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. Real Estate Calculations

   An income property has a net operating income of $60,000 and sold for $750,000. What is the indicated capitalization rate?

   • a.12.5%
   • b.6%
   • c.10%
   • d.8%

   Answer: d

   Explanation: The capitalization rate is found by rearranging Value = NOI / cap rate into cap rate = NOI / value = $60,000 / $750,000 = 0.08, or 8%. This is the same relationship used to value income property, just solved for the rate instead of the value. Any two of the three variables (NOI, value, cap rate) let you solve for the third. Brokers working with investors use this constantly to compare properties, since a higher cap rate signals a lower price relative to income.

3. 3. Contracts

   Both parties have already signed a purchase contract. They now agree to change the closing date. Which instrument correctly records that change to the existing agreement?

   • a.A new listing agreement with the brokerage
   • b.An addendum attached at the original signing
   • c.A contingency removal form from the buyer
   • d.An amendment signed by both of the parties

   Answer: d

   Explanation: Changes to the terms of an already signed contract are made by amendment, executed by both parties. An addendum adds terms and is normally attached and made part of the agreement when it is first written, at or before signing, so it is not the tool for a later change. A contingency removal form waives or satisfies a condition and cannot move a closing date. And a listing agreement is the seller's contract with the brokerage, unrelated to modifying a purchase agreement. The vocabulary matters in file review, because a change documented on the wrong form invites disputes.

4. 4. General Principles of Agency

   A broker advances $40,000 for renovations and, in exchange, receives a recorded ownership interest in the property along with the exclusive right to sell it. The owner now tries to revoke. Why can the broker resist?

   • a.The broker holds an exclusive right-to-sell listing agreement
   • b.The broker has already performed part of the marketing work
   • c.The agency is coupled with an interest, so it is not freely revocable
   • d.The broker recorded the listing agreement in the public records

   Answer: c

   Explanation: An agency coupled with an interest exists when the agent holds an actual stake in the property itself, not merely an expectation of a commission, and such an agency cannot be unilaterally revoked by the principal or terminated by the principal's death. The broker's ownership interest, secured by the advance, is that stake. An ordinary exclusive right-to-sell listing gives no property interest and remains revocable in power. Partial performance may support a damages claim but does not defeat revocation. Recording a listing does not convert a contract right into an interest in land.

5. 5. Practice of Real Estate

   An affiliated licensee posts an online listing showing only her first name and cell number, with no mention of the brokerage anywhere. This advertisement is:

   • a.Acceptable once she names the firm to a caller
   • b.Acceptable, because personal branding is clearly permitted
   • c.An unlawful blind ad concealing the firm's name
   • d.Lawful for rental ads though not for sale listings

   Answer: c

   Explanation: An advertisement that does not identify the brokerage is a blind ad, and advertising rules require the firm's name so consumers know who stands behind the offer. Naming the firm only when a caller asks comes too late, because the published ad is itself the violation. Personal branding is permitted, but it sits alongside the firm's name rather than replacing it. Nothing distinguishes rentals from sales for this purpose; a brokerage advertisement is a brokerage advertisement. A supervising broker should sweep the office's online and social content for the same defect.

6. 6. Financing

   A lender receives a completed residential loan application on Monday. Under TRID, the Loan Estimate must be delivered or placed in the mail:

   • a.Only after the appraisal report is received
   • b.Within three business days of application
   • c.At least three business days before consummation
   • d.At the same time as the Closing Disclosure

   Answer: b

   Explanation: TRID requires the Loan Estimate within three business days after the lender receives a completed application, which is defined by a short list of items rather than by the lender's own checklist. The three-business-day period running before consummation belongs to the Closing Disclosure, which the consumer must receive at least that far ahead of closing. The two forms therefore arrive at opposite ends of the transaction, not together, and the estimate is not held for the appraisal. Three changes reset the closing waiting period: an APR outside tolerance, a change of loan product, or adding a prepayment penalty.

7. 7. Valuation and Market Analysis

   An investor asks why the broker's operating statement charges an annual amount for future appliance and roof replacement even though nothing was actually spent on either item this year.

   • a.A replacement reserve is a legitimate operating expense
   • b.Capital improvements are always expensed in the year budgeted
   • c.Book depreciation is being charged as an operating expense
   • d.Debt service is being spread across the building's components

   Answer: a

   Explanation: A replacement reserve sets aside an annual amount for short-lived components that will inevitably need replacing, and it is a recognized operating expense in a reconstructed statement precisely because it smooths lumpy capital costs into the year they are being earned. It is not book depreciation, which is an accounting allocation excluded from operating expenses. Capital improvements themselves are not expensed in the year incurred; the reserve is the mechanism that accounts for them. Debt service is excluded from operating expenses altogether and is never allocated across components. Property tax, insurance, and a management fee also belong in operating expenses, though some lenders and investors compute net operating income without a reserve, so a broker should say which convention a statement follows.

8. 8. Real Estate Calculations

   A brokerage closed 40 sides last quarter at an average price of $300,000, earning 3% on each side. Agents keep an average of 65% of the firm's commission. What is the office's company dollar?

   • a.$360,000
   • b.$126,000
   • c.$234,000
   • d.$252,000

   Answer: b

   Explanation: Gross commission income is everything the firm collects: 40 x $300,000 x 0.03 = $360,000. Company dollar is what remains after agent splits are paid: $360,000 x (1 - 0.65) = $360,000 x 0.35 = $126,000. Reporting $360,000 confuses gross commission income with company dollar. The $234,000 figure is the agents' side, not the firm's. Applying a full 6% commission to the $12,000,000 of volume gives $720,000 of gross commission income, and $720,000 x 0.35 = $252,000. Check: agents receive $234,000, and $234,000 + $126,000 = the $360,000 of gross commission income. Company dollar, not gross commission income, is what covers office rent and overhead.

9. 9. Property Management

   A residential tenant is two months behind in rent. The on-site manager changes the locks and has the electricity shut off to push the tenant out. This action is:

   • a.Proper, since the tenant breached the lease agreement first
   • b.Proper if the lease authorizes a lockout for nonpayment
   • c.Unlawful self-help rather than lawful court process
   • d.Improper only if the tenant later pays the full balance

   Answer: c

   Explanation: Changing locks, cutting utilities, removing doors, or setting a tenant's belongings on the curb are self-help evictions, and they are unlawful, exposing the owner, the manager, and the supervising broker to damages and license discipline. The lawful path is a proper notice, then a summary possession or unlawful detainer action, a judgment for possession, and a writ executed by a law enforcement officer; the notice forms and time periods are set by each state. A lease clause cannot authorize what the law forbids, the tenant's own breach creates no right of self-help, and the tenant paying later does not make the lockout retroactively lawful.

10. 10. Transfer of Title

    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

    Answer: d

    Explanation: 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.