Real Estate Practice Exam Questions

Which clause protects a lender if he does not want the loan to be assumed by another party? a) Abandonment b) Subordination c) Satisfaction d) Alienation

Justin defaulted on his home mortgage payments. The lender obtained a court order to foreclose on the property. At the foreclosure sale, Justin's house sold for $339,000 and the unpaid balance of his loan is $400,000. What must the lender do to recover the $61,000 Justin still owes? a) Nothing, they cannot recover the $61,000 b) Seek a deficiency judgment c) Contact their state's Recovery Fund for compensation d) Seek a quitclaim suit

When the agency relationship has been terminated, the licensee is no longer considered the principal's agent and does not owe any further duties to the principal except for... a) loyalty and accounting b) accounting and confidentiality c) obedience and loyalty d) care and obedience

How might a voidable contract become valid? a) If the party who has reason to disaffirm the contract elects instead to perform it b) If neither party agrees to the terms c) If the party who wants to enforce the contract seeks damages d) If the party who wants to enforce the contract seeks legal relief

The essential criteria for an acceptable legal description is that it: a) Only contains the mailing address b) accurately locates the parcel when using Google Maps c) accurately locates the parcel in the opinion of a court d) includes at least 2 landmarks

Which statement about a deed in lieu of foreclosure is false? a) It gives the borrower an opportunity to change the loan terms b) The borrowers' credit is hurt less than in a formal foreclosure c) It avoids public notice of the foreclosure d) There is less risk to the lender that the borrower will damage the property in revenge for the loss of the property

A broker induces an owner to sell by telling him that Muslims are moving into the neighborhood. This broker is guilty of... a) Greenlining b) Conversion c) Testing d) Blockbustering

Gerald is 55, single, and resides on his 3 acre property. Why will Gerald qualify for a homestead exemption? a) Because he is over 50 years old b) Because he is single c) Because he lives on the property d) Because the property is larger than 1 acre

Under what type of contract is a seller obligated to sell, but the buyer is not obligated to buy? a) Bilateral b) Option c) Chance d) Recovery

The first step in the appraisal process is to... a) estimate the value of the land b) state the problem c) analyze the neighborhood d) gather data

Which principle is used with the sales comparison approach to value? a) Substitution b) Anticipation c) Contribution d) Assemblage

A type of mortgage which allows the lender to increase the outstanding balance of a loan up to the original amount of the loan in order to advance additional funds is called an a) wraparound mortgage b) take-out mortgage c) open-end mortgage d) spiral mortgage

Which parties typically purchase title insurance once the transaction is complete? a) The HUD and seller b) The lender and buyer c) The licensee and buyer d) The broker and lender

A(n)_____________ contract is one that unduly favors the party with superior bargaining power. a) equal b) dual c) reasonable d) unconscionable

How does Planned Unit Development zoning differ from ordinary zoning? a) It applies only to residential and commercial properties b) It is organized by HUD instead of local zoning committees c) It requires developers to obtain a separate building permit for every structure d) It requires that multiple tracts of land be developed according to a single design for efficient use of space

Which of these statements about the American Disabilities Act is TRUE? a) The American with Disabilities Act did not take effect until 2004 b) A duplex owner might need to remodel the kitchen in the rental unit to accommodate persons with disabilities c) An apartment manager might be required to allow a tenant with a disability to widen a doorway d) Since most real estate firms are private places, they do not fall into ADA's definition of a public accommodation

What is the definition of "valuable consideration" in regard to contract validity? a) Cash or cash equivalents b) Tangible goods c) Something specifically offered in exchange for something else d) Something offered by only one party

The assessed value of Sidney's home is $350,000 but the home was recently appraised at $225,000. As a result, Sidney believes her tax bill is way too high. What option does Sidney have? a) She can file a complaint with the local board of assessment review b) She can opt to pay her tax bill based on the appraisal of $ 225,000 c) She must file an appeal to adjust the millage rate d) Sidney has no option and must simply pay the large tax bill

Which of the following legal description methods has been used the longest in the US? a) The rectangular survey system b) The recorded play system c) The British survey system d) The metes and bounds system

Why is the condition of bearing walls more important than non-bearing walls? a) Bearing walls protect the home from the outdoor elements and radon gas b) Bearing walls are part of the interior framework of the house c) Bearing walls support the ceiling and roof d) Bearing walls are much weaker than non-bearing walls

Under the __________ of recording, title passes when the conveyance is registered on the title certificate. a) Binder System b) Torrens system c) Metes system d) Meridans system

Broker Torrey hired Wes to be his personal assistant. What must Torrey provide to his new employee Wes? a) Dental insurance b) A pension plan c) An incentive/bonus plan d) Disability insurance

Seller Monica is selling her property to Harriet. What is Monica's primary responsibility at closing? a) To deliver marketable title b) To ensure the closing is conducted properly c) To ensure her agent gets paid d) To sign Harriet's new mortgage documents

Should a licensee who represents both the buyer and seller tell the buyer about material defects on the seller's property? a) No, material defects cannot be shared with the buyer when dual agency exists b) Yes, any defects known to the broker should have been disclosed to the buyer c) No, the broker can only disclose material facts that the seller tells him to disclose d) No, caveat emptor would apply in this case

Broker Jon is attaching a rider strip to a For Sale sign. What information is most likely on this rider strip? a) Jon's license number b) A picture of Jon c) The owner's phone number d) Jon's cell phone number

Vicky was posing as a customer of Establishment Realty. However, she was really there to see if Establishment Realty was following fair housing laws. Vicky was a... a) tester b) block watcher c) yellowliner d) checker

Which of the following statements is false regarding a tenancy in common? a) The co-owners must be married b) The tenants share an indivisible interest c) All tenants in common have distinct and separable ownership of their respective interests d) Any number of people may be co-tenants in single property

The size of jurisdiction's tax base is derived by... a) adding exemptions to the market values b) dividing the number of eligible properties by the total number of properties c) subtracting exemptions from assessed values d) multiplying the total income of the jurisdiction's property owners by the millage rate

Why would a property with a rectangular system description also have a metes and bounds legal description? a) Because the property is irregular in shape b) Because the property is larger than 20 acres c) Because the law requires it d) Because the property is agricultural

Robert owns his property and enjoys the full bundle of rights. Can he use his property as collateral for debt? a) Yes, Robert can encumber the property, but only if the debt is less than $10,000 b) Yes, Robert can encumber his property c) No, Robert cannot encumber his property d) Yes, Robert can encumber the property, but only if the debt is more than $50,000

New salesperson Juliet has been assigned office duty for Saturday and Sunday. What is another common term for office duty? a) Compliance time b) Floor Time c) Chill time d) Time-in

Of the following liens: a $100,000 mortgage, a $2,500 property tax bill, and a $8,000 mechanic's lien, and a $25,000 judgment lien, which will be paid off first after a foreclosure sale? a) Mechanic's lien b) Judgment lien c) Mortgage d) Property Tax lien

Neal's home has been foreclosed on and sold at a Sheriff's sale. The sale brought $500,000 and the total liabilities on the home were $425,000. Who receives the additional $75,000? a) The lender b) Neal c) The purchaser of the property d) The state's Real Estate Commission or Recovery Fund

Which form does RESPA require lenders to use to detail the costs that the buyer and seller will pay at closing? a) Loan estimate b) Truth-in-Lending Form c) Closing Disclosure d) RESPA Settlement Statement

Which of these listing agreement statements is FALSE? a) The listing price is listed on the listing agreement b) The seller can change the listing agreement whenever he or she wants c) A listing agreement can be modified, but only if all parties agree in writing d) Contract law applies to listing agreements

Licensee Alex only represents the buyer in a transaction. What is Alex called in this situation? a) A listing agent b) A dual agent c) A single agent d) A married agent

A(n)____________ is one that conflicts with the ordinances that were enacted after the use commenced. a) illegal conforming use b) enhanced nonconforming use c) escheat use d) legal nonconforming use

Morgan owned a large condominium on the ocean. She died and no legal heirs were found. Who will receive title to the property? a) The state or county b) The previous owner of the condominium unit c) The Federal Government d) The developer of the condominium complex

The cost to replace an improvement with original materials is known as... a) replacement cost b) placebo cost c) cloning cost d) reproduction cost

Escrow moneys should be held in the broker's.... a) business account b) personal account c) escrow account d) safe

Which of the following would be found in a management proposal? a) Tenant credit histories b) The desired demographic of the property c) Schedule of maintenance requirements d) A list of all pets residing in the complex

A buyer told broker Lena that she wants to move to a Cuban neighborhood. The the buyer asked if Lena could show her the best home in the Cuban area. How should Lena respond to this request? a) Lena should comply with this request to the best of her abilities b) Lena should explain to the buyer that she ethically and legally cannot recommend housing based on national origin c) Lena should not answer the question unless the buyer offers to pay her more d) Lena should refer the buyer to a brokerage that can legally steer buyers

Which of the following statements best describes what happens with a judicial foreclosure? a) The mortgaged property is transferred directly to the lender b) The mortgaged property is sold without the supervision of a court c) The mortgaged property is sold under the supervision of a court d) The mortgaged property is transferred directly to the state

Broker Ron wants to open a separate escrow account for each transaction he is involved in. Is this legal? a) No, only lawyers and trust companies can open escrow accounts b) No, each broker can only have one escrow account c) Yes, this is legal unless he has more than three escrow accounts open at once d) Yes, there is no legal limit on the number of escrow accounts a broker can have

Who can qualify for an FHA loan? a) Eligible veterans only, or widows of veterans who have not remarried b) People with a net worth over $1,000,000 c) Anyone with qualified income d) Only members of protected classes

How does the Federal Reserve control lenders? a) They set the range of acceptable loan amounts b) All loan underwriters are employed by the Federal Reserve c) They tell lenders what percentage of assets they must keep as reserves d) They set the number of loans that can be made

160 County Drive has 4 acres of open pasture and a 1,900 square foot home. The home has 2 bedrooms and 4 bathrooms. Call 555-555-5555 now for information! What is missing from this advertisement that makes it a blind ad? a) The price b) The broker's identification c) The reason the property is for sale d) How long the property has been on the market

In the appraisal process, looking at the number of recreational facilities, the distances to schools and adequacy of public transportation is called.... a) demographic analysis b) market data approach c) neighborhood analysis d) comparative market analysis

"This property has the best view in the entire county." This statement is an example of... a) fraud b) unintentional misrepresentation c) puffing d) a fair housing violation

Why is designated agency a good alternative to traditional dual agency? a) Fair housing laws do not apply to transactions involving designated agency b) Even though the same broker represents each party, both the buyer and seller have a licensee who exclusively acts as their agent in the transaction c) Designated agency is legal in all 50 states while dual agency is banned in every state d) Only the broker is involved in the transaction and the parties do not have an exclusive agent

What is the balance on an amortized loan of $780,000 after the first payment if the interest rate is 5% with a monthly P payment of $3,780? a) $779,470 b) $776,220 c) $776,750 d) $779,121

Which of the following types of property sales typically requires a property condition disclosure? a) a transfer of an interest that is less than fee simple b) a foreclosure or deed-in-lieu of foreclosure c) a property transferred to the seller's parent d) a three unit, multi-family dwelling

Bobbie decided to redeem her property after a tax sale. Bobbie exercised her.... a) legal right of rescission b) statutory right of redemption c) optional right of disclosure d) required right of recourse

If cooperating broker accepts the offer of subagency from a listing broker, to whom does the cooperating broker owe fiduciary duties? a) Seller b) Listing broker c) Buyer d) Nobody

Ownership of a property reverted to the grantor of the real estate when its usage failed to conform to a stated condition in the grant. What type of estate existed? a) Fee simple defeasible b) Freehold estate with reversion c) Life estate with condition subsequent d) Fee simple absolute

What is a forecast of income and expenses that can be projected over five years? a) Cash flow statement b) Stabilized budget c) Balance Sheet d) Capital budget

If a cooperative corporation cannot pay its bills, what would happen? a) Only the residents who have not paid their rents on time can be affected b) The HUD will bail out the struggling cooperative c) The corporation owning the property would be dissolved, and all of the residents could lose their interest in the cooperative d) The cooperative must evict all of the current stock holders

A town is replacing a sidewalk that serves eight homes. The length of the sidewalk is 900 feet. Laura's property has 60 feet of the sidewalk. If the cost of the project to be paid by a special assessment is $18,000, what will Laura's assessment be? a) $775 b) $900 c) $1,200 d) $2,400

An income producing property rents for $2,790 per month and the GRM is 97. What is the estimated market value of the property? a) $270,630 b) $287,370 c) $1,004,400 d) $301,550

Broker Jack has an agreement with seller Mauve that says Jack will receive compensation if anyone except Mauve sells Mauve's home. This is an example of... a) enclave agency b) exclusive agency c) net agency d) exclusive right to sell agency

What is the most common lease term for space in an office building? a) 3-6 months b) 2 years c) 1 year d) 3-5 years

A written pledge by a lender to lend a certain amount of money to a qualified borrower on a particular piece of real estate for a specified time under specific terms is a(n).... a) bridge approval b) delivered approval c) conditional approval d) permanent acceptance

Earl orally agreed to a 18-month lease with landlord Blake. Is this contract enforceable? a) Yes, all oral leases are enforceable b) No, all leases for longer than one year must be in writing to be enforceable c) Yes, all leases for longer than 6 months are enforceable d) No, it is not enforceable unless Earl is older than 50 years old

Real estate licensees should know enough about building ordinances to be able to... a) conduct a professional home inspection b) provide solid legal advice c) answer all client questions about a building's compliance d) alert clients of potential problems in a home

Mary abandoned her property by failing to pay its property taxes, and the property reverted to the state. This is an example of.... a) condemnation b) a zoning exception c) escheat d) eminent domain

What is a disadvantage of real estate investment? a) There is very low risk b) It is not highly liquid c) The cost of improvements may be depreciated or deducted over an arbitrary period of time d) Real Estate has shown an above average rate of return

The cost of doing direct mail advertising depends on.... a) the amount you have to pay the state's Real Estate Commission for approval b) the frequency of the mailings c) the percent of people that reply d) the date of the mailing

One of the major considerations in a master plan is... a) how to best maximize tax revenue b) the effect of new development on traffic patterns and the environment c) the effect on the voting boundaries of an area d) the effect on the culture of an area

Homeowner Louise has been lax in protecting her property rights. According to the ________________, Louise may lose those property rights. a) Doctrine of De Jure b) Doctrine of Laches c) Stringent Theory d) Torrens Theory

What is another common name for the lot and block system of legal descriptions? a) The metes and bounds system b) The recorded plat method c) The urban survey system d) The triangular plat method

A property has a gross income multiplier of 14, and a value of $800,000. What is its annual income? a) $50,000 b) $57,143 c) $66,667 d) $11,200,000

Which of the following wills may be considered invalid? a) a will written by someone who is only 23 b) a will that is not signed c) a will that is indicated to be a "last will and testament" d) a will that has been completed voluntarily

The Quarry Mountain Subdivision requires all properties to have fences that are at least 8 feet tall surrounding each property. This is an example of... a) a zoning restriction b) an easement c) escheat d) a deed restriction

Francis just signed the papers on a conventional 30-year, $210,000 loan. He was wondering what type of interest will he be paying on the loan. What is the correct answer? a) Complex interest b) Simple interest c) Revolving interest d) Repetitive interest

Which of the following best describes the principle of conformity? a) The value of a home increases when the supply is short b) A home maintains its highest value by being in a neighborhood with similar-type housing c) A property will decrease in value if there are rumors of a zoning change d) Valuewise, it is best for a neighborhood to have little demographic diversity

A seller decided to back out of a sales contract for no good reason. What recourse does the buyer have? a) To sue for specific performance b) To sue the state's Recovery Fund c) No recourse d) To sue the seller's broker for breaking contract

The system of land ownership in the United States is known as what? a) The allodial system b) The feudal system c) the aristocratic system d) The riparian system

Carla has been walking across a path on John's property for the past 22 years. John knows about this but has never given Carla permission. What might a court grant to Carla? a) An easement by necessity b) An easement by prescription c) An encroachment by necessity d) Ownership by prescription

A tenant who stays beyond his lease without consent of the landlord is known as... a) A tenant at request b) A freeload tenant c) A tenant at sufferance d) An encroaching tenant

Home Hoarding Realty is advertising to the public that their managing broker has been in the business 37 years and has sold over 1,250 homes. This is an example of.... a) selfish advertising b) product advertising c) institutional advertising d) antitrust advertising

On a $280,000 loan, the lender charges a 2 point service charge. How much does the borrower have to pay for just these two points? a) $28,000 b) $560 c) $2,800 d) $5,600

Broker Austin represents a party in a transaction where there is a dispute regarding the deposited escrow money. What should Austin do? a) Hold the money until both parties (or their lawyers) provide a written release b) Claim the escrow money for himself and move it into his personal account c) Split the money evenly between the buyer and seller and let them figure it out d) Immediately release the money to the party he represents

What type of agency cannot be revoked by the principal, nor is terminated if the principal dies? a) Dual Agency b) Universal Agency c) Agency coupled with an interest d) Agency coupled with fraud

Given the net income of a property, the appraiser can determine an option of the value for that property by.... a) multiplying by the rate of depreciation b) multiplying by the rate of economic appreciation c) dividing by the percentage of capital gains d) dividing by the rate of capitalization

Unlike buyer/seller agency agreements that create _______________, the management agreement creates _______________. a) general agency, special agency b) universal agency, special agency c) special agency, universal agency d) special agency, general agency

Which of the following is FALSE regarding a promissory note? a) The property is collateral for the promissory note b) A promissory note is a negotiable instrument, which means that the lender can sell the note to a third party c) It is the primary evidence of a loan d) It is the term used for a note that is guaranteed or insured by a governmental agency

Which of these activities is appropriate to do within the first few days of obtaining a listing? a) Discuss modifying the listing price b) Discuss the protected classes the sellers do not want to show the home to c) Require the sellers to pay for a formal appraisal d) Have the managing broker send a "thank you for listing" letter to the sellers

If a comparable has one less bathroom than the subject, an adjustment is made by.... a) adding value to the subject b) deducting value from the subject c) adding value to comparable d) deducting value from the comparable

A cooperative is.... a) a type of residential property b) a type of commercial property c) a hybrid between residential and recreational property d) a type of institutional property

What type of clause allows a broker to collect a commission for some period of time after the listing expires? a) A return on investment clause b) A recovery clause c) A self-dealing clause d) A carryover clause

Non-judicial foreclosure is required to foreclose on a.... a) Deed of Recovery b) Chain of Deed c) Deed of Trust d) Deed of Liability

Which of the following would be considered community property in a community property state? a) A car that spouses bought together after the marriage b) Income received from stocks owned by one spouse c) Property inherited by one spouse after the marriage d) A coin collection bought by a spouse before the marriage

Which of the following would qualify as an example of retail property? a) A hospital b) A farm c) A shopping center d) A warehouse

Jordan has a month-to-month lease with landlord Greg. What type of lease did Jordan sign? a) Estate from period-to-period b) Estate at sufferance c) Estate at will d) Estate at easement

Which of the following is a valuable skill for a property manager to have? a) Knowledge of building systems b) Knowledge of how to steer tenants into specific buildings c) Knowledge of appraisal d) Knowledge of mortgage disclosure

Which of these is a violation of the Sherman Antitrust laws? a) Commingling b) Zoning c) Redlining d) Market allocation

What are the primary advantages of PEX piping? a) PEX piping is lightweight but not flexible b) PEX piping is able to withstand both high and low temperatures and it is highly resistant to chemicals c) PEX piping is strong and sturdy d) PEX piping is ideal for septic systems and sewer systems

Owner Tom decided to lease out his basement to a college student. By leasing the basement, Tom has.... a) exercised one of his police powers b) permanently transferred his subsurface rights c) transferred a portion of his bundle rights d) encroached his bundle of rights