US Texas Broker License Exam Set Two

The solution is derived by applying the Texas Real Estate Commission (TREC) rules for qualifying experience points for a broker license, not a standard mathematical formula. An applicant must demonstrate at least four years of active experience as a Texas license holder during the 60-month period preceding the filing of the application. This experience must total 3600 points. The points are awarded based on a fixed schedule for different types of transactions. For example, a closed residential purchase or sale where the applicant acted as the sole agent for one party is worth 300 points. A closed residential lease where the applicant represented either the landlord or tenant is worth 50 points. A closed commercial real estate sale is worth 500 points per transaction. The scenario requires achieving a minimum of 3600 points. The qualifying combination presented involves twelve closed residential sales transactions, which would accumulate a total of 3600 points. This is calculated by multiplying the number of sales by the points awarded for each one: 12 sales times 300 points per sale equals 3600 points. This total meets the minimum requirement for broker license eligibility, assuming all transactions occurred within the required time frame and were properly documented on the Qualifying Experience Report for a Broker License form. It is critical to understand that experience is not just measured in time but in transactional volume as quantified by this point system. Activities like general property management, supervising other agents without direct transactional involvement, or transactions that did not close do not typically count toward these points.

The situation described hinges on the interpretation of the protection period clause, formally known as Paragraph 11.B in the Texas Real Estate Commission Residential Buyer/Tenant Representation Agreement (TXR-1501). This clause is designed to protect a broker’s commission for work performed during the term of the agreement, even if the purchase is finalized after the agreement terminates. For the broker to be entitled to a commission under this clause, two primary conditions must be met. First, the buyer must purchase a property that the broker introduced or negotiated for during the term of the representation agreement. Second, the purchase must occur within a specified number of days after the agreement’s termination, which is the defined protection period. An essential element that voids the broker’s protection under this clause is if the buyer, during the protection period, enters into a new exclusive representation agreement with another broker. In the scenario presented, the broker introduced the specific property to the buyer while the agreement was active. The buyer then proceeded to purchase that same property within the contractually defined protection period. Crucially, the buyer did not engage another broker under an exclusive agreement. By dealing directly with the seller’s agent, the buyer did not trigger the condition that would nullify the original broker’s rights under the protection period. Therefore, the original broker’s contractual right to the commission remains intact as all conditions of the protection period clause were satisfied.

The core of this scenario revolves around the hierarchy and non-negotiable nature of a broker’s fiduciary duties, specifically confidentiality and loyalty, within the framework of a Texas intermediary relationship. The broker, Mateo, has a pre-existing agency relationship with the seller, Anya. This relationship establishes the primary fiduciary duties owed to her. The duty of confidentiality is absolute regarding the client’s personal information, such as financial status, personal motivations, or willingness to accept certain terms, unless the client grants permission to disclose it. This duty survives the termination of the agency relationship. When the potential for an intermediary relationship arises because a buyer is represented by an agent from the same brokerage, the broker’s duties do not simply vanish or become diluted. Mateo’s knowledge of Anya’s financial distress is confidential information. Disclosing this to the buyer’s agent, Lin, or the buyer would be a direct breach of this duty. It would also breach the duty of loyalty, as it would weaken Anya’s negotiating position for the benefit of another party. The duty of disclosure owed to a buyer pertains to material facts about the property’s physical condition, not the seller’s personal circumstances. Therefore, Mateo’s primary obligation is to protect his client’s confidential information while continuing to provide advice that serves her best interests, which includes presenting all offers and counseling her on the potential responses without leveraging her confidential situation against her.

The logical determination is that the custom-built commercial ovens are trade fixtures and remain the personal property of the tenant, Alejandro. This conclusion is reached by applying the legal tests used in Texas to differentiate between real and personal property, particularly in a commercial lease context. The primary test revolves around the intention of the party who installed the item. Other factors considered are the method of annexation (how it is attached), the adaptation of the item to the real estate’s use, and the relationship between the parties. In a commercial landlord-tenant relationship, there is a strong legal presumption that a tenant installs items for the purpose of conducting their business and intends to remove them when the lease terminates. These items are known as trade fixtures. Even though the ovens are bolted to the floor and connected to a dedicated ventilation system, their nature as essential equipment for a commercial bakery business overrides the physical attachment. The law recognizes that such installations are for the tenant’s benefit and use in their trade, not to permanently enhance the landlord’s property. Therefore, Alejandro has the right to remove the ovens before the lease expires. This right is contingent upon the tenant repairing any physical damage to the premises caused by the removal process. The absence of a specific clause in the lease addressing this matter does not extinguish the tenant’s established right to remove trade fixtures.

The core issue revolves around a broker’s non-delegable responsibility to supervise their sponsored agents. According to Texas Real Estate Commission Rule §535.2, a broker is required to provide adequate supervision of their sponsored sales agents. This includes responsibility for all acts performed by the agent under the authority of the brokerage, especially advertising. The agent, Anika, created an advertisement that was misleading in two significant ways. First, it created the false impression that she was the agent responsible for the sale, which is a misrepresentation. Second, under TREC Rule §535.155, all advertisements, including social media posts, must clearly and conspicuously contain the name of the broker. Anika’s post omitted the brokerage name, which is a direct violation. While the agent created the problematic advertisement, the sponsoring broker, Kenji, is ultimately responsible for ensuring all advertising complies with TREC rules. A policy of reviewing dynamic content like social media only on a quarterly basis may be deemed insufficient to constitute adequate supervision. Therefore, the broker’s primary failure is the lack of effective and timely oversight of the agent’s advertising activities, which directly violates his supervisory duties as mandated by the commission.

First, the relevant financial metrics for the borrower, Alejandro, must be calculated. The purchase price is $525,000 and the down payment is $84,000. The loan amount is the purchase price minus the down payment: \(\$525,000 – \$84,000 = \$441,000\). The Loan-to-Value (LTV) ratio is the loan amount divided by the property value: \(\frac{\$441,000}{\$525,000} = 0.84\), or 84%. Because the LTV is greater than 80%, Private Mortgage Insurance (PMI) is required. Next, we calculate the Debt-to-Income (DTI) ratios based on a gross monthly income of $12,000. The front-end DTI (or housing ratio) includes principal, interest, taxes, insurance (PITI), and PMI. The total monthly housing payment is \(\$2,800 + \$250 = \$3,050\). The front-end DTI is \(\frac{\$3,050}{\$12,000} \approx 0.254\), or 25.4%. The back-end DTI includes the total housing payment plus all other recurring monthly debts. Alejandro’s other debts are $1,500. The total monthly debt obligation is \(\$3,050 + \$1,500 = \$4,550\). The back-end DTI is \(\frac{\$4,550}{\$12,000} \approx 0.379\), or 37.9%. In conventional mortgage underwriting, lenders evaluate multiple risk factors. An LTV of 84% is common and is managed through the requirement of PMI, so it is not in itself a major obstacle. The front-end DTI of 25.4% is well below the typical benchmark of 28%, indicating the housing payment is very affordable relative to the borrower’s income. However, the back-end DTI of 37.9% exceeds the traditional guideline of 36% used by many conventional lenders following Fannie Mae and Freddie Mac standards. While lenders may approve loans with higher DTI ratios, often up to 45% or more, a ratio exceeding the 36% benchmark will trigger additional scrutiny. The underwriter will look for significant compensating factors, such as a high credit score, substantial cash reserves after closing, or a long history of stable employment, to mitigate the perceived risk associated with the higher total debt load. Therefore, this specific ratio is the most critical point of evaluation in the loan file and presents the most significant potential challenge to approval.

The compliance analysis is based on Texas Real Estate Commission (TREC) advertising rules, specifically §535.155(b). This rule addresses the relationship between the display of a sales agent’s name and the sponsoring broker’s name in an advertisement. The rule requires the broker’s name to be at least half the size of the largest contact information for any single sales agent, associated broker, or team name. Let \(S_{agent}\) represent the font size of the agent’s name and branding. Let \(S_{broker}\) represent the font size of the broker’s name. The rule can be expressed as: \[S_{broker} \ge \frac{1}{2} S_{agent}\] In the described scenario: \(S_{agent} = 36\) point font \(S_{broker} = 10\) point font We check if the condition is met: \[10 \ge \frac{1}{2} \times 36\] \[10 \ge 18\] This inequality is false. The broker’s name font size (10-point) is less than half the size of the agent’s name font size (18-point), which is a direct violation. Under TREC rules, any website, social media profile, or other digital asset created by a license holder to attract the public to use real estate brokerage services is considered an advertisement. A core principle of these advertising rules is to ensure the public is never misled about the identity of the entity responsible for the brokerage activity. The sponsoring broker is that responsible party. To enforce this, TREC requires the broker’s name to be displayed clearly and conspicuously on all advertisements. The half-size rule is a specific, measurable standard to enforce the “clear and conspicuous” requirement when an agent’s name or a team name is also present. By displaying the agent’s name far more prominently than the brokerage’s name, the advertisement could incorrectly imply that the agent is the primary or sole operator, which contravenes the purpose of the regulations. Therefore, failing to meet this size requirement is a significant compliance failure.

The Truth in Lending Act, implemented by Regulation Z, governs how credit terms are advertised to consumers. The law is designed to ensure that consumers receive clear and complete information about the cost of credit. A key component of Regulation Z relates to “triggering terms” in advertisements. If an advertisement for credit contains a triggering term, it must also include a set of prescribed disclosures to provide a more complete picture of the credit offer. Triggering terms are specific statements about credit, not general descriptions. The four main categories of triggering terms are: the specific amount or percentage of a down payment; the number of payments or the repayment period; the specific dollar amount of any payment; and the specific dollar amount of any finance charge. In this scenario, the statement about monthly payments being under a specific dollar figure constitutes a triggering term. By stating a payment amount, even as a ceiling, the advertisement moves from general marketing to specific credit information. This action legally obligates the advertiser to provide the full set of additional disclosures required by TILA. These disclosures include the amount or percentage of the down payment, the full terms of repayment including the number and timing of payments, and the Annual Percentage Rate or APR. Phrases like “financing available,” “flexible terms,” or “low down payment” are considered general and do not, by themselves, trigger these extensive disclosure requirements because they do not state a specific number, amount, or percentage.

The logical process to determine the critical consideration in the reconciliation phase for this specific property involves a systematic evaluation of the three approaches to value. First, the Sales Comparison Approach is analyzed. While it is typically the most reliable for residential properties, its applicability here is significantly weakened by the subject property’s unique combination of historic character and mixed-use zoning. Finding truly comparable sales would be extremely difficult, making the data less reliable. Second, the Cost Approach is evaluated. This approach is generally least reliable for older, historic structures. Calculating the reproduction cost of 120-year-old materials and craftsmanship is highly speculative. Furthermore, accurately estimating the total accrued depreciation, including physical, functional, and external factors over such a long period, is a subjective and challenging task, reducing the credibility of this approach’s value indication. Third, the Income Approach is considered. Given that the property has a legally zoned commercial component generating a verifiable income stream, this approach provides a strong, market-based indicator of value from an investor’s perspective. Therefore, the reconciliation process cannot be a simple mathematical average. The appraiser must engage in a critical analysis, weighing the strengths and weaknesses of each approach. The final opinion of value will be derived by placing the most emphasis and weight on the approaches that are supported by the most robust and relevant data for this particular property. In this case, the Income and Sales Comparison approaches, despite the latter’s challenges, would likely be given more weight than the highly speculative Cost Approach. The core task is this qualitative weighing process, not a formulaic calculation. In the appraisal process, reconciliation is the final step where the appraiser analyzes the value indications from the different appraisal approaches to arrive at a single, defensible opinion of market value. This is not a mathematical average of the values; rather, it is a complex weighting process based on the appraiser’s professional judgment. The appraiser must consider the quantity and quality of the data gathered for each approach and the appropriateness of each approach to the specific type of property being valued. For a unique, historic, mixed-use property as described, each approach has distinct limitations and strengths. The Sales Comparison Approach, while paramount for typical homes, is hampered by a lack of similar properties sold recently. The Cost Approach is particularly weak for historic properties because estimating reproduction cost and, more importantly, accrued depreciation over a century is exceptionally difficult and subjective. The Income Approach gains significant relevance because the property generates actual income, providing a direct data point for what an investor might pay. The appraiser’s most critical task during reconciliation is to thoughtfully consider these factors, determine which approach or approaches are most reliable and relevant in this specific context, and assign appropriate weight to them to form a credible conclusion.

The calculation to determine the core operational funds for the brokerage is: \[ \text{Company Dollar} = \text{Gross Commission Income} – \text{Commissions Paid to Sales Associates} \] \[ \$225,000 = \$750,000 – \$525,000 \] This calculation yields the company dollar, which is the amount of revenue the brokerage retains after paying out the agents’ share of commissions. This figure is a critical key performance indicator for any real estate brokerage. It is not profit. Instead, it represents the total pool of money available to the brokerage to cover all of its own operating expenses. These expenses include, but are not limited to, office rent or mortgage, salaries for administrative staff, marketing and advertising costs, utilities, insurance, technology fees, and professional dues. After all of these fixed and variable costs are paid from the company dollar, the remaining amount is the brokerage’s net profit or loss. A Texas broker has a responsibility to manage the firm’s finances effectively, and closely monitoring the company dollar is fundamental to this duty. It allows the broker to assess the financial viability of the current commission structure, control overhead costs, and make informed strategic decisions to ensure the long term profitability and stability of the entire operation.

The situation is governed by the Texas Property Code, specifically Chapter 92, which outlines the rights and responsibilities of landlords and tenants. The core issue is the landlord’s statutory duty to repair a condition that materially affects the physical health or safety of an ordinary tenant. A non-functional central air conditioning unit in Houston during August would almost certainly meet this standard. The tenant, Mei-Ling, has taken the correct first step by providing notice in a manner that creates a rebuttable presumption of receipt—certified mail. The landlord, represented by Broker Chen, is required to make a diligent effort to repair the condition within a reasonable time after receiving this notice. Chen’s failure to respond or act within ten days constitutes a breach of this duty. According to Texas Property Code § 92.056, this breach entitles the tenant to specific remedies, provided the tenant is not delinquent in rent at the time notices are given. One of the most significant remedies is lease termination. However, this remedy is not immediate after the first notice. To legally terminate the lease, the tenant must provide a second, subsequent written notice to the landlord stating that if the condition is not repaired within a reasonable time, the tenant will terminate the lease. After giving this second notice, if the repair is still not made, the tenant can then terminate the lease, vacate the premises, and may be entitled to a pro-rata refund of rent and other damages as specified by the statute. Therefore, the broker’s inaction has placed the landlord in a position where the tenant, by following the correct two-notice procedure, can legally exit the lease agreement and potentially seek further damages.

There is no calculation required for this question. Under the Texas Real Estate License Act, a license holder has specific fiduciary duties to their client. These duties are often remembered by the acronym OLD CAR: Obedience, Loyalty, Disclosure, Confidentiality, Accounting, and Reasonable Care. The highest obligation is to the client. In contrast, the duty owed to a customer, who is a party to the transaction but not represented by the agent, is one of honesty and fairness. This includes disclosing material facts about the condition of the property. In this scenario, the broker represents the seller, making the seller the client and the unrepresented buyer a customer. The buyer’s disclosure of their willingness and ability to pay a higher price is considered material information. It directly impacts the client’s financial interests and negotiating position. The fiduciary duty of Disclosure requires the broker to inform their client of all material information received. The buyer’s request for confidentiality (“just between us”) does not create a duty of confidentiality for the broker toward the buyer, as the buyer is a customer, not a client. The broker’s primary duty of loyalty and disclosure is to their seller-client. Withholding this information would be a breach of that fiduciary duty. While the broker must be honest with the customer, this honesty does not extend to concealing material facts from their own client to the client’s detriment. The proper course of action is to convey this valuable negotiating information to the seller.

A Texas broker has a fiduciary duty to represent their client’s best interests with competence and diligence. When an appraisal report appears to contain significant errors or relies on questionable data that negatively impacts a client’s transaction, the broker’s role is to facilitate a professional and data-supported challenge. The appropriate mechanism for this is a “Reconsideration of Value” request. This process involves the broker, on behalf of their client, assembling a comprehensive package of objective evidence. This evidence should include more suitable comparable sales that the appraiser may have overlooked, detailed documentation of property features or recent upgrades not adequately considered, and a clear, factual explanation of any perceived errors in the original report. This package is submitted to the lender, as the lender is the appraiser’s client. The lender then forwards the information to the appraiser for review. This procedure respects the established professional channels and the appraiser’s independence. Simply advising termination without attempting to resolve the issue is premature. Furthermore, a Broker Price Opinion cannot replace a formal appraisal for lending purposes, and filing a complaint against an appraiser is handled by the Texas Appraiser Licensing and Certification Board (TALCB), not the Texas Real Estate Commission (TREC), which oversees brokers and sales agents.

The determination of whether property is separate or community in Texas is governed by the inception of title rule. This legal doctrine establishes that the character of an asset is fixed at the very moment the rights to that property are first acquired. In the given scenario, Alejandro acquired the equitable title to the duplex when he signed the binding earnest money contract. Since this event occurred before his marriage to Bianca, the duplex itself is legally classified as his separate property. However, the analysis does not end there. During the marriage, community funds, specifically the salaries earned by both spouses, were used for the down payment and all subsequent mortgage payments. Under the Texas Family Code, when community funds are used to pay down the debt on or make improvements to a spouse’s separate property, the community estate does not gain an ownership interest in the property itself. Instead, it acquires an equitable interest in the form of a claim for reimbursement. Upon the sale of the property, the community estate is entitled to be reimbursed for the principal reduction and other contributions it made. Furthermore, any income generated from separate property during a marriage, such as the rent collected from the second unit of the duplex, is considered community property. Therefore, while the duplex remains Alejandro’s separate asset, the community estate has a significant financial claim against it that must be satisfied from the sale proceeds.

This is a conceptual question based on Texas statute; no numerical calculation is required. The solution is derived through the following logical steps: 1. The transaction involves a wraparound mortgage, which is a form of seller financing where the seller’s existing mortgage remains in place. 2. Texas Property Code § 5.016 specifically governs transactions involving seller financing for residential property that is already encumbered by a lien. 3. This statute mandates that the seller must provide the buyer with a separate written disclosure statement detailing the status of the existing loan(s) before the binding contract of sale is executed. 4. The statute provides a specific remedy for the seller’s failure to provide this required disclosure. The buyer is granted the unconditional right to terminate the contract and receive a full refund of all payments made to the seller, including the down payment and any principal and interest payments. A wraparound mortgage is a complex financing tool where a buyer makes payments to a seller, and the seller continues to make payments on their underlying original mortgage. This structure carries significant risk, primarily because the seller’s original lender can invoke a due-on-sale clause, potentially leading to foreclosure if they discover the unapproved transfer of interest. To mitigate this risk for the buyer, the Texas Legislature enacted Property Code § 5.016. This law requires the seller to give the buyer a formal, written disclosure about any existing liens before the purchase contract becomes binding. The disclosure must include the loan balance, the lender’s name, the case number, and a statement about whether the lienholder has consented to the sale. If the seller fails to provide this crucial notice, the law grants the buyer a powerful remedy. The buyer may terminate the contract for any reason at any time before closing and receive a complete refund of all monies paid to the seller. This right to cancel and receive a refund is a key protection that a knowledgeable broker must understand when facilitating such a transaction. The broker has a duty of competence to advise their seller client of this statutory obligation to prevent liability and protect all parties.

The sponsoring broker, Ananya, is ultimately responsible for the actions of her sponsored sales agents, including their advertising practices. The Texas Real Estate License Act (TRELA) and Texas Real Estate Commission (TREC) rules are clear on this matter. Specifically, TREC Rule §535.154 governs advertising. A key provision within this rule, §535.154(d), explicitly prohibits a team name from using terms that imply the team is an independent brokerage, such as “Realty,” “Brokerage,” or “Company.” The team name “Apex Realty Group” is a direct violation of this rule. As the sponsoring broker, Ananya has a duty to review and approve team names and ensure they comply with all regulations. Furthermore, TREC Rule §535.155 establishes the broker’s responsibility for the acts of sponsored sales agents. While a broker is not required to directly supervise every action, they are responsible for ensuring their agents comply with the law. Ananya’s awareness of the team name and the advertising materials means she had the opportunity to identify and correct these violations. The claim of being the “#1 Team” could also be deemed misleading if the basis for the claim is not clearly and conspicuously stated in the advertisement, which is a violation of the general principles against deceptive advertising in TRELA §1101.652. The primary responsibility rests with the sponsoring broker to maintain compliance and prevent such violations.

The legal analysis hinges on whether the broker’s statement constitutes an actionable misrepresentation under the Texas Deceptive Trade Practices-Consumer Protection Act (DTPA). The core issue is the distinction between a statement of fact and a statement of opinion, often referred to as “puffing.” Step 1: Identify the nature of the broker’s statement. The broker, Lorenzo, stated the property “would likely be approved for a zoning variance” and was a “guaranteed moneymaker.” Step 2: Analyze the statement in the context of the DTPA. The DTPA prohibits false, misleading, or deceptive acts, including misrepresenting the characteristics, uses, or benefits of goods or services. Step 3: Differentiate between fact and opinion. A statement of fact is a representation about a current, verifiable condition (e.g., “the property is currently zoned C-1”). A statement of opinion or puffing involves subjective claims, predictions about future events, or exaggerations that a reasonable person would not take as a literal guarantee (e.g., “this is the best view in the city”). Step 4: Apply the distinction to the scenario. Lorenzo’s claim that the property was a “guaranteed moneymaker” is a classic example of puffing—a subjective and speculative prediction of future financial success. His statement that a variance would “likely be approved” is also a prediction about the future action of a government body, not a statement of existing fact. It is an opinion, not a guarantee of a specific land-use characteristic. Step 5: Conclude the viability of the DTPA claim. Because Lorenzo’s statements are legally considered opinions and puffery rather than misrepresentations of material fact, they do not provide a basis for a successful DTPA lawsuit. A buyer’s reliance on such forward-looking, speculative statements is generally not protected under the act. The DTPA is designed to protect consumers from misrepresentations about the known, present qualities of a property or service, not from the failure of future predictions to materialize. A broker is not held to be a guarantor of a client’s future business success or of future decisions by a zoning board.

When a lender denies a credit application based wholly or partly on information contained in a consumer’s credit report, federal law imposes specific disclosure requirements on the lender. The Fair Credit Reporting Act (FCRA) mandates that the lender must provide the applicant with an “adverse action notice.” This notice is critical as it empowers the consumer. It must include the name, address, and telephone number of the credit reporting agency that furnished the report, a statement that the agency did not make the credit decision and is unable to provide the specific reasons for it, and a notification of the consumer’s right to obtain a free copy of their credit report from that agency within 60 days. Furthermore, the Equal Credit Opportunity Act (ECOA) requires the creditor to either provide the specific reasons for the denial or to disclose the applicant’s right to request the reasons within 60 days. Therefore, a real estate broker’s primary responsibility in this situation is not to intervene directly or offer specialized financial services, but to exercise their duty of care by accurately informing the client of these statutory rights. The broker should guide the client to seek the legally mandated information from the lender, which is the starting point for understanding the denial and identifying any potential errors on the credit report. This approach ensures the broker acts within their professional capacity, avoids unauthorized legal or financial advice, and properly supports the client’s interests.

Calculation of active experience within the preceding five years: Total look-back period = 5 years Period of inactivity within the last 5 years = 1.5 years Total active experience within the last 5 years = 5 years – 1.5 years = 3.5 years Required minimum active experience = 4 years Conclusion: The applicant has 3.5 years of active experience, which is less than the required 4 years. To qualify for a Texas broker license, an applicant must satisfy several distinct requirements set forth by the Texas Real Estate Commission (TREC). These include education, moral character, and experience. The experience component is twofold. First, an applicant must demonstrate sufficient practical experience by accumulating a minimum of 3600 points from real estate transactions, which are detailed on the Qualifying Experience Report for a Broker License. The scenario indicates this requirement has been met. Second, and critically, the applicant must meet a time-based requirement. This rule stipulates that the applicant must have held an active real estate sales agent license in Texas for at least four of the five years preceding the date the application is filed. In the given situation, the look-back period is five years. Within this period, the individual was inactive for one and a half years. This means they only have three and a half years of active licensure within the relevant five-year window, falling short of the mandatory four-year minimum. While a bachelor’s degree from an accredited university can satisfy the majority of the 900-hour educational requirement, it does not waive the mandatory 30-hour Real Estate Brokerage course, which the applicant correctly completed. Therefore, the sole unmet criterion preventing eligibility is the time-based active experience rule.

The core issue in this scenario revolves around Section 8 of the Real Estate Settlement Procedures Act (RESPA), which prohibits giving or receiving a “thing of value” in exchange for the referral of settlement service business. In this case, the brokerage is offering a $500 credit to the client. This credit is not a general discount available to all clients; it is specifically contingent upon the client using two other settlement service providers in which the broker has an ownership interest. This credit constitutes a “thing of value.” Because its provision is directly tied to the referral to and use of the affiliated mortgage and title companies, it is considered an illegal kickback or referral fee under RESPA. While Affiliated Business Arrangements (AfBAs) are permissible under RESPA, they are subject to strict conditions. One of these conditions is that the only thing of value received from the arrangement, other than permissible payments for services rendered, is a return on the ownership interest. Providing a special credit or discount to the consumer for using the affiliated entities goes beyond a return on ownership and is designed to improperly influence the consumer’s choice of providers. The required AfBA disclosure form informs the consumer of the relationship but does not legitimize an otherwise illegal payment or incentive structure. Therefore, the brokerage’s incentive program directly violates the anti-kickback provisions of RESPA.

The correct action is for the broker to provide full written disclosure of his personal interest and all material facts related to the developer’s offer. Under the Texas Real Estate License Act (TRELA), a broker has a strict fiduciary duty to their client. This includes the duties of loyalty and disclosure. The duty of loyalty requires the broker to place the client’s interests above all others, including the broker’s own financial interests. In this scenario, the broker’s ownership of an adjacent property creates a significant conflict of interest because the sale to the developer could personally enrich the broker. The duty of disclosure mandates that the broker must inform the client of all material information relevant to the transaction. The potential for a large-scale development and its impact on property values is a material fact, as is the broker’s personal financial stake in that outcome. Simply presenting one offer or advising on a course of action without revealing this conflict would be a severe breach of these duties. The primary and immediate legal and ethical obligation is to make a full, written disclosure of the conflict of interest to the seller. This allows the seller to make an informed decision about how to proceed, whether that means continuing with the broker, seeking other counsel, or choosing a specific offer.

The broker, Anika, is entitled to the full commission. The core of this issue lies in the specific terms of an Exclusive Agency Listing agreement and the legal concept of procuring cause. In an Exclusive Agency Listing, the seller retains the right to sell the property themselves without owing a commission to the broker. However, this right is narrowly defined. It means the seller must find the buyer and facilitate the sale entirely on their own, without the broker being the procuring cause. If the listing broker, or any other broker, is the one who initiates an uninterrupted chain of events that leads to a successful sale, that broker is considered the procuring cause and is owed the commission. In this scenario, while Mr. Chen made the initial introduction, the prospective buyer did not proceed directly with Mr. Chen. Instead, the buyer contacted Anika, the listing broker. By showing the property, handling the negotiations, and managing the transaction paperwork, Anika established herself as the procuring cause of the sale. The buyer came through her brokerage to execute the purchase. The seller’s initial conversation does not negate the broker’s role as the procuring cause once the buyer engages the broker to complete the transaction. This situation is distinct from one where the seller finds a buyer and they complete the sale without any involvement from the broker. Therefore, under the terms of the Exclusive Agency Listing, the commission is earned by and due to Anika’s brokerage. This contrasts with an Exclusive Right to Sell, where the broker earns a commission regardless of who finds the buyer, and an Open Listing, where only the broker who actually procures the buyer is paid.

The initial ownership structure is a joint tenancy with right of survivorship among Alejandro, Bianca, and Carlos, with each holding an equal, undivided one-third interest. The explicit language in the deed is crucial, as Texas law does not presume a right of survivorship in joint tenancies. When Carlos sells his one-third interest to Dahlia, this act severs the joint tenancy only as to his share. The unities of time and title are broken for Dahlia’s interest. Consequently, Alejandro and Bianca remain joint tenants with right of survivorship with each other for their combined two-thirds interest, while Dahlia holds her one-third interest as a tenant in common with them. Upon Alejandro’s death, the right of survivorship between him and Bianca is activated. Alejandro’s one-third interest automatically passes to Bianca, the surviving joint tenant, by operation of law. This transfer supersedes any conflicting provisions in Alejandro’s will, meaning his son Eduardo does not inherit any interest in this specific property. After this transfer, Bianca’s total interest becomes two-thirds (her original one-third plus Alejandro’s one-third). Since the joint tenancy element only existed between Alejandro and Bianca, it is now extinguished. The final ownership structure is that Bianca holds a two-thirds interest and Dahlia holds a one-third interest, and they hold title together as tenants in common.

No calculation is required for this question. This scenario tests the understanding of how different types of unwritten property rights, specifically easements, are established under Texas law. The primary concepts are easement by prescription, easement by necessity, and easement by estoppel (sometimes referred to as an irrevocable license). An easement by necessity in Texas requires three elements: 1) there was unity of ownership of the alleged dominant and servient estates prior to their severance; 2) the claimed access is a true necessity and not a mere convenience; and 3) the necessity existed at the time the two estates were severed. In the given scenario, while there was prior unity of ownership, the necessity for the easement did not arise at the time the original ranch was divided in the 1950s. Instead, it arose decades later due to the highway project. Therefore, a claim for an easement by necessity would likely fail on the third element. An easement by estoppel arises when a landowner’s actions or representations lead another person to reasonably believe they have a right to use the property, and that person acts on that belief to their detriment, such as by making significant improvements. In this case, while Beatrice’s family acquiesced to the use, there is no information that Alejandro incurred significant expenses or made improvements in reliance on this perceived right. Simple use of the path is generally insufficient to establish estoppel. The strongest claim is for an easement by prescription. In Texas, this requires a use that is open, notorious, hostile, adverse, continuous, and exclusive for a period of ten years. The use of the path for over two decades clearly meets the open and continuous requirements. Under Texas law, when a person uses another’s land openly and without permission for the statutory period, the use is presumed to be adverse or hostile. The burden then shifts to the landowner (Caspian Corp.) to prove the use was permissive. The silent acquiescence of Beatrice’s family is not sufficient to overcome this presumption of adversity. Therefore, Alejandro has a strong argument that his long-term, open use has ripened into a permanent, legally enforceable prescriptive easement.

In Texas, when a seller breaches a real estate contract, the buyer has several legal remedies. The choice of remedy depends on the buyer’s goals and the specifics of the contract. One of the most powerful remedies is specific performance. This is an equitable remedy where a court orders the breaching party to perform their specific obligations under the contract—in this case, to complete the sale of the property. The legal principle behind specific performance in real estate is that every parcel of land is considered unique. Therefore, monetary damages are often considered an inadequate remedy because the buyer cannot simply take the money and buy an identical property elsewhere. The TREC One to Four Family Residential Contract (Resale) addresses default in Paragraph 15. It typically gives the non-breaching party options. For a buyer facing a seller’s default, these options usually include terminating the contract and receiving the earnest money back, thereby releasing both parties, or enforcing specific performance, or seeking other relief as may be provided by law. Simply accepting the earnest money as liquidated damages is one choice, but it is not the buyer’s only recourse. The buyer can waive the liquidated damages and instead file a lawsuit to compel the seller to convey the property. Given that the property is unique and the buyer has a strong interest in acquiring it, pursuing specific performance is the most direct way to achieve that objective.

Under the Texas Real Estate License Act (TRELA) and the rules of the Texas Real Estate Commission (TREC), a sponsoring broker has a non-delegable duty to supervise their sponsored agents. This includes ensuring agents comply with all advertising rules and ethical obligations. The TREC Canons of Professional Ethics and Conduct, specifically the Canon of Integrity, mandates that a license holder must exercise scrupulous and meticulous care in all dealings and avoid misrepresentation in any form. When a broker becomes aware that a sponsored agent is making material misrepresentations, their primary responsibility is to the public and to the integrity of the profession. This requires the broker to take immediate and substantive corrective action. Such action involves instructing the agent to cease the misleading activity, ensuring all false information is corrected or removed, and implementing enhanced supervision or training to prevent recurrence. Documenting these steps is crucial for demonstrating compliance with supervisory duties. The broker’s financial interest in the agent’s productivity is secondary to their fundamental ethical and legal obligations to ensure truthful representation and protect the public from harm. Failure to act decisively constitutes a breach of the broker’s supervisory duties and the Canon of Integrity, potentially subjecting the broker to disciplinary action by TREC.

The logical determination of the correct answer is as follows: 1. Analyze the legal framework governing the scenario. The question concerns a reverse mortgage in Texas, which is specifically regulated by the Texas Constitution, Article XVI, Section 50(k). 2. Evaluate the broker’s first statement: “The total amount you owe can never exceed the appraised value of your home at the time the loan is repaid.” This statement describes the non-recourse nature of the loan, which is a key feature mandated by Section 50(k)(8). This advice is accurate. 3. Evaluate the broker’s second statement: “The loan must be repaid if you sell the home or cease to use it as your primary residence for 12 consecutive months.” This statement correctly identifies two of the primary triggers for the loan becoming due and payable, as outlined in the terms of a standard Home Equity Conversion Mortgage (HECM) and consistent with Texas law. This advice is accurate. 4. Evaluate the broker’s third statement: “You must attend a counseling session with a state-approved counselor and provide me with the completion certificate before we can close.” This reflects the mandatory counseling requirement under Section 50(k)(10). This advice is accurate. 5. Evaluate the broker’s fourth statement: “Once you complete your application and counseling, we can schedule the closing to occur after a mandatory 5-business-day waiting period.” This statement is inaccurate. Texas Constitution Article XVI, Section 50(k)(11) explicitly states that a reverse mortgage may not be closed before the 12th calendar day after the date the lender provides the prospective borrower with a written notice. This 12-day cooling-off period is a critical consumer protection measure and is significantly different from a 5-business-day period. The broker’s advice misrepresents this constitutional requirement. Conclusion: The statement regarding the 5-business-day waiting period is factually incorrect under Texas law. A reverse mortgage, known in Texas as a Texas Reverse Mortgage under Article XVI, Section 50(k) of the Texas Constitution, is a complex financial instrument designed for homeowners aged 62 or older. It allows them to access the equity in their home without having to make monthly mortgage payments. The loan is typically repaid when the last surviving borrower dies, sells the home, or no longer lives in the home as their principal residence. Texas law provides several key consumer protections for these loans. One of the most important is the non-recourse provision, which ensures that the total debt owed can never be more than the value of the home when the loan is repaid, protecting the borrower’s estate from a deficiency judgment. Another critical protection is the requirement for mandatory counseling with a HUD-approved or other state-approved counselor to ensure the borrower fully understands the loan’s terms, benefits, and risks. Perhaps the most distinct Texas provision is the mandatory 12-day cooling-off period. This period begins after the borrower receives a specific written notice from the lender and prevents the loan from closing for at least 12 calendar days, giving the borrower ample time to reconsider the decision without pressure. A broker must be precise about these state-specific requirements when advising clients.

The primary political force directly facilitating a fundamental change in land use from low-density residential to high-density mixed-use is the proactive and official action taken by a local government. In this case, the municipal government’s adoption of a comprehensive plan amendment and a specific zoning ordinance to encourage transit-oriented development is the most significant factor. This governmental action creates the legal framework that supersedes previous land use restrictions and provides the legal entitlement for the developer’s proposed project. While other forces are influential, they operate within the context set by these governmental controls. For instance, social forces like community sentiment can create political pressure and procedural delays, but they do not hold the legal weight of an enacted zoning ordinance. Economic forces, such as shifts in employment sectors or interest rates, determine the financial feasibility and market absorption of a project but do not grant the legal right to build it. Similarly, environmental regulations and physical constraints, like floodplain designations, dictate how and where development can occur on a site but do not authorize the type of use itself. Therefore, the deliberate change in municipal planning and zoning policy is the foundational political act that unlocks the property’s potential for a higher and better use, directly impacting its value by changing its development rights.

The final opinion of value is derived through reconciliation, which involves weighting the different value indications. Assume the appraiser derived the following values: Cost Approach = \$920,000; Sales Comparison Approach = \$885,000; Income Approach = \$750,000. Given the property’s unique historic nature and lack of good comparables, the appraiser determines the most logical weighting is 55% for the Cost Approach, 40% for the Sales Comparison Approach, and 5% for the Income Approach. The calculation is as follows: \[ (\$920,000 \times 0.55) + (\$885,000 \times 0.40) + (\$750,000 \times 0.05) \] \[ \$506,000 + \$354,000 + \$37,500 = \$897,500 \] Reconciliation is the final step in the appraisal process where the appraiser arrives at a final opinion of value from the data analyzed. It is a common misconception that this is a simple mathematical averaging of the values produced by the different appraisal approaches. Instead, reconciliation is a complex analytical process requiring the appraiser to exercise professional judgment. The appraiser evaluates the quality and quantity of data available for each approach and considers the applicability of each approach to the subject property and the intended use of the appraisal. More weight is assigned to the approach or approaches deemed most reliable and relevant. For a unique property like a historic home, where directly comparable sales are scarce, the Sales Comparison Approach may be less reliable. The Cost Approach, which considers the cost to reproduce or replace the structure less depreciation, often becomes a more significant indicator of value for such special-purpose properties. Conversely, the Income Approach is least relevant for an owner-occupied residence as it is not primarily an income-producing asset. The appraiser must provide a clear and reasoned justification for the weights assigned and the final value conclusion, consistent with the standards set by the Uniform Standards of Professional Appraisal Practice (USPAP).

The logical process to determine the correct advice is as follows: 1. Calculate the initial Loan-to-Value (LTV) ratio. The loan amount is \( \$540,000 \) (\( \$600,000 \times 0.90 \)) and the original property value is \( \$600,000 \). The initial LTV is \( \frac{\$540,000}{\$600,000} = 90\% \). Since this is greater than \( 80\% \), Private Mortgage Insurance (PMI) is required. 2. Analyze the conditions for PMI cancellation under the federal Homeowners Protection Act (HPA). The HPA provides two primary paths for cancellation on a principal residence: automatic termination and borrower-requested termination. 3. Automatic termination occurs when the loan balance is scheduled to reach \( 78\% \) of the original property value. This would be a balance of \( \$600,000 \times 0.78 = \$468,000 \). The current balance is \( \$525,000 \), so this condition is not met. 4. Borrower-requested termination can be initiated when the loan balance reaches \( 80\% \) of the original value (\( \$600,000 \times 0.80 = \$480,000 \)). The current balance is too high for this as well. 5. However, the HPA and lender guidelines also allow for borrower-requested cancellation based on the current value of the property, especially in cases of significant appreciation. To exercise this right, the borrower must formally petition the lender. The lender will then require a new, certified appraisal to verify the current market value. The LTV based on this new appraisal must be at or below \( 80\% \). In this scenario, the current LTV would be \( \frac{\$525,000}{\$750,000} = 70\% \). Since \( 70\% \) is less than \( 80\% \), the condition is met. Lenders also typically impose “seasoning” requirements, meaning the loan must be held for a certain period (often two to five years), which the borrowers in this four-year scenario satisfy. Therefore, the most accurate advice involves petitioning the lender and securing a new appraisal to prove the current LTV. The Homeowners Protection Act provides critical consumer protections regarding PMI on conventional loans for a primary residence. A Texas broker must understand the nuances between cancellation based on the original amortization schedule and cancellation based on substantial increases in property value. The former is more straightforward, tied to reaching \( 80\% \) LTV (for borrower request) or \( 78\% \) LTV (for automatic termination) of the original value. The latter path, which is relevant in appreciating markets, is a right the borrower can pursue but it is not automatic. It requires proactive steps from the borrower, including a formal request and willingness to pay for a new appraisal. The lender has the right to verify the new value and ensure the borrower has a good payment history. Advising a client simply to refinance is not always the best or only option, as it involves new closing costs and potentially a different interest rate. A knowledgeable broker provides the full range of options available under the law.