Tennessee Real Estate Broker Exam — All Questions

A new environmental ordinance leaves a landowner with no economically viable use of a parcel, although the government takes no title to it. The owner's strongest constitutional claim is:

• a.The ordinance is void because zoning cannot restrict use
• b.A regulatory taking entitling the owner to payment✓
• c.Escheat has occurred and the state now owns the parcel
• d.Spot zoning, since only this parcel lost its value

Regulation that goes so far it denies an owner all economically viable use is treated as a regulatory taking, and just compensation is owed even though the government never took title. Arguing that zoning simply cannot restrict use fails, because regulating land is a valid exercise of the police power and owners have no right to the most profitable use. Escheat moves property to the state only when an owner dies with no will and no heirs, which has nothing to do with an ordinance. Spot zoning describes singling out one parcel for a different classification, not a general environmental rule applied to a class of land.

Reviewing a title report, a broker finds an old recorded covenant, written decades ago, that bars resale of the lot to members of a specified race. Its legal effect today is:

• a.It binds the buyer because it was recorded before purchase
• b.It is void, so a court will never enforce it or enjoin it✓
• c.It stays valid until the homeowners association removes it
• d.It is enforceable by the association but not by an owner

A private restriction that discriminates on a protected basis is void and unenforceable under the federal Fair Housing Act and the Civil Rights Act of 1866, so no court will order compliance or enjoin a violation, and the association has no power the courts would back. Recording rescues nothing, because an illegal restriction gains no force from sitting in the public record. No association vote is required to strip it of effect, although many states let an owner have the language formally struck. Valid CC&Rs, by contrast, are enforced privately by injunction brought by an owner or the association. A broker must never repeat or give effect to such language.

A grantor signs and notarizes a deed naming a nephew as grantee, locks it in a safe deposit box, and tells no one. The grantor later dies. What is the deed's effect?

• a.Title passed when the grantor signed the deed
• b.Title passed because the deed was acknowledged
• c.No title passed, because delivery never occurred✓
• d.Title passes when the estate later records it

A deed operates only when the grantor delivers it with the present intent to pass title and the grantee accepts, and both must happen while the grantor is alive. Signing accomplishes nothing while the instrument stays under the grantor's control in a box no one knows about. Acknowledgment before a notary serves recording, not validity, so notarizing it changes nothing here. An estate representative cannot supply the delivery the grantor failed to make, and recording an undelivered deed does not revive it. The nephew takes only through the will or the intestacy statute, which is why closings hand over the executed deed rather than merely signing it.

A deed is signed by a competent grantor and handed to a grantee who accepts it, but the grantor's signature was never notarized. As between those two parties, the deed is:

• a.Void, since notarizing is a validity requirement
• b.Valid, though it cannot be recorded as it stands✓
• c.Valid only if the grantee later pays a recording fee
• d.Voidable at the option of the grantor's creditors

Acknowledgment is a recording requirement, not an element of a valid deed. Delivered and accepted, the deed transfers title between grantor and grantee even with no notary, but the recorder will reject it, leaving the grantee exposed to later purchasers and lienholders who record first. Calling it void confuses the two ideas: validity turns on a competent grantor, an identifiable grantee, words of conveyance, an adequate legal description, the grantor's signature, and delivery and acceptance. Paying a fee cannot cure a missing acknowledgment, because the recorder cannot accept the instrument at all. Creditors of the grantor gain no power to undo a completed conveyance.

In a deed, which clause opens with the words 'to have and to hold' and defines the extent of the estate the grantee is receiving?

• a.The granting clause containing the words of conveyance
• b.The habendum clause, following the granting clause✓
• c.The acknowledgment taken before a notary public officer
• d.The legal description identifying the land conveyed

The habendum clause follows the granting clause, begins with the traditional phrase 'to have and to hold,' and spells out the estate conveyed, for example a fee simple absolute or a life estate. The granting clause holds the words of conveyance that actually transfer the interest and names the grantee. The acknowledgment is the notary's certificate that the signature is genuine, which the recorder requires but the transfer does not. The legal description identifies the land by metes and bounds, lot and block, or government survey, and it fixes what is conveyed rather than how much of an estate. Reading both clauses tells a broker exactly what the buyer is getting.

A relocation company that has owned a home for three months conveys it, warranting title only against defects that arose during its own ownership. The deed it delivers is a:

• a.Bargain and sale deed implying ownership without covenants
• b.General warranty deed covering the entire chain of title
• c.Quitclaim deed conveying only the interest actually held
• d.Special (limited) warranty deed covering the grantor's period✓

Warranting only against defects created or suffered while the grantor held title describes the special or limited warranty deed, the customary instrument for corporate, relocation, and fiduciary sellers who cannot vouch for what earlier owners did. A general warranty deed reaches back through the whole history of the property and offers the broadest protection, which is more than this seller is giving. A quitclaim carries no warranties at all and passes only whatever interest the signer happens to hold. A bargain and sale deed implies that the grantor owns the property but adds few or no covenants. A buyer taking narrower covenants should lean on an owner's title policy.

A title search shows that a seller's former spouse may still hold a possible interest in the property. What is the usual instrument used to release that interest and clear the record?

• a.A quitclaim deed from the former spouse✓
• b.A general warranty deed from the former spouse
• c.A trustee's deed issued after a foreclosure
• d.A correction deed fixing the legal description

A quitclaim releases whatever interest the signer may hold, with no warranties attached, which makes it the standard tool for removing a cloud such as a possible marital interest, a stale easement claim, or a name discrepancy. Demanding a general warranty deed asks the former spouse to guarantee title he or she may never have owned, and it is normally refused. A trustee's deed is what the trustee under a deed of trust issues to the purchaser at a foreclosure sale. A correction deed reforms a mistake in an earlier deed between the same parties and cannot release an outsider's claim.

A court-appointed personal representative sells a decedent's home during probate, and the buyer's broker asks what instrument will convey title. The answer is:

• a.A trustee's deed given after a nonjudicial foreclosure
• b.A sheriff's deed issued following a judicial sale
• c.A general warranty deed with full title covenants
• d.An executor's or personal representative's deed✓

Estate property is conveyed by an executor's deed when a will names the executor, or by a personal representative's or administrator's deed when the court makes the appointment; these deeds recite the court authority and give only limited covenants. A trustee's deed comes from the trustee under a deed of trust after a nonjudicial foreclosure sale. A sheriff's deed, called a referee's deed in some states, follows a judicial sale ordered by a court. A general warranty deed is not used, because a fiduciary will not personally guarantee title against the acts of the decedent or of owners further back in the chain.

After closing under a general warranty deed, a buyer discovers a recorded utility easement that the deed never disclosed. Which covenant did the grantor breach?

• a.Quiet enjoyment, a promise against eviction by better title
• b.Seisin, a promise that the grantor owns the estate conveyed
• c.Against encumbrances, a promise of no undisclosed burdens✓
• d.Further assurance, a promise to sign curative papers

The covenant against encumbrances promises that no liens, easements, or similar burdens exist beyond those the deed discloses, so a recorded easement left unmentioned breaches it at the moment of delivery. Seisin promises the grantor actually owns the estate being conveyed, which is not the trouble when ownership is sound but burdened. Quiet enjoyment shields the grantee from later eviction by someone holding superior title, and an easement holder's use is not an eviction. Further assurance obliges the grantor to sign additional documents needed to perfect title. A general warranty deed carries all of these along with the right to convey and warranty forever.

A neighbor has openly farmed and fenced a strip of an absentee owner's land, excluding others and never asking permission. To take title by adverse possession the neighbor must prove:

• a.Payment of the owner's property taxes for every year
• b.Open, notorious, continuous, hostile, and exclusive possession✓
• c.A written agreement signed by the record title owner
• d.A recorded deed describing the disputed strip of land

Adverse possession requires possession that is open and notorious, continuous, hostile in the sense of being without permission, and exclusive, held for the statutory period set by state law. Some states add payment of taxes or color of title, but those elements are not universal, so a broker should never assume them from another state's rule. A written agreement from the record owner would destroy the claim outright, since permission defeats hostility. Recording a deed creates no possession and cannot manufacture the required years of use. Adverse possession is one form of involuntary alienation, alongside descent, escheat, foreclosure, eminent domain, and accretion.

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✓

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.

A search reveals an old mortgage of record that was paid off but never released, and the lender no longer exists. Which step clears that cloud so title is marketable?

• a.Ordering an abstract of title with an attorney's opinion
• b.Buying an owner's title policy that insures over it
• c.Filing a quiet title action asking a court to clear it✓
• d.Recording a correction deed signed by the current seller

A quiet title action asks a court to determine ownership and extinguish a stale or unreleasable claim, which is the practical cure when the mortgagee has vanished and no release can be obtained. An abstract of title with an attorney's opinion summarizes and evaluates the recorded chain; it reports the cloud rather than removing it, and it offers no indemnity. An owner's policy may insure over a known risk, but insurance pays for loss and leaves the defect on the record for the next buyer to confront. A correction deed fixes a drafting error between the original parties and cannot release a third party's lien.

A seller deeds a parcel to one buyer and later deeds the same parcel to a second buyer, who records first. Which framework decides who owns the land?

• a.A federal recording statute applied in all fifty states
• b.The state's recording act, race, notice, or race-notice✓
• c.The order in which the two deeds were signed and dated
• d.The county recorder's discretion over competing claims

Priority between competing grantees is governed by the recording act of the state where the land lies, and the schemes differ: a pure race state protects whoever records first, a notice state protects a later purchaser who took without notice of the earlier deed, and a race-notice state protects one who took without notice and recorded first. No federal statute governs land recording. Signing dates do not decide the contest, which is precisely why a public recording system exists. Recorders act ministerially and have no power to resolve claims. Because the gap between closing and recording is the danger zone, a broker should press for prompt recording.

A buyer pays for a lender's title policy at closing and asks the broker whether it also protects the buyer's equity in the home. The correct answer is that the policy:

• a.Protects both parties equally up to the full purchase price
• b.Protects the buyer once the mortgage has been fully repaid
• c.Protects the buyer against defects arising after closing
• d.Protects only the lender, declining with the balance✓

A lender's, or mortgagee's, policy insures only the lender's security interest, and its coverage shrinks as the principal is paid down, ending altogether when the loan is satisfied. It never covers the buyer's equity, which is why a separate owner's policy is offered at closing for a one-time premium and lasts as long as the insured holds an interest. Repaying the mortgage does not convert the lender's coverage into the buyer's; it extinguishes it. And no title policy insures defects that first arise after its date. Brokers should explain this plainly before a buyer waives owner's coverage to save money.

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

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.

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✓

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.

Which body issues, renews, and disciplines Tennessee real estate broker licenses?

• a.The Tennessee Association of Realtors, a private trade membership organization for licensees
• b.The Tennessee Secretary of State, through its division of business services
• c.The Tennessee Attorney General, through its division of consumer protection
• d.The Tennessee Real Estate Commission, within the Department of Commerce and Insurance✓

Tenn. Code Ann. section 62-13-201 creates the Tennessee Real Estate Commission, section 62-13-203 gives it the power to do all things necessary and proper for carrying out the Real Estate Broker License Act and to promulgate rules under the Uniform Administrative Procedures Act, and section 62-13-312 gives it the power to refuse, suspend, or revoke a license. The Commission sits inside the Department of Commerce and Insurance's division of regulatory boards, which is why section 62-13-312(d) speaks of the director of that division examining a broker's escrow records. A trade association is a private membership body and issues no license. The secretary of state records business filings, and the attorney general represents the state in litigation; neither is given licensing power anywhere in chapter 13.

Two licensees at the same Tennessee firm disagree over how a closed sale's commission should be split, and one asks the Commission to decide. Under the Commission's rules, the Commission will:

• a.appoint a hearing officer to divide the commission between the licensees
• b.order the principal broker to pay each licensee the full amount in dispute
• c.suspend both licenses until the two licensees reach a written agreement
• d.not intervene in commission disputes between firms, brokers, or affiliates✓

Tenn. Comp. R. and Regs. 1260-02-.02(8) states flatly that the Commission will not intervene in the settlement of debts, loans, draws, or commission disputes between firms, brokers, and/or affiliates. A money quarrel between licensees is a civil matter for the courts or for whatever the firm's independent contractor agreement provides. The Commission's disciplinary jurisdiction under section 62-13-312 runs to conduct such as misrepresentation, mishandling of trust money, or failure to supervise, not to who is owed what share of a commission. Nothing in the rule authorizes a hearing officer to divide a commission, an order directing payment, or a suspension used as leverage to force a settlement.

The Commission notifies a Tennessee broker in writing that it has received a verified written complaint and encloses a copy of it. Under Tenn. Code Ann. section 62-13-313, the broker must file an answer with the Commission within:

• a.ten (10) days✓
• b.twenty (20) days
• c.thirty (30) days
• d.sixty (60) days

Tenn. Code Ann. section 62-13-313(a)(1) requires the Commission, before refusing to issue a license or suspending or revoking one on a verified written complaint, to notify the accused applicant or licensee in writing and enclose a copy of the complaint. Section 62-13-313(a)(2) then gives the accused ten days to file an answer with the Commission, a copy of which is transmitted to the complainant. Only after that exchange does section 62-13-313(a)(3) let the Commission decide, after investigation, that the matter should be set for hearing. The twenty, thirty, and sixty day figures appear nowhere in the complaint procedure; sixty days is the separate deadline in section 62-13-312(f) for reporting a criminal conviction.

What vote of the Tennessee Real Estate Commission does Tenn. Code Ann. section 62-13-313 require in order to revoke or suspend a license?

• a.An affirmative vote of a majority of the commission✓
• b.A unanimous vote of all nine members of the commission
• c.An affirmative vote of two thirds of the commission members
• d.A written recommendation from the executive director alone

Tenn. Code Ann. section 62-13-313(c) provides that the affirmative vote of a majority of the commission shall be necessary to revoke or suspend a license. The Commission has nine members under section 62-13-201, so a simple majority controls. Unanimity is not required and would make discipline nearly impossible; no two-thirds supermajority appears in chapter 13. The executive director administers the Commission's office and, under rule 1260-01-.18, decides firm-name appeals in the first instance, but the director cannot revoke or suspend a license alone. Compare section 62-13-311, which sets a different and higher bar: reissuance of a license revoked by a court requires the consenting vote of six members.

Under the Commission's civil penalty rule, what is the maximum civil penalty the Commission may assess against a licensee for each separate violation of a statute, rule, or order pertaining to the Commission?

• a.$1,000 per violation, with each day of a continued violation a separate violation✓
• b.$500 per violation, with any continuing violation treated as a single ongoing violation
• c.$2,500 per violation, with each transaction treated as a single violation
• d.$5,000 per violation, with each calendar month of noncompliance a separate violation

Tenn. Comp. R. and Regs. 1260-02-.32(1) authorizes the Commission, in addition to or in lieu of any other lawful disciplinary action, to assess a civil penalty of $0 to $1,000 for each separate violation of a statute, rule, or order pertaining to the Commission. Paragraph (2) applies the same range to an unlicensed person acting as a broker, and paragraph (3) provides that each day of a continued violation may constitute a separate violation, which is how a small daily amount becomes a large total. Paragraph (4) lists the factors the Commission weighs, including deterrence, the severity of the violation, and the economic benefit gained. The $500, $2,500, and $5,000 ceilings are not in the rule, and none of the alternative counting conventions appears in it.

In addition to or in lieu of other lawful discipline, Tenn. Code Ann. section 62-13-312 permits the Commission to impose which sanction on a Tennessee broker?

• a.Order the broker to pay treble damages to the complaining party
• b.Order the broker to transfer every listing to a competing firm
• c.Order the broker to sit the national portion of the examination again
• d.Order that the broker be downgraded to affiliate broker status✓

Tenn. Code Ann. section 62-13-312(c) provides that the Commission may, in addition to or in lieu of any other lawful disciplinary action against a broker, order that the broker be downgraded to affiliate broker status. That is a distinctly Tennessee remedy: it strips the licensee of the authority to hold escrow money and supervise others without ending the person's ability to practice. Damages are awarded by courts, not by the Commission, and treble damages appear nowhere in chapter 13. The Commission cannot reassign a firm's listings, which are contracts between the firm and its clients. Retesting is a condition of reinstatement in the expired-license and revoked-license rules, not a disciplinary sanction under section 62-13-312.

Tenn. Code Ann. section 62-13-303(c) requires an applicant for a Tennessee broker license to certify satisfactory completion of:

• a.60 classroom hours in real estate, including 30 hours covering basic principles
• b.90 classroom hours in real estate, including 30 hours covering residential real estate finance and lending
• c.120 classroom hours in real estate, including 30 hours covering office or brokerage management✓
• d.150 classroom hours in real estate, including 30 hours covering commercial appraisal practice and review

Tenn. Code Ann. section 62-13-303(c)(2) requires the broker applicant to certify satisfactory completion of one hundred twenty classroom hours in real estate, taken before or after receipt of an affiliate broker's license at a school, college, or university approved by the Commission, including thirty classroom hours covering office or brokerage management. Section 62-13-303(c)(3)(A) adds the experience condition for anyone licensed as an affiliate broker after May 12, 1988: an active real estate license held for at least thirty-six months, or twenty-four months for an applicant holding a baccalaureate degree with a major in real estate. The sixty-hour figure with thirty hours of basic principles is the affiliate broker requirement in section 62-13-303(b). The ninety-hour and one hundred fifty-hour figures appear nowhere in the statute.

Under the Commission's fingerprinting rule, which applicant for a Tennessee broker license must submit a new set of electronic fingerprints?

• a.An applicant who holds an active affiliate broker license with a licensed Tennessee firm
• b.An applicant who holds an affiliate broker license that is currently in retired status
• c.An applicant who previously held an affiliate broker license but no longer holds one✓
• d.An applicant who holds an affiliate broker license that is currently in inactive status

Tenn. Comp. R. and Regs. 1260-01-.17(1)(e) defines who counts as an initial applicant for fingerprinting purposes. Besides new applicants, it captures any former licensee who must reapply to obtain reissuance, and any person who previously held an affiliate broker license but no longer holds one at the time of applying for a broker license. The rule then says expressly that this does not include a person whose affiliate broker license is inactive or retired at the time of the broker application, which is why the retired and inactive candidates are not caught. An applicant already holding an active affiliate broker license was fingerprinted at original licensure, and section 62-13-303(l)(2) exempts applicants for broker licensure who are already licensed from resubmitting. All prints must be submitted electronically and at the applicant's expense.

A Tennessee principal broker opens a second office in another city. Under Tenn. Code Ann. section 62-13-309, that second office:

• a.may operate under the main office's firm license as long as it displays the firm's registered sign
• b.may operate without a firm license while it houses fewer than five affiliated licensees
• c.requires only a written branch supervision plan filed with the Commission within ten days of opening
• d.requires an additional firm license and must be supervised by a broker licensed at that address✓

Tenn. Code Ann. section 62-13-309(d)(1) requires a broker who maintains more than one place of business in the state to apply for and obtain an additional firm license for each branch office. Subdivision (d)(2) requires the application to state the branch location and the name of the person in charge, and subdivision (d)(3) requires each branch office to be under the direction and supervision of a broker licensed at that address. Section 62-13-309(a)(1)(A) already requires each office to have a firm license, a principal broker, and a fixed location conforming to zoning, and subparagraph (B) applies the same requirements to each branch. Rule 1260-02-.03(3)(a) treats an office as a branch if it is advertised, has a registered mail drop, or solicits telephone calls. No headcount exemption and no branch plan substitute exists.

A Tennessee broker's license has been expired for fourteen months. Under the Commission's reinstatement rule, that person must:

• a.reapply for licensure, meet current education requirements, and pass all required examinations✓
• b.pay the accrued monthly penalty fees plus the renewal fee, with no further conditions
• c.request a medical waiver from the Commission and submit a signed statement explaining the lapse
• d.sign a reinstatement order and complete sixteen classroom hours of approved continuing education

Tenn. Comp. R. and Regs. 1260-01-.21(3) provides that if a license is expired for more than one year, the individual must reapply for licensure, meet current education requirements, and pass all required examinations. The graduated penalty schedule in 1260-01-.21(2) covers only shorter lapses: fifty dollars per thirty-day period within the first sixty days, and after sixty days a reinstatement order plus penalties that run to one hundred dollars per thirty-day period from the one hundred twenty-first day. Tenn. Code Ann. section 62-13-319(a) likewise allows reinstatement without examination only within sixty days after expiration. The medical waiver in 1260-01-.21(1) requires a signed doctor's statement and addresses a failure to renew within sixty days, not a fourteen-month lapse.

A Tennessee licensee's license is suspended under Tenn. Code Ann. section 62-13-112 for failing to maintain errors and omissions insurance. If that suspension lasts more than one year, the license is:

• a.automatically revoked without any further action by the commission✓
• b.placed in temporarily retired status until proof of insurance is filed
• c.reinstated on payment of a single five hundred dollar penalty fee
• d.referred to an administrative law judge for a contested case hearing

Tenn. Code Ann. section 62-13-112(a) makes errors and omissions insurance a condition of licensure for every licensee except acquisition agents, and section 62-13-112(j)(1) suspends the license of a licensee who fails to obtain, maintain, or renew that coverage. Section 62-13-112(k)(1) allows reinstatement with no fee if proof of complying coverage is filed within thirty days of the suspension, with escalating penalties after that. Section 62-13-112(l)(1) then provides that a license suspended more than one year under the section shall be automatically revoked without any further action by the commission, after which the person must reapply. Retirement status is voluntary under section 62-13-318 and is not a consequence of a lapse; no single flat payment restores a license suspended for over a year.

Under Tenn. Comp. R. and Regs. 1260-02-.12, all advertising by a Tennessee firm and its licensees must:

• a.be under the direct supervision of the principal broker and list the firm name and firm telephone number✓
• b.be submitted to the Commission for written approval before it is placed in any paid advertising medium
• c.be limited to the advertising media that the firm identified on its most recent license renewal application
• d.be reviewed by the firm's attorney whenever the advertisement names an individual licensee

Tenn. Comp. R. and Regs. 1260-02-.12(3)(b) requires that all advertising be under the direct supervision of the principal broker and list the firm name and the firm telephone number as listed on file with the Commission, with the firm name appearing in letters the same size or larger than the name of any licensee, team, or group. Subparagraph (c) adds that advertising referring to an individual licensee must use that licensee's name as licensed. Rule 1260-02-.12(1) defines advertising broadly enough to reach signs, flyers, letterheads, e-mail signatures, websites, social media, and streamed audio or video, while excluding promotional items such as hats, pens, and business cards. The Commission does not pre-approve advertisements, does not restrict a firm to media named on a renewal, and imposes no attorney review requirement.

Before posting a sign advertising a property for sale, a Tennessee licensee must have:

• a.verbal permission from any adult occupant of the advertised property, obtained on site
• b.a copy of the most recent recorded deed for the advertised property in the transaction file
• c.approval from the local government authority that issued the property's zoning permit
• d.written authorization from the owner of the advertised property or the owner's agent✓

Tenn. Comp. R. and Regs. 1260-02-.12(3)(d) provides that no licensee shall post a sign in any location advertising property for sale, purchase, exchange, rent, or lease without written authorization from the owner of the advertised property or the owner's agent. Subparagraph (e) is the companion rule for someone else's listing: no licensee shall advertise property listed by another licensee without written authorization from the listing agent or listing broker. Tenn. Code Ann. section 62-13-310(b) adds that a licensee may not post a sign advertising himself as a real estate agent unless the firm's name appears in letters the same size or larger than the licensee's name. Verbal permission from an occupant, a recorded deed, and a zoning permit do none of this work.

Under the Commission's advertising rule, licensees who hold themselves out as a team within a Tennessee firm advertise falsely when the team name:

• a.includes the surname of the team member who has held a Tennessee real estate license for the longest time
• b.appears in letters smaller than the firm name wherever the two names appear together
• c.appears on a sign that also carries the firm name and the firm telephone number
• d.uses terms such as "Realty," "Company," or "LLC" that suggest services independent of the firm✓

Tenn. Comp. R. and Regs. 1260-02-.12(3)(f)2 lists as false, misleading, or deceptive advertising any use by a team, group, or similar entity within a firm of terms such as Real Estate, Real Estate Brokerage, Realty, Company, Corporation, LLC, Corp., Inc., Associates, or similar terms that would lead the public to believe the team offers brokerage services independent of the firm and principal broker. Rule 1260-02-.41 reinforces this: team members must all be affiliated with the same licensed firm, may not keep a separate physical location, may not be compensated by anyone other than their principal broker, and may not represent themselves as a separate entity. Using a member's surname is permitted, and the last two choices describe compliant advertising, since the firm name must be the same size or larger and the firm name and telephone number must appear.

A Tennessee firm's website displays listings drawn from an outside database. Besides showing the firm name and firm telephone number on each page, the Commission's internet advertising rule requires each such page to:

• a.show the Tennessee license number and photograph of every licensee currently affiliated with the firm
• b.link to the Commission's public licensee verification search page for each listing displayed
• c.state that some or all of the listings may not belong to the firm whose website is being visited✓
• d.display the date and the time at which the outside listing database was most recently updated in full

Tenn. Comp. R. and Regs. 1260-02-.12(5) sets three internet requirements. Subparagraph (a) requires the firm name and firm telephone number on file with the Commission to appear conspicuously on each page of the website. Subparagraph (b) requires each page displaying listings from an outside database of available properties to include a statement that some or all of the listings may not belong to the firm whose website is being visited. Subparagraph (c) requires listing information to be kept current and accurate, expressly limited to first generation advertising placed by the licensee rather than syndicated copies outside the licensee's control. License numbers, photographs, verification links, and database timestamps are not required by the rule.

A Tennessee licensee advertises a specific property using a national franchise trade name. The Commission's advertising rule requires the advertisement to show, adjacent to the property advertised:

• a.the franchise's national headquarters address and its toll-free consumer service telephone number
• b.the licensee's name, firm name, and firm telephone number, all as registered with the Commission✓
• c.the licensee's Tennessee license number and the calendar date on which the listing was taken by the firm
• d.the property owner's name and the calendar date on which the firm's listing agreement will expire

Tenn. Comp. R. and Regs. 1260-02-.12(4)(a) requires any licensee using a franchise trade name or advertising as a member of a cooperative group to indicate clearly and unmistakably his name, firm name, and firm telephone number, all as registered with the Tennessee Real Estate Commission, adjacent to any specific properties advertised for sale or lease in any media. Subparagraph (b) extends the same requirement to business cards, contracts, and other transaction documents bearing a franchise trade name. Rule 1260-02-.12(3)(f)1 separately makes it false or misleading to advertise using only the franchise name without the firm name. Nothing in the rule calls for the franchise's headquarters details, a license number, a listing date, or the owner's name.

Tennessee law bars a licensee from giving or paying cash rebates, cash gifts, or cash prizes in connection with a real estate transaction. Under the Commission's current gifts and prizes rule, a licensee may still:

• a.mail a cash rebate to a buyer after the deed has been recorded
• b.advertise a cash prize drawing open to every consumer who tours one of the firm's listings
• c.give a gift card at an open house held for other real estate licensees✓
• d.pay a cash finder's fee to an unlicensed neighbor who refers a seller

Tenn. Code Ann. section 62-13-302(b) prohibits a licensee from giving or paying cash rebates, cash gifts, or cash prizes in conjunction with any real estate transaction, and authorizes the Commission to regulate gifts, prizes, and rebates that are not otherwise prohibited. Tenn. Comp. R. and Regs. 1260-02-.33(2), as amended effective September 23, 2025, restates that prohibition for cash, gift cards, and similar cash-based incentives and then carves out two narrow exceptions: a gift card offered at an open house for other real estate licensees, and a gift card given as a closing gift. Subparagraph (c) adds that a closing-gift gift card may not be used in any advertisement to induce business. Rule 1260-02-.33(1) also requires any noncash inducement to be sponsored and approved by the firm and offered in a signed writing that discloses the item, its fair market value, the time and place of delivery, and any conditions. Paying an unlicensed person for a referral separately violates section 62-13-302(a).

Under the Commission's social media advertising rule, the firm name and firm telephone number on file with the Commission must be:

• a.repeated in the text of every individual post
• b.no more than one click away from the viewable page✓
• c.shown in the first line of the account biography
• d.included in the caption of every photograph posted

Tenn. Comp. R. and Regs. 1260-02-.12(6)(a) defines social media as internet-based applications or platforms that allow the public to create and share content and information, naming Facebook, Twitter, Instagram, and LinkedIn as examples. Subparagraph (b) sets the disclosure standard: the firm name and firm telephone number listed on file with the Commission must be no more than one click away from the viewable page. That is a deliberate relaxation of the website rule in 1260-02-.12(5)(a), which requires the firm name and telephone number on each page, and it accommodates platforms with limited space in a post. Subparagraph (c) still requires listing information in first generation social media advertising to be kept current and accurate.

A Tennessee affiliate broker closes a sale. Under Tenn. Code Ann. section 62-13-312(b)(11), the affiliate broker may accept the commission from:

• a.the seller directly, provided the closing attorney records the payment
• b.the cooperating firm that represented the buyer in the sale
• c.any licensee who took part in negotiating the transaction
• d.the licensed broker with whom the affiliate broker is affiliated✓

Tenn. Code Ann. section 62-13-312(b)(11) makes it a ground for discipline for an affiliate broker to accept a commission or any valuable consideration for the performance of any act specified in the chapter from any person except the licensed real estate broker with whom the licensee is affiliated. The money must therefore run from the closing to the firm and from the firm to the affiliate broker. Section 62-13-302(a) is the mirror image: it is unlawful for a licensed broker to employ or compensate a person who is not a licensed broker or affiliate broker, though a Tennessee broker may pay a cooperating broker licensed in another state if that nonresident conducts none of the negotiations in Tennessee. Rule 1260-02-.41(2) applies the same restriction to licensees advertising as a team.

Tenn. Comp. R. and Regs. 1260-02-.01 permits a Tennessee licensee to be engaged only by a principal broker who is:

• a.a member in good standing of a national real estate franchise or cooperative advertising network
• b.engaged primarily in the real estate business and accessible during normal daytime working hours✓
• c.licensed as a broker in Tennessee and in at least one adjoining state simultaneously
• d.a resident of the same Tennessee county in which the firm's registered office is located

Tenn. Comp. R. and Regs. 1260-02-.01(2) states that a licensee may be engaged only by a principal broker who is engaged primarily in the real estate business and accessible during normal daytime working hours. Paragraph (1) is the companion condition on the office itself: no licensee shall engage in any real estate activity in any office unless there is a principal broker devoted to the full time management of that office. Rule 1260-02-.38 shows what happens when that fails, giving a firm at most thirty days after the death, resignation, termination, or incapacity of its principal broker, extendable once so that a new principal broker is in place no later than the sixty-first day. Franchise membership, a license in another state, and county residency are not conditions of affiliation anywhere in the rules.

An affiliate broker at a Tennessee firm commits a violation of the license act. Reading Tenn. Code Ann. section 62-13-310(c) together with section 62-13-312(b)(15), the principal broker:

• a.is automatically suspended for the same period of time that the affiliate broker is suspended
• b.is liable to the Commission for treble the amount of commission earned on that transaction
• c.faces discipline only for the broker's own failure to exercise adequate supervision✓
• d.must surrender the firm license until the Commission has completely closed the matter

Tenn. Code Ann. section 62-13-310(c) provides that any unlawful act or violation of the chapter by an affiliate broker may not be cause for the suspension or revocation of the license of the broker with whom the affiliate broker is affiliated. Discipline in Tennessee is therefore not vicarious. What does reach the principal broker is the broker's own conduct: section 62-13-312(b)(15) makes it a ground for discipline to fail to exercise adequate supervision over the activities of any licensed affiliate broker. Tenn. Comp. R. and Regs. 1260-01-.16(2)(a) gives a concrete example, providing that a principal broker's failure to ensure that affiliated licensees carry errors and omissions insurance constitutes failing to exercise adequate supervision. Automatic parallel suspension, treble liability, and surrender of the firm license appear nowhere in the act.

A Tennessee firm's principal broker dies. The Commission must be notified within ten days, and under Tenn. Comp. R. and Regs. 1260-02-.38 the firm may be permitted to keep operating without a principal broker for an initial period not exceeding:

• a.thirty (30) days✓
• b.seven (7) days
• c.ninety (90) days
• d.one hundred eighty (180) days

Tenn. Comp. R. and Regs. 1260-02-.38(1) requires the Commission to be notified within ten days of the death, resignation, termination, or incapacity of a principal broker, and requires a plan addressing the continuation of operations to be submitted at the time of notification. Paragraph (2) allows the Commission, in its discretion and on the merits of each case, to permit the firm to continue operating without a principal broker for a period not to exceed thirty days from the date of that event. Paragraph (3) lets the executive director grant one thirty-day extension where the firm demonstrates compliance with its approved plan, so that a new principal broker must be in place no later than the sixty-first day. Paragraph (4) makes failure to comply grounds for a civil penalty or closure of the firm.

A Tennessee affiliate broker is released from a firm. Under Tenn. Comp. R. and Regs. 1260-02-.02, the licensee must complete the administrative measures for a change of affiliation or retirement within ten days of the release and:

• a.may not engage in any activity defined in section 62-13-102 until the transfer is processed✓
• b.may keep working for the former firm until the Commission processes the transfer
• c.may begin work at the new firm as soon as the principal broker has signed the release form
• d.may hold two active Tennessee licenses for as long as the transfer remains pending

Tenn. Comp. R. and Regs. 1260-02-.02(2) requires the licensee, within ten days after the date of release, to complete the required administrative measures for either change of affiliation or retirement, and provides that the licensee shall not engage in any activities defined in section 62-13-102 until a change of affiliation is received and processed by the Commission. Failure to comply may draw disciplinary action. Paragraph (1) ends the former principal broker's supervisory responsibility for the licensee's future acts upon the Commission's receipt of the release form or online submission, which is precisely why the licensee may not continue working for the old firm. Paragraph (3) treats an online transfer as complete only when the receiving principal broker has verified an active license and current errors and omissions coverage and the signed submission and payment are in. Section 62-13-309(e) bars holding more than one license at a time.

When a Tennessee licensee terminates affiliation with a firm, Tenn. Comp. R. and Regs. 1260-02-.02 permits the licensee to take or use property listings and buyer representation agreements secured through the firm:

• a.whenever the licensee personally procured each of those agreements
• b.only if the principal broker specifically authorizes it in writing✓
• c.whenever the client signs a statement asking to move with the licensee
• d.only after the Commission has processed the change of affiliation form

Tenn. Comp. R. and Regs. 1260-02-.02(4) provides that when a licensee terminates affiliation with a firm, the licensee shall neither take nor use any property listings or buyer representation agreements secured through the firm unless specifically authorized by the principal broker in writing. The listing is a contract between the client and the firm, not between the client and the individual licensee, which is why the licensee's own effort in procuring it does not change the answer and why the client cannot unilaterally reassign it. Paragraph (5) obliges the principal broker to grant a demanded release promptly, and rule 1260-02-.39 confirms that commissions already earned under the principal broker remain payable after a transfer, retirement, broker release, expiration, or the licensee's death.

Tenn. Code Ann. section 62-13-312(b)(6) makes it a ground for discipline to fail to preserve records relating to a real estate transaction for how long following its consummation?

• a.one (1) year
• b.three (3) years✓
• c.two (2) years
• d.seven (7) years

Tenn. Code Ann. section 62-13-312(b)(6) makes it a ground for discipline to fail to preserve, for three years following its consummation, records relating to any real estate transaction. Section 62-13-321 sets the same three-year period for escrow account records specifically. Tenn. Comp. R. and Regs. 1260-02-.40(1) quotes the statutory three-year period when it allows electronic recordkeeping, and conditions that allowance on documents being readily accessible in an organized format within twenty-four hours of a Commission request and on the principal broker maintaining a retention schedule that safeguards the security, authenticity, and accuracy of the records. One, two, and seven years appear nowhere in chapter 13; the four-year figure that does appear, in rule 1260-06-.02, applies to a time-share developer's receipt for a public offering statement.

A Tennessee firm keeps all of its transaction records electronically. Tenn. Comp. R. and Regs. 1260-02-.40 requires those documents to be readily accessible in an organized format within:

• a.five (5) business days of a request for inspection by the Commission
• b.ten (10) business days of a request for inspection by the Commission
• c.twenty-four (24) hours of a request for inspection by the Commission✓
• d.thirty (30) days of a request for inspection by the Commission

Tenn. Comp. R. and Regs. 1260-02-.40(1)(a) permits electronic recordkeeping only if all documents required to be retained are readily accessible in an organized format providing ease in document identification within twenty-four hours of any request for inspection by representatives of the Commission. Subparagraph (b) places the burden on the principal broker of every firm using electronic methods to develop and use a retention schedule that safeguards the security, authenticity, and accuracy of the records for the entire retention period and that provides for technology and hardware keeping the records accessible in a readable format. The rule is written against the three-year retention period of section 62-13-312(b)(6). Five days, ten days, and thirty days are not in the rule.

Tenn. Code Ann. section 62-13-321 requires a Tennessee broker's escrow account records to show the depositor of the funds, the date of deposit, the date of withdrawal, and:

• a.the payee of the funds✓
• b.the buyer's credit score
• c.the listing agent's commission split
• d.the appraised value of the property

Tenn. Code Ann. section 62-13-321 requires every broker to keep an escrow or trustee account of funds deposited with the broker relating to a real estate transaction, in accordance with rules promulgated under section 62-13-203, and to maintain accurate records of the account for at least three years showing the depositor of the funds, the date of deposit, the date of withdrawal, the payee of the funds, and any other pertinent information the Commission may require. That last catch-all is what rule 1260-02-.09 builds on. A credit score, a commission split, and an appraised value may appear elsewhere in a transaction file but none of them is an element of the statutory escrow ledger, and none of them identifies where the money went, which is the point of the record.

A Tennessee seller rejects a written offer. Under Tenn. Comp. R. and Regs. 1260-02-.08, the licensee shall:

• a.destroy the rejected offer once the seller states in writing that it has been rejected
• b.file a copy of the rejected offer with the Commission within ten days of the rejection
• c.request the seller to note the rejection on the offer and return the offer to the offeror or the offeror's agent✓
• d.hold the rejected offer in the transaction file until the property closes with another buyer

Tenn. Comp. R. and Regs. 1260-02-.08 requires a broker or affiliate broker promptly to tender every written offer to purchase or sell obtained on a property until a contract is signed by all parties, and on a proper acceptance of an offer or counteroffer promptly to deliver true executed copies signed by the seller to both the purchaser and the seller. It closes with the rejection instruction: in the event an offer is rejected, the licensee shall request the seller to note the rejection on the offer and return the same to the offeror or the offeror's agent. Destroying the offer would defeat the three-year retention duty in section 62-13-312(b)(6). The Commission does not receive rejected offers, and holding the offer without returning it does not satisfy the rule.

Under Tenn. Code Ann. section 62-13-312(b)(8), a Tennessee licensee must furnish a copy of any listing, sale, lease, or other contract relevant to a real estate transaction to all signatories of that contract:

• a.within three business days
• b.at or before the closing
• c.upon written request only
• d.at the time of execution✓

Tenn. Code Ann. section 62-13-312(b)(8) makes it a ground for discipline to fail to furnish a copy of any listing, sale, lease, or other contract relevant to a real estate transaction to all signatories of the contract at the time of execution. The duty attaches at signing, not later, and it does not depend on anyone asking. Rule 1260-02-.08 works the same way for accepted offers, requiring prompt delivery of true executed copies to both purchaser and seller. Rule 1260-02-.10 adds that if a broker acts as closing agent, the broker shall provide copies of the closing documents to each customer or client. A three-day window, delivery by closing, and delivery on request all describe a slower duty than the statute imposes.

A Tennessee broker refuses to let the director of the division of regulatory boards examine escrow records at a reasonable hour. Under Tenn. Code Ann. section 62-13-312(d), that refusal:

• a.constitutes grounds for the Commission to suspend or revoke the license✓
• b.may be cured by producing the requested records within the next thirty days
• c.is permitted whenever a civil lawsuit over the disputed funds is pending
• d.requires the director to obtain a search warrant from a court of record

Tenn. Code Ann. section 62-13-312(d) allows the director of the division of regulatory boards or the director's duly authorized representatives, at all reasonable hours, to examine and copy books, accounts, documents, or records relevant to whether a licensee has properly maintained and disbursed funds from escrow or trustee accounts. On a refusal, the director may pursue the remedies in section 4-5-311(b) for disobedience to a lawful agency requirement for information, and the statute adds that refusal shall also constitute grounds for the Commission to suspend or revoke a license. There is no thirty-day cure period, no litigation exception, and no warrant requirement; the same inspection power appears for time-share escrow in rule 1260-06-.03(4).

Tenn. Comp. R. and Regs. 1260-02-.09 lists the circumstances in which a Tennessee principal broker may properly disburse trust money. Which of the following is on that list?

• a.Upon the listing agent's signed written instruction to release the funds directly to the seller
• b.Upon the expiration of ninety calendar days from the date on which the purchase contract was signed
• c.Upon a written request from the closing attorney that the funds be sent ahead of the closing date
• d.Upon the rejection of an offer to purchase, sell, rent, lease, exchange or option real estate✓

Tenn. Comp. R. and Regs. 1260-02-.09(7) sets out the complete list of proper disbursements: on a reasonable interpretation of the contract authorizing the broker to hold the money; on a written agreement signed by all parties having an interest and separate from that contract; at the closing of the transaction; upon the rejection of an offer to purchase, sell, rent, lease, exchange or option real estate; upon the withdrawal of an offer not yet accepted; upon filing an interpleader action in a court of competent jurisdiction; or upon the order of a court of competent jurisdiction. Paragraph (8) requires disbursement in a proper manner without unreasonable delay. One agent's instruction is not an agreement signed by all interested parties; the mere passage of time is not on the list; and a closing attorney's request ahead of the closing is not the closing itself, which is the event subparagraph (c) names.

A Tennessee principal broker receives a written request to disburse earnest money and the parties disagree about who should get it. Absent a demonstration of a compelling reason, the Commission's rule requires the broker to disburse, interplead, or turn the funds over to an attorney with instructions to interplead them within:

• a.seven (7) calendar days from the date of the written request
• b.fourteen (14) calendar days from the date of the written request
• c.twenty-one (21) calendar days from the date of the written request✓
• d.forty-five (45) calendar days from the date of the written request

Tenn. Comp. R. and Regs. 1260-02-.09(9) provides that absent a demonstration of a compelling reason, earnest money shall be disbursed, interpleaded, or turned over to an attorney with instructions to interplead the funds within twenty-one calendar days from the date of receipt of a written request for disbursement. A Tennessee broker facing a disputed deposit therefore cannot simply sit on the money indefinitely waiting for the parties to agree; the clock starts on the written request. Paragraph (7)(f) confirms that filing an interpleader action in a court of competent jurisdiction is itself a proper disbursement, and paragraph (8) separately requires trust money to be disbursed in a proper manner without unreasonable delay. Seven, fourteen, and forty-five days do not appear in the rule.

Under Tenn. Comp. R. and Regs. 1260-02-.09, who must maintain the separate escrow or trustee account holding a Tennessee firm's trust money and remains responsible for that money at all times?

• a.The affiliate broker who wrote the contract
• b.The principal broker of the firm✓
• c.The closing attorney named in the contract
• d.The county register of deeds for that county

Tenn. Comp. R. and Regs. 1260-02-.09(2) requires each principal broker to maintain a separate escrow or trustee account for the purpose of holding any trust money received in a fiduciary capacity, and paragraph (4) makes principal brokers responsible at all times for trust money accepted by them or their affiliated brokers, in accordance with the terms of the contract. Paragraph (5) requires the contract to specify the terms and conditions for disbursement and the name and address of the person or firm who will actually hold the money. Only paragraph (6) shifts responsibility: where the contract authorizes someone other than the principal broker to hold trust money, the principal broker is relieved of responsibility on that agent's receipt of the funds. Tenn. Code Ann. section 62-13-309(f) requires proof of the firm's escrow account at original firm application and at each renewal.

Tenn. Comp. R. and Regs. 1260-02-.09 defines commingling as a licensee maintaining funds belonging to others in the same bank account that contains:

• a.another client's rental security deposits
• b.funds held for a different closing agent
• c.the licensee's personal or business funds✓
• d.escrow money from a cooperating firm

Tenn. Comp. R. and Regs. 1260-02-.09(1)(a) defines commingling as the act of a licensee maintaining funds belonging to others in the same bank account that contains his or her personal or business funds, and paragraph (13) states that commingling of funds contained within firm accounts is expressly prohibited. The same rule defines trust money as money belonging to others received by a licensee acting as agent or facilitator, or any money held by a licensee acting as temporary custodian of funds belonging to others. Mixing one client's money with another client's money in a properly designated escrow account is ordinary escrow practice, not commingling, though paragraph (12) does require lease-related trust money to be held in one or more separate escrow or trustee accounts. Tenn. Code Ann. section 62-13-312(b)(5) supplies the discipline for failing to account for or remit money belonging to others.