Indiana Real Estate Broker Exam — All Questions

The principle of contribution states that the value of a component or improvement is measured by:

• a.The raw number of square feet of floor area or land area that the improvement happens to occupy
• b.The owner's personal emotional attachment to and sentimental feelings about that improvement
• c.Its original construction or installation cost in every case, dollar for dollar, with no exception
• d.How much it adds to the overall value of the property, not its cost✓

Under contribution, an improvement is worth the amount it adds to the whole property's market value, which may be more or less than its cost. This principle explains why some renovations do not fully return their expense, a key point in over-improvement analysis.

Under Internal Revenue Code Section 121, a qualifying homeowner may generally EXCLUDE from taxable capital gain:

• a.Up to $250,000 of gain if single, or $500,000 if married filing jointly✓
• b.Up to a full one million dollars of gain on any property at all, at any time and any frequency
• c.All gain on any and every investment or rental property the taxpayer happens to own and sell
• d.Absolutely nothing, because gain on the sale of a home is always fully and entirely taxable

Section 121 lets homeowners who owned and used the home as their principal residence for at least two of the prior five years exclude up to $250,000 of gain (single) or $500,000 (married filing jointly). It applies to a primary residence, not to investment property.

Depreciation recapture on the sale of investment real estate means that:

• a.All of the depreciation deductions previously claimed are simply refunded to the investor in cash
• b.The investor is legally required to physically restore and rebuild the depreciated building itself
• c.Gain from prior depreciation may be taxed, often at a special rate✓
• d.No income tax is ever owed at all on the sale of a property that has previously been depreciated

When depreciated property is sold at a gain, the portion of gain due to depreciation deductions is 'recaptured' and taxed under special rules, reflecting the earlier tax benefit. It is a tax concept, not a requirement to rebuild, and it increases, not eliminates, tax on sale.

Which appraisal approach is generally MOST reliable for a special-purpose property, such as a church or public school, that rarely sells and earns no market income?

• a.The sales comparison approach, which depends on recent sales of similar comparable properties
• b.The income approach, which converts a property's market rental income into an indicated value
• c.The gross rent multiplier method, which relies on typical market rents that these lack entirely
• d.The cost approach✓

Special-purpose properties have few or no comparable sales and generate no market rent, so the cost approach (replacement cost new, less depreciation, plus land) is typically most reliable. Sales comparison lacks comparables and the income/GRM methods need market income these properties do not produce.

The four characteristics an item must have to possess value in the market, often remembered as DUST, are:

• a.Debt, Utility, Supply, and Taxes, a mix of unrelated financing and cost terms rather than value
• b.Demand, Utility, Scarcity, and Transferability✓
• c.Depreciation, Use, Sale, and Title, which describe stages of ownership rather than value itself
• d.Demand, Ownership, Scarcity, and Time, which swaps in two terms that are not part of the concept

For something to have market value it must have Demand (buyers who want it), Utility (usefulness), Scarcity (limited supply), and Transferability (the ability to convey it). The DUST acronym captures these four essentials of value.

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.Ownership in severalty
• c.A leasehold estate
• d.Joint tenancy✓

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

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 income approach
• b.The gross rent multiplier method
• c.The sales comparison approach✓
• 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.Prepayment clause
• c.Subordination clause
• d.Alienation (due-on-sale) 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 doctrine of laches
• c.The statute of frauds✓
• 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.Acceptance that forms a binding contract
• b.Option to purchase
• c.Novation of the contract
• d.Counteroffer that terminates the original offer✓

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.Assignment
• b.Exclusive listing
• c.Option contract✓
• 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.Designated agency
• c.Dual agency
• d.Implied 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.1988
• c.1978✓
• 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.A permitted marketing strategy
• c.A RESPA requirement
• d.Steering, which is prohibited by fair housing law✓

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.

How many hours of classroom instruction must an approved Indiana real estate broker prelicensing course contain?

• a.Sixty (60) hours of classroom instruction
• b.Seventy-five (75) hours of classroom instruction
• c.Ninety (90) hours of classroom instruction✓
• d.One hundred twenty (120) hours of instruction

Indiana consolidated licensure into a single broker license, and the required broker curriculum is at least ninety hours covering principles, practices, Indiana license law and professional standards, law of agency, contracts, financing, settlement procedures, escrow responsibility, recordkeeping, government regulations and appraising. Cite: IC 25-34.1-5-5; 876 IAC 6-4-1.

An Indiana licensee is working with a prospective buyer and has signed nothing with anyone. Whom does the licensee represent?

• a.That buyer, absent a written agreement to the contrary✓
• b.No one, until a written agency agreement is signed
• c.The seller, because the listing side pays the fee
• d.Both parties, as a limited agent by operation of law

Indiana reverses the old default: a licensee has an agency relationship with, and is representing, the individual the licensee is working with unless there is a written agreement to the contrary or the licensee is merely assisting the person as a customer without compensation. Cite: IC 25-34.1-10-9.5(a).

What offense does a person commit by performing the acts of a broker in Indiana without a license?

• a.A Class B misdemeanor for each transaction
• b.A Class A misdemeanor for each transaction
• c.A Level 6 felony for each transaction
• d.A Class A infraction for each transaction✓

Unlicensed brokerage is an infraction rather than a crime, and each transaction is a separate offense. On conviction the court must add to any fine the amount of the fee or other compensation earned in committing the offense. Cite: IC 25-34.1-6-2.

By when must an Indiana listing broker deposit money received in connection with a transaction after final acceptance of the offer?

• a.Within twenty-four hours of receiving the money
• b.On or before the next two banking days after acceptance✓
• c.On or before the next five banking days after acceptance
• d.At closing, together with the remaining sale proceeds

The commission's rule gives the listing broker until the end of the next two banking days after final acceptance either to deposit the money in the broker's escrow/trust account or to deliver it to whoever the purchase agreement names to hold it. The broker with whom money is deposited is held responsible for it. Cite: 876 IAC 8-2-2(a).

A broker first licensed in Indiana after June 30, 2014 must complete postlicensing education. How much, and within what period?

• a.Twelve hours within the first year after issuance
• b.Twenty-four hours within the first year after issuance
• c.Thirty hours within the first two years after issuance✓
• d.Forty-five hours within the first three years after issuance

The thirty hours of commission-approved postlicensing education replace, rather than add to, the continuing education the broker would otherwise owe, and they cover the practical matters of real estate transactions. A broker who goes inactive before finishing them must finish them before reactivating. Cite: IC 25-34.1-3-4.1(f); 876 IAC 7-4-2.

What is a "limited agent" under Indiana agency law?

• a.A licensee whose authority ends when the listing expires
• b.A licensee who represents both sides with written consent✓
• c.A licensee acting as subagent for the listing broker
• d.A licensee who represents a client for one showing only

A limited agent represents both the seller and the buyer, or both the landlord and the tenant, only with the written and informed consent of all parties, and owes a client only the duties set out in the agency chapter. Cite: IC 25-34.1-10-7; IC 25-34.1-10-12(a).

What is the most the Indiana real estate recovery fund may pay on any single judgment?

• a.Twenty thousand dollars✓
• b.Ten thousand dollars
• c.Twenty-five thousand dollars
• d.Fifty thousand dollars

The fund pays the actual and direct loss left unpaid on a final judgment for embezzlement, or for unlawfully obtaining money or property by false pretenses, a device, trickery or forgery. Court costs may be included; attorney's fees and punitive damages may not. Cite: IC 25-34.1-7-4(a).

A buyer and a seller each refuse to release the earnest money the broker holds. What does the commission's rule allow the broker to do?

• a.Release the money to the seller as liquidated damages
• b.Deposit the money with the commission for distribution
• c.Hold the money indefinitely until a court orders release
• d.Give certified notice and release the money after 60 days✓

The broker may start a release process: notify all parties at their last known address by certified mail that the deposit will go to the party named in the letter unless, within sixty days of the mailing date, the parties enter a mutual release or one of them begins litigation. Cite: 876 IAC 8-2-2(d).

Indiana measures broker continuing education by a "continuing education year." What period is that?

• a.January 1 through December 31 of the same year
• b.July 1 through June 30 of the following year✓
• c.April 1 through March 31 of the following year
• d.The twelve months following the license issue date

The CE year is fixed by rule and does not float with the licensee's own issue date. Hours earned above the annual minimum do not carry forward into the next CE year, so a broker cannot bank them. Cite: 876 IAC 7-2-2; 876 IAC 7-5-1(g).

What does Indiana law say about offering subagency through a multiple listing service?

• a.It is allowed if the seller consents in writing
• b.It is allowed if the compensation is disclosed
• c.It is prohibited; licensees may not offer it✓
• d.It is allowed only in commercial transactions

Indiana eliminated subagency. A licensee may not offer subagency through an MLS or other information source, or agree to appoint, cooperate with, compensate or otherwise associate with a subagent. Cooperating with a licensee who is not acting for a client remains permitted. Cite: IC 25-34.1-10-17.

What is the aggregate lifetime limit the Indiana real estate recovery fund may pay with respect to any one licensee?

• a.$20,000 for all claims against that licensee
• b.$100,000 for all claims against that licensee
• c.$250,000 for all claims against that licensee
• d.$50,000 for all claims against that licensee✓

The per-judgment cap is twenty thousand dollars and the lifetime aggregate for one licensee is fifty thousand. If two or more valid claims against the same licensee would exceed that aggregate, the commission distributes the fifty thousand among the claimants in proportion to their claims. Cite: IC 25-34.1-7-4(a); IC 25-34.1-7-5(a).

What must every Indiana listing agreement contain and do?

• a.A definite expiration date, and a copy to the owner in three business days✓
• b.A definite expiration date, and a copy to the owner at the time of closing
• c.An automatic renewal clause, and a copy to the owner within thirty days
• d.A guaranteed net return, and a copy to the owner within three business days

Since 2024 the writing requirement sits in the statute as well as the rule, and the 2025 amendment confirmed that paper or electronic form both satisfy it. The same rule now covers buyer agency agreements. The original and all electronic files stay in the listing broker's office. Cite: IC 25-34.1-12-1; 876 IAC 8-2-1(a).

How long must an individual have held an active Indiana broker license before qualifying as a managing broker?

• a.One full year of active licensure
• b.Two years of active licensure
• c.Three years of active licensure✓
• d.Five years of active licensure

P.L.166-2025 raised this from two years to three and added a written examination. The older commission rule, 876 IAC 7-3-2, still prints the two-year figure, but the statute controls, so a candidate who studied only the rule would answer this wrong today. Cite: IC 25-34.1-4-0.5.

Which obligations survive the end of an Indiana agency relationship?

• a.Presenting offers that arrive after the relationship ends
• b.Accounting for money and keeping the client's confidences✓
• c.Continuing to promote the former client's interests
• d.None; every duty ends when the relationship ends

Exactly two duties carry forward: accounting for all money and property received during the relationship, and keeping confidential what the client asked to be kept confidential. Confidentiality lapses only if the law requires disclosure, the client consents in writing, or the information becomes public from another source. Cite: IC 25-34.1-10-14(c).

The recovery fund pays a claim caused by an Indiana licensee. When may that licensee be licensed again?

• a.Immediately, since the fund is subrogated to the claim
• b.After three years, whether or not the fund is repaid
• c.After repaying the fund in full, with no interest charged
• d.After repaying the fund in full with 12% interest✓

The commission must suspend the judgment debtor's license when it pays, and the licensee is not eligible to be licensed again as a broker until the amount paid from the fund is repaid in full with interest of twelve percent per annum. Cite: IC 25-34.1-7-10(a).

When may an Indiana broker company accept a listing that provides for a net return to the seller?

• a.Only if the listing states a maximum commission✓
• b.Only if the seller is represented by an attorney
• c.Only in commercial real estate transactions
• d.Never, because net listings are always prohibited

Indiana does not ban net listings outright. The rule forbids accepting one unless the listing agreement provides for a maximum commission the seller will pay, which is what stops the arrangement from handing the broker every dollar above the seller's number. Cite: 876 IAC 8-2-1(b).

Besides the required years of licensure, what must an Indiana broker do to become a managing broker?

• a.Complete 30 hours of postlicensing education and a written exam
• b.Pass 24 hours of broker management courses and a written exam✓
• c.Complete 12 hours of management CE and post a surety bond
• d.Pass 24 hours of broker management courses and post a bond

The written examination requirement was added to the statute in 2025 alongside the longer licensure period. The twenty-four hours of broker management instruction is unchanged and may be taken at an approved real estate school. Cite: IC 25-34.1-4-0.5; 876 IAC 7-3-3.

What does a licensee representing the seller owe a prospective buyer in Indiana?

• a.An independent inspection of the property's condition
• b.Verification of the statements the seller has made
• c.Honesty and disclosure of known physical defects✓
• d.Nothing, because the buyer is not the licensee's client

The seller's licensee must treat prospective buyers honestly, must not knowingly give them false information, and must disclose adverse material facts or risks actually known about the physical condition that a reasonable and timely inspection would not reveal. There is no duty to inspect independently or to verify the seller's statements. Cite: IC 25-34.1-10-10(c), (d).

An Indiana licensee is convicted of a crime. How soon must the commission receive a copy of the judgment?

• a.Not more than 30 days after the conviction✓
• b.Not more than 10 days after the conviction
• c.Not more than 60 days after the conviction
• d.At the licensee's next renewal application

The licensee must send the commission both the complaint or other information describing the crime and the judgment of conviction within thirty days of the conviction date. Discipline for a conviction substantially related to real estate practice then proceeds under IC 25-1-11. Cite: IC 25-34.1-3-12; IC 25-34.1-6-3.

What must appear in an Indiana broker's classified ad, sign, business card or internet listing?

• a.The broker's individual real estate license number
• b.The commission's consumer complaint hotline
• c.The seller's written consent to the advertising
• d.The broker company's name, clearly visible✓

All advertising is under the direct supervision of, and in the name of, the broker company. Advertising that shows only a post office box, a telephone number or a street address is prohibited, and a broker may not advertise so as to suggest the property is offered by a private party. Cite: 876 IAC 8-1-8.

How much of an Indiana managing broker's twelve annual continuing education hours must be management specific?

• a.Two of the twelve hours
• b.Four of the twelve hours✓
• c.Six of the twelve hours
• d.Eight of the twelve hours

The four hours must be dedicated to the business and management skills and legal knowledge a managing broker needs, and the requirement applies in any continuing education year in which the broker functions as a managing broker for any period of time. Cite: IC 25-34.1-9-11(d); 876 IAC 7-5-2.