Florida Real Estate Sales Associate — All Questions

In a general agency relationship, which duty requires a real estate licensee to place the principal's interests above the licensee's own?

• a.The duty to appraise the property
• b.The duty of loyalty (obedience and putting the principal first)✓
• c.The duty to guarantee a sale
• d.The duty of price fixing

Loyalty is a core fiduciary duty owed by an agent to a principal, requiring the agent to act in the principal's best interest. In Florida, however, most licensees work as transaction brokers rather than single agents, which changes the specific duties owed. Fiduciary-style duties are strongest in a single-agent relationship.

Under Florida law, what is the default brokerage relationship presumed when a licensee deals with a member of the public?

• a.Transaction broker✓
• b.No brokerage relationship
• c.Single agent for the buyer
• d.Dual agent

Florida's brokerage relationship law presumes a transaction broker relationship unless the parties establish another relationship in writing. A transaction broker provides limited representation to a buyer or seller but does not owe full fiduciary duties. This default was designed to reduce confusion over agency. Specific statutory details can change, so verify current Chapter 475 provisions.

Which of the following best describes 'real property'?

• a.A lease that lasts less than one year
• b.Movable items owned by a person
• c.Land and everything permanently attached to it, plus the bundle of legal rights✓
• d.Only the physical soil and minerals below the surface

Real property includes land, improvements permanently affixed to it, and the associated legal rights known as the bundle of rights. Personal property (chattel) is movable and not permanently attached. The distinction matters because different laws govern the sale of each.

The 'bundle of rights' in real property ownership includes the right to do all of the following EXCEPT:

• a.Transfer the property to another
• b.Use the property in violation of valid zoning laws✓
• c.Exclude others from the property
• d.Possess the property

The bundle of rights typically includes possession, control, enjoyment, exclusion, and disposition. However, these rights are always subject to government limitations such as zoning, so an owner cannot legally use property in violation of valid law. Ownership rights are not absolute.

An item that was once personal property but has become permanently attached to real estate is called a:

• a.Leasehold
• b.Chattel
• c.Fixture✓
• d.Emblement

A fixture is personal property that has been attached to land or a building in a way that makes it part of the real estate. Courts often use tests such as method of attachment, adaptation, and intention. Fixtures generally transfer with the property unless excluded in the contract.

Which government power allows the taking of private property for public use with just compensation?

• a.Police power
• b.Estoppel
• c.Escheat
• d.Eminent domain✓

Eminent domain is the government's power to take private property for public use, provided just compensation is paid to the owner. The actual process of taking is called condemnation. It is one of the four government powers (often remembered as PETE: police power, eminent domain, taxation, escheat).

When a person dies without a will and without legal heirs, ownership of the property passes to the state through:

• a.Escheat✓
• b.Adverse possession
• c.Eminent domain
• d.Novation

Escheat is the government power by which property reverts to the state when an owner dies intestate (without a will) and leaves no legal heirs. It prevents property from being ownerless. It is one of the four basic governmental powers over real estate.

Which of the following is an example of the government's police power?

• a.Claiming property of a person who dies with no heirs
• b.Collecting property taxes to fund government
• c.Taking land to build a highway with compensation
• d.Enforcing zoning and building codes for public health and safety✓

Police power is the government's authority to regulate property to protect public health, safety, and welfare, and it includes zoning and building codes. Unlike eminent domain, no compensation is paid to the owner for these regulations. It underlies most land-use controls.

A form of co-ownership that includes the right of survivorship, meaning a deceased owner's share passes automatically to the surviving owners, is:

• a.Tenancy in common
• b.Ownership in severalty
• c.Joint tenancy✓
• d.A life estate

Joint tenancy includes the right of survivorship, so when one owner dies their interest passes automatically to the surviving joint tenants rather than through probate. It traditionally requires the four unities of time, title, interest, and possession. Tenancy in common, by contrast, has no survivorship right.

Ownership of real property by one individual or entity alone is called ownership in:

• a.Common
• b.Severalty✓
• c.Joint tenancy
• d.Partnership

Ownership in severalty means title is held by a single person or a single legal entity. The word derives from the idea that the owner is 'severed' from other owners. It contrasts with the various forms of concurrent (co-)ownership.

The highest and most complete form of ownership interest in real estate is:

• a.An easement
• b.A life estate
• c.Fee simple absolute✓
• d.A leasehold estate

Fee simple absolute is the most complete ownership interest, giving the holder full rights subject only to governmental powers and any private restrictions. It is of indefinite duration and freely transferable and inheritable. Most residential property is held in fee simple.

An estate that lasts only for the duration of a specified person's life is a:

• a.Tenancy at sufferance
• b.Periodic tenancy
• c.Life estate✓
• d.Fee simple determinable

A life estate is a freehold interest measured by the life of a named person, often the life tenant. When that person dies, the property passes to a remainderman or reverts to the grantor. The life tenant may use the property but cannot commit waste.

The right of one party to use another's land for a specific purpose, such as a driveway or utility line, is a(n):

• a.Easement✓
• b.Lien
• c.Deed restriction
• d.Encroachment

An easement is a nonpossessory right to use another owner's land for a specific purpose. An easement appurtenant benefits an adjacent parcel, while an easement in gross benefits a person or company such as a utility. Easements can affect a property's value and use.

A lien placed against a property as security for the repayment of a debt is best described as a(n):

• a.Financial encumbrance on title✓
• b.Transfer of full ownership
• c.Physical intrusion onto neighboring land
• d.Government zoning classification

A lien is a claim or encumbrance against property that secures payment of a debt or obligation. Common examples include mortgages, property tax liens, and mechanic's liens. Liens generally must be satisfied before clear title can transfer.

A structure or improvement that unlawfully extends over a property boundary onto a neighbor's land is called a(n):

• a.Easement in gross
• b.Emblement
• c.Estoppel
• d.Encroachment✓

An encroachment occurs when a building, fence, or other improvement intrudes onto an adjoining owner's property. It is typically discovered through a survey and can cloud title. Encroachments may lead to disputes or claims for removal or compensation.

Private restrictions on land use created by a developer and recorded to control a subdivision are commonly called:

• a.Eminent domain orders
• b.Deed restrictions or restrictive covenants✓
• c.Zoning ordinances
• d.Building permits

Deed restrictions, also called restrictive covenants or CC&Rs, are private limitations placed on land use, often by a developer for a subdivision. They run with the land and bind future owners. Unlike zoning, they are enforced by private parties rather than the government.

A homeowners' association (HOA) most commonly has the authority to:

• a.Change state zoning laws
• b.Issue real estate licenses
• c.Enforce community rules and collect assessments from members✓
• d.Set mortgage interest rates

An HOA governs a community, enforcing its covenants and rules and collecting assessments to fund shared expenses. Buyers of HOA-governed property agree to abide by its documents. Assessments and restrictions can materially affect ownership costs and use.

In Florida, a person's primary residence may qualify for a homestead exemption, which primarily provides:

• a.A guarantee that property taxes will never increase
• b.Free title insurance
• c.A reduction in the property's taxable assessed value and certain creditor protections✓
• d.Exemption from all zoning laws

Florida's homestead exemption reduces the taxable assessed value of an owner's primary residence and provides certain protections from forced sale by creditors. It also interacts with assessment-increase limits under the Save Our Homes provision. Exact amounts and rules are set by law and can change.

Which of the following is considered an example of personal property (chattel) rather than real property?

• a.A freestanding refrigerator that is not built in✓
• b.The land itself
• c.An in-ground swimming pool
• d.A permanently installed central air conditioning system

Personal property, or chattel, is movable and not permanently affixed to real estate. A freestanding refrigerator generally remains personal property, while built-in or permanently attached items are usually fixtures. Contracts should specify which items convey to avoid disputes.

A licensee who discovers a material defect that is not readily observable by the buyer generally has a duty to:

• a.Ignore it because buyers should inspect
• b.Disclose the known material defect✓
• c.Report it only to the MLS
• d.Conceal it to protect the seller

Florida law and case precedent require disclosure of known material defects that materially affect a property's value and are not readily observable to the buyer. This duty applies even in a transaction broker relationship. Failure to disclose can create liability for the licensee and seller.

The process by which soil is gradually deposited by the action of water, increasing an owner's land, is called:

• a.Reliction
• b.Avulsion
• c.Accretion✓
• d.Erosion

Accretion is the gradual addition of land through the deposit of soil by natural water action, and the new soil is called alluvion. It typically increases the landowner's property. Erosion is the opposite gradual loss of land.

Which of the following would most likely be classified as a freehold estate?

• a.Fee simple ownership of a home✓
• b.A one-year apartment lease
• c.A tenancy at sufferance
• d.A month-to-month tenancy

Freehold estates involve ownership of real property for an indefinite duration, such as fee simple and life estates. Leasehold estates, by contrast, give possession for a limited time without ownership. The key distinction is ownership versus a temporary right to possess.

A married couple in Florida who take title together as a legally protected form of co-ownership with survivorship rights typically hold title as:

• a.Tenants by the entirety✓
• b.Tenants in common
• c.Joint venturers
• d.Owners in severalty

Tenancy by the entirety is a form of co-ownership available only to married couples in states such as Florida, and it includes rights of survivorship. It also offers protection from certain creditors of only one spouse. On the death of one spouse, the survivor owns the whole.

The physical characteristic of land meaning that no two parcels are exactly alike is known as:

• a.Immobility
• b.Indestructibility
• c.Nonhomogeneity (uniqueness)✓
• d.Scarcity

Nonhomogeneity, also called heterogeneity or uniqueness, means every parcel of land differs at least by location. This is one of the physical characteristics of land, along with immobility and indestructibility. Uniqueness supports the legal remedy of specific performance in real estate contracts.

Which Florida body is primarily responsible for administering and enforcing the real estate license law under Chapter 475?

• a.The Florida Real Estate Commission (FREC)✓
• b.The Florida Bar
• c.The U.S. Department of Housing and Urban Development
• d.The National Association of REALTORS

The Florida Real Estate Commission (FREC) administers and enforces Chapter 475 of the Florida Statutes, which governs real estate licensing and practice. FREC operates within the Department of Business and Professional Regulation (DBPR). Its duties include rulemaking, licensing, and discipline. Specific rules can change over time.

Under Florida law, a sales associate must perform licensed real estate activities under the supervision of:

• a.The county tax collector
• b.No one; sales associates may operate independently
• c.The buyer's attorney
• d.A licensed broker or owner-developer employer✓

A Florida sales associate must be employed by and act under the direction of a licensed broker (or a licensed owner-developer). Sales associates cannot operate independently or be paid directly by consumers. This supervisory structure is central to Chapter 475.

A real estate licensee who represents a buyer or seller with limited representation, not as a fiduciary, is acting as a:

• a.Transaction broker✓
• b.Designated sales associate
• c.Single agent
• d.Dual agent

A transaction broker provides limited representation and owes duties such as dealing honestly and fairly, accounting for funds, and disclosing known material facts, but not full fiduciary loyalty. This is Florida's default relationship. It differs from a single agent, who owes full fiduciary duties.

Which of the following is one of the duties a Florida single agent owes that a transaction broker does not?

• a.Accounting for all funds
• b.Dealing honestly and fairly
• c.Disclosing known material facts affecting value
• d.Loyalty and full confidentiality to the principal✓

A single agent owes full fiduciary duties including loyalty, confidentiality, obedience, and full disclosure to the principal. A transaction broker owes a more limited set of duties and does not owe loyalty or full confidentiality. Both relationships require honesty, accounting, and disclosure of material facts.

Escrow funds held by a broker must generally be:

• a.Loaned to the buyer for closing costs
• b.Kept in a separate trust or escrow account, not commingled with the broker's own funds✓
• c.Deposited into the broker's personal checking account
• d.Immediately paid to the seller upon receipt

Brokers must place escrowed funds, such as earnest money deposits, into a designated trust or escrow account and must not commingle them with personal or operating funds. Florida law sets specific timeframes for deposit. Improper handling of escrow funds is a common cause of discipline.

Commingling, a violation of Florida real estate law, refers to:

• a.Advertising a property without the owner's consent
• b.Failing to renew a license on time
• c.Mixing client escrow funds with the broker's personal or business funds✓
• d.Representing both buyer and seller

Commingling occurs when a broker mixes clients' trust funds with the broker's own personal or business money. It is prohibited because it endangers client funds and obscures accountability. Conversion, a related and more serious offense, is actually using those funds improperly.

To be eligible for an initial Florida sales associate license, an applicant must generally be at least:

• a.25 years old and a Florida resident for 10 years
• b.16 years old with no education requirement
• c.18 years old and hold a high school diploma or equivalent✓
• d.21 years old and a college graduate

Applicants for a Florida sales associate license generally must be at least 18 years old and hold a high school diploma or its equivalent. They must also complete required prelicensing education, pass a background check, and pass the state exam. Exact requirements are set by statute and rule and can change.

Which of the following actions by a licensee would most likely be grounds for disciplinary action by FREC?

• a.Recommending that a buyer obtain an inspection
• b.Providing the seller with a copy of the listing agreement
• c.Placing an earnest money deposit in escrow promptly
• d.Fraud, misrepresentation, or concealment in a transaction✓

Fraud, misrepresentation, concealment, dishonest dealing, and similar acts are grounds for discipline under Chapter 475. FREC may impose penalties ranging from fines to license suspension or revocation. Recommending inspections and handling escrow properly are lawful, expected practices.

A Florida broker who wishes to open a real estate office must:

• a.Share a single license among multiple brokers
• b.Operate only from the broker's home with no registration
• c.Maintain and register a principal office with DBPR✓
• d.Avoid displaying any sign or identification

A Florida broker must maintain a principal office and register it with the DBPR, and branch offices generally must also be registered. The office must meet requirements for signage and recordkeeping. These rules help ensure accountability and consumer access.

The purpose of continuing education requirements for Florida real estate licensees is primarily to:

• a.Keep licensees current on law and practice for consumer protection✓
• b.Reduce the number of licensees in the market
• c.Guarantee licensees a minimum income
• d.Increase state revenue from license fees

Continuing education requirements ensure licensees stay current on laws, ethics, and best practices, which protects consumers. Florida requires a set number of CE hours each renewal cycle, including specified core and law topics. The specific hour requirements are set by rule and can change.

If a broker's escrow account has conflicting demands from a buyer and seller over a disputed deposit, Florida law allows the broker to use several settlement procedures, including:

• a.Ignoring the dispute indefinitely
• b.Keeping the disputed funds as a commission
• c.Requesting an escrow disbursement order (EDO) from FREC✓
• d.Immediately giving the funds to whichever party asks first

When there are conflicting demands or a good-faith doubt over escrowed funds, a Florida broker must promptly notify FREC and choose a settlement procedure such as an EDO, mediation, arbitration, or interpleader. The broker may not simply keep or arbitrarily release the funds. Timely notification is required by law.

Which of the following individuals generally must hold a real estate license to be paid a commission for the activity described?

• a.A person who, for another and for compensation, negotiates the sale of real estate✓
• b.An owner selling their own personal residence
• c.A salaried apartment manager renting units of their employer
• d.A licensed attorney handling a client's legal matter within their practice

Florida law requires a license for anyone who, for another and for compensation, performs real estate services such as selling, buying, leasing, or negotiating. Certain parties are exempt, including owners selling their own property and attorneys acting within their practice. The compensation-for-another element is key to the license requirement.

An 'earnest money deposit' delivered by a buyer with an offer is typically held by the:

• a.County property appraiser
• b.Broker or an authorized escrow holder such as a title company✓
• c.Buyer's personal bank in the buyer's own account
• d.Listing sign company

Earnest money deposits are typically held in escrow by a neutral party such as the broker, a title company, or an attorney. The funds show the buyer's good faith and are credited or handled per the contract at closing. Florida sets time limits for depositing these funds into escrow.

A licensee who tells a buyer that a home 'has the best view in the county' is most likely engaging in:

• a.A material misrepresentation of fact
• b.Fraud, which is always actionable
• c.Puffing, which is a nonactionable statement of opinion✓
• d.Commingling of funds

Puffing is an exaggerated opinion or sales talk that a reasonable person would not treat as a statement of fact, and it is generally not actionable. It differs from misrepresentation, which is a false statement of material fact. Licensees should still avoid statements that could mislead a buyer.

Under Florida law, when must a single agent disclosure or transaction broker notice generally be provided?

• a.Never; disclosure is optional
• b.Only if the customer specifically requests it
• c.Before or at the time of entering into a listing or before showing property, as required by statute✓
• d.Only after closing has occurred

Florida's brokerage relationship disclosure requirements specify when and how licensees must disclose the type of relationship, historically tied to the point of entering a listing agreement or before showing property. The exact disclosure obligations have been amended over time. Licensees must follow the current statutory requirements in Chapter 475.

The Florida Real Estate Recovery Fund exists primarily to:

• a.Reimburse consumers who obtain a court judgment for a licensee's wrongdoing that cannot be collected✓
• b.Pay licensees when commissions go unpaid by brokers
• c.Provide loans to first-time homebuyers
• d.Fund advertising for the real estate industry

The Recovery Fund reimburses members of the public who have suffered monetary damages from a licensee's fraud or similar act and hold an uncollectible court judgment. Payment from the fund can lead to automatic suspension of the offending licensee. Recovery is subject to statutory limits per transaction and licensee.

A licensee's failure to renew a license before its expiration generally results in the license becoming:

• a.Involuntarily inactive, requiring action to reactivate✓
• b.Transferred to another licensee
• c.Automatically upgraded to a broker license
• d.Permanently and irrevocably void with no path to renewal

A license that is not renewed by its expiration date typically becomes involuntarily inactive, and continued practice during that period is prohibited. The licensee must complete requirements to reactivate within statutory timeframes. Failing to act for too long can lead to the license becoming null and void.

Which of the following best describes a 'designated sales associate' arrangement permitted in Florida?

• a.The broker personally guarantees the sale price
• b.One associate secretly represents both buyer and seller
• c.An unlicensed assistant negotiates the deal
• d.Two associates in the same firm each represent a different party as single agents in certain nonresidential transactions✓

In certain nonresidential transactions where both parties meet asset thresholds, a broker may appoint two designated sales associates to each represent a different party as a single agent. This allows single-agent representation within one firm. It is a specific, limited exception under Florida law.

Advertising by a Florida licensee must generally:

• a.List only the sales associate's personal cell number
• b.Include the licensed name of the brokerage firm✓
• c.Omit the brokerage name to focus on the property
• d.Guarantee a future increase in property value

Florida advertising rules generally require that a licensee's advertising include the brokerage firm's licensed name so the public can identify the responsible broker. Advertising must not be false, deceptive, or misleading. Specific advertising rules are set by FREC and can change.

A broker who improperly takes and uses a client's escrow money for the broker's own purposes has committed:

• a.Novation
• b.Subrogation
• c.Puffing
• d.Conversion✓

Conversion is the unauthorized use or appropriation of another person's funds or property, such as a broker spending client escrow money. It is more serious than commingling, which is merely mixing funds. Conversion is grounds for severe discipline and possible criminal liability.

The federal Fair Housing Act prohibits discrimination in housing based on all of the following protected classes EXCEPT:

• a.Occupation or profession✓
• b.Religion and national origin
• c.Familial status and disability
• d.Race and color

The federal Fair Housing Act protects seven classes: race, color, religion, sex, national origin, familial status, and disability. Occupation is not a federally protected class, though other laws or local ordinances may add protections. Licensees must avoid steering, blockbusting, and other discriminatory practices.

'Steering' under fair housing law refers to:

• a.Encouraging owners to sell by claiming values will fall
• b.Refusing to make a mortgage loan in a defined area
• c.Charging a higher commission for luxury homes
• d.Directing prospective buyers toward or away from neighborhoods based on protected class✓

Steering is the illegal practice of guiding buyers toward or away from certain areas based on race, national origin, or another protected class. It restricts housing choice and violates fair housing law. Blockbusting and redlining are related but distinct prohibited practices.

Which practice involves a lender refusing to lend or offering worse terms in specific geographic areas, often correlated with protected classes?

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

Redlining is the discriminatory practice of denying or pricing loans and services unfavorably based on the location of a property, often tied to the racial makeup of a neighborhood. It is prohibited under fair housing and fair lending laws. Steering and blockbusting are related discriminatory practices carried out by others.

If a Florida sales associate wants their license to remain active, they generally must:

• a.Keep it registered under a current employing broker and meet renewal requirements✓
• b.Renew only once every ten years
• c.Personally register a brokerage office with DBPR
• d.Hold funds in their own personal escrow account

For a sales associate license to remain active, it must be registered under a current employing broker and the associate must meet renewal and continuing education requirements. Without an employer of record, the license generally becomes inactive. Renewal cycles and CE requirements are set by rule.

For a real estate contract to be enforceable, the Statute of Frauds generally requires that it be:

• a.In writing and signed by the party to be charged✓
• b.Notarized by a real estate licensee
• c.Approved by the local zoning board
• d.Recorded with the county before signing

The Statute of Frauds requires contracts for the sale of real estate to be in writing and signed to be enforceable. This protects parties from fraudulent claims based on oral agreements. Certain short-term leases may be exceptions, but purchase agreements must be written.

The essential elements of a valid contract generally include offer and acceptance, consideration, legal purpose, and:

• a.A real estate license held by both parties
• b.A government subsidy
• c.A recorded deed
• d.Competent parties with legal capacity✓

A valid contract requires competent parties, mutual assent (offer and acceptance), consideration, and a lawful object. Parties must have legal capacity, meaning they are of legal age and sound mind. Missing an essential element can make a contract void or voidable.

When a seller responds to a buyer's offer by changing the price, this response is legally a:

• a.Counteroffer, which rejects the original offer✓
• b.Novation of an existing contract
• c.Unilateral contract
• d.Binding acceptance of the original offer

A counteroffer changes the terms of the original offer and thereby rejects it, creating a new offer that the other party may accept or reject. The original offer is no longer available for acceptance once countered. Negotiations often involve a series of offers and counteroffers.

A contract in which only one party makes a promise, such as an option to purchase, is a:

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

In a unilateral contract, one party makes a promise in exchange for the other party's performance, rather than a mutual exchange of promises. An option is a common example: the seller promises to keep the offer open, but the buyer is not obligated to buy. A bilateral contract, by contrast, involves promises by both parties.

An 'executory' contract is one in which:

• a.No consideration was ever exchanged
• b.All obligations have already been fully performed
• c.The contract has been declared void by a court
• d.Something remains to be done by one or both parties✓

An executory contract is one that has been formed but not yet fully performed, such as a signed purchase agreement before closing. Once all parties complete their obligations, it becomes an executed contract. This distinction matters for determining remaining duties.

A contingency in a purchase contract, such as a financing or inspection contingency, functions to:

• a.Allow a party to cancel or renegotiate if a specified condition is not met✓
• b.Waive the buyer's right to inspect
• c.Transfer title before closing
• d.Automatically increase the purchase price

A contingency is a condition that must be satisfied for the contract to proceed, and it protects a party by allowing cancellation or renegotiation if the condition fails. Common examples include financing, appraisal, and inspection contingencies. If a contingency is not met, the protected party may usually withdraw without penalty.

The remedy of 'specific performance' in a real estate contract dispute means:

• a.A court orders the breaching party to complete the sale as agreed✓
• b.The broker forfeits the entire commission
• c.The buyer receives triple the deposit as damages
• d.The contract is automatically canceled with no consequences

Specific performance is an equitable remedy in which a court orders a party to perform the contract as agreed, often available because each parcel of real estate is unique. A buyer may seek it to compel a reluctant seller to convey title. It is an alternative to monetary damages.

'Liquidated damages' in a purchase contract typically refers to:

• a.The broker's guaranteed commission
• b.The buyer's mortgage interest for the year
• c.An amount, often the earnest money, agreed in advance as compensation if the buyer defaults✓
• d.A penalty imposed by the state on the seller

Liquidated damages are a predetermined amount the parties agree the seller may keep if the buyer defaults, commonly the earnest money deposit. This provides certainty and avoids litigation over actual damages. The amount must be a reasonable estimate, not a punitive penalty.

When a new party is substituted for an original party to a contract, with the consent of all parties, this is called:

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

Novation is the substitution of a new party or a new contract for an existing one, releasing the original party from liability, and it requires the consent of all parties. It differs from assignment, in which the original party may remain secondarily liable. Novation is common in loan assumptions where the lender releases the original borrower.

A listing agreement in which the broker earns a commission only if that broker procures the buyer, but the seller may also sell independently without owing a commission, is a(n):

• a.Exclusive agency listing✓
• b.Net listing guaranteed by law
• c.Exclusive right to sell listing
• d.Open listing that excludes the seller

In an exclusive agency listing, one broker is authorized, but the seller retains the right to sell the property themselves without paying a commission. This differs from an exclusive right to sell, where the broker earns a commission regardless of who finds the buyer. Both are common listing types.

Under an 'exclusive right to sell' listing, the listing broker earns a commission:

• a.Only if the seller finds the buyer
• b.Regardless of who procures the buyer during the listing period✓
• c.Only if the broker personally finds the buyer
• d.Never, because commissions are illegal

In an exclusive right to sell listing, the listing broker is entitled to a commission if the property sells during the listing period no matter who finds the buyer, including the seller. It offers the broker the strongest commission protection. This is the most common residential listing type.

A 'net listing,' which is discouraged or restricted in many jurisdictions, is one in which:

• a.The broker keeps any amount above a net price the seller specifies✓
• b.The buyer and seller split the commission
• c.The broker receives no compensation at all
• d.The seller pays a flat government fee

In a net listing, the seller sets a net amount they want to receive, and the broker keeps any sale proceeds above that figure as commission. This arrangement creates a conflict of interest and is prohibited or restricted in many states. Licensees should be cautious and follow state law.

If a buyer and seller mutually agree to cancel their contract and return to their pre-contract positions, this is called:

• a.Specific performance
• b.Novation
• c.Assignment
• d.Rescission✓

Rescission is the cancellation of a contract that returns the parties to their original positions, as if the contract had not been made. It can be mutual or, in some cases, granted by a court. Any consideration exchanged is typically returned.

The transfer of one's rights and obligations under a contract to another person is called:

• a.Subordination
• b.Foreclosure
• c.Assignment✓
• d.Escheat

Assignment is the transfer of contractual rights (and often duties) from one party to another. Unless the contract prohibits it, many real estate contracts are assignable. The original party may remain secondarily liable unless released through novation.

A contract signed by a minor is generally considered:

• a.A criminal offense
• b.Fully enforceable against the minor
• c.Automatically void from the start in all cases
• d.Voidable at the option of the minor✓

Contracts entered into by minors are generally voidable at the minor's option, meaning the minor may disaffirm the contract. This protects those who lack full legal capacity. A void contract, by contrast, has no legal effect from the beginning.

'Time is of the essence' in a real estate contract means:

• a.The closing can occur at any convenient time
• b.Only the seller's dates matter
• c.Deadlines in the contract must be strictly met✓
• d.The contract has no expiration

A 'time is of the essence' clause makes the stated deadlines binding and strictly enforceable, so failing to perform on time can be a breach. Without such a clause, courts may allow reasonable extensions. This clause is common in purchase agreements to keep transactions on schedule.

An option contract gives the holder (optionee) the:

• a.Obligation to purchase the property immediately
• b.Right, but not the obligation, to buy within a set time and price✓
• c.Right to occupy the property rent-free forever
• d.Power to change the property's zoning

An option contract gives the optionee the right, but not the obligation, to buy (or lease) property on set terms within a specified period. The optionor (owner) is bound to keep the offer open in exchange for consideration. If the option is not exercised, it simply expires.

Which of the following typically makes a contract 'void' rather than merely voidable?

• a.It requires performance of an illegal act✓
• b.One party was a minor
• c.One party later changes their mind
• d.One party was induced by a misrepresentation

A contract with an illegal purpose or object is void, meaning it has no legal effect and cannot be enforced by either party. Voidable contracts, by contrast, are valid until one party elects to disaffirm, as with a minor's contract or one induced by fraud. The illegality of the object is a fundamental defect.

In most residential purchase contracts, the earnest money deposit is:

• a.Kept by the broker as a nonrefundable fee in all cases
• b.Paid directly to the county as a tax
• c.Applied toward the purchase price or closing costs at closing✓
• d.Returned to the buyer even after a buyer default

Earnest money is credited toward the buyer's purchase price or closing costs when the transaction closes. If the buyer defaults without a valid contingency, the seller may be entitled to keep it as liquidated damages. Its handling depends on the contract terms and whether contingencies are met.

A 'meeting of the minds,' essential to contract formation, refers to:

• a.Mutual agreement by both parties to the same terms✓
• b.Approval by the homeowners' association
• c.The buyer and broker agreeing on commission
• d.A required in-person meeting at the courthouse

A meeting of the minds, or mutual assent, means both parties understand and agree to the essential terms of the contract. It is shown through a valid offer and acceptance. Without genuine mutual agreement, no enforceable contract is formed.

In a typical mortgage, the borrower who pledges the property as security for the loan is the:

• a.Mortgagor✓
• b.Trustee
• c.Mortgagee
• d.Grantee only

The mortgagor is the borrower who pledges the property as collateral, while the mortgagee is the lender. Remembering that the borrower 'gives' the mortgage helps: the party ending in '-or' gives it. This terminology is reversed from what many people initially assume.

A loan feature that requires a large final payment at the end of the term, larger than the regular payments, is called a:

• a.Balloon payment✓
• b.Prepayment penalty
• c.Negative amortization credit
• d.Fully amortized payment

A balloon payment is a large lump-sum payment due at the end of a loan whose regular payments do not fully pay off the balance. Balloon loans carry the risk that the borrower must refinance or pay the balance when due. They contrast with fully amortized loans that pay off completely.

In an amortized loan, each monthly payment is applied to:

• a.Property taxes only
• b.Both interest and principal, with interest typically higher early on✓
• c.Principal only for the entire term
• d.Interest only for the entire term

In a fully amortized loan, each payment covers accrued interest and reduces principal, gradually paying off the balance over the term. Early payments are mostly interest, and later payments are mostly principal. By the final payment, the balance reaches zero.

Which government-related program insures loans made by approved lenders to help borrowers with lower down payments?

• a.FHA (Federal Housing Administration) insurance✓
• b.The MLS
• c.The county property appraiser
• d.The Federal Reserve open market desk

The FHA insures mortgage loans made by approved lenders, which reduces lender risk and allows lower down payments for qualified borrowers. FHA does not make loans directly; it insures them. VA loans, by contrast, are guaranteed for eligible veterans.

A VA loan is designed primarily to benefit:

• a.Foreign investors
• b.First-time commercial developers
• c.Eligible veterans and certain service members✓
• d.Local governments

VA loans are guaranteed by the Department of Veterans Affairs for eligible veterans, active service members, and certain surviving spouses. The guarantee allows favorable terms, often including no down payment. The VA guarantees rather than directly makes most of these loans.

Private mortgage insurance (PMI) is typically required when a conventional borrower makes a down payment of:

• a.Any amount, regardless of down payment
• b.Exactly 100 percent
• c.More than 50 percent
• d.Less than 20 percent✓

Lenders typically require PMI on conventional loans when the down payment is less than 20 percent, protecting the lender against default. PMI can often be canceled once the borrower reaches sufficient equity. It differs from FHA mortgage insurance premiums, which have their own rules.

The clause in a mortgage that allows the lender to demand full repayment if the borrower defaults is the:

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

An acceleration clause lets the lender declare the entire remaining balance due upon default, such as missed payments. It is a necessary step before foreclosure. A defeasance clause, by contrast, requires the lender to release the lien once the loan is paid in full.

A 'due-on-sale' (alienation) clause in a mortgage generally:

• a.Reduces the interest rate upon sale
• b.Allows unlimited free assumption by any buyer
• c.Forgives the loan when the property is sold
• d.Requires the loan to be paid off when the property is sold or transferred✓

A due-on-sale, or alienation, clause allows the lender to require full repayment if the property is sold or transferred, preventing an unauthorized loan assumption. This lets lenders adjust to current rates on transfer. Some government-backed loans may allow qualified assumptions.

When a buyer takes over the seller's existing mortgage and becomes personally responsible for it, the buyer has:

• a.Subordinated the loan
• b.Assumed the loan✓
• c.Refinanced with a new lender
• d.Defeased the loan

Assuming a loan means the buyer takes over the seller's existing mortgage and agrees to be personally liable for the debt. Lender approval is often required, especially with a due-on-sale clause. This differs from buying 'subject to' the mortgage, where the buyer does not assume personal liability.

The interest rate on an adjustable-rate mortgage (ARM) is typically calculated as:

• a.The seller's asking price divided by twelve
• b.The property tax rate
• c.A fixed rate that never changes
• d.An index plus a margin✓

An ARM's interest rate equals a benchmark index plus a fixed margin set by the lender. As the index moves, the rate adjusts at set intervals, often within caps. This contrasts with a fixed-rate mortgage, whose rate stays constant for the loan's life.

The secondary mortgage market, including entities like Fannie Mae and Freddie Mac, primarily functions to:

• a.Set property tax rates
• b.Directly originate loans to individual borrowers at retail
• c.License real estate agents
• d.Buy loans from lenders, providing liquidity so lenders can make more loans✓

The secondary mortgage market buys existing loans from primary lenders, giving those lenders fresh capital to make new loans and improving liquidity. Fannie Mae and Freddie Mac are major participants. This market helps standardize lending and keep funds flowing.

A prepayment penalty in a loan is a charge for:

• a.Requesting a payoff statement
• b.Paying off the loan earlier than scheduled✓
• c.Making a payment late
• d.Insuring the property

A prepayment penalty is a fee some loans impose if the borrower pays off the balance early, compensating the lender for lost interest. Not all loans have them, and some loan types restrict or prohibit them. Borrowers should review loan terms for such clauses.

The federal Truth in Lending Act (TILA) primarily requires lenders to:

• a.Guarantee approval to all applicants
• b.Set a maximum home price
• c.Disclose credit terms and costs, including the annual percentage rate (APR)✓
• d.Provide free appraisals

TILA requires lenders to disclose key credit terms so borrowers can compare offers, including the finance charge and APR. The APR reflects the total yearly cost of credit as a percentage. TILA also governs certain advertising of credit terms.

A discount point paid on a mortgage loan generally equals what percentage of the loan amount, and serves to:

• a.Five percent of the down payment, paid to the county
• b.One percent of the loan amount, paid to lower the interest rate✓
• c.Ten percent of the loan amount, paid to increase the rate
• d.One percent of the sale price, paid to the seller

One discount point equals one percent of the loan amount and is prepaid interest a borrower pays to buy down (lower) the interest rate. Points can reduce long-term interest costs in exchange for higher upfront cost. Whether points are worthwhile depends on how long the borrower keeps the loan.

A mortgage is best described as which type of instrument in the financing process?

• a.A lease of the property to the lender
• b.The promise to repay the debt itself
• c.A security instrument that pledges property as collateral for a debt✓
• d.A deed transferring full ownership to the lender

A mortgage is the security instrument that pledges real property as collateral for a loan, creating a lien. The promissory note is the separate document that contains the borrower's promise to repay. Together, the note and mortgage document the loan obligation and its security.

Which document contains the borrower's actual promise to repay the loan and the repayment terms?

• a.The deed of reconveyance
• b.The estoppel certificate
• c.The title commitment
• d.The promissory note✓

The promissory note is the borrower's written promise to repay the loan and sets out the amount, interest rate, and payment terms. The mortgage or deed of trust secures that note with the property. The note is the primary evidence of the debt.

'Equity' in a property is best defined as:

• a.The annual property tax bill
• b.The total amount originally borrowed
• c.The broker's commission
• d.The market value of the property minus the debts secured against it✓

Equity is the owner's financial interest in a property, calculated as market value minus any outstanding liens or mortgage balances. Equity grows as the loan is paid down and as the property appreciates. It represents the portion of value the owner truly owns.

The Real Estate Settlement Procedures Act (RESPA) is primarily intended to:

• a.Guarantee mortgage approval
• b.Set national property tax rates
• c.Provide consumers disclosures about settlement costs and prohibit kickbacks✓
• d.License appraisers

RESPA is a federal law requiring disclosures about closing (settlement) costs and prohibiting kickbacks and referral fees that increase costs to consumers. It applies to most federally related mortgage loans on residential property. It works alongside TILA to protect borrowers.

Which approach to value estimates a property's worth by comparing it to recently sold similar properties?

• a.The cost approach
• b.The income approach
• c.The sales comparison approach✓
• d.The gross rent multiplier method only

The sales comparison approach estimates value by analyzing recent sales of comparable properties and adjusting for differences. It is the most common method for valuing single-family homes. It relies on the principle of substitution.

The appraisal principle stating that a buyer will pay no more than the cost of an equally desirable substitute property is:

• a.The principle of substitution✓
• b.The principle of escheat
• c.The principle of regression
• d.The principle of anticipation

The principle of substitution holds that a buyer will pay no more for a property than the cost of acquiring an equally desirable substitute. It underlies the sales comparison approach. It reflects rational buyer behavior in a competitive market.

The cost approach to value is often most appropriate for:

• a.Rental apartment complexes valued on income
• b.Newer or special-purpose properties with few comparable sales✓
• c.Vacant land with no improvements
• d.Typical existing single-family homes with many recent sales

The cost approach estimates value as land value plus the depreciated cost to rebuild the improvements, and it works best for newer or special-purpose buildings such as schools or churches where comparable sales are scarce. It relies on estimating replacement or reproduction cost and deducting depreciation. It is less reliable for older properties with significant depreciation.

In the income approach, the relationship used to convert net operating income into value is the:

• a.Loan-to-value ratio
• b.Gross rent multiplier only
• c.Capitalization rate✓
• d.Assessment ratio

The income approach converts a property's net operating income (NOI) into value using a capitalization (cap) rate, where value equals NOI divided by the cap rate. It is used mainly for income-producing properties. A higher cap rate generally indicates higher risk and lower value for the same income.

An appraisal is best described as:

• a.A guarantee of the exact future sale price
• b.A legal transfer of title
• c.A type of mortgage loan
• d.An opinion or estimate of value as of a specific date✓

An appraisal is a professional, supportable opinion of value as of a particular date, not a guarantee of price. Appraisers use recognized approaches to reach their conclusion. Lenders rely on appraisals to ensure the loan is adequately secured.

Depreciation in appraisal that results from outdated design or features, such as an obsolete floor plan, is called:

• a.Physical deterioration
• b.Functional obsolescence✓
• c.Accrued appreciation
• d.External (economic) obsolescence

Functional obsolescence is a loss in value caused by outdated or poorly designed features within the property, such as an awkward floor plan or too few bathrooms. It is one of three types of depreciation. It can sometimes be cured through remodeling.

A loss in property value caused by negative factors outside the property, such as a nearby factory or declining neighborhood, is:

• a.Functional obsolescence
• b.External (economic) obsolescence✓
• c.Physical deterioration
• d.Curable depreciation

External or economic obsolescence is a loss in value caused by factors outside the property boundaries, such as adverse neighborhood conditions or nearby nuisances. Because the owner cannot control off-site factors, this type of depreciation is generally incurable. It contrasts with functional obsolescence, which stems from the property itself.

The concept of 'highest and best use' refers to the use that is:

• a.Always the most expensive possible structure
• b.Legally permissible, physically possible, financially feasible, and maximally productive✓
• c.Determined solely by the listing agent
• d.Whatever the current owner personally prefers

Highest and best use is the reasonably probable use that is legally permissible, physically possible, financially feasible, and produces the highest value. Appraisers analyze it to value land and improvements properly. It may differ from the property's current use.

An appraiser making adjustments in the sales comparison approach adjusts the:

• a.Subject property's price to match each comparable
• b.Local property tax rate
• c.Buyer's mortgage rate
• d.Comparable properties' prices to the subject, not the subject itself✓

In the sales comparison approach, the appraiser adjusts the sale prices of the comparables to account for their differences from the subject property. The subject is never adjusted because its value is unknown. If a comparable is superior, its price is adjusted downward, and if inferior, upward.

The principle of 'conformity' in appraisal suggests that a property's maximum value is generally realized when:

• a.It is far larger and more expensive than all neighbors
• b.It has no relationship to nearby properties
• c.It is the smallest home in the area
• d.It is similar in style and use to surrounding properties✓

The principle of conformity holds that properties reach their maximum value when they are reasonably similar to others in the neighborhood. Overimprovement or underimprovement relative to neighbors can reduce value. Related principles are regression and progression.

Under the principle of regression, a high-value home located among lower-value homes will tend to:

• a.Automatically become the neighborhood standard
• b.Have no effect on its own value
• c.Increase the value of all neighbors to its level
• d.Be pulled downward in value by the lesser surrounding properties✓

The principle of regression states that the value of a superior property is adversely affected by the presence of inferior surrounding properties. Conversely, progression holds that a lesser property benefits from higher-value neighbors. Both relate to conformity.

A comparative market analysis (CMA) prepared by a licensee differs from a formal appraisal because it:

• a.Is an estimate to help price a listing, not a certified appraisal✓
• b.Establishes the assessed value for taxes
• c.Is legally binding on the lender
• d.Must be prepared only by a licensed appraiser

A CMA is an informal analysis licensees prepare using comparable sales to help sellers price a home or buyers make offers. It is not a formal, certified appraisal and should not be represented as one. Lenders generally require a licensed appraiser's appraisal for financing.

Accrued depreciation in the cost approach represents:

• a.The total loss in value from all causes since construction✓
• b.The buyer's down payment
• c.The increase in land value over time
• d.The lender's required insurance

Accrued depreciation is the total loss in value of the improvements from physical deterioration, functional obsolescence, and external obsolescence since they were built. In the cost approach, it is subtracted from the reproduction or replacement cost. Land is valued separately and is not depreciated.

Market value, as used in appraisal, generally assumes:

• a.A forced sale under time pressure
• b.A willing buyer and willing seller, each acting knowledgeably and without undue pressure✓
• c.The highest price any single buyer might ever pay
• d.That the buyer is unaware of the property's condition

Market value assumes a transaction between a willing, informed buyer and seller, neither under duress, with reasonable market exposure. It differs from a distressed or forced sale price. This standard underlies most lending appraisals.

Which of the following is a form of physical deterioration in an appraisal?

• a.A declining local job market
• b.An outdated one-car garage in a two-car neighborhood
• c.A worn roof and peeling paint due to age and wear✓
• d.A newly built freeway causing noise nearby

Physical deterioration is a loss in value from wear, tear, age, and the action of the elements, such as a worn roof or peeling paint. It can be curable or incurable depending on cost. Functional and external obsolescence are the other two categories of depreciation.

The 'gross rent multiplier' (GRM) is calculated by:

• a.Subtracting expenses from the sale price
• b.Dividing the loan amount by the down payment
• c.Multiplying net income by the cap rate
• d.Dividing the sale price by the gross rental income✓

The gross rent multiplier is found by dividing a property's price by its gross rental income, giving a quick relationship between price and rent. It is a simple screening tool for income properties, often using monthly or annual rent. Unlike the cap rate, it does not account for operating expenses.

An appraiser reconciling the results of the three approaches to value will:

• a.Weigh the approaches based on reliability and the property type to reach a final opinion✓
• b.Discard all approaches and use the asking price
• c.Always use the highest of the three values
• d.Simply average the three values together in every case

Reconciliation is the process of weighing the value indications from the applicable approaches to arrive at a single, supported opinion of value. The appraiser gives more weight to the approach most reliable for the property type, rather than mechanically averaging. Judgment and data quality guide the final conclusion.

Which factor would most likely cause economic (external) obsolescence?

• a.Construction of a noisy airport expansion adjacent to the property✓
• b.An outdated kitchen layout inside the home
• c.A cracked driveway on the property
• d.Worn interior carpeting

Economic or external obsolescence results from negative influences outside the property, such as a new airport, highway, or industrial use nearby. Because these factors are beyond the owner's control, this depreciation is usually incurable. Internal issues like layout or carpeting are functional or physical in nature.

A home sells for $400,000 with a total commission rate of 6 percent. What is the total commission?

• a.$18,000
• b.$2,400
• c.$40,000
• d.$24,000✓

Total commission equals sale price times commission rate: $400,000 x 0.06 = $24,000. Percentages are converted to decimals before multiplying. This total would then be split among the brokerages and agents involved.

A property sells for $250,000 with a 6 percent commission. If the listing and selling brokerages split the commission equally, how much does each brokerage receive?

• a.$12,500
• b.$7,500✓
• c.$3,750
• d.$15,000

First find the total commission: $250,000 x 0.06 = $15,000. An equal split gives each brokerage $15,000 / 2 = $7,500. Individual agents would then split their brokerage's share per their own agreements.

A buyer makes a 20 percent down payment on a $350,000 home. How much is the down payment?

• a.$35,000
• b.$7,000
• c.$70,000✓
• d.$280,000

The down payment equals the price times the down payment percentage: $350,000 x 0.20 = $70,000. The remaining $280,000 would typically be financed. Converting 20 percent to 0.20 is the key step.

A lender requires a loan-to-value (LTV) ratio of 80 percent on a home appraised at $300,000. What is the maximum loan amount?

• a.$240,000✓
• b.$375,000
• c.$24,000
• d.$60,000

The maximum loan equals value times the LTV ratio: $300,000 x 0.80 = $240,000. The borrower would need to cover the remaining $60,000 as a down payment. LTV compares the loan amount to the property's value.

Annual property taxes are $3,600. Using a 360-day year, what is the daily proration amount?

• a.$1.00
• b.$30.00
• c.$10.00✓
• d.$100.00

Using a 360-day year, divide annual taxes by 360: $3,600 / 360 = $10.00 per day. Prorations allocate expenses like taxes between buyer and seller at closing. Many closings use a 360-day (banker's) year for simplicity.

A parcel of land measures 200 feet by 300 feet. What is its area in square feet?

• a.1,000 square feet
• b.6,000 square feet
• c.60,000 square feet✓
• d.500 square feet

Area of a rectangle equals length times width: 200 ft x 300 ft = 60,000 square feet. Area calculations are common in real estate for lots and buildings. To convert to acres, you would divide by 43,560.

One acre equals 43,560 square feet. How many acres is a lot containing 87,120 square feet?

• a.2 acres✓
• b.4 acres
• c.0.5 acre
• d.1 acre

Divide total square feet by 43,560: 87,120 / 43,560 = 2 acres. Memorizing that one acre is 43,560 square feet is essential for land math. This conversion appears frequently on real estate exams.

A home's value increased from $200,000 to $250,000. What is the percentage of increase?

• a.50 percent
• b.25 percent✓
• c.20 percent
• d.5 percent

Percentage increase equals the change divided by the original value: ($250,000 - $200,000) / $200,000 = $50,000 / $200,000 = 0.25, or 25 percent. Always divide by the original (starting) amount. The result shows growth relative to the starting value.

An investment property generates $30,000 in net operating income and is valued using an 8 percent capitalization rate. What is its indicated value?

• a.$37,500
• b.$240,000
• c.$375,000✓
• d.$2,400,000

In the income approach, value equals net operating income divided by the cap rate: $30,000 / 0.08 = $375,000. A lower cap rate produces a higher value for the same income. This formula is central to valuing income property.

A seller wants to net $188,000 after paying a 6 percent commission on the sale price. What must the sale price be (rounded)?

• a.$211,000
• b.$199,280
• c.$188,000
• d.$200,000✓

The seller keeps 94 percent of the price after a 6 percent commission, so price = $188,000 / 0.94 = $200,000. You divide the net amount by (100% minus the commission rate). Dividing rather than adding 6 percent avoids a common error.

A mortgage loan of $150,000 has an annual interest rate of 6 percent. How much interest accrues in the first month (simple interest)?

• a.$9,000
• b.$75
• c.$1,500
• d.$750✓

Annual interest is $150,000 x 0.06 = $9,000; one month is $9,000 / 12 = $750. Early in an amortized loan, most of each payment goes toward interest. Monthly interest is the annual interest divided by 12.

A buyer pays 2 discount points on a $180,000 loan. How much do the points cost?

• a.$1,800
• b.$360
• c.$3,600✓
• d.$36,000

Each point equals one percent of the loan amount, so 2 points on $180,000 = $180,000 x 0.02 = $3,600. Points are prepaid interest paid to lower the loan's interest rate. They are calculated on the loan amount, not the purchase price.

Annual property taxes of $2,400 are paid in arrears. At a closing on July 1, using a 360-day year, how much does the seller owe for the 6 months already elapsed?

• a.$600
• b.$2,400
• c.$400
• d.$1,200✓

The seller owes taxes for the portion of the year they owned the property. Six months is half the year: $2,400 x 6/12 = $1,200. In arrears means taxes are paid after the period, so the seller credits the buyer for their share.

A rectangular building is 40 feet wide and 80 feet long. At a construction cost of $120 per square foot, what is the total cost?

• a.$384,000✓
• b.$96,000
• c.$3,840
• d.$38,400

First find the area: 40 ft x 80 ft = 3,200 square feet. Then multiply by cost per square foot: 3,200 x $120 = $384,000. Cost-per-square-foot calculations are common in the cost approach and construction estimates.

An agent receives a 3 percent share of a $500,000 sale, then keeps 70 percent after a 30 percent brokerage split. What is the agent's take-home amount?

• a.$7,000
• b.$15,000
• c.$4,500
• d.$10,500✓

The agent's gross share is $500,000 x 0.03 = $15,000. Keeping 70 percent after the split gives $15,000 x 0.70 = $10,500. Commission splits are applied in sequence: first compute the share, then apply the split.

A property assessed at $250,000 is taxed at a millage rate of 20 mills. What is the annual tax?

• a.$5,000✓
• b.$500
• c.$50,000
• d.$2,500

One mill equals $1 per $1,000 of assessed value, so 20 mills is $20 per $1,000. Tax equals $250,000 / 1,000 x 20 = $5,000. Millage rates are a common way local governments express property tax rates.

Florida requires an applicant for a sales associate license to complete a state-approved prelicensing course of how many classroom hours?

• a.90 hours including a mandatory legal-ethics seminar
• b.63 hours✓
• c.40 hours of coursework plus a supervised brokerage internship
• d.14 hours, the same as a continuing-education cycle

Florida's Course I prelicensing education for a sales associate is 63 classroom hours and must be completed before sitting for the state exam. The broker prelicense course is longer at 72 hours. Course hour requirements are set by rule and can change.

What is the minimum passing score on the Florida sales associate state licensing examination?

• a.80%, matching the broker examination standard
• b.70% on each of two separately graded sections
• c.A scaled score set individually for each testing window
• d.75%✓

An applicant must score at least 75 out of 100 to pass the Florida sales associate state exam. The same 75% standard applies to the broker exam. Applicants who fail may retake the exam within the allowed timeframe.

Before a Florida sales associate's initial license expires, the licensee must complete how much post-licensing education?

• a.72 hours, identical to the broker prelicensing requirement
• b.45 hours✓
• c.No additional education until the second renewal period
• d.14 hours of continuing education, the same as every later cycle

A newly licensed Florida sales associate must complete 45 hours of approved post-licensing education before the first license renewal. Failing to do so causes the license to become null and void. This is separate from later continuing education.

After the first renewal, a Florida sales associate must complete how many hours of continuing education each two-year cycle?

• a.14 hours✓
• b.63 hours, repeating the original prelicensing course
• c.45 hours of approved post-licensing coursework
• d.None, provided the license is kept active

After completing post-licensing education, a Florida licensee must take 14 hours of continuing education each two-year renewal cycle, including required law and ethics/business hours. The exact breakdown is set by rule and can change.

A Florida real estate license must be renewed every:

• a.Two years (24 months)✓
• b.Year, on the licensee's birthday
• c.Ten years, unless discipline shortens the period
• d.Five years, matching the broker experience requirement

Florida real estate licenses are issued on a two-year (biennial) renewal cycle. Continuing-education and, for new licensees, post-licensing requirements must be met to renew. Practicing on an expired license is prohibited.

The Florida Real Estate Commission (FREC) is composed of how many members appointed by the Governor?

• a.Nine, including three sitting circuit judges
• b.Seven✓
• c.Eleven, one drawn from each appellate district
• d.Five, all of whom must be active brokers

FREC consists of seven members appointed by the Governor and confirmed by the Senate, including licensed brokers, a broker or sales associate, and consumer members. The exact composition is set in Chapter 475.

FREC operates as part of which state agency?

• a.The Department of Business and Professional Regulation (DBPR)✓
• b.The Florida Department of Financial Services
• c.The U.S. Department of Housing and Urban Development
• d.The real property section of the Florida Bar

FREC functions within the Florida Department of Business and Professional Regulation (DBPR), which provides administrative support and enforcement. FREC handles licensing, rulemaking, and discipline under Chapter 475.

Under FREC rules, a broker who receives an earnest money deposit must place it into the escrow account no later than the end of:

• a.The month in which the purchase contract is signed
• b.Thirty calendar days following the closing date
• c.The third business day after receipt✓
• d.The same business hour in which the funds are received

A Florida broker must deposit trust funds such as earnest money into the escrow account no later than the end of the third business day after receipt. Timely handling of escrow is strictly enforced. Delays can result in discipline.

A Florida sales associate who receives a buyer's earnest money deposit must deliver it to the broker:

• a.Whenever the associate next visits the brokerage office
• b.Within three business days, the same as the broker's deadline
• c.Only after the seller has accepted the offer in writing
• d.By the end of the next business day✓

A sales associate must turn escrow funds over to the employing broker immediately, no later than the end of the next business day. The broker then has until the end of the third business day to deposit them. Associates may not hold escrow funds.

When a broker has conflicting demands on escrowed funds, FREC must be notified in writing within:

• a.24 hours of learning of the dispute
• b.15 business days✓
• c.One full license renewal cycle
• d.30 calendar days after the scheduled closing

A broker with conflicting demands or good-faith doubt about escrowed funds must notify FREC in writing within 15 business days. The broker must then institute a settlement procedure within 30 business days.

After notifying FREC of conflicting escrow demands, a broker must institute a settlement procedure within:

• a.30 business days✓
• b.15 business days, the same as the notice deadline
• c.90 calendar days from the date of the dispute
• d.The end of the current license renewal period

Following the 15-business-day notice to FREC, the broker must institute one of the settlement procedures (EDO, mediation, arbitration, or interpleader) within 30 business days. The broker may not simply keep or arbitrarily release the funds.

The Florida Real Estate Recovery Fund limits reimbursement to how much per single transaction?

• a.The full amount of any uncollected court judgment
• b.$50,000✓
• c.$25,000, regardless of the judgment amount
• d.$150,000, the same as the per-licensee aggregate cap

The Recovery Fund pays a maximum of $50,000 per transaction to reimburse a consumer holding an uncollectible judgment against a licensee. A separate aggregate cap applies per licensee. Payment triggers automatic suspension of that licensee.

The aggregate amount the Recovery Fund will pay for claims against any one licensee is capped at:

• a.$150,000✓
• b.$50,000, matching the single-transaction limit
• c.$500,000 across the licensee's entire career
• d.An unlimited amount until the fund is exhausted

The Recovery Fund limits total payments arising from the acts of a single licensee to $150,000 in the aggregate. Each individual transaction is capped at $50,000. These statutory limits protect the solvency of the fund.

When the Recovery Fund pays a claim on a licensee's behalf, that licensee's license is:

• a.Permanently revoked with no possibility of reinstatement
• b.Downgraded from broker to sales associate status
• c.Automatically suspended until the fund is repaid with interest✓
• d.Unaffected, because the fund exists to protect licensees

Payment from the Recovery Fund results in automatic suspension of the offending licensee's license until the licensee repays the fund in full plus interest. This deters wrongdoing and helps replenish the fund.

The longest period for which FREC may suspend a real estate license is:

• a.An indefinite period at the Commission's discretion
• b.One year for any single violation
• c.10 years✓
• d.Five years, after which revocation becomes automatic

FREC may suspend a license for a maximum of 10 years. More serious violations can lead to revocation, which is more permanent. Penalties are imposed after due process under Chapter 475 and Chapter 455.

FREC may impose an administrative fine of up to what amount for each count of a violation?

• a.$5,000✓
• b.$25,000 aggregated across all counts
• c.$1,000 per license the violator holds
• d.$10,000, but only for a first offense

FREC may levy an administrative fine of up to $5,000 for each count or separate offense. Fines may be combined with suspension, revocation, probation, or other discipline. Amounts are set by statute and can change.

How many statutory duties does a Florida single agent owe to the principal?

• a.Five, the same as a designated sales associate
• b.Ten, including a guarantee of the sale price
• c.Three, the same as a no-brokerage relationship
• d.Seven✓

A single agent owes seven duties: dealing honestly and fairly, loyalty, confidentiality, obedience, full disclosure, accounting for all funds, and skill, care, and diligence. This is the fullest fiduciary relationship allowed in Florida.

Which duty is unique to the transaction broker relationship rather than a single agent relationship?

• a.Obedience to all lawful instructions of the principal
• b.Full fiduciary loyalty to one party
• c.Limited confidentiality✓
• d.A guarantee that the transaction will successfully close

A transaction broker owes limited confidentiality, along with honesty, accounting, disclosure of material facts, and skill and care. It does not owe the full loyalty, obedience, and confidentiality that a single agent owes.

In a no-brokerage relationship, a Florida licensee owes all of the following EXCEPT:

• a.Accounting for all funds entrusted to the licensee
• b.Dealing honestly and fairly
• c.Loyalty and obedience to the customer✓
• d.Disclosing all known facts that materially affect the value of residential property

In a no-brokerage relationship the licensee owes only three duties: honesty and fair dealing, disclosure of known material facts affecting residential value, and accounting for funds. Loyalty and obedience arise only in a single agent relationship.

Under Florida's Chapter 475, dual agency is:

• a.Prohibited✓
• b.Permitted if both parties sign a written consent form
• c.The default relationship presumed with the public
• d.Allowed only in commercial transactions over $1 million

Florida law does not authorize dual agency, in which one licensee fully represents both buyer and seller. Instead, Florida uses single agent, transaction broker (the default), and no-brokerage relationships. Attempting undisclosed dual representation is a violation.

A Florida single agent may change to a transaction broker during a transaction only if:

• a.The broker files a notice with FREC within 15 days
• b.The principal consents before the change✓
• c.The transaction exceeds the designated-sales-associate asset threshold
• d.The buyer and seller are represented by different firms

To transition from single agent to transaction broker, the licensee must obtain the principal's consent, typically through a signed Consent to Transition to Transaction Broker notice, before the change takes effect. Without consent the relationship cannot change.

The single agent notice required in a residential transaction must be:

• a.Recorded in the county's official public records
• b.Delivered orally at the first showing and confirmed later by email
• c.Provided only if the customer specifically asks about representation
• d.In writing, before or when entering into a listing or representation✓

Florida requires the single agent notice to be in writing and given before or at the time of entering into a listing agreement or an agreement to represent a buyer. Proper, timely disclosure of the relationship is mandatory.

A Florida licensee who changes their mailing address must notify the DBPR within:

• a.The next license renewal cycle
• b.30 days, the same as an escrow settlement period
• c.24 hours of the move
• d.10 days✓

A licensee must notify the DBPR of a change in mailing address within 10 days. Keeping current contact information on file is required so official notices reach the licensee. Failing to do so can lead to discipline.

A Florida broker's principal office entrance sign must include the broker's name, any trade name, and the words:

• a.'FREC-Approved Brokerage Office'
• b.'Licensed Real Estate Broker'✓
• c.'Member, National Association of REALTORS'
• d.'Bonded and Insured Real Estate Office'

A broker's entrance sign must show the broker's name (and any registered trade name) together with the words 'Licensed Real Estate Broker' or a permitted abbreviation. This lets the public identify the responsible broker.

'Blind advertising' by a Florida licensee, which is prohibited, is advertising that:

• a.Fails to list the exact square footage of the home
• b.Contains an exaggerated opinion about a property's view
• c.Omits the licensed name of the brokerage firm✓
• d.Is published in a language other than English

Blind advertising conceals the fact that the advertiser is a licensee by leaving out the brokerage's licensed name. Florida requires that advertising include the brokerage name so consumers know they are dealing with a licensed firm.

A Florida broker may pay a share of a real estate commission to:

• a.The buyer directly, as an incentive to close the deal
• b.An unlicensed assistant who showed the property to buyers
• c.Only a properly licensed person✓
• d.Any person who referred the buyer, licensed or not

A broker may share a commission only with a properly licensed person. Paying compensation to an unlicensed person for real estate services is prohibited. Sales associates are paid only through their employing broker.

A Florida sales associate may lawfully be paid a real estate commission by:

• a.Either the buyer or the seller by mutual agreement
• b.The title company handling the escrow account
• c.Only their employing broker✓
• d.The seller directly at the closing table

A sales associate may be compensated for real estate services only by the employing broker, never directly by a buyer, seller, or other party. This preserves the broker's supervisory responsibility under Chapter 475.

FREC rules require a broker to reconcile the escrow (trust) account:

• a.At least monthly✓
• b.At the end of every calendar quarter
• c.Only when a discrepancy is reported by a client
• d.Once during each license renewal cycle

A broker must review and reconcile the escrow account at least monthly, comparing the account balance against the broker's records and outstanding liabilities. Written reconciliation statements must be kept and signed.

A 'broker associate' in Florida is a person who:

• a.Holds a broker license but works under another broker✓
• b.Holds only a sales associate license and manages an office
• c.Is a broker who owns the brokerage outright
• d.Is an unlicensed partner in a brokerage firm

A broker associate holds a broker license but chooses to work under the direction of another broker rather than operate independently. This differs from a sales associate, who holds a lower-level license.

Which of the following is a ground for disciplinary action under Section 475.25?

• a.Placing escrow funds into the trust account on time
• b.Recommending that a buyer consult an attorney before signing
• c.Refusing to carry out an unlawful instruction from a principal
• d.Culpable negligence or breach of trust in a transaction✓

Section 475.25 lists grounds for discipline, including fraud, misrepresentation, concealment, dishonest dealing, and culpable negligence or breach of trust. Lawful, protective acts such as depositing escrow on time are not violations.

Florida's mutual recognition agreements with certain other states allow a qualifying nonresident to:

• a.Skip Florida's prelicensing course and take a shorter Florida-law exam✓
• b.Automatically receive a Florida broker license by mail
• c.Practice in Florida without holding any Florida license
• d.Bypass all background-check and fingerprint requirements

Under mutual recognition, an applicant licensed in a partner state may obtain a Florida license by passing a Florida-law-focused exam instead of completing the full Florida prelicensing course. Other requirements, such as background checks, still apply.

Practicing real estate in Florida without a license is, on a first offense, generally a:

• a.First-degree misdemeanor✓
• b.Matter handled solely through license suspension
• c.Noncriminal civil infraction resulting only in a warning
• d.Second-degree felony punishable exclusively by prison

Unlicensed real estate activity is a first-degree misdemeanor for a first offense in Florida, with escalating penalties for repeat offenses. The state can also pursue civil remedies. A license is required to be paid for services performed for another.

An advertisement stating 'adults only, no children' most likely violates the fair housing prohibition against discrimination based on:

• a.National origin and ancestry
• b.Marital status under federal law
• c.Lawful source of income
• d.Familial status✓

Excluding families with children implicates familial status, a protected class under the federal Fair Housing Act. Licensees must avoid advertising that expresses a preference or limitation based on any protected class.

Inducing owners to sell by suggesting that people of a particular protected class are moving into the neighborhood is called:

• a.Puffing about anticipated future property values
• b.Redlining a defined geographic lending area
• c.Steering buyers toward specific subdivisions
• d.Blockbusting✓

Blockbusting is the illegal practice of causing panic selling by claiming that the entry of a protected class will lower values or change a neighborhood. It violates fair housing law, as do steering and redlining.

Housing may lawfully limit occupancy to persons 55 and older under the fair housing exemption if:

• a.The community is located in a retirement-zoned district
• b.At least 80% of units are occupied by at least one person 55 or older✓
• c.The owner files an annual age waiver with HUD
• d.Every single occupant is at least 55 years of age

The 'housing for older persons' exemption allows 55-and-older communities if at least 80% of the occupied units have at least one resident 55 or older, along with published policies demonstrating intent. This is an exception to the familial-status rule.

The federal Civil Rights Act of 1866 prohibits all racial discrimination in property transactions with:

• a.An exemption for single-family homes sold without a broker
• b.An exemption for owner-occupied fourplexes
• c.The same exemptions found in the Fair Housing Act
• d.No exemptions✓

The Civil Rights Act of 1866 bars all racial discrimination in real property transactions and, as confirmed in Jones v. Mayer, has no exemptions. The later Fair Housing Act has limited exemptions, but they never permit racial discrimination.

A person who believes they suffered housing discrimination may file a complaint with:

• a.The U.S. Department of Housing and Urban Development (HUD)✓
• b.The Florida Real Estate Commission exclusively
• c.The local zoning board of appeals
• d.The National Association of REALTORS ethics panel

Fair housing complaints may be filed with HUD, which investigates and enforces the federal Fair Housing Act. State and local fair housing agencies may also have jurisdiction. Complaints generally must be filed within statutory time limits.

A Florida license that remains involuntarily inactive for more than two years generally becomes:

• a.Null and void✓
• b.Eligible for reimbursement from the Recovery Fund
• c.Converted to a broker license by operation of law
• d.Automatically reactivated at the next renewal

If a license stays involuntarily inactive for more than two years, it typically becomes null and void, and the person must requalify to be licensed again. Reactivation is possible only within the statutory window.

A 'group license' issued to a Florida sales associate allows the associate to:

• a.Maintain multiple separate escrow accounts
• b.Hold real estate licenses in several states at once
• c.Work for an owner-developer that has multiple entities under one broker✓
• d.Directly supervise a group of unlicensed assistants

A group license lets a sales associate or broker associate work for an owner-developer that operates through several related entities, all under one broker of record. It is a specific administrative arrangement.

A 'multiple license' in Florida is issued to a broker who:

• a.Holds both a Florida and an out-of-state license
• b.Manages more than one branch office at a time
• c.Acts as broker for more than one business entity✓
• d.Supervises more than ten sales associates

A multiple license allows a broker to serve as the broker for more than one registered business entity. It differs from a group license, which applies to associates of an owner-developer with multiple entities.

A Florida licensee who is selling their own property must:

• a.List it only with their current employing broker
• b.Disclose their licensed status to prospective buyers✓
• c.Route all proceeds through the Recovery Fund
• d.Obtain written FREC approval before listing it

A licensee selling their own property must disclose that they hold a real estate license, so the other party understands they are dealing with a knowledgeable licensee. Honesty and full disclosure remain required.

A Florida licensee who accepts an undisclosed fee from a home inspector in exchange for referrals has committed:

• a.A lawful cooperative marketing arrangement
• b.An illegal undisclosed referral fee (kickback)✓
• c.An acceptable ordinary business courtesy
• d.A permitted finder's fee under Chapter 475

Accepting a secret fee for steering clients to a vendor is an illegal undisclosed kickback. Any compensation arrangement affecting a client must be disclosed. Such conduct is a ground for discipline.

In the DBPR discipline process, the decision whether to file a formal complaint against a licensee is made by:

• a.A jury of licensed brokers
• b.The employing broker of the accused licensee
• c.A probable-cause panel✓
• d.The Governor's executive office

After an investigation, a probable-cause panel determines whether there is probable cause to believe a violation occurred and to file a formal administrative complaint. The matter may then proceed to a hearing.

A 'citation' issued by the DBPR for a minor violation:

• a.Automatically revokes the license upon issuance
• b.Carries a set penalty and becomes final unless timely disputed✓
• c.Requires a full formal administrative hearing first
• d.May be issued only to brokers, never to sales associates

A citation imposes a predetermined fine for specified minor violations and becomes a final order if the licensee does not dispute it within the allowed time. It is a streamlined alternative to a full disciplinary proceeding.

In a Florida brokerage transaction, escrow funds may be held by:

• a.The buyer, in the buyer's own personal bank account
• b.The listing sign or marketing vendor
• c.Any licensee, including the sales associate who took the offer
• d.The broker, a title company, or an attorney, but not a sales associate✓

Escrow funds may be held by a neutral party such as the broker, a title company, or an attorney. A sales associate may not hold or maintain escrow funds; they must be delivered to the broker promptly.

If a Florida broker dies, FREC may issue a temporary license to a suitable person to:

• a.Permanently take over and operate the deceased broker's firm
• b.Wind up the existing business of the brokerage✓
• c.Collect payments from the Recovery Fund
• d.List and sell an unlimited number of new properties

On a broker's death, FREC may grant a temporary broker license to an otherwise unlicensed but qualified person for the limited purpose of concluding the brokerage's pending business. It is not a permanent operating license.

Under limited confidentiality, a Florida transaction broker may NOT disclose that a buyer:

• a.Has been prequalified by a mortgage lender
• b.Intends to have a professional home inspection
• c.Would prefer a 30-day closing timeline
• d.Will pay more than the price already offered✓

Limited confidentiality prohibits a transaction broker from revealing that a buyer will pay more (or a seller will accept less) than the price offered, the parties' motivation, or other bargaining information, unless authorized or required by law.

A Florida real estate team or group advertising name must:

• a.Include the trademarked word 'REALTOR' by law
• b.Be registered as a separate brokerage with the DBPR
• c.Replace the brokerage name to avoid consumer confusion
• d.Be used together with the licensed brokerage's name✓

Team or group names used in advertising must appear with, and may not overshadow, the licensed brokerage's name so the responsible brokerage is clearly identified. Team names may not imply the team is a separate brokerage.

A licensee who sells rental information to a prospective tenant for a fee must refund up to 75% of the fee if:

• a.The tenant does not obtain a rental as represented✓
• b.The listed information is more than 30 days old
• c.The landlord raises the advertised rent after listing
• d.The tenant changes their mind within 24 hours

Under Section 475.453, a licensee who charges for rental information must refund 75% of the fee if the prospective tenant does not obtain a rental as represented and requests a refund within the statutory period.

Chapter 475, Part I, of the Florida Statutes governs:

• a.Community association managers exclusively
• b.Real estate brokers, sales associates, and schools✓
• c.Mortgage loan originators and lenders
• d.State-certified appraisers and appraisal firms only

Chapter 475, Part I regulates real estate brokers, broker associates, sales associates, and real estate schools. Appraisers are covered under Part II. Understanding the statute's scope is central to license law.

To qualify for a Florida broker license, an applicant must generally hold an active sales associate license for at least:

• a.No time at all if the applicant holds a college degree
• b.10 years of continuous licensure
• c.24 months within the preceding five years✓
• d.6 months in any prior period

A broker applicant must have held an active real estate sales associate license for at least 24 months during the five years preceding application, in addition to completing broker prelicensing education and passing the broker exam.

A Florida broker may place escrow funds in an interest-bearing account only if:

• a.All parties consent in writing and agree who receives the interest✓
• b.FREC first issues a written escrow disbursement order
• c.The broker automatically keeps the interest as a service fee
• d.The account balance stays above $10,000 at all times

Escrow funds may be placed in an interest-bearing account only with the written consent of all parties, who must also agree on who is entitled to the interest and when it will be disbursed. The broker cannot simply keep the interest.

Failing to account for or deliver funds that belong to another party is, under Chapter 475:

• a.Permitted whenever the amount is under $500
• b.Only a civil matter with no license consequence
• c.A ground for disciplinary action✓
• d.Excused if the broker was merely careless

Failure to account for and deliver funds or property belonging to another is expressly a ground for discipline. Brokers must safeguard trust funds and deliver them as required. Violations can lead to fines, suspension, or revocation.

Which advertising practice by a Florida licensee is expressly prohibited?

• a.Noting that the seller is motivated, with the seller's consent
• b.Making false, deceptive, or misleading statements✓
• c.Including the brokerage's full licensed name
• d.Stating the property's accurate current list price

Advertising that is false, deceptive, or misleading is prohibited and is a ground for discipline. Accurate, non-deceptive advertising that identifies the brokerage is permitted and expected.

A designated sales associate arrangement in a nonresidential Florida transaction is permitted only when each party has assets of at least:

• a.$250,000 in verified liquid funds
• b.$1 million✓
• c.$5 million in total holdings
• d.$500,000 in combined net worth

Designated sales associates are allowed in nonresidential transactions where the buyer and seller each have assets of $1 million or more and both request the arrangement in writing. Two associates in one firm then each represent a party as a single agent.

A legal description that uses distances and compass directions running from a point of beginning is a:

• a.Government rectangular survey description
• b.Metes-and-bounds description✓
• c.Lot-and-block (recorded plat) description
• d.Monument-and-datum elevation description

A metes-and-bounds description defines a parcel by measured distances (metes) and directional boundaries (bounds), starting and ending at a point of beginning. It is often used for irregular parcels. Florida also uses lot-and-block and rectangular survey descriptions.

In the government (rectangular) survey system, a township is:

• a.One mile square, containing 640 acres
• b.A parcel of exactly 160 acres
• c.Six miles square, containing 36 sections✓
• d.A strip six miles wide running north to south

A township is a six-mile by six-mile square containing 36 sections. Townships are formed by the intersection of township lines and range lines. Each section within it is one square mile.

One section in the government survey system contains:

• a.43,560 acres, one acre per square foot
• b.5,280 acres, one per linear mile
• c.640 acres✓
• d.160 acres, equal to one quarter of a township

A section is one square mile and contains 640 acres. A quarter section is 160 acres, and a quarter-quarter section is 40 acres. These fractions appear frequently in land-description math.

Most platted subdivisions in Florida are legally described using the:

• a.Lot-and-block (recorded plat) system✓
• b.Datum-and-benchmark elevation system
• c.Metes-and-bounds system exclusively
• d.Government rectangular survey alone

The lot-and-block system refers to a recorded subdivision plat that identifies each parcel by lot and block number. It is the most common method for describing platted residential lots. The plat is recorded in the county's public records.

In a metes-and-bounds description, the survey must always close by returning to the:

• a.Nearest principal meridian
• b.Closest government section corner
• c.Geographic center of the township
• d.Point of beginning✓

A metes-and-bounds description begins and ends at the same point of beginning, forming a closed boundary. If it does not close, the description is defective. Monuments and markers help fix the boundaries.

Range lines in the rectangular survey system run:

• a.East and west, parallel to the base line
• b.North and south✓
• c.Only along the banks of navigable waterways
• d.Diagonally between principal meridians

Range lines run north and south, parallel to the principal meridian, and are spaced six miles apart. Township lines run east and west, parallel to the base line. Their intersections form townships.

A distinguishing feature of a tenancy in common is that:

• a.There is no right of survivorship✓
• b.It is available only to legally married couples
• c.The four unities are required to create it
• d.All co-owners must always hold equal shares

In a tenancy in common there is no right of survivorship, so a deceased co-owner's share passes to their heirs or devisees rather than the other owners. Co-owners may hold unequal, freely transferable shares.

Creating a joint tenancy traditionally requires the four unities of:

• a.Price, possession, purpose, and proximity
• b.Time, title, income, and profit
• c.Time, title, interest, and possession✓
• d.Deed, description, delivery, and date

The four unities required for a joint tenancy are time, title, interest, and possession (PITT): the owners take title at the same time, by the same instrument, with equal interests, and equal rights of possession. Breaking a unity can sever the joint tenancy.

In a condominium, an owner holds title to the individual unit plus:

• a.A proprietary lease covering the entire building
• b.Fee simple title to the land beneath the building
• c.An undivided share of the common elements✓
• d.Shares of stock in the condominium corporation

A condominium owner holds fee title to the individual unit and an undivided interest in the common elements, such as hallways, grounds, and amenities. This distinguishes it from a cooperative, which uses corporate shares.

Ownership in a housing cooperative typically consists of:

• a.A life estate covering the entire property
• b.Shares in a corporation and a proprietary lease✓
• c.A fee simple deed to a specific numbered unit
• d.An undivided interest in the common elements

In a cooperative, the resident owns shares in the corporation that owns the building and receives a proprietary lease to occupy a specific unit. The resident does not hold direct title to real estate, unlike a condominium owner.

Florida's constitutional homestead protection shields a primary residence from forced sale EXCEPT for:

• a.Ordinary credit-card judgments but not mortgages
• b.All debts, without any exception whatsoever
• c.Only unpaid federal income tax liens
• d.Property taxes, mortgages, and construction (mechanic's) liens✓

Florida homestead is protected from forced sale by most creditors, but not for obligations such as property taxes, mortgages voluntarily given, and mechanic's liens for improvements. These are the recognized exceptions.

For creditor-protection purposes, Florida's homestead is limited to one-half acre within a municipality or:

• a.One full section anywhere in the state
• b.An unlimited amount of acreage
• c.40 acres regardless of location
• d.160 acres outside a municipality✓

The homestead creditor exemption covers up to one-half acre within a city or up to 160 contiguous acres outside a municipality. Land beyond those limits does not receive the same protection.

Florida's 'Save Our Homes' provision caps annual increases in the assessed value of a homestead at:

• a.A flat $50,000 increase per year
• b.3% or the change in the CPI, whichever is lower✓
• c.10% for all types of property statewide
• d.The full change in market value each year

Save Our Homes limits yearly increases in the assessed value of homestead property to 3% or the change in the Consumer Price Index, whichever is less. This can create a gap between assessed and market value over time.

Florida's homestead property-tax exemption can reduce a home's taxable assessed value by up to:

• a.$100,000 for every homeowner
• b.The property's entire assessed value
• c.$50,000✓
• d.$25,000, with no additional amount available

Florida's homestead exemption can reduce taxable assessed value by up to $50,000, made up of an initial $25,000 plus an additional $25,000 that applies to value above $50,000 for non-school taxes. Exact rules are set by law.

Florida law restricts how homestead property may be devised by will if the owner is survived by:

• a.Any relative within the third degree of kinship
• b.A mortgage lender holding a lien
• c.A business partner or co-investor
• d.A spouse or minor child✓

Florida's constitution restricts devise of homestead when the owner leaves a surviving spouse or minor child, protecting those family members. An owner cannot freely will the homestead away from a spouse or minor child.

A life estate measured by the life of someone other than the life tenant is a life estate:

• a.In remainder to a third party
• b.Pur autre vie✓
• c.Owned in severalty
• d.Held by the entirety

A life estate pur autre vie is measured by the life of a person other than the life tenant. When that measuring life ends, the estate terminates and passes to the remainderman or reverts to the grantor.

When a life estate ends and the property returns to the original grantor, the grantor holds a:

• a.Reversion✓
• b.Remainder interest
• c.Easement in gross
• d.Leasehold estate

If the future interest following a life estate returns to the grantor, it is a reversion. If it passes to a named third party instead, that party holds a remainder. Both are future interests.

A deed conveying land 'so long as it is used as a public park,' which ends automatically if the condition is broken, creates a:

• a.Life estate pur autre vie
• b.Leasehold estate for a fixed term of years
• c.Fee simple absolute with no conditions
• d.Fee simple determinable✓

A fee simple determinable automatically ends and reverts to the grantor if a stated condition is violated, using durational language such as 'so long as.' It differs from a fee simple subject to a condition subsequent, which requires the grantor to act to reclaim the estate.

A lease with a definite beginning and ending date creates an:

• a.Tenancy at sufferance after a holdover
• b.Estate at will with no set term
• c.Periodic tenancy that renews automatically
• d.Estate for years✓

An estate (tenancy) for years has a fixed beginning and ending date and expires automatically without notice. Despite the name, it can be for any definite period, even less than a year. It differs from open-ended periodic tenancies.

A tenant who remains in possession after the lease expires without the owner's consent holds a tenancy:

• a.For years, under the original term
• b.By the entirety with the owner
• c.At sufferance✓
• d.At will, by mutual agreement

A tenancy at sufferance arises when a holdover tenant stays after the lease ends without the landlord's permission. It is the lowest form of estate. The landlord may treat the tenant as a trespasser or accept rent.

In an easement appurtenant, the parcel that benefits from the easement is the:

• a.Leasehold estate
• b.Dominant tenement✓
• c.Servient tenement
• d.Encumbered estate

An easement appurtenant involves two parcels: the dominant tenement benefits from the easement, and the servient tenement is burdened by it. The easement runs with the land and transfers with the dominant parcel.

A utility company's right to run power lines across privately owned land is typically an easement:

• a.Established only by prescription
• b.By necessity created for the landowner
• c.Appurtenant to the utility's headquarters building
• d.In gross✓

An easement in gross benefits a person or entity rather than an adjoining parcel, as with utility easements for power, water, or pipelines. There is no dominant tenement. Commercial easements in gross are generally transferable.

An easement acquired through open, continuous, and hostile use for the statutory period is an easement by:

• a.Prescription✓
• b.Necessity for a landlocked parcel
• c.Reservation stated in a deed
• d.Estoppel based on reliance

An easement by prescription is gained when someone uses another's land openly, continuously, and adversely for the statutory period. It resembles adverse possession but grants a use right rather than ownership.

A landlocked parcel with no road access is most likely to receive access through an easement by:

• a.Estoppel based on a verbal promise
• b.Prescription after long adverse use
• c.Necessity✓
• d.Condemnation by the neighbor

An easement by necessity is created when a parcel would otherwise be landlocked, giving the owner a right of access over adjoining land. Courts recognize it because land must be usable and accessible.

A revocable personal privilege to use another's land, such as a ticket to attend an event, is a:

• a.License✓
• b.Leasehold estate granting possession
• c.Profit a prendre to remove resources
• d.Easement appurtenant that runs with the land

A license is a personal, revocable privilege to enter or use another's land for a specific purpose. Unlike an easement, it does not create a lasting interest in land and can generally be revoked by the owner.

The rights of a landowner whose property borders a flowing river or stream are called:

• a.Littoral rights along an ocean shore
• b.Prior appropriation water rights
• c.Riparian rights✓
• d.Prescriptive use rights

Riparian rights belong to owners of land bordering flowing water such as rivers and streams, generally allowing reasonable use of the water. Florida follows riparian and littoral doctrines rather than prior appropriation.

An owner of property bordering a large navigable lake or the ocean holds:

• a.Littoral rights✓
• b.Appropriative rights granted by permit
• c.Riparian rights along a flowing stream
• d.Percolating groundwater rights only

Littoral rights attach to land bordering a sea, ocean, or large navigable lake, generally extending to the mean high-water mark. Riparian rights, by contrast, apply to flowing watercourses such as rivers.

In deciding whether an item is a fixture, courts weigh method of attachment, adaptation, and, most importantly, the:

• a.The color and decorative style of the item
• b.Original purchase price paid for the item
• c.Intention of the party who attached it✓
• d.Whether the item is currently insured

The tests for a fixture include the method of attachment, adaptation to the property, the relationship of the parties, and the intention of the person who installed it, with intention often given the most weight. Fixtures generally transfer with the real estate.

A commercial tenant's shelving and equipment installed to operate a business are:

• a.Personal property owned by the landlord
• b.Emblements belonging to the landlord
• c.Trade fixtures the tenant may usually remove✓
• d.Real property that must remain with the building

Trade fixtures are items a commercial tenant attaches to conduct business; the tenant generally may remove them before the lease ends, repairing any damage. This is an exception to the usual rule that fixtures stay with the real estate.

Annual crops produced by a tenant farmer's labor and cultivation are known as:

• a.Fixtures attached to the soil
• b.Trade improvements owned by the landlord
• c.Emblements✓
• d.Appurtenances that pass with title

Emblements are annual cultivated crops treated as the tenant farmer's personal property, which the tenant may harvest even after the tenancy ends. This doctrine protects the labor invested in growing the crops.

A right or benefit that transfers with the land, such as an easement that benefits the parcel, is a(n):

• a.Encumbrance held by a creditor
• b.Reversionary future interest
• c.Chattel that remains personal property
• d.Appurtenance✓

An appurtenance is a right, privilege, or improvement that belongs to and passes with the land, such as an easement appurtenant or water rights. When the land is sold, its appurtenances generally transfer with it.

In Florida, a claim of adverse possession generally requires continuous possession for at least:

• a.7 years✓
• b.3 years with any casual use
• c.10 years, but only against the state
• d.21 years, the traditional common-law period

Florida requires seven years of continuous, open, and hostile possession, typically with color of title or payment of taxes, to establish adverse possession. The requirements are strict and statute-based.

Property taxes levied in proportion to the assessed value of real estate are called:

• a.Ad valorem taxes✓
• b.Special assessments for improvements
• c.Intangible personal-property taxes
• d.Documentary stamp transfer taxes

Ad valorem means 'according to value,' so ad valorem taxes are based on the assessed value of the property. They fund local government services. A property's assessed value and any exemptions determine the tax owed.

A charge levied only on properties that benefit from a specific public improvement, such as a new sidewalk, is a:

• a.Documentary stamp tax on the deed
• b.Special assessment✓
• c.State intangible tax on the mortgage
• d.General ad valorem property tax

A special assessment is a charge imposed on properties that directly benefit from a public improvement like paving, sewers, or sidewalks. Unlike general ad valorem taxes, it applies only to the benefited parcels.

A property owner who wants to use land in a way that slightly departs from zoning requirements may apply for a:

• a.Private restrictive covenant
• b.Deed in lieu of foreclosure
• c.Legal nonconforming-use certificate
• d.Variance✓

A variance is permission to deviate from specific zoning requirements, often due to hardship, without changing the zoning classification. It is granted by the local zoning board of adjustment under set criteria.

A lawful land use that existed before a new zoning ordinance and is permitted to continue is a:

• a.Conditional easement of record
• b.Legal nonconforming use✓
• c.Special exception granted by variance
• d.Spot-zoning violation of the plan

A legal nonconforming use, often called grandfathered, is a use that was lawful before a zoning change and is allowed to continue despite no longer conforming. Restrictions may limit expanding or rebuilding it.

Local long-range land-use goals in a Florida community are set out in its:

• a.Comprehensive plan✓
• b.Recorded deed restrictions
• c.Multiple listing service rules
• d.Uniform building code

A comprehensive plan (or general plan) states a community's long-range goals for growth, land use, and infrastructure. Zoning ordinances are enacted to implement the plan. Florida requires local governments to adopt such plans.

Illegally rezoning a single parcel to benefit one owner, contrary to the surrounding area, is called:

• a.Lawful downzoning of a district
• b.A properly granted variance
• c.Inclusionary zoning for housing
• d.Spot zoning✓

Spot zoning is the improper rezoning of a single parcel in a way inconsistent with the surrounding area and the comprehensive plan, usually to benefit one owner. Courts may strike it down as invalid.

The deed that offers a buyer the greatest protection through full covenants of title is a:

• a.Bargain-and-sale deed
• b.Special warranty deed with limited covenants
• c.General warranty deed✓
• d.Quitclaim deed with no warranties

A general warranty deed provides the broadest protection, with the grantor warranting title against all defects, even those arising before the grantor owned the property. A quitclaim deed, by contrast, offers no warranties.

A deed that transfers only whatever interest the grantor may have, with no warranties of title, is a:

• a.Quitclaim deed✓
• b.Trustee's deed containing warranties
• c.General warranty deed with full covenants
• d.Special warranty deed with limited covenants

A quitclaim deed conveys whatever interest, if any, the grantor holds, without any warranties. It is often used to clear clouds on title or transfer between family members, but it offers the grantee the least protection.

For fair housing purposes, 'familial status' protects:

• a.Only legally married couples
• b.Households with one or more children under 18✓
• c.Persons who are over the age of 62
• d.Extended families of any composition

Familial status protects families with children under 18, pregnant individuals, and those securing custody of a child. It prohibits discrimination against households with minor children, subject to the older-persons housing exemption.

A landlord's duty to permit a disabled tenant to install a wheelchair ramp at the tenant's own expense is a reasonable:

• a.Modification✓
• b.Variance obtained from the zoning board
• c.Accommodation that the landlord must pay for
• d.Exemption from the fair housing laws

A reasonable modification is a physical change to the premises, generally at the tenant's expense, needed for a disabled person's full use. A reasonable accommodation, by contrast, is a change in rules or policies, which the landlord provides.

The federal Fair Housing Act's limited exemption for an owner-occupied building applies to buildings with:

• a.Any single-family home in all cases
• b.Four or fewer units✓
• c.Only government-subsidized housing
• d.Up to ten units in any location

The 'Mrs. Murphy' exemption may apply to owner-occupied buildings of four or fewer units, in limited circumstances. However, the exemption never permits discriminatory advertising or racial discrimination barred by the 1866 Civil Rights Act.

Which of the following is NOT one of the four government powers over private property?

• a.Police power to regulate land use
• b.Novation✓
• c.Eminent domain to take for public use
• d.Taxation to fund public services

The four government powers over real estate are police power, eminent domain, taxation, and escheat (PETE). Novation is a contract-law concept involving substitution of parties, not a government power.

The right within the bundle of rights that allows an owner to sell, lease, or will the property is the right of:

• a.Physical possession
• b.Exclusion of others
• c.Quiet enjoyment
• d.Disposition✓

Disposition is the right to transfer the property by sale, gift, lease, or will. It is one of several rights in the bundle, along with possession, control, enjoyment, and exclusion. All are subject to governmental powers.

When a growing tree is cut down and removed from land, it changes from real property to personal property through:

• a.Accession to the land
• b.Annexation to a building
• c.Severance✓
• d.Accretion by water

Severance is the act of detaching something from the land, converting real property (such as a standing tree) into personal property (such as cut timber). Annexation is the opposite process.

When personal property is permanently attached so that it becomes part of the real estate, the process is called:

• a.Annexation✓
• b.Reliction of water
• c.Severance from the land
• d.Emblement of crops

Annexation occurs when personal property is affixed to real estate and becomes a fixture, part of the real property. Severance is the reverse process. Whether an item became a fixture depends on the fixture tests.

For a deed to be valid, it must be signed by the:

• a.Listing broker of record
• b.Grantor✓
• c.County property appraiser
• d.Grantee receiving the property

A valid deed must be executed (signed) by the grantor, the party conveying the property. The grantee need not sign. Other requirements include a competent grantor, legal description, granting clause, and delivery and acceptance.

Title to real estate actually passes to the buyer when the deed is:

• a.Notarized by a licensed notary
• b.Recorded in the public records
• c.Delivered and accepted✓
• d.Signed by the grantor alone

Title passes upon delivery of the deed by the grantor and acceptance by the grantee during the grantor's lifetime. Recording is not required to pass title, though it protects the grantee by giving constructive notice.

The primary purpose of recording a deed in the public records is to:

• a.Make the deed valid between the parties
• b.Give constructive notice of the owner's interest✓
• c.Satisfy and release the mortgage lien
• d.Actually transfer title from grantor to grantee

Recording provides constructive notice to the world of the grantee's interest, protecting priority against later claims. A deed is valid between the parties without recording, but recording guards against subsequent purchasers and lienholders.

Title insurance protects the insured against:

• a.Default by the borrower on the mortgage loan
• b.Physical damage to the structure from fire or storms
• c.Future declines in the property's market value
• d.Losses from title defects that existed before the policy date✓

Title insurance protects against losses from covered defects in the title that existed on or before the policy's effective date, such as undisclosed liens or forged deeds. It does not cover physical damage or future value changes.

A title that a reasonable buyer would accept without objection, free of serious defects, is a:

• a.Marketable title✓
• b.Color of title without real ownership
• c.Equitable title held by the buyer
• d.Clouded title with unresolved claims

Marketable title is title free from significant defects, liens, or reasonable doubt that a well-informed buyer would accept. Purchase contracts typically require the seller to convey marketable title at closing.

A claim or encumbrance that may impair an owner's title, such as an old unreleased lien, is a:

• a.Constructive eviction of a tenant
• b.Cloud on the title✓
• c.Marketable and insurable title
• d.Valid legal description

A cloud on title is an outstanding claim or encumbrance, such as an unreleased mortgage or a recording error, that could challenge the owner's title. Clouds are often removed through a quitclaim deed or a quiet-title action.

When selling Florida homestead property owned by a married person, the deed generally must be signed by:

• a.Either spouse acting individually
• b.Both spouses, even if only one holds title✓
• c.Only the spouse whose name appears on the deed
• d.The listing broker as attorney-in-fact

Because of Florida's homestead protections, both spouses generally must sign a deed conveying homestead property, even if title is in only one spouse's name. This spousal joinder requirement safeguards the family's homestead rights.

A co-owner who wants to end the co-ownership and force a division of the property may file a court action for:

• a.Escheat back to the state
• b.Novation of the ownership agreement
• c.Partition✓
• d.Subordination of the other owners' shares

Partition is a legal action that allows a co-owner, such as a tenant in common or joint tenant, to divide the property or force its sale and split the proceeds. It provides a remedy when co-owners cannot agree.

The three traditional approaches an appraiser uses to estimate value are the sales comparison, cost, and:

• a.Income approach✓
• b.Gross-profit accounting approach
• c.Assessment ratio approach
• d.Mortgage-equity approach used alone

The three approaches to value are sales comparison, cost, and income. An appraiser applies the approaches relevant to the property type and then reconciles the results into a final opinion of value.

Which approach is generally most reliable for valuing vacant residential land?

• a.Income capitalization approach
• b.Sales comparison approach✓
• c.Cost approach using reproduction cost
• d.Gross rent multiplier method

Vacant land is best valued by the sales comparison approach, analyzing recent sales of similar parcels. The cost approach does not apply well because there are no improvements to cost out, and land itself is not depreciated.

An appraiser valuing a 40-unit apartment complex would rely most heavily on the:

• a.Cost approach with depreciation
• b.Gross living area measurement method
• c.Income approach✓
• d.Sales comparison approach used alone

Income-producing properties such as apartment complexes are best valued using the income approach, which converts net operating income into value using a capitalization rate. Other approaches may support the conclusion.

The cost approach estimates value as:

• a.Net operating income divided by the capitalization rate
• b.The simple average of three recent comparable sales
• c.Gross rent multiplied by the gross rent multiplier
• d.Land value plus the depreciated cost of improvements✓

The cost approach adds the value of the land to the current cost of building the improvements, then subtracts accrued depreciation. It works best for new or special-purpose properties where comparable sales are limited.

Reproduction cost differs from replacement cost in that reproduction cost is the cost to build:

• a.An exact duplicate using the same design and materials✓
• b.A functionally equivalent building with modern materials
• c.The single most profitable building allowed on the site
• d.A structure of any size that physically fits the lot

Reproduction cost is the cost to construct an exact replica of the improvement, using the same design and materials, including any outdated features. Replacement cost is the cost of a building with equivalent utility using current methods.

Land is worth $90,000, the replacement cost of the home is $260,000, and accrued depreciation is $40,000. What is the indicated value by the cost approach?

• a.$310,000✓
• b.$210,000
• c.$390,000
• d.$350,000

Cost approach value equals land plus improvement cost minus depreciation: $90,000 + $260,000 - $40,000 = $310,000. Depreciation is subtracted from the improvement cost, and land is added at its own value.

A building costs $500,000 to reproduce and has an estimated economic life of 50 years. Using the straight-line method, what is the annual depreciation?

• a.$50,000
• b.$5,000
• c.$10,000✓
• d.$25,000

Straight-line (age-life) depreciation divides cost by economic life: $500,000 / 50 = $10,000 per year. This assumes the improvement loses value evenly over its useful life. Land is not depreciated.

A building reproduced at $400,000 has a 40-year economic life. Using the straight-line method, how much depreciation accrues over 8 years?

• a.$320,000
• b.$80,000✓
• c.$10,000
• d.$40,000

Annual depreciation is $400,000 / 40 = $10,000; over 8 years that is $10,000 x 8 = $80,000. The remaining depreciated improvement value would be $400,000 - $80,000 = $320,000.

An appraiser assigns a well-maintained 30-year-old home an effective age of 15 years. Effective age is based on the property's:

• a.Remaining term on the current mortgage loan
• b.Condition and remaining utility, not its actual age✓
• c.Number of years since it last sold on the market
• d.Chronological age as recorded on the deed

Effective age reflects a property's condition and usefulness rather than its literal chronological age. Good maintenance and updates can make effective age lower than actual age, while neglect can make it higher.

A property has effective gross income of $120,000 and operating expenses of $46,000. What is the net operating income?

• a.$74,000✓
• b.$120,000
• c.$46,000
• d.$166,000

Net operating income equals effective gross income minus operating expenses: $120,000 - $46,000 = $74,000. NOI excludes debt service (mortgage payments) and is the figure capitalized in the income approach.

Potential gross income is $100,000 and vacancy and collection losses are 5%. What is the effective gross income?

• a.$50,000
• b.$105,000
• c.$95,000✓
• d.$5,000

Effective gross income equals potential gross income minus vacancy and collection loss: $100,000 - (5% x $100,000) = $100,000 - $5,000 = $95,000. Operating expenses are then subtracted to reach NOI.

A property with net operating income of $60,000 sells for $750,000. What is the indicated capitalization rate?

• a.12.5%
• b.6%
• c.8%✓
• d.0.8%

The capitalization rate equals NOI divided by value: $60,000 / $750,000 = 0.08, or 8%. A higher cap rate generally reflects higher risk and a lower value for the same income.

Using a 6% capitalization rate, what is the indicated value of a property with $48,000 in net operating income?

• a.$2,880
• b.$720,000
• c.$800,000✓
• d.$288,000

In the income approach, value equals NOI divided by the cap rate: $48,000 / 0.06 = $800,000. A lower cap rate produces a higher value for the same net operating income.

A rental home sells for $240,000 and rents for $2,000 per month. What is its monthly gross rent multiplier?

• a.12
• b.20
• c.1,200
• d.120✓

The monthly gross rent multiplier equals price divided by monthly rent: $240,000 / $2,000 = 120. The GRM is a quick screening tool that does not account for operating expenses.

If comparable homes show a monthly GRM of 110 and a subject property rents for $1,800 per month, its indicated value is:

• a.$16,364
• b.$198,000✓
• c.$19,800
• d.$1,980,000

Value equals the GRM times monthly rent: 110 x $1,800 = $198,000. The GRM is derived from comparable sales and applied to the subject's rent to estimate value.

A comparable that sold for $300,000 has a pool worth $15,000 that the subject property lacks. To value the subject, the appraiser adjusts the comparable's price to:

• a.$315,000
• b.$300,000
• c.$285,000✓
• d.$270,000

When a comparable is superior (it has a feature the subject lacks), the appraiser subtracts that value from the comparable: $300,000 - $15,000 = $285,000. Adjustments are always made to the comparables, never the subject.

A comparable sold for $250,000 but lacks a garage worth $12,000 that the subject property has. The adjusted price of the comparable is:

• a.$238,000
• b.$250,000
• c.$262,000✓
• d.$274,000

When a comparable is inferior (it lacks a feature the subject has), the appraiser adds that value to the comparable: $250,000 + $12,000 = $262,000. This makes the comparable equivalent to the subject.

A 2,400-square-foot home sold for $360,000. What is the price per square foot?

• a.$100
• b.$240
• c.$1,500
• d.$150✓

Price per square foot equals sale price divided by area: $360,000 / 2,400 = $150. Price-per-square-foot figures help compare properties of different sizes in the sales comparison approach.

Estimating reproduction cost at $140 per square foot for a 2,000-square-foot home yields a cost of:

• a.$14,000
• b.$280,000✓
• c.$2,800,000
• d.$28,000

Reproduction cost equals area times cost per square foot: 2,000 x $140 = $280,000. This figure is used in the cost approach before subtracting depreciation and adding land value.

A property has operating expenses of $40,000 and effective gross income of $100,000. Its operating expense ratio is:

• a.40%✓
• b.25%
• c.60%
• d.250%

The operating expense ratio equals operating expenses divided by effective gross income: $40,000 / $100,000 = 40%. It measures the share of income consumed by operating costs.

A property has EGI of $90,000, operating expenses of $30,000, and an 8% capitalization rate. What is its indicated value?

• a.$60,000
• b.$750,000✓
• c.$375,000
• d.$1,125,000

First find NOI: $90,000 - $30,000 = $60,000. Then divide by the cap rate: $60,000 / 0.08 = $750,000. The income approach capitalizes NOI, not gross income.

The appraisal principle holding that an improvement's value equals what it adds to the whole property, not what it cost, is the principle of:

• a.Conformity with the neighborhood
• b.Anticipation of future benefits
• c.Contribution✓
• d.Competition among sellers

The principle of contribution states that the value of an improvement is measured by how much it adds to the property's overall value, which may differ from its cost. Overimprovements often fail to return their full cost.

The appraisal principle holding that value is created by the expectation of future benefits is:

• a.Regression toward lower value
• b.Balance of land uses
• c.Substitution of an equivalent
• d.Anticipation✓

The principle of anticipation holds that value is based on the present worth of expected future benefits, such as income or appreciation. It underlies the income approach, where future income drives value.

Combining two adjacent lots to create a single, more valuable parcel produces added value called:

• a.Progression from neighbors
• b.Contribution of an improvement
• c.Accretion from water action
• d.Plottage✓

Assemblage is the act of combining adjacent parcels, and plottage is the increase in value that can result when the combined parcel is worth more than the sum of the separate lots. This often occurs with development sites.

Depreciation is considered 'curable' when:

• a.It results only from the age of the structure
• b.The cost to fix it is less than the value it adds✓
• c.It can never be economically repaired at all
• d.It is caused by factors located outside the property

Depreciation is curable when the cost to remedy the item is equal to or less than the value the cure adds to the property. If repair costs more than the value gained, the depreciation is considered incurable.

The recognized standards that guide professional appraisal practice in the United States are the:

• a.National Association of REALTORS Code of Ethics
• b.Uniform Standards of Professional Appraisal Practice (USPAP)✓
• c.Generally Accepted Accounting Principles (GAAP)
• d.Uniform Residential Landlord and Tenant Act

USPAP sets the ethical and performance standards for appraisers in the United States. Appraisers performing appraisals for federally related transactions must comply with USPAP. It is updated periodically.

A federally related mortgage transaction generally requires an appraisal performed by a:

• a.State-licensed or state-certified appraiser✓
• b.Real estate sales associate preparing a CMA
• c.Home inspector reviewing the condition
• d.Mortgage loan officer at the lender

Federally related transactions above threshold amounts require an appraisal by a state-licensed or state-certified appraiser. A licensee's CMA or a broker price opinion is not a substitute for such an appraisal.

A broker price opinion (BPO) is best described as:

• a.The county's assessed value used for taxation
• b.A binding guarantee of the future sale price
• c.A broker's estimate of value that is not a formal appraisal✓
• d.A certified appraisal accepted for all mortgage loans

A BPO is a broker's or agent's opinion of likely value, often used by lenders for non-lending decisions such as short sales. It is not a certified appraisal and cannot substitute for one where an appraisal is legally required.

The best comparable sales for the sales comparison approach are those that are:

• a.Recent, nearby, and similar to the subject✓
• b.Active listings that have not yet gone under contract
• c.The highest-priced sales found anywhere in the county
• d.Sales that closed more than five years ago

Good comparables are recent, located near the subject, and physically and functionally similar. Using current, nearby, similar sales minimizes the adjustments needed and improves the reliability of the value estimate.

If market prices have risen since a comparable sold, the appraiser applies a:

• a.Positive market-conditions (time) adjustment to the comparable✓
• b.No adjustment, because time never affects value
• c.Downward adjustment to the comparable's sale price
• d.Negative adjustment to the subject property itself

When prices rose after a comparable sold, its older price understates current value, so the appraiser adds a positive market-conditions (time) adjustment to the comparable. Adjustments are made to comparables, not the subject.

A gross income multiplier (GIM) applied to a commercial property is based on:

• a.Net operating income after all expenses
• b.The loan-to-value ratio of financing
• c.Annual gross income rather than monthly rent✓
• d.The property's capitalization rate

A gross income multiplier typically uses annual gross income for commercial or larger properties, while a monthly gross rent multiplier is common for residential rentals. Both are quick tools that ignore operating expenses.

For a given net operating income, a higher capitalization rate results in:

• a.A higher gross rent multiplier
• b.A higher indicated value
• c.No change in the indicated value
• d.A lower indicated value✓

Because value equals NOI divided by the cap rate, a higher cap rate produces a lower value for the same income. Higher cap rates generally reflect greater perceived risk in the investment.

A property's net operating income is $80,000. At a 10% capitalization rate, its indicated value is:

• a.$8,000,000
• b.$88,000
• c.$720,000
• d.$800,000✓

Value equals NOI divided by the cap rate: $80,000 / 0.10 = $800,000. Dividing income by a decimal rate is the core calculation of the income approach.

Potential gross income is $200,000, vacancy is 10%, and operating expenses are $50,000. What is the net operating income?

• a.$180,000
• b.$140,000
• c.$150,000
• d.$130,000✓

First find effective gross income: $200,000 - (10% x $200,000) = $180,000. Then subtract operating expenses: $180,000 - $50,000 = $130,000. NOI does not deduct mortgage payments.

A building generating $90,000 in net operating income is valued at $1,000,000. The capitalization rate is:

• a.0.9%
• b.90%
• c.9%✓
• d.11%

The cap rate equals NOI divided by value: $90,000 / $1,000,000 = 0.09, or 9%. This rate can then be applied to similar properties to estimate their values.

Improvements originally worth $300,000 have lost $30,000 in value. Expressed as a percentage, the depreciation is:

• a.3%
• b.30%
• c.10%✓
• d.13%

Percentage depreciation equals the loss divided by the original value: $30,000 / $300,000 = 0.10, or 10%. The remaining depreciated value of the improvements would be $270,000.

External obsolescence is generally considered:

• a.Incurable, because its cause lies outside the property✓
• b.Always curable through interior renovation
• c.A form of ordinary physical wear and tear
• d.Caused only by an outdated interior floor plan

External (economic) obsolescence results from negative influences outside the property boundaries, such as a nearby nuisance or a declining area. Because the owner cannot control off-site factors, it is usually incurable.

Which of the following is an example of functional obsolescence?

• a.A five-bedroom home with only one bathroom✓
• b.A worn roof that needs full replacement
• c.A new landfill built next to the property
• d.A cracked and settling foundation

Functional obsolescence stems from outdated or poorly designed features within the property, such as too few bathrooms for the number of bedrooms. A worn roof is physical deterioration, and a nearby landfill is external obsolescence.

In the cost approach, depreciation is applied to the:

• a.Land only, since it wears out over time
• b.Both the land and the improvements equally
• c.Outstanding mortgage balance on the loan
• d.Improvements only, not the land✓

Depreciation in the cost approach applies only to the improvements, because land is generally considered not to depreciate. The appraiser estimates improvement cost, subtracts depreciation, and adds land value separately.

A property's assessed value, used for taxation, is:

• a.The same figure as its replacement cost
• b.Always exactly equal to its market value
• c.Set each year by the listing broker
• d.Often different from its market value✓

Assessed value is determined by the taxing authority and, due to exemptions, caps such as Save Our Homes, and timing, often differs from current market value. Market value reflects what a willing buyer and seller would agree on.

A triangular lot has a base of 300 feet and a height of 200 feet. What is its area?

• a.45,000 square feet
• b.30,000 square feet✓
• c.60,000 square feet
• d.15,000 square feet

The area of a triangle is one-half the base times the height: 0.5 x 300 x 200 = 30,000 square feet. Forgetting the one-half factor would incorrectly give 60,000.

A room measures 15 feet by 12 feet. How many square yards of carpet are needed to cover the floor?

• a.15 square yards
• b.20 square yards✓
• c.60 square yards
• d.540 square yards

The floor is 15 x 12 = 180 square feet. Because one square yard equals 9 square feet, 180 / 9 = 20 square yards.

A floor of 40 square yards is carpeted at $18 per square yard. What is the total carpet cost?

• a.$360
• b.$720✓
• c.$3,240
• d.$6,480

Multiply the number of square yards by the price per square yard: 40 x $18 = $720. Using square feet instead of yards is a common error.

An investor buys 6 acres of land at $28,000 per acre. What is the total price?

• a.$18,000
• b.$140,000
• c.$1,680,000
• d.$168,000✓

Total price equals acreage times price per acre: 6 x $28,000 = $168,000. Careful decimal placement avoids the off-by-ten errors.

A 3.5-acre parcel sells for $210,000. What is the price per acre?

• a.$52,500
• b.$735,000
• c.$60,000✓
• d.$6,000

Divide the total price by the number of acres: $210,000 / 3.5 = $60,000 per acre.

A waterfront lot with 90 feet of frontage sells for $270,000. What is the price per front foot?

• a.$30,000
• b.$3,000✓
• c.$300
• d.$2,700

Price per front foot equals total price divided by the number of front feet: $270,000 / 90 = $3,000.

A parcel contains 130,680 square feet. How many acres is that? (1 acre = 43,560 sq ft)

• a.4 acres
• b.1.5 acres
• c.2 acres
• d.3 acres✓

Divide total square feet by 43,560: 130,680 / 43,560 = 3 acres. Memorizing 43,560 square feet per acre is essential.

A rectangular tract contains 217,800 square feet. How many acres does it contain?

• a.6 acres
• b.10 acres
• c.4 acres
• d.5 acres✓

Divide square footage by 43,560: 217,800 / 43,560 = 5 acres.

A property sells for $525,000 with a total commission of 6 percent. What is the total commission?

• a.$26,250
• b.$31,500✓
• c.$315,000
• d.$3,150

Multiply the sale price by the commission rate: $525,000 x 0.06 = $31,500.

On a $525,000 sale the total 6 percent commission ($31,500) is split 50/50 between the listing and selling brokerages. The listing agent keeps 60 percent of the listing brokerage's share. How much does the listing agent earn?

• a.$6,300
• b.$18,900
• c.$15,750
• d.$9,450✓

The listing brokerage receives half of $31,500, which is $15,750. The agent keeps 60 percent: $15,750 x 0.60 = $9,450.

A sale of $400,000 pays a graduated commission of 8 percent on the first $150,000 and 4 percent on the balance. What is the total commission?

• a.$16,000
• b.$22,000✓
• c.$18,000
• d.$32,000

The first tier is $150,000 x 0.08 = $12,000; the balance is $250,000 x 0.04 = $10,000. Added together the commission is $22,000.

A seller wants to net $235,000 after paying a 6 percent commission and no other costs. What must the sale price be?

• a.$249,100
• b.$251,000
• c.$235,000
• d.$250,000✓

The seller keeps 94 percent of the price, so price = $235,000 / 0.94 = $250,000. Dividing by (100% minus the rate) avoids the common add-back error.

A home sells for $400,000. The seller pays a 6 percent commission, $4,800 in other closing costs, and a $250,000 loan payoff. What are the net proceeds to the seller?

• a.$150,000
• b.$126,000
• c.$121,200✓
• d.$145,200

Commission is $400,000 x 0.06 = $24,000. Net = $400,000 - $24,000 - $4,800 - $250,000 = $121,200.

A Florida deed transfers property for $360,000. At $0.70 per $100 of consideration, what is the documentary stamp tax on the deed?

• a.$3,600
• b.$1,260
• c.$25,200
• d.$2,520✓

Florida deed stamps are $0.70 per $100: $360,000 / 100 = 3,600 units, times $0.70 = $2,520.

A Florida deed shows consideration of $283,450. Documentary stamp tax on deeds is $0.70 per $100 or fraction thereof. What is the deed stamp tax?

• a.$1,984.15
• b.$2,834.50
• c.$1,983.80
• d.$1,984.50✓

The tax rounds up to the next full $100, so $283,450 becomes 2,835 taxable units. At $0.70 each, 2,835 x $0.70 = $1,984.50.

A buyer signs a $250,000 promissory note secured by a Florida mortgage. Documentary stamp tax on notes is $0.35 per $100. What is the note stamp tax?

• a.$875✓
• b.$1,750
• c.$525
• d.$8,750

Note stamps are $0.35 per $100: $250,000 / 100 = 2,500 units, times $0.35 = $875.

A new Florida mortgage of $250,000 is recorded. Florida's intangible tax is 2 mills ($0.002 per $1). What is the intangible tax?

• a.$250
• b.$5,000
• c.$500✓
• d.$50

The intangible tax is $0.002 per dollar of the mortgage: $250,000 x 0.002 = $500.

A $300,000 Florida mortgage is recorded. Documentary stamp tax on the note is $0.35 per $100 and intangible tax is 2 mills. What is the combined tax on the mortgage?

• a.$600
• b.$1,650✓
• c.$1,050
• d.$1,950

Note stamps are 3,000 x $0.35 = $1,050 and intangible tax is $300,000 x 0.002 = $600. Combined, $1,050 + $600 = $1,650.

A buyer finances a Florida purchase with a $320,000 mortgage. Using $0.35 per $100 for note stamps and 2 mills for intangible tax, what is the total tax charged on the mortgage?

• a.$2,800
• b.$640
• c.$1,120
• d.$1,760✓

Note stamps are 3,200 x $0.35 = $1,120 and intangible tax is $320,000 x 0.002 = $640. The total on the mortgage is $1,760.

A lender makes a $255,000 loan on a home valued at $300,000. What is the loan-to-value ratio?

• a.85 percent✓
• b.75 percent
• c.90 percent
• d.80 percent

LTV equals the loan divided by value: $255,000 / $300,000 = 0.85, or 85 percent.

A lender will lend at a 75 percent LTV on a property valued at $340,000. What is the maximum loan amount?

• a.$453,333
• b.$255,000✓
• c.$272,000
• d.$85,000

Maximum loan equals value times LTV: $340,000 x 0.75 = $255,000.

A buyer purchases a $420,000 home with an 80 percent loan. How large is the required down payment?

• a.$8,400
• b.$336,000
• c.$84,000✓
• d.$42,000

An 80 percent loan means a 20 percent down payment: $420,000 x 0.20 = $84,000.

A home is priced at $305,000 but appraises for $295,000. The lender uses a 90 percent LTV on the lower of price or appraised value. How much cash (excluding closing costs) must the buyer bring to close?

• a.$44,500
• b.$30,500
• c.$39,500✓
• d.$61,000

The loan is 90 percent of the lower $295,000 value: $265,500. Cash needed is $305,000 - $265,500 = $39,500.

A borrower pays 2.5 discount points on a $280,000 loan. What is the cost of the points?

• a.$5,600
• b.$7,000✓
• c.$70,000
• d.$700

One point is one percent of the loan, so 2.5 points equal 0.025 x $280,000 = $7,000.

A borrower pays 3 discount points to lower the rate on a $200,000 loan. How much do the points cost?

• a.$9,000
• b.$6,000✓
• c.$2,000
• d.$600

Three points equal 3 percent of the loan amount: $200,000 x 0.03 = $6,000. Points are figured on the loan, not the sale price.

A lender uses a 28 percent front-end (housing) qualifying ratio. If a borrower's gross monthly income is $7,200, what is the maximum monthly PITI payment?

• a.$2,592
• b.$1,296
• c.$2,016✓
• d.$20,160

The maximum housing payment is 28 percent of gross monthly income: $7,200 x 0.28 = $2,016.

A lender uses a 36 percent back-end ratio. A borrower earns $8,000 per month and has $530 in other monthly debt. What is the maximum allowable monthly housing payment?

• a.$2,350✓
• b.$530
• c.$2,880
• d.$2,470

Total debt cannot exceed 36 percent of $8,000, which is $2,880. Subtracting the $530 of other debt leaves $2,350 for housing.

A loan has monthly principal and interest of $1,400, annual taxes of $3,600, and annual hazard insurance of $1,200. What is the monthly PITI payment?

• a.$5,300
• b.$1,800✓
• c.$1,900
• d.$1,700

Monthly taxes are $3,600 / 12 = $300 and monthly insurance is $1,200 / 12 = $100. PITI = $1,400 + $300 + $100 = $1,800.

A $180,000 loan carries a 5.5 percent annual interest rate. Using simple interest, how much interest accrues in one month?

• a.$9,900
• b.$825✓
• c.$750
• d.$412.50

Annual interest is $180,000 x 0.055 = $9,900. One month is $9,900 / 12 = $825.

A $250,000 loan at 6 percent annual interest has a monthly payment of $1,600. After the first payment, what is the new principal balance?

• a.$249,650✓
• b.$248,750
• c.$249,350
• d.$250,350

First-month interest is $250,000 x 0.06 / 12 = $1,250, so $1,600 - $1,250 = $350 reduces principal. The balance becomes $250,000 - $350 = $249,650.

A borrower takes a $20,000 loan at 7.5 percent simple interest for 6 months. How much interest is owed?

• a.$1,050
• b.$1,500
• c.$375
• d.$750✓

Simple interest equals principal x rate x time: $20,000 x 0.075 x 0.5 = $750.

An income property has a net operating income of $60,000 and a market value of $750,000. What is the capitalization rate?

• a.8 percent✓
• b.10 percent
• c.12.5 percent
• d.6 percent

The cap rate equals NOI divided by value: $60,000 / $750,000 = 0.08, or 8 percent.

A property produces $63,000 of net operating income and is valued using a 9 percent cap rate. What is its indicated value?

• a.$567,000
• b.$770,000
• c.$630,000
• d.$700,000✓

Value equals NOI divided by the cap rate: $63,000 / 0.09 = $700,000.

A rental has gross potential income of $100,000, a 5 percent vacancy loss, and operating expenses of $35,000. What is the net operating income?

• a.$65,000
• b.$60,000✓
• c.$95,000
• d.$55,000

Effective gross income is $100,000 minus 5 percent vacancy ($5,000), or $95,000. Subtracting $35,000 in expenses gives NOI of $60,000.

A property has a net operating income of $60,000. Using a 7.5 percent capitalization rate, what is its estimated value?

• a.$750,000
• b.$450,000
• c.$800,000✓
• d.$4,500,000

Value equals NOI divided by the cap rate: $60,000 / 0.075 = $800,000.

A property sells for $450,000 and produces annual gross rent of $37,500. What is the gross rent multiplier (annual)?

• a.10
• b.0.083
• c.12✓
• d.15

The annual GRM equals price divided by annual gross rent: $450,000 / $37,500 = 12.

An appraiser uses a monthly gross rent multiplier of 110. If a property rents for $2,500 per month, what is its indicated value?

• a.$275,000✓
• b.$2,750,000
• c.$225,000
• d.$250,000

Value equals the monthly GRM times monthly rent: 110 x $2,500 = $275,000.

An investor buys a property for $220,000 and later sells it for $253,000. What is the percentage of profit based on cost?

• a.85 percent
• b.12 percent
• c.15 percent✓
• d.13 percent

Profit is $253,000 - $220,000 = $33,000. Dividing by the $220,000 cost gives 0.15, or 15 percent.

A home sold for $189,000, which was a 10 percent loss from what the owner originally paid. What was the original purchase price?

• a.$189,000
• b.$170,100
• c.$207,900
• d.$210,000✓

A 10 percent loss means the sale equals 90 percent of cost: $189,000 / 0.90 = $210,000.

An investor buys a home for $160,000, spends $40,000 on renovations, and sells for $240,000. What is the percentage of profit on total cost?

• a.20 percent✓
• b.50 percent
• c.33 percent
• d.25 percent

Total cost (basis) is $160,000 + $40,000 = $200,000, and profit is $240,000 - $200,000 = $40,000. Dividing $40,000 by $200,000 gives 20 percent.

A property worth $300,000 appreciates 5 percent per year, compounded, for 2 years. What is its value after 2 years?

• a.$315,000
• b.$330,750✓
• c.$330,000
• d.$347,288

Compounding: $300,000 x 1.05 x 1.05 = $300,000 x 1.1025 = $330,750.

A Florida home is assessed at $280,000 with combined exemptions of $50,000. The millage rate is 22 mills. What is the annual property tax?

• a.$5,060✓
• b.$5,600
• c.$6,160
• d.$4,600

Taxable value is $280,000 - $50,000 = $230,000. At 22 mills ($22 per $1,000), tax = 230 x $22 = $5,060.

A property with a taxable value of $210,000 owes $4,200 in annual property tax. What is the millage rate?

• a.0.02 mills
• b.200 mills
• c.20 mills✓
• d.2 mills

The rate equals tax divided by value: $4,200 / $210,000 = 0.02, which is $20 per $1,000, or 20 mills.

Annual property taxes are $5,475, paid in arrears. Using Florida's 365-day proration, the seller owned the property for the first 90 days of a non-leap year. What is the seller's share owed to the buyer at closing?

• a.$1,335
• b.$1,350✓
• c.$1,365
• d.$4,125

The daily rate is $5,475 / 365 = $15. For 90 days the seller owes 90 x $15 = $1,350, credited to the buyer.

Monthly rent of $1,800 was collected by the seller for June. The sale closes June 16 and the buyer owns the day of closing. Using a 30-day month, how much rent is credited to the buyer?

• a.$900✓
• b.$1,080
• c.$960
• d.$840

The buyer owns June 16 through 30, which is 15 days. The daily rent is $1,800 / 30 = $60, so 15 x $60 = $900 is credited to the buyer.

Florida is which type of state for enforcing a defaulted mortgage?

• a.A strict-foreclosure state where title passes to the lender automatically on default in all cases
• b.A state that prohibits foreclosure entirely on homestead property
• c.A nonjudicial state where the lender may sell without any court action
• d.A judicial foreclosure state, where the lender must file suit and obtain a court judgment✓

Florida requires judicial foreclosure: the lender files a lawsuit and the court orders a sale. This process protects the borrower and produces a clerk's sale of the property.

Florida follows the 'lien theory' of mortgages, which means that:

• a.The borrower keeps legal title and the mortgage is only a lien securing the debt✓
• b.The borrower has no ownership interest during the loan in all cases under Florida law
• c.The lender holds legal title until the loan is repaid
• d.Title is held by a neutral trustee for the lender

In a lien-theory state such as Florida, the borrower retains title and the lender's mortgage is merely a lien. This is one reason Florida uses judicial rather than power-of-sale foreclosure.

When a Florida lender begins a foreclosure, it records a document that gives public notice a suit affecting title is pending. This is a:

• a.Deed of reconveyance
• b.Lis pendens✓
• c.Estoppel certificate
• d.Satisfaction of mortgage

A lis pendens is a recorded notice that litigation affecting the property is pending. It provides constructive notice so later buyers or lienholders take subject to the outcome.

In a Florida judicial foreclosure, the borrower's equitable right of redemption generally lasts until:

• a.Ten years after the foreclosure sale
• b.The clerk of court files the certificate of sale✓
• c.The property is resold by the new owner
• d.The moment the borrower misses a single payment in all cases

Florida's equity of redemption allows the borrower to pay the full debt and stop the sale up to the time the clerk files the certificate of sale. After that point, the right to redeem is cut off.

If a foreclosure sale brings less than the total mortgage debt, the lender may pursue the borrower for the shortfall through a:

• a.Lis pendens
• b.Satisfaction piece
• c.Subordination agreement
• d.Deficiency judgment✓

A deficiency judgment lets the lender recover the difference between the debt and the foreclosure sale proceeds. Florida courts may grant deficiency judgments subject to statutory limits.

In residential financing, the document that is the borrower's actual promise to repay, separate from the security instrument, is the:

• a.Estoppel letter
• b.Promissory note✓
• c.Mortgage
• d.Deed of trust

The promissory note evidences the debt and the borrower's promise to repay with stated terms. The mortgage is the separate instrument that pledges the property as security for that note.

A borrower who pledges real property as security for a loan while keeping possession and use of it is engaging in:

• a.Hypothecation✓
• b.Escheat
• c.Subrogation
• d.Novation

Hypothecation is pledging property as collateral without giving up possession. It is exactly what a borrower does when granting a mortgage on a home they continue to occupy.

Unlike some states, Florida generally does not permit a lender to foreclose a residential mortgage through a private 'power of sale' because Florida:

• a.Requires the courts to oversee the foreclosure✓
• b.Bans all residential mortgages
• c.Automatically forgives defaulted loans in all cases
• d.Allows only cash purchases of homes

Because Florida is a judicial-foreclosure state, a lender must obtain a court judgment rather than sell privately under a power-of-sale clause. Court oversight is a defining feature of Florida foreclosures.

When a Florida mortgage loan is paid in full, the lender records a document releasing the lien known as a:

• a.Lis pendens
• b.Satisfaction of mortgage✓
• c.Purchase money mortgage
• d.Acceleration notice

A satisfaction of mortgage is recorded to clear the paid-off lien from the public record. Failing to record it can leave a cloud on the owner's title.

The mortgage clause that requires the lender to release its lien once the debt is fully paid is the:

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

A defeasance clause obligates the lender to defeat, or cancel, its lien and issue a satisfaction when the loan is repaid. It is the counterpart to the acceleration clause that speeds up repayment on default.

A clause by which an existing lender agrees to let its lien become inferior to a new loan is a:

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

A subordination clause lets an existing lienholder voluntarily give a later loan higher priority. It is common in construction and development financing where a new lender demands first position.

A written statement from a lender showing the exact remaining balance and terms of a loan is commonly called a(n):

• a.Warranty deed
• b.Promissory note
• c.Estoppel (payoff) letter✓
• d.Lis pendens

An estoppel or payoff letter states the current unpaid balance and prevents the lender from later claiming a different amount. It is often requested before a sale or loan assumption.

When a seller finances part of the purchase price by taking back a mortgage from the buyer, that instrument is a:

• a.Blanket mortgage
• b.Wraparound deed
• c.Purchase money mortgage✓
• d.Reverse mortgage

A purchase money mortgage is created when the seller extends credit to the buyer and takes back a mortgage as security. It allows financing directly between the parties without an institutional lender.

A financing arrangement in which a new, larger mortgage is placed over an existing loan that the seller keeps paying is a:

• a.Package mortgage
• b.Blanket mortgage
• c.Open-end mortgage
• d.Wraparound mortgage✓

In a wraparound, the seller keeps the underlying first mortgage and the buyer makes payments on the larger wrap, from which the seller pays the original loan. It is a form of seller financing that requires care with due-on-sale clauses.

Under a contract for deed (installment land contract), during the payment period the:

• a.Buyer takes possession while the seller keeps legal title until the balance is paid✓
• b.Lender holds title in trust for both parties
• c.Buyer receives full legal title immediately at signing in all cases under Florida law
• d.Seller must move out and give up all interest

In a contract for deed, the seller retains legal title as security and the buyer holds equitable title with possession. Legal title transfers only after the buyer completes the agreed payments.

A single mortgage that covers several parcels of land and includes a clause allowing individual lots to be freed as they are sold is a:

• a.Reverse mortgage
• b.Open-end mortgage
• c.Blanket mortgage with a partial release clause✓
• d.Package mortgage

A blanket mortgage secures more than one parcel, which is common for subdivisions. A partial release clause lets the developer release individual lots from the lien as each one is sold and paid down.

A mortgage that secures both real property and specified personal property, such as appliances, is a:

• a.Blanket mortgage
• b.Bridge loan
• c.Wraparound mortgage
• d.Package mortgage✓

A package mortgage finances real estate together with certain personal property like a refrigerator or range. It is common in new-home and furnished-condominium sales.

A mortgage that lets the borrower re-borrow funds already repaid, up to the original amount, is an:

• a.Blanket mortgage
• b.Amortized mortgage
• c.Open-end mortgage✓
• d.Package mortgage

An open-end mortgage works like a line of credit against the property, allowing additional advances up to a set limit. It saves the cost of writing a brand-new loan for later borrowing.

A short-term loan that funds a builder in stages as work is completed is best described as a:

• a.Purchase money mortgage
• b.Construction loan disbursed in draws✓
• c.Fully amortized 30-year loan in all cases
• d.Reverse mortgage

A construction loan advances money in draws tied to completed phases of the project. It is short term and is usually replaced by permanent financing once the building is finished.

A reverse mortgage (HECM) is generally available to homeowners who are:

• a.First-time buyers under 30 seeking low down payments in all cases
• b.At least 62 years old and converting home equity into payments✓
• c.Any borrower who wants to skip a down payment
• d.Investors buying commercial buildings

A HECM reverse mortgage lets owners aged 62 or older draw on their equity, with repayment deferred until they sell, move, or die. It is designed to help older homeowners access equity without monthly loan payments.

Section 8 of the Real Estate Settlement Procedures Act (RESPA) specifically prohibits:

• a.Charging any closing costs to the buyer in all cases under Florida law in every transaction
• b.Selling a loan on the secondary market
• c.Kickbacks and unearned referral fees among settlement service providers✓
• d.Requiring title insurance on a purchase

RESPA Section 8 bans kickbacks, fee-splitting, and unearned referral fees that raise the cost of settlement services. Its goal is to keep closing costs fair and transparent for consumers.

Under the Truth in Lending Act and Regulation Z, the three-day right of rescission generally applies to:

• a.Every residential purchase-money loan
• b.Only loans that have no finance charge in all cases under Florida law in every transaction
• c.A refinance or home-equity loan on a borrower's principal residence, not a purchase loan✓
• d.Commercial loans on office buildings

Regulation Z gives borrowers three business days to rescind certain loans secured by their principal residence, such as refinances and home-equity loans. It does not apply to the loan used to purchase the home.

Under the TRID rule, the lender must deliver the Loan Estimate to the applicant no later than:

• a.Thirty days after closing
• b.The day the loan is paid off in all cases under Florida law
• c.One year after application
• d.Three business days after receiving the loan application✓

TRID requires the Loan Estimate within three business days of a completed application so the borrower can compare terms early. It combines earlier good-faith-estimate and TILA disclosures.

Under TRID, the borrower must receive the Closing Disclosure at least:

• a.Thirty days before application in all cases under Florida law
• b.Three business days before consummation of the loan✓
• c.Only after the loan funds
• d.On the morning of closing

The Closing Disclosure must reach the borrower at least three business days before consummation so they can review final terms. Certain significant changes restart the three-day period.

The Equal Credit Opportunity Act (ECOA) prohibits a lender from:

• a.Verifying an applicant's income in all cases under Florida law in every transaction without exception as a general rule regardless of the circumstances
• b.Charging interest on a loan
• c.Requiring a down payment
• d.Discriminating in credit decisions based on race, sex, religion, national origin, marital status, age, or public-assistance income✓

ECOA bars discrimination in any part of a credit transaction based on protected characteristics. Lenders may still evaluate legitimate creditworthiness factors such as income and credit history.

The Home Mortgage Disclosure Act (HMDA) primarily requires lenders to:

• a.Guarantee approval to every applicant
• b.Report data about mortgage applications and originations to help detect discriminatory patterns✓
• c.Insure loans against borrower default
• d.Set interest rates for the whole market in all cases under Florida law in every transaction without exception

HMDA requires covered lenders to collect and report mortgage application and loan data. Regulators use the data to identify possible discriminatory or redlining patterns.

Under the federal Homeowners Protection Act, a lender must automatically terminate borrower-paid private mortgage insurance when the loan balance reaches:

• a.20 percent of the current sale price
• b.50 percent of the original value in every case in all cases under Florida law
• c.78 percent of the original property value, if payments are current✓
• d.The full 100 percent of the loan

The Homeowners Protection Act requires automatic PMI termination at 78 percent LTV of the original value when the borrower is current. Borrowers may also request cancellation at 80 percent.

A key feature of an FHA-insured loan is that the borrower must pay:

• a.A guarantee fee only for veterans
• b.Nothing extra because FHA loans carry no insurance in all cases
• c.A mortgage insurance premium (both upfront and annual)✓
• d.Double the normal down payment

FHA loans require a mortgage insurance premium, typically an upfront premium plus an annual premium. The insurance protects the lender and lets borrowers qualify with smaller down payments.

A distinctive benefit of a VA-guaranteed loan for an eligible veteran is that it often allows:

• a.A guaranteed 2 percent interest rate for life
• b.Financing with no down payment✓
• c.Purchase of unlimited investment properties
• d.Waiver of all closing costs by law

VA loans are guaranteed for eligible veterans and frequently permit 100 percent financing with no down payment. Borrowers usually pay a VA funding fee unless exempt.

A conventional 'conforming' loan is one that:

• a.Meets Fannie Mae and Freddie Mac standards and loan limits and is not government-insured✓
• b.Exceeds the maximum limit set for the secondary market in all cases under Florida law in every transaction
• c.Is insured by the FHA
• d.Is guaranteed by the VA

Conforming loans satisfy the underwriting and size limits set by Fannie Mae and Freddie Mac so they can be sold to those agencies. They are conventional loans, meaning not FHA or VA backed.

A loan whose amount exceeds the conforming limits set for Fannie Mae and Freddie Mac is called a:

• a.Package loan
• b.Jumbo loan✓
• c.Bridge loan
• d.Conforming loan

A jumbo loan is larger than the conforming loan limit and therefore cannot be purchased by Fannie Mae or Freddie Mac. Jumbo loans often carry stricter qualifying standards.

Ginnie Mae (the Government National Mortgage Association) primarily:

• a.Guarantees mortgage-backed securities that pool government-backed FHA and VA loans✓
• b.Licenses real estate brokers
• c.Directly lends money to individual homebuyers in all cases under Florida law in every transaction
• d.Sets local property tax rates

Ginnie Mae guarantees timely payment on securities backed by government-insured or guaranteed loans. It supports liquidity for FHA and VA lending in the secondary market.

The primary mortgage market is where:

• a.The government sets national interest rates
• b.Appraisers are licensed and regulated
• c.Existing loans are pooled and sold to investors
• d.Lenders originate loans directly to borrowers✓

The primary market is where borrowers obtain loans directly from originating lenders. The secondary market is where those existing loans are bought and sold to provide lenders more capital.

A charge a lender collects for processing and originating a loan, typically about one percent of the loan and not used to lower the rate, is a(n):

• a.Prepayment penalty
• b.Loan origination fee✓
• c.Discount point
• d.Intangible tax

An origination fee compensates the lender for making the loan and is usually about one percent of the amount. Unlike discount points, it does not buy down the interest rate.

In a temporary '2-1 buydown,' the borrower or seller pays upfront so that the interest rate is:

• a.Eliminated entirely for the life of the loan
• b.Reduced in the first two years, then rises to the note rate✓
• c.Fixed below market for the entire 30-year term in all cases under Florida law
• d.Increased for the first two years only

A 2-1 buydown lowers the effective rate by two points the first year and one point the second, then it reaches the full note rate. The upfront cost funds the early payment reduction.

Charging interest at a rate higher than the maximum allowed by law is known as:

• a.Amortization
• b.Hypothecation
• c.Subordination
• d.Usury✓

Usury is charging an unlawfully high rate of interest. States, including Florida, set maximum permissible rates, and violations can carry penalties.

An adjustable-rate mortgage typically limits how much the rate can change with:

• a.A balloon payment in month one
• b.Periodic and lifetime interest rate caps✓
• c.A prohibition on any index
• d.A fixed rate that never changes in all cases

ARMs use periodic caps to limit each adjustment and a lifetime cap to limit the total increase over the loan's life. Caps protect borrowers from sudden large payment jumps.

The low starting rate on some adjustable-rate mortgages, set below the fully indexed rate, is commonly called the:

• a.Index
• b.Cap
• c.Margin
• d.Teaser (initial) rate✓

A teaser or introductory rate is a temporarily discounted initial rate on an ARM. When it expires, the rate resets to the index plus the margin, often increasing the payment.

Negative amortization occurs when:

• a.The loan is paid off ahead of schedule
• b.The monthly payment is less than the interest due, so the loan balance grows✓
• c.The interest rate drops to zero
• d.Each payment reduces principal faster than scheduled in all cases under Florida law

Negative amortization happens when a payment does not cover the accruing interest, and the unpaid interest is added to principal. The balance can rise even though the borrower is paying.

A lender that collects money each month toward the borrower's property taxes and hazard insurance is maintaining a(n):

• a.Trust account for commissions
• b.Intangible tax fund
• c.Discount point reserve
• d.Escrow (impound) account✓

An escrow or impound account holds monthly amounts the lender uses to pay taxes and insurance when they come due. It ensures these obligations are paid and protects the lender's collateral.

At closing, a lender commonly collects prepaid 'per diem' interest to cover:

• a.The buyer's homeowner association dues in all cases under Florida law
• b.The interest from the closing date to the end of that month✓
• c.The seller's capital gains tax
• d.A full year of interest in advance

Because the first regular payment covers the prior month, lenders collect daily interest from closing through the end of the closing month. This aligns the loan's interest accrual with the payment cycle.

A higher loan-to-value ratio generally means:

• a.A smaller loan relative to value
• b.Lower risk and no need for insurance
• c.A larger down payment by the borrower in all cases under Florida law in every transaction
• d.Greater lender risk and a higher likelihood of required mortgage insurance✓

A high LTV means the borrower has less equity, which increases the lender's risk of loss on default. Lenders typically require private mortgage insurance when the LTV exceeds 80 percent.

Florida's documentary stamp tax on a promissory note secured by a mortgage is charged at:

• a.$1.00 per $100 of the note amount
• b.$0.35 per $100 of the note amount✓
• c.2 mills per $100 of the note amount
• d.$0.70 per $100 of the note amount

Florida imposes documentary stamp tax on notes at $0.35 per $100. This is separate from the $0.70 per $100 deed stamps and the intangible tax on the mortgage.

Florida's intangible tax on a new mortgage is imposed at:

• a.2 mills ($0.002 per $1) of the mortgage amount✓
• b.$0.70 per $100 of the mortgage amount in all cases
• c.6 percent of the mortgage amount
• d.$0.35 per $1 of the mortgage amount

Florida charges a nonrecurring intangible tax of 2 mills, or $0.002 per dollar, on new mortgages. It is paid once when the mortgage is recorded.

The Dodd-Frank Ability-to-Repay rule requires that a lender making a residential mortgage:

• a.Approve any applicant who requests a loan in all cases under Florida law in every transaction
• b.Guarantee the loan will never default
• c.Make a reasonable, good-faith determination that the borrower can repay the loan✓
• d.Ignore the borrower's income and debts

The Ability-to-Repay rule obligates lenders to verify income, assets, and obligations before making most home loans. A 'qualified mortgage' provides a safe harbor for compliance.

Steering borrowers into needlessly costly loans, inflating fees, or using deceptive terms is generally described as:

• a.Conforming lending
• b.Secondary marketing
• c.Subordination
• d.Predatory lending✓

Predatory lending involves abusive or deceptive loan practices that harm borrowers, such as hidden fees or unsuitable terms. Federal and state laws prohibit many of these practices.

When a buyer takes title 'subject to' an existing mortgage rather than assuming it, the buyer:

• a.Receives a brand-new loan from the lender
• b.Becomes personally liable and the seller is released in all cases
• c.Automatically pays off the loan at closing
• d.Makes the payments but is not personally liable for the debt✓

Buying 'subject to' means the buyer takes title and typically makes payments, but does not accept personal liability on the note. In an assumption, by contrast, the buyer becomes personally responsible.

A loan assumption in which the lender releases the original borrower from liability and substitutes the new buyer is accomplished through:

• a.Hypothecation
• b.Novation✓
• c.Reconveyance
• d.Subrogation

Novation substitutes a new borrower for the original and releases the original from liability, with the lender's consent. Without novation, the seller may remain secondarily liable after an assumption.

Compared with a fully amortized loan, an interest-only loan during its interest-only period:

• a.Does not reduce the principal balance✓
• b.Pays the loan off faster
• c.Increases the principal each month in all cases
• d.Charges no interest at all

During the interest-only period, payments cover only interest, so the principal balance stays the same. Once that period ends, payments rise to begin amortizing the balance.

Fannie Mae and Freddie Mac are best described as:

• a.Federal agencies that originate loans directly to buyers in all cases under Florida law
• b.Private title insurance companies
• c.State agencies that license appraisers
• d.Government-sponsored enterprises that buy loans on the secondary market✓

Fannie Mae and Freddie Mac are government-sponsored enterprises that purchase and securitize conforming loans. By buying loans, they give primary lenders fresh capital to keep lending.

Under Florida law, a deed conveying real property generally must be signed by the grantor in the presence of:

• a.Two subscribing witnesses✓
• b.No witnesses, only a notary
• c.The county property appraiser
• d.The buyer's real estate broker

Florida Statutes require a deed to be signed by the grantor in the presence of two subscribing witnesses. This witnessing requirement is in addition to the notary acknowledgment needed for recording.

In a deed, the party who conveys the ownership interest is the:

• a.Grantor✓
• b.Grantee
• c.Trustee
• d.Devisee

The grantor is the person conveying the interest, and the grantee is the one receiving it. Remembering that the grantor 'gives' helps keep the terms straight.

Which deed offers the buyer the greatest protection by fully warranting title against all defects, even those arising before the grantor owned the property?

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

A general warranty deed contains the full set of covenants and warrants title against all defects, including those predating the grantor's ownership. It gives the grantee the strongest protection.

A special warranty deed differs from a general warranty deed because it warrants:

• a.Only the accuracy of the legal description
• b.Nothing at all about the title
• c.Only against defects arising during the grantor's ownership✓
• d.Against every defect since the beginning of the chain of title

A special warranty deed limits the grantor's warranties to claims arising during the grantor's own period of ownership. Defects predating the grantor are not covered.

A quitclaim deed is most commonly used to:

• a.Transfer personal property only
• b.Guarantee marketable title to the buyer
• c.Convey whatever interest the grantor may have and clear clouds on title✓
• d.Provide the strongest possible warranties in all cases under Florida law in every transaction

A quitclaim deed conveys only whatever interest the grantor holds, with no warranties. It is frequently used to remove clouds on title, such as a possible claim by a former spouse.

A deed that implies the grantor holds an interest but contains no warranties of title is a:

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

A bargain and sale deed implies that the grantor owns the property but does not warrant against encumbrances unless language is added. It offers less protection than a warranty deed.

The covenant of seizin in a warranty deed assures the grantee that the grantor:

• a.Will pay the property taxes forever
• b.Guarantees the property's future value in all cases
• c.Has never lived on the property
• d.Owns the property and has the right to convey it✓

The covenant of seizin promises that the grantor actually owns the estate being conveyed and has the right to transfer it. It is one of the basic covenants in a general warranty deed.

The covenant of quiet enjoyment in a deed protects the grantee against:

• a.Ordinary wear and tear of the home in all cases under Florida law in every transaction
• b.Noisy neighbors near the property
• c.Disturbance by a person holding a superior or lawful claim to title✓
• d.Increases in the property tax rate

The covenant of quiet enjoyment assures the grantee will not be evicted or disturbed by someone with a superior lawful title claim. It concerns legal title, not literal noise.

The clause in a deed beginning 'to have and to hold,' which defines the extent of ownership granted, is the:

• a.Granting clause
• b.Habendum clause✓
• c.Acceleration clause
• d.Defeasance clause

The habendum clause follows the granting clause and defines the quantity and type of estate the grantee receives. Its traditional wording is 'to have and to hold.'

The words of conveyance in a deed, such as 'grants and conveys,' appear in the:

• a.Granting clause✓
• b.Habendum clause
• c.Reddendum clause
• d.Testimonium clause

The granting clause contains the operative words showing intent to transfer, such as 'grants, bargains, and sells.' It identifies the parties and states that a conveyance is being made.

For title to pass by deed, the deed must be:

• a.Delivered by the grantor and accepted by the grantee✓
• b.Recorded before it can be signed
• c.Held by the grantor until death
• d.Approved by the local zoning board in all cases under Florida law

A deed transfers title only when it is delivered with intent to convey and accepted by the grantee. Recording is not required for a valid transfer, though it protects against later claims.

A legal description that identifies a parcel by referring to a recorded plat map using a lot and block number is the:

• a.Street address method
• b.Metes and bounds method
• c.Lot and block (recorded plat) method✓
• d.Government rectangular survey method

The lot and block, or recorded plat, method describes property by reference to a subdivision map filed in the public records. It is common in platted residential subdivisions.

The type of consideration in a deed described as love and affection, rather than money, is called:

• a.Nominal financing
• b.Liquidated consideration
• c.Valuable consideration
• d.Good consideration✓

Good consideration is based on affection or a nonmonetary motive, such as a gift between family members. Valuable consideration, by contrast, is money or something of measurable worth.

Recording a deed in the public records primarily serves to:

• a.Transfer title, which cannot occur without recording in all cases under Florida law
• b.Set the property's assessed value for taxes
• c.Give constructive notice of the owner's interest and establish priority✓
• d.Guarantee the property is free of all liens

Recording provides constructive notice to the world of the grantee's interest and helps establish priority over later claims. It protects the owner even though delivery, not recording, actually transfers title.

A title that is reasonably free from doubt, defects, and undisclosed encumbrances, so a buyer would accept it, is called:

• a.Equitable title
• b.Marketable title✓
• c.Color of title
• d.Clouded title

Marketable title is title a reasonable buyer would accept without fear of litigation, being free of serious defects and undisclosed liens. Contracts commonly require the seller to convey marketable title.

The main purpose of an owner's title insurance policy is to:

• a.Guarantee the property will rise in value in all cases under Florida law in every transaction without exception
• b.Insure the loan against borrower default
• c.Protect the owner against losses from covered title defects that existed before the policy date✓
• d.Cover physical damage from fire or storms

Owner's title insurance protects against losses from covered defects in title that predate the policy, such as forged deeds or undisclosed liens. It differs from hazard insurance, which covers physical damage.

A defect or claim that impairs an owner's title, which may be removed by a quitclaim deed or a quiet-title suit, is called a:

• a.Cloud on title✓
• b.Habendum defect
• c.Marketable title
• d.Covenant of seizin

A cloud on title is an apparent claim or encumbrance that may impair marketability. It can often be cleared by obtaining a quitclaim deed or by bringing a quiet-title action.

A lease of real property for a term longer than one year generally must be in writing to be enforceable because of the:

• a.Doctrine of laches
• b.Parol evidence rule
• c.Statute of Frauds✓
• d.Statute of Limitations

The Statute of Frauds requires certain contracts, including leases longer than one year and sales of real estate, to be in writing. This helps prevent fraudulent claims based on oral agreements.

In contract law, 'consideration' refers to:

• a.The buyer's real estate agent
• b.A government permit to build
• c.A required notarized signature in all cases under Florida law in every transaction
• d.Something of legal value that each party bargains for and exchanges✓

Consideration is the bargained-for exchange of value, such as money for a promise to convey. It is one of the essential elements needed to form a valid, enforceable contract.

If an offeror dies before the offeree accepts a purchase offer, the offer is generally:

• a.Binding on the heirs
• b.Automatically accepted
• c.Converted into an option
• d.Terminated✓

An offer is generally terminated by the death or incapacity of the offeror before acceptance. Because no contract has yet formed, there is nothing binding on the estate.

A financing contingency in a purchase contract protects the buyer by allowing cancellation if:

• a.The seller finds a higher offer
• b.The buyer cannot obtain the specified loan by the deadline✓
• c.Interest rates rise anywhere in the country
• d.The buyer simply changes their mind for any reason in all cases

A financing contingency lets the buyer cancel and typically recover the deposit if they cannot secure the described loan within the stated time. It ties the obligation to obtaining financing.

An appraisal contingency in a contract generally allows the buyer to renegotiate or cancel if:

• a.The seller repaints the home
• b.Property taxes are paid in arrears
• c.The buyer's agent changes brokerages in all cases under Florida law
• d.The property appraises below the agreed purchase price✓

An appraisal contingency protects the buyer when the appraised value comes in below the contract price. The buyer may renegotiate, pay the difference, or cancel per the contract terms.

Under a typical inspection contingency, the buyer generally has the right to:

• a.Waive the seller's duty to disclose defects
• b.Force the seller to lower the price by law
• c.Inspect the property and cancel or seek repairs within a set period✓
• d.Occupy the property before closing rent-free in all cases under Florida law

An inspection contingency gives the buyer a defined period to investigate the property's condition and to cancel or negotiate based on findings. It shifts investigation risk to the inspection window.

Under the Florida 'AS IS' residential contract, during the inspection period the buyer may:

• a.Force the seller to complete all requested repairs in all cases under Florida law in every transaction
• b.Never cancel once the contract is signed
• c.Extend the closing indefinitely without consent
• d.Cancel for any reason and get the deposit back, while the seller is not required to make repairs✓

The Florida AS IS Residential Contract lets the buyer cancel during the inspection period and recover the deposit, but the seller has no obligation to repair. The buyer accepts the property in its existing condition if they proceed.

The 'effective date' of a Florida purchase contract is generally the date:

• a.The property is first listed for sale in all cases under Florida law in every transaction
• b.The last party signs and communicates acceptance of the final terms✓
• c.The buyer is pre-approved for a loan
• d.The deed is recorded after closing

The effective date is when the last party signs and delivers acceptance, and it starts the clock on contract deadlines. Correctly identifying it is critical because time periods run from that date.

Under Florida rules, a broker who receives an earnest money deposit must generally place it into an escrow account no later than the end of the:

• a.Third business day after receiving the funds✓
• b.Thirtieth business day after receipt in all cases
• c.Tenth calendar day after closing
• d.Same hour the funds are received

Florida requires a broker to deposit trust funds into escrow no later than the end of the third business day after receiving them. Prompt deposit protects the funds and is strictly enforced.

When a broker receives conflicting demands over an escrow deposit, Florida law requires the broker to notify FREC within:

• a.24 hours
• b.15 business days✓
• c.3 business days
• d.6 months

A Florida broker must notify FREC within 15 business days of receiving conflicting demands or having a good-faith doubt about escrowed funds. The broker must then timely institute a settlement procedure.

To resolve a disputed escrow deposit, Florida permits a broker to use settlement procedures that include mediation, arbitration, litigation, or a(n):

• a.Ignoring the dispute until it resolves itself
• b.Escrow disbursement order (EDO) from FREC✓
• c.Keeping the funds as the broker's fee
• d.Immediate payment to whichever party asks first

Among the authorized settlement procedures, a broker may request an escrow disbursement order from FREC. The broker may not simply keep or arbitrarily release the disputed funds.

Under the Florida AS IS Residential Contract, if the buyer defaults without a valid reason, the seller's typical remedy is to:

• a.Retain the buyer's earnest money deposit as liquidated damages✓
• b.Force the buyer to purchase a different home
• c.Sue the buyer for triple damages automatically
• d.Keep the deposit and also demand the commission from the buyer

The standard contract lets the seller keep the earnest money deposit as agreed liquidated damages when the buyer defaults. Liquidated damages fix compensation in advance and avoid litigation over actual loss.

Under FIRPTA, when a foreign person sells U.S. real estate, the buyer generally must withhold and remit a percentage of the amount realized, typically:

• a.50 percent
• b.1 percent
• c.6 percent
• d.15 percent✓

The Foreign Investment in Real Property Tax Act generally requires withholding 15 percent of the amount realized on a sale by a foreign person. The buyer is responsible for withholding and remitting it to the IRS.

A Section 1031 like-kind exchange allows an investor to:

• a.Defer capital gains tax by exchanging investment property for like-kind property✓
• b.Exchange a personal residence tax-free at any time in all cases under Florida law in every transaction
• c.Avoid paying any property taxes going forward
• d.Eliminate the mortgage on the property

A 1031 exchange lets an owner defer capital gains tax by reinvesting proceeds from qualifying investment property into like-kind property. Strict timing and identification rules apply, and personal residences do not qualify.

Under Florida law, a listing agreement must generally:

• a.Last forever until the property sells
• b.Be approved by the county before it is valid in all cases under Florida law
• c.Automatically renew every 30 days
• d.Contain a definite expiration date and no automatic renewal✓

Florida requires listing agreements to have a definite expiration date and prohibits automatic-renewal (self-renewing) clauses. This protects sellers from being bound indefinitely.

In an open listing, the seller:

• a.Cannot sell the property personally
• b.Owes a full commission to every broker who advertises the home in all cases under Florida law
• c.Gives one broker the exclusive right to sell
• d.May list with multiple brokers and owes a commission only to the one who procures the buyer✓

An open listing lets the seller engage several brokers and pay only the broker who actually procures the buyer. The seller also keeps the right to sell independently with no commission.

A buyer brokerage agreement establishes that the licensee:

• a.Works only for the seller
• b.Must appraise the property for the lender
• c.Represents the buyer in the transaction✓
• d.Guarantees the buyer will qualify for a loan

A buyer brokerage agreement makes the licensee the buyer's representative, setting out duties and compensation. In Florida the relationship may be single agent, transaction broker, or no brokerage relationship as disclosed.

The broker who starts an uninterrupted chain of events that results in the sale is said to be the:

• a.Designated appraiser
• b.Statutory trustee
• c.Escrow agent of record in all cases
• d.Procuring cause of the sale✓

Procuring cause is the broker whose efforts set in motion the unbroken chain of events leading to a completed sale. It is often decisive in commission disputes between brokers.

Under a typical exclusive-right-to-sell listing, a broker generally earns the commission when the broker produces a buyer who is:

• a.Merely curious about the property
• b.Ready, willing, and able to purchase on the seller's terms✓
• c.Unable to qualify for financing
• d.Interested only in leasing the home in all cases under Florida law

A broker generally earns the commission by producing a ready, willing, and able buyer who meets the seller's terms, even if the seller then refuses to close. The buyer must have both the willingness and the financial ability to buy.

A right of first refusal gives its holder the right to:

• a.Match a bona fide offer before the owner sells to someone else✓
• b.Buy the property immediately at any price they choose in all cases
• c.Occupy the property rent-free indefinitely
• d.Force the owner to sell at a set future date

A right of first refusal lets the holder step in and match a legitimate third-party offer before the owner may sell to that party. Unlike an option, it is triggered only when the owner decides to sell.

A contract that calls for the performance of an illegal act is:

• a.Voidable at one party's option
• b.Merely unenforceable until recorded
• c.Fully enforceable
• d.Void✓

A contract with an illegal object or purpose is void and has no legal effect from the outset. Neither party can enforce it, unlike a voidable contract that is valid until disaffirmed.

Under the parol evidence rule, a prior oral agreement generally:

• a.Must be recorded to be valid
• b.Cannot be used to contradict the terms of a complete written contract✓
• c.Always overrides the written contract in all cases under Florida law in every transaction
• d.Replaces the need for consideration

The parol evidence rule bars using earlier oral or written statements to contradict a final, complete written contract. It encourages parties to put all agreed terms in the writing.

If a purchase contract specifies a closing date and a separate possession date, the possession date determines when the:

• a.Buyer is entitled to occupy the property✓
• b.Property is first advertised for sale in all cases
• c.Listing agreement first takes effect
• d.Deposit must be placed in escrow

The possession date sets when the buyer may take physical occupancy, which can differ from the closing date. Contracts should state clearly whether possession occurs at closing or another time.

Under Florida's Uniform Vendor and Purchaser Risk Act, if the property is materially damaged before title or possession passes, the risk of loss generally falls on the:

• a.County government
• b.Listing broker
• c.Buyer, in every case
• d.Seller✓

Under the Florida risk-of-loss statute, the seller generally bears the risk of material damage until title or possession transfers to the buyer. If neither has passed, the buyer may typically cancel and recover the deposit.

A buyer of a resale condominium in Florida generally has a right to cancel within a set period after receiving the required condominium documents, which is:

• a.1 year
• b.3 business days✓
• c.30 calendar days
• d.6 months

Florida gives a resale condominium buyer a 3-business-day right to cancel after receiving the condominium disclosure documents. The cancellation window protects buyers who need time to review association materials.

A purchaser of a Florida timeshare interest generally has a statutory right to cancel the contract within:

• a.10 calendar days✓
• b.45 days
• c.3 business days
• d.24 hours

Florida law gives a timeshare purchaser a 10-day right to cancel the purchase contract. This cooling-off period cannot be waived by the buyer.

Under Florida case law (Johnson v. Davis), a seller of residential property must disclose:

• a.Only cosmetic issues visible from the street
• b.Only defects the buyer specifically asks about in all cases under Florida law in every transaction
• c.Nothing, because all sales are caveat emptor
• d.Known facts that materially affect value and are not readily observable to the buyer✓

The Johnson v. Davis rule requires a seller to disclose known material defects that are not readily observable and not known to the buyer. This duty applies to residential transactions in Florida.

For a home built before 1978, federal law requires the seller to provide the buyer with a disclosure about:

• a.A guarantee of no future repairs
• b.The seller's personal credit score
• c.Known lead-based paint and related hazards✓
• d.The exact resale value in ten years in all cases

The federal lead-based paint disclosure rule applies to most housing built before 1978. Sellers must disclose known lead hazards and provide the EPA pamphlet and a disclosure form.

To convey or mortgage Florida homestead property owned by a married person, the law generally requires that:

• a.Both children must consent
• b.The spouse also join in signing the deed or mortgage✓
• c.Only the titleholder needs to sign in all cases under Florida law
• d.The county commission must approve

Florida's constitution protects homestead property, and a married owner generally must have the spouse join in any conveyance or mortgage of the homestead. This applies even if only one spouse holds title.

The difference between a deed and title is that a deed is:

• a.The written instrument used to convey ownership, while title is the ownership itself✓
• b.Issued by the government, while title is issued by the buyer in all cases under Florida law
• c.A type of mortgage, while title is a lease
• d.The ownership itself, while title is the document

A deed is the physical, written instrument that transfers an interest in real property. Title is the abstract concept of ownership and the bundle of rights that the deed conveys.

Before a deed can be recorded in the Florida public records, the grantor's signature typically must be:

• a.Notarized by the buyer's lender
• b.Published in a local newspaper
• c.Approved by the homeowners association in all cases under Florida law in every transaction
• d.Acknowledged before a notary (in addition to the required witnesses)✓

For recording, a deed must be acknowledged before a notary public, and Florida also requires two subscribing witnesses to the grantor's signature. Proper acknowledgment allows the deed to be recorded and provide constructive notice.

When an owner dies with a valid will directing who receives the real property, that transfer is called a:

• a.Dedication
• b.Descent
• c.Devise✓
• d.Escheat

A gift of real property by will is a devise, and the recipient is a devisee. If the owner dies without a will, the property passes by descent under the state's intestacy laws.

A claimant seeking title by adverse possession in Florida generally must possess the land openly, continuously, and hostilely for:

• a.30 years regardless of taxes
• b.6 months under color of title
• c.1 year with no other requirements in all cases under Florida law
• d.7 years, typically while paying the property taxes✓

Florida's adverse possession statute generally requires open, notorious, continuous, and hostile possession for 7 years, usually with payment of taxes. Meeting all statutory elements is necessary to claim title.

The substitution of an entirely new contract for an existing one, extinguishing the old obligation with all parties' consent, is:

• a.Ratification
• b.Novation✓
• c.Assignment
• d.Rescission

Novation replaces an existing contract or party with a new one, discharging the original obligation. It requires the agreement of all parties, unlike a simple assignment of rights.

A backup offer that a seller accepts while already under contract with another buyer generally:

• a.Has no legal effect whatsoever
• b.Immediately cancels the first contract
• c.Forces the seller to sell to both buyers in all cases under Florida law
• d.Becomes the primary contract only if the first contract falls through✓

A backup offer is a secondary contract that moves into first position only if the primary contract terminates. It gives the seller a ready replacement buyer without breaching the existing deal.

A percentage lease is one in which the tenant's rent is based on:

• a.A fixed amount that never changes over the term in all cases
• b.The landlord's mortgage payment each month
• c.A base rent plus a percentage of the tenant's gross sales✓
• d.The assessed value of the land only

A percentage lease is common in retail, where the tenant pays a base rent plus a percentage of gross sales. It lets the landlord share in a successful tenant's business volume.

Under a gross lease, the landlord is generally responsible for paying:

• a.Nothing, because the tenant pays every cost in all cases under Florida law in every transaction
• b.Only the tenant's utility bills
• c.The property's operating expenses, such as taxes, insurance, and maintenance✓
• d.The tenant's business income taxes

In a gross lease, the tenant pays a flat rent and the landlord covers operating expenses like taxes, insurance, and maintenance. A net lease, by contrast, shifts some of those expenses to the tenant.

The key difference between assigning a lease and subleasing is that an assignment transfers:

• a.Only part of the space for part of the remaining term in all cases under Florida law
• b.The tenant's entire remaining interest in the lease to a new party✓
• c.The landlord's duties to the original tenant
• d.Ownership of the building to the tenant

An assignment transfers the tenant's whole remaining leasehold interest to the assignee. A sublease transfers only part of the term or space, with the original tenant remaining liable to the landlord.