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

Question 1: A listing agent discovers that the property has a hidden foundation crack during an open house. What must the agent do?

Disclose the defect only if asked by potential buyers
Wait until a buyer makes an offer before disclosing
Keep the information confidential per the seller's request
Disclose the defect to all prospective buyers (Correct answer)

Correct answer: Disclose the defect to all prospective buyers

Material defects that affect property value or safety must be disclosed to all prospective buyers regardless of the seller's wishes.

Question 2: A real estate agent representing the seller receives an offer that is 10% below asking price. The agent is legally obligated to do which of the following?

Hold the offer until a better one arrives
Reject the offer on behalf of the seller since it is too low
Present the offer to the seller promptly (Correct answer)
Counter the offer at a higher price without consulting the seller

Correct answer: Present the offer to the seller promptly

An agent has a fiduciary duty to present all offers to their client promptly, regardless of the offer amount, unless the seller has given prior written instructions otherwise.

Question 3: Which federal law requires lenders to provide borrowers with a Closing Disclosure at least three business days before consummation of a mortgage loan?

Community Reinvestment Act (CRA)
Real Estate Settlement Procedures Act (RESPA) Section 8
TILA-RESPA Integrated Disclosure (TRID) rule (Correct answer)
Equal Credit Opportunity Act (ECOA)

Correct answer: TILA-RESPA Integrated Disclosure (TRID) rule

The TRID rule, which integrates disclosure requirements from TILA and RESPA, mandates that lenders deliver the Closing Disclosure no later than three business days before closing, giving borrowers time to review final loan terms.

Question 4: A real estate professional would be aware of the following associations between the names "Inwood and Hoskold":

Architectural design
A group of developers
Estimating values (Correct answer)
Private construction

Correct answer: Estimating values

Inwood and Hoskold are names associated with specific tables and methods used in real estate appraisal, particularly for valuing income-producing properties or leasehold interests. These tables provide factors for calculating present value, future value, and amortization, which are essential tools for appraisers in estimating property values based on anticipated income streams.

Question 5: 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 binding contract at $305,000
A binding contract at $298,000
No contract — the offer was rejected (Correct answer)
A counteroffer that must be accepted within 24 hours

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 6: An appraiser adjusts a comparable sale downward by $5,000 because the comp has a feature the subject property lacks. What does this mean?

The comp sold for $5,000 too much
The subject property is worth $5,000 more than the comp
The appraiser made an error in the adjustment
The subject property is worth $5,000 less than the comp (Correct answer)

Correct answer: The subject property is worth $5,000 less than the comp

When a comp has a superior feature, the appraiser adjusts the comp downward, indicating the subject property is worth less than the comp by that amount.

Question 7: What is the primary purpose of a contingency clause in a real estate purchase agreement?

To allow one party to renegotiate commission rates after signing
To waive the buyer's right to a home inspection
To make the contract binding only if certain specified conditions are met (Correct answer)
To increase the purchase price automatically if market values rise

Correct answer: To make the contract binding only if certain specified conditions are met

A contingency clause makes the buyer's (or seller's) obligation to complete the transaction conditional upon a specific event occurring, such as a satisfactory home inspection, loan approval, or the sale of the buyer's current home. If the condition is not met, the contract can typically be voided without penalty.

Question 8: Which fiduciary duty requires an agent to place the client's interests above the interests of all other parties, including the agent's own interests?

Duty of accounting
Duty of disclosure
Duty of loyalty (Correct answer)
Duty of reasonable care

Correct answer: Duty of loyalty

The duty of loyalty requires an agent to always prioritize the client's interests above those of all other parties, including the agent's own personal or financial interests.

Question 9: 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?

10 business days
3 business days (Correct answer)
1 business day
5 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 10: Which of the following is NOT one of the traditional fiduciary duties owed by an agent to their client?

Confidentiality
Disclosure
Profitability (Correct answer)
Loyalty

Correct answer: Profitability

Profitability is not a fiduciary duty; the traditional duties are loyalty, obedience, disclosure, confidentiality, accounting, and reasonable care (LODCAR).

Question 11: A buyer with a disability requests that the seller install a wheelchair ramp before closing. What is the seller's obligation?

The seller has no obligation to modify the property but must allow the buyer to do so at the buyer's expense (Correct answer)
The seller must install the ramp only if the property is federally funded
The seller must split the cost of the modification equally
The seller must install the ramp as a reasonable accommodation

Correct answer: The seller has no obligation to modify the property but must allow the buyer to do so at the buyer's expense

Under the Fair Housing Act, sellers must permit reasonable modifications by buyers with disabilities, but the cost of modifications is typically borne by the buyer.

Question 12: A real estate broker receives a security deposit from a tenant. Where must these funds be held?

A federally insured savings bond
A separate escrow or trust account (Correct answer)
The broker's operating account
The owner's personal bank account

Correct answer: A separate escrow or trust account

Security deposits and client funds must be kept in a separate trust or escrow account to prevent commingling with the broker's own funds.

Question 13: A homebuyer is purchasing a property for $400,000 and the lender has agreed to a loan with an 80% loan-to-value (LTV) ratio. What is the amount of the buyer's down payment?

$40,000
$320,000
$100,000
$80,000 (Correct answer)

Correct answer: $80,000

The loan-to-value (LTV) ratio represents the percentage of the property's value the lender is willing to finance. In this case, an 80% LTV on a $400,000 property means the loan amount is $320,000 ($400,000 * 0.80). The down payment is the remaining portion, which is 20% of the purchase price. Therefore, the down payment is $80,000 ($400,000 * 0.20 or $400,000 - $320,000).

Question 14: What is a 'net listing' and why is it generally discouraged?

A listing requiring the agent to guarantee a minimum sale price
A listing where the agent earns a fixed flat fee, discouraged because it reduces service quality
A listing where the broker keeps everything above a set net price, discouraged due to conflict of interest (Correct answer)
A listing with a tiered commission schedule, discouraged for complexity

Correct answer: A listing where the broker keeps everything above a set net price, discouraged due to conflict of interest

In a net listing the broker's profit depends on exceeding the seller's net, creating a conflict of interest that is illegal in many states.

Question 15: Which of the following amounts has been invested by a person who earns $225 per month from a money market savings account that yields 7 <sup>1</sup>⁄<sub>2</sub>% annually?

$12,500
$36,000 (Correct answer)
$27,000
$48,000

Correct answer: $36,000

To determine the amount invested, first calculate the total annual earnings by multiplying the monthly earnings ($225) by 12 months, which equals $2,700. Then, divide the annual earnings by the annual yield rate (7.5% or 0.075). This calculation ($2,700 / 0.075) reveals that the person has invested $36,000.

Question 16: Which marketing strategy involves holding a property open for other real estate agents rather than the general public?

Broker's open house (Correct answer)
Public open house
Virtual tour
Pocket listing

Correct answer: Broker's open house

A broker's open house is specifically scheduled for real estate agents and brokers to preview the property and consider it for their buyer clients.

Question 17: What does the covenant of seisin in a general warranty deed guarantee?

The grantor has the right to convey the property (Correct answer)
The grantor will defend against future title challenges
The grantee will not be disturbed by superior claims
The property is free from all encumbrances

Correct answer: The grantor has the right to convey the property

The covenant of seisin warrants that the grantor owns the estate and has the legal right to convey it.

Question 18: Which document gives a real estate agent legal authority to represent a seller?

Listing agreement (Correct answer)
Purchase agreement
Title commitment
Disclosure statement

Correct answer: Listing agreement

A listing agreement is the contract between the seller and broker authorizing the agent to market and sell the property.

Question 19: A person openly occupies and maintains a vacant lot belonging to an absentee owner for 15 years, meeting all statutory requirements. What legal doctrine may allow that person to claim ownership?

Accretion
Eminent domain
Adverse possession (Correct answer)
Escheat

Correct answer: Adverse possession

Adverse possession allows a party to claim title to property after occupying it openly, continuously, exclusively, and hostilely for the statutory period. The elements are often remembered with the acronym OCEAN: Open, Continuous, Exclusive, Adverse, Notorious.

Question 20: Under the TILA-RESPA Integrated Disclosure (TRID) rules, how many business days before closing must the borrower receive the Closing Disclosure?

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

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 21: Which type of mortgage loan features payments that increase over time according to a predetermined schedule?

Reverse mortgage
Blanket mortgage
Package mortgage
Graduated payment mortgage (Correct answer)

Correct answer: Graduated payment mortgage

A graduated payment mortgage starts with lower payments that increase at set intervals, designed for borrowers who expect rising income.

Question 22: Which type of listing agreement gives the broker the exclusive right to earn a commission regardless of who sells the property?

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

Correct answer: Exclusive right-to-sell listing

An exclusive right-to-sell listing entitles the broker to a commission even if the seller finds the buyer independently, providing the strongest protection for the broker.

Question 23: Under the doctrine of prior appropriation, water rights are determined by which principle?

Government allocation based on property size
First in time, first in right (Correct answer)
Equal sharing among all property owners
Riparian ownership of adjacent land

Correct answer: First in time, first in right

Prior appropriation grants water rights based on who first put the water to beneficial use, regardless of land proximity.

Question 24: A buyer and seller have a valid purchase agreement, but both mutually decide to cancel it. This is known as which of the following?

Assignment
Novation
Breach
Rescission (Correct answer)

Correct answer: Rescission

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

Question 25: The NAR Code of Ethics requires a REALTOR® to present all offers to a seller:

Only offers that meet the seller's minimum price
All written offers until closing unless the seller instructs otherwise in writing (Correct answer)
Offers received within 72 hours of listing
Only offers with pre-approval letters attached

Correct answer: All written offers until closing unless the seller instructs otherwise in writing

Article 1 of the NAR Code of Ethics requires REALTORS® to present all offers objectively and as quickly as possible unless the seller directs otherwise in writing.

Question 26: Which legal concept allows a person who has openly and continuously used another's land for a statutory period to gain a legal right to continue that use?

Adverse possession
Eminent domain
Prescriptive easement (Correct answer)
Equitable estoppel

Correct answer: Prescriptive easement

A prescriptive easement is acquired through open, continuous, and hostile use of another's property for the required statutory period.

Question 27: For a real estate contract to be valid and legally binding, it must contain several essential elements. Which of the following is NOT a required element for a valid contract?

Competent parties
Consideration
Notarization (Correct answer)
Lawful objective

Correct answer: Notarization

The essential elements of a valid real estate contract are: competent parties, mutual consent (offer and acceptance), a lawful objective, and consideration. While notarization may be required for recording certain documents like a deed, it is not a requirement for the validity of the contract itself.

Question 28: Redlining historically refers to:

Setting price ceilings in rent-controlled zones
Marking high-crime areas on maps for buyer disclosure
Denying services such as loans or insurance to residents in minority neighborhoods (Correct answer)
Drawing boundaries for school district assignments

Correct answer: Denying services such as loans or insurance to residents in minority neighborhoods

Redlining was the practice of refusing loans, insurance, or other services to residents of neighborhoods deemed racially undesirable.

Question 29: Which government-sponsored enterprise (GSE) purchases conventional conforming loans on the secondary market?

VA
Fannie Mae (Correct answer)
FHA
HUD

Correct answer: Fannie Mae

Fannie Mae (and Freddie Mac) purchase conforming conventional loans from lenders on the secondary mortgage market.

Question 30: Recording a deed protects the grantee primarily against:

Subsequent bona fide purchasers who claim the same property (Correct answer)
Environmental liens that predate the purchase
Physical encroachments from neighbors
Zoning violations discovered after closing

Correct answer: Subsequent bona fide purchasers who claim the same property

Recording gives constructive notice to the world, preventing a later purchaser from claiming they were unaware of the prior conveyance.

Question 31: In the income approach to valuation, a property generates $48,000 in annual net operating income and the capitalization rate is 6%. What is the estimated property value?

$720,000
$288,000
$800,000 (Correct answer)
$960,000

Correct answer: $800,000

Using the income capitalization formula: Value = NOI / Cap Rate = $48,000 / 0.06 = $800,000.

Question 32: Which of the following is TRUE regarding a net listing?

Net listings are legal and encouraged in all 50 states
The buyer pays the broker's commission directly
The broker's commission is a fixed dollar amount
The broker receives all proceeds above the seller's minimum desired price (Correct answer)

Correct answer: The broker receives all proceeds above the seller's minimum desired price

In a net listing, the seller sets a minimum acceptable price and the broker keeps any amount above that as commission, which creates a potential conflict of interest.

Question 33: A real estate agent posts a listing ad stating 'perfect for young professionals.' This phrasing potentially violates the FHA because it:

Discourages families with children, a protected class (Correct answer)
Violates truth-in-advertising standards
Uses an unapproved HUD term
Describes the buyer's lifestyle accurately

Correct answer: Discourages families with children, a protected class

Language that implies a preference for certain buyers can constitute discriminatory advertising under the FHA's familial status protections.

Question 34: Under California's Mello-Roos Community Facilities Act, what type of financial obligation may be attached to a property?

A mandatory homeowner association fee
A state transfer tax collected at closing
A special tax to fund public infrastructure and services in a Community Facilities District (Correct answer)
An income tax surcharge on the property owner

Correct answer: A special tax to fund public infrastructure and services in a Community Facilities District

Mello-Roos allows formation of Community Facilities Districts that levy special taxes on properties to fund infrastructure such as schools, roads, and fire stations.

Question 35: A potential buyer is technically referred to as the "offeror" because they are the ones making the offer. Officially, the "offeree" is the prospective seller who accepts the offer.

True (Correct answer)
False

Correct answer: True

In contract law, the party who initiates an offer is correctly identified as the 'offeror,' and the party to whom the offer is extended is the 'offeree.' Therefore, a potential buyer making an offer on a property is the offeror, and the prospective seller who receives and considers that offer is the offeree. This terminology clearly defines the roles in the negotiation process.

Question 36: Which of the following actions would turn Jackson's freehold property interest into a less-than-freehold property if he owns it?

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

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 37: A homeowner discovers that a neighbor's fence extends two feet onto their property. This situation is legally known as what?

Adverse possession
Prescriptive easement
Trespass
Encroachment (Correct answer)

Correct answer: Encroachment

An encroachment occurs when a structure or improvement illegally extends onto another person's property.

Question 38: Which action best demonstrates a listing agent's fiduciary duty of loyalty to the seller?

Encouraging buyers to submit higher offers by sharing seller motivations
Withholding the seller's urgent need to sell to protect negotiating position (Correct answer)
Disclosing all known defects to buyers before an offer is made
Revealing the seller's minimum acceptable price to potential buyers

Correct answer: Withholding the seller's urgent need to sell to protect negotiating position

Loyalty requires the agent to protect the seller's confidential information, including motivations that could weaken their negotiating position.

Question 39: Under the Fair Housing Act, which action constitutes illegal steering?

Recommending a neighborhood based solely on school district quality
Showing a buyer every available listing in their price range
Providing a buyer with listings only in neighborhoods matching their racial background (Correct answer)
Suggesting a property because it is close to the buyer's workplace

Correct answer: Providing a buyer with listings only in neighborhoods matching their racial background

Steering occurs when an agent directs buyers toward or away from neighborhoods based on protected class characteristics such as race.

Question 40: Which California agency is responsible for licensing and regulating real estate brokers and salespersons?

California Department of Real Estate (DRE) (Correct answer)
California Bureau of Land Management
California Housing Finance Agency
California Department of Consumer Affairs

Correct answer: California Department of Real Estate (DRE)

The California Department of Real Estate (DRE) administers real estate licensing, regulation, and enforcement in the state.

Question 41: What is the primary purpose of a title search?

To assess property tax liability
To determine the market value of the property
To verify the physical boundaries of the lot
To uncover liens, encumbrances, or defects in the chain of title (Correct answer)

Correct answer: To uncover liens, encumbrances, or defects in the chain of title

A title search examines public records to identify any outstanding claims, liens, or ownership gaps that could affect the buyer's ownership.

Question 42: Under a purchase-money mortgage, who acts as the lender?

A commercial bank
A mortgage broker
The property seller (Correct answer)
The Federal Housing Administration

Correct answer: The property seller

In a purchase-money mortgage, the seller extends credit directly to the buyer instead of the buyer obtaining a third-party loan, with the property serving as collateral — a form of seller financing.

Question 43: A contract signed by a minor is generally considered:

Valid and fully binding
Void and unenforceable by either party
Illegal under federal law
Voidable at the minor's option (Correct answer)

Correct answer: Voidable at the minor's option

Contracts with minors are voidable—the minor may disaffirm the contract, but the adult party is bound unless the minor elects to void it.

Question 44: Which of the following would NOT be considered an encumbrance on real property?

A fee simple absolute ownership interest (Correct answer)
A mortgage lien
A restrictive covenant
A utility easement

Correct answer: A fee simple absolute ownership interest

Fee simple absolute is the highest form of ownership, not a burden or limitation on the property, and therefore is not an encumbrance.

Question 45: A property with a legal nonconforming use may continue operating because:

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

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 46: Which appraisal approach is most commonly used for income-producing properties like apartment buildings?

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

Correct answer: Income capitalization approach

The income capitalization approach converts a property's expected income stream into a value estimate, making it the primary method for income-producing properties.

Question 47: Under the Fair Housing Act, which of the following is considered a protected class?

Sexual orientation at the federal level
Familial status (Correct answer)
Source of income
Marital status

Correct answer: Familial status

Familial status, which includes families with children under 18, was added as a protected class by the Fair Housing Amendments Act of 1988.

Question 48: An adjustable-rate mortgage (ARM) has a start rate of 4.5%, a periodic adjustment cap of 2%, and a lifetime cap of 6%. What is the highest rate the loan can reach at the very first adjustment?

8.5%
4.5%
10.5%
6.5% (Correct answer)

Correct answer: 6.5%

At each adjustment, the rate can increase no more than the periodic cap of 2%. Starting at 4.5%, the maximum after the first adjustment is 4.5% + 2% = 6.5%, regardless of how far the index moved.

Question 49: What does 'buying down the rate' mean in mortgage financing?

Negotiating a lower sales price to reduce the loan amount
Refinancing at a lower rate after closing
Paying discount points upfront to obtain a lower interest rate (Correct answer)
Choosing an ARM over a fixed-rate loan

Correct answer: Paying discount points upfront to obtain a lower interest rate

Buying down the rate means paying discount points (prepaid interest) at closing to reduce the loan's ongoing interest rate; each point equals 1% of the loan amount and typically lowers the rate by approximately 0.25%.

Question 50: A real estate agent refuses to show properties in a particular neighborhood to a family because of their national origin. Which federal law is being violated?

Fair Housing Act of 1968 (Correct answer)
Civil Rights Act of 1866
Home Mortgage Disclosure Act
Equal Credit Opportunity Act

Correct answer: Fair Housing Act of 1968

The Fair Housing Act of 1968 prohibits discrimination in housing based on national origin, among other protected classes.

Question 51: When performing these calculations, an appraiser utilizing the cost technique may utilize the unit cost per square foot or cost per cubic foot. Considering unit costs:

The cost of a small house and a large house would be the same
A small house would cost less than a large house
A small house would cost more than a large house (Correct answer)
A large house would cost more than a small house

Correct answer: A small house would cost more than a large house

When using the cost approach in appraisal, the unit cost per square foot (or cubic foot) typically decreases as the size of the building increases. This is due to economies of scale; fixed costs like permits, foundation, and utility connections are spread over a larger area in a bigger house, making the per-unit cost lower. Conversely, a smaller house will have these fixed costs distributed over fewer square feet, resulting in a higher unit cost.

Question 52: A seller is conveying property to a buyer and wants to guarantee the title is clear only for the duration of their own ownership, not against any prior defects. Which type of deed would accomplish this?

General Warranty Deed
Bargain and Sale Deed
Special Warranty Deed (Correct answer)
Quitclaim Deed

Correct answer: Special Warranty Deed

A special warranty deed warrants the title only against defects that arose during the grantor's (seller's) period of ownership. A general warranty deed provides the broadest protection, covering the property's entire history. A quitclaim deed offers no warranties at all. A bargain and sale deed implies the grantor holds title but offers no express warranties against encumbrances.

Question 53: A licensee who practices real estate without a valid, active license is subject to:

Civil and criminal penalties, and loss of any earned commission (Correct answer)
Mandatory CE courses only
A verbal warning only
A probationary license

Correct answer: Civil and criminal penalties, and loss of any earned commission

Practicing real estate without a valid license can result in civil fines, criminal charges, and forfeiture of any commissions earned.

Question 54: The Equal Credit Opportunity Act (ECOA) prohibits lenders from discriminating based on all of the following EXCEPT:

Credit score (Correct answer)
Race
Religion
National origin

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 55: Which of the following best describes tenancy by the entirety?

Ownership by a corporation through its board of directors
Joint tenancy between business partners
A lease arrangement between landlord and tenant
A form of co-ownership available only to married couples with right of survivorship (Correct answer)

Correct answer: A form of co-ownership available only to married couples with right of survivorship

Tenancy by the entirety is a form of concurrent ownership exclusive to married couples that includes an automatic right of survivorship.

Question 56: A homebuyer purchases an owner's title insurance policy at closing. What is the primary function of this policy?

To ensure the property will appreciate in value over time.
To guarantee the buyer will not suffer any future physical damage to the property.
To protect the buyer from financial loss due to title defects that existed prior to the purchase. (Correct answer)
To cover the lender's interest in the property in case of the buyer's default.

Correct answer: To protect the buyer from financial loss due to title defects that existed prior to the purchase.

An owner's title insurance policy is a contract that protects the new owner against financial losses from past events, such as forged deeds, undisclosed heirs, or recording errors that could cloud the title. It looks backward in time to protect against pre-existing defects. It does not cover physical condition or future appreciation. The lender's interest is protected by a separate lender's policy.

Question 57: A REALTOR® is representing a seller. The REALTOR®'s own brother submits an offer to purchase the property. According to the NAR Code of Ethics, what is the REALTOR®'s primary obligation?

To advise the seller to reject the offer to avoid a conflict of interest.
To recommend their brother's offer over others, as they can vouch for his reliability.
To disclose their personal relationship with the buyer to the seller in writing. (Correct answer)
To reduce their commission since a family member is involved in the transaction.

Correct answer: To disclose their personal relationship with the buyer to the seller in writing.

Article 4 of the NAR Code of Ethics requires REALTORS® to make their true position known when they or their immediate family members have an interest in a property or are parties to a transaction. This disclosure must be in writing and ensures all parties can make informed decisions.

Question 58: Which scenario best illustrates blockbusting?

An agent advertises a property as ideal for a specific religious group
A lender charges higher interest rates in certain zip codes
An agent tells homeowners that people of a different race are moving into the area to induce panic selling (Correct answer)
An agent refuses to provide mortgage information to a qualified buyer

Correct answer: An agent tells homeowners that people of a different race are moving into the area to induce panic selling

Blockbusting is the illegal practice of inducing owners to sell by suggesting that a protected class is moving into the neighborhood, causing property values to decline.

Question 59: An investor is analyzing a commercial property that generates a Net Operating Income (NOI) of $90,000 per year. If the prevailing capitalization rate for similar properties in the market is 7.5%, what is the estimated value of the property using the income approach?

$675,000
$1,200,000 (Correct answer)
$1,500,000
$975,000

Correct answer: $1,200,000

The formula for the income approach to value is: Value = Net Operating Income (NOI) / Capitalization Rate. In this scenario, Value = $90,000 / 0.075, which equals $1,200,000.

Question 60: Which fiduciary duty requires an agent to place the client's interests above their own personal gain?

Confidentiality
Loyalty (Correct answer)
Obedience
Disclosure

Correct answer: Loyalty

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

Question 61: The maximum civil penalty for a first fair housing violation found by HUD is approximately:

$16,000 (Correct answer)
$50,000
$100,000
$5,000

Correct answer: $16,000

HUD can impose civil penalties up to approximately $16,000 for a first fair housing violation (amounts are periodically adjusted for inflation).

Question 62: A real estate agent has an exclusive buyer agency agreement with a client. The agent finds a property they personally own that fits the buyer's criteria. What must the agent do?

Show the property without disclosing ownership to remain impartial
Transfer the listing to another brokerage before showing it
Decline to show the property to avoid a conflict of interest
Disclose their ownership interest in writing before the buyer makes an offer (Correct answer)

Correct answer: Disclose their ownership interest in writing before the buyer makes an offer

An agent must disclose any personal interest in a property to their client in writing, as failing to do so would violate the fiduciary duties of loyalty and disclosure.

Question 63: A home equity line of credit (HELOC) is best described as:

A short-term bridge loan for buyers between properties
A fixed-rate second mortgage with one lump-sum disbursement
A government-backed loan for first-time buyers
A revolving line of credit secured by the borrower's home equity (Correct answer)

Correct answer: A revolving line of credit secured by the borrower's home equity

A HELOC is a revolving credit line secured by home equity, allowing borrowers to draw and repay as needed.

Question 64: The term "tenancy" in real estate means:

A tenacious person
A mode of holding ownership (Correct answer)
A device
Two or more people joined in an enterprise

Correct answer: A mode of holding ownership

In real estate, 'tenancy' refers to the manner or mode in which property is held or occupied. It describes the legal relationship between an owner and the property, or between a tenant and a landlord. Examples include joint tenancy, tenancy in common, tenancy by the entirety, and leasehold tenancy, each defining specific rights and responsibilities regarding the property.

Question 65: Which of the following is an essential element for a real estate contract to be valid and enforceable?

Notarization
Consideration (Correct answer)
Earnest money deposit
Professional appraisal

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 66: Which document must a real estate licensee provide to a potential buyer at the first substantive contact?

Purchase agreement
Title commitment
Agency disclosure form (Correct answer)
Property condition report

Correct answer: Agency disclosure form

Most states require licensees to present an agency disclosure form at first substantive contact to clarify whom they represent.

Question 67: A seller instructs their agent not to show the property to families with children. What should the agent do?

Only comply if the property qualifies as senior housing
Follow the seller's instructions as they own the property
Refuse the instruction because it violates the Fair Housing Act's familial status protections (Correct answer)
Show the property but disclose the seller's preference to buyers

Correct answer: Refuse the instruction because it violates the Fair Housing Act's familial status protections

The Fair Housing Act prohibits discrimination based on familial status, and agents must refuse discriminatory instructions from clients.

Question 68: What is the primary purpose of a Comparative Market Analysis (CMA) prepared by a real estate agent?

To help sellers set a listing price or buyers make offers (Correct answer)
To determine property tax assessments
To establish the insurable value of a property
To satisfy lender requirements for a mortgage

Correct answer: To help sellers set a listing price or buyers make offers

A CMA uses recent comparable sales data to help sellers price their property or buyers determine a fair offer amount.

Question 69: A homeowner's deed includes a clause stating the property must never be used for commercial purposes. If the restriction is violated, the grantor has the right to retake the property. What type of estate does the homeowner hold?

Fee simple absolute
Fee simple determinable
Life estate pur autre vie
Fee simple subject to a condition subsequent (Correct answer)

Correct answer: Fee simple subject to a condition subsequent

A fee simple subject to a condition subsequent grants the grantor a right of re-entry if a specified condition is violated — meaning ownership does not automatically revert but the grantor must take legal action to reclaim it. A fee simple determinable automatically terminates upon the violation.

Question 70: A real estate agent's client asks them to only market their home to buyers of a specific religion. How should the agent respond?

Refer the client to another agent willing to comply
Refuse the request and explain it violates fair housing laws (Correct answer)
Market to all buyers but give preference to the specified group
Follow the client's instructions as required by fiduciary duty

Correct answer: Refuse the request and explain it violates fair housing laws

An agent must refuse any client instruction that would violate fair housing laws, regardless of fiduciary obligations.

Question 71: A buyer's agent learns that the seller is willing to accept a lower price than listed. What is the agent's fiduciary obligation?

Keep this information confidential (Correct answer)
Disclose this information to the buyer immediately
Report it to the listing broker
Share it only if the buyer asks directly

Correct answer: Keep this information confidential

A buyer's agent owes confidentiality to their client and must not disclose the seller's motivation or willingness to accept less without authorization.

Question 72: A buyer's agent knows their client is in a hurry to move due to a job relocation. The seller's agent asks why the buyer is moving. Which fiduciary duty requires the buyer's agent to keep the client's motivation private?

Accounting
Obedience
Confidentiality (Correct answer)
Disclosure

Correct answer: Confidentiality

The duty of confidentiality requires an agent to protect their client's personal information and motivations. Disclosing that the buyer is in a hurry could weaken their negotiating position. This duty continues even after the transaction closes.

Question 73: A property listed at $500,000 in California has a tax rate of 1% plus a local voter-approved bond assessment of 0.25%. What is the approximate annual property tax?

$5,000
$7,500
$5,625
$6,250 (Correct answer)

Correct answer: $6,250

The total tax rate is 1.25% (1% base plus 0.25% bond), and 1.25% of $500,000 equals $6,250 annually.

Question 74: A seller agrees to make monthly payments to the buyer who previously owned the property — what type of financing is this?

Purchase-money mortgage (Correct answer)
Bridge loan
Reverse mortgage
Wraparound mortgage

Correct answer: Purchase-money mortgage

A purchase-money mortgage is created when the seller finances part or all of the purchase price, acting as the lender.

Question 75: Which ratio compares a borrower's total monthly debt payments to gross monthly income?

Back-end (total debt-to-income) ratio (Correct answer)
Loan-to-value ratio
Front-end ratio
Debt coverage ratio

Correct answer: Back-end (total debt-to-income) ratio

The back-end DTI ratio includes all monthly debt obligations (housing + other debts) divided by gross monthly income.

Question 76: An agent is representing a buyer and learns through public records that the property being purchased was previously used as a methamphetamine lab. The seller has not disclosed this. What is the agent's obligation?

Keep the information confidential since it came from public records
Disclose the material fact to the buyer immediately (Correct answer)
Disclose the information to the buyer only if asked directly
Notify the listing agent and take no further action

Correct answer: Disclose the material fact to the buyer immediately

A buyer's agent owes the duty of disclosure to the buyer, which includes all known material facts that could affect the buyer's decision. A prior methamphetamine lab is a significant material fact requiring immediate disclosure.

Question 77: Which of the following practices constitutes illegal steering under fair housing laws?

Directing buyers toward or away from neighborhoods based on race (Correct answer)
Providing school district information when asked
Showing all available listings to every client
Offering a buyer a list of neighborhoods within their budget

Correct answer: Directing buyers toward or away from neighborhoods based on race

Steering occurs when an agent channels buyers toward or away from certain areas based on a protected characteristic such as race.

Question 78: Which federal agency primarily enforces the Fair Housing Act through complaint investigation?

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

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

HUD is the primary federal agency that investigates fair housing complaints filed by individuals.

Question 79: Which document is used to remove a cloud on title caused by a paid-off mortgage?

Deed of trust
Abstract of title
Lis pendens
Satisfaction of mortgage (Correct answer)

Correct answer: Satisfaction of mortgage

A satisfaction of mortgage is recorded to publicly confirm that the mortgage debt has been fully paid and the lien released.

Question 80: In a bilateral contract for the sale of real estate, which of the following best describes the obligations of the parties?

A third party guarantees performance
Only the buyer is bound to perform
Only the seller is bound to perform
Both parties exchange binding promises to perform (Correct answer)

Correct answer: Both parties exchange binding promises to perform

A bilateral contract involves mutual promises where both the buyer and seller are obligated to perform.

Question 81: Which of the following factors should be considered the least when evaluating a location for commercial use?

Convenience of facility to shipping and labor sources
Amenities (Correct answer)
The community's purchasing power
Zoning regulations

Correct answer: Amenities

When evaluating a location for commercial use, factors like zoning regulations, convenience to shipping and labor, and the community's purchasing power are critical for business success and operational efficiency. While amenities (such as parks or scenic views) might be important for residential properties, they are generally considered the least significant factor for commercial properties, whose value is primarily driven by economic utility and access to markets and resources.

Question 82: Which of the following actions would constitute a breach of the agent's duty of accounting?

Failing to return phone calls within 24 hours
Commingling client funds with the agent's personal funds (Correct answer)
Showing properties outside the client's preferred area
Forgetting to schedule a home inspection

Correct answer: Commingling client funds with the agent's personal funds

The duty of accounting requires agents to keep client funds separate from personal funds; commingling these funds is a serious violation of fiduciary responsibility.

Question 83: Which type of mortgage clause prevents a borrower from paying off the loan early without penalty?

Prepayment penalty clause (Correct answer)
Subordination clause
Acceleration clause
Defeasance clause

Correct answer: Prepayment penalty clause

A prepayment penalty clause charges the borrower a fee for paying off the mortgage before the scheduled maturity date.

Question 84: What is the function of an acknowledgment on a deed?

It transfers ownership from grantor to grantee
It guarantees the title is free of liens
It establishes the purchase price for tax purposes
It confirms the grantor signed voluntarily and is who they claim to be (Correct answer)

Correct answer: It confirms the grantor signed voluntarily and is who they claim to be

An acknowledgment is a formal declaration before a notary that the grantor executed the deed voluntarily and verified their identity.

Question 85: Which of the following properties is EXEMPT from the Federal Fair Housing Act?

A single-family home listed with a real estate agent
A duplex where the owner lives in one unit and rents the other without using a broker (Correct answer)
A condominium with 10 units advertised in the local newspaper
A 50-unit apartment complex managed by a property management company

Correct answer: A duplex where the owner lives in one unit and rents the other without using a broker

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

Question 86: What is a 'due-on-sale' clause in a mortgage?

A provision requiring the borrower to pay property taxes into escrow
A penalty charged when the borrower refinances within the first year
A clause allowing the lender to demand full repayment if the property is sold or transferred (Correct answer)
A requirement that the buyer purchase title insurance at closing

Correct answer: A clause allowing the lender to demand full repayment if the property is sold or transferred

A due-on-sale (alienation) clause gives the lender the right to call the entire loan balance due immediately upon transfer of ownership, effectively preventing assumption of the mortgage by a new buyer without lender approval.

Question 87: A subagent in a real estate transaction owes fiduciary duties to which party?

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

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 88: What is the key difference between a purchase money mortgage and a home equity loan?

There is no difference between the two
A purchase money mortgage is only for commercial properties
A purchase money mortgage has no interest, while a home equity loan does
A purchase money mortgage is used to buy the property, while a home equity loan borrows against existing equity (Correct answer)

Correct answer: A purchase money mortgage is used to buy the property, while a home equity loan borrows against existing equity

A purchase money mortgage finances the actual purchase of a property, whereas a home equity loan allows owners to borrow against equity already built up.

Question 89: A mortgage lender offers a local real estate agent a $500 gift card for every client they refer who closes a loan with the lender. This arrangement is a violation of which federal law?

Real Estate Settlement Procedures Act (RESPA) (Correct answer)
Fair Housing Act
Sherman Antitrust Act
Truth in Lending Act (TILA)

Correct answer: Real Estate Settlement Procedures Act (RESPA)

Section 8 of the Real Estate Settlement Procedures Act (RESPA) prohibits kickbacks and unearned fees. It is illegal to give or receive any 'thing of value' (like a gift card) for the referral of settlement service business, such as a mortgage loan. This practice is seen as inflating the cost of settlement services for consumers.

Question 90: A borrower's monthly gross income is $8,000. If the lender uses a 28% front-end ratio, what is the maximum allowable monthly housing expense?

$2,800
$2,240 (Correct answer)
$2,560
$1,920

Correct answer: $2,240

The front-end ratio limits housing costs to 28% of gross monthly income: $8,000 x 0.28 = $2,240.

Question 91: A property manager who collects rent on behalf of an owner is acting as what type of agent?

Subagent
Universal agent
General agent (Correct answer)
Special agent

Correct answer: General agent

A general agent is authorized to handle a range of ongoing matters for the principal, such as a property manager conducting day-to-day operations.

Question 92: A counteroffer is essentially a complete rejection of the initial offer in legal terms.

False
True (Correct answer)

Correct answer: True

In legal terms, a counteroffer serves as a complete rejection of the original offer and simultaneously proposes new or modified terms. Once a counteroffer is made, the original offer is no longer valid and cannot be accepted unless it is re-extended. The party who made the initial offer then becomes the offeree, with the option to accept, reject, or make another counteroffer.

Question 93: Which of the following best describes a transaction broker (facilitator)?

Represents both parties as a dual agent
Represents only the buyer
Represents only the seller
Assists both parties without representing either (Correct answer)

Correct answer: Assists both parties without representing either

A transaction broker provides limited representation services to both parties without acting as a fiduciary for either side.

Question 94: Under the Fair Housing Act, which of the following advertising statements would be considered discriminatory?

'Perfect for a Christian family' (Correct answer)
'Quiet neighborhood close to schools'
'Easy highway access and ample parking'
'Recently renovated kitchen and bathrooms'

Correct answer: 'Perfect for a Christian family'

Advertising a property as 'Perfect for a Christian family' expresses a religious preference, which violates the Fair Housing Act's prohibition on discriminatory advertising. Real estate ads cannot indicate any preference, limitation, or discrimination based on protected class characteristics.

Question 95: Which of the following is exempt from the Fair Housing Act's prohibition against discrimination?

Any property owned by a religious organization used for commercial purposes
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

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 96: Under the federal Residential Lead-Based Paint Hazard Reduction Act, which of the following is TRUE regarding the sale of a home built in 1975?

The buyer must be given a 10-day opportunity to conduct a lead paint inspection. (Correct answer)
The seller is required to remove all known lead-based paint before closing.
The real estate agent is solely responsible for providing the required disclosures.
The law does not apply because the home was built after 1978.

Correct answer: The buyer must be given a 10-day opportunity to conduct a lead paint inspection.

The Residential Lead-Based Paint Hazard Reduction Act of 1992 applies to most housing built before 1978. The law requires that sellers provide buyers with a 10-day period to conduct a lead paint inspection or risk assessment at their own expense. The seller is not required to remediate or remove the paint, only to disclose any known information and provide available records. Both the seller and the agent share responsibility for ensuring compliance with the disclosure requirements.

Question 97: A buyer discovers after closing that a previous owner's heir has a legitimate claim to the property. Which type of insurance would protect the buyer?

Liability insurance
Title insurance (Correct answer)
Homeowner's insurance
Flood insurance

Correct answer: Title insurance

Title insurance protects the insured against losses from defects in title, including undiscovered claims from prior owners or heirs.

Question 98: Which type of listing agreement entitles the listing broker to a commission regardless of who procures the buyer, even if the seller finds the buyer themselves?

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

Correct answer: Exclusive right-to-sell listing

An exclusive right-to-sell listing guarantees the broker a commission no matter who brings the buyer — including the seller — making it the broadest form of broker protection.

Question 99: What is the primary risk to a borrower who agrees to a negative amortization loan?

The borrower must make double payments each month
The lender can change the loan to a fixed rate at any time
The interest rate decreases over time
The loan balance can grow larger than the original amount borrowed (Correct answer)

Correct answer: The loan balance can grow larger than the original amount borrowed

Negative amortization occurs when monthly payments are insufficient to cover the interest due, causing unpaid interest to be added to the principal balance.

Question 100: A seller's agent who learns that the buyer is willing to pay more than the offering price must:

Disclose it only if asked by the seller
Keep it confidential from all parties
Report it to the state licensing board
Share that information with the seller immediately (Correct answer)

Correct answer: Share that information with the seller immediately

A seller's agent has a fiduciary duty of disclosure to the seller, including material information about the buyer's motivation.

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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Unanswered questions count as wrong — answer everything
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These practice questions were written with AI tools. They are not real exam questions. Exam facts are checked against the official sources listed below. Not reviewed by a subject-matter expert. Editorial policy

Sources & references

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