Real Estate Exam: Key Questions and Answers

Introduction

• Purpose: To help you study and prepare for your real estate exam.

Contract Questions

Fully Executed Contract

• Status: All terms fulfilled and transaction closed.
• Answer: A. Fully executed.

Easement Questions

Easement Appurtenant

• Definition: Easement transferring with sale of either property.
• Answer: B. Easement appurtenant.

Property Ownership

Resort Timeshare

• Definition: Fee simple interest for private use for one week annually.
• Answer: D. Resort timeshare.

Joint Tenancy

• Right of Survivorship: Interest passes to remaining tenants upon death.
• Answer: A. Joint tenancy.

Severable Rights

• Definition: Surface, air, and subsurface rights sold separately.
• Answer: A. Severable rights.

Fee Simple Absolute

• Highest Ownership: Full bundle of property rights.
• Answer: D. Fee simple absolute.

Tenancy in Common

• Ownership: Allows unequal ownership percentages.
• Answer: C. Tenancy in common.

Tenancy in Severalty

• Definition: Property owned by one person.
• Answer: B. One property owner.

Land Use Controls and Regulations

Public Land Use Controls

• Include: Police power, escheat, eminent domain, taxation.
• Answer: B. Interstate is not a control.

Building Permits

• Purpose: Ensure minimum construction standards.
• Answer: D. To require a minimum level of construction standards.

Variance

• Definition: Deviation from zoning requirements.
• Answer: B. Andy will need to obtain a variance.

Eminent Domain

• Definition: Government takes possession with compensation.
• Answer: D. Take possession with compensation.

Escheat

• Definition: Property reverts to state if no heirs/will.
• Answer: B. Escheat.

Market Analysis

Comparative Market Analysis (CMA)

• Definition: Report of market data to determine list price.
• Answer: C. Comparative Market Analysis.

Appraisal Principles

Highest and Best Use

• Definition: Property's most profitable use.
• Answer: A. Highest and best use.

Principle of Competition

• Definition: Two similar businesses attract more customers together.
• Answer: C. Competition.

Principle of Progression

• Definition: Nicer surrounding homes increase property value.
• Answer: B. Progression.

Appraisal Adjustments

• Value Adjustments: Never adjust the subject property.
• Answer: C. Subject Property.
• Superior Comps: Subtract value from comparables.
• Answer: A. Subtract value from comparable.

Supply and Demand

• Price Impact: Limited housing increases prices.
• Answer: D. Prices will increase.

Lending and Financing

Truth in Lending Act

• Regulation Z: Property owners are exempt from advertising requirements.
• Answer: B. No, property owners are not regulated.

VA Loan

• No Down Payment: Offered to qualifying veterans.
• Answer: A. VA loan.

Discount Points

• Cost Based On: Percentage of loan amount.
• Answer: C. The loan amount.

Private Mortgage Insurance (PMI)

• FHA Loans: Required to protect lenders.
• Answer: C. Private Mortgage Insurance.

Redlining

• Definition: Denying loans based on racial demographics.
• Answer: B. Redlining.

Prepayment Penalty

• Definition: Fee for early loan payoff.
• Answer: D. Pre-payment Penalty.

Acceleration Clause

• Definition: Lender demands full balance due to default.
• Answer: C. Acceleration Clause.

Escrow Account

• Purpose: Pay property taxes.
• Answer: A. Escrow Account.

Loan Types

• Highest Down Payment: Conventional loan.
• Answer: B. Conventional Loan.

PITI

• Breakdown: Principal, Interest, Taxes, Insurance.
• Answer: C. Principal, Interest, Taxes, Insurance.

Agency and Disclosure

Definition of Customers

• Definition: Customers are third parties in transactions.
• Answer: D. Customers.

Duty of Obedience

• Definition: Follow principal's orders if ethical and legal.
• Answer: A. Obedience.

Legal Advice

• Recommendation: Suggest legal counsel for legal questions.
• Answer: A. Suggest they seek legal counsel.

Self-Dealing

• Misrepresentation: Not disclosing relationship/interest in a transaction.
• Answer: D. Self-dealing.

Commission Owed

• Seller Defaults: Seller owes commission if contract is terminated.
• Answer: D. The seller owes Paula commission.

Arm’s Length Transaction

• Definition: Sale between unrelated parties.
• Answer: C. Arm's length transaction.

Real Estate Definition

• Components: Land, water, air, improvements.
• Answer: B. Land including water, air, and improvements.

Encroachment

• Definition: Improvement extends onto another's property.
• Answer: C. Encroachment.

Dominant Estate

• Benefit: Property benefiting from an easement.
• Answer: C. Dominant estate.

Economic Characteristics of Land

• Components: Demand, utility, scarcity, transferability, sitis.
• Answer: A. Demand, utility, scarcity, transferability, sitis.

Trade Fixtures

• Definition: Business items installed by tenant.
• Answer: B. Trade fixtures.

Natural Processes and Interests

Accretion

• Definition: Accumulation of land by water.
• Answer: B. Accretion.

Remainder Man

• Interest: Third-party interest after life tenant passes.
• Answer: C. Remainder Man.

Lead-Based Paint Disclosure

• Requirement: For properties constructed prior to 1978.
• Answer: A. Lead-based paint disclosure.

Seller’s Disclosure

• Details: Condition of property components.
• Answer: D. Seller's Disclosure.

Buyer and Seller Responsibilities

Unknown Issues

• Non-disclosure: Seller not at fault if unaware.
• Answer: B. No, the seller had no knowledge.

Environmental Hazards

• Disclosure Duty: Agents must disclose known hazards.
• Answer: C. Yes, the agent must disclose.

Post-Inspection Updates

• Action: Update seller's disclosure form.
• Answer: B. Update the seller's disclosure.

Foreclosure Sales

• Disclosure Exemption: Seller disclosure generally not required.
• Answer: C. Residential foreclosure.

Express Agency

• Creation: Written listing agreement.
• Answer: C. Express agency.

Unenforceable Deed Restrictions

• Protected Classes: Deed restrictions contradicting fair housing laws are void.
• Answer: B. Is not legal, void and unenforceable.

Protection Clause

• Void Condition: Nullified if relisted with another agent.
• Answer: D. LaDawn, clause void with new agent.

Contract Types

Bilateral Contract

• Definition: Promise for promise agreement.
• Answer: B. Bilateral contract.

Unilateral Contract

• Definition: One-sided performance agreement.
• Answer: D. Unilateral contract.

Statute of Frauds

• Requirement: Contracts must be in writing.
• Answer: B. Statute of Frauds.

Competency and Authority

• Requirements: Legal age, mental competency, proper authority.
• Answer: A. Parties must be U.S. citizens.

Valuable Consideration

• Definition: Something of value exchanged for something else.
• Answer: C. Something clearly offered.

Legal Description

• Requirement: To convey ownership.
• Answer: B. A legal description.

Contract Validity

• Components: Competent parties, valuable consideration, etc.
• Answer: C. Notarization.

Duress

• Definition: Forced into a contract.
• Answer: B. Duress.

Void Contract

• Definition: Lacking necessary elements.
• Answer: B. Void.

Liquidated Damages

• Fixed Damages: Monetary compensation specified in contract.
• Answer: C. Liquidated damages.

Executory Contract

• Status: Terms in the process of being fulfilled.
• Answer: A. Executory.

Voidable Contracts

• Minor’s Rights: Only minor can void the agreement.
• Answer: B. Eric.

Earnest Money

Good Faith Deposit

• Definition: Applied toward purchase price at closing.
• Answer: C. Earnest money.

Fully Executed

• Status: All contract terms fulfilled and closed.
• Answer: B. Executed.

Lease Agreements

Estate for Years

• Definition: Fixed lease period, no automatic renewal.
• Answer: D. Estate for years.

Property Management

Fiduciary Duties

• Property Manager: Owe fiduciary obligations to owner.
• Answer: B. Fiduciary Duties.

Management Contract

• Components: Signatures, duration, fees—tenant signature not needed.
• Answer: C. Signature of the tenant.

Title Transfer

Voluntary Transfer

• Methods: Will, grant, deed.
• Answer: B. Will, grant, deed.

Testate

• Definition: Deceased with a valid will.
• Answer: A. Testate.

Clearing Title

• Satisfaction of Judgment: Paying debt and filing documentation.
• Answer: D. Paying the debt and filing a satisfaction of judgment.

Voluntary Lien

• Example: Mortgage.
• Answer: A. Mortgage.

Encumbrance

• Example: Recorded easement on title.
• Answer: C. Encumbrance.

Deed Transfer

• Instrument: Used to transfer property.
• Answer: B. Deed.

Warranty Deed

• Protection: Most protective title for the owner.
• Answer: C. Warranty Deed.

Closing Signature

• Required: Only seller signs deed.
• Answer: B. The seller.

Sherman Antitrust Act

• Violation: Price fixing among agents.
• Answer: D. Sherman Antitrust Act.

Loyalty

• Agent’s Duty: Place client’s best interests above all others.
• Answer: B. Loyalty.

Disclosure Questions

Material Fact

• Disclosure: Agent must reveal known facts.
• Answer: C. Shelley cannot withhold known material facts.

Puffing

• Definition: Exaggeration, not misrepresentation.
• Answer: D. Exaggeration.

Discriminatory Advertising

• Violation: Describing buyer type desired.
• Answer: B. Discriminatory.

Undisclosed Dual Agency

• Violation: Representing both parties without consent.
• Answer: D. Undisclosed dual agency.

Net Listing

• Compensation Agreement: Seller sets minimum proceeds; agent keeps excess.
• Answer: A. Net listing.

Subagent

• Representation: Works for the seller.
• Answer: B. Seller.

Steering

• Violation: Showing homes based on nationality.
• Answer: D. Steering.

Discrimination Based on Race

• Scenario: Different treatment based on caller's race.
• Answer: A. Race.

Exempt from Fair Housing

• Scenario: Owner-occupied dwelling with 4 units or less.
• Answer: D. No, he is exempt.

Non-Protected Class

• Under Fair Housing: Felons.
• Answer: A. Felons.

E&O Insurance

• Limitation: Does not cover broker’s negligence.
• Answer: A. E&O insurance will not cover negligence.

Calculation Questions

Property Sale Price

• Commission Calculated: $20,700 at 6%.
• Answer: C. $345,000.

Square Feet in an Acre

• Number: 43,560.
• Answer: A. 43,560.

Lowest Offer with Costs and Commission

• Calculation: Including net proceeds, loan payoff, closing costs, and commission.
• Answer: C. $194,086.

Agent Commission Split

• Calculation: 50-50 split and broker’s percentage.
• Answer: B. $7,875.

Depreciation Calculation

• Straight-Line: Roof value after 5 years.
• Answer: C. $6,250.

Property Appreciation

• Calculation: Based on annual 5% increase.
• Answer: A. $191,442.

Loan-to-Value Ratio

• Ratio Calculated: $225,000 loan on $250,000.
• Answer: D. 90%.

Seller’s Share of Taxes

• Using 365-Day Method: $1,300 taxes, closing April 10.
• Answer: A. $356.

Lot Acreage

• Calculation: 250 x 325.
• Answer: C. 1.86 acres.

Principal in First Mortgage Payment

• Interest and Principal Calculated: $100,000 loan at 6%, $800 monthly.
• Answer: B. $300.

Conclusion

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