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 broker reviews a purchase agreement during file review. Which set of elements must be present for the agreement to be a valid contract?

   • a.Offer, acceptance, earnest money, and a recorded deed
   • b.A licensed broker, an appraisal, financing, and a survey
   • c.Written form, notarization, witnesses, and a closing date
   • d.Competent parties, mutual assent, lawful object, and consideration

   Answer: d

   Explanation: A contract needs competent parties, mutual assent (a valid offer and acceptance), a lawful object, and consideration; a real estate contract must also be in writing to satisfy the statute of frauds. Earnest money is customary evidence of good faith but is not an element, and a deed is the instrument that conveys title after the contract is performed. Notarization and witnesses matter for recording documents, not for contract formation. An appraisal, financing, and a survey are transaction steps a contract may require, not elements that make it enforceable.

3. 3. Contracts

   A buyer is satisfied with the inspection results and wants the seller to know that this contingency no longer applies. Which document should the buyer deliver?

   • a.A contingency removal form for that item
   • b.A rider adding new terms to the contract
   • c.An amendment changing the purchase price
   • d.A mutual release ending the transaction

   Answer: a

   Explanation: A contingency removal form, sometimes called a notice of satisfaction or waiver, tells the seller that a specified condition has been met or waived, which is exactly what the buyer wants to communicate about the inspection. An amendment changes agreed terms such as price, which is not happening here. A rider adds new terms rather than clearing an existing condition. And a mutual release would end the transaction, the opposite result. Delivering the right form on time matters because contracts treat an unremoved contingency either as waived or as a ground to cancel, depending on the wording.

4. 4. General Principles of Agency

   A firm's business cards, office signage, and website all present a licensee as the office manager, although internally she holds no such authority. She signs a service contract with a vendor. The firm is likely:

   • a.Free of the contract, because she lacked internal authority
   • b.Bound, because the firm created apparent authority
   • c.Free of the contract, since the vendor should have verified
   • d.Bound only if the broker later ratifies the vendor contract

   Answer: b

   Explanation: Apparent or ostensible authority is measured by what the principal leads third parties to believe. Cards, signage, and a website are the firm's own manifestations, so a vendor who reasonably relies on them can hold the firm to the contract even though the licensee had no actual authority. Internal limits the vendor never saw do not defeat that reliance. Ratification would be one way to become bound, but it is not the only way, so the contract does not depend on it. Shifting the burden to the vendor to investigate ignores that the firm created the appearance.

5. 5. 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.

6. 6. Financing

   A seller insists, as a condition of selling, that the buyer purchase the title insurance policy from a company the seller selects. Under RESPA this condition is:

   • a.Permitted if the seller discloses the choice in writing
   • b.Required by federal law in every home sale
   • c.Prohibited where the buyer pays for the policy
   • d.Permitted only in commercial transactions instead

   Answer: c

   Explanation: RESPA bars a seller from requiring, directly or indirectly, that a buyer who pays for title insurance buy it from any particular company as a condition of the sale, and violations can expose the seller to damages measured against the charges. Disclosing the demand does not cure it, because the problem is the coercion, not the secrecy. Nothing in federal law requires such a condition. And the protection runs to residential federally related mortgage loans rather than being limited to commercial deals. A buyer may of course choose the seller's suggested company voluntarily.

7. 7. Valuation and Market Analysis

   A comparable home sold for $315,000 and rents for $2,100 per month, while the subject rents for $2,400 per month. Using a monthly gross rent multiplier, what does that sale indicate?

   • a.A GRM of 12.5 and an indicated value of $30,000
   • b.A GRM of 150 and an indicated value of $360,000
   • c.A GRM of 150 and an indicated value of $315,000
   • d.A GRM of 131.25 and an indicated value of $315,000

   Answer: b

   Explanation: A gross rent multiplier is derived by dividing sale price by monthly gross rent: $315,000 / $2,100 = 150. Applying it to the subject: 150 x $2,400 = $360,000. The 12.5 figure comes from dividing by annual rent ($2,100 x 12 = $25,200), a gross income multiplier, and then wrongly multiplying it by a monthly rent to reach $30,000. The 131.25 figure divides the comparable's price by the subject's rent, mixing two properties together. Repeating $315,000 simply restates the comparable's price. Note that a GRM uses gross rent only, ignoring vacancy and operating expenses, so it screens rather than values.

8. 8. Real Estate Calculations

   A buyer purchases at $325,000 with an 80% loan-to-value first mortgage and agrees to pay 2.5 discount points to buy down the rate. What do the points cost in dollars?

   • a.$8,125.00
   • b.$6,500.00
   • c.$1,625.00
   • d.$2,600.00

   Answer: b

   Explanation: Points are charged against the loan amount, never the purchase price. The loan is 80% of $325,000 = $260,000. One point equals 1% of the loan, so 2.5 points = 0.025 x $260,000 = $6,500. Charging 2.5% against the $325,000 price gives $8,125, the most common error on this problem. Counting a single point gives $2,600. Applying the 2.5% to the $65,000 down payment gives $1,625. Check: 1% of $260,000 = $2,600, and $2,600 x 2.5 = $6,500. Points are prepaid interest and count as a finance charge, so a broker should confirm in writing who pays them.

9. 9. Property Management

   A covered fire leaves an owner's office building untenantable for eight months. Rent stops coming in while the mortgage and taxes continue. Which coverage responds to the lost rental income?

   • a.General liability coverage
   • b.Fire legal liability coverage
   • c.Business interruption coverage
   • d.Workers compensation coverage

   Answer: c

   Explanation: Business interruption coverage, often written as rent loss for investment property, replaces the income the building would have produced while it cannot be occupied after a covered peril, which is why lenders and experienced owners insist on it. Property or hazard insurance pays to repair the physical damage but not for the stream of rent that stopped. General liability responds to bodily injury and property damage claims brought by others on the premises. Workers compensation covers job injuries to on-site employees. Fire legal liability covers a tenant's liability for fire damage to the space it rents. Managers also require tenants to carry renters insurance, since the owner's policy covers neither tenants' belongings nor tenants' liability.

10. 10. Transfer of Title

    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

    Answer: a

    Explanation: 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.