Sample practice questions

A few real questions from this free bank, with full explanations. Use the practice tool above for the whole set.

1. 1. Real Property

   A homeowner installs custom bookshelves that are bolted into wall studs and built to fit a specific alcove. In a sale, how are these most likely treated?

   • a.Personal property the seller always removes
   • b.Fixtures that transfer with the real property unless excluded in writing
   • c.Trade fixtures the seller may remove regardless of the contract
   • d.Emblements that pass to the buyer at closing

   Answer: b

   Explanation: Items permanently attached and adapted to the property are fixtures and pass with the real estate unless the contract specifically excludes them. Personal property would move with the seller, but bolting into studs and custom fitting show intent for the items to become part of the realty. Trade fixtures apply to a commercial tenant's business equipment, and emblements refer to annual crops, neither of which fits a homeowner's bookshelves.

2. 2. Valuation

   An appraiser adjusts comparable sales when using the sales comparison approach. To which property is the adjustment always applied?

   • a.The comparable, never the subject property
   • b.The subject property, never the comparable
   • c.Whichever property has the higher value
   • d.Both properties equally

   Answer: a

   Explanation: In the sales comparison approach the subject has no known sale price, so adjustments are made to the comparables to make them resemble the subject. If a comparable is superior, its price is adjusted downward; if inferior, upward. The subject is never adjusted because its value is the unknown the appraiser is trying to estimate.

3. 3. Contracts & Agency

   A broker's fiduciary duties to a client include loyalty, obedience, disclosure, confidentiality, accounting, and reasonable care. Which best describes the duty of confidentiality after agency ends?

   • a.It ends the moment the transaction closes
   • b.It continues indefinitely as to the client's confidential information
   • c.It applies only to the purchase price
   • d.It is waived automatically once a commission is paid

   Answer: b

   Explanation: The duty to keep a client's confidential information private survives the termination of the agency relationship and generally continues indefinitely. Closing the transaction or paying a commission does not release the broker to reveal a former client's motivations, financial limits, or bargaining position. The duty is not limited to the price; it covers any confidential information learned during the agency.

4. 4. Real Estate Practice

   A broker tells prospective buyers that a neighborhood is 'changing' and they should buy now before values fall due to new residents moving in. This practice is called:

   • a.Redlining
   • b.Puffing
   • c.Steering
   • d.Blockbusting

   Answer: d

   Explanation: Blockbusting is inducing owners to sell or buyers to act by suggesting that people of a particular protected class are entering the neighborhood and will affect values, and it is illegal under fair housing law. Redlining is denying loans or services in certain areas, and steering is directing buyers toward or away from areas based on protected characteristics. Puffing is legal opinion-based sales talk and does not involve protected classes.

5. 5. Financing

   A borrower obtains a mortgage loan with a fixed interest rate and equal monthly payments that fully repay the loan by the end of the term. This is best described as:

   • a.An interest-only loan
   • b.A balloon loan
   • c.A fully amortizing loan
   • d.A negative amortization loan

   Answer: c

   Explanation: A fully amortizing loan uses level payments that cover both interest and principal so the balance reaches zero at the end of the term. An interest-only loan leaves the principal untouched during the interest-only period, and a balloon loan requires a large lump-sum payoff before amortization would complete. Negative amortization occurs when payments are too small to cover interest, causing the balance to grow.

6. 6. NC Agency

   Under North Carolina law, when must a broker first review the Working With Real Estate Agents Disclosure with a consumer?

   • a.Only at the closing table
   • b.Only after a written offer is prepared
   • c.Whenever the broker feels it is appropriate
   • d.At first substantial contact with the consumer

   Answer: d

   Explanation: North Carolina requires brokers to review the Working With Real Estate Agents Disclosure with a buyer or seller at first substantial contact, meaning before the consumer shares confidential information. Waiting until closing or until an offer is written would defeat the disclosure's purpose of explaining agency options early. The timing is set by Commission rule, not left to the broker's discretion.

7. 7. Brokerage Practice

   A North Carolina broker receives an earnest money deposit. Where must those funds be held?

   • a.In the broker's personal checking account
   • b.In a trust or escrow account separate from the broker's own funds
   • c.In the broker-in-charge's investment account
   • d.In cash in the office safe until closing

   Answer: b

   Explanation: North Carolina License Law requires client and customer money such as earnest money to be deposited in a trust or escrow account kept separate from the broker's personal or business funds. Commingling those funds with the broker's own money is prohibited and can lead to discipline. Holding deposits in cash or a personal account fails the safeguarding and record-keeping requirements the Commission enforces.

8. 8. Other NC Laws

   North Carolina's Residential Property and Owners' Association Disclosure Statement generally requires a seller of residential real property to:

   • a.Guarantee that the property has no defects
   • b.Repair all defects before listing
   • c.Provide a professional home inspection to the buyer
   • d.Disclose known material characteristics and defects or note 'No Representation'

   Answer: d

   Explanation: North Carolina's disclosure statement asks sellers to reveal known conditions of the property or to answer 'No Representation,' placing the duty on disclosure rather than warranty. The seller need not guarantee the property is defect-free, repair items before listing, or supply an inspection. The form gives buyers information about known conditions while allowing the seller to decline to represent certain items.

9. 9. Contracts/Closing

   In North Carolina, residential real estate closings are conducted under a model in which:

   • a.Only real estate brokers may conduct the closing
   • b.No attorney involvement is permitted
   • c.A licensed attorney supervises the closing and handles the title work
   • d.Closings are always handled by out-of-state escrow companies

   Answer: c

   Explanation: North Carolina follows an attorney-supervised closing model in which a licensed North Carolina attorney handles the title examination and the disbursement of funds. Brokers may facilitate the transaction but do not perform the legal closing work themselves. Out-of-state escrow-only companies do not replace the attorney's role in North Carolina residential closings.

10. 10. Taxes/Insurance

    A buyer is purchasing a home in a federally designated Special Flood Hazard Area with a federally backed mortgage. What is typically required?

    • a.Nothing, because flood insurance is always optional
    • b.Flood insurance as a condition of the loan
    • c.A waiver of all hazard insurance
    • d.Private mortgage insurance instead of flood coverage

    Answer: b

    Explanation: When a property in a Special Flood Hazard Area is financed with a federally backed or federally regulated loan, the lender must require flood insurance. Standard homeowners hazard policies do not cover flood damage, so a separate flood policy is needed. Private mortgage insurance protects the lender against default and is unrelated to flood risk, so it cannot substitute for flood coverage.