Oregon Real Estate Broker Exam — All Questions

Which type of estate gives an owner the fullest bundle of rights, is of potentially unlimited duration, and passes to the owner's heirs?

• a.Fee simple absolute✓
• b.Estate at will
• c.Estate for years
• d.Life estate

A fee simple absolute is the highest and most complete estate in land: it lasts indefinitely and is freely inheritable and transferable. A life estate ends at the death of the measuring life, so it is not inheritable. An estate for years and an estate at will are leasehold (less-than-freehold) estates that give possession, not ownership, so they confer far fewer rights.

Two people own a property as joint tenants. When one owner dies, what happens to the deceased owner's interest?

• a.It reverts to the original grantor
• b.It passes to the deceased owner's heirs by will
• c.It passes automatically to the surviving joint tenant✓
• d.It is sold and the proceeds go to the estate

The defining feature of joint tenancy is the right of survivorship: on the death of one joint tenant, that interest passes automatically to the surviving joint tenant(s) outside of probate. Because of survivorship, the interest cannot be devised by will (that is the rule for a tenancy in common instead). There is no forced sale and no reversion to the grantor.

A local government's power to divide land into districts and regulate the use, height, and density of structures within each district is called:

• a.Eminent domain
• b.Zoning✓
• c.A deed restriction
• d.Escheat

Zoning is an exercise of the government's police power to promote public health, safety, and welfare by regulating land use, building height, lot size, and density within designated districts. Escheat is the reversion of property to the state when an owner dies with no heirs. Eminent domain is the power to take private property for public use with just compensation. A deed restriction is a private (not governmental) limitation placed by a prior owner.

An appraiser is valuing a single-family home in an established neighborhood. Which approach to value will the appraiser rely on most heavily?

• a.Sales comparison approach✓
• b.Cost approach
• c.Income approach
• d.Gross rent multiplier approach

The sales comparison approach, which analyzes recent sales of similar nearby properties, is the most reliable and heavily weighted method for single-family residences because such homes are bought and sold frequently, giving plenty of comparable data. The cost approach is most useful for new or special-purpose buildings, and the income approach (and gross rent multiplier) apply to income-producing property, not owner-occupied homes.

The principle that a property's maximum value tends to be set by the cost of acquiring an equally desirable substitute property is known as:

• a.Progression
• b.Contribution
• c.Anticipation
• d.Substitution✓

The principle of substitution holds that an informed buyer will pay no more for a property than the cost of an equally desirable substitute; it is the foundation of the sales comparison approach. Progression is when a lower-value property gains value from higher-value neighbors. Contribution measures how much a specific component adds to total value. Anticipation is value based on expected future benefits.

In a typical mortgage or deed of trust, which document is the borrower's personal promise to repay the debt?

• a.The promissory note✓
• b.The deed of trust
• c.The mortgage
• d.The reconveyance

The promissory note is the borrower's written promise to repay the loan and is the evidence of the debt itself. The mortgage or deed of trust is the security instrument that pledges the property as collateral; it secures the note but does not create the debt. A reconveyance is issued when the debt is fully paid to release the lien.

A clause in a loan that allows the lender to demand the entire remaining balance be paid immediately if the borrower defaults is called a(n):

• a.Subordination clause
• b.Acceleration clause✓
• c.Alienation clause
• d.Defeasance clause

An acceleration clause lets the lender declare the whole unpaid balance due at once upon default, which is a necessary step before foreclosure. An alienation (due-on-sale) clause lets the lender call the loan due if the property is sold or transferred. A subordination clause changes lien priority. A defeasance clause requires the lender to release the lien once the debt is paid.

Which federal law requires lenders to disclose the true cost of credit, including the annual percentage rate (APR) and finance charges, to consumer borrowers?

• a.RESPA
• b.The Fair Housing Act
• c.The Equal Credit Opportunity Act
• d.The Truth in Lending Act (Regulation Z)✓

The Truth in Lending Act, implemented by Regulation Z, requires lenders to disclose credit terms such as the APR and total finance charges so borrowers can compare loans. RESPA governs settlement-cost disclosures and prohibits kickbacks. The Fair Housing Act bars discrimination in housing. The Equal Credit Opportunity Act prohibits discrimination in lending but does not set the cost-of-credit disclosure rules.

Which of the following is NOT one of the essential elements required for a valid contract?

• a.Consideration
• b.Legal capacity of the parties
• c.Offer and acceptance (mutual assent)
• d.Notarization of the parties' signatures✓

A valid contract requires mutual assent (offer and acceptance), consideration, legal capacity of the parties, lawful object, and (for real estate) usually a writing. Notarization is not an element of validity; it is only an authentication used for recording certain documents such as deeds. The other three choices are all genuine essential elements.

A seller receives an offer and responds by changing the closing date and raising the price before signing. This response is legally best described as a:

• a.Novation
• b.Counteroffer✓
• c.Option
• d.Valid acceptance

Any change to the material terms of an offer is a counteroffer, which rejects the original offer and creates a new offer that the other party may accept or reject. It is not an acceptance because acceptance must mirror the offer exactly. An option is a separate contract giving a right to buy within a set time. A novation is the substitution of a new contract or party for an existing one.

The legal doctrine that requires contracts for the sale of real estate to be in writing to be enforceable is called the:

• a.Statute of limitations
• b.Doctrine of laches
• c.Parol evidence rule
• d.Statute of frauds✓

The statute of frauds requires certain contracts, including those for the sale of real property, to be in writing and signed to be enforceable. The statute of limitations sets the time limit for filing a lawsuit. Laches bars a claim due to unreasonable delay that prejudices the other party. The parol evidence rule limits the use of outside evidence to contradict a written contract.

A buyer and seller sign a purchase agreement, but before closing the seller changes his mind and refuses to convey title. The buyer sues to force the seller to complete the sale. The buyer is seeking:

• a.Rescission
• b.A novation
• c.Specific performance✓
• d.Liquidated damages

Specific performance is an equitable remedy that compels a party to carry out the contract as agreed; it is available in real estate because each parcel of land is considered unique and money damages may be inadequate. Liquidated damages are a pre-agreed money amount for a breach. Rescission cancels the contract and returns the parties to their prior positions. A novation replaces the contract, which is not what the buyer wants.

A contract signed by a 15-year-old minor to purchase real estate is generally considered:

• a.Void from the start
• b.Fully enforceable against both parties
• c.Voidable by the minor✓
• d.Illegal

A contract made by a minor is voidable at the minor's option because minors lack full legal capacity; the minor may disaffirm it, but the adult party is bound unless the minor chooses to cancel. It is not void from the start (that describes contracts with an illegal purpose or missing an essential element), it is not fully enforceable against the minor, and buying real estate is a lawful object, so it is not illegal.

A real estate licensee owes a client duties of loyalty, obedience, confidentiality, disclosure, accounting, and reasonable care. These are collectively known as:

• a.General obligations
• b.Statutory rights
• c.Ministerial duties
• d.Fiduciary duties✓

An agent owes fiduciary duties to the principal (client): loyalty, obedience, confidentiality, disclosure, accounting, and reasonable care and diligence. These arise from the position of trust in an agency relationship. Ministerial duties are routine, non-advisory tasks performed for a customer. The other choices are not the recognized term for this bundle of client duties.

A licensee represents both the buyer and the seller in the same transaction with the informed written consent of both. This relationship is called:

• a.Designated subagency
• b.A general agency
• c.Dual agency✓
• d.Single agency

Dual agency occurs when one licensee (or brokerage) represents both parties in the same transaction, and it is permitted only with the informed written consent of both because of the inherent conflict of interest. Single agency is representing only one party. Subagency extends the listing broker's agency to another broker. A general agency covers a broad range of acts, unrelated to representing both sides at once.

In a typical seller-listing arrangement, when is the listing broker generally considered to have earned the commission?

• a.When the broker produces a ready, willing, and able buyer who meets the seller's terms✓
• b.Only if the buyer obtains financing
• c.Only after the deed is recorded
• d.As soon as the listing agreement is signed

Under the common-law rule, a broker earns the commission by producing a buyer who is ready, willing, and able to purchase on the seller's stated terms (or terms the seller accepts). Signing the listing alone does not earn a commission; it only creates the agency. Recording the deed and the buyer's financing are closing events, and although most agreements tie actual payment to closing, the commission is legally 'earned' when the qualified buyer is produced.

A buyer's agent learns that the buyer is willing to pay far more than the asking price. To whom does the agent owe the duty of confidentiality regarding this information?

• a.The listing broker
• b.Both the buyer and the seller equally
• c.The seller
• d.The buyer✓

As the buyer's agent, the licensee owes fiduciary duties, including confidentiality, to the buyer (the principal). Disclosing the buyer's top price to the seller or listing broker would breach loyalty and confidentiality and harm the client's negotiating position. The duty runs to the principal, not to the other party in the transaction.

Federal law requires which disclosure for the sale of most residential housing built before 1978?

• a.A radon test report
• b.A mold inspection
• c.A lead-based paint disclosure✓
• d.A flood elevation certificate

The federal Residential Lead-Based Paint Hazard Reduction Act requires sellers and landlords of most housing built before 1978 to disclose known lead-based paint hazards and provide an EPA pamphlet, because lead paint was banned for residential use in 1978. Radon, flood, and mold disclosures may be required in some states or circumstances but are not the federal pre-1978 requirement.

A seller knows the basement floods every spring but does not mention it, and the defect is not visible during a normal inspection. This is an example of a:

• a.Condition protected by caveat emptor
• b.Latent material defect that must be disclosed✓
• c.Stigmatized condition
• d.Patent defect the buyer should have found

A latent defect is a hidden, material problem not discoverable by ordinary inspection; a seller (and agent) who knows of it generally must disclose it because it affects value or desirability and safety. A patent defect is one that is obvious or readily observable. A stigmatized property involves events like a death, not a physical defect. Modern disclosure duties limit the old caveat emptor ('let the buyer beware') rule for known latent defects.

Which type of deed offers the grantee the greatest protection by warranting clear title against defects arising at any time in the property's history?

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

A general warranty deed provides the greatest protection because the grantor warrants title against all defects, including those arising before the grantor owned the property. A special warranty deed covers only defects arising during the grantor's ownership. A quitclaim deed carries no warranties and conveys only whatever interest the grantor may have. A bargain and sale deed implies ownership but offers limited or no express warranties.

For a deed to transfer title, it must be delivered to and accepted by the grantee. Recording the deed in the public records primarily serves to:

• a.Give constructive notice to the world of the grantee's ownership✓
• b.Transfer title even without delivery
• c.Make the deed valid between the grantor and grantee
• d.Satisfy the requirement of consideration

Recording gives constructive (public) notice of the grantee's interest and establishes lien and title priority against later claimants. A deed is valid between the parties upon proper execution, delivery, and acceptance even if never recorded, so recording is not needed for validity between grantor and grantee. Recording cannot substitute for delivery, and it has nothing to do with consideration.

Under the federal Fair Housing Act, which of the following is a protected class?

• a.Occupation
• b.Level of education
• c.Religion✓
• d.Source of a person's income

The federal Fair Housing Act prohibits discrimination based on race, color, religion, sex, national origin, familial status, and disability (handicap). Religion is therefore a protected class. Occupation, education level, and source of income are not protected under the federal act, although some state or local laws add extra protected categories such as source of income.

An agent tells prospective buyers that they would be 'more comfortable' in a different neighborhood based on the racial makeup of the area, steering them away from certain homes. This illegal practice is called:

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

Steering is directing buyers toward or away from particular neighborhoods based on a protected characteristic such as race, and it violates fair housing law. Blockbusting is inducing owners to sell by suggesting that people of a particular protected class are moving in. Redlining is refusing to lend or insure in certain areas. Puffing is legal, non-factual sales exaggeration and is unrelated to discrimination.

Client funds such as earnest money deposits that a broker holds on behalf of others must be kept in a:

• a.Broker's general operating account
• b.Separate trust or escrow account✓
• c.Personal savings account of the agent
• d.Petty cash fund

Money belonging to others, such as earnest money, must be held in a separate trust (escrow) account to keep it distinct from the broker's own funds. Mixing client money with the broker's business or personal funds is commingling, and using it for the broker's own purposes is conversion, both of which are serious license-law violations. A general operating, personal, or petty cash account would all constitute commingling.

A tenant remains in possession of a leased property after the lease term ends, without the landlord's permission. This tenancy is best described as a(n):

• a.Tenancy at will
• b.Estate for years
• c.Estate from period to period
• d.Tenancy at sufferance✓

A tenancy (estate) at sufferance arises when a tenant who was lawfully in possession stays past the end of the lease without the landlord's consent, becoming a holdover tenant. An estate for years has a definite beginning and end. A periodic tenancy renews automatically for successive periods. A tenancy at will continues with the consent of both parties and can be ended by either at any time, unlike the unauthorized holdover here.

A home sells for $340,000 with a total commission of 6%. The listing brokerage receives 50% of the total commission, and the listing agent receives 60% of the listing brokerage's share. How much does the listing agent earn?

• a.$10,200
• b.$6,120✓
• c.$4,080
• d.$20,400

First find the total commission: $340,000 x 6% = $20,400. The listing brokerage's share is 50%: $20,400 x 0.50 = $10,200. The listing agent then receives 60% of that: $10,200 x 0.60 = $6,120. The $20,400 figure is the total commission and $10,200 is the brokerage's full share, not the agent's; $4,080 mistakenly takes 40% instead of 60%.

A seller wants to net $200,000 from a sale after paying a 6% commission (and no other costs). Rounded to the nearest dollar, what must the sale price be?

• a.$212,000
• b.$200,600
• c.$212,766✓
• d.$188,000

After a 6% commission the seller keeps 94% of the sale price, so Sale Price x 0.94 = $200,000, giving Sale Price = $200,000 / 0.94 = $212,765.96, which rounds to $212,766. A common error is to add 6% to $200,000 (getting $212,000), but you cannot simply add the rate back because the commission is charged on the higher sale price, not on the net.

A rectangular parcel measures 200 feet by 217.8 feet. Given that one acre equals 43,560 square feet, how many acres does the parcel contain?

• a.2 acres
• b.1.5 acres
• c.1 acre✓
• d.0.5 acre

Area = length x width = 200 ft x 217.8 ft = 43,560 square feet. Since one acre is exactly 43,560 square feet, the parcel is 43,560 / 43,560 = 1 acre. The other answers result from dividing or multiplying the area incorrectly; memorizing that an acre equals 43,560 square feet makes this a one-step conversion.

A homeowner installs built-in bookshelves bolted to the wall studs. With no contrary agreement in the sale, these shelves are generally treated as:

• a.movable chattels that were never attached to the land
• b.fixtures that transfer with the real property✓
• c.the seller's personal property that may be removed before closing
• d.trade fixtures installed by a business tenant

A fixture is personal property annexed to realty so firmly, and with the intent, that it becomes part of the real estate; bolted-in shelving passes with the deed unless excluded in writing. Trade fixtures are installed by a business tenant and stay personal property. Chattels are movable items that are not attached.

Which factor is LEAST relevant in deciding whether an item has become a fixture?

• a.the purchase price of the item✓
• b.the item's adaptation to the use of the real estate
• c.the method by which the item is attached
• d.the intention of the party who installed the item

Courts judge fixtures by the method of annexation, adaptation to the property's use, and the parties' intention (the classic tests). What the item originally cost is not a determining factor. The other three choices are all recognized fixture tests.

An owner conveys a parcel 'to Ann for life, then to Ben.' Ben's future interest is best described as:

• a.an executory limitation that cuts the estate short
• b.a reversionary interest that returns to the grantor
• c.a reversion retained by the original grantor
• d.a remainder✓

When a life estate is followed by a grant to a named third party, that party holds a remainder. A reversion is the grantor's retained interest that comes back to the grantor after the life estate ends. Because Ben is a named third party, his interest is a remainder, not a reversion.

A life tenant who neglects the property and lets it seriously deteriorate, harming the value for those who take title afterward, has committed:

• a.waste✓
• b.an easement created by necessity
• c.an encroachment onto adjoining land
• d.escheat to the state government

A life tenant must not commit waste - conduct that permanently damages the property and injures the remainderman's or reversioner's future interest. Escheat is reversion to the state when there are no heirs. An encroachment is an improvement intruding onto adjoining land. An easement by necessity provides access to landlocked land.

Two unmarried partners hold title as tenants in common with unequal shares. When one of them dies, what happens to that person's interest?

• a.the share is divided equally among the other co-tenants
• b.the surviving co-tenant automatically owns the entire property
• c.the property immediately escheats to the state
• d.the deceased owner's share passes to their heirs or by will✓

Tenancy in common has no right of survivorship, so a deceased co-tenant's undivided interest passes to their heirs or devisees. Automatic survivorship is the defining feature of joint tenancy instead. Escheat applies only when there are no heirs, and the shares are not redistributed to the other co-tenants.

The four unities required to create a joint tenancy are time, title, interest, and:

• a.conveyance
• b.possession✓
• c.partition
• d.survivorship

A joint tenancy requires the four unities - time, title, interest, and possession (PITT): the tenants take by the same instrument, at the same time, with equal interests, and an undivided right to possess the whole. Survivorship is the result of a joint tenancy, not one of the four unities. Partition is a legal action to divide co-owned property.

A married couple holds title so that each spouse has an undivided one-half interest with the right of survivorship, and neither may convey separately. This is:

• a.a tenancy in common with no survivorship
• b.community property owned equally by the spouses
• c.tenancy by the entirety✓
• d.a joint tenancy that has already been severed

Tenancy by the entirety is a co-ownership form reserved for married couples in states that recognize it, featuring survivorship and protection against one spouse conveying alone. Tenancy in common lacks survivorship and allows separate transfer. Community property treats marital property as equally owned but operates differently.

An easement that benefits an adjoining parcel of land and passes automatically when that parcel is sold is an easement that is:

• a.appurtenant✓
• b.personal to the holder and not transferable
• c.in gross, benefiting a person or company
• d.created by prescription through long hostile use

An easement appurtenant benefits a particular parcel (the dominant tenement) and runs with the land, transferring automatically to a new owner of that parcel. An easement in gross benefits a person or company rather than a parcel. A prescriptive easement is acquired by long, open, hostile use.

In an easement appurtenant, the parcel that receives the benefit is the ___ tenement, and the parcel that is burdened is the ___ tenement.

• a.primary; secondary
• b.dominant; servient✓
• c.superior; inferior
• d.servient; dominant

The dominant tenement enjoys the benefit of the easement, while the servient tenement is burdened by it (for example, by providing a driveway across it). The other paired terms are not the recognized legal labels for the two parcels.

A utility company holds a recorded right to run power lines across many separate private lots. This is best classified as an easement:

• a.appurtenant to a neighboring parcel
• b.in gross✓
• c.arising by estoppel from reliance
• d.created by strict necessity for access

An easement in gross benefits a person or entity rather than an adjoining parcel; commercial easements in gross, such as a utility's, are common and assignable. An appurtenant easement requires a benefited parcel. An easement by necessity arises to reach landlocked land.

A neighbor's fence is built two feet over the property line onto the adjoining lot. This condition is an example of:

• a.an easement in gross held by a utility
• b.a revocable license to use the land
• c.a private deed restriction on use
• d.an encroachment✓

An encroachment is an unauthorized physical intrusion of a structure - such as a fence, wall, or roofline - onto an adjoining owner's land, and it is a title or boundary problem often revealed by a survey. A license is temporary permission to use land, and a deed restriction is a private limitation on use.

A lien is best described as:

• a.a charge against property used to secure the payment of a debt✓
• b.the legal right to cross a neighbor's land to reach a public roadway for access
• c.a private restriction limiting how the land may be used by its owner
• d.the transfer of title to a new owner at the owner's death by will

A lien is a financial encumbrance - a claim against property that secures payment of a debt or obligation (such as a mortgage, tax, or judgment lien) and may lead to a forced sale if unpaid. Crossing another's land is an easement, a use limitation is a deed restriction, and a transfer at death is a devise.