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

   An affiliated licensee resigns and joins a competing firm while several listings she took still have months left to run. What becomes of those listing agreements?

   • a.They follow the licensee to her new brokerage automatically
   • b.They stay with her former firm, which reassigns servicing of them
   • c.They terminate at once, freeing each seller to relist anywhere
   • d.They convert to open listings until each seller signs a new one

   Answer: b

   Explanation: The listing is a contract between the seller and the brokerage, so the firm keeps it when the individual who took it departs, and the broker assigns another licensee to service the property. Moving a listing to the new firm takes both the releasing broker's agreement and the client's, which is why departures are negotiated rather than assumed. A resignation does not terminate the seller's contract, so the seller is not free to relist elsewhere while the term runs. Nor does the agreement quietly become an open listing, because changing the type of listing requires a new agreement the seller signs. A written departure policy stating what an agent may take avoids most of these fights.

4. 4. General Principles of Agency

   An affiliated licensee commits a serious violation the broker genuinely knew nothing about. The firm has no written policy manual, and the broker has never reviewed a transaction file. What is the broker's exposure?

   • a.None, because the broker had no knowledge of the violation
   • b.Limited to a civil claim brought by the injured consumer
   • c.Shared liability only if the agent is classified as an employee
   • d.Discipline for failure to supervise, apart from the agent's violation

   Answer: d

   Explanation: Failure to supervise is its own offense. A broker who maintains no written policies, provides no training, and never reviews files can be disciplined for that failure even though the underlying misconduct was the agent's and the broker never knew of it. Lack of knowledge is precisely what the supervisory duty is meant to prevent, so it is no defense. Exposure is not confined to a private lawsuit; the license authority can act separately. And employee versus independent-contractor status is a tax classification that does not switch the supervisory duty on or off.

5. 5. Practice of Real Estate

   A brokerage emails a monthly commercial newsletter to thousands of past contacts. Which requirement does the CAN-SPAM Act place on that email?

   • a.Prior written consent from every recipient
   • b.Registration of the campaign with a federal agency
   • c.Transmission only during ordinary business hours
   • d.A working opt-out link and the sender's postal address

   Answer: d

   Explanation: CAN-SPAM governs commercial email and requires a clear and conspicuous opt-out mechanism that keeps working for a period after the message is sent, a valid physical postal address, accurate header and routing information, and a subject line that is not deceptive. It uses an opt-out model rather than an opt-in one, so prior written consent is not the trigger, which is a frequent confusion with the text-message rules. No agency registration or filing exists for email campaigns. And time-of-day restrictions belong to telemarketing calls rather than to email.

6. 6. Financing

   Under the Dodd-Frank ability-to-repay rule, before making a residential mortgage loan a lender must:

   • a.Verify the borrower can repay the loan
   • b.Rely on stated income
   • c.Qualify at the teaser rate
   • d.Approve any borrower who makes a large down payment

   Answer: a

   Explanation: The ability-to-repay rule requires a reasonable, good-faith determination that the borrower can repay, based on verified income or assets, employment, debts, the resulting debt ratios, and credit history. Stated-income lending and qualifying at a discounted starting rate are precisely the practices the rule ended, since both let borrowers into payments they could not sustain. A large down payment reduces the lender's loss but does not excuse the analysis. Loans meeting the qualified mortgage standards, which bar features such as negative amortization and excessive points, receive greater legal protection for the lender.

7. 7. Valuation and Market Analysis

   A submarket has 180 active listings, and closings have averaged 20 per month over the past six months. What does this absorption data tell a broker advising a seller about pricing?

   • a.0.11 months of supply, found by dividing sales by listings
   • b.3 months of supply, a seller's market with tight inventory
   • c.9 months of supply, a seller's market favoring listing clients
   • d.9 months of supply, a buyer's market where sellers compete

   Answer: d

   Explanation: Months of supply divides active inventory by the monthly absorption rate: 180 / 20 = 9 months. Roughly six months is treated as balance, so nine months signals an oversupplied, buyer-favoring market in which sellers compete on price, condition, and concessions. Reading nine months as a seller's market inverts the interpretation and would lead to an overpriced listing. The three-month answer uses the wrong arithmetic entirely. The 0.11 figure divides sales by listings rather than listings by sales, producing a monthly turnover fraction, not months of supply. Pairing this with median days on market gives the seller a defensible pricing conversation.

8. 8. Real Estate Calculations

   A lender applies a 36% back-end ratio to total monthly debt. An applicant earns $8,400 gross monthly and pays $480 on a car, $220 on a student loan, and $100 in minimum card payments. Maximum PITI?

   • a.$2,224.00
   • b.$2,352.00
   • c.$1,552.00
   • d.$3,024.00

   Answer: a

   Explanation: The back-end ratio limits housing plus recurring debt together. Total allowable debt = $8,400 x 0.36 = $3,024. Recurring obligations total $480 + $220 + $100 = $800. Maximum PITI = $3,024 - $800 = $2,224. Reporting $3,024 forgets to subtract the existing obligations. Using the 28% front-end ratio produces $2,352, which ignores the debts entirely. Subtracting the $800 from that front-end figure gives $1,552 and mixes the two tests. Check: ($2,224 + $800) / $8,400 = 0.36. Underwriting runs both ratios and qualifies the borrower at whichever produces the lower payment.

9. 9. Property Disclosures

   Two weeks after a home goes under contract, a heavy storm reveals a serious roof leak that neither the seller nor the agent previously knew about. What does the disclosure duty require?

   • a.The newly discovered material fact must be disclosed to the buyer promptly
   • b.The seller may simply address the leak at the final walk-through
   • c.Nothing further, since disclosure closed when the contract was signed
   • d.The contract must be canceled and the property relisted from scratch

   Answer: a

   Explanation: The obligation to disclose material facts continues until closing, so a defect that appears or is discovered after the contract is signed must go to the buyer promptly and in writing, together with any updated disclosure statement the state requires. The buyer can then decide whether to proceed, renegotiate, ask for a repair, or use a contract right to cancel. Saving the news for the walk-through takes that choice away and is a frequent source of post-closing claims against brokers. Nothing requires the parties to tear up the contract and relist; the agreement stays in force unless a contingency or the parties themselves end it.

10. 10. Licensing Requirements

    Which personal qualification does SDCL 36-21A-30 impose on every South Dakota real estate license applicant?

    • a.Being twenty-one and a South Dakota resident for at least one year
    • b.Being eighteen and a registered voter resident in South Dakota
    • c.Being eighteen and a United States citizen or South Dakota resident
    • d.Being nineteen and a United States citizen or a lawful permanent resident

    Answer: c

    Explanation: SDCL 36-21A-30 grants a license only to persons "of reputable character who have attained the age of eighteen years" and who are "competent to transact the business of a licensee in a manner as to safeguard the interest of the public," and closes with the citizenship sentence: "No one except a citizen of the United States of America, or resident of South Dakota, is eligible to secure a license as a broker." Because citizenship and residency are alternatives joined by "or," a nonresident United States citizen qualifies and no waiting period applies, which disposes of the one-year residency option. Twenty-one and nineteen are not the statutory ages. Voter registration is not a licensing condition anywhere in the chapter. The same section also bars an applicant whose license was revoked in any state within the previous five years.