Wyoming Real Estate Broker Exam — All Questions

A landlord upgrading an apartment building found that the first $200,000 of amenities raised rents sharply, while the next $200,000 barely moved them at all. This pattern illustrates:

• a.The principle of regression is pulling the rents downward
• b.The principle of increasing returns continues to apply here
• c.External obsolescence
• d.The point of diminishing returns has been reached✓

Increasing returns describes the stage where each additional dollar invested produces a proportional or greater increase in value. Once added dollars stop producing matching value gains, the property has passed into diminishing returns, which is exactly what the flat rent response to the second $200,000 shows. Claiming increasing returns still applies contradicts the rent data. External obsolescence comes from forces outside the property line, such as a nearby nuisance, and nothing outside changed here. Regression concerns a superior property surrounded by lesser ones, a neighborhood effect rather than a spending curve. Brokers use this principle to talk owners out of unrecoverable renovations.

A vacant lot could physically support a 12-story tower, the market would absorb the units at a profit, and no other use would earn more, but the zoning ordinance caps height at four stories. Which test fails?

• a.The physically possible test
• b.The legally permissible test✓
• c.The financially feasible test
• d.The maximally productive test

A use must clear four tests in sequence to qualify as the highest and best use: legally permissible, physically possible, financially feasible, and maximally productive. The facts expressly satisfy the physical, financial, and productivity tests, so the tower fails only on legal permissibility, because the ordinance caps height at four stories. The soil supports the structure, the units would sell at a profit, and no alternative use earns more, so none of those three tests is the one that fails. The appraiser therefore tests the best use allowed by law, meaning a four-story project unless a rezoning is reasonably probable.

A 60-year-old cottage sits on a commercial corner. The land alone is worth $900,000, while the property with the cottage standing is worth $780,000. How should highest and best use be analyzed?

• a.As improved, since an existing building always controls value
• b.Highest and best use cannot apply to an improved parcel
• c.The cottage sets a floor under the property's total value
• d.As vacant, since the site is worth more without the cottage standing✓

Highest and best use is tested both as though vacant and as improved. When the site value exceeds the value of the property with the existing building, the improvement has become an interim or detrimental use, and the conclusion is the vacant-site use, with demolition cost deducted from land value. An existing building does not automatically control the analysis; if it did, obsolete structures would never be cleared. The cottage sets no floor here, since it actually depresses the total. Highest and best use is analyzed for improved parcels routinely, which is precisely how teardown and redevelopment opportunities are identified.

Three adjoining lots are worth $180,000 each standing alone. A broker assembles all three for a developer, and the combined site is then worth $690,000. What is the plottage increment?

• a.$150,000✓
• b.$50,000
• c.$540,000
• d.$690,000

Assemblage is the act of combining adjoining parcels under one ownership; plottage is the added value that combination creates. Compute the separate total first: 3 x $180,000 = $540,000. Then subtract it from the assembled value: $690,000 - $540,000 = $150,000, which is the plottage increment. The $540,000 answer is the sum of the individual lot values, the starting point rather than the increment. The $690,000 answer is the whole assembled value, not the gain. The $50,000 answer divides the increment across the three lots ($150,000 / 3) and reports a per-lot share as if it were the total.

A municipality asks a broker to help value a 40-year-old fire station that has no rental market and almost no comparable sales anywhere in the region. Which approach should carry the most weight?

• a.Sales comparison
• b.The income approach, capitalizing an imputed market rent
• c.The cost approach, with land valued separately✓
• d.A gross rent multiplier

The cost approach is the primary indicator for new construction and for special-purpose properties such as fire stations, schools, and churches, because these rarely sell and rarely produce rent. The appraiser values the land separately at its highest and best use, estimates the cost new of the improvements, subtracts accrued depreciation, and adds the two. Sales comparison collapses without genuinely comparable sales, and adjusting from houses to a fire station is not a defensible bridge. The income approach and a gross rent multiplier both require market rent evidence, which the facts say does not exist for this use.

An investor asks a broker which valuation approach a lender's appraiser will most likely rely on for a 90-unit apartment complex being purchased purely for its cash flow. The broker should say:

• a.The cost approach, since the buildings can be priced by the foot
• b.The income approach, since the property is bought for its income✓
• c.The sales comparison approach, as with owner-occupied homes
• d.The gross rent multiplier, since it captures operating expenses

Each approach has a natural home. The income approach leads for investment property, because the buyer is purchasing a stream of net operating income and the capitalization process values that stream directly. The cost approach leads for new or special-purpose property, since depreciation estimates on a 90-unit complex are guesswork rather than evidence. Sales comparison leads for owner-occupied residential, where buyers shop emotionally among substitutes. A gross rent multiplier is a screening shortcut derived from gross rent alone and specifically ignores vacancy and operating expenses, so it cannot substitute for a capitalized net income on a property of this size.

A broker reviews an agent's CMA and finds all three comparables sold within the past month but in a town twelve miles away at a different price level, chosen because no recent sales existed nearby.

• a.Keep the distant sales, applying a flat percentage adjustment for location
• b.Use the owner's purchase price plus the cost of improvements made since
• c.Use sales from the subject's own market area, time-adjusted where older✓
• d.Keep the distant sales, since sales this recent outrank older nearby ones

Comparables come first from the subject's own competitive market area, because those are the properties a buyer shopping for the subject would realistically consider. A sale twelve miles away in a differently priced market does not compete with the subject, and the gap between two separate markets cannot be measured by any supported adjustment, so a flat percentage for location is a guess dressed as data. Recency does not cure the wrong market. The better course is to reach back for older sales inside the market area, apply a supported market-conditions adjustment, and document why. Pricing from what the owner paid plus improvements substitutes cost for market evidence and ignores the sales entirely.

A comparable sold for $415,000. It has a finished basement the subject lacks, worth $18,000. The subject has a garage the comparable lacks, worth $12,000. Rising prices since that sale warrant $9,000. What is the adjusted sale price?

• a.$376,000
• b.$412,000
• c.$418,000✓
• d.$454,000

Adjust the comparable, subtracting where it is superior and adding where it is inferior. The comparable is superior on the basement, so subtract $18,000: $415,000 - $18,000 = $397,000. It is inferior on the garage, so add $12,000: $397,000 + $12,000 = $409,000. It sold before the market rose, making it inferior on market conditions, so add $9,000: $409,000 + $9,000 = $418,000. The $454,000 answer adds all three adjustments without regard to direction. The $412,000 answer reverses every sign. The $376,000 answer subtracts all three. Check: only $418,000 respects both the direction rule and the arithmetic.

A comparable sold for $400,000, but the seller paid $12,000 of the buyer's closing costs as a concession. The subject's likely sale involves no concessions at all. How should this be handled?

• a.Adjust the comparable downward for the concession✓
• b.Adjust the comparable upward by the same concession amount
• c.Ignore concessions, which are financing rather than value items
• d.Adjust the subject downward instead

Financing terms and seller concessions are the first element of comparison, applied before location and physical characteristics. A concession inflates the recorded price above what the property alone commanded, so the comparable's price is adjusted downward toward a cash-equivalent figure. Adjusting upward compounds the distortion the concession created. Concessions are never ignored, because a market with heavy concessions can show recorded prices well above true cash-equivalent value, which is exactly what regulators and lenders watch for. The subject is not adjusted; it is the unknown. Brokers reviewing a grid should confirm the agent verified terms of sale, not just the recorded price.

Matched pairs show a home with a lake view sold for $492,000 while an otherwise identical home without the view sold for $455,000. The subject has a view; the comparable does not. What adjustment applies?

• a.Subtract $37,000 from the comparable that lacks a view
• b.Add $37,000 to the comparable lacking the view✓
• c.Add $37,000 to the subject's indicated value instead
• d.Subtract $37,000 from the subject, which has the view

Paired sales analysis isolates the market's price for a single feature by comparing two sales that differ in only that feature: $492,000 - $455,000 = $37,000 for the view. The comparable lacks the view and is therefore inferior to the subject, so $37,000 is added to the comparable's sale price. Subtracting from an inferior comparable moves the indicated value the wrong direction. Adjusting the subject, whether up or down, violates the rule that only comparables are adjusted, since the subject's value is what the analysis is trying to produce. A single pair is thin evidence, so a careful analyst confirms the figure with additional pairs.

Three approaches indicate $402,000, $418,000, and $455,000 for a suburban home, and the agent averages the three to $425,000 for the report. What should the supervising broker correct?

• a.Averaging is correct when all three approaches are developed
• b.Reconciliation weights the most reliable indication, and never averages✓
• c.The three indications should have matched before reconciling
• d.The highest indication should always be selected for the client

Reconciliation is a reasoned judgment about which indication rests on the best data, not an arithmetic exercise. For a suburban home the sales comparison indication normally carries the most weight, and a mechanical average lets weak indications pull the conclusion off. Choosing the highest number serves the client's mood rather than the evidence and is exactly the bias that gets reports challenged. Requiring the three indications to match misunderstands the process; spread among them is normal and is itself information about data quality. A broker reviewing an agent's work should ask which indication is best supported and why, then expect the conclusion to sit near it.

A broker reviews an agent's CMA that used a single comparable, sold two years ago, located in a different school district, with no adjustments made. What is the broker's most appropriate response?

• a.Approve it, since a CMA is only an informal opinion of price
• b.Send it out and let the appraiser fix any errors later
• c.Require recent, adjusted comparables before delivery✓
• d.Relabel the document as an appraisal to add credibility

A CMA is not an appraisal, but it is still a work product the brokerage puts its name on, and a supervising broker is responsible for its quality. One stale comparable from a different school district with no adjustments cannot support a price opinion, so the correct action is to send it back for recent, genuinely similar, properly adjusted comparables. Calling a CMA informal does not excuse misleading a seller into a bad list price. Relying on a later appraisal ignores that the seller may act on this document immediately. Relabeling it an appraisal is worse still, since a licensee must never present a price opinion as an appraisal.

A home's tax roll shows $260,000, its insurer's dwelling figure is $310,000, and comparable sales support $395,000. The buyer asks the broker why three figures for one house differ so much.

• a.The assessor's figure is the property's true market value
• b.Each figure measures value for a different stated purpose✓
• c.Insurable value must always equal the property's market value
• d.Investment value is whatever the lender's appraiser concludes

One property carries many values because each is computed for a different purpose. Assessed value is produced by a taxing authority under its own schedule and ratio and is not a market opinion. Insurable value estimates the cost to rebuild the structure and typically leaves out land, which is why it usually sits below a sales-supported figure. Market value is the sales-supported opinion of a probable price under defined conditions. Investment value is what a particular investor would pay given personal return requirements and tax position, which is set by that investor, not by a lender's appraiser. Going-concern value bundles a business with its real estate.

A 1915 house has plaster walls, cast-iron radiators, and hand-milled trim. An appraiser estimates the cost of building a structure of equal utility using today's materials and methods. This estimate is:

• a.Depreciated cost, after subtracting physical deterioration
• b.Reproduction cost, using an exact historical duplicate
• c.Replacement cost, using an equal-utility substitute✓
• d.Reproduction cost, because the trim cannot be duplicated

Replacement cost is the cost to build a structure of equivalent utility using current materials, design, and construction methods, which is what the appraiser did here. Reproduction cost is the cost of an exact duplicate, including the plaster, radiators, and hand-milled trim, and it is normally used only for historic or landmark properties where the original detail is itself the value. Saying the trim cannot be duplicated does not convert the estimate into reproduction cost; it is an argument for using replacement cost. Depreciated cost is a later step, after accrued depreciation is subtracted from whichever cost basis was chosen.

A cost consultant prices every board, fastener, and labor hour for a proposed building and totals them with overhead and profit. Which cost-estimating method is this, and where does it rank?

• a.The quantity survey method, the most detailed and most accurate✓
• b.The unit-in-place method, which prices installed components
• c.The square-foot method, the fastest and most common
• d.The index method, which trends an original cost forward

The quantity survey method itemizes every material and labor component plus overhead and profit, making it the most accurate and by far the most time-consuming cost estimate; it is essentially how a general contractor bids a job. The square-foot method multiplies a cost per square foot by building area and is the quickest and most widely used, but the least precise. The unit-in-place method prices installed assemblies such as a completed roof or a linear foot of wall, sitting between the other two in both effort and precision. The index method updates a known historical cost with a construction cost index and does not price components at all.

Land at its highest and best use is worth $120,000. The reproduction cost new of the improvements is $340,000, and accrued depreciation from all causes totals $85,000. What does the cost approach indicate?

• a.$255,000
• b.$460,000
• c.$375,000✓
• d.$545,000

Land value plus improvement cost new minus accrued depreciation is the formula. Depreciate the improvements first: $340,000 - $85,000 = $255,000. Then add the separately valued land: $255,000 + $120,000 = $375,000. The $255,000 answer stops at the depreciated improvements and forgets that land is valued separately at its highest and best use and is never depreciated. The $460,000 answer adds land and cost new but skips depreciation entirely ($120,000 + $340,000). The $545,000 answer adds the depreciation instead of subtracting it. Check: $375,000 + $85,000 of depreciation equals the $460,000 undepreciated total, confirming the arithmetic.

An investor compares two apartment sales. Building A has 24 units and sold for $4,320,000. Building B has 30 units and sold for $5,700,000. Which sale shows the lower price per unit?

• a.Building B, by $10,000 per unit
• b.Building A, by $1,380,000 in total price
• c.Building A, by $10,000 per unit✓
• d.Building B, by $190,000 per unit

Price per unit divides sale price by the number of units. Building A: $4,320,000 / 24 = $180,000 per unit. Building B: $5,700,000 / 30 = $190,000 per unit. Building A is therefore the lower of the two, by $190,000 - $180,000 = $10,000 per unit. Naming Building B reverses the comparison. The $1,380,000 figure is simply the difference in total prices ($5,700,000 - $4,320,000), which says nothing about relative pricing because the buildings differ in size. Reporting $190,000 as a difference confuses Building B's price per unit with the gap between the two. Brokers pair this metric with price per square foot before advising.

A rural home was built with a $90,000 indoor lap pool and a commercial-grade kitchen that buyers in that market will not pay extra for. This excess of quality is best classified as:

• a.A superadequacy, a form of functional obsolescence✓
• b.External obsolescence caused by the rural market's limits
• c.Physical deterioration from heavy use of the improvements
• d.Curable functional obsolescence, since features can be removed

A superadequacy is a component that exceeds what the market requires, so its cost is not returned in value; it is a species of functional obsolescence and is usually incurable, because tearing out a working lap pool destroys the investment without creating value. Physical deterioration is wear, tear, and deferred maintenance, and nothing here is worn out. External obsolescence arises from influences outside the property line, such as a nearby nuisance, while this problem was built into the house. Calling it curable fails the cost-to-cure test, since removal spends money that the market will not repay.

A regional employer shuts down and a waste transfer station opens a quarter mile from a client's warehouse, cutting the building's value sharply. How should the broker characterize this loss?

• a.External obsolescence, generally incurable because the cause is off site✓
• b.Functional obsolescence, curable by redesigning the warehouse layout
• c.Physical deterioration, curable through deferred maintenance
• d.Economic appreciation offset by higher operating expenses

External obsolescence, sometimes called economic obsolescence, is a loss in value caused by influences outside the property's boundaries, such as an employer leaving or a nuisance use arriving. It is generally incurable, because the owner cannot spend money on the subject to remove a cause located off the property. Functional obsolescence involves the property's own design or components, and no redesign of this warehouse relocates a transfer station. Physical deterioration is wear on the improvements, and deferred maintenance is not the issue. Nothing here is appreciation. A broker should factor incurable external influences into pricing rather than promising the owner a fix.

Replacing a failing roof would cost $14,000 and would raise the home's value by about $20,000. Rebuilding an undersized garage would cost $30,000 and add roughly $11,000. Which item is curable?

• a.Neither item, since depreciation is never curable
• b.Both items, because any defect a builder can fix is curable
• c.The garage only, because structural work always pays back
• d.The roof only, because the cure returns more than it costs✓

Curability is an economic test, not a construction test: an item is curable when the cost to cure is recovered, or more than recovered, in added value. The roof costs $14,000 and adds about $20,000, so curing it returns $6,000 more than it costs and the item is curable. The garage costs $30,000 and adds about $11,000, so spending on it destroys roughly $19,000 of value and it is incurable even though a builder could easily rebuild it. Saying depreciation is never curable ignores routine deferred maintenance. Structural work does not automatically pay back, as the garage shows. Physical possibility alone never establishes curability.

A 30-year-old duplex was gutted and rebuilt inside, so it now competes with buildings roughly eight years old. Applying the age-life method, which figure should the appraiser use for it?

• a.The 8-year effective age it now shows✓
• b.The average of actual and effective age, 19 years
• c.The 30-year actual age
• d.The remaining economic life minus the actual age

Effective age reflects a building's apparent age given its condition, modernization, and utility, and it is the figure used in the age-life method. A full interior rebuild can push effective age well below actual age, so eight years is the correct input even though the structure was built 30 years ago. Actual age is simple chronology and would overstate depreciation badly here. Averaging the two ages, giving 19 years, is not a recognized method and merely splits the difference. Subtracting actual age from remaining economic life mixes two figures that are not defined against each other and produces a meaningless number.

A building has an actual age of 22 years but, after a full renovation, an effective age of 12 years. Total economic life is 60 years and reproduction cost new is $600,000. Straight-line accrued depreciation is:

• a.$72,000
• b.$220,000
• c.$480,000
• d.$120,000✓

The straight-line age-life method divides effective age by total economic life to get the depreciation rate, then applies it to cost new. Here 12 / 60 = 0.20, or 20 percent, and 0.20 x $600,000 = $120,000. The $220,000 answer uses actual age instead of effective age: 22 / 60 = 0.3667, and 0.3667 x $600,000 = $220,000, which ignores the renovation entirely. The $480,000 answer is the depreciated improvement value, $600,000 - $120,000, not the depreciation itself. The $72,000 answer applies 12 percent rather than the 12/60 ratio. Check: $120,000 plus $480,000 returns the original $600,000.

An agent's reconstructed operating statement for an investment listing shows mortgage interest, income tax, book depreciation, and the cost of a new roof all listed among the operating expenses. Which correction should the supervising broker require?

• a.Only the mortgage interest belongs out of the statement
• b.Book depreciation belongs in, since it is a real cost
• c.Every one of those four items must be removed from expenses✓
• d.The roof belongs in as ordinary repair and maintenance

A reconstructed operating statement is built so that net operating income reflects the property, not the owner's financing or tax position. Mortgage interest and principal are debt service and come out. Income tax is personal to the owner and comes out. Book depreciation is an accounting entry rather than a cash operating cost and comes out. A new roof is a capital improvement, not a repair; it is handled through a replacement reserve rather than expensed in one year. Removing only the interest leaves three distortions in place. Leaving depreciation or the roof in understates net operating income and, once capitalized, understates value.

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

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.

A building's potential gross income is $240,000, vacancy and collection loss is 5 percent, operating expenses are $91,000 including a replacement reserve, and annual debt service is $60,000. What is net operating income?

• a.$149,000
• b.$77,000
• c.$137,000✓
• d.$228,000

Build the income statement in order. Vacancy and collection loss: 5 percent of $240,000 = $12,000. Effective gross income: $240,000 - $12,000 = $228,000. Net operating income: $228,000 - $91,000 = $137,000. Debt service is excluded, so the $60,000 never enters. The $228,000 answer stops at effective gross income and skips operating expenses. The $149,000 answer subtracts expenses from potential gross income and forgets vacancy ($240,000 - $91,000). The $77,000 answer wrongly deducts debt service ($137,000 - $60,000), producing pre-tax cash flow rather than net operating income. Check: $137,000 plus $91,000 plus $12,000 returns the $240,000 starting figure.

Two buildings each produce $90,000 of net operating income, but one sits in a stable district with long-term credit tenants and the other in a district with heavy turnover. What will investors demand?

• a.A higher capitalization rate, which lowers that building's value✓
• b.A lower capitalization rate on the riskier building
• c.A capitalization rate set by the lender, not by the market
• d.The same capitalization rate, since the two incomes are identical

A capitalization rate is the return an investor requires, so more risk means a higher required rate. Because value equals net operating income divided by the rate, a higher rate applied to the same $90,000 produces a lower value, which is how the market discounts uncertain income. Identical net operating income does not mean identical value; the durability of that income is exactly what the rate prices. Demanding a lower rate for the riskier building inverts the relationship and would reward risk with a premium price. Lenders underwrite to market-derived rates; they do not set them. Cap rate and value always move in opposite directions.

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

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.

An investor plans to hold a shopping center for seven years and then sell it. The broker models each year's cash flow and the net sale proceeds, discounting all of them to today. Those sale proceeds are called:

• a.The holding period, expressed in dollars rather than years
• b.The effective gross income of the final year of ownership
• c.The capitalization rate applied to the terminal year
• d.The reversion, discounted to present value with the cash flows✓

In a discounted cash flow analysis the analyst projects each year's cash flow over a holding period and adds the reversion, the net proceeds expected when the property is sold at the end of that period. Every amount, including the reversion, is discounted back to present value at the investor's required yield rate. The holding period is the seven-year span itself, a length of time and not a dollar figure. Effective gross income is an intermediate line above net operating income in a single year. A capitalization rate is a rate, not proceeds, though a terminal rate is often used to estimate the reversion.

A loan officer emails an appraiser that the deal needs $450,000 to work and asks whether that number is achievable before the report is finished. What does appraiser independence require?

• a.The appraiser may confirm it if value supports it
• b.The appraiser may never accept a target value✓
• c.The broker should relay the target to close on time
• d.A target is allowed with the borrower's written consent

Appraiser independence rules and USPAP forbid accepting an assignment conditioned on reporting a predetermined value or a minimum figure, and they forbid interested parties from coercing or influencing the appraiser. Agreeing to confirm a number in advance is exactly that prohibited condition, even if the appraiser privately believes the value is supportable. A broker who passes the target along becomes part of the improper influence rather than a neutral messenger. Borrower consent cannot waive a rule that exists to protect the lender, the secondary market, and the public. The proper answer is to develop the opinion independently and report it, whatever it turns out to be.

A lender orders a valuation for a $900,000 commercial loan secured by an apartment building, and a broker asks whether any licensed appraiser may complete it. What is the general national framework?

• a.Appraiser credential levels limit the value and complexity of assignments✓
• b.Any state-licensed appraiser may value any property type at any loan amount
• c.Federally related transactions never require an appraisal
• d.Certification levels apply only to residential appraisals

Appraisers hold tiered credentials, and each tier defines the complexity and value of assignments the holder may accept: a state-licensed appraiser handles the simplest residential work, a certified residential appraiser handles more complex residential assignments, and a certified general appraiser is the credential associated with commercial property such as an apartment building of this size. Saying any licensee may appraise any property ignores the tiers entirely. Federally related transactions do generally require an appraisal by a state-credentialed appraiser above the applicable threshold, so that statement is backwards. Certification is not limited to residential work; the general certification exists precisely for commercial assignments.

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✓

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.

A buyer and seller dispute whether a custom wine rack screwed into a dining room wall conveyed with the house. Which factor do courts usually weigh most heavily?

• a.The dollar value of the item at the time of installation
• b.The intent of the party who annexed it, judged by objective evidence✓
• c.Whether the buyer noticed the item during the walkthrough
• d.Whether the seller paid a contractor to install the item

The classic fixture tests are method of annexation, adaptation to the realty, the relationship of the parties, and any agreement between them, but the thread running through all of them is intent, measured objectively rather than by what someone later claims to have meant. A rack screwed in and built for that wall signals an intent to make it permanent. Cost tells a court little, since expensive items are often personal property and cheap ones often fixtures. What a buyer happened to notice at a walkthrough does not change an item's legal character. Who performed the work is beside the point, because the annexer's intent controls.

A seller wants to keep an heirloom chandelier that is wired into the dining room ceiling. How should the listing broker handle it before the property is marketed?

• a.Have the seller remove and replace it before marketing begins✓
• b.Rely on the general rule that light fixtures are personal property
• c.Note it in the listing remarks and settle the question at closing
• d.Assume the chandelier's heirloom status excludes it from the sale

A wired-in chandelier is annexed to the realty and is presumed to be a fixture that conveys. The cleanest solution is severance before marketing: the seller physically removes it, installs a replacement, and no buyer ever forms an expectation about it. Treating light fixtures as personal property inverts the presumption and invites a dispute. Listing remarks are marketing copy, not a contract term, and rarely bind a buyer. Leaving the item to be sorted out at closing is how transactions collapse at the table. If the chandelier stays in place, the exclusion must be written into the purchase agreement, because an express agreement between the parties controls.

A farm tenant plants and cultivates a corn crop. Through no fault of the tenant, the tenancy ends before harvest. Under the doctrine of emblements, the tenant may:

• a.Claim a lien against the land for the value of seed and labor
• b.Force the landlord to renew the tenancy through the harvest season
• c.Reenter the land to tend and harvest that year's planted crop✓
• d.Collect nothing, because growing crops belong to the landowner

Emblements are annual crops produced by the tenant's own labor, and the law treats them as the tenant's personal property. When a tenancy of uncertain duration ends through no fault of the tenant, the doctrine allows the tenant back onto the land to tend and gather that season's crop. It does not create a lien on the land itself, and it does not extend or renew the tenancy, since the right is limited to the crop. Saying the owner takes everything confuses cultivated annual crops with naturally growing trees and perennial plants, which are part of the real property and pass with a conveyance of the land.

A broker explains that a client is buying real property, not merely land. Beyond the surface, the subsurface, and the airspace, what does the term real property add?

• a.Only the buildings and other permanent improvements on the site
• b.The improvements plus the bundle of legal rights of ownership✓
• c.The seller's personal property left behind at the property
• d.The right to use adjoining public streets and utilities

Land means the surface of the earth, everything beneath it to the center of the earth, and the airspace above it. Real estate is land plus the permanent improvements attached to it. Real property is real estate plus the bundle of rights that come with ownership: possession, control, enjoyment, exclusion, and disposition. Stopping at the improvements describes real estate, one step short of the answer. Personal property a seller abandons is not part of the realty and does not pass by deed. A right to use public streets or receive utility service arises from public dedication or a separate easement, not from the definition itself.

An owner sells the mineral rights under a ranch to an energy company but keeps the surface. What is the position of a buyer who later purchases the surface estate?

• a.The buyer acquires the minerals because they pass with the surface
• b.The severance is void unless the state approves the split estate
• c.The buyer may block all drilling by refusing to sign a lease
• d.The buyer takes subject to the mineral owner's right of reasonable access✓

Subsurface and mineral rights, like air rights, can be severed from the surface and sold separately, creating what is called a split estate. Once severed, the mineral estate is generally dominant: its owner retains an implied right to make reasonable use of the surface to reach the minerals, so a later surface buyer takes subject to that burden. Minerals do not quietly reattach to the surface on a subsequent sale. The surface owner cannot veto extraction by withholding a lease, because the mineral owner already holds that interest. No state approval creates the split; a deed or reservation does, which is why the title search must reveal it.

A listing fronts a large lake in a state that follows the prior appropriation doctrine. Which statement correctly pairs the owner's water-related rights with that doctrine?

• a.Littoral rights attach to the land; use rights come by permit✓
• b.Riparian rights attach to the land, allowing reasonable use of the flow
• c.Littoral rights let the owner divert any quantity from the lake
• d.Prior appropriation gives the oldest deed on the lake first use

Land bordering a lake, sea, or ocean carries littoral rights, while riparian rights belong to land along a flowing waterway such as a river or stream, so calling lakefront rights riparian misuses the term. In prior appropriation states, most of them arid western states, the right to use water does not ride along with land ownership at all; the state grants it based on first beneficial use and administers it through permits. Neither doctrine allows an owner to draw unlimited water. Priority under appropriation depends on the date use actually began, not on how old the shoreline owner's deed happens to be.

A sudden storm shifts a river channel overnight, leaving several acres of a riverfront owner's land on the far side of the new channel. How is this treated?

• a.Accretion, so the acreage now belongs to the far-bank owner
• b.Avulsion, so the boundary and ownership stay unchanged✓
• c.Reliction, so the owner loses title to the exposed streambed
• d.Erosion, so the boundary shifts with the new channel location

Avulsion is a sudden, perceptible loss or movement of land, typically from a flood or a shifting channel, and the settled rule is that boundaries do not move with it: the former owner keeps title even though the parcel now sits across the water. Accretion is the slow build-up of soil deposited by moving water, which does add to the abutting owner's holdings. Reliction is land uncovered as water permanently recedes, which likewise benefits the abutting owner. Erosion is the gradual wearing away of land, and gradual processes do move boundaries. Suddenness is exactly what keeps this line where it was.

A deed conveys land to a city so long as it is used as a public library. The city later converts the building into administrative offices. What is the result?

• a.The grantor must file a court action to recover the parcel
• b.The city keeps fee simple absolute because the condition is void
• c.Title ends automatically and returns under a possibility of reverter✓
• d.The grantor holds a right of re-entry and may elect to reclaim it

The words so long as create a fee simple determinable, an estate that ends by its own terms the moment the stated use stops, leaving the grantor's retained future interest as a possibility of reverter. Title returns without any election by the grantor, though a court action may still be needed to recover physical possession. Language such as but if or on condition that instead creates a fee simple subject to a condition subsequent, where the grantor holds a right of re-entry and must act to reclaim the land. The limitation is not void, and it is what prevents the city's estate from being fee simple absolute. This is the common-law rule the national portion tests; a minority of states have abolished the determinable fee by statute or limit how long a possibility of reverter survives.

A life tenant on a wooded parcel begins clear-cutting mature timber for income, which will permanently reduce the property's value. What can the remainderman do?

• a.Sue to stop the cutting as waste that harms the future interest✓
• b.Do nothing until the life tenant dies and the estate ends
• c.Take possession immediately and evict the life tenant
• d.Collect rent from the life tenant for the ongoing use

A life tenant may use and profit from the property but must not commit waste, meaning acts that permanently reduce the value of what the remainderman or reversioner will eventually receive. Stripping mature timber for income is the textbook example, and the holder of the future interest can seek an injunction or damages while the life estate is still running. Waiting for the life tenant to die would leave the loss unremedied. The remainderman has no present right of possession, so eviction is unavailable. No rent is owed either, because possession for the measuring life is precisely what the life estate grants, and a life tenant can convey no more than that.

A grantor conveys a cottage to Ann for the life of Ben. Ann dies while Ben is still living, and the deed names a remainderman. What becomes of the cottage?

• a.It passes to Ann's heirs and lasts until Ben dies✓
• b.It vests in Ben, the measuring life named in the deed
• c.It reverts to the grantor because Ann's death ends it
• d.It is sold and the proceeds divided among the parties

An estate measured by the life of someone other than its holder is an estate pur autre vie. Because Ben is the measuring life, Ann's death does not end the estate; her interest passes to her heirs or devisees, who hold it until Ben dies. Only then does the named remainderman take, and only where no remainderman is named would the property fall back to the grantor as a reversion. Ben receives nothing merely for serving as the yardstick. Nothing in a life estate triggers a forced sale with proceeds divided; that describes a partition of co-owned property rather than the end of a life tenancy.

A brokerage's commercial client asks how a leasehold estate differs from a freehold estate. Which statement should the broker give as accurate?

• a.A leasehold gives possession while the landlord keeps a reversion✓
• b.A leasehold is simply a freehold estate that lasts a limited number of years
• c.A leasehold conveys title to the land for the term of the lease
• d.A leasehold cannot be assigned, sold, or used as loan security

Freehold estates, meaning fee simple and life estates, are of indefinite duration and carry ownership. Leasehold or less-than-freehold estates give the tenant a right of possession for a determinable period while the landlord retains the reversion and the underlying title. A leasehold is therefore not a kind of freehold no matter how long the stated term runs, which is the distinction the categories exist to draw. The lease conveys possession, not title to the land. And leaseholds are real property interests that can often be assigned, subleased, sold, or pledged as security, subject to whatever the lease itself permits.

Two neighbors share a driveway under a recorded easement that benefits each lot and burdens the other. One neighbor sells to a new owner. What is the buyer's position?

• a.The buyer must negotiate and record a new easement with the neighbor
• b.The buyer takes both the benefit and the burden automatically✓
• c.The buyer may use the drive but owes no maintenance share
• d.The easement ends because it was personal to the seller

A shared-driveway arrangement of this kind creates cross easements that are appurtenant: each lot is a dominant tenement as to its own right of use and a servient tenement as to the neighbor's. Appurtenant easements run with the land, so they transfer with the parcel and bind later owners without any new document. They are not personal to a particular owner, which would describe an easement in gross. Maintenance obligations spelled out in the recorded instrument travel with the benefit, so a buyer who enjoys the driveway also carries the recorded share of upkeep rather than using it at the neighbor's expense.

A power company holds a recorded right to run transmission lines across a ranch. No neighboring parcel is benefited by the right. This interest is best described as:

• a.A license the ranch owner may revoke at any time
• b.An easement appurtenant to the utility's substation
• c.A profit a prendre allowing removal of ranch resources
• d.A commercial easement in gross, which is freely assignable✓

An easement in gross benefits a person or a company rather than a neighboring parcel, so no dominant tenement exists; utility, pipeline, and railroad easements are the standard illustrations. Commercial easements in gross are treated as property interests that may be assigned or sold, unlike a personal easement in gross, which generally cannot. Calling this a license is wrong because a license is a revocable personal privilege, while this right is recorded and permanent. It cannot be appurtenant when there is no benefited parcel to attach to. A profit lets its holder take something from the land, such as timber or gravel, which transmission lines do not do.

An owner splits a large tract and sells the back half, which has no access to any public road. The buyer's deed says nothing about access. What is the buyer's remedy?

• a.Ask the county to condemn a public road across the front parcel
• b.Sue to rescind the sale for failure to disclose the access
• c.Claim an easement by prescription after years of open use
• d.Claim an easement by necessity over the seller's land✓

When a parcel is left landlocked because a single tract was divided, courts imply an easement by necessity across the grantor's remaining land, reasoning that the parties must have intended the buyer to be able to reach the property. It arises by operation of law even though the deed is silent. Prescription is a different route, requiring open, notorious, continuous, and hostile use for the period set by state law, and a brand-new buyer has used nothing yet. Condemnation is a government power exercised for public use, not a private access fix. Rescission is a drastic remedy that ignores the implied easement already available.

A neighbor has openly driven across a corner of an adjoining lot for many years without permission, and the owner never objected. What claim does the neighbor have?

• a.An easement by implication created when the lots were divided
• b.Fee title to the strip crossed, under adverse possession
• c.Nothing, because using land without permission is trespass
• d.An easement by prescription, if the statutory period is met✓

Use that is open, notorious, continuous, and hostile, meaning without the owner's permission, can ripen into an easement by prescription once it continues for the period the state sets, giving the neighbor a right to keep crossing. It does not convey ownership: adverse possession requires exclusive possession and passes title, while prescription passes only a use right, and driving across a corner is plainly not exclusive. Dismissing the conduct as bare trespass ignores the doctrine that converts long unchallenged use into a legal right. Implication arises from prior apparent use at the moment a single parcel is severed, which did not occur here.

The owner of a dominant tenement buys the servient parcel next door and now holds both lots in fee simple. What happens to the easement between them?

• a.It survives and may still be used by the common owner
• b.It is suspended until either lot is sold again
• c.It converts into an easement in gross by law
• d.It is terminated by merger of the two title estates✓

An easement presupposes two separately owned parcels. When one person acquires both the dominant and the servient tenements, the easement is extinguished by merger, and it does not spring back automatically if the lots are later divided again; a new easement must be created. The interest is ended, not merely suspended, and an owner needs no easement to cross land already owned. It cannot transform into an easement in gross, which benefits a person rather than a parcel. Easements can also end by written release from the dominant owner, by abandonment shown through conduct, or when the purpose they served has come to an end.

A landowner writes to a hunting club saying its members may cross the back field during hunting season. The writing says nothing about being permanent. This is:

• a.A license the owner may revoke at will✓
• b.An easement in gross that runs to later owners
• c.An implied easement from prior seasonal use
• d.A leasehold estate for the hunting season

Permission to use land that is personal, temporary, and revocable is a license, not an easement. A license creates no interest in the land and generally ends when the owner withdraws it, when the owner dies, or when the property is sold. An easement in gross is an interest in land that would survive a transfer, and casual seasonal permission does not create one. An implied easement arises from prior apparent use when a single parcel is divided, not from a neighborly invitation. A lease would hand the club exclusive possession of the field, whereas crossing it to hunt is a limited privilege on land the owner still occupies and controls.

A survey ordered before closing shows that the neighbor's garage extends two feet across the boundary onto the property being sold. This condition is:

• a.A prescriptive easement the buyer is forced to accept
• b.An encroachment that clouds the buyer's title✓
• c.A zoning violation that a variance filing would cure
• d.A minor defect that title insurance always covers

A structure extending over a boundary line is an encroachment. It is an encumbrance that can cloud title, reduce the usable value of the land it sits on, and support a claim for removal or damages, which is why a survey rather than a title search alone is the tool that brings it to light. Long unchallenged encroachment can eventually ripen into a prescriptive easement, but that is a possible future outcome, not what this survey found. Standard owner's policies commonly except survey matters unless extended coverage is purchased. And a boundary intrusion is a private dispute between owners, not a zoning question a variance would resolve.

A creditor records a court judgment against a debtor who owns several parcels in the same county. How is the resulting lien classified?

• a.General and voluntary, because the debtor agreed to the underlying debt
• b.Specific and voluntary, like a purchase money mortgage
• c.Specific and involuntary, attaching to one named parcel
• d.General and involuntary, reaching all the debtor's property✓

A recorded judgment lien is general, meaning it attaches to all of the debtor's non-exempt property in the jurisdiction rather than to a single asset, and involuntary, because a court imposed it without the owner's consent. A mortgage is the mirror image, specific to one described parcel and voluntary because the borrower signed it. Property tax liens are specific and involuntary, since they burden only the taxed parcel. Owing money does not make a lien voluntary; voluntariness turns on whether the owner created the lien by agreement, which a defendant who lost a lawsuit obviously did not do.