Texas Real Estate Exam Practice

Question 1 of 5

Closing & FinanceMedium

What does a title insurance policy generally protect against?

APhysical damage from fire, storms, or flooding

BLoss from title defects predating the policy

CThe buyer's liability if a visitor is injured

DA decline in the property's market value

Explanation

Title insurance covers financial loss from title defects — like an undisclosed lien or an ownership dispute — that existed before the policy was issued. It has nothing to do with physical property damage, visitor liability (that's homeowner's/general liability insurance), or market value changes.

Question 2 of 5

Closing & FinanceMedium

Why is a property survey often obtained before a Texas real estate closing?

ATo verify the buyer's identity before funding

BTo show boundaries and any encroachments

CTo determine the property's exact market value

DTo confirm the mortgage interest rate is accurate

Explanation

A survey shows boundary lines, structures, and any encroachments (like a fence crossing a property line) — it's a factual mapping of the land, not a valuation tool, an identity-verification step, or something that has anything to do with confirming a loan's interest rate.

Question 3 of 5

Closing & FinanceMedium

What role does a title company typically play as the escrow/closing agent?

ANegotiates the final sales price for the parties

BDecides if the buyer qualifies for the mortgage

CHolds and disburses funds once conditions are met

DRepresents the buyer's legal interests

Explanation

The title/escrow company holds funds and documents neutrally and disburses them once all closing conditions are satisfied — loan qualification is the lender's decision, price negotiation is between the parties (or their agents), and the title company doesn't represent either party's legal interests.

Question 4 of 5

Closing & FinanceMedium

What generally happens at the closing of a Texas real estate transaction?

AThe listing agreement officially begins

BThe parties sign the purchase contract

CThe property is inspected for the only time

DTitle transfers and funds are disbursed

Explanation

Closing is when title actually transfers and money changes hands per the settlement statement — the purchase contract was already signed well before this point, inspections (if any) also typically happen earlier, and the listing agreement began even before that.

Question 5 of 5

Closing & FinanceMedium

At closing, how are property taxes for the current year typically handled between buyer and seller?

APaid entirely by the buyer, regardless of date

BDeferred untouched to the following tax year

CProrated by each party's ownership period

DPaid entirely by the seller, regardless of date

Explanation

Property taxes are typically prorated at closing, so each party effectively covers taxes only for the portion of the year they actually owned the property — not dumped entirely on one side, and not simply deferred untouched to next year.

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