The 50 terms below come straight from TexPrep RE's flashcard deck, organized by the same eight topic areas the exam draws from — including the Texas-only concepts (intermediary representation, the option period, rule of capture) that national study material skips entirely.
Topic 1 of 8
License Law & TREC
TREC
Texas Real Estate Commission — the state agency that licenses and regulates real estate brokers, sales agents, inspectors, and appraisers in Texas.
TRELA
Texas Real Estate License Act — the law that governs the licensing and conduct of real estate licensees in Texas. Codified in the Texas Occupations Code.
SAE
Salesperson Apprentice Education — additional education required at the first license renewal for TX sales agents who have not yet obtained a broker license.
Commingling
The illegal mixing of client trust funds with the broker's personal or business funds. A serious TREC violation — grounds for license suspension or revocation.
Conversion (trust funds)
Unauthorized use of client trust funds for personal or business purposes. One of the most serious TREC violations — grounds for immediate revocation.
TREC Recovery Trust Account
A fund that compensates members of the public who suffer financial harm caused by the fraudulent or dishonest conduct of a licensed Texas real estate agent.
Topic 2 of 8
Agency & Brokerage
Information About Brokerage Services (IABS)
A TREC-required disclosure form that explains the different types of agency relationships available in Texas. Licensees must provide it at first substantive communication with a prospective client.
Intermediary representation in Texas
A broker who represents both the buyer and seller in the same transaction. The broker acts as a neutral facilitator — not as a fiduciary advocate for either party.
Duty of loyalty
The agent must act in the client's best interest at all times — placing the client's interests above the agent's own and above all others.
Exclusive right-to-sell listing
The most common listing type. The broker earns a commission regardless of who sells the property — even if the seller finds the buyer themselves. Offers the strongest broker protection.
Procuring cause
The broker whose efforts were the direct and proximate cause of the completed sale. Determines which broker earns the commission in a dispute.
Client vs. customer in Texas real estate
Client: a party the broker represents in an agency relationship — owes fiduciary duties. Customer: a party the broker assists but does not represent — owes honesty and fairness but not full fiduciary duties.
Topic 3 of 8
Contracts & Forms
TREC-promulgated forms
Standardized contract forms created by TREC that Texas licensees are required to use. Licensees may not use alternative forms unless prepared by the parties' attorneys or otherwise authorized by TREC.
Option period in Texas
An agreed number of days during which the buyer has the unrestricted right to terminate the contract for any reason — in exchange for a non-refundable option fee paid to the seller.
Option fee vs. earnest money in Texas
Option fee: paid directly to the seller; non-refundable; buys the right to terminate. Earnest money: deposited with the title company; may be refundable depending on how the contract is terminated.
Statute of Frauds
Requires real estate contracts to be in writing and signed to be enforceable. Oral agreements to buy or sell real estate are generally not enforceable in Texas.
Third Party Financing Condition (Texas)
A TREC contract provision that allows the buyer to terminate and receive a refund of earnest money if they cannot obtain the specified financing — provided they applied in good faith and were not responsible for the denial.
Amendment vs. addendum
Amendment: modifies an existing contract after it has been executed. Addendum: added to the contract at the time of execution to address additional terms. Both must be signed by all parties.
Void vs. voidable contract
Void: has no legal effect from the start — as if it never existed (e.g., illegal purpose). Voidable: valid but one party has the right to cancel it (e.g., a contract signed by a minor).
Topic 4 of 8
Real Estate Practice
Steering
Directing buyers toward or away from certain neighborhoods based on their race, religion, or other protected characteristics. An illegal practice under the Fair Housing Act.
Blockbusting
Inducing homeowners to sell by suggesting that the entry of a protected class into the neighborhood will lower property values. Illegal under the Fair Housing Act.
Redlining
Refusing to make loans or provide services in certain geographic areas based on the racial or ethnic composition of the neighborhood. Illegal under the Fair Housing Act and ECOA.
Non-judicial foreclosure in Texas
Texas allows lenders to foreclose without going to court — through the deed of trust's power of sale clause. The trustee sells the property at a public auction after proper notice.
Texas homestead protection from forced sale
A Texas homestead is protected from forced sale by most creditors. Exceptions include: purchase money mortgage, property tax liens, mechanic's liens for improvements, and home equity loans.
Eminent domain
The government's power to take private property for public use — with just compensation paid to the owner. The legal process is called condemnation.
Topic 5 of 8
Property Ownership
Community property in Texas
Property acquired by either spouse during the marriage is presumed to be community property — owned equally by both spouses. Texas is one of nine community property states.
Separate property in Texas
Property owned by a spouse before marriage, or received during marriage as a gift or inheritance. Separate property remains the sole property of that spouse.
General warranty deed
The strongest form of deed — the grantor warrants title against all claims, including those arising before the grantor's ownership. Provides the broadest protection to the grantee.
Mineral rights in Texas
Mineral rights can be severed from surface rights and owned separately. Texas landowners own the minerals beneath their land unless previously severed by a prior deed. Mineral estates are dominant over surface estates.
Rule of capture (Texas)
A landowner has the right to pump and keep oil, gas, or groundwater extracted from beneath their land — even if it drains from under a neighbor's property.
Adverse possession in Texas
A person who openly, continuously, exclusively, and hostilely possesses another's land for 10 years may gain legal title. Texas's general statute of limitations for adverse possession is 10 years.
Metes and bounds description
A legal description that defines a parcel by its boundary lines — starting from a point of beginning, describing each boundary by direction and distance, and returning to the starting point.
Topic 6 of 8
Finance & Loans
Texas deed of trust vs. mortgage
Texas uses a deed of trust — not a mortgage. The key difference: Texas is a non-judicial foreclosure state, so lenders can foreclose through the trustee without going to court.
Promissory note
The borrower's written promise to repay the loan — it is the personal liability document. The deed of trust is the security instrument. Together they form the mortgage loan.
Texas Section 50(a)(6) home equity loan
Texas constitutional rules for cash-out loans on homestead property. Key restriction: total liens cannot exceed 80% of the property's fair market value. Only one home equity loan at a time.
Texas Veterans Land Board (VLB)
A Texas state agency offering below-market rate home loans, land loans, and home improvement loans to eligible Texas veterans and active-duty service members.
Discount points
Prepaid interest paid at closing to reduce the loan's interest rate. One point = 1% of the loan amount. Paying points makes sense if the borrower keeps the loan long enough to recoup the upfront cost.
Loan Estimate (LE)
A TRID-required disclosure provided within 3 business days of a completed loan application — showing estimated loan terms, monthly payment, and closing costs.
Closing Disclosure (CD)
A TRID-required disclosure showing final loan terms and closing costs. The borrower must receive it at least 3 business days before closing. Saturdays count as business days for this rule.
Topic 7 of 8
Appraisal & Value
Market value
The most probable price a property would bring in a competitive, open market between a knowledgeable, willing buyer and a willing seller — neither under pressure to act.
Sales comparison approach
Estimates value by comparing the subject property to recently sold comparable properties — making adjustments for differences in size, condition, location, and features. Most commonly used for residential property.
Highest and best use
The most profitable, legally permissible, physically possible, and financially feasible use of a property. Appraisers determine this first — it forms the foundation for the valuation.
Principle of substitution
A buyer will not pay more for a property than the cost of acquiring an equally desirable substitute. This principle underlies the sales comparison and cost approaches.
Functional obsolescence
Loss in value due to an outdated or poor design feature — such as only one bathroom in a 4-bedroom home, or a bedroom accessible only through another bedroom.
Gross Rent Multiplier (GRM)
A quick valuation tool for income properties. GRM = Sales Price ÷ Monthly Gross Rent. Used to compare similar properties — does not account for expenses or vacancy.
Topic 8 of 8
Disclosures & Environment
Texas Seller's Disclosure Notice
A TREC-required form for residential property sales — sellers must disclose known defects in structural components, systems, and environmental conditions. The buyer may terminate within a set period after receiving it.
MUD disclosure in Texas
Texas requires sellers to disclose if a property is located within a Municipal Utility District (MUD) — a special taxing district that finances infrastructure. MUD tax rates can significantly affect the total property tax burden.
Lead-based paint disclosure
Federal law requires disclosure of known lead-based paint hazards in homes built before 1978. Buyers must receive the EPA pamphlet and have a 10-day period to conduct a lead inspection.
Special Flood Hazard Area (SFHA)
FEMA-designated areas with a 1% annual chance of flooding — also called the 100-year floodplain. Properties in SFHAs with federally backed mortgages must carry flood insurance.
Texas resale certificate (HOA)
A document from the HOA disclosing current dues, special assessments, violations, reserve fund balances, and governing documents. Must be delivered to the buyer — who then has a period to review and potentially terminate.
Keep Going
50 Down. The Exam Draws From Hundreds.
These 50 give you the highest-value core, but the exam's vocabulary pool runs deeper — and recognition under time pressure is a different skill than reading a list. That's what spaced-repetition flashcards are for: the terms you miss keep coming back until they stick.
