Tennessee Real Estate Affiliate 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.

Tennessee real estate licensing is administered by the Tennessee Real Estate Commission (TREC) under:

• a.Tennessee Code Annotated Title 62, Chapter 13✓
• b.U.S. Department of Housing and Urban Development regulations
• c.the bylaws of the National Association of REALTORS
• d.local multiple listing service rules

TREC licenses and regulates real estate professionals in Tennessee under Title 62, Chapter 13 of the Tennessee Code Annotated. TREC handles licensing, education standards, and discipline; trade associations and the MLS do not license practitioners.

In Tennessee, the entry-level license held by a new licensee working under a broker is the:

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

Tennessee's entry-level license is the 'affiliate broker,' which must be held under a principal broker. With experience and additional education, an affiliate broker may qualify for a broker license. The affiliate broker is Tennessee's equivalent of a salesperson.

Tennessee requires all active real estate licensees to carry:

• a.Only a surety bond
• b.Errors and omissions (E&O) insurance✓
• c.Health insurance
• d.No insurance of any kind

A distinctive Tennessee requirement is that every active real estate licensee must carry errors and omissions (E&O) insurance. TREC offers a group policy option, but licensees may obtain equivalent independent coverage; without current E&O coverage a license cannot be active.

Under Tennessee law, a licensee who does not represent either party but assists them in completing a transaction acts as a:

• a.Designated agent
• b.Facilitator (transaction broker)✓
• c.Dual agent
• d.Subagent

Tennessee recognizes the 'facilitator,' sometimes called a transaction broker, who assists parties in a transaction without representing either as an agent. A facilitator does not owe the full fiduciary duties of an agent but must still be honest and disclose known adverse facts.

When two different affiliate brokers in the same Tennessee firm represent the buyer and the seller in one transaction, the firm may appoint them as:

• a.Dual agents for both parties
• b.Designated agents, each representing one party✓
• c.Facilitators for the whole firm
• d.Subagents of the buyer

Tennessee allows designated agency: the principal broker may designate different affiliate brokers within the firm to represent the buyer and the seller separately, so each client still receives individual representation rather than the firm acting as a dual agent.

Earnest money held by a Tennessee firm must be placed in a separate escrow or trust account and disbursed according to:

• a.The affiliate broker's personal discretion
• b.The terms of the agreement and TREC rules✓
• c.The buyer's verbal request only
• d.Whatever cash is on hand

Tennessee firms must deposit earnest money in a separate escrow or trust account and may disburse it only as the purchase agreement and TREC rules allow. The principal broker is responsible for proper handling; commingling or improper disbursement is a violation.

A Tennessee affiliate broker's license must be held by, and the affiliate must work under, the:

• a.Affiliate broker personally
• b.Principal broker of the firm✓
• c.Tennessee Real Estate Commission
• d.Local multiple listing service

An affiliate broker's license is held by and 'hangs with' the principal broker of the firm. The affiliate may conduct brokerage activity only under that principal broker's supervision, and compensation flows through the firm.

To maintain a Tennessee license, licensees must complete continuing education each renewal cycle, which includes a required:

• a.TREC Core Course✓
• b.national licensing exam
• c.multi-year apprenticeship
• d.no education at all

Tennessee licensees must complete continuing education for each renewal cycle, including the mandatory TREC Core Course that covers current Tennessee law and rules. New affiliate brokers also complete a post-license course. Confirm current hour totals with TREC.