Texas Contracts & Forms Practice Questions
This Texas state-law area is 8 outline items. It covers TREC-promulgated contracts, forms, and addenda; the rule that license holders fill in blanks only; the termination-option period; and the statutory Seller's Disclosure Notice. Work the questions below, then read every explanation.
Exam prep only
These questions test how Texas controls residential contracts. License holders use TREC-promulgated forms and may fill in blanks only. Drafting custom language is the unauthorized practice of law.
Use the form-first read. Identify which promulgated form or addendum the scenario uses, then apply the Texas-specific rule, such as the option fee and termination period or the Seller's Disclosure Notice requirement. Confirm form names and deadlines against current TREC forms when applying outside exam practice.
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Texas Contracts & Forms Practice Questions
15 scenario-based questions on texas contracts & forms, scored, each with a full explanation after you answer. Every question is also written out below if you would rather study at your own pace.
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. For most residential resale transactions, a Texas license holder must use
- A.any contract form the agent prefers
- B.a TREC-promulgated or approved contract form, filling in the blanks only
- C.a form drafted by the agent for each deal
- D.an out-of-state contract form
Show answer and explanation
Correct answer: B. a TREC-promulgated or approved contract form, filling in the blanks only
Why B is correct: Texas license holders must use TREC-promulgated or approved contract forms for most residential transactions and may fill in only the blanks. Drafting custom contract language is the unauthorized practice of law.
Trap: Use the promulgated form and fill in blanks only. Writing your own clauses is the unauthorized practice of law.
Source: TRELA / TREC Rules; promulgated forms
2. The TREC form used for a typical resale of an existing single-family home is the
- A.One to Four Family Residential Contract (Resale)
- B.Farm and Ranch Contract
- C.New Home Contract (Completed Construction)
- D.Commercial Contract
Show answer and explanation
Correct answer: A. One to Four Family Residential Contract (Resale)
Why A is correct: The One to Four Family Residential Contract (Resale) is the standard TREC-promulgated form for the resale of an existing one-to-four-family residence. Other promulgated forms cover farm and ranch, new construction, and other property types.
Trap: Match the form to the property. The resale of an existing home uses the One to Four Family Residential Contract (Resale).
Source: TREC promulgated forms
3. In a Texas residential contract, the termination-option period gives the buyer
- A.a free right to extend closing indefinitely
- B.an unrestricted right to terminate the contract for any reason within a negotiated number of days, in exchange for a negotiated option fee
- C.the right to force the seller to lower the price
- D.the right to skip the inspection
Show answer and explanation
Correct answer: B. an unrestricted right to terminate the contract for any reason within a negotiated number of days, in exchange for a negotiated option fee
Why B is correct: The termination-option period is a distinctly Texas feature. For a negotiated option fee paid to the seller, the buyer receives an unrestricted right to terminate the contract for any reason within a negotiated number of days. It is often used for inspections.
Trap: The option period is a paid, time-limited right to walk away for any reason. It is negotiated, not automatic or unlimited.
Source: TREC residential contract; termination option
4. The option fee paid for the termination-option period is
- A.refundable to the buyer in all cases
- B.paid to the seller for the buyer's unrestricted right to terminate, and is generally credited or applied as the contract provides
- C.the same as the earnest money
- D.set by TREC at a fixed amount
Show answer and explanation
Correct answer: B. paid to the seller for the buyer's unrestricted right to terminate, and is generally credited or applied as the contract provides
Why B is correct: The option fee is paid to the seller in exchange for the buyer's unrestricted right to terminate during the option period. It is negotiated by the parties, not fixed by TREC, and the contract specifies how it is handled, such as crediting it at closing.
Trap: The option fee is negotiated and goes to the seller; it is separate from the earnest money and is not set by TREC.
Source: TREC residential contract; option fee
5. Under Texas law, for most residential resales the seller must provide the buyer a
- A.federal Closing Disclosure
- B.statutory Seller's Disclosure Notice describing the property's known condition
- C.TREC license certificate
- D.survey prepared by the agent
Show answer and explanation
Correct answer: B. statutory Seller's Disclosure Notice describing the property's known condition
Why B is correct: Texas requires a statutory Seller's Disclosure Notice for most residential resales. The seller discloses the property's known condition. This is a Texas requirement separate from the federal lead-based-paint disclosure.
Trap: The Seller's Disclosure Notice is a Texas requirement about the property's condition, separate from the federal lead disclosure.
Source: Texas Property Code 5.008; Seller's Disclosure Notice
6. Which is a recognized exemption from the statutory Seller's Disclosure Notice?
- A.Any sale over $500,000
- B.Certain transfers such as those by an executor of an estate or under a foreclosure
- C.Any cash sale
- D.Sales involving a buyer's agent
Show answer and explanation
Correct answer: B. Certain transfers such as those by an executor of an estate or under a foreclosure
Why B is correct: The statutory Seller's Disclosure Notice has specific exemptions, such as transfers by an administrator or executor of an estate and transfers under a foreclosure or by a trustee. These are categorical exemptions, not based on price or financing.
Trap: Exemptions are categorical, such as estate or foreclosure transfers, not based on sale price or whether a buyer's agent is involved.
Source: Texas Property Code 5.008; exemptions
7. A contract for the sale of Texas real estate must be in writing and signed to be enforceable. This requirement comes from the
- A.TREC advertising rule
- B.Statute of Frauds
- C.Deceptive Trade Practices Act
- D.homestead exemption
Show answer and explanation
Correct answer: B. Statute of Frauds
Why B is correct: The Statute of Frauds requires that a contract for the sale of real estate be in writing and signed by the party to be charged to be enforceable. This applies to Texas residential contracts.
Trap: The writing requirement comes from the Statute of Frauds, not from a TREC advertising rule or the DTPA.
Source: Texas Business & Commerce Code 26.01; Statute of Frauds
8. A buyer needs a conventional loan to purchase the home. The TREC form used to make the contract contingent on that financing is
- A.the Third Party Financing Addendum
- B.the Seller's Temporary Residential Lease
- C.the Lead-Based Paint Addendum
- D.the Non-Realty Items Addendum
Show answer and explanation
Correct answer: A. the Third Party Financing Addendum
Why A is correct: The Third Party Financing Addendum makes the contract contingent on the buyer obtaining third-party financing. Other addenda cover different needs, such as a seller's temporary leaseback or the conveyance of non-realty items.
Trap: Match the addendum to the need. Financing contingencies use the Third Party Financing Addendum.
Source: TREC promulgated addenda
9. A buyer is represented by an attorney who drafts a custom contract for the purchase. The license holder
- A.must still force the parties to use a TREC form
- B.may use the attorney-prepared contract, since a promulgated form is not required when an attorney for a principal prepares it
- C.must draft a competing contract
- D.cannot be involved at all
Show answer and explanation
Correct answer: B. may use the attorney-prepared contract, since a promulgated form is not required when an attorney for a principal prepares it
Why B is correct: License holders must use the promulgated form when one applies, but an exception exists when the contract is prepared by an attorney representing one of the principals. In that case the license holder may use the attorney-prepared document.
Trap: The attorney-prepared exception is real, but the license holder still may not draft the legal language themselves.
Source: TREC Rules, 22 TAC §537; promulgated forms
10. In a Texas residential contract, the option fee and the earnest money are
- A.the same payment
- B.two separate payments: the option fee buys the unrestricted right to terminate, and earnest money shows good faith
- C.both refundable for any reason at any time
- D.both paid only at closing
Show answer and explanation
Correct answer: B. two separate payments: the option fee buys the unrestricted right to terminate, and earnest money shows good faith
Why B is correct: The option fee is paid for the termination-option period, buying the buyer the unrestricted right to terminate during that time. Earnest money is a separate good-faith deposit credited toward the purchase. They serve different purposes.
Trap: Do not merge the option fee and earnest money. The option fee buys the right to walk; earnest money is the good-faith deposit.
Source: TREC promulgated contract; option and earnest money
11. A buyer can only purchase if the buyer's current home sells first. The correct TREC form is the
- A.Third Party Financing Addendum
- B.Addendum for Sale of Other Property by Buyer
- C.Seller's Temporary Residential Lease
- D.Notice of Buyer's Termination
Show answer and explanation
Correct answer: B. Addendum for Sale of Other Property by Buyer
Why B is correct: The Addendum for Sale of Other Property by Buyer makes the purchase contingent on the buyer selling another property. The Third Party Financing Addendum, by contrast, handles a loan-approval contingency.
Trap: Match the contingency to the addendum: sale-of-other-property for the buyer's home sale, third-party-financing for the loan.
Source: TREC promulgated addenda
12. After a contract is signed, the parties agree to move the closing date. They should use
- A.a brand-new contract
- B.an Amendment to the contract
- C.a verbal agreement only
- D.a new option period
Show answer and explanation
Correct answer: B. an Amendment to the contract
Why B is correct: Changes to the terms of an already-executed contract, such as the closing date or sales price, are made with the Amendment to the contract, signed by both parties. An addendum adds terms at the outset; an amendment changes an existing contract.
Trap: Amend an existing contract with an Amendment, not a new contract or a handshake.
Source: TREC promulgated Amendment form
13. A property is already under contract with a first buyer. A second buyer wants to get in line. The correct form is the
- A.Addendum for Back-Up Contract
- B.Seller's Disclosure Notice
- C.Third Party Financing Addendum
- D.Notice of Seller's Termination
Show answer and explanation
Correct answer: A. Addendum for Back-Up Contract
Why A is correct: The Addendum for Back-Up Contract makes the second contract contingent on the termination of the first contract. The back-up becomes primary only if and when the first contract falls through.
Trap: A back-up buyer uses the Back-Up Contract addendum, which is contingent on the first contract ending.
Source: TREC promulgated Back-Up Contract addendum
14. To exercise the right to terminate during the option period, the buyer must give notice
- A.any time before closing
- B.by the deadline at the end of the option period (commonly by 5:00 p.m. on the last day)
- C.only after the seller agrees
- D.within 30 days of closing
Show answer and explanation
Correct answer: B. by the deadline at the end of the option period (commonly by 5:00 p.m. on the last day)
Why B is correct: The buyer's unrestricted right to terminate ends when the option period ends. Notice must be given by the contractual deadline, commonly 5:00 p.m. on the last day of the option period. Missing the deadline ends the unrestricted right to terminate.
Trap: The option right is time-limited. Blow the deadline and the unrestricted right to terminate is gone.
Source: TREC promulgated contract; termination option
15. In a Texas residential contract, who pays for the owner's title policy and the survey is
- A.fixed by state law and not changeable
- B.negotiable between buyer and seller and filled in on the promulgated form
- C.always paid by the buyer
- D.decided by TREC for each sale
Show answer and explanation
Correct answer: B. negotiable between buyer and seller and filled in on the promulgated form
Why B is correct: The promulgated contract provides blanks for the parties to allocate costs such as the owner's title policy and the survey. These are negotiable between buyer and seller; the license holder completes the form to reflect the agreement.
Trap: Cost allocation is negotiated and entered on the form, not fixed by statute.
Source: TREC promulgated contract; cost allocation
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Get the full question bankFrequently asked questions
Why can a Texas license holder only fill in the blanks on a contract?+
Texas license holders must use TREC-promulgated or approved forms for most residential transactions and may fill in only the blanks. Drafting new contract language is the unauthorized practice of law, which is reserved to attorneys.
What is the termination-option period in a Texas contract?+
For a negotiated option fee paid to the seller, the buyer receives an unrestricted right to terminate the contract for any reason within a negotiated number of days. It is a distinctly Texas feature often used to allow time for inspections.
What is the Seller's Disclosure Notice?+
Texas requires a statutory Seller's Disclosure Notice for most residential resales, in which the seller discloses the property's known condition. Certain transfers, such as estate or foreclosure sales, are exempt. It is separate from the federal lead-based-paint disclosure.