Arkansas Real Estate License Exam — Questions and Answers

Question 1: In Arkansas, 'informed consent' for dual agency means the parties must:

Agree to use the same attorney for closing
Verbally agree to dual agency at the closing table
Sign a written consent acknowledging the limits of dual agency representation before proceeding (Correct answer)
Simply receive a copy of the dual agency disclosure after signing the purchase contract

Correct answer: Sign a written consent acknowledging the limits of dual agency representation before proceeding

Arkansas requires written informed consent acknowledging the limitations of dual agency — particularly the agent's inability to fully advocate for either party — before the relationship continues.

Question 2: An Arkansas real estate agent is preparing a Comparative Market Analysis (CMA) for a residential property. Which of the following principles of value is the primary basis for the Sales Comparison Approach used in the CMA?

Principle of Substitution (Correct answer)
Principle of Highest and Best Use
Principle of Contribution
Principle of Conformity

Correct answer: Principle of Substitution

The Principle of Substitution is the foundation of the sales comparison approach. It states that a knowledgeable buyer will not pay more for a property than the cost of acquiring a similar substitute property with the same utility and desirability. A CMA relies on this by analyzing what similar properties have recently sold for.

Question 3: Which of the following statements about the sales comparison approach is most accurate?

It is only used for vacant land appraisals
It relies entirely on the subject property's income-producing potential
It is the preferred approach for appraising special-use properties like churches
It is most reliable when many recent, similar sales exist in the subject's market area (Correct answer)

Correct answer: It is most reliable when many recent, similar sales exist in the subject's market area

The sales comparison approach is most reliable when there are sufficient recent, arms-length sales of comparable properties in the same market area.

Question 4: In Arkansas, if a buyer's agent learns that the buyer intends to demolish the property after purchase, must the agent disclose this to the seller?

Yes, but only if the seller directly asks
No, this is confidential client information protected by the buyer's agent's duty of loyalty (Correct answer)
Only if the property is historic or protected
Yes, always — all client plans must be disclosed

Correct answer: No, this is confidential client information protected by the buyer's agent's duty of loyalty

A buyer's agent owes loyalty to the buyer and must keep buyer's plans confidential, as disclosing them could harm the buyer's negotiating position.

Question 5: Under Arkansas designated agency, what happens to the managing broker's role when two agents in the same firm represent opposing parties?

The broker becomes a neutral supervisory party (Correct answer)
The broker represents the buyer only
The broker represents the seller only
The broker withdraws from the transaction entirely

Correct answer: The broker becomes a neutral supervisory party

In designated agency, the managing broker assumes a neutral supervisory role rather than advocating for either party in the transaction.

Question 6: A salesperson receives a referral fee from a title company for sending clients their way. Under AREC rules, this is:

Permitted without any disclosure requirement
Permitted if disclosed to the client (Correct answer)
Prohibited unless the salesperson is also a title agent
Always prohibited under any circumstances

Correct answer: Permitted if disclosed to the client

Referral fees from settlement service providers are permissible under AREC rules only when fully disclosed to the client.

Question 7: How long does an inactive Arkansas real estate license remain valid before it expires?

1 year
5 years
Indefinitely with annual fee
2 years (Correct answer)

Correct answer: 2 years

An inactive Arkansas real estate license remains valid for up to 2 years, after which the licensee must meet reactivation requirements.

Question 8: What remedy is available to a buyer in Arkansas if the seller cannot deliver marketable title at closing?

The buyer forfeits all rights and deposits
The seller is automatically liable for triple damages
The buyer must proceed with closing regardless
The buyer may terminate the contract and receive a refund of earnest money (Correct answer)

Correct answer: The buyer may terminate the contract and receive a refund of earnest money

If a seller cannot deliver marketable title, the buyer typically has the right to terminate the contract and recover their earnest money deposit.

Question 9: Under AREC regulations, a principal broker is responsible for:

Setting commission rates for the entire market
The real estate activities of all licensees affiliated with their brokerage (Correct answer)
Filing tax returns on behalf of affiliated salespeople
Only their own personal transactions

Correct answer: The real estate activities of all licensees affiliated with their brokerage

The principal broker bears supervisory responsibility for all real estate activities conducted by licensees under their license.

Question 10: An Arkansas listing agent's seller client instructs the agent not to present any offers below $250,000. What should the agent do?

Terminate the listing agreement immediately
Present all offers regardless of the instruction (Correct answer)
Follow the instruction without question
Report the seller to the Arkansas Real Estate Commission

Correct answer: Present all offers regardless of the instruction

In Arkansas, agents have a legal obligation to present all offers to their clients; a seller cannot instruct an agent to withhold offers as this violates real estate law.

Question 11: In Arkansas, when must a licensee provide the 'Working With Real Estate Agents' disclosure form to a buyer?

At the time of closing
At the first substantive contact (Correct answer)
After an offer is accepted
Only if the buyer requests it

Correct answer: At the first substantive contact

Arkansas law requires licensees to provide the agency disclosure form at the first substantive contact with a prospective buyer.

Question 12: The legal process a landlord must use in Arkansas to remove a tenant who has failed to pay rent or violated the lease is called:

Ejectment by distress
Unlawful detainer (eviction) action (Correct answer)
Lis pendens filing
Quiet title action

Correct answer: Unlawful detainer (eviction) action

In Arkansas, landlords must file an unlawful detainer action through the courts to legally evict a non-compliant or non-paying tenant.

Question 13: A real estate advertisement that states 'perfect for young couples' could be considered a Fair Housing violation because it discriminates against:

Disability — excluding persons with mobility issues
National origin — excluding non-Americans
Familial status — implying families with children are not welcome (Correct answer)
Religion — favoring certain religious groups

Correct answer: Familial status — implying families with children are not welcome

Advertising language that implies a preference for people without children, or for people of a specific family type, violates familial status protections.

Question 14: Arkansas follows which type of property recording system?

Torrens system exclusively
Pure notice recording statute
Pure race recording statute
Race-notice recording statute (Correct answer)

Correct answer: Race-notice recording statute

Arkansas uses a race-notice system where a subsequent purchaser is protected only if they had no notice and recorded first.

Question 15: A licensee in Arkansas who changes their home address must notify AREC within:

90 days
10 days
60 days
30 days (Correct answer)

Correct answer: 30 days

Arkansas licensees must notify AREC of a change of address within 30 days of the change.

Question 16: Which of the following is NOT a ground for license revocation or suspension under Arkansas law?

Advertising a competitor's listing without permission
Belonging to a national real estate trade association (Correct answer)
Conviction of a felony
Paying a referral fee to an unlicensed person

Correct answer: Belonging to a national real estate trade association

Membership in a trade association is not a violation; the other choices are recognized grounds for disciplinary action.

Question 17: The concept of 'highest and best use' as applied in land use and appraisal means the use that is:

Most environmentally sustainable
Legally permissible, physically possible, financially feasible, and maximally productive (Correct answer)
Approved in the current comprehensive plan only
Preferred by neighboring property owners

Correct answer: Legally permissible, physically possible, financially feasible, and maximally productive

Highest and best use is the reasonably probable use of a property that meets all four tests — legal, physical, financial feasibility, and maximum value — and drives appraisal decisions.

Question 18: A landowner in rural Arkansas sells a back portion of their property to a buyer. The sold parcel is now landlocked with no direct access to a public road. Under Arkansas law, what is the buyer's most likely legal remedy to gain access?

The buyer can sue the county government to build a new public road to the property.
The buyer can petition a court for an easement by necessity across the seller's remaining land. (Correct answer)
The buyer must purchase an access route from a different neighboring landowner.
The buyer can claim the seller's entire remaining property through eminent domain.

Correct answer: The buyer can petition a court for an easement by necessity across the seller's remaining land.

When a property owner conveys a portion of their land that results in the conveyed parcel being landlocked, the law presumes the parties intended for the buyer to have access. The buyer has the right to seek an easement by necessity, which is a court-ordered right to cross the seller's remaining property to reach a public road.

Question 19: For how long must a principal broker in Arkansas maintain complete records of their real estate transactions, including trust account files and closing statements?

Three years from the date of the transaction. (Correct answer)
Seven years from the date of the transaction.
One year from the date of the transaction.
Indefinitely.

Correct answer: Three years from the date of the transaction.

According to Arkansas Code of Rules § 220-1006, principal brokers must maintain complete records of all real estate business, including transaction files and property management records, for a period of three years.

Question 20: In Arkansas, which type of loan is insured by the federal government and typically requires a minimum 3.5% down payment?

FHA loan (Correct answer)
VA loan
Conventional loan
USDA loan

Correct answer: FHA loan

FHA loans are insured by the Federal Housing Administration and require as little as 3.5% down for qualifying borrowers.

Question 21: In Arkansas, a listing agent discovers the seller has not disclosed a leaking roof. What should the agent do?

Disclose it directly to buyers without telling the seller
Ignore it since the seller is the client
Reduce the asking price to account for the defect
Advise the seller to disclose and refuse to continue if they won't (Correct answer)

Correct answer: Advise the seller to disclose and refuse to continue if they won't

Arkansas agents must advise their clients to disclose material defects and may withdraw from the transaction if the client refuses to comply with legal requirements.

Question 22: In Arkansas, the document that transfers legal title to real property at closing is called a:

Deed of trust
Warranty deed (Correct answer)
Closing disclosure
Promissory note

Correct answer: Warranty deed

A warranty deed conveys legal title and includes the grantor's guarantee against title defects.

Question 23: Which of the following acts requires an Arkansas real estate license?

Negotiating a lease on behalf of another person for compensation (Correct answer)
Auctioning foreclosed properties as a licensed auctioneer
Managing your own personal rental properties
Selling cemetery lots for a cemetery company

Correct answer: Negotiating a lease on behalf of another person for compensation

Negotiating leases for others for compensation is a licensed real estate activity in Arkansas.

Question 24: Which type of Arkansas real estate license allows a licensee to supervise other agents?

Associate broker license (Correct answer)
Salesperson license
Temporary license
Provisional broker license

Correct answer: Associate broker license

An associate broker license allows the licensee to supervise other agents when designated by the principal broker.

Question 25: A plat map is best described as:

A government report on environmental hazards on a parcel
A recorded survey map showing the division of land into lots, blocks, and streets (Correct answer)
A blueprint of the interior floor plan of a building
A document listing all liens against a property

Correct answer: A recorded survey map showing the division of land into lots, blocks, and streets

A plat map is an official, recorded survey that shows how a tract of land is divided into lots, including dimensions, easements, streets, and block numbers.

Question 26: An Arkansas broker who wants to operate a real estate business under a trade name must:

Obtain approval from the local county clerk only
File the name with the IRS
Register the trade name with AREC (Correct answer)
No special action is required

Correct answer: Register the trade name with AREC

Trade names (assumed names) used by brokers must be registered with the Arkansas Real Estate Commission.

Question 27: When must an Arkansas licensee provide an agency disclosure to a consumer?

Before providing substantive real estate assistance (Correct answer)
Only when a listing agreement is signed
After an offer has been accepted
At the time of closing

Correct answer: Before providing substantive real estate assistance

Arkansas law requires agency disclosure before the licensee provides substantive real estate assistance to any consumer.

Question 28: An Arkansas licensee wishes to sell their own personal property. Which of the following is TRUE?

They need no disclosure since it is their own property
They must disclose their licensed status in the transaction (Correct answer)
They must hire another broker to list the property
Personal transactions are exempt from license law

Correct answer: They must disclose their licensed status in the transaction

Arkansas licensees must disclose their licensed status in writing when buying or selling property for their own account.

Question 29: In Arkansas, an appraisal report for a federally related transaction must comply with:

Only Arkansas Real Estate Commission (AREC) guidelines
Standards set solely by the lender ordering the appraisal
The Federal Reserve appraisal standards only
The Uniform Standards of Professional Appraisal Practice (USPAP) (Correct answer)

Correct answer: The Uniform Standards of Professional Appraisal Practice (USPAP)

USPAP, established by the Appraisal Standards Board, is the required standard for appraisals in federally related transactions in all states including Arkansas.

Question 30: Which of the following events would automatically terminate an agency relationship by operation of law in Arkansas?

The client revokes the agency because they are unhappy with the marketing efforts.
The agent renounces the relationship because the client is difficult to work with.
The property is destroyed by a tornado. (Correct answer)
The listing agreement's expiration date passes without a sale.

Correct answer: The property is destroyed by a tornado.

Termination of agency by operation of law occurs due to events beyond the control of the parties. The destruction of the subject matter (the property) makes the fulfillment of the contract impossible, thus automatically terminating the agency relationship. The other options describe termination by acts of the parties (renunciation, revocation) or fulfillment/expiration of the contract terms.

Question 31: Which appraisal method is MOST appropriate for valuing a single-family home in a suburban neighborhood with many recent sales?

Cost approach
Gross rent multiplier
Sales comparison approach (Correct answer)
Income capitalization approach

Correct answer: Sales comparison approach

The sales comparison approach is most reliable for residential properties when comparable sales data is available.

Question 32: Under the Arkansas Real Estate License Law, which of the following is exempt from licensing requirements?

An unlicensed assistant who shows properties independently
A property manager collecting rent for multiple owners
An owner selling their own property without an agent (Correct answer)
A person who regularly negotiates sales for others for a fee

Correct answer: An owner selling their own property without an agent

Property owners selling their own real estate are exempt from the Arkansas licensing requirement.

Question 33: A seller's agent learns that the seller is going through a divorce and must sell quickly. What is the agent's duty regarding this information?

Disclose it to all buyers to generate faster offers
Share it only with buyers who make full-price offers
Report it to the Arkansas Real Estate Commission
Keep it confidential as it could weaken the seller's negotiating position (Correct answer)

Correct answer: Keep it confidential as it could weaken the seller's negotiating position

A seller's agent has a fiduciary duty of confidentiality to the seller and must not disclose information that would harm the seller's bargaining position.

Question 34: In Arkansas, who has the authority to rezone property within a city's limits?

The state legislature acting alone
Any neighboring property owner who files a petition
The Arkansas Real Estate Commission (AREC)
The local city council or county quorum court (Correct answer)

Correct answer: The local city council or county quorum court

Rezoning decisions are made by local legislative bodies — city councils for incorporated areas and county quorum courts for unincorporated areas — following public hearings and planning board recommendations.

Question 35: A seller's agent in Arkansas learns that the property has a foundation defect. Which fiduciary duty requires the agent to inform the seller about potential liability if this is not disclosed to buyers?

Obedience
Disclosure (Correct answer)
Confidentiality
Due diligence

Correct answer: Disclosure

The duty of disclosure requires the agent to inform their client of all material facts and information that could affect the transaction.

Question 36: Which of the following actions would be considered commingling under AREC rules?

Mixing client funds with the broker's personal or operating funds (Correct answer)
Maintaining separate ledgers for each client in the trust account
Returning earnest money to a buyer after a failed transaction with proper authorization
Depositing earnest money into a trust account within the required timeframe

Correct answer: Mixing client funds with the broker's personal or operating funds

Commingling occurs when a broker mixes client trust funds with their own personal or business operating funds.

Question 37: A seller's agent is holding an open house. A prospective buyer attends without an agent and begins to share confidential financial information and their high motivation to buy quickly. The seller's agent should:

Advise the buyer to get their own representation without explaining why.
Agree to keep the buyer's information confidential to build rapport.
Immediately stop the buyer and disclose that the agent represents the seller and must convey this information to them. (Correct answer)
Use this information to the seller's advantage in negotiations.

Correct answer: Immediately stop the buyer and disclose that the agent represents the seller and must convey this information to them.

The agent's primary duty is to the seller. Allowing the unrepresented buyer to share confidential information without understanding the agent's role creates a potential undisclosed dual agency situation and is unfair to the buyer. The agent must immediately clarify their agency relationship and explain that their duty of loyalty and disclosure is to the seller, meaning any confidential information shared will be passed on to the seller.

Question 38: Under Arkansas law, which of the following contract modifications must be in writing to be enforceable?

Extending the inspection period by a week
Increasing the purchase price by $50,000
Changing the move-in date by one day
All changes to a real estate contract must be in writing (Correct answer)

Correct answer: All changes to a real estate contract must be in writing

Under the Statute of Frauds, any modification to a contract for the sale of real property must be in writing to be enforceable.

Question 39: A listing agent receives a second, higher written offer on a property that is already under a binding contract with a buyer. According to Arkansas Real Estate Commission regulations, the listing agent should:

Promptly present the second offer to the seller for consideration as a potential backup offer, unless the seller has provided written instructions not to. (Correct answer)
Advise the seller that they cannot consider the offer under any circumstances.
Return the offer to the buyer's agent, explaining that the property is already sold.
Hold the offer and present it only if the first contract terminates.

Correct answer: Promptly present the second offer to the seller for consideration as a potential backup offer, unless the seller has provided written instructions not to.

AREC Regulation 10.12(a) requires a licensee to promptly present ALL offers received to the seller. The acceptance of a primary offer does not remove the obligation to present subsequent offers, which could be accepted as backup offers, unless the client provides written instructions to the contrary.

Question 40: Under Arkansas real estate law, what happens if a licensee fails to make required agency disclosures?

The licensee may face disciplinary action including license suspension or revocation (Correct answer)
The transaction is automatically voided
Nothing, disclosures are optional
Only a small fine is imposed

Correct answer: The licensee may face disciplinary action including license suspension or revocation

Failure to make required agency disclosures can result in disciplinary action by the Arkansas Real Estate Commission, including suspension or revocation of the license.

Question 41: Under Arkansas law, a licensee's failure to disclose a known material defect to a buyer is considered:

A minor procedural violation
Only a civil matter outside AREC jurisdiction
Misrepresentation or fraud (Correct answer)
An acceptable business practice

Correct answer: Misrepresentation or fraud

Knowingly concealing a material defect constitutes misrepresentation or fraud and is a violation of Arkansas license law.

Question 42: Under the Home Mortgage Disclosure Act (HMDA), what are lenders required to do?

Provide low-interest loans to minority applicants
Maintain escrow accounts for all borrowers
Collect and report data on mortgage applications by race, gender, and income (Correct answer)
Disclose all fees associated with the mortgage

Correct answer: Collect and report data on mortgage applications by race, gender, and income

HMDA requires financial institutions to collect and publicly disclose data about their mortgage lending to identify discriminatory patterns.

Question 43: A listing agent who accepts an offer without presenting all competing offers to the seller has violated which core duty?

Disclosure and obedience (Correct answer)
Confidentiality
Reasonable care
Accounting

Correct answer: Disclosure and obedience

The agent must disclose all offers and follow the seller's lawful instructions; withholding offers violates both the duty of disclosure and obedience.

Question 44: In the cost approach, the term 'reproduction cost' differs from 'replacement cost' in that:

Replacement cost uses modern materials and design; reproduction cost is an exact replica using original materials and design (Correct answer)
Reproduction cost uses modern materials while replacement cost replicates original design
Both terms mean the same thing in modern appraisal practice
Replacement cost always exceeds reproduction cost

Correct answer: Replacement cost uses modern materials and design; reproduction cost is an exact replica using original materials and design

Reproduction cost is the cost to build an exact replica of the original structure; replacement cost is the cost to build a functionally equivalent structure using current materials and standards.

Question 45: An appraiser is valuing a rental property generating $36,000 annual net operating income with a 9% cap rate. What is the estimated value?

$300,000
$360,000
$324,000
$400,000 (Correct answer)

Correct answer: $400,000

Value = NOI ÷ Cap Rate = $36,000 ÷ 0.09 = $400,000.

Question 46: Under Arkansas law, what is the primary purpose of recording a deed with the circuit clerk?

To make the transfer legally binding between the parties
To satisfy the statute of frauds requirement
To provide constructive notice to third parties (Correct answer)
To trigger the transfer tax assessment

Correct answer: To provide constructive notice to third parties

Recording provides constructive notice to the public that a transfer of ownership has occurred, protecting the grantee against subsequent claims.

Question 47: An Arkansas property has a net operating income of $48,000 and is valued at $600,000 using the income approach. What is the capitalization rate?

8% (Correct answer)
12%
6%
10%

Correct answer: 8%

The capitalization rate is calculated by dividing net operating income ($48,000) by the property value ($600,000), which equals 8%.

Question 48: Under AREC rules, a licensee wishing to operate as an independent contractor rather than an employee of a broker must:

File a special independent contractor registration with AREC
Obtain a broker's license
Establish their own separate escrow account
Still be affiliated with and supervised by a licensed broker (Correct answer)

Correct answer: Still be affiliated with and supervised by a licensed broker

Regardless of their employment classification as independent contractor or employee, every salesperson must be affiliated with and supervised by a licensed broker.

Question 49: A principal broker in Arkansas receives an earnest money deposit from a buyer on a Friday afternoon. According to AREC rules, what is the LATEST the broker can deposit these funds into the trust account?

Within three calendar days following the execution of the contract.
Immediately upon receipt.
By the end of the next business day.
Within three business days following the execution of the contract. (Correct answer)

Correct answer: Within three business days following the execution of the contract.

AREC Regulation 10.8(g)(1) specifies that trust funds, such as earnest money, must be deposited into a trust account no later than three (3) days following the execution of a real estate contract by both the seller and buyer. The count typically refers to business days, not calendar days.

Question 50: A broker's trust account in Arkansas must be reconciled at a minimum of:

Weekly
At the close of every transaction
Quarterly
Monthly (Correct answer)

Correct answer: Monthly

Arkansas requires brokers to reconcile trust accounts at least monthly to ensure proper handling of client funds.

Question 51: Which fiduciary duty requires an Arkansas real estate agent to act in the client's best interest above their own?

Disclosure
Loyalty (Correct answer)
Accounting
Obedience

Correct answer: Loyalty

The duty of loyalty obligates an agent to place the client's interests above all others, including the agent's own interests.

Question 52: The 'depth table' method in land valuation is used to:

Measure the usable building area after setbacks
Adjust lot value based on the depth of the parcel relative to a standard depth (Correct answer)
Calculate the square footage of irregularly shaped lots
Determine frontage value along a commercial street

Correct answer: Adjust lot value based on the depth of the parcel relative to a standard depth

Depth tables provide percentage adjustments to account for the fact that lots deeper or shallower than a standard depth contribute different values per front foot.

Question 53: An active Arkansas real estate salesperson wants to renew their license. What is the annual continuing education (CE) requirement they must meet?

10 hours, with 2 hours in contract law.
7 hours, with at least 3 hours focused on ethics.
6 hours of electives and 1 hour of safety. (Correct answer)
12 hours, with a mandatory 3-hour legislative update course.

Correct answer: 6 hours of electives and 1 hour of safety.

To renew an active real estate license in Arkansas, licensees must complete seven (7) hours of continuing education annually. The specific required topics can change from year to year, but for 2024, it included a mandatory one-hour course on safety. The remaining hours are typically elective courses approved by AREC.

Question 54: A buyer submits an offer to purchase a home in Little Rock. The seller is not satisfied with the price and writes in a higher price, initials the change, and signs the document. What is the status of the contract at this point?

A valid contract has been formed.
The original offer is terminated, and the seller has created a counteroffer. (Correct answer)
The buyer is now legally obligated to accept the new price.
The original offer remains valid, and the seller's change is a separate offer.

Correct answer: The original offer is terminated, and the seller has created a counteroffer.

When a party to a contract changes the terms of the original offer, it constitutes a rejection of that offer and the creation of a new offer, known as a counteroffer. The original offer is no longer valid. The original offeror (the buyer) now has the power to accept, reject, or counter the seller's new offer.

Question 55: AREC's Rules and Regulations require that a net listing agreement:

Is prohibited in Arkansas (Correct answer)
Must disclose the minimum net amount to the seller
Be executed in writing and approved by AREC
Requires a fixed commission percentage above the net

Correct answer: Is prohibited in Arkansas

Net listings are prohibited in Arkansas because they create an inherent conflict of interest between the broker and the seller.

Question 56: Which of the following is NOT a ground for AREC license revocation in Arkansas?

Misrepresentation of property condition
Commingling client funds
Failing to disclose a known material defect
Charging a commission higher than standard rates (Correct answer)

Correct answer: Charging a commission higher than standard rates

Arkansas has no set 'standard' commission rate — commission is negotiable, and charging a higher rate is not grounds for revocation.

Question 57: When does an agency relationship in Arkansas typically terminate?

Only when the AREC revokes the license
When the listing period expires, both parties complete the transaction, or by mutual consent (Correct answer)
When the agent stops working on the property
Only when the commission is paid

Correct answer: When the listing period expires, both parties complete the transaction, or by mutual consent

Agency terminates upon expiration of the agreement, completion of the transaction, mutual consent, death of either party, or other legal events.

Question 58: A lender in Arkansas is foreclosing on a property using the non-judicial foreclosure process. What is a key requirement regarding the sale of the property?

The property must be sold at a public auction to the highest bidder, regardless of the price.
The homeowner has a statutory right of redemption for one year after the sale.
The property must sell for at least two-thirds of its appraised value. (Correct answer)
The sale must be approved by a court before it can be finalized.

Correct answer: The property must sell for at least two-thirds of its appraised value.

In an Arkansas foreclosure, whether judicial or non-judicial, the property must be appraised before the sale. The law mandates that the property cannot be sold for less than two-thirds (2/3) of the appraised value. The right of redemption only applies to judicial foreclosures, not non-judicial ones.

Question 59: An Arkansas listing agent receives two offers simultaneously — one from a buyer with their own agent and one from an unrepresented buyer. The listing agent must:

Present only the highest offer to avoid complicating the seller's decision
Present the represented buyer's offer first as a professional courtesy
Ask the unrepresented buyer to get an agent before presenting their offer
Automatically present both offers simultaneously to the seller (Correct answer)

Correct answer: Automatically present both offers simultaneously to the seller

Arkansas law requires all offers to be presented to the seller promptly, and the agent must not discriminate in how or when offers are presented.

Question 60: Which of the following is a requirement for a principal broker's real estate office in Arkansas?

A sign must be permanently attached and easily visible, identifying the location as a real estate office. (Correct answer)
All agent licenses must be physically displayed in the office lobby.
The principal broker must personally be present in the office at all times during business hours.
The office must be located in a commercially zoned district.

Correct answer: A sign must be permanently attached and easily visible, identifying the location as a real estate office.

Arkansas law requires that every principal broker maintain a place of business and display a permanently attached sign that clearly indicates to the public that they are engaged in the real estate business. There are no specific rules about commercial zoning or the broker being present at all times.

Question 61: In Arkansas, a broker must keep trust account records for how many years?

10 years
3 years (Correct answer)
1 year
5 years

Correct answer: 3 years

Arkansas requires brokers to maintain trust account records for a minimum of 3 years.

Question 62: Under Arkansas law, which of the following would TERMINATE an agency relationship?

The property failing inspection
The agent taking a vacation
The buyer making an offer below list price
Expiration of the listing or representation agreement (Correct answer)

Correct answer: Expiration of the listing or representation agreement

An agency relationship automatically terminates when the agreed-upon contract period expires, along with other events like completion of the purpose, mutual agreement, or death.

Question 63: Under Arkansas regulations, which of the following must be kept in a real estate firm's transaction file?

Agent's commission agreement with the MLS
Copy of the buyer's credit report
All written offers and counteroffers (Correct answer)
Lender's approval letter

Correct answer: All written offers and counteroffers

Arkansas requires that all written offers and counteroffers be retained in the transaction file for the required record-keeping period.

Question 64: An agent who represents a seller but negotiates in the buyer's favor to speed up the sale is violating which duty?

Loyalty (Correct answer)
Confidentiality
Disclosure
Reasonable care

Correct answer: Loyalty

The duty of loyalty requires the listing agent to negotiate in the seller's best interest, not the buyer's or the agent's own interest in closing quickly.

Question 65: How often must an Arkansas real estate salesperson renew their license?

Annually (Correct answer)
Every five years
Every three years
Every two years

Correct answer: Annually

Arkansas real estate salesperson licenses must be renewed on an annual basis.

Question 66: Under Arkansas law, what is the effect of a property seller failing to provide the required property disclosure form?

The contract is automatically void
The buyer may have grounds to rescind the contract or seek damages (Correct answer)
The seller must pay a fine to the Arkansas Real Estate Commission
The closing is delayed by 90 days

Correct answer: The buyer may have grounds to rescind the contract or seek damages

Failure to provide required property disclosures in Arkansas may give the buyer the right to rescind the contract or pursue damages for any undisclosed defects.

Question 67: RESPA prohibits kickbacks between settlement service providers. What is the penalty for violations?

Fines set by the Arkansas Real Estate Commission
License revocation only
A warning letter from HUD
Civil fine up to $10,000 and up to 1 year in prison (Correct answer)

Correct answer: Civil fine up to $10,000 and up to 1 year in prison

RESPA Section 8 violations can result in civil fines up to $10,000 per violation and/or up to 1 year imprisonment.

Question 68: Which of the following is a primary characteristic of an FHA-insured loan compared to a typical conventional loan?

The seller is always required to pay the buyer's discount points.
It is designed for borrowers with high credit scores and substantial assets.
It requires a minimum 20% down payment to avoid mortgage insurance.
It allows for a lower down payment and has more flexible credit requirements. (Correct answer)

Correct answer: It allows for a lower down payment and has more flexible credit requirements.

FHA loans are insured by the Federal Housing Administration and are designed to make homeownership more accessible. They typically feature lower minimum down payments (as low as 3.5%) and more lenient credit score requirements compared to conventional loans, which are not government-insured and often have stricter qualifying standards.

Question 69: Which of the following BEST describes 'downzoning'?

Transferring zoning rights from one parcel to an adjacent one
Rezoning a parcel to permit less intensive use than previously allowed (Correct answer)
Removing all zoning restrictions from a parcel
Rezoning a parcel to allow more intensive development

Correct answer: Rezoning a parcel to permit less intensive use than previously allowed

Downzoning reduces the intensity of permitted land uses — for example, changing a parcel from multi-family residential to single-family residential — which can decrease a property's development potential and value.

Question 70: What is the legal effect of a time is of the essence clause in an Arkansas real estate contract?

It only applies to the inspection period, not the closing date
It makes all deadlines strictly enforceable, and failure to meet them may constitute a breach (Correct answer)
It allows unlimited extensions to the closing date
It requires the transaction to close within 24 hours

Correct answer: It makes all deadlines strictly enforceable, and failure to meet them may constitute a breach

A 'time is of the essence' clause makes all contractual deadlines strictly binding, meaning failure to perform by the specified dates can be treated as a material breach.

Question 71: Under Arkansas law, which of the following fiduciary duties owed by a licensee to their client CANNOT be waived, even with the client's written consent?

The duty to perform a market analysis for the client every month.
The duty to attend the closing in person.
The duty of absolute fidelity to protect and promote the client's interests. (Correct answer)
The duty to show the client alternative properties listed with other firms.

Correct answer: The duty of absolute fidelity to protect and promote the client's interests.

Arkansas Code § 17-42-316 and AREC forms explicitly state that the fundamental fiduciary duties, such as the primary duty of absolute fidelity to protect and promote the client's interests, cannot be waived. While some specific services might be negotiable, the core ethical and legal obligations of agency are statutory and mandatory.

Question 72: After a listing agreement expires, an Arkansas listing agent may NOT:

Continue to market the property as if still listed (Correct answer)
Keep copies of transaction documents for their records
Provide the seller with a final accounting of expenses
Contact the seller to renew the listing

Correct answer: Continue to market the property as if still listed

Once the listing agreement expires, the agency relationship ends and the agent has no authority to continue marketing the property.

Question 73: Which of the following would be considered normal wear and tear in a residential rental, allowing a tenant to receive their full security deposit back?

Pet stains on the carpet
Large holes in the drywall
Broken window glass
Small nail holes from hanging pictures (Correct answer)

Correct answer: Small nail holes from hanging pictures

Small nail holes from hanging pictures are considered normal wear and tear and cannot be deducted from a security deposit.

Question 74: Under the Fair Housing Act, a person with a disability has the right to:

Request reasonable modifications to a rental unit at their own expense (Correct answer)
Require the landlord to pay for all accessibility upgrades
Terminate a lease if the unit is not fully ADA compliant
Demand any modifications regardless of cost to the landlord

Correct answer: Request reasonable modifications to a rental unit at their own expense

Disabled tenants have the right to make reasonable modifications at their own expense, with the landlord's permission, to accommodate their disability.

Question 75: Which type of lease is most commonly used in retail commercial properties, where the tenant pays base rent plus a percentage of gross sales?

Ground lease
Percentage lease (Correct answer)
Gross lease
Net lease

Correct answer: Percentage lease

A percentage lease requires the tenant to pay base rent plus a percentage of their gross sales, aligning the landlord's income with the business's success.

Question 76: Under Arkansas law, a salesperson may receive compensation from:

The seller's attorney
Only their sponsoring broker (Correct answer)
The buyer directly if both parties agree
Any party to the transaction

Correct answer: Only their sponsoring broker

A salesperson may only receive compensation through their sponsoring/employing broker, never directly from a transaction party.

Question 77: A first-time homebuyer in Arkansas is seeking a loan with the lowest possible down payment. They have a credit score of 600. Which loan program would most likely meet their needs?

Conventional Loan
Rural Development Loan
FHA Loan (Correct answer)
VA Loan

Correct answer: FHA Loan

FHA loans are insured by the Federal Housing Administration and are designed for low-to-moderate-income borrowers. With a credit score of 580 or higher, a borrower can qualify for a down payment as low as 3.5%. While VA and Rural Development loans also offer low or no down payment options, they have specific eligibility requirements (veteran status or property location) that are not mentioned in the scenario.

Question 78: Which of the following best describes a conventional loan?

A loan insured by the FHA
A loan guaranteed by the VA
A loan issued by a government agency directly
A loan not insured or guaranteed by a government agency (Correct answer)

Correct answer: A loan not insured or guaranteed by a government agency

A conventional loan is one that is not backed by a government program such as FHA, VA, or USDA.

Question 79: Which of the following best defines 'effective age' of a property?

The remaining economic life of the improvements
The number of years since the building permit was issued
The age listed in the county tax records
The age indicated by the property's condition and utility relative to similar properties (Correct answer)

Correct answer: The age indicated by the property's condition and utility relative to similar properties

Effective age reflects a property's condition and utility rather than its actual chronological age; a well-maintained older home may have a younger effective age.

Question 80: Which loan feature allows the interest rate to change periodically based on a financial index, potentially raising or lowering monthly payments?

Fixed-rate mortgage
Wraparound mortgage
Balloon mortgage
Adjustable-rate mortgage (ARM) (Correct answer)

Correct answer: Adjustable-rate mortgage (ARM)

An ARM has an interest rate tied to a financial index that can adjust at specified intervals during the loan term.

Arkansas Real Estate License Exam

The Arkansas Real Estate License Exam exam validates essential knowledge and skills required for certification or licensure in this field.

Questions

120 min

Time Limit

70%

To Pass

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