Arkansas Real Estate Broker Exam — All Questions

A new environmental ordinance leaves a landowner with no economically viable use of a parcel, although the government takes no title to it. The owner's strongest constitutional claim is:

• a.The ordinance is void because zoning cannot restrict use
• b.A regulatory taking entitling the owner to payment✓
• c.Escheat has occurred and the state now owns the parcel
• d.Spot zoning, since only this parcel lost its value

Regulation that goes so far it denies an owner all economically viable use is treated as a regulatory taking, and just compensation is owed even though the government never took title. Arguing that zoning simply cannot restrict use fails, because regulating land is a valid exercise of the police power and owners have no right to the most profitable use. Escheat moves property to the state only when an owner dies with no will and no heirs, which has nothing to do with an ordinance. Spot zoning describes singling out one parcel for a different classification, not a general environmental rule applied to a class of land.

Reviewing a title report, a broker finds an old recorded covenant, written decades ago, that bars resale of the lot to members of a specified race. Its legal effect today is:

• a.It binds the buyer because it was recorded before purchase
• b.It is void, so a court will never enforce it or enjoin it✓
• c.It stays valid until the homeowners association removes it
• d.It is enforceable by the association but not by an owner

A private restriction that discriminates on a protected basis is void and unenforceable under the federal Fair Housing Act and the Civil Rights Act of 1866, so no court will order compliance or enjoin a violation, and the association has no power the courts would back. Recording rescues nothing, because an illegal restriction gains no force from sitting in the public record. No association vote is required to strip it of effect, although many states let an owner have the language formally struck. Valid CC&Rs, by contrast, are enforced privately by injunction brought by an owner or the association. A broker must never repeat or give effect to such language.

A grantor signs and notarizes a deed naming a nephew as grantee, locks it in a safe deposit box, and tells no one. The grantor later dies. What is the deed's effect?

• a.Title passed when the grantor signed the deed
• b.Title passed because the deed was acknowledged
• c.No title passed, because delivery never occurred✓
• d.Title passes when the estate later records it

A deed operates only when the grantor delivers it with the present intent to pass title and the grantee accepts, and both must happen while the grantor is alive. Signing accomplishes nothing while the instrument stays under the grantor's control in a box no one knows about. Acknowledgment before a notary serves recording, not validity, so notarizing it changes nothing here. An estate representative cannot supply the delivery the grantor failed to make, and recording an undelivered deed does not revive it. The nephew takes only through the will or the intestacy statute, which is why closings hand over the executed deed rather than merely signing it.

A deed is signed by a competent grantor and handed to a grantee who accepts it, but the grantor's signature was never notarized. As between those two parties, the deed is:

• a.Void, since notarizing is a validity requirement
• b.Valid, though it cannot be recorded as it stands✓
• c.Valid only if the grantee later pays a recording fee
• d.Voidable at the option of the grantor's creditors

Acknowledgment is a recording requirement, not an element of a valid deed. Delivered and accepted, the deed transfers title between grantor and grantee even with no notary, but the recorder will reject it, leaving the grantee exposed to later purchasers and lienholders who record first. Calling it void confuses the two ideas: validity turns on a competent grantor, an identifiable grantee, words of conveyance, an adequate legal description, the grantor's signature, and delivery and acceptance. Paying a fee cannot cure a missing acknowledgment, because the recorder cannot accept the instrument at all. Creditors of the grantor gain no power to undo a completed conveyance.

In a deed, which clause opens with the words 'to have and to hold' and defines the extent of the estate the grantee is receiving?

• a.The granting clause containing the words of conveyance
• b.The habendum clause, following the granting clause✓
• c.The acknowledgment taken before a notary public officer
• d.The legal description identifying the land conveyed

The habendum clause follows the granting clause, begins with the traditional phrase 'to have and to hold,' and spells out the estate conveyed, for example a fee simple absolute or a life estate. The granting clause holds the words of conveyance that actually transfer the interest and names the grantee. The acknowledgment is the notary's certificate that the signature is genuine, which the recorder requires but the transfer does not. The legal description identifies the land by metes and bounds, lot and block, or government survey, and it fixes what is conveyed rather than how much of an estate. Reading both clauses tells a broker exactly what the buyer is getting.

A relocation company that has owned a home for three months conveys it, warranting title only against defects that arose during its own ownership. The deed it delivers is a:

• a.Bargain and sale deed implying ownership without covenants
• b.General warranty deed covering the entire chain of title
• c.Quitclaim deed conveying only the interest actually held
• d.Special (limited) warranty deed covering the grantor's period✓

Warranting only against defects created or suffered while the grantor held title describes the special or limited warranty deed, the customary instrument for corporate, relocation, and fiduciary sellers who cannot vouch for what earlier owners did. A general warranty deed reaches back through the whole history of the property and offers the broadest protection, which is more than this seller is giving. A quitclaim carries no warranties at all and passes only whatever interest the signer happens to hold. A bargain and sale deed implies that the grantor owns the property but adds few or no covenants. A buyer taking narrower covenants should lean on an owner's title policy.

A title search shows that a seller's former spouse may still hold a possible interest in the property. What is the usual instrument used to release that interest and clear the record?

• a.A quitclaim deed from the former spouse✓
• b.A general warranty deed from the former spouse
• c.A trustee's deed issued after a foreclosure
• d.A correction deed fixing the legal description

A quitclaim releases whatever interest the signer may hold, with no warranties attached, which makes it the standard tool for removing a cloud such as a possible marital interest, a stale easement claim, or a name discrepancy. Demanding a general warranty deed asks the former spouse to guarantee title he or she may never have owned, and it is normally refused. A trustee's deed is what the trustee under a deed of trust issues to the purchaser at a foreclosure sale. A correction deed reforms a mistake in an earlier deed between the same parties and cannot release an outsider's claim.

A court-appointed personal representative sells a decedent's home during probate, and the buyer's broker asks what instrument will convey title. The answer is:

• a.A trustee's deed given after a nonjudicial foreclosure
• b.A sheriff's deed issued following a judicial sale
• c.A general warranty deed with full title covenants
• d.An executor's or personal representative's deed✓

Estate property is conveyed by an executor's deed when a will names the executor, or by a personal representative's or administrator's deed when the court makes the appointment; these deeds recite the court authority and give only limited covenants. A trustee's deed comes from the trustee under a deed of trust after a nonjudicial foreclosure sale. A sheriff's deed, called a referee's deed in some states, follows a judicial sale ordered by a court. A general warranty deed is not used, because a fiduciary will not personally guarantee title against the acts of the decedent or of owners further back in the chain.

After closing under a general warranty deed, a buyer discovers a recorded utility easement that the deed never disclosed. Which covenant did the grantor breach?

• a.Quiet enjoyment, a promise against eviction by better title
• b.Seisin, a promise that the grantor owns the estate conveyed
• c.Against encumbrances, a promise of no undisclosed burdens✓
• d.Further assurance, a promise to sign curative papers

The covenant against encumbrances promises that no liens, easements, or similar burdens exist beyond those the deed discloses, so a recorded easement left unmentioned breaches it at the moment of delivery. Seisin promises the grantor actually owns the estate being conveyed, which is not the trouble when ownership is sound but burdened. Quiet enjoyment shields the grantee from later eviction by someone holding superior title, and an easement holder's use is not an eviction. Further assurance obliges the grantor to sign additional documents needed to perfect title. A general warranty deed carries all of these along with the right to convey and warranty forever.

A neighbor has openly farmed and fenced a strip of an absentee owner's land, excluding others and never asking permission. To take title by adverse possession the neighbor must prove:

• a.Payment of the owner's property taxes for every year
• b.Open, notorious, continuous, hostile, and exclusive possession✓
• c.A written agreement signed by the record title owner
• d.A recorded deed describing the disputed strip of land

Adverse possession requires possession that is open and notorious, continuous, hostile in the sense of being without permission, and exclusive, held for the statutory period set by state law. Some states add payment of taxes or color of title, but those elements are not universal, so a broker should never assume them from another state's rule. A written agreement from the record owner would destroy the claim outright, since permission defeats hostility. Recording a deed creates no possession and cannot manufacture the required years of use. Adverse possession is one form of involuntary alienation, alongside descent, escheat, foreclosure, eminent domain, and accretion.

An owner dies leaving no will, and after a diligent search no heirs can be located. A broker asked to list the property should understand that title:

• a.Passes by devise to the beneficiaries named in a will
• b.Descends to the decedent's nearest surviving creditors
• c.Vests permanently in the administrator the court appoints
• d.Escheats to the state, an involuntary transfer of title✓

Escheat is the state's claim to property when an owner dies intestate and no heirs can be found, and it is a classic involuntary transfer rather than a voluntary one by deed or will. Devise is a gift of real property by will, so it cannot operate where there is no will and no named beneficiary. Descent carries property to heirs under the intestacy statute, but creditors are paid as claimants out of the estate and never inherit the land itself. An administrator has authority to manage and convey estate property during probate, not to own it permanently. Each state sets its own escheat procedure and waiting period.

A search reveals an old mortgage of record that was paid off but never released, and the lender no longer exists. Which step clears that cloud so title is marketable?

• a.Ordering an abstract of title with an attorney's opinion
• b.Buying an owner's title policy that insures over it
• c.Filing a quiet title action asking a court to clear it✓
• d.Recording a correction deed signed by the current seller

A quiet title action asks a court to determine ownership and extinguish a stale or unreleasable claim, which is the practical cure when the mortgagee has vanished and no release can be obtained. An abstract of title with an attorney's opinion summarizes and evaluates the recorded chain; it reports the cloud rather than removing it, and it offers no indemnity. An owner's policy may insure over a known risk, but insurance pays for loss and leaves the defect on the record for the next buyer to confront. A correction deed fixes a drafting error between the original parties and cannot release a third party's lien.

A seller deeds a parcel to one buyer and later deeds the same parcel to a second buyer, who records first. Which framework decides who owns the land?

• a.A federal recording statute applied in all fifty states
• b.The state's recording act, race, notice, or race-notice✓
• c.The order in which the two deeds were signed and dated
• d.The county recorder's discretion over competing claims

Priority between competing grantees is governed by the recording act of the state where the land lies, and the schemes differ: a pure race state protects whoever records first, a notice state protects a later purchaser who took without notice of the earlier deed, and a race-notice state protects one who took without notice and recorded first. No federal statute governs land recording. Signing dates do not decide the contest, which is precisely why a public recording system exists. Recorders act ministerially and have no power to resolve claims. Because the gap between closing and recording is the danger zone, a broker should press for prompt recording.

A buyer pays for a lender's title policy at closing and asks the broker whether it also protects the buyer's equity in the home. The correct answer is that the policy:

• a.Protects both parties equally up to the full purchase price
• b.Protects the buyer once the mortgage has been fully repaid
• c.Protects the buyer against defects arising after closing
• d.Protects only the lender, declining with the balance✓

A lender's, or mortgagee's, policy insures only the lender's security interest, and its coverage shrinks as the principal is paid down, ending altogether when the loan is satisfied. It never covers the buyer's equity, which is why a separate owner's policy is offered at closing for a one-time premium and lasts as long as the insured holds an interest. Repaying the mortgage does not convert the lender's coverage into the buyer's; it extinguishes it. And no title policy insures defects that first arise after its date. Brokers should explain this plainly before a buyer waives owner's coverage to save money.

Six months after closing, a contractor the buyer hired records a mechanic's lien against the home. The buyer files a claim under the owner's title policy. The insurer will most likely:

• a.Deny, because the defect arose after the policy was issued✓
• b.Pay, because owner's policies cover all future liens
• c.Pay, because the standard exceptions were removed
• d.Deny, because only a lender may file a title claim

Title insurance looks backward: it covers defects that already existed when the policy was issued but were not discovered or excepted, not events that happen later. A lien for work the buyer ordered after closing is a new problem the buyer must resolve directly. Buying extended coverage removes standard exceptions and broadens what is insured as of the policy date, but it does not push coverage forward in time. Owners plainly may claim under their own policies; the lender's policy is the one limited to the lender. Extended coverage typically depends on a current survey, which reveals encroachments and boundary issues a records search alone cannot.

A buyer tours a house and finds an occupant who is not the seller living there under an unrecorded lease. What kind of notice does that occupancy give the buyer?

• a.Actual notice, given by the seller's written disclosure
• b.Constructive notice, given by the public record
• c.No notice at all, since the lease was not recorded
• d.Inquiry notice, requiring the buyer to ask about it✓

Someone in possession who is not the seller puts a buyer on inquiry notice: the buyer is charged with whatever a reasonable investigation of that occupancy would have turned up, including an unrecorded lease or an option to purchase. Actual notice is what a party genuinely knows, typically from a disclosure or a conversation, and no one has told this buyer anything. Constructive notice comes from the public record, which by definition cannot reveal an unrecorded lease. Treating an unrecorded interest as invisible is the classic error, because possession is itself notice. A broker should always ask who occupies a property and on what terms.

Real estate licensing in Arkansas is administered by the:

• a.Arkansas Secretary of State
• b.Arkansas Insurance Department
• c.Arkansas Realtors Association
• d.Arkansas Real Estate Commission (AREC)✓

The Arkansas Real Estate Commission administers the Arkansas Real Estate License Law, Ark. Code Ann. § 17-42-101 et seq., and the Commission Regulations promulgated under it. Section 17-42-203(a) authorizes the Commission to "do all things necessary and convenient for carrying into effect the provisions of this chapter" and to promulgate rules. The Realtors Association is a private trade group with no licensing power; the Secretary of State and the Insurance Department have no real estate licensing authority.

Under AREC Regulation 10.7(b)(3), the firm records a principal broker must keep are open to inspection by:

• a.any licensee of the firm, though not by the Commission absent a court order
• b.the Commission's investigative staff, but only at the Commission's office in Little Rock
• c.the Commission's investigative staff, but only after a verified complaint is filed
• d.the Commission's investigative staff, at the firm's office or another location it designates✓

Regulation 10.7(b)(3) says the records "shall be open to inspection by and made available to the investigative staff of the Commission at the firm's office or other location designated by the Commission." The power does not depend on a complaint having been filed: Ark. Code Ann. § 17-42-312(a)(1) lets the Commission investigate on its own motion. Nor is inspection confined to Little Rock, and no court order is required, because the records are made inspectable as a condition of licensure. The records may be kept electronically so long as copies can be produced.

Except where a license was obtained by false or fraudulent representation, AREC may not investigate a licensee's conduct or hold a disciplinary hearing on it unless the complaint is filed or the investigation begins within:

• a.one year of the actions complained of
• b.three years of the actions complained of✓
• c.ten years of the actions complained of
• d.six months of the actions complained of

Ark. Code Ann. § 17-42-314(b) bars the Commission from investigating or holding a disciplinary hearing "unless the complaint is filed or the investigation initiated within three (3) years from the date of the actions complained of." The one stated exception is a license obtained by false or fraudulent representation, which is not time-limited. One year, six months and ten years are not the figure the statute uses.

AREC's authority under Arkansas license law includes the power to:

• a.investigate complaints and suspend, revoke, or condition a license✓
• b.set the commission rate that every Arkansas broker must charge
• c.license the attorneys who close real estate transactions
• d.issue building permits for property a licensee has listed

Ark. Code Ann. § 17-42-312(a)(4) lets the Commission, on finding a violation, impose "suspension, revocation, or denial of his or her license," a penalty of not more than $1,000 per violation, required education or reexamination, conditions or restrictions on the license, or restitution. Note what the Commission also can do, which is often misstated: under § 17-42-406 it determines the aggrieved party's actual damages in a disciplinary hearing and directs the licensee to pay them, and § 17-42-407 limits that award to actual, compensatory damages, with no punitive damages and no interest. What the Commission cannot do is issue building permits, fix commission rates, or license attorneys.

When the Arkansas Real Estate Recovery Fund pays a claim caused by a licensee, that licensee's license is:

• a.suspended for exactly thirty days regardless of any repayment
• b.unaffected, because the fund's payment settles the claim in full
• c.immediately suspended until the Commission is reimbursed with interest✓
• d.revoked permanently, with no right to reapply at a later date

Ark. Code Ann. § 17-42-409(3) states the consequence precisely: in addition to any other disciplinary action, the licensee's "license shall be immediately suspended until he or she has completely reimbursed the commission for the payment, plus interest at a rate to be determined by the commission," and that rate "shall not exceed ten percent (10%) per annum." The fund's payment settles the injured consumer's claim; it does not settle the licensee's debt to the fund, which is why the license stays down until the money comes back. A fixed thirty-day suspension misses the mechanism, and the statute provides no permanent revocation for this.

Under Ark. Code Ann. § 17-42-301, an unlicensed person who performs one act for another for compensation that requires a license has:

• a.committed a violation only if the transaction actually closed
• b.committed no violation, unless three or more acts occur in a year
• c.committed a violation, because a single act is enough✓
• d.committed no violation, because a course of conduct is needed

Section 17-42-301(c) is explicit: "The commission of a single act by a person required to be licensed under this chapter and not so licensed shall constitute a violation of this chapter." Subsection (b) reaches anyone who "offers, attempts, or agrees to perform any single act" described in § 17-42-103(10) or (12), "whether as part of a transaction or as an entire transaction," so neither repetition nor a completed closing is required. Section 17-42-109(a) allows a civil penalty of up to $5,000 for unlicensed real estate activity, and § 17-42-105(d) makes a violation of the chapter a Class D felony.

Which person is exempt from Arkansas real estate licensure under Ark. Code Ann. § 17-42-104?

• a.A leasing agent paid a commission on each lease signed at an apartment complex
• b.A resident manager who lives on the premises and leases units for that employer✓
• c.An unlicensed assistant who negotiates lease terms for a share of the rent
• d.A person who lists a neighbor's house for sale for a flat fee paid at closing

Section 17-42-104(a)(5) exempts "a person acting as a resident manager when the resident manager resides on the premises and is engaged in the leasing of real property in connection with his or her employment." The other three all involve acts described in § 17-42-103(10) or (12) done for compensation. Section 17-42-104(a)(6) does exempt an unlicensed person paid only at a salaried or hourly rate for narrow clerical leasing functions, but that exemption is lost the moment the person negotiates terms, is paid a commission, or otherwise performs a listed act.

In Arkansas, principal broker and executive broker are designations placed on a person who already holds a broker license. To qualify for that broker license, an applicant generally must show:

• a.a higher application fee, with no experience of any kind
• b.24 months of licensed experience plus 60 classroom hours✓
• c.a real estate license in another state for one week
• d.the 120 classroom hours the statute sets as a ceiling

AREC Regulation 4.1(a)(2) calls for not less than 60 classroom hours completed within the 36 months immediately preceding the application, of which at least 45 must be in a course developed by the Commission. Ark. Code Ann. § 17-42-303(b)(1) supplies the experience: an active, bona fide apprenticeship holding a valid salesperson license issued by the Commission, or a salesperson or broker license from another state, "for a period of not less than twenty-four (24) months within the previous forty-eight-month period immediately preceding the date of application." A single week of out-of-state licensure clears nothing, and a larger fee substitutes for neither the time nor the coursework. The 120-hour figure is real but § 17-42-303(a)(1) sets it as a ceiling on what the Commission may require, not as the requirement.

AREC Regulation 4.1(c)(4) requires an applicant's state and federal criminal background check to have been completed within:

• a.six months immediately preceding receipt of the application✓
• b.thirty days immediately preceding receipt of the application
• c.three years immediately preceding receipt of the application
• d.twelve months immediately preceding receipt of the application

Regulation 4.1(c)(4) provides that the criminal background check "shall be completed within six months immediately preceding the date the Application for Real Estate License Examination is received in the Commission's office, and if not, the application shall be returned to the applicant." Regulation 4.1(h) lets an applicant sit for the examination once the request has been sent to the Identification Bureau of the Arkansas State Police, but Ark. Code Ann. § 17-42-306(a)(4)(B) bars issuing the license until the Commission receives and approves the checks.

An applicant who passes the Arkansas licensing examination must pay the license fee and the Real Estate Recovery Fund fee within:

• a.12 months of the examination, or the results are invalidated
• b.90 days of the examination, though the results remain valid
• c.30 days of the examination, or the results are invalidated
• d.90 days of the examination, or the results are invalidated✓

Ark. Code Ann. § 17-42-306(b)(1)(A) requires payment "within ninety (90) days from the date of the licensing examination," and § 17-42-306(b)(2) says failure to pay in that window "shall invalidate the licensing examination results, and the applicant shall be required to make new application and retake the licensing examination as an original applicant." Regulation 4.3(c) repeats the ninety days and waives the recovery fund fee for an applicant who has already paid it. The one extension the statute allows is § 17-42-306(b)(1)(B)(i), for a federal criminal background check that has not yet come back.

The holder of an inactive Arkansas real estate license may:

• a.practice as a broker or salesperson on the licensee's own property
• b.practice as a broker or salesperson for ninety days while activating
• c.practice as a broker or salesperson if a principal broker supervises
• d.not practice as a broker or salesperson without first activating it✓

Ark. Code Ann. § 17-42-308(a)(2) says the holder of an inactive license "shall not practice as a real estate broker, salesperson, property management associate, or property management broker in this state without first activating the license," and Regulation 6.2(c) repeats it. Supervision does not cure it, no grace period runs while activation is pending, and there is no self-dealing exception, since § 17-42-312(a)(1) reaches a licensee's conduct "regardless of whether the transaction was for his or her own account." Regulation 6.2(d) sets what activation takes: seven classroom hours of approved continuing education for each year renewed inactive, capped at thirty.

A terminated Arkansas licensee's transfer application to a new firm must be signed by the new principal broker and accompanied by the transfer fee and:

• a.a statement that the former principal broker consents to the licensee's move
• b.a statement that the licensee has completed seven hours of continuing education
• c.a statement that the licensee is taking no documents belonging to the old firm✓
• d.a statement that the licensee has settled all commissions the old firm owes

Regulation 7.5(b) requires the transfer application to be accompanied by "a statement that the licensee is not taking any listings, management contracts, appraisals, lease agreements, or copies of any such documents, or any other pertinent information belonging to the former principal broker or firm," plus a transfer fee. Ark. Code Ann. § 17-42-310(e) states the same requirement. The former broker's consent is not part of it, and neither continuing education nor a commission settlement is a condition of transfer. A temporary interim license may be issued when the application and accompanying items are filed.

When a licensee's association with an Arkansas principal broker ends, Regulation 7.5(a) gives the principal broker how long to notify the Commission and return the license and pocket card?

• a.Seven days, and the notification automatically inactivates the license✓
• b.Seven days, though the license stays active until the licensee transfers
• c.Thirty days, and the notification automatically inactivates the license
• d.Sixty days, and the notification automatically inactivates the license

Regulation 7.5(a) provides that "within seven (7) days after the employment or association of a licensee with a principal broker ends, such principal broker shall notify the Commission of such termination and return to the Commission the license and pocket card of the terminated licensee. Such notification shall automatically inactivate the license." Ark. Code Ann. § 17-42-310(d)(1) says the same. The terminated licensee must deliver the pocket card to the principal broker immediately, and under Regulation 7.5(d) the duty falls on the licensee if the principal broker is dead, unavailable, or unwilling to act.

Arkansas real estate licenses expire on December 31 each year. Under AREC Regulation 6.1(b), the renewal application and fee must be filed with the Commission no later than:

• a.September 30✓
• b.June 30
• c.December 31
• d.November 30

Regulation 6.1(a) provides that "unless renewed as active or inactive, every real estate broker or salesperson license shall expire on December 31 of each calendar year," and Regulation 6.1(b) requires renewal applications with the fee to be "filed with the Commission no later than September 30," by postmark or receipt. Renewal notices go out about July 15. A renewal application filed after the deadline "shall be treated as an application to renew an expired license," which carries the higher expired-license fee set by Regulation 3.1(a)(6).

How often must an Arkansas real estate license be renewed, and what is required?

• a.Only once, because an Arkansas license is permanent
• b.Annually, with AREC-approved continuing education✓
• c.Every two years, with AREC-approved continuing education
• d.Every ten years, with a new licensing examination

Regulation 6.1(a) puts every broker and salesperson license on a calendar-year cycle expiring December 31. Regulation 6.1(c) conditions active status on completing "annually seven (7) classroom hours of continuing education approved by the Commission," of which one hour "must focus on how real estate professionals can limit risk to preserve personal safety for agents and consumers." Ark. Code Ann. § 17-42-307(b)(1)(A) sets the statutory band at not less than six nor more than seven hours. A two-year cycle is the norm in many states but not in Arkansas, and Arkansas conditions renewal on coursework rather than on retesting.

Upon a change of name, address, or place of business, an Arkansas licensee must notify the Commission:

• a.within one year, by letter to the executive director, and pay the transfer fee
• b.promptly, on a form the Commission prescribes, and pay the reissuance fee✓
• c.at the next annual renewal, on the renewal form, and pay the reissuance fee
• d.only if the change also moves the licensee to a different real estate firm

Regulation 7.6(a) requires the licensee to "promptly notify the Commission of such change or loss on a form prescribed by the Commission," after which the Commission issues a new license for the unexpired period "upon the payment of the license reissuance fee." Ark. Code Ann. § 17-42-310(a) states the same duty. Regulation 7.6(b) adds that all licensees, active and inactive, must keep the Commission informed in writing of their personal residence address, physical business address, and mailing address. Waiting for renewal or for a year misses "promptly," and the duty is not limited to changes of firm.

AREC Regulation 10.16(a) requires a licensee convicted of, or pleading guilty or nolo contendere to, any crime other than a traffic violation to report it to the Commission within:

• a.thirty days after the conviction or plea✓
• b.six months after the conviction or plea
• c.thirty days after the sentence is served
• d.ten days after the conviction or plea

Regulation 10.16(a) requires the written report "within thirty (30) days after the conviction or plea," and it must include the dates of the offense and of the conviction or plea, the court, the specific crime, the sanctions imposed, copies of the charging document and judgment, and the licensee's explanation. The clock runs from the conviction or plea, not from completion of any sentence. Regulation 10.16(b) imposes a parallel thirty-day report when another occupational license is surrendered, denied, revoked, suspended, or sanctioned.

AREC Regulation 10.14 makes it the duty of each licensee to report to the Commission:

• a.in writing, only violations the licensee personally witnessed at a closing
• b.orally at the next Commission meeting, any violation by a competing firm
• c.in writing, only violations by licensees affiliated with the licensee's own firm
• d.in writing, any information that is or may be a violation of the law or rules✓

Regulation 10.14 provides that "it is the duty of each licensee to report in writing to the Commission any information coming to the licensee's knowledge which is or may be (1) a violation of the Arkansas Real Estate License Law; or (2) a violation of the Commission Regulations." The duty is not limited to what the licensee saw first-hand, is not limited to the licensee's own firm, and is not discharged by speaking at a meeting. Note the standard is "is or may be" a violation, so the licensee does not have to be certain before reporting.

Ark. Code Ann. § 17-42-302(a) lists what an applicant must show to be issued an Arkansas real estate license. Membership in a trade association such as the Arkansas REALTORS Association is:

• a.not on that list, and is voluntary for a licensee✓
• b.required only of principal broker applicants
• c.required only of nonresident applicants
• d.required before the license may be issued

Section 17-42-302(a) directs that the Commission "shall issue a license to any applicant who meets the following requirements," then lists age of majority, the education and experience requirements, the examination, no record of unprofessional conduct, evidence of good reputation, and the criminal background check under § 17-42-315. Trade association membership appears nowhere in that list, and § 17-42-302(b) lets the Commission deny a license only to an applicant who fails those requirements or the fees. Association membership is a private matter; Regulation 7.3(a) does allow the marks REALTOR and REALTIST on a firm sign for those who are entitled to use them.

Under AREC Regulation 13.4, a purchaser may cancel a contract to buy a time-share interest from a developer within:

• a.five days after signing, though the right to cancel may be waived
• b.three days after signing, and the right to cancel may not be waived
• c.ten days after signing, though the right to cancel may be waived
• d.five days after signing, and the right to cancel may not be waived✓

Regulation 13.4(a) provides that "a purchaser may cancel any contract for the purchase of a time-share interest from a developer within five (5) days after execution of the contract. The purchaser's right to cancel a contract for purchase shall not be waived." Regulation 13.4(d) extends the fifth day to the next day that is not a Saturday, Sunday, or legal holiday, and notice is deemed given when postmarked. Regulation 13.4(c) requires a "NOTICE TO PURCHASER" of the same right immediately above the signature line of the contract, in at least 10-point boldface.

The "IMPORTANT NOTICE" that Regulation 13.4(b) requires to be attached to the front of a time-share public offering statement must state that payments made before cancellation will be refunded within:

• a.thirty days of receipt of the notice of cancellation✓
• b.sixty days of receipt of the notice of cancellation
• c.ninety days of receipt of the notice of cancellation
• d.fifteen days of receipt of the notice of cancellation

The prescribed language in Regulation 13.4(b) reads in part: "I UNDERSTAND THAT CANCELLATION IS WITHOUT PENALTY AND ALL PAYMENTS MADE BY ME BEFORE CANCELLATION SHOULD BE REFUNDED WITHIN THIRTY (30) DAYS OF RECEIPT OF THE NOTICE OF CANCELLATION." The notice must be in duplicate, in at least 10-point boldface, attached to the front of the public offering statement, with the original retained by the developer and the copy given to the purchaser, and it must carry no other printing or writing.

AREC Regulation 15.2(a) provides that a real estate auction is with reserve unless:

• a.the seller signs a listing agreement naming a minimum bid the auctioneer must get
• b.the property has been advertised for at least thirty days before the auction date
• c.the real estate is offered using terms such as "absolute" or "without reserve"✓
• d.the auctioneer announces a reserve price to those attending before bidding opens

Regulation 15.2(a) provides that an "auction shall be with reserve, unless the real estate is offered without reserve using explicit terms such as 'absolute' or 'without reserve.'" The consequence matters: in an auction with reserve the auctioneer may withdraw the real estate at any time until announcing completion, while in an absolute auction the real estate cannot be withdrawn once bids are called for unless no bid is made within a reasonable time. Regulation 15.2(b) requires an absolute auction agreement to carry a 14-point boldface acknowledgment that the seller has no right to refuse to convey to the high bidder.

Regulation 15.4 requires an auctioneer who advertises real estate to disclose the existence of a buyer's premium:

• a.only to the winning bidder, before the closing statement
• b.in all published advertising, but not orally at the auction
• c.before the auction starts, but not in published advertising
• d.in all published advertising and before the auction starts✓

Regulation 15.4(3) requires that an auctioneer "disclose the existence of any buyer's premium to be charged to a buyer at an auction sale. Such disclosure shall be made in all published advertising and disclosed prior to the start of an auction." Both channels are required, not one or the other, and the disclosure is owed to everyone bidding rather than only to the buyer who wins. Regulation 15.1(h) defines a buyer's premium as "an advertised percentage of the high bid or flat fee added to the high bid to determine the total contract price to be paid by the buyer," and Regulation 15.4(1) separately requires the advertisement to name the real estate firm and the auctioneer licensed with it.

Regulation 15.1 defines a "shill" at an Arkansas real estate auction as a person who:

• a.pretends to have no association with the auctioneer or seller and puffs a bid✓
• b.bids for an absent buyer under a written absentee bid authorization
• c.records the winning bids and prepares the closing statement afterward
• d.inspects the property before the auction for a prospective bidder

Regulation 15.1(l) defines a shill as "a person who falsely pretends to have no association with the auctioneer or seller and gives the impression of being an enthusiastic bidder by puffing of a bid," and Regulation 15.1(j) defines a rafter bid or puffing as "a fictitious bid used to increase the final sales price." Regulation 15.7(1) makes knowingly receiving or using a rafter bid, puffing, or the services of a shill a prohibited act. Under Regulation 15.8, an unlicensed person who acts as a shill is engaged in unlicensed real estate activity and faces the civil penalties in Ark. Code Ann. § 17-42-109.

In a mortgage insured by the Federal Housing Administration, the FHA:

• a.guarantees the borrower an interest rate that Congress sets
• b.lends the money to the borrower at a subsidized fixed rate
• c.buys the loan and holds it in a federal mortgage portfolio
• d.insures the lender against loss; it does not lend the money✓

FHA operates a mortgage insurance program: an approved private lender makes the loan, and FHA insures that lender against loss if the borrower defaults, in exchange for an up-front and an annual mortgage insurance premium paid by the borrower. FHA does not originate loans, does not set the note rate, and does not buy loans for a portfolio. The VA program is a guaranty rather than insurance, and buying closed loans on the secondary market is the role of Fannie Mae and Freddie Mac.

A person who violates RESPA's prohibition on kickbacks and unearned fees, 12 U.S.C. § 2607, may be:

• a.fined not more than $10,000, imprisoned not more than one year, or both✓
• b.fined not more than $10,000, imprisoned not more than ten years, or both
• c.fined not more than $100,000, imprisoned not more than one year, or both
• d.fined not more than $1,000, imprisoned not more than one year, or both

Section 2607(d)(1) provides that "any person or persons who violate the provisions of this section shall be fined not more than $10,000 or imprisoned for not more than one year, or both." Section 2607(d)(2) adds private liability to the person charged, jointly and severally, for three times the amount of the charge paid for the settlement service. The underlying prohibition in Regulation X, 12 C.F.R. § 1024.14(b), is broad: "A company may not pay any other company or the employees of any other company for the referral of settlement service business."

Under Regulation Z, the three-business-day right of rescission applies to a:

• a.commercial mortgage on a small apartment building the borrower owns
• b.purchase-money mortgage on the borrower's new principal dwelling
• c.mortgage on a vacation home the borrower will occupy part-time
• d.home equity loan on the borrower's existing principal dwelling✓

12 C.F.R. § 1026.23(a)(1) gives a consumer the right to rescind a credit transaction in which a security interest is taken in the consumer's principal dwelling, and § 1026.23(f)(1) exempts "a residential mortgage transaction" — the purchase-money loan — from that right. So refinances with a new creditor, home equity loans and home equity lines on the borrower's existing principal dwelling are rescindable, while the loan used to buy the home is not. A dwelling that is not the borrower's principal dwelling, and credit extended primarily for a business purpose under § 1026.3(a), are outside the rule.

Under 12 C.F.R. § 1026.19(e), the creditor must deliver or mail the Loan Estimate no later than:

• a.the third business day after the creditor receives the application✓
• b.the third business day before consummation of the transaction
• c.the seventh business day after the creditor receives the application
• d.the tenth business day after the creditor receives the application

Section 1026.19(e)(1)(iii)(A) requires the creditor to deliver or place in the mail the Loan Estimate "not later than the third business day after the creditor receives the consumer's application." A second, separate clock in § 1026.19(e)(1)(iii)(B) requires delivery or mailing not later than the seventh business day before consummation, and § 1026.19(e)(1)(iv) deems a consumer to have received a mailed disclosure three business days after it is sent. The three-business-day-before-consummation figure belongs to the Closing Disclosure under § 1026.19(f)(1)(ii)(A), not to the Loan Estimate.

After the consumer has received the Closing Disclosure, which change requires a new three-business-day waiting period under 12 C.F.R. § 1026.19(f)(2)(ii)?

• a.The property's appraised value comes in below the contract price
• b.The seller agrees to pay a larger share of the buyer's closing costs
• c.The loan product changes, for example from a fixed rate to adjustable✓
• d.The borrower's homeowners insurance premium rises by two hundred dollars

Section 1026.19(f)(2)(ii) lists exactly three changes that restart the three-business-day clock: the disclosed annual percentage rate becomes inaccurate as defined in § 1026.22; the loan product is changed; or a prepayment penalty is added. Everything else that becomes inaccurate before consummation is handled under § 1026.19(f)(2)(i), which requires corrected disclosures at or before consummation with no new waiting period. That is why a last-minute seller credit, an appraisal result, or an insurance premium change does not delay the closing under this rule.

Section 1 of the Sherman Act declares illegal every contract, combination, or conspiracy in restraint of trade. For a broker, that most directly prohibits:

• a.setting the firm's own commission rate without consulting other firms
• b.declining to cooperate with a firm whose practices the broker distrusts
• c.charging one seller a different commission rate than another seller
• d.agreeing with a competing firm on the commission rate both will charge✓

15 U.S.C. § 1 reaches concerted action, not unilateral conduct: "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." Horizontal price fixing between competing firms is the classic violation, and the statute makes it a felony punishable by a fine up to $100,000,000 for a corporation or $1,000,000 for an individual, or up to ten years' imprisonment. A single firm setting its own rate, deciding on its own not to work with another firm, or negotiating different rates with different clients is not an agreement among competitors.

The federal Fair Housing Act, 42 U.S.C. § 3604, lists which of these as a protected class?

• a.Military service
• b.Marital status
• c.Source of income
• d.Familial status✓

The classes protected by 42 U.S.C. §§ 3604 and 3605 are race, color, religion, sex, familial status, national origin and handicap. Familial status, added by the Fair Housing Amendments Act of 1988, protects households with a child under eighteen and people who are pregnant or securing custody. Marital status, source of income and military or veteran status are not federal fair housing classes, though state and local ordinances add some of them. Section 3607(b) exempts qualifying housing for older persons from the familial status provisions only.

The Fair Housing Act exemption in 42 U.S.C. § 3603(b)(2) covers rooms or units in a dwelling occupied by no more than four families living independently, provided that:

• a.the owner has not used a real estate broker or agent within twelve months
• b.the owner owns no more than three such dwellings anywhere in the country
• c.the owner has published no advertisement for the vacancy in thirty days
• d.the owner actually maintains and occupies one of the units as a residence✓

Section 3603(b)(2) exempts "rooms or units in dwellings containing living quarters occupied or intended to be occupied by no more than four families living independently of each other, if the owner actually maintains and occupies one of such living quarters as his residence." Owner occupancy is the whole condition. Two limits survive the exemption in any event: § 3603(b) does not reach § 3604(c), so discriminatory advertising stays unlawful, and § 3606 on brokerage services and § 3617 on coercion still apply. The three-house and no-broker conditions belong to the separate single-family exemption in § 3603(b)(1).

Title III of the Americans with Disabilities Act reaches a real estate brokerage's office because the office is:

• a.a federally assisted facility subject to Section 504 of the Rehabilitation Act
• b.a commercial facility exempt unless it employs fifteen or more people
• c.a place of public accommodation, where readily achievable barriers must go✓
• d.a dwelling covered by the Fair Housing Act's design and construction rules

42 U.S.C. § 12181(7)(E) lists "a bakery, grocery store, clothing store, hardware store, shopping center, or other sales or rental establishment" among the twelve categories of public accommodation, and § 12181(7)(F) covers a service establishment. Section 12182(a) then bars discrimination on the basis of disability in the full and equal enjoyment of such a place, and § 12182(b)(2)(A)(iv) requires removal of architectural barriers in existing facilities "where such removal is readily achievable." Title III has no employee-count threshold; the fifteen-employee floor belongs to Title I, which governs employment.

Federal lead-based paint disclosure rules apply to "target housing," which 40 C.F.R. § 745.103 defines as housing:

• a.built before 1978, except elderly or disabled housing and 0-bedroom units✓
• b.built before 1978, including every rental unit whatever its bedroom count
• c.built before 1950, except elderly or disabled housing and 0-bedroom units
• d.built before 1992, except elderly or disabled housing and 0-bedroom units

Section 745.103 defines target housing as "any housing constructed prior to 1978, except housing for the elderly or persons with disabilities or any 0-bedroom dwelling (unless any child who is less than 6 years of age resides or is expected to reside in such housing)." Section 745.101 further excludes foreclosure sales, leases of housing certified lead-based paint free, short-term leases of 100 days or less with no renewal, and renewals where the lessor has already disclosed and has no new information. 1978 is the year residential lead paint was banned; 1992 is the year the disclosure statute was enacted.