Washington 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 homeowner installs custom built-in bookshelves that are bolted to the wall studs. Absent an agreement, these built-ins are most likely considered:

• a.Fixtures that convey with the real property✓
• b.Emblements belonging to the seller
• c.Personal property the seller may remove
• d.Trade fixtures owned by the buyer's lender

An item permanently attached and adapted to the property is a fixture and normally conveys with the real estate unless the contract says otherwise. Method of attachment (bolted to studs) and adaptation strongly indicate a fixture. Emblements are annual crops.

A parcel is currently used as a small store, but new zoning permits only residential use. The store may generally continue operating as a:

• a.Conditional condemnation
• b.Spot zone
• c.Legal nonconforming use✓
• d.Variance

A use that was lawful before a zoning change but no longer conforms is a legal nonconforming use, sometimes called grandfathered. It may usually continue, though expansion or rebuilding after damage can be restricted. A variance is granted prospectively for hardship.

An investor is valuing an apartment building. The appraiser divides the building's net operating income by a capitalization rate. This reflects the:

• a.Sales comparison approach
• b.Income approach✓
• c.Assessed value method
• d.Cost approach

The income approach values income-producing property by capitalizing net operating income (NOI divided by cap rate equals value). It is the primary approach for investment property such as apartments, where income potential drives value.

Which of the following would an appraiser consider a form of external (economic) obsolescence?

• a.A cracked foundation
• b.A new landfill built next to the property✓
• c.An outdated kitchen inside the home
• d.Peeling interior paint

External (economic) obsolescence is a loss in value from factors outside the property, such as a nearby landfill or highway. It is generally incurable by the owner. An outdated kitchen is functional obsolescence, and a cracked foundation is physical deterioration.

A buyer assumes the seller's existing loan and also gives the seller a new, larger loan that 'wraps around' the old one. This financing technique is a:

• a.Reverse mortgage
• b.Wraparound mortgage✓
• c.Purchase-money bridge loan
• d.Blanket release

A wraparound mortgage is a junior loan that includes (wraps around) an existing loan, which stays in place. The buyer pays the wraparound lender, who continues paying the underlying loan. It is a form of seller financing, subject to any due-on-sale clause.

Discount points paid to a lender at closing are best described as:

• a.A penalty for paying the loan off early
• b.The lender's title insurance premium
• c.A prepaid interest charge that lowers the loan's interest rate, where one point equals 1% of the loan amount✓
• d.Money set aside for property taxes

Discount points are prepaid interest paid to buy down the interest rate. One point equals one percent of the loan amount. Paying points reduces the rate and thus the monthly payment over the life of the loan.

A contract in which only one party makes an enforceable promise, performed by the other party's act, is called a:

• a.Void contract
• b.Unilateral contract✓
• c.Executed contract
• d.Bilateral contract

In a unilateral contract only one party is obligated, and the other party accepts by performing the requested act (for example, an open listing where the broker is paid only if they procure a buyer). A bilateral contract exchanges mutual promises.

A buyer and seller agree to replace their original purchase contract with an entirely new contract, discharging the old one. This substitution is called:

• a.Rescission by mistake
• b.Assignment
• c.Novation✓
• d.Estoppel

Novation is the substitution of a new contract or new party for an existing one, with the intent to discharge the original obligation. Assignment transfers rights under the existing contract but does not necessarily release the original party.

Under general agency principles, which duty requires a broker to promptly deliver all offers and material information to the client?

• a.Confidentiality
• b.Obedience
• c.Accounting
• d.Disclosure✓

The duty of disclosure requires the agent to share all material facts and communicate offers and relevant information to the client so the client can make informed decisions. Confidentiality protects the client's private information from others.

An agent exaggerates that a home has 'the best view in the entire city.' This kind of non-factual sales talk is known as:

• a.Puffing✓
• b.Fraud
• c.Latent defect
• d.Negligent misrepresentation

Puffing is opinion-based sales talk that a reasonable buyer would not rely on as fact, such as calling a view 'the best.' It is generally not actionable. Fraud and misrepresentation involve false statements of material fact that induce reliance and harm.

A latent defect is best described as a problem that is:

• a.Hidden and not discoverable by ordinary inspection, but known to the seller✓
• b.Obvious to anyone walking through the property
• c.Purely cosmetic and never needs disclosure
• d.Only found after the warranty expires

A latent defect is a hidden material defect not discoverable by a reasonable inspection. Sellers and agents who know of a latent defect must disclose it, because the buyer cannot detect it. A patent defect, by contrast, is obvious.

A grantor conveys 'only whatever interest I may have, if any' with no warranties of title. This is accomplished with a:

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

A quitclaim deed conveys whatever interest, if any, the grantor holds, with no warranties. It is often used to clear clouds on title or transfer between family members. It offers the grantee the least protection of the common deed types.

A lender refuses to make loans in a specific older neighborhood regardless of the applicant's qualifications. This illegal practice is called:

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

Redlining is the illegal practice of denying loans or insurance in particular areas, often correlating with the racial or ethnic makeup of a neighborhood. It violates fair housing and fair lending laws. Steering and blockbusting are separate prohibited practices.

An open listing differs from an exclusive-right-to-sell listing because in an open listing:

• a.The broker earns a commission even if the seller sells it alone
• b.The seller may list with multiple brokers and owes commission only to the one who procures a buyer✓
• c.No commission is ever payable
• d.Only one broker has the listing and always earns a commission

In an open listing, the seller can engage several brokers and pays only the broker who actually procures a ready, willing, and able buyer; if the seller sells it themselves, no commission is due. An exclusive-right-to-sell listing pays the listing broker regardless of who finds the buyer.

A landlord wrongfully makes an apartment uninhabitable, effectively forcing the tenant to leave. This is known as:

• a.Constructive eviction✓
• b.Novation of the lease
• c.Subletting
• d.Actual eviction by court order

Constructive eviction occurs when a landlord's failure to maintain habitable conditions substantially interferes with the tenant's use, effectively forcing them out. The tenant may be released from the lease. Actual eviction is a formal legal process to remove a tenant.

A salesperson earns 60% of a 3% commission on a $400,000 sale. How much does the salesperson receive?

• a.$4,800
• b.$12,000
• c.$2,400
• d.$7,200✓

The brokerage commission is $400,000 x 3% = $12,000. The salesperson's 60% share is $12,000 x 0.60 = $7,200.

Real estate licensing in Washington is administered by the Department of Licensing under which chapter of the Revised Code of Washington?

• a.RCW 84.40
• b.RCW 64.06
• c.RCW 18.85✓
• d.RCW 59.18

Washington real estate broker licensing is governed by RCW 18.85 and administered by the Washington State Department of Licensing (DOL). RCW 64.06 covers the seller disclosure statement, and RCW 59.18 is the Residential Landlord-Tenant Act.

In Washington's current licensing structure, the entry-level license for a person who lists and sells real estate under supervision is called a:

• a.Salesperson
• b.Real estate broker (working under a managing broker)✓
• c.Registered agent
• d.Realtor

Washington replaced the term salesperson; the entry-level license is now the real estate broker, who must be affiliated with and supervised by a designated or managing broker. A managing broker has additional experience and education and may supervise a firm.

Washington's real estate agency law (RCW 18.86) requires that consumers be provided which informational document explaining brokerage relationships?

• a.A federal Truth in Lending statement
• b.The pamphlet on the law of real estate agency✓
• c.A homeowners insurance binder
• d.A property tax assessment

Under RCW 18.86, Washington brokers must provide consumers with the statutory pamphlet describing the law of real estate agency, which explains the duties owed and the types of relationships. This ensures consumers understand representation before entering a transaction.

In most Washington residential resales, the seller must give the buyer a completed real estate 'Form 17.' This form is the:

• a.Seller Disclosure Statement required under RCW 64.06✓
• b.Lead paint addendum
• c.Escrow instruction letter
• d.Purchase and sale agreement

Washington's Form 17 is the Seller Disclosure Statement required by RCW 64.06 for most residential sales. The seller discloses the known condition of the property and systems. The buyer typically has a right to rescind within a set period after receiving it if not satisfied.

Washington real estate closings are commonly handled by a neutral third party that holds funds and documents and completes the transaction. This party is the:

• a.Listing broker acting alone
• b.State treasurer
• c.Escrow agent or closing agent✓
• d.County assessor

Washington transactions are typically closed through a neutral escrow or closing agent who holds the buyer's funds and the deed, follows the parties' instructions, and disburses funds and records documents at closing. Escrow protects both buyer and seller.

When a Washington firm receives earnest money, the funds must generally be:

• a.Deposited into the firm's trust account and handled per RCW 18.85 rules✓
• b.Given to the seller before closing
• c.Kept as cash by the individual broker
• d.Spent on marketing the property

Earnest money and other client funds must be deposited into the firm's real estate trust account and handled according to the requirements of RCW 18.85, not commingled with personal or operating funds. The designated broker is responsible for the trust account.

How many clock hours of approved prelicensing education must a Washington real estate broker applicant complete?

• a.60 hours
• b.40 hours
• c.90 hours✓
• d.No education is required

Washington requires 90 clock hours of approved prelicensing education for a broker applicant, commonly divided into a 60-hour Real Estate Fundamentals course and a 30-hour Real Estate Practices course, before taking the licensing exam.

A Washington real estate broker license must be renewed on which cycle, with continuing education required?

• a.Every 6 months
• b.Only once, never renewed
• c.Every 5 years
• d.Every 2 years✓

Washington real estate broker licenses are renewed every two years, and licensees must complete continuing education, including a required core course, to renew. Keeping education current maintains an active license and up-to-date knowledge.

Which individual real estate license levels does Washington issue?

• a.Salesperson, broker, and broker-in-charge
• b.Sales agent, broker associate, and qualifying broker
• c.Broker, managing broker, and designated broker✓
• d.Associate broker, principal broker, and salesperson

Washington has no salesperson license. RCW 18.85.011 defines a broker, who acts for a firm under supervision; a managing broker, who may supervise other licensees; and a designated broker, the natural person who acts for the firm and must hold an endorsed managing broker's license. Cite: RCW 18.85.011.

A Washington real estate license runs two years from issuance. What happens if the renewal fee is never paid?

• a.The license is canceled one year after the expiration date✓
• b.The license is canceled immediately on the expiration date
• c.The license stays renewable for five years after expiring
• d.The license drops to inactive status and never is canceled

RCW 18.85.191 gives a license a two-year term and cancels the license of a person whose renewal fee is not received within one year from the date of expiration. Inactive status under RCW 18.85.265 is something a licensee elects, not a resting place for an unpaid renewal. Cite: RCW 18.85.191.

A Washington broker candidate passes the national portion of the licensing examination. What is the deadline for the state portion?

• a.Twelve months, or the national portion must be retaken
• b.Two years, matching the life of the education courses
• c.Ninety days, after which both portions must be retaken
• d.Six months, or both portions must be taken over again✓

The Department of Licensing requires a candidate to pass the state and national examinations within six months of each other or retake both. Two separate clocks also run: the examinations must be taken within two years of finishing the 90 clock hours, and the license application filed within one year of passing the final examination. Cite: Washington DOL, Get your license: Real estate brokers.

A Washington broker closes a sale. Who may pay the broker's share of the commission?

• a.The escrow agent, directly out of the closing funds
• b.The firm, through its designated broker only✓
• c.The buyer, by separate check written at closing
• d.The cooperating firm that produced the buyer

RCW 18.85.301(3) makes it unlawful for brokers or managing brokers to be paid any part of their commission except through the firm's designated broker, and subsection (2) bars a firm from paying a licensee who is not licensed to that firm. Cite: RCW 18.85.301.

Washington bars paying commission to unlicensed persons who perform brokerage services. Which payment does the statute expressly allow?

• a.A finder's fee to an unlicensed buyer who refers a friend
• b.A commission split with the firm's unlicensed assistant
• c.A shared commission with a manufactured housing retailer✓
• d.A referral fee to an unlicensed out-of-state salesperson

RCW 18.85.301(4) permits a commission to be shared with a manufactured housing retailer licensed under chapter 46.70 RCW on the sale of personal property manufactured housing sold in conjunction with the sale or lease of land. Subsection (1) otherwise reaches only persons licensed in some state or in a foreign jurisdiction with a real estate regulatory program. Cite: RCW 18.85.301(4).

What prelicense education must a Washington broker applicant complete?

• a.A 60-hour Real Estate Fundamentals course and a 30-hour Practices course✓
• b.A single 63-hour salesperson prelicensing course, then the state exam
• c.Two 45-hour courses, one national in scope and one Washington-specific
• d.A 30-hour Real Estate Law course and a 30-hour Advanced Practices course

The Department of Licensing requires 90 hours of approved education made up of a 60-hour Real Estate Fundamentals course and a 30-hour Real Estate Practices course. RCW 18.85.101 sets the same 90 hours, taken within two years before the examination, and requires three of those hours to cover fair housing and consumer protection. Real Estate Law and Advanced Practices belong to the first renewal, not to prelicensing. Cite: RCW 18.85.101; Washington DOL, Get your license: Real estate brokers.

What licensed experience must a Washington managing broker applicant have?

• a.Two years as a broker at any time before applying
• b.Five years as a broker immediately before applying
• c.Three years as a broker, all of it inside Washington
• d.Three years as a full-time broker within the past five✓

RCW 18.85.111 requires a minimum of three years of licensed experience as a full-time real estate broker, in this state or in another jurisdiction having comparable requirements, within the five years previous to applying. The experience need not have been earned in Washington. Cite: RCW 18.85.111.

Which courses make up the 90 clock hours a Washington managing broker applicant must complete?

• a.Fundamentals, Practices, and Advanced Practices, 30 hours each
• b.Advanced law, brokerage management, and business management✓
• c.Real estate law, fair housing, and appraisal, 30 hours each
• d.Brokerage management, property management, and finance

WAC 308-124A-750 requires 90 clock hours in addition to any other clock hours completed: advanced real estate law, real estate brokerage management, and business management. Each course must run at least 30 clock hours, include a comprehensive examination, and be completed within three years before applying for the managing broker examination. Cite: WAC 308-124A-750.

What must a Washington broker complete for the first active renewal of the license?

• a.90 hours: Advanced Practices, Real Estate Law, core, and electives✓
• b.30 hours of continuing education, the same as every later renewal
• c.60 hours, plus a repeat of the 30-hour Real Estate Practices course
• d.90 hours, but only after two full renewal cycles have been served

The first active renewal is the heavy one. The Department of Licensing requires 90 hours: the 30-hour Advanced Practices course, the 30-hour Real Estate Law course, the 3-hour Current Issues in Washington Residential Real Estate core course, and at least 27 hours of other approved continuing education. Later renewals drop to 30 hours. Cite: RCW 18.85.101; WAC 308-124A-785; Washington DOL, Renew or reinstate your license: Real estate brokers.

After the first renewal, what continuing education does a Washington broker owe at each two-year renewal?

• a.30 hours, of which 20 must fall within 24 months of renewal
• b.15 hours, with the balance carried over from prior renewals
• c.30 hours, of which 15 must fall within 24 months of renewal✓
• d.45 hours, of which 30 must fall within 24 months of renewal

The Department of Licensing requires at least 30 clock hours for each two-year renewal, including the 3-hour Current Issues in Washington Residential Real Estate core course and at least 27 other approved hours, and at least 15 of the 30 must be completed within 24 months of the renewal date. Cite: WAC 308-124A-790; Washington DOL, Renew or reinstate your license: Real estate brokers.

How does the Washington real estate fair housing course requirement work at renewal?

• a.Three hours once, then no further fair housing course is due
• b.Six hours the first time, then three hours at each renewal✓
• c.Six hours at every renewal, with no shorter version offered
• d.Three hours the first time, then six hours at each renewal

A licensee who has not completed the initial 6-hour Washington Real Estate Fair Housing course must take it first; after that, the 3-hour Washington Real Estate Fair Housing course is required at each renewal. WAC 308-124A-802 defines the prescribed curriculum. Cite: WAC 308-124A-790 and 308-124A-802; Washington DOL, Renew or reinstate your license: Real estate brokers.

A person who was unlicensed when a Washington listing was taken sues for the commission. What is the result?

• a.Recovery in quantum meruit for the value of services
• b.Recovery is allowed if licensed by the closing date
• c.Recovery is allowed if the seller knew of the lapse
• d.No suit lies; licensure must be pleaded and proven✓

RCW 18.85.331 bars any suit for compensation without alleging and proving that the plaintiff was duly licensed before offering to perform the transaction or procuring the promise of compensation. Licensing up later, and the seller's knowledge, do not cure it. Cite: RCW 18.85.331.

Which activity is exempt from Washington real estate licensing?

• a.An attorney-in-fact under a power of attorney, without pay✓
• b.An unlicensed assistant who shows listings for a small fee
• c.A property manager who negotiates leases for owner clients
• d.A referral company paid a share of the closing commission

RCW 18.85.151(2) exempts a duly authorized attorney-in-fact acting under a power of attorney without compensation. Subsection (8) exempts a referral provider only when the compensation is not contingent on the transaction, which is why a commission-share referral company is not exempt. Cite: RCW 18.85.151.

A Washington designated broker must supervise licensees for compliance with what?

• a.Only the firm's own written office policy manual
• b.Only chapter 18.85 RCW and the firm's listing forms
• c.Chapters 18.85 and 18.235 RCW, and RCW 18.86.030✓
• d.Only the federal fair housing and RESPA requirements

RCW 18.85.275(1) directs the designated broker or managing broker to supervise the conduct of brokers and managing brokers for compliance with chapter 18.85 RCW, chapter 18.235 RCW (the Uniform Regulation of Business and Professions Act), and RCW 18.86.030. Cite: RCW 18.85.275(1).

A Washington broker with six years of experience is asked to supervise three new brokers. What does that take?

• a.Two years of experience and the designated broker's consent
• b.A managing broker license, which supervision always requires✓
• c.A written delegation from the firm's designated broker alone
• d.Nothing more; any broker may supervise less senior brokers

RCW 18.85.275(5) requires any broker who supervises other brokers in the performance of real estate brokerage services to hold a managing broker license. Experience and a written delegation are not substitutes. A managing broker in the first two years must also receive heightened supervision under RCW 18.85.275(6). Cite: RCW 18.85.275.

Who may rescind or release a real estate brokerage service contract on behalf of a Washington firm?

• a.Any broker licensed to the firm who signed the contract
• b.The firm's owner, whether or not that person is licensed
• c.The principal alone, since the firm is only the agent
• d.The designated broker or the designated broker's delegate✓

RCW 18.85.275(4) gives the designated broker, or the designated broker's delegate, authority to amend, modify, bind, create, rescind, terminate, or release real estate brokerage service contracts on behalf of the real estate firm. Cite: RCW 18.85.275(4).

A Washington broker begins showing homes to a buyer before any paperwork is signed. Whom does the broker represent?

• a.Neither party, until a written services agreement is signed
• b.The seller, under the listing firm's offer of cooperation
• c.The buyer, unless the firm appointed the broker to the seller✓
• d.Both parties, as a limited dual agent by operation of law

RCW 18.86.020(1) makes a broker who performs real estate brokerage services for a buyer that buyer's agent unless the firm appointed the broker to represent the seller, appointed the broker to both (limited dual agency), or the broker is the seller. Representation attaches from the services, not from a signature. Cite: RCW 18.86.020(1).

When must a Washington firm enter into a services agreement with its principal?

• a.Before services begin, or as soon as practical after✓
• b.Within five business days after the buyer first tours a home
• c.At any time before the closing agent disburses the proceeds
• d.Only when the principal asks the firm to put terms in writing

RCW 18.86.020(2)(a) requires the firm to enter into a services agreement with the principal before, or as soon as reasonably practical after, its appointed broker commences rendering real estate brokerage services to or on behalf of the principal. Cite: RCW 18.86.020(2)(a).

A Washington buyer services agreement does not state how long it runs. What term applies?

• a.Ninety days, the term used for residential listings
• b.Sixty days, the default the statute writes into it✓
• c.Six months, unless the buyer objects in writing
• d.No term; it runs until either party cancels it

RCW 18.86.020(2)(b)(i) requires a services agreement to state its term, and where the principal is a buyer it sets a default term of 60 days with the option of a longer term. This came from the agency overhaul in 2023 c 318, effective January 1, 2024. Cite: RCW 18.86.020(2)(b)(i).

How must a Washington principal consent to the appointed broker acting as a limited dual agent?

• a.By a separate addendum signed at the time of mutual acceptance
• b.Orally, then confirmed by the broker in the transaction file
• c.By initialing the purchase and sale agreement at closing
• d.By separately initialing that term in the services agreement✓

RCW 18.86.020(2)(b)(iv) requires the services agreement to state whether the principal consents to limited dual agency; that consent must be separately initialed by the principal and include an acknowledgment that a limited dual agent may not advocate terms favorable to one principal to the detriment of the other. Cite: RCW 18.86.020(2)(b)(iv).

When does Washington not require a services agreement for buyer representation?

• a.When the services are solely for commercial property✓
• b.When the buyer is paying cash and no financing is involved
• c.When the buyer has used the same firm in a prior purchase
• d.When the firm also holds the listing on the same property

RCW 18.86.020(3) provides that a services agreement is not required when a broker performs real estate brokerage services as a buyer's agent solely for commercial real estate, a term chapter 18.86 RCW defines by reference to RCW 60.42.005. Cite: RCW 18.86.020(3).