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 rejects a buyer's offer outright, then reconsiders an hour later and signs the same offer form. The buyer refuses to proceed. What is the legal position?

   • a.The seller's signature revived the original offer
   • b.The buyer is bound because nothing changed
   • c.The contract is voidable at the seller's option
   • d.Rejection ended the offer, so the signing is a new offer

   Answer: d

   Explanation: A communicated rejection terminates the offer immediately, and the offeree cannot revive it by signing later. The seller's signature amounts to a new offer back to the buyer, who is free to walk away. The signature therefore revived nothing, and the buyer is not bound merely because the printed terms are unchanged. Describing the result as voidable at the seller's option is backwards, since there is no contract for the seller to cancel. This trap appears often in fast-moving multiple-offer situations, so brokers should document exactly when a rejection was communicated and by whom.

3. 3. General Principles of Agency

   A firm's buyer client wants to tour a property that the same firm has listed. In a state that permits designated agency, how does the brokerage typically proceed?

   • a.It requires the buyer to hire an unaffiliated brokerage instead
   • b.It withdraws the listing so the buyer's agent can represent him
   • c.It converts both licensees into transaction brokers automatically
   • d.It appoints one licensee to each party as their designated agent

   Answer: d

   Explanation: Designated agency solves the in-house conflict by assigning a different licensee to each side, so each party keeps a real advocate even though one firm is on both sides of the transaction. The appointments are made by the broker and disclosed to the parties. Pulling the listing would abandon the seller and is never the routine answer. Nothing converts licensees into non-agency transaction brokers by itself; that role requires its own agreement. Sending the buyer to another firm may be one option in some states, but it is not how designated agency works.

4. 4. Practice of Real Estate

   A licensee posts 'JUST SOLD by our team!' beside a photo of a home her firm neither listed nor sold. What action should the broker take?

   • a.Allow it if the post links to the listing broker
   • b.Require only that the listing firm's name be added
   • c.Allow it because closed sale data is public information
   • d.Order it removed as a false and misleading advertisement

   Answer: d

   Explanation: Claiming credit for a sale the firm neither listed nor sold is false advertising, and using another firm's listing in marketing without permission adds a second problem. The broker should have the post removed and the record corrected. A link to the listing broker does not repair a headline reading 'by our team.' Closed sale data may sometimes be shared where the source permits, but truthfulness still governs how it is presented. Adding the listing firm's name beneath a false claim of credit leaves the claim just as false.

5. 5. Valuation and Market Analysis

   An investor plans to build a 6,000-square-foot luxury home in a neighborhood of 1,800-square-foot houses, and a broker warns the finished home will not appraise near its construction cost. Which principle applies?

   • a.Progression, because the finest home in an area gains value
   • b.Regression, because surrounding lesser properties drag the value down
   • c.Anticipation, because buyers pay for expected future benefits
   • d.Plottage, because combining features increases total value

   Answer: b

   Explanation: Regression is the loss a superior property suffers from being surrounded by lesser ones, and it is the classic explanation for an over-improvement that cannot recover its cost. Progression works the other direction, lifting a modest property in a superior area, so it predicts the opposite outcome here. Anticipation concerns the present worth of expected future benefits and does not address neighborhood mismatch. Plottage is the increment created when adjoining parcels are assembled under one ownership, an entirely different concept. Advising an investor about regression before construction begins is far more useful than explaining it after the appraisal comes in low.

6. 6. Property Ownership

   An investor wants exposure to a diversified pool of income properties without managing any of them, and asks a broker about real estate investment trusts. Which statement is accurate?

   • a.A REIT holds real estate assets and investors own its shares
   • b.A REIT keeps its status only by reinvesting all earnings
   • c.A REIT is a private syndicate closed to ordinary investors
   • d.A REIT investor receives a recorded deed to a share of each property

   Answer: a

   Explanation: A REIT is a company that owns, and frequently operates, income-producing real estate. Investors buy shares in the trust rather than an interest in any particular parcel, so nothing is deeded into an investor's name and no individual property title changes hands. Many REITs trade publicly and are open to small investors, which is much of their appeal, so describing them as closed private syndicates gets it backward. REITs are also known for the opposite of retaining earnings: to keep their favorable tax treatment they must distribute the large majority of taxable income to shareholders, which is why they are held for dividend income.

7. 7. Property Management

   A firm manages a multi-tenant office building whose lobby, corridors, and restrooms are open to the public. Which statement best describes the ADA obligations for those existing areas?

   • a.The building is exempt because it predates the ADA entirely
   • b.Compliance is triggered only when the city issues a permit
   • c.Barriers must be removed where removal is readily achievable
   • d.A lease clause assigning ADA duties to tenants ends liability

   Answer: c

   Explanation: Title III of the Americans with Disabilities Act covers public accommodations and commercial facilities, and in existing buildings it requires removal of architectural barriers where that is readily achievable, meaning able to be carried out without much difficulty or expense; alterations and new construction must meet the accessibility standards outright. Being built before the ADA is not an exemption, and no permit application triggers or postpones the duty. Landlords and tenants may allocate the work between themselves by lease, but that private allocation does not extinguish either one's liability to the public. A prudent manager keeps a written barrier-removal plan and documents what has been completed each year.

8. 8. Property Ownership and Land Use Controls and Regulations

   The four government rights in land are commonly summarized as police power, eminent domain, taxation and escheat. Escheat operates when:

   • a.A local agency downzones a parcel in a way that reduces its economic value
   • b.An owner dies leaving neither a valid will nor any heirs, so title passes to the state
   • c.A public agency takes private property for public use upon payment of just compensation
   • d.An owner fails to pay property taxes and the county tax collector sells the parcel

   Answer: b

   Explanation: Escheat is the state's reversionary right to property left by an owner who dies intestate without heirs, so that land does not become ownerless. Downzoning is an exercise of the police power, which regulates the use of land for public health, safety and welfare and generally requires no payment. Taking property for public use on payment of just compensation is eminent domain, a different power entirely. A tax sale is an exercise of the taxing power enforced through the tax lien, and the parcel is sold to a purchaser rather than passing to the state as an escheat.

9. 9. Property Valuation and Financial Analysis

   An income property produces a net operating income of $60,000. Investors in that market require a 6 percent capitalization rate. Using the income approach the indicated value is:

   • a.$360,000
   • b.$1,000,000
   • c.$100,000
   • d.$3,600,000

   Answer: b

   Explanation: In direct capitalization, value equals net operating income divided by the capitalization rate. Dividing $60,000 by 0.06 gives $1,000,000. Multiplying instead of dividing gives $60,000 times 0.06, or $3,600, which is not among the choices; the $360,000 and $3,600,000 options are that same multiplication done after misreading the 6 percent rate as 6 or as 60. Dividing $60,000 by 0.6 gives $100,000. Committing the relationship to memory in all three forms, so that rate equals income divided by value and income equals value times rate, lets a candidate solve any of the three variants.

10. 10. Practice of Real Estate and Mandated Disclosures

    Under Commissioner's Regulation 2729, a California broker may store required transaction records electronically only if the storage medium:

    • a.Is nonerasable write once, read many (WORM) media
    • b.Is backed up to a server physically located within the State of California
    • c.Is inspected annually by a certified public accountant retained by the broker
    • d.Permits the broker to correct clerical errors in a stored record at any time

    Answer: a

    Explanation: Regulation 2729(a)(1) requires electronic image storage to be nonerasable write once, read many media that does not allow changes to the stored document or record, and the balance of the regulation requires regular course of business preparation, an identifiable custodian, a reliable indexing system with quality control, and retention for three years under section 10148. Subdivision (b) requires the broker to keep a means of viewing the records at the office and to provide paper copies at the broker's expense. Nothing turns on server location or an accountant's inspection, and the ability to alter a stored record is exactly what the rule forbids.