Texas Real Estate Closing & Settlement Practice Questions (Free + Explained)

TL;DR

What Does the Texas Real Estate Closing Section Test?

Based on the current Pearson VUE Texas Real Estate Candidate Handbook and exam content outline, Closing and Settlement content appears on both the national and state portions of the Texas real estate licensing exam. The national portion covers federal closing regulations — RESPA, TRID disclosures, and HUD-1 settlement statements — which overlap with content in our finance and mortgage practice questions. The state portion covers Texas-specific closing procedures, title insurance requirements, and the role of escrow in Texas transactions.

Closing questions are heavily scenario-based. Our complete study guide covers how to approach scenario-based questions across all sections. Candidates are expected to know not just what each document is, but who prepares it, who pays for what, and what happens when a closing condition is not met — many of these scenarios originate in the contract terms tested in our contracts section. Proration calculations are a consistent feature of this section and are also covered in our real estate math practice questions.

What Topics Are Tested?

• Closing Disclosure (CD) — required under TRID, the Closing Disclosure must be delivered to the borrower at least three business days before closing. It replaces the HUD-1 Settlement Statement for most residential transactions. For TRID purposes, business days for the CD are all calendar days except Sundays and federal holidays (Saturday counts).
• Title insurance — Texas has two types of title insurance policies: the owner's policy (protects the buyer) and the mortgagee's policy (protects the lender). In Texas, the seller typically pays for the owner's title insurance policy, though this is negotiable. Title insurance rates in Texas are set by the Texas Department of Insurance — companies cannot charge more or less than the filed rates.
• Title commitment — before closing, a title company issues a title commitment (also called a preliminary title report) showing the current state of title, any existing liens or encumbrances, and the conditions that must be satisfied before a policy will be issued. Candidates must know the difference between Schedule A (what the policy will cover), Schedule B (exceptions to coverage), and Schedule C (requirements that must be satisfied before the policy will be issued).
• Deed types and delivery — the general warranty deed provides the strongest protection, warranting title against all claims including those arising before the grantor owned the property. The special warranty deed warrants only against claims arising during the grantor's ownership. A deed is not effective until it is delivered to and accepted by the grantee — recording gives constructive notice but is not required for the deed to be valid between the parties.
• Prorations at closing — property taxes, HOA dues, and rents are typically prorated at closing. Prorations are typically calculated using a 365-day year unless otherwise specified in the contract — exam questions may use either a 365-day or 360-day year. Know which items are prorated and who receives the credit — the buyer receives a credit for taxes accrued but not yet paid if the seller has owned the property during that period.
• Escrow and closing agents — in Texas, closings are typically handled by title companies acting as escrow agents. The escrow agent is a neutral third party who holds funds and documents and disburses them according to the terms of the contract. Texas is not an attorney-closing state — closings are typically handled by title companies acting as neutral escrow agents.
• Recording and constructive notice — recording a deed in the county deed records provides constructive notice to the world. Texas follows the "race-notice" recording statute: a subsequent purchaser who records first and has no notice of a prior unrecorded deed takes priority — recording statutes are also covered in our laws and compliance practice questions.

What Are the Common Exam Traps in This Section?

• CD vs HUD-1 — the HUD-1 is still used for reverse mortgages and certain non-TRID transactions. The Closing Disclosure replaced the HUD-1 for most TRID-covered transactions. Questions that use "HUD-1" may be testing whether you know which transaction types still fall outside TRID coverage.
• Title insurance — who pays in Texas — in Texas, the seller customarily pays for the owner's title insurance policy, which is the opposite of many other states where the buyer pays. This is a common trap for candidates who have studied national content.
• Deed delivery requirement — a deed that is signed but not delivered is not effective. Delivery requires intent to transfer ownership, not just physical handing over of the document. Recording does not substitute for delivery between the parties.
• General vs special warranty deed — the general warranty deed warrants against ALL prior claims, including those before the grantor's ownership. The special warranty deed only warrants against claims arising during the grantor's period of ownership. Exam questions often present scenarios where the distinction matters.
• Proration direction — property taxes in Texas are paid in arrears (at the end of the year for the preceding period). At closing, the seller owes the buyer a credit for taxes accrued during the seller's ownership period that have not yet been paid. Getting the direction of the credit wrong is a common calculation error.
• Race-notice statute — Texas protects a subsequent bona fide purchaser for value who records first without notice of a prior unrecorded interest. Both conditions must be met: recording first AND having no prior notice of the competing claim.

How Ardelia Structures These Practice Questions

Ardelia's question bank contains 300+ Closing & Settlement practice questions covering federal closing regulations, Texas title insurance rules, deed types, and closing calculations. Each question includes:

• A full explanation of why the correct answer is right
• Why each wrong answer is wrong — with particular attention to Texas-specific rules that differ from national practice
• The specific regulation, statute, or closing procedure being tested
• Calculation walkthroughs for proration questions showing each step

The adaptive engine tracks your accuracy on calculation-based closing questions separately from conceptual questions. If proration math is your weak point, your sessions will route more closing calculation scenarios until your confidence score improves.

Frequently Asked Questions

Who pays for title insurance in Texas?

In Texas, it is customary for the seller to pay for the owner's title insurance policy that protects the buyer. The buyer typically pays for the mortgagee's (lender's) title insurance policy if financing is involved. Title insurance rates in Texas are set by the Texas Department of Insurance — all title companies must charge the same filed rates and cannot negotiate pricing. This is different from most other states where the buyer pays for the owner's policy.

What is the difference between a general warranty deed and a special warranty deed?

A general warranty deed provides the strongest buyer protection — the grantor warrants title against all claims, including those that arose before the grantor owned the property. A special warranty deed limits the warranty to claims arising only during the grantor's period of ownership. The grantor makes no promises about what happened to the title before they acquired it. The general warranty deed is most common in Texas residential transactions.

How are property taxes prorated at closing in Texas?

Because taxes are paid in arrears, at closing the seller owes a credit to the buyer for the portion of the year's taxes that accrued during the seller's ownership but have not yet been paid. For example, if the property closes on July 1, the seller would credit the buyer for approximately six months of taxes. The exact amount depends on the annual tax rate and the agreed proration method.

When must the Closing Disclosure be provided?

The Closing Disclosure must be delivered to the buyer at least three business days before the loan closes. For the Closing Disclosure, business days are all calendar days except Sundays and federal holidays — Saturday counts as a business day. If certain changes occur after the CD is issued (such as an APR increase of more than 0.125%), a new CD must be issued and the three-business-day clock resets.

Source: Pearson VUE Texas Real Estate Salesperson Candidate Handbook · Texas Real Estate Commission (trec.texas.gov)