These Texas real estate contracts & agency practice questions are designed to match the actual exam format. Each question includes a detailed explanation so you understand why the answer is correct — not just what it is.
TL;DR
The Contracts section covers TREC-promulgated contract forms — particularly the One to Four Family Residential Contract — including the option period, effective date, earnest money deposit timing, and the distinction between the option fee and earnest money. Contracts questions are scenario-based and among the most frequently tested on the state portion.
What Does the Texas Real Estate Contracts Section Test?
Based on the current Pearson VUE Texas Real Estate Candidate Handbook and exam content outline, Contracts is a major section on the state portion of the Texas real estate licensing exam — along with agency and intermediary law, it is one of the two highest-fail content areas on the state exam. The state outline explicitly lists Contracts as a standalone category, covering the formation, execution, and performance of real estate contracts — with particular emphasis on TREC-promulgated forms that Texas license holders are required to use.
Contracts questions test both legal knowledge and practical application — see our complete study guide for how to structure your preparation across both state and national content. Candidates are expected to know not just what a contract clause means, but what happens when conditions are met, missed, or disputed — exactly the scenario-based format covered in our retake guide for candidates who lost points here.
What Topics Are Tested?
- Elements of a valid contract — offer, acceptance, consideration, competent parties, legal purpose, and in writing (the Statute of Frauds generally requires real estate contracts to be in writing to be enforceable).
- TREC-promulgated contract forms — the One to Four Family Residential Contract (Resale) is the most tested. Know its structure: sales price, financing, earnest money, title, property condition, closing date, and possession.
- Option period — the buyer pays an option fee for the unrestricted right to terminate within a specified number of days. The option fee is negotiable and is paid directly to the seller; it is not deposited into escrow. The option fee must be delivered within the timeframe specified in the contract (typically within 3 days), or the option period may not be effective. If the buyer terminates during the option period, the option fee is non-refundable but earnest money is returned.
- Earnest money — deposited with an escrow agent by the close of business of the second working day after execution by all parties (the effective date). Earnest money is refundable or forfeited depending on which party defaults and the remedies elected under the contract (e.g., liquidated damages vs specific performance).
- Contingencies — common contingencies include financing (Third Party Financing Addendum), sale of other property, and inspections. Each has specific notice and termination procedures.
- Contract termination and default — if the buyer defaults, the seller may retain earnest money as liquidated damages — the closing and disbursement mechanics are covered in our closing and settlement practice questions. If the seller defaults, the buyer may seek specific performance, return of earnest money, or other legal remedies.
- Addenda — TREC has promulgated addenda for financing, property condition, HOA, back-up contracts, and more. Know when each addendum applies and what it covers.
- Listing agreements — exclusive right to sell, exclusive agency, and open listings. TREC does not promulgate listing agreements; the Texas REALTORS association provides standard forms.
What Are the Common Exam Traps in This Section?
- Option fee vs earnest money — these are two separate payments with different rules. The option fee goes directly to the seller (not escrow), is non-refundable, and buys the unrestricted right to terminate. Contracts and agency law are the two highest-fail state content areas — study both thoroughly. Earnest money goes to escrow and may be refundable depending on contract terms.
- Effective date confusion — the effective date is when the contract is fully executed by all parties. The clock for all time-based obligations (option period, earnest money deposit, financing contingency) starts on the effective date, not the date either party signed.
- Statute of Frauds — real estate contracts generally must be in writing to be enforceable. Oral agreements to buy or sell real property are not enforceable in Texas — this and other statutory requirements are covered in our laws and compliance practice questions.
- Termination during option period — the buyer can terminate for any reason during the option period. The option fee is not returned; earnest money is. After the option period expires, termination requires a specific contractual basis.
- Listing agreement types — in an exclusive right to sell, the broker earns commission regardless of who finds the buyer. In an exclusive agency, the seller can sell without paying commission if they find the buyer independently, without broker involvement. This distinction is frequently tested.
- Negative phrasing — contract questions often use NOT/EXCEPT phrasing. Read every answer before selecting.
How Ardelia Structures These Practice Questions
Ardelia's question bank contains 300+ Contracts practice questions covering all topics above. Each question includes:
- A full explanation of why the correct answer is right
- Why each wrong answer is wrong — including the specific misconception each distractor targets
- The contract clause, TREC form section, or legal principle being tested
- Scenario-based questions that mirror the format used on the actual exam
The adaptive engine identifies which contract topics you miss most — option period rules, earnest money timing, addenda requirements — and routes more questions to those areas in subsequent sessions.
Frequently Asked Questions
- What is the difference between the option fee and earnest money?
- The option fee is paid directly to the seller (not held in escrow) and buys the buyer an unrestricted right to terminate within the option period. It is negotiable in amount and duration, is generally non-refundable if the buyer terminates, though it is typically credited to the buyer at closing if the transaction proceeds. Earnest money is deposited with an escrow agent and is subject to refund or forfeiture depending on which party defaults and the specific contract terms.
- When does the option period start?
- The option period begins on the effective date — the date the contract is fully executed by all parties. It does not start when the first party signs. All time-based obligations in the contract, including the earnest money deposit deadline, run from the effective date.
- Which listing agreement guarantees the broker a commission regardless of who sells the property?
- The exclusive right to sell listing guarantees the broker a commission if the property sells during the listing period, regardless of who procured the buyer — including the seller themselves. This is the most common listing agreement in Texas.
- Does TREC promulgate listing agreements?
- No. TREC promulgates contract forms (purchase agreements and addenda) but not listing agreements. Listing agreements are typically provided by the Texas REALTORS association or drafted by attorneys. License holders are not required to use a TREC-promulgated form for listings because no such form exists.
Source: Pearson VUE Texas Real Estate Salesperson Candidate Handbook · Texas Real Estate Commission (trec.texas.gov)