of law under the rule's narrow written-instruction provision

   Why B is correct: Rule 537.11(d)(2) permits a conspicuous addition or deletion made at a principal's specific written instruction. The provision is narrow: it does not authorize the license holder to create the wording or advise on legal effect.

   Trap: Do not turn the written-instruction exception into general permission to draft or interpret clauses.

   Source: 22 TAC §537.11(d)(2); specific written principal instruction

7. 7. A buyer hands an earnest-money check to a sponsored sales agent. Under TREC's trust-money rule, the sales agent must

   • A.open a personal trust account
   • B.deliver it immediately to the sponsoring broker
   • C.hold it until the option period ends
   • D.deposit it in the brokerage operating account
   ▸Show answer and explanation

   Correct answer: B. deliver it immediately to the sponsoring broker

   Why B is correct: A sales agent may not maintain a trust account. Any trust money received by the sales agent must be delivered immediately to the sponsoring broker.

   Trap: The broker's later deposit deadline does not give the sales agent permission to hold the check.

   Source: 22 TAC §535.146(b)(2); sales-agent receipt of trust money

8. 8. The principals have not agreed in writing to different timing. A broker receives trust money on Monday. Under Rule 535.146, the broker must deposit it in the trust account or deliver it to an authorized escrow agent

   • A.whenever the transaction closes
   • B.no later than close of business on the second working day after receipt
   • C.within 30 calendar days
   • D.only after every party approves the bank
   ▸Show answer and explanation

   Correct answer: B. no later than close of business on the second working day after receipt

   Why B is correct: Rule 535.146 treats a reasonable time as no later than close of business on the second working day after the broker receives the money, unless the principals expressly agreed to a different time in writing.

   Trap: Use working days, start with the broker's receipt, and notice whether the stem supplies a different written agreement.

   Source: 22 TAC §535.146(b)(3); trust-money deposit timing

9. 9. A broker withdraws a buyer's earnest money from the trust account to pay the brokerage's office rent, planning to replace it next week. This is

   • A.proper if the broker replaces it
   • B.prohibited use of trust money for an operating expense
   • C.allowed if the broker keeps good records
   • D.only a violation after the transaction closes
   ▸Show answer and explanation

   Correct answer: B. prohibited use of trust money for an operating expense

   Why B is correct: Rule 535.146 prohibits commingling and treats payment of operating expenses or other improper trust-account withdrawals as prima facie evidence of commingling. Using the buyer's funds for the broker's own purpose is also commonly described as conversion.

   Trap: An intention to repay does not make an unauthorized use lawful.

   Source: 22 TAC §535.146(c)-(d); commingling and improper withdrawal

10. 10. A broker promises an unlicensed neighbor $300 cash for referring a prospective buyer. The neighbor expects the payment when making the referral. Under Rule 535.20, the referral is

    • A.unlicensed activity because it is made with the expectation of valuable consideration
    • B.permitted because the neighbor does not negotiate
    • C.permitted because cash is not merchandise
    • D.permitted if the buyer eventually closes
    ▸Show answer and explanation

    Correct answer: A. unlicensed activity because it is made with the expectation of valuable consideration

    Why A is correct: Rule 535.20 treats a real estate referral made with the expectation of valuable consideration as an act requiring a license. Money is expressly listed as valuable consideration.

    Trap: The merchandise threshold in Rule 535.20 does not make a small cash referral fee lawful.

    Source: 22 TAC §535.20(a)(1); compensated unlicensed referral

11. 11. A Texas broker cooperates with a broker licensed in another state. When may the Texas broker share the earned commission with the out-of-state broker under TRELA?

    • A.Whenever the out-of-state broker negotiates in Texas
    • B.When the out-of-state broker conducts none of the negotiations in Texas
    • C.Only when the out-of-state broker becomes a Texas sales agent
    • D.Never
    ▸Show answer and explanation

    Correct answer: B. When the out-of-state broker conducts none of the negotiations in Texas

    Why B is correct: TRELA §1101.651(a)(2) permits broker compensation to a real estate broker licensed in another state who does not conduct in Texas any of the negotiations for which the compensation is paid.

    Trap: The exception permits cooperation, not unlicensed Texas negotiation.

    Source: TRELA §1101.651(a)(2); out-of-state broker exception

12. 12. A sales agent wants to rebate part of the commission to the buyer the agent represents. Which condition is required by Rule 535.147?

    • A.Only oral approval from the buyer
    • B.Written consent from the sponsoring broker and the represented party, with no misleading payment structure
    • C.TREC approval of the dollar amount
    • D.Payment outside the closing records
    ▸Show answer and explanation

    Correct answer: B. Written consent from the sponsoring broker and the represented party, with no misleading payment structure

    Why B is correct: Rule 535.147 permits a rebate to a party when its conditions are met. A sales agent needs the sponsoring broker's written consent and the represented party's written consent, and the payment may not mislead transaction participants or decision-makers about the transaction or buyer's finances.

    Trap: A rebate is not automatically unlawful, but an off-record or misleading rebate is not a safe answer.

    Source: 22 TAC §535.147(d); rebate to a transaction party

13. 13. An inspector offers a sales agent $100 for every buyer referred. The agent discloses the arrangement to each buyer and receives the payments. Under Rule 535.148, the arrangement is

    • A.permitted because the buyers were told
    • B.prohibited because it pays a settlement-service provider referral fee
    • C.permitted if the inspector charges market rates
    • D.permitted if the sales agent reports the income
    ▸Show answer and explanation

    Correct answer: B. prohibited because it pays a settlement-service provider referral fee

    Why B is correct: Rule 535.148 prohibits paying or receiving a fee or other valuable consideration to or from another settlement-service provider for referrals. Inspectors are expressly included. Disclosure does not cure this prohibition.

    Trap: Do not apply a disclosure rule before asking whether the payment itself is prohibited.

    Source: 22 TAC §535.148(d)(1); settlement-service referral payment

14. 14. A team postcard displays the team phone number in 24-point type and the broker's name in 8-point type. Under Rule 535.155, the broker-name size is

    • A.compliant because the broker name appears somewhere
    • B.noncompliant because the broker's name must be at least half the size of the largest relevant contact information
    • C.compliant if the broker approved the design
    • D.unregulated because it is printed advertising
    ▸Show answer and explanation

    Correct answer: B. noncompliant because the broker's name must be at least half the size of the largest relevant contact information

    Why B is correct: The largest relevant contact information is 24 points, so the broker's name must be at least 12 points and readily noticeable. Eight points is too small.

    Trap: Presence alone is not enough. Apply the one-half size comparison to the largest relevant contact information.

    Source: 22 TAC §535.155(a)(2); broker-name size

15. 15. A sponsored sales agent wants to advertise under the new name "Capitol Realty Associates." Which answer best states the team-name problem?

    • A.There is no problem if the name is memorable
    • B.A team name must end in "team" or "group," must not imply an independent brokerage, and must be registered by the broker before use
    • C.Only the sales agent needs to register it after the first ad
    • D.Any name ending in "associates" is automatically a broker DBA
    ▸Show answer and explanation

    Correct answer: B. A team name must end in "team" or "group," must not imply an independent brokerage, and must be registered by the broker before use

    Why B is correct: Rule 535.154 requires a team name to end with "team" or "group," prohibits names that imply brokerage independent from the sponsor, and requires the broker to register the team name before an associated broker or sponsored sales agent uses it.

    Trap: Registration does not fix a misleading name, and a team name is not automatically a broker's assumed business name.

    Source: 22 TAC §535.154(c)(1)-(3); team names