Real Estate Salesperson Exam (National Portion) — Questions and Answers

Question 1: A subagent in a real estate transaction owes fiduciary duties to which party?

The buyer who is viewing the property
No party, as subagents are independent contractors
The seller, through the listing broker (Correct answer)
The listing broker only

Correct answer: The seller, through the listing broker

A subagent works through the listing broker and owes fiduciary duties to the seller, even though the subagent may have direct contact primarily with the buyer.

Question 2: What is a 'buydown' in mortgage financing?

The lender buying the loan from the original creditor
Reducing the loan balance by making a larger down payment
Paying upfront points to lower the interest rate temporarily or permanently (Correct answer)
Refinancing to a shorter loan term

Correct answer: Paying upfront points to lower the interest rate temporarily or permanently

A buydown involves paying discount points at closing to reduce the mortgage interest rate, either temporarily (e.g., 2-1 buydown) or permanently.

Question 3: A special warranty deed differs from a general warranty deed in that it:

Requires no consideration
Transfers no warranties whatsoever
Must be signed by both grantor and grantee
Only warrants against defects arising during the grantor's ownership (Correct answer)

Correct answer: Only warrants against defects arising during the grantor's ownership

A special warranty deed limits the grantor's warranty to title defects that occurred only during the period the grantor owned the property.

Question 4: A property is listed at $320,000. The seller agrees to accept $305,000. The buyer offers $298,000. At this point there is:

A counteroffer that must be accepted within 24 hours
A binding contract at $298,000
A binding contract at $305,000
No contract — the offer was rejected (Correct answer)

Correct answer: No contract — the offer was rejected

Because the buyer's offer did not match the seller's acceptable price, no contract exists and the seller is free to reject.

Question 5: A life tenant who commits waste by failing to maintain the property and allowing it to deteriorate is committing which type of waste?

Voluntary waste
Ameliorative waste
Constructive waste
Permissive waste (Correct answer)

Correct answer: Permissive waste

Permissive waste occurs when a life tenant fails to maintain the property, allowing it to fall into disrepair through neglect.

Question 6: Which type of loan allows seniors aged 62+ to convert home equity into cash without making monthly mortgage payments?

Reverse mortgage (Correct answer)
Construction loan
Bridge loan
Home equity loan

Correct answer: Reverse mortgage

A reverse mortgage lets homeowners aged 62 or older convert equity into loan proceeds, with repayment deferred until they sell, move out, or die.

Question 7: Under the duty of accounting, a real estate agent must:

Keep accurate records of all client funds and property (Correct answer)
Provide financial investment advice
File the client's taxes
Manage the client's investment portfolio

Correct answer: Keep accurate records of all client funds and property

The duty of accounting requires agents to safeguard and properly account for all money and property entrusted to them by clients.

Question 8: A real estate agent who represents a landlord and helps rent a property owes fiduciary duties to:

Both the landlord and tenant equally
Neither party in a lease transaction
The tenant, as the end consumer
The landlord, as the principal (Correct answer)

Correct answer: The landlord, as the principal

When hired by a landlord, the agent represents the landlord's interests and owes fiduciary duties exclusively to the landlord.

Question 9: A developer places a restriction in all deeds within a subdivision prohibiting commercial use. This is an example of which type of restriction?

Deed restriction (restrictive covenant) (Correct answer)
Easement by necessity
Encroachment
Zoning ordinance

Correct answer: Deed restriction (restrictive covenant)

A deed restriction, also called a restrictive covenant, is a private limitation placed on property use by the grantor through the deed.

Question 10: The most complete form of property ownership, which grants the owner the full bundle of rights for an indefinite duration, is known as:

A fee simple absolute estate (Correct answer)
A life estate
A fee simple defeasible estate
A leasehold estate

Correct answer: A fee simple absolute estate

A fee simple absolute estate is the highest and most complete form of ownership in real property. It is of potentially infinite duration and is not subject to any conditions or limitations, giving the owner the entire bundle of rights.

Question 11: Which federal agency insures loans made under the FHA mortgage program?

The Department of Veterans Affairs
Fannie Mae
The Federal Reserve
The Federal Housing Administration within HUD (Correct answer)

Correct answer: The Federal Housing Administration within HUD

The Federal Housing Administration, a division of the Department of Housing and Urban Development, insures FHA loans against borrower default.

Question 12: An investor purchases a property for $500,000 and later sells it for $650,000. Ignoring other costs, the gain is subject to which federal tax?

Capital gains tax (Correct answer)
Estate tax
Transfer tax
Self-employment tax

Correct answer: Capital gains tax

Profit from the sale of investment real property is subject to federal capital gains tax, with the rate depending on the holding period.

Question 13: Which of the following contracts must be in writing to be enforceable under the Statute of Frauds?

A contract for the sale of a condominium (Correct answer)
A six-month residential lease
A month-to-month rental agreement
An open listing agreement with a broker

Correct answer: A contract for the sale of a condominium

The Statute of Frauds is a legal principle that requires certain types of contracts, including those for the sale or transfer of an interest in real property, to be in writing to be legally enforceable. A contract for the sale of a condominium falls into this category. Leases for a year or less are often exceptions to this rule.

Question 14: An agent's fiduciary duty of obedience requires them to follow all lawful client instructions. Which instruction would the agent be RIGHT to refuse?

Schedule open houses on weekends only
Decline to negotiate with a specific buyer
Reject all offers below the listed price
Do not disclose that the property is located in a flood zone (Correct answer)

Correct answer: Do not disclose that the property is located in a flood zone

Failing to disclose a known material fact such as flood zone location violates state disclosure laws and the agent must refuse such instructions.

Question 15: A landlord refuses to allow a tenant with a disability to install a grab bar in the bathroom at the tenant's own expense. Is this legal?

No, the landlord must pay for all disability-related modifications
Yes, the landlord has full control over property alterations
Yes, but only if the building was built before 1988
No, the landlord must allow reasonable modifications at the tenant's expense (Correct answer)

Correct answer: No, the landlord must allow reasonable modifications at the tenant's expense

Under the Fair Housing Act, landlords must permit reasonable modifications by disabled tenants at the tenant's expense.

Question 16: A property owner who holds mineral rights but not surface rights possesses which type of ownership interest?

Riparian rights
Air rights
Littoral rights
Subsurface rights (Correct answer)

Correct answer: Subsurface rights

Subsurface rights grant ownership of minerals, oil, gas, and other resources below the surface, separate from surface ownership.

Question 17: Which document must a seller in California provide to a buyer disclosing known material facts about the property's condition?

Estoppel Certificate
Preliminary Title Report
Grant Deed
Transfer Disclosure Statement (TDS) (Correct answer)

Correct answer: Transfer Disclosure Statement (TDS)

California Civil Code requires sellers of residential property to complete a Transfer Disclosure Statement revealing known defects and material facts.

Question 18: Under the Fair Housing Act, a landlord may lawfully ask a disabled tenant to:

Pay a pet deposit for a service animal
Restore the unit to its original condition at move-out if reasonable modifications were made at the tenant's expense (Correct answer)
Provide proof of disability from a doctor before allowing any accommodation
Sign a waiver of their right to reasonable accommodations

Correct answer: Restore the unit to its original condition at move-out if reasonable modifications were made at the tenant's expense

Landlords can require tenants who make modifications to restore the unit to its original condition at move-out, but cannot charge extra deposits for service animals.

Question 19: When a real estate agent receives an offer on a listed property, the agent's duty is to:

Reject offers below the asking price without presenting them
Present all offers to the seller promptly and honestly (Correct answer)
Share the offer details with competing buyers
Accept the offer on the seller's behalf immediately

Correct answer: Present all offers to the seller promptly and honestly

Agents have a fiduciary duty to present all written offers to the seller promptly and in their entirety, regardless of the offer price.

Question 20: A seller's agent learns that the seller is willing to accept $20,000 less than the asking price. What must the agent do with this information?

Disclose it to the buyer to close the deal faster
Share it with the buyer's agent only
Keep it confidential as it belongs to the seller (Correct answer)
Disclose it in the MLS listing

Correct answer: Keep it confidential as it belongs to the seller

A seller's agent must maintain confidentiality of the seller's minimum acceptable price, as disclosing it would breach the fiduciary duty of confidentiality owed to the seller.

Question 21: What is the primary purpose of a loan estimate (LE) as required by the TILA-RESPA Integrated Disclosure (TRID) rule?

To lock in the interest rate for 60 days
To serve as the final closing document
To replace the need for a title search
To provide borrowers with estimated loan costs within three business days of application (Correct answer)

Correct answer: To provide borrowers with estimated loan costs within three business days of application

The Loan Estimate must be provided within three business days of receiving a mortgage application and outlines estimated costs, terms, and fees.

Question 22: In a wraparound mortgage, what happens to the original loan?

It remains in place while the new loan wraps around it (Correct answer)
It is assumed by the buyer with lender approval
It is paid off immediately at closing
It converts to an adjustable-rate mortgage

Correct answer: It remains in place while the new loan wraps around it

A wraparound mortgage keeps the existing loan intact while creating a new, larger loan that encompasses the original balance.

Question 23: Under USPAP (Uniform Standards of Professional Appraisal Practice), an appraiser must:

Remain independent, impartial, and objective in all appraisal assignments (Correct answer)
Provide an appraisal within 48 hours of the assignment date
Arrive at a value that satisfies the lender's requirements
Use all three approaches to value in every appraisal

Correct answer: Remain independent, impartial, and objective in all appraisal assignments

USPAP requires appraisers to be independent, impartial, and objective — they must not allow client pressure or predetermined conclusions to influence their value opinion.

Question 24: Which of the following BEST defines the appraisal concept of 'Highest and Best Use'?

The current use of the property, provided it is generating a positive cash flow.
The use that results in the highest property tax assessment for the municipality.
The use that requires the most expensive construction and materials to complete.
The most profitable, legally permissible, physically possible, and financially feasible use of a property. (Correct answer)

Correct answer: The most profitable, legally permissible, physically possible, and financially feasible use of a property.

Highest and Best Use is defined as the use of a property that is legally permissible, physically possible, financially feasible, and results in the highest value. An appraiser must consider all these factors to determine the use that maximizes the property's potential value, regardless of its current use.

Question 25: Which agency primarily enforces the federal Fair Housing Act?

Federal Trade Commission (FTC)
Department of Housing and Urban Development (HUD) (Correct answer)
Consumer Financial Protection Bureau (CFPB)
Department of Justice (DOJ) exclusively

Correct answer: Department of Housing and Urban Development (HUD)

HUD is the primary federal agency responsible for enforcing the Fair Housing Act, though the DOJ can also bring cases.

Question 26: An agent who fails to present all offers to a seller has violated which fiduciary duty?

Loyalty
Accounting
Disclosure (Correct answer)
Obedience

Correct answer: Disclosure

The duty of disclosure requires agents to present all material facts and offers to their clients, regardless of the agent's opinion of the offer.

Question 27: A real estate broker receives an offer on a listed property on a Friday afternoon. The seller is traveling and unreachable until Monday. What should the broker do?

Accept the offer on the seller's behalf to avoid losing it
Reject the offer and ask the buyer to resubmit on Monday
Make all reasonable efforts to present the offer to the seller as soon as possible (Correct answer)
Hold the offer until the next business day without notifying the seller

Correct answer: Make all reasonable efforts to present the offer to the seller as soon as possible

Brokers have a fiduciary duty to present all offers to the seller promptly. The broker must make every reasonable effort to contact the seller immediately rather than holding or acting on the offer unilaterally.

Question 28: Which of the following is exempt from the Fair Housing Act's prohibition against discrimination?

Apartment complexes with fewer than ten units
An owner-occupied dwelling with no more than four units where no broker is used (Correct answer)
All single-family homes regardless of how they are sold
Any property owned by a religious organization used for commercial purposes

Correct answer: An owner-occupied dwelling with no more than four units where no broker is used

The Mrs. Murphy exemption allows owner-occupied buildings with four or fewer units to be exempt when no broker is involved and no discriminatory advertising is used.

Question 29: A seller's agent receives a verbal offer from a buyer. The agent believes the offer is too low and unlikely to be accepted. What should the agent do?

Present all offers to the seller promptly (Correct answer)
Reject the offer on behalf of the seller
Only present offers that meet the listing price
Advise the buyer to increase the offer before presenting it

Correct answer: Present all offers to the seller promptly

Agents have a fiduciary duty to present all offers to their client promptly, regardless of the agent's personal opinion about the offer's adequacy.

Question 30: What distinguishes a balloon mortgage from a fully amortizing loan?

A balloon mortgage has a large lump-sum payment due at the end of the term (Correct answer)
A balloon mortgage cannot be refinanced
A balloon mortgage always has a lower interest rate
A balloon mortgage never requires monthly payments

Correct answer: A balloon mortgage has a large lump-sum payment due at the end of the term

A balloon mortgage requires a large final payment of the remaining principal balance at the end of a shorter loan term.

Question 31: A seller receives two simultaneous offers. What is the agent's ethical obligation?

Disclose both offers to each buyer so they can increase their bids
Accept the first offer received automatically
Present only the higher-priced offer
Present both offers to the seller and let the seller decide (Correct answer)

Correct answer: Present both offers to the seller and let the seller decide

The agent must present all offers to the seller, who then decides how to respond to each; disclosing one buyer's offer details to another violates confidentiality.

Question 32: A borrower secures a loan where for the first five years, the monthly payments only cover the interest. At the end of the five years, the entire principal balance is due in a single payment. What type of loan is this?

Fully amortized loan
Adjustable-rate mortgage
Interest-only loan (Correct answer)
Graduated payment mortgage

Correct answer: Interest-only loan

An interest-only loan is a type of financing where the borrower pays only the interest on the principal balance for a specified period. Unlike a fully amortized loan where payments include both principal and interest, the principal on an interest-only loan is not reduced during the interest-only period and must be paid off later, often as a lump-sum balloon payment.

Question 33: The Equal Credit Opportunity Act (ECOA) prohibits lenders from discriminating based on all of the following EXCEPT:

Credit score (Correct answer)
National origin
Race
Religion

Correct answer: Credit score

ECOA prohibits discrimination based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance — not credit score.

Question 34: When determining the final estimate of value for an antique single-family home, all of the following would be relevant, with the exception of:

Original cost of the residence (Correct answer)
Physical condition of the building
Suitability of the residence to the site
Purpose of the appraisal

Correct answer: Original cost of the residence

While the physical condition, purpose of the appraisal, and suitability of the residence to the site are crucial for determining current market value, the original cost of construction is generally irrelevant. Market value is based on what a willing buyer would pay today, not on what it cost to build in the past. Depreciation, appreciation, and market forces significantly alter a property's value over time, making original cost an unreliable indicator of current worth.

Question 35: Which type of ownership estate can potentially last forever but may be terminated if a specific condition occurs?

Fee simple defeasible (Correct answer)
Estate at sufferance
Estate for years
Life estate

Correct answer: Fee simple defeasible

A fee simple defeasible estate has potentially infinite duration but can be terminated automatically or by re-entry if the owner violates a stated condition.

Question 36: When a deed is recorded in the public records, it provides what type of notice to the world?

Actual notice
Constructive notice (Correct answer)
Implied notice
Equitable notice

Correct answer: Constructive notice

Recording a deed gives constructive notice, which means the law presumes everyone is aware of the transfer even if they have not personally seen the document. Actual notice requires someone to have direct knowledge of the fact.

Question 37: A listing agent receives two offers simultaneously — one slightly lower from a first-time buyer and one higher from a real estate investor. Which action best fulfills the agent's fiduciary duty?

Advise the seller to accept the investor's offer without presenting both
Present the lower offer first since it arrived earlier
Present only the higher offer to save the seller time
Present both offers to the seller and let the seller decide (Correct answer)

Correct answer: Present both offers to the seller and let the seller decide

The duty of loyalty and care requires the agent to present all offers to the seller and allow the seller to make an informed decision. Withholding any offer violates fiduciary duty.

Question 38: A seller's agent who steers buyers toward or away from neighborhoods based on racial composition violates:

The Fair Housing Act and fiduciary duties (Correct answer)
Only state licensing laws
Agency law only
The duty of confidentiality

Correct answer: The Fair Housing Act and fiduciary duties

Steering violates both the Fair Housing Act's anti-discrimination provisions and the agent's fiduciary duty of loyalty and care to clients.

Question 39: A property built in 1972 is being sold. What must the seller disclose regarding lead-based paint?

Only that lead paint may be present if the buyer requests information
The seller only needs to disclose if lead paint has been tested and confirmed
Nothing, because the property was built after the 1960 cutoff
The seller must provide the EPA lead hazard pamphlet and disclose any known lead-based paint (Correct answer)

Correct answer: The seller must provide the EPA lead hazard pamphlet and disclose any known lead-based paint

Federal law requires sellers of homes built before 1978 to provide the EPA pamphlet and disclose any known lead-based paint or hazards.

Question 40: A listing agent is holding an open house. A potential buyer, who is not represented by an agent, attends and tells the listing agent they are pre-approved for a loan amount well above the asking price. To whom does the listing agent owe the fiduciary duty of loyalty?

To both the buyer and seller, as a dual agent.
To the seller. (Correct answer)
To neither party, as they are just a facilitator.
To the buyer, because they shared confidential information.

Correct answer: To the seller.

The listing agent has an established agency relationship with the seller (their client or principal). Therefore, their duty of loyalty is exclusively to the seller. The unrepresented buyer is a customer, and the agent owes them honesty and fair dealing, but not fiduciary duties like loyalty.

Question 41: Redlining refers to the practice of:

Directing minority buyers to specific neighborhoods
Refusing to rent to families with children
Charging higher prices to minority buyers
Marking boundaries on maps to exclude racial minorities from obtaining mortgages in certain areas (Correct answer)

Correct answer: Marking boundaries on maps to exclude racial minorities from obtaining mortgages in certain areas

Redlining is the illegal practice of refusing loans or insurance to people in certain areas, often based on the racial composition of those neighborhoods.

Question 42: Which government power allows a city to take private property for a public use project, provided just compensation is paid?

Eminent domain (Correct answer)
Escheat
Taxation
Police power

Correct answer: Eminent domain

Eminent domain is the government's constitutional authority to acquire private property for public use in exchange for fair (just) compensation.

Question 43: A "contract binding offer" is an advance payment made by the buyer in accordance with the agreement of sale as a good faith offer to the seller of the property.

True
False (Correct answer)

Correct answer: False

An advance payment made by the buyer as a good faith gesture to show serious intent to purchase the property is known as an 'earnest money deposit.' This deposit is typically held in an escrow account and is not referred to as a 'contract binding offer.' The earnest money demonstrates the buyer's commitment and becomes part of the down payment or closing costs if the sale proceeds.

Question 44: If a buyer's agent discovers the seller has already received a higher offer, the agent should:

Advise the buyer to withdraw and find another property
Keep it confidential to maintain a good relationship with the seller's agent
Increase the buyer's offer without consulting the buyer
Disclose this material fact to the buyer client so they can make an informed decision (Correct answer)

Correct answer: Disclose this material fact to the buyer client so they can make an informed decision

A buyer's agent must disclose material facts affecting the buyer's decision, including the existence of competing offers, fulfilling the duty of disclosure.

Question 45: Under the TILA-RESPA Integrated Disclosure (TRID) rules, how many business days before closing must the borrower receive the Closing Disclosure?

1 business day
3 business days (Correct answer)
5 business days
2 business days

Correct answer: 3 business days

TRID requires the Closing Disclosure to be delivered to the borrower at least 3 business days before consummation of the loan.

Question 46: Under the Equal Credit Opportunity Act (ECOA), a lender may NOT deny a loan based on which of the following?

Marital status (Correct answer)
Employment history
Credit score
Debt-to-income ratio

Correct answer: Marital status

ECOA prohibits credit discrimination based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance.

Question 47: The sale agreement is NOT a contract that must be followed by law.

True
False (Correct answer)

Correct answer: False

The sale agreement is a legally binding contract that must be followed by law once both parties have signed it. It outlines the rights and obligations of the buyer and seller, and any failure to adhere to its terms can lead to legal action, such as specific performance or monetary damages. Therefore, it is not merely a suggestion but a enforceable legal document.

Question 48: Which of the following liens generally has the highest priority in a foreclosure sale?

Second mortgage
Property tax lien (Correct answer)
Judgment lien
Mechanic's lien

Correct answer: Property tax lien

Property tax liens hold super-priority status and are paid before all other liens, including first mortgages, in most states.

Question 49: An agent's duty of reasonable care and diligence requires which of the following?

Providing legal advice on contract terms
Guaranteeing the client will profit from the transaction
Using professional expertise and skill expected of a competent licensee (Correct answer)
Performing a structural engineering inspection of the property

Correct answer: Using professional expertise and skill expected of a competent licensee

The duty of reasonable care requires agents to apply the level of knowledge, skill, and competence that a reasonably qualified real estate professional would exercise in similar circumstances.

Question 50: What is the legal effect of an 'as-is' clause in a residential purchase contract?

The seller is exempt from all disclosure requirements
The buyer waives the right to a home inspection
The property is sold without any warranties including title
The seller will not make repairs but must still disclose known defects (Correct answer)

Correct answer: The seller will not make repairs but must still disclose known defects

An as-is clause means the seller will not make repairs, but most states still require disclosure of known material defects.

Question 51: Adverse possession allows a trespasser to acquire title after meeting all statutory requirements, which typically include all of the following EXCEPT:

Hostile claim against the owner's interest
Payment of fair market value to the owner (Correct answer)
Open and notorious use
Continuous use for the statutory period

Correct answer: Payment of fair market value to the owner

Adverse possession never requires payment to the owner; it is acquired by meeting the statutory elements of open, notorious, continuous, hostile, and exclusive use.

Question 52: A seller discloses that the basement floods during heavy rain. This type of disclosure is an example of:

Misrepresentation
Caveat emptor
Puffing
A material fact disclosure (Correct answer)

Correct answer: A material fact disclosure

Known defects that could affect a buyer's decision, like flooding, are material facts that must be disclosed.

Question 53: Which deed offers the MOST protection to the grantee?

Bargain and sale deed
Quitclaim deed
General warranty deed (Correct answer)
Special warranty deed

Correct answer: General warranty deed

A general warranty deed contains six covenants, including the covenant of seisin and covenant against encumbrances, providing the highest level of protection against all title defects.

Question 54: A property owner grants an easement to a utility company to run power lines across their land. This is an example of which type of easement?

Easement by necessity
Easement by prescription
Easement appurtenant
Easement in gross (Correct answer)

Correct answer: Easement in gross

An easement in gross benefits a specific person or entity rather than an adjacent property, and utility easements are the most common example of this type.

Question 55: The adage, "The value of the best property in a neighborhood will be adversely influenced by the existence of relatively poor property," refers to the notion of:

Anticipation
Contribution
Regression (Correct answer)
Balance

Correct answer: Regression

The principle of regression states that the value of a superior property will be negatively affected by the presence of lesser-quality properties in its vicinity. Conversely, the principle of progression suggests that the value of a lesser property will be enhanced by the presence of superior properties. This concept highlights how surrounding properties influence the market value of an individual property.

Question 56: A buyer signs a purchase agreement but the seller never signs it. What is the status of this transaction?

The contract is fully executed
The buyer can enforce the contract through specific performance
No valid contract exists (Correct answer)
The contract is voidable by the buyer

Correct answer: No valid contract exists

A contract requires acceptance by all parties, and without the seller's signature there is no mutual agreement.

Question 57: A real estate licensee tells prospective buyers that a particular neighborhood is 'changing' and suggests they look at homes in another area instead. This practice is known as:

Steering (Correct answer)
Redlining
Puffing
Blockbusting

Correct answer: Steering

Steering is the illegal practice of guiding buyers toward or away from certain neighborhoods based on protected class characteristics. Directing buyers to different areas based on racial or ethnic composition of a neighborhood violates the Fair Housing Act.

Question 58: Which contingency allows a buyer to exit a contract if they cannot obtain financing?

Inspection contingency
Mortgage contingency (Correct answer)
Appraisal contingency
Title contingency

Correct answer: Mortgage contingency

A mortgage (financing) contingency protects the buyer's earnest money if they are unable to secure a loan within the specified timeframe.

Question 59: An owner has used an unrecorded path across a neighbor's land openly, continuously, and without permission for the statutory period. They may acquire a:

Easement in gross
License
Prescriptive easement (Correct answer)
Easement by implication

Correct answer: Prescriptive easement

A prescriptive easement is acquired by using another's land openly, notoriously, continuously, and without permission for the legally required period.

Question 60: A property is purchased for $250,000. The buyer makes a 20% down payment and obtains a mortgage for the remainder. After two years, the outstanding loan balance is $192,000 and the property appraises at $275,000. What is the buyer's current equity?

$75,000
$50,000
$83,000 (Correct answer)
$25,000

Correct answer: $83,000

Equity equals the current market value minus the outstanding loan balance: $275,000 − $192,000 = $83,000. Equity grows as the loan is paid down and/or property value increases.

Question 61: Under RESPA, which of the following is prohibited between settlement service providers?

Collecting escrow for taxes and insurance
Charging origination fees
Paying kickbacks or unearned referral fees (Correct answer)
Providing a good faith estimate

Correct answer: Paying kickbacks or unearned referral fees

RESPA Section 8 prohibits kickbacks and fee-splitting arrangements that inflate settlement costs for consumers.

Question 62: Which type of mortgage allows the interest rate to change periodically based on an index?

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

Correct answer: Adjustable-rate mortgage (ARM)

An ARM has an interest rate that adjusts at set intervals based on a market index such as SOFR or the Treasury index.

Question 63: A 'due-on-sale' clause in a mortgage requires that:

The seller pay all closing costs
The buyer must obtain the same interest rate
The appraisal must be completed before listing
The full loan balance is due when the property is sold (Correct answer)

Correct answer: The full loan balance is due when the property is sold

A due-on-sale (alienation) clause prevents assumption of the existing loan without lender approval by requiring full repayment upon sale.

Question 64: What distinguishes a special warranty deed from a general warranty deed?

A special warranty deed does not require a legal description
A special warranty deed must be notarized but not recorded
A special warranty deed cannot be used in commercial transactions
A special warranty deed only warrants against defects arising during the grantor's period of ownership (Correct answer)

Correct answer: A special warranty deed only warrants against defects arising during the grantor's period of ownership

A special warranty deed limits the grantor's warranties to only those title defects that occurred during their ownership period.

Question 65: Which of the following closing costs is most commonly paid by the seller in a residential real estate transaction?

Title insurance premium for the lender's policy
Home inspection fee
Real estate agent commissions (Correct answer)
Loan origination fee

Correct answer: Real estate agent commissions

The seller typically pays commissions for both the listing agent and the buyer's agent at closing, as these fees are negotiated as part of the listing agreement and deducted from sale proceeds.

Question 66: Which of the following forms of ownership is characterized by the right of survivorship, where the surviving co-owners automatically inherit a deceased owner's share?

Tenancy in common
Tenancy in severalty
Community property
Joint tenancy (Correct answer)

Correct answer: Joint tenancy

Joint tenancy includes the right of survivorship, which is its key feature. When one joint tenant dies, their interest automatically passes to the surviving joint tenant(s), bypassing probate.

Question 67: A deed restriction that runs with the land and legally binds all future owners of the property is called a:

Lien
Easement in gross
Restrictive covenant (Correct answer)
License

Correct answer: Restrictive covenant

A restrictive covenant (deed restriction) is a limitation written into a deed that binds all future owners and transfers with the property.

Question 68: A buyer and seller have a valid purchase agreement, but both mutually decide to cancel it. This is known as which of the following?

Rescission (Correct answer)
Breach
Novation
Assignment

Correct answer: Rescission

Rescission is the mutual agreement by both parties to cancel a contract and return to their pre-contract positions.

Question 69: Two siblings inherit a property and hold equal, undivided shares. If one sibling dies, their share passes to their own heirs rather than the surviving sibling. What form of co-ownership does this describe?

Tenancy by the entirety
Tenancy in common (Correct answer)
Joint tenancy
Severalty

Correct answer: Tenancy in common

Tenancy in common allows each co-owner to hold an undivided interest that passes to their heirs upon death, with no right of survivorship. This distinguishes it from joint tenancy, where the surviving owner automatically inherits the deceased owner's share.

Question 70: The 'bundle of rights' refers to the set of legal privileges associated with real property ownership. Which of the following is NOT considered one of the primary rights in this bundle?

Right of Taxation (Correct answer)
Right of Disposition
Right of Enjoyment
Right of Exclusion

Correct answer: Right of Taxation

The bundle of rights includes the rights of possession, control, enjoyment, exclusion, and disposition. The right of taxation is a power of the government, not a right of the private property owner.

Question 71: The 'bundle of rights' refers to the set of legal privileges that are generally transferred to the buyer of real property. Which of the following is NOT considered one of the primary rights in this bundle?

The right of possession
The right of exclusion
The right of unrestricted development (Correct answer)
The right of disposition

Correct answer: The right of unrestricted development

The bundle of rights includes the rights of possession, control, enjoyment, exclusion, and disposition. The right of development is part of the right of control, but it is not unrestricted; it is subject to zoning laws, building codes, and other governmental regulations.

Question 72: What is the primary purpose of a title search?

To confirm the property's tax assessment
To verify the property's zoning classification
To discover any defects, liens, or encumbrances on the title (Correct answer)
To determine the property's market value

Correct answer: To discover any defects, liens, or encumbrances on the title

A title search examines public records to identify any claims, liens, or defects that could affect ownership rights.

Question 73: RESPA prohibits which of the following practices in real estate transactions?

Requiring title insurance
Paying kickbacks for referrals between settlement service providers (Correct answer)
Collecting prepaid interest at closing
Charging origination fees

Correct answer: Paying kickbacks for referrals between settlement service providers

RESPA Section 8 prohibits kickbacks and unearned fee-splitting arrangements between settlement service providers.

Question 74: The principle of substitution in appraisal states that:

A property's value increases when surrounding values rise
A property's value is set by the government
No buyer will pay more for a property than the cost of an equally desirable substitute (Correct answer)
The highest and best use determines the land value

Correct answer: No buyer will pay more for a property than the cost of an equally desirable substitute

The substitution principle is the foundation of the sales comparison approach: buyers compare alternatives and won't overpay.

Question 75: Which type of listing agreement gives the broker the exclusive right to collect a commission regardless of who sells the property—even the owner?

Exclusive right-to-sell listing (Correct answer)
Exclusive agency listing
Open listing
Net listing

Correct answer: Exclusive right-to-sell listing

Under an exclusive right-to-sell listing, the broker earns a commission no matter who procures the buyer, including the seller themselves.

Question 76: Under the Fair Housing Act, which of the following is NOT a protected class at the federal level?

Religion
Familial status
National origin
Sexual orientation (Correct answer)

Correct answer: Sexual orientation

The seven federally protected classes under the Fair Housing Act are race, color, national origin, religion, sex, disability, and familial status. Sexual orientation is not a federally protected class under the Fair Housing Act, though many states and localities have added it.

Question 77: Under the Code of Ethics, a REALTOR discovers that a competing agent has made false claims about a property listing. What is the REALTOR's primary obligation?

Inform the buyer and ignore the competing agent
Post a public warning about the competing agent
Confront the competing agent directly
Report the matter to the local board of REALTORS (Correct answer)

Correct answer: Report the matter to the local board of REALTORS

The NAR Code of Ethics requires that disputes and ethical violations be reported to the local board for proper adjudication.

Question 78: An agent's duty of care requires them to:

Maintain client confidentiality permanently
Disclose all offers immediately
Exercise reasonable skill and diligence on behalf of their client (Correct answer)
Always recommend the highest-priced listing

Correct answer: Exercise reasonable skill and diligence on behalf of their client

The duty of care (competence) requires agents to use the skills and knowledge expected of a competent real estate professional.

Question 79: A zoning regulation requiring buildings to be located at least 25 feet from the front property line is known as a:

Setback requirement (Correct answer)
Floor area ratio
Variance
Buffer zone

Correct answer: Setback requirement

A setback requirement specifies the minimum distance a structure must be located from the property line, street, or other boundary.

Question 80: Which of the following is an essential element for a real estate contract to be valid and enforceable?

Professional appraisal
Notarization
Consideration (Correct answer)
Earnest money deposit

Correct answer: Consideration

For a real estate contract to be valid, it must contain several essential elements. These include offer and acceptance, competent parties, legal purpose, and consideration. Consideration is something of value exchanged between the parties, such as the purchase price for the property. While common, an earnest money deposit, notarization, and a professional appraisal are not strictly required for a contract to be valid.

Question 81: Which naturally occurring colorless, odorless radioactive gas found in soil can accumulate in basements and poses a serious health risk?

Radon (Correct answer)
Formaldehyde
Asbestos
Lead

Correct answer: Radon

Radon is a colorless, odorless radioactive gas that forms from uranium decay in soil and can accumulate to dangerous levels inside buildings.

Question 82: Which fiduciary duty requires an agent to place the client's interests above their own personal gain?

Disclosure
Loyalty (Correct answer)
Confidentiality
Obedience

Correct answer: Loyalty

Loyalty requires the agent to prioritize the client's interests over all others, including the agent's own financial benefit.

Question 83: A lender refuses to issue mortgage loans for properties located in a minority-majority neighborhood regardless of applicants' creditworthiness. This practice is known as:

Redlining (Correct answer)
Steering
Puffing
Blockbusting

Correct answer: Redlining

Redlining is the illegal practice of denying loans or insurance to people based on the racial or ethnic composition of a neighborhood rather than individual qualifications. It violates both the Fair Housing Act and the Equal Credit Opportunity Act.

Question 84: The process by which title to real property passes from a deceased person who died without a will is called:

Devise
Bequest
Intestate succession (Correct answer)
Testamentary transfer

Correct answer: Intestate succession

Intestate succession is the statutory process determining how property passes when the owner dies without a valid will.

Question 85: The Real Estate Settlement Procedures Act (RESPA) requires lenders to provide borrowers with a Loan Estimate within how many business days of receiving a loan application?

3 business days (Correct answer)
1 business day
5 business days
10 business days

Correct answer: 3 business days

Under RESPA and TRID rules, lenders must deliver the Loan Estimate to the borrower within three business days of receiving a completed loan application.

Question 86: Under RESPA, a lender must provide the borrower with a Loan Estimate within how many business days of receiving a loan application?

3 business days (Correct answer)
1 business day
7 business days
5 business days

Correct answer: 3 business days

RESPA requires lenders to deliver the Loan Estimate to borrowers within 3 business days of receiving a completed application.

Question 87: A building has a replacement cost of $300,000 and accrued depreciation of $60,000. The land value is $80,000. What is the indicated value using the cost approach?

$360,000
$240,000
$380,000
$320,000 (Correct answer)

Correct answer: $320,000

Cost approach value = (Replacement cost − Depreciation) + Land = ($300,000 − $60,000) + $80,000 = $320,000.

Question 88: Which of the following best describes an executory contract in real estate?

A contract that has been fully performed by both parties
A contract that is unenforceable due to a legal defect
A contract that has been terminated by mutual agreement
A contract where one or both parties still have obligations to fulfill (Correct answer)

Correct answer: A contract where one or both parties still have obligations to fulfill

An executory contract is one in which one or both parties have not yet completed their contractual obligations.

Question 89: When does a buyer's agency relationship typically begin?

When the buyer makes an offer on a property
When a buyer-broker agreement is signed (Correct answer)
When the agent first shows the buyer a home
When the buyer obtains mortgage pre-approval

Correct answer: When a buyer-broker agreement is signed

A formal buyer's agency relationship is established when a buyer-broker agreement is signed, creating enforceable duties between the parties.

Question 90: Which of the following is NOT a protected class under the federal Fair Housing Act?

Sexual orientation (Correct answer)
National origin
Handicap (disability)
Familial status

Correct answer: Sexual orientation

Sexual orientation is not a federally protected class under the FHA, though many states and localities add this protection.

Question 91: Which clause in a real estate contract allows the buyer to cancel if they cannot obtain financing by a specified date?

Subordination clause
Financing contingency clause (Correct answer)
Acceleration clause
Due-on-sale clause

Correct answer: Financing contingency clause

A financing contingency clause lets the buyer exit the contract without penalty if they fail to secure a loan by the deadline.

Question 92: Under what circumstance can a buyer typically terminate a contract without losing earnest money during the option period?

Only if financing falls through
Only if the appraisal comes in low
For any reason, as the option period provides unrestricted termination rights (Correct answer)
Only if the home inspection reveals major defects

Correct answer: For any reason, as the option period provides unrestricted termination rights

During the option period, the buyer generally has the unrestricted right to terminate the contract for any reason while retaining their earnest money.

Question 93: Title insurance that protects a lender's security interest in a mortgaged property is called a:

Gap coverage endorsement
Lender's (mortgagee's) policy (Correct answer)
Owner's policy
Extended coverage binder

Correct answer: Lender's (mortgagee's) policy

A lender's title insurance policy (mortgagee policy) protects the lender's mortgage lien up to the loan amount and is typically required by the lender.

Question 94: An easement appurtenant benefits:

The government for utility purposes
The public at large
The adjoining dominant estate (Correct answer)
A specific individual regardless of land ownership

Correct answer: The adjoining dominant estate

An easement appurtenant is attached to and runs with the dominant estate, benefiting the land rather than a specific person.

Question 95: Which of the following actions would turn Jackson's freehold property interest into a less-than-freehold property if he owns it?

none of the above (Correct answer)
a transfer of the property's mineral and oil rights to a third party
the granting of a right-of-way easement over the land
a five-year lease to a third party for the use of the property for agriculture

Correct answer: none of the above

A freehold estate signifies ownership of real property for an indefinite duration, while a less-than-freehold estate (like a leasehold) grants possession but not ownership for a defined period. Granting a lease, transferring mineral rights, or granting an easement are all actions that create encumbrances or separate interests in the property, but they do not change the *owner's* underlying freehold interest into a less-than-freehold estate. Jackson would still retain his freehold ownership, subject to these other rights.

Question 96: A property with a legal nonconforming use may continue operating because:

The use existed before the current zoning ordinance was enacted (Correct answer)
The property is within a designated enterprise zone
The owner obtained a special use permit
The city council granted a variance

Correct answer: The use existed before the current zoning ordinance was enacted

A grandfathered nonconforming use is one that lawfully existed prior to the adoption of a zoning ordinance that would otherwise prohibit it.

Question 97: A property has been on the market for 90 days with no offers. What adjustment most commonly corrects this?

Increasing the listing price
Cancelling all open houses
Removing all photos from the MLS
Reducing the listing price (Correct answer)

Correct answer: Reducing the listing price

Extended days on market typically signal overpricing; a price reduction brings the listing in line with buyer expectations.

Question 98: A seller's agent receives two offers on the same day. The seller instructs the agent to present only the higher offer and discard the lower one without informing the lower bidder. What should the agent do?

Discard the lower offer but notify the lower buyer that their offer was not considered
Follow the seller's instructions, as obedience to the principal is paramount
Refuse to present either offer until the seller agrees to consider all offers fairly
Present both offers to the seller but explain the legal risk of not responding to the lower offer (Correct answer)

Correct answer: Present both offers to the seller but explain the legal risk of not responding to the lower offer

While agents owe obedience to their principal, that duty does not extend to illegal acts. The agent must present all written offers (required by law in most states) and can advise the seller of legal obligations, but the final decision on how to respond belongs to the seller.

Question 99: What typically triggers the due diligence period in a residential real estate sale?

The seller's disclosure statement delivery
The buyer's pre-approval for a mortgage
The listing of the property on MLS
Mutual acceptance of the purchase agreement (Correct answer)

Correct answer: Mutual acceptance of the purchase agreement

The due diligence period generally begins once both parties have mutually accepted and executed the purchase agreement.

Question 100: A real estate contract contains a time is of the essence clause. What is the legal significance of this provision?

The contract automatically renews if not closed on time
The seller must close within 30 days regardless of the stated date
Failure to perform by the specified dates may constitute a material breach (Correct answer)
Deadlines in the contract are flexible at the discretion of both parties

Correct answer: Failure to perform by the specified dates may constitute a material breach

A 'time is of the essence' clause makes all dates and deadlines in the contract strictly binding. Missing a deadline — such as the closing date or inspection period — can be treated as a material breach, potentially allowing the non-breaching party to terminate the contract and seek damages.

Real Estate Salesperson Exam (National Portion)

This exam certifies individuals to practice as real estate salespersons, covering national real estate principles and practices.

100

Questions

150 min

Time Limit

70%

To Pass

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