Sample practice questions

A few real questions from this free bank, with full explanations. Use the practice tool above for the whole set.

1. 1. Property Ownership

   A commercial tenant bolts custom display shelving to the walls to run a retail store. Absent any agreement to the contrary, what is the usual character of that shelving?

   • a.A permanent fixture that automatically belongs to the landlord
   • b.Real property that must be conveyed with the building
   • c.A trade fixture the tenant may remove before the lease ends
   • d.An easement appurtenant to the leased space

   Answer: c

   Explanation: Items a commercial tenant installs to conduct business are trade fixtures. Even though they are attached, the law lets the tenant remove them before the lease ends (repairing any damage), because the tenant's intent was to use them in the business, not to improve the landlord's property permanently. This is an exception to the general rule that attached items become part of the realty. It is not an easement, which is a right to use another's land, not an object.

2. 2. Contracts

   A seller signs a buyer's offer but locks it in a desk drawer and tells no one. Two days later the buyer withdraws the offer in writing. Which statement is correct?

   • a.A contract formed the instant the seller signed the offer
   • b.No contract formed without communicated acceptance
   • c.The buyer's withdrawal is a breach of the agreement
   • d.The seller may enforce the contract after telling the buyer

   Answer: b

   Explanation: Acceptance is effective only when it is communicated to the offeror in a manner the offer permits. A signature kept secret in a drawer forms nothing, so the buyer's withdrawal before any communication was valid and no contract exists. Signing alone does not create the agreement, which is why the buyer's withdrawal cannot be a breach. Telling the buyer afterward comes too late, since the offer was already revoked. This is why offices require prompt delivery of signed documents and keep time-stamped records showing exactly when an acceptance was transmitted to the other side.

3. 3. General Principles of Agency

   A property manager hires a roofer for $8,000, bills the owner $11,000 for the same work, and quietly keeps the difference. Under agency law, the extra $3,000 is:

   • a.A secret profit the agent must surrender to the owner
   • b.An acceptable markup if the total price is still reasonable
   • c.A finder's fee the owner impliedly agreed to when hiring
   • d.A permissible management fee under the industry custom

   Answer: a

   Explanation: Any undisclosed benefit an agent takes out of the principal's transaction is a secret profit, and the remedy is disgorgement to the principal, often alongside loss of compensation and license discipline. Calling it a management fee does not help, because fees must come from the management agreement, not from a hidden markup. Reasonableness of the final price is irrelevant when the owner was never told. And nothing in hiring a manager implies consent to undisclosed vendor markups; consent must be informed and actual, not assumed.

4. 4. Practice of Real Estate

   A broker withdraws $2,000 from the trust account to cover the firm's payroll, intending to replace it the following week. This act is properly called:

   • a.Conversion of trust funds to the broker's use
   • b.Commingling, because the funds were merely mixed together
   • c.Permissible, since the money will be restored quickly
   • d.A bookkeeping error cured by the later deposit

   Answer: a

   Explanation: Taking trust money and spending it on the firm's own obligations is conversion, the most serious trust violation, and an intention to repay is not a defense. Commingling is the lesser offense of mixing trust and personal funds in one account without spending them, whereas here the money was actually used. Prompt restoration may reduce the harm but does not undo the violation or replace the missing funds in the meantime. Nor is this a posting mistake that a later deposit cures, because the withdrawal was deliberate. Regulators treat conversion as grounds for the harshest discipline available.

5. 5. Financing

   A defaulting borrower wants to halt the foreclosure by paying the full debt plus costs before the foreclosure sale takes place. That opportunity is:

   • a.A statutory redemption right exercised after the sale
   • b.A deficiency judgment entered against the borrower
   • c.The equitable right of redemption before sale
   • d.A deed given to the lender in lieu of foreclosure

   Answer: c

   Explanation: The equitable right of redemption is the borrower's chance to cure by paying the accelerated debt and costs at any time before the foreclosure sale, and it exists as a general principle. A statutory right to redeem after the sale is different: it exists only where state law creates it, and its terms vary, so a broker should never assume one is available. A deficiency judgment is the lender's separate claim for a shortfall remaining after the sale, where permitted. A deed in lieu is a voluntary conveyance that avoids foreclosure rather than redeeming from it.

6. 6. Property Ownership

   The owner of a dominant tenement buys the servient parcel next door and now holds both lots in fee simple. What happens to the easement between them?

   • a.It survives and may still be used by the common owner
   • b.It is suspended until either lot is sold again
   • c.It converts into an easement in gross by law
   • d.It is terminated by merger of the two title estates

   Answer: d

   Explanation: An easement presupposes two separately owned parcels. When one person acquires both the dominant and the servient tenements, the easement is extinguished by merger, and it does not spring back automatically if the lots are later divided again; a new easement must be created. The interest is ended, not merely suspended, and an owner needs no easement to cross land already owned. It cannot transform into an easement in gross, which benefits a person rather than a parcel. Easements can also end by written release from the dominant owner, by abandonment shown through conduct, or when the purpose they served has come to an end.

7. 7. Property Management

   A tenant with a disability in a privately owned building that receives no federal housing assistance asks the manager to waive the no-pets rule for her assistance animal and to have grab bars installed in the bathroom. Which statement is correct?

   • a.Both are modifications the landlord must install and pay for itself
   • b.Both may be refused because the no-pets rule applies to all tenants equally
   • c.The animal is a reasonable accommodation and the grab bars a reasonable modification
   • d.The animal requires a pet deposit and the grab bars require landlord funding

   Answer: c

   Explanation: A reasonable accommodation is a change in rules, policies, or services, such as waiving a no-pets rule; a reasonable modification is a physical change to the premises, such as grab bars. In private, unassisted housing the landlord bears the administrative cost of the accommodation, while the tenant generally pays for the modification and may be required to restore the unit where that is reasonable; where the provider receives federal financial assistance, Section 504 shifts the cost of structural modifications to the provider. An assistance animal is not a pet, so no pet deposit, pet rent, or pet fee may be charged, though the tenant remains responsible for actual damage the animal causes. Refusing both because the rule is applied uniformly is precisely the reasoning fair housing law rejects.

8. 8. Transfer of Title

   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

   Answer: d

   Explanation: 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.

9. 9. Agency Relationships & Managerial Duties

   A designated broker will be unable to act for two weeks. What does A.R.S. 32-2127(D) permit?

   • a.A written designation of another licensee, not exceeding thirty days
   • b.A written designation of another licensee for up to one year
   • c.Closure of the office until the designated broker returns
   • d.An oral designation confirmed at the next office meeting

   Answer: a

   Explanation: A.R.S. 32-2127(D) lets a designated broker who is unable to act within twenty-four hours designate an employed licensee or another designated broker to act on their behalf. The designation must be in writing, the original must be kept at the office for one year from its effective date, a copy must be attached to any hire, sever or renewal form signed by the designee, and the designation 'shall not exceed thirty days' duration.'

10. 10. Escrow and Settlement

    Under FIRPTA, what must a buyer generally do when the seller is a foreign person?

    • a.Obtain a certificate of good standing from the seller's country
    • b.Report the sale to the state department of revenue only
    • c.Pay the seller's entire capital gains tax before closing
    • d.Withhold part of the amount realised and remit that

    Answer: d

    Explanation: The Foreign Investment in Real Property Tax Act makes the transferee responsible for withholding a portion of the amount realised on the disposition of a United States real property interest by a foreign person, and for remitting it to the Internal Revenue Service. The withholding is an advance against the seller's eventual tax liability, not the tax itself, and exemptions and reduced rates apply, including for certain lower-priced residences the buyer will occupy.