Indiana Real Estate Broker Exam — All Questions

A form of co-ownership in which two or more owners each hold an undivided interest with the right of survivorship is known as:

• a.Tenancy in common
• b.Joint tenancy✓
• c.Ownership in severalty
• d.A leasehold estate

In a joint tenancy, co-owners hold equal, undivided interests and enjoy the right of survivorship: when one joint tenant dies, that share passes automatically to the surviving joint tenants rather than to heirs. Tenancy in common has no survivorship, and ownership in severalty is ownership by one person alone.

A city's authority to enact zoning ordinances that regulate how land may be used comes primarily from its:

• a.Police power✓
• b.Power of eminent domain
• c.Power of escheat
• d.Power of taxation

Zoning, building codes, and other land-use regulations are exercises of the government's police power: the inherent authority to enact rules that protect public health, safety, and general welfare. Eminent domain is the power to take private property for public use with compensation; escheat returns property to the state when an owner dies without heirs.

Which approach to value is generally the most reliable for appraising a single-family, owner-occupied home?

• a.The sales comparison approach✓
• b.The income approach
• c.The gross rent multiplier method
• d.The cost approach only

The sales comparison approach compares the subject property to recently sold, similar properties and adjusts for differences. Because ample comparable sales usually exist for residential homes, it best reflects what a buyer would pay. The income approach suits rental and investment property, while the cost approach is most useful for new or special-purpose buildings.

A mortgage clause that lets the lender demand full repayment of the loan balance if the borrower sells or transfers the property is a(n):

• a.Defeasance clause
• b.Alienation (due-on-sale) clause✓
• c.Prepayment clause
• d.Subordination clause

An alienation clause, also called a due-on-sale clause, allows the lender to call the entire balance due when the property is transferred, preventing an unqualified buyer from assuming the loan. A defeasance clause requires the lender to release the lien when the debt is paid in full.

Under which legal doctrine must a contract for the sale of real estate be in writing to be enforceable?

• a.The parol evidence rule
• b.The statute of frauds✓
• c.The doctrine of laches
• d.The statute of limitations

The statute of frauds requires certain contracts, including those for the sale of an interest in real estate, to be in writing and signed to be enforceable. The parol evidence rule limits use of outside evidence to change a written contract, and laches concerns unreasonable delay in asserting a right.

A seller receives a buyer's offer and responds by changing the closing date and price. The seller's response is best described as a(n):

• a.Counteroffer that terminates the original offer✓
• b.Acceptance that forms a binding contract
• c.Option to purchase
• d.Novation of the contract

Changing any material term of an offer creates a counteroffer, which rejects and terminates the original offer. The original offeror (the buyer) is then free to accept, reject, or counter again. Only an unqualified acceptance of all terms forms a binding contract.

An agreement that gives a prospective buyer the right, but not the obligation, to purchase a property at a set price within a stated period in exchange for consideration is a(n):

• a.Option contract✓
• b.Assignment
• c.Exclusive listing
• d.Land contract

An option is a unilateral contract in which the optionor (owner) gives the optionee the right to buy within a set time for agreed consideration. The optionee may choose whether to exercise the option; the owner is bound to sell only if the option is exercised.

An agent's fiduciary duty to place the principal's interests above the agent's own and to avoid conflicts of interest is the duty of:

• a.Loyalty✓
• b.Accounting
• c.Disclosure
• d.Reasonable care

Loyalty requires the agent to act solely in the principal's best interest and avoid self-dealing or conflicts of interest. Accounting concerns safeguarding and reporting the principal's money and property; disclosure requires sharing material facts. These are commonly summarized by the acronym OLD CAR.

An agency relationship that is created by the conduct of the parties rather than by a written or spoken agreement is a(n):

• a.Express agency
• b.Implied agency✓
• c.Designated agency
• d.Dual agency

Implied agency arises from the actions and conduct of the parties, even without a formal contract, when a person reasonably relies on another to act as their agent. Express agency, by contrast, is created by a written or oral agreement that states the relationship.

Federal law requires sellers and landlords to disclose known lead-based paint hazards for residential housing built before:

• a.1968
• b.1978✓
• c.1988
• d.1992

The federal Residential Lead-Based Paint Hazard Reduction Act requires disclosure of known lead-based paint and hazards, and delivery of an EPA pamphlet, for target housing built before 1978, the year residential lead paint was banned. Buyers must generally be given a 10-day period to test for lead.

Which type of deed offers the grantee the greatest protection by warranting the title against all defects, even those arising before the grantor owned the property?

• a.Quitclaim deed
• b.Special warranty deed
• c.General warranty deed✓
• d.Bargain and sale deed

A general warranty deed contains the full set of covenants, warranting the title against defects arising at any time in the property's history, and is the strongest deed for the grantee. A special warranty deed covers only the grantor's period of ownership, and a quitclaim conveys only whatever interest the grantor may have, with no warranties.

The federal Fair Housing Act prohibits discrimination in housing based on all of the following EXCEPT:

• a.Religion
• b.National origin
• c.Occupation✓
• d.Familial status

The Fair Housing Act protects seven classes: race, color, religion, sex, national origin, familial status, and disability. Occupation is not a protected class under federal law. Note that many states and localities add protected classes such as age, marital status, or source of income.

Directing prospective buyers toward or away from particular neighborhoods based on their race or other protected class is an illegal practice known as:

• a.Blockbusting, which is legal with disclosure
• b.Steering, which is prohibited by fair housing law✓
• c.A permitted marketing strategy
• d.A RESPA requirement

Steering is guiding buyers toward or away from neighborhoods based on a protected characteristic, limiting their housing choices. It violates the Fair Housing Act. Blockbusting (inducing panic selling) and redlining (denying loans by area) are separately prohibited practices.

In which type of lease does the tenant pay a fixed rent while the landlord pays the property taxes, insurance, and maintenance?

• a.Gross lease✓
• b.Net lease
• c.Percentage lease
• d.Ground lease

Under a gross lease the tenant pays a flat rent and the landlord covers the operating expenses such as taxes, insurance, and maintenance. In a net lease the tenant pays some or all of those expenses in addition to base rent, and a percentage lease ties rent partly to the tenant's sales.

A home sells for $300,000 and the total real estate commission is 6% of the sale price. What is the total commission?

• a.$1,800
• b.$18,000✓
• c.$15,000
• d.$24,000

Commission equals sale price multiplied by the rate: $300,000 x 0.06 = $18,000. Be careful to convert the percentage to a decimal (6% = 0.06). This $18,000 is the total paid to the brokerages before any split between the listing and selling sides.

A property has a market value of $250,000 and is assessed at 40% of value. If the tax rate is $2.50 per $100 of assessed value, what is the annual property tax?

• a.$2,500✓
• b.$6,250
• c.$1,000
• d.$10,000

First find assessed value: $250,000 x 0.40 = $100,000. Then divide by 100 to get the number of tax units: $100,000 / 100 = 1,000. Multiply by the rate: 1,000 x $2.50 = $2,500. Always apply the assessment ratio before the tax rate.

Indiana real estate licensing is regulated by the Indiana Real Estate Commission, which operates under the:

• a.Indiana Professional Licensing Agency (PLA)✓
• b.U.S. Department of Housing and Urban Development
• c.National Association of REALTORS
• d.local multiple listing service

The Indiana Real Estate Commission sets licensing and practice standards, and the Indiana Professional Licensing Agency (PLA) provides its administrative support, processing applications, renewals, and enforcement under Indiana Code Title 25.

In Indiana, the entry-level real estate license (the level a new practitioner earns to begin working under supervision) is called a:

• a.Salesperson
• b.Broker✓
• c.Affiliate broker
• d.Associate

Indiana consolidated its licensing so the entry-level license is titled 'broker.' A new Indiana broker must work under a 'managing broker.' Indiana no longer issues a 'salesperson' license, unlike many other states, though the role is functionally the equivalent.

An Indiana broker must conduct licensed real estate activities under the supervision of a:

• a.Managing broker✓
• b.Attorney
• c.The Indiana Real Estate Commission directly
• d.No one; brokers work fully independently

In Indiana, a licensed broker affiliates with and is supervised by a managing broker, who is responsible for the broker's activities and for the company's trust funds and records. A new broker cannot operate independently until qualifying as a managing broker.

Indiana law permits a licensee to represent both the buyer and the seller in the same transaction as a limited agent only with the:

• a.Consent of the managing broker alone
• b.Written consent of both parties✓
• c.Verbal consent of one party
• d.Approval of the Commission

Indiana's agency statute allows limited agency (representing both sides) only when both the buyer and seller give written consent after disclosure. Without informed written consent, a licensee may not act as a limited agent for opposing parties.

Under Indiana agency law, a licensee representing a client owes duties that include loyalty, confidentiality, and:

• a.Guaranteeing the client the lowest price
• b.Disclosing adverse material facts about the property✓
• c.Representing the other party's interests
• d.Setting the commission rate by law

An Indiana agent owes the client statutory duties such as loyalty, confidentiality, obedience to lawful instructions, accounting, reasonable care, and disclosure of adverse material facts about the property that the licensee knows. The licensee cannot guarantee price or represent opposing interests without proper consent.

Earnest money and other client funds received in an Indiana transaction must be deposited into the:

• a.Escrow or trust account maintained by the company or managing broker✓
• b.Individual broker's personal account
• c.Indiana Real Estate Commission's account
• d.Seller's personal account

Indiana requires client funds such as earnest money to be held in a properly maintained escrow or trust account, the responsibility of the managing broker. Commingling client funds with personal or business operating money is prohibited.

Under Indiana law, a licensee who fails to disclose their agency relationship to the consumers involved may face:

• a.No consequence
• b.Disciplinary action by the Indiana Real Estate Commission✓
• c.An automatic license upgrade
• d.A required commission increase

Indiana requires licensees to disclose their agency status to consumers. Failing to make required agency disclosures, or misrepresenting whom the licensee represents, can result in disciplinary action by the Commission, including fines or license sanctions.

Indiana real estate licenses are renewed with required continuing education measured over a:

• a.Single day
• b.Three-year renewal cycle✓
• c.Ten-year cycle
• d.One-week cycle

Indiana renews broker licenses on a multi-year cycle and requires continuing education completed within that renewal period, including certain mandatory course content. New brokers must also complete post-licensing education. Confirm current hour totals and deadlines with the PLA.