Georgia Real Estate Salesperson Practice Exam

1. A broker's listing on a house expired without a sale, ending the agency relationship. Months later the house is back on the market with a different brokerage, and a buyer now working with the former listing agent asks: 'You used to represent that seller — what's the lowest price they'd actually take?' May the agent share this information?

• A. No — confidentiality survives termination of the agency, and the seller's lowest acceptable price is exactly the kind of information it protects
• B. Yes — the duty of confidentiality ended when the listing expired along with the rest of the agency
• C. Yes — the agent's duties now run to the buyer, so withholding the information would be disloyal to the current customer
• D. No — and the agent is barred from ever working with any buyer interested in that property

2. A purchase contract states that time is of the essence and sets a firm closing date. The buyer's funds are not ready until two days after that date, and the buyer argues that short delays are customary in real estate closings. What is the legal effect of missing the stated date?

• A. The closing date extends automatically for a reasonable period, since brief delays are customary
• B. There is no consequence, because closing dates are targets rather than binding terms
• C. The seller must first grant one written extension before any breach can be declared
• D. The buyer is in breach, because the clause makes the stated deadline strictly enforceable

3. A new licensee memorizes the acronym OLD CAR to recall the fiduciary duties owed to a principal. Which of the following is NOT one of the duties represented in that acronym?

• A. Obedience
• B. Reasonable care
• C. Honesty
• D. Accounting

4. A salesperson has been working with a buyer client when the buyer falls in love with a house the salesperson has listed for a seller client. For the salesperson to continue representing both sides of this transaction as a dual agent, what is required?

• A. The informed written consent of both the buyer and the seller
• B. An oral disclosure to both parties no later than closing
• C. The seller's consent only, since the seller is the party paying the commission
• D. Nothing — representing both parties is automatically permitted when both are clients of the same licensee

5. A salesperson represents the seller of a home. At an open house, an unrepresented visitor becomes seriously interested in buying it. Under agency law, what duties does the salesperson owe this visitor?

• A. The full fiduciary duties summarized by OLD CAR
• B. None, because the visitor is not the salesperson's client
• C. Honesty, fair dealing, and disclosure of known material defects
• D. Confidentiality protecting anything the visitor reveals about their finances

6. A buyer and seller negotiate the sale of a duplex. Which of the following is NOT required for their agreement to be a valid, enforceable real estate contract?

• A. Parties who are legally competent to contract
• B. An earnest money deposit
• C. Mutual assent shown by offer and acceptance
• D. A written and signed agreement satisfying the Statute of Frauds

7. A buyer submits a written offer on a house. The seller signs it but first crosses out the closing date and writes in a later one, then returns it. The buyer, uneasy about the change, walks away. The seller then announces she will now accept the buyer's original offer exactly as written. Is there a binding contract?

• A. Yes — the seller's later acceptance of the original, unaltered terms formed a contract
• B. No — the seller's alteration was a counteroffer that rejected and terminated the original offer, leaving nothing for her to accept later
• C. Yes — a minor change such as a closing date does not prevent the seller's signature from operating as an acceptance
• D. No — but only because the buyer never deposited earnest money to make the offer binding

8. A salesperson receives a buyer's earnest money check late on a Friday and, 'to keep it safe over the weekend,' deposits it into the salesperson's personal checking account, intending to move it to the brokerage's trust account on Monday. Which fiduciary duty has the salesperson violated?

• A. Obedience
• B. Accounting
• C. Disclosure
• D. Loyalty

9. A seller tells a broker: 'I want you — and only you — marketing my house, and no other broker gets a dime. But if I end up selling it myself to my neighbor, I don't want to owe you a commission.' Which listing agreement matches what the seller wants?

• A. An exclusive-right-to-sell listing
• B. An open listing
• C. An exclusive-agency listing
• D. No standard listing allows a seller to sell personally without owing a commission

10. Which statement best describes the legal nature of a listing agreement?

• A. A written instrument that conveys title to the property from the seller to the broker
• B. A purchase contract that obligates a buyer to acquire the property
• C. A guarantee by the broker that the property will sell during the listing term
• D. An employment contract in which the seller authorizes a broker to market the property and find a ready, willing, and able buyer

11. A salesperson represents a seller. At a showing, an unrepresented buyer — a customer — asks the salesperson two questions: whether the property has any problems the salesperson knows about, and the lowest price the seller would actually accept. The salesperson knows the basement floods every spring and also knows the seller is privately willing to take substantially less than the list price. What must the salesperson do?

• A. Disclose the basement flooding but refuse to reveal the seller's bottom-line price.
• B. Answer both questions fully, because honesty requires complete answers to a buyer's direct questions.
• C. Decline to answer either question, because the salesperson owes duties only to the seller.
• D. Reveal the seller's bottom line but stay silent on the flooding, because property condition is the seller's own duty to disclose.

12. A house sells for 400,000 dollars under a listing that provides for a five percent commission on the sale price. Under the brokers' agreement, the total commission is split equally between the listing broker and the selling broker. How much does the selling broker receive?

• A. 5,000 dollars
• B. 10,000 dollars
• C. 20,000 dollars
• D. 40,000 dollars

13. A listing salesperson learns that a seller-client's asking price is far below what the property is worth. Without telling the seller, the salesperson arranges for a close friend to buy the property, planning to share in the profit when the friend resells it. Which fiduciary duty does this scheme most directly violate?

• A. Accounting
• B. Loyalty
• C. Reasonable care and diligence
• D. Obedience

14. A buyer includes an earnest money check with a written purchase offer. Which statement correctly describes this deposit?

• A. It is a good-faith deposit that is held in the broker's trust account.
• B. It is the consideration that makes the purchase contract legally binding.
• C. It may be kept in the brokerage's general operating account until closing.
• D. It is legally required before any purchase offer can be submitted.

15. Which of the following terminates an agency relationship by operation of law, rather than by an act or agreement of the parties?

• A. The principal is declared legally incapacitated.
• B. The seller and broker mutually agree to cancel the listing.
• C. The listing's stated term expires without a sale.
• D. The broker renounces the agency and returns the listing paperwork.

16. A seller-client gives the listing salesperson two lawful instructions: hold no open houses, and present every written offer no matter how low. The salesperson believes open houses would sell the home faster and considers quietly skipping the lowest offers to save the seller time. Which fiduciary duty requires the salesperson to follow the seller's instructions anyway?

• A. Obedience
• B. Reasonable care and diligence
• C. Accounting
• D. Confidentiality

17. Both buyer and seller have given informed written consent to dual agency in the same transaction. The buyer then privately tells the licensee: 'Now go work on the seller — tell them their price is unrealistic and get it down for me.' How should the dual agent respond?

• A. Comply, because an agent owes a client the duty to follow lawful instructions.
• B. Decline, because a dual agent cannot advocate for one party against the other.
• C. Comply, as long as the seller is informed of the negotiation afterward.
• D. Withdraw from the transaction entirely, because dual agency becomes illegal once price negotiations begin.

18. A seller signs open listings with three different brokerages and also continues to advertise the property personally. Broker B ultimately produces the buyer who purchases the home. What commission is owed?

• A. Only Broker B earns a commission, because under an open listing only the procuring broker is paid.
• B. All three brokers split the commission equally, because each held a valid listing.
• C. No commission is owed, because signing listings with multiple brokers voids all of the agreements.
• D. The first broker to sign a listing earns the commission, regardless of who procured the buyer.

19. Over coffee, a homeowner orally agrees to sell a rental house to a friend at an agreed price, and they shake hands on the deal. A week later the owner receives a better offer and refuses to perform. Can the friend enforce the handshake agreement?

• A. Yes, because mutual assent and consideration were both present.
• B. Yes, provided two witnesses can confirm the handshake took place.
• C. No, because the Statute of Frauds requires a real estate contract to be in a signed writing.
• D. No, because real property may only be sold through a licensed broker.

20. Which of the following events, by itself, creates an agency relationship between a property owner and a real estate licensee?

• A. The licensee shows the owner's property to several prospective buyers.
• B. The owner authorizes the licensee to act on the owner's behalf in dealings with third parties.
• C. The licensee pays annual dues to the local multiple listing service.
• D. A buyer submits a written offer to purchase the owner's property.

21. A licensee receives an offer while an earlier offer is pending seller review. What must the licensee do?

• A. Present the later offer to the seller promptly, since all offers must be presented until closing unless the seller has instructed otherwise in writing within the law's limits
• B. Hold the later offer until the seller decides on the first
• C. Present only the offer with the higher price
• D. Present the later offer only if the first is rejected

22. A purchase contract obligates the seller to convey marketable title. The buyer's title search reveals a serious, unresolved defect. The seller insists the buyer must close anyway, arguing that the general warranty deed offered at closing 'guarantees everything, so the title is as good as clean.' Is the seller's argument sound?

• A. Yes — a general warranty deed warrants against all defects arising at any time, so the title automatically qualifies as marketable
• B. No — marketable title must be free from reasonable doubt or serious defects that a prudent buyer would accept, and deed covenants do not remove a known serious defect from the title itself
• C. Yes — as long as the buyer also purchases title insurance, any defect becomes acceptable
• D. No — only a quitclaim deed is capable of conveying marketable title

23. Marta sells her house to Ben and delivers a special warranty deed at closing. Months later, Ben discovers a valid claim against the title that arose years before Marta ever owned the property. Can Ben recover from Marta under the deed's warranties?

• A. Yes — her deed warrants against all title defects arising at any time, even before she owned the property
• B. Yes — every deed automatically includes a warranty that title is marketable
• C. No — a special warranty deed covers only defects that arose during Marta's period of ownership
• D. No — a special warranty deed, like a quitclaim deed, carries no warranties at all

24. Which written instrument actually conveys title to real property from one party to another?

• A. A deed
• B. A title insurance policy
• C. A listing agreement
• D. A promissory note secured by a mortgage

25. A dishonest seller deeds the same lot twice: first to Ana, who puts her deed in a safe-deposit box, then to Blake, who knows nothing of Ana's purchase and promptly records his deed in the county land records. When the double sale surfaces, who generally holds priority, and why?

• A. Ana, because the deed that is delivered first always controls priority
• B. Blake, because recording gave constructive notice to the world and priority generally protects the first party to record
• C. Ana, because recording is optional and never affects the order of ownership interests
• D. Blake, but only because he can file a claim on a title insurance policy

26. A title search turns up an old, doubtful interest clouding a property's title. The person holding that possible interest is willing to sign it away but refuses to make any promises about the condition of the title. Which deed fits this situation?

• A. General warranty deed
• B. Special warranty deed
• C. Quitclaim deed
• D. Deed of trust

27. A widow signs a deed conveying her farm to her nephew. The deed names competent parties, contains words of conveyance and an adequate legal description, and bears her signature. She then locks it in her desk drawer, telling no one, intending to hand it over 'when the time is right.' She dies with the deed still in the drawer. Did the nephew receive title?

• A. Yes — the deed met every formal requirement the moment she signed it
• B. Yes — a signed deed takes effect automatically at the grantor's death
• C. No — the deed was never delivered to and accepted by the nephew, so title never transferred
• D. No — the deed was never recorded, and recording is what transfers title

28. A seller signs an exclusive-right-to-sell listing with a broker. During the listing period, the seller's coworker — who never had any contact with the broker or its marketing — offers to buy the house directly from the seller, and the seller accepts. The seller now claims no commission is owed because the broker did not procure the buyer. Is a commission owed?

• A. No — under any exclusive listing, a seller who personally finds the buyer owes no commission.
• B. No — only a broker who actually procures the buyer is ever entitled to a commission.
• C. Yes — under an exclusive-right-to-sell listing, the broker earns the commission if the property sells during the listing period, regardless of who procures the buyer.
• D. Yes — but only if the broker can prove its marketing reached the coworker.

29. A seller signs a listing agreement with a brokerage. Midway through the listing term, the seller dies. A buyer then submits a full-price offer, and the salesperson argues the listing is still in force because its stated term has not expired and the seller's heirs 'inherited the contract.' What is the status of the agency relationship?

• A. It continues until the stated expiration date, because the listing is a binding written contract.
• B. It terminated by operation of law upon the seller's death.
• C. It continues automatically and binds the seller's estate unless the heirs formally revoke it.
• D. It ends only when the broker formally renounces the agency.

30. Hoping to generate new listings, a licensee canvasses a neighborhood telling homeowners that families belonging to a particular protected class have begun moving into the area, and urges the owners to sell quickly 'before it's too late.' Which prohibited practice does this conduct describe?

• A. Blockbusting
• B. Lawful prospecting, because no one was refused housing
• C. Steering
• D. Redlining

31. An owner lives in one unit of her four-unit building and rents out the other three herself, using no real estate licensee and running no advertising. When an applicant of a different race applies for a vacant unit, she refuses to rent to him because of his race, insisting she is shielded by the exemption for owner-occupied buildings of four or fewer units. Is her refusal lawful?

• A. No — the exemption applies only to single-family homes, never to multi-unit buildings.
• B. No — the exemption never applies to race, and the Civil Rights Act of 1866 separately prohibits all racial discrimination in property transactions with no exemptions.
• C. Yes — but only because she avoided using a licensee and ran no discriminatory advertising.
• D. Yes — the owner-occupied exemption for buildings of four or fewer units covers this refusal.

32. A buyer's purchase contract includes a financing contingency. Despite a diligent, good-faith loan application, the buyer's financing is denied before the contingency deadline, and the buyer promptly notifies the seller. What is the buyer's position with respect to the contract and the earnest money?

• A. The buyer may cancel the contract and recover the earnest money deposit.
• B. The buyer forfeits the earnest money to the seller for failing to perform.
• C. The buyer must proceed to closing and locate alternative financing.
• D. The buyer may cancel only if the seller voluntarily agrees to a mutual release.

33. During a compliance training session, new licensees are asked to name the seven classes protected by the federal Fair Housing Act. Which of the following is NOT one of the seven federally protected classes?

• A. Age
• B. Religion
• C. National origin
• D. Familial status

34. A commercial property owner renovates a retail space. Which federal law imposes accessibility obligations on the public accommodation?

• A. The Americans with Disabilities Act, which requires readily achievable barrier removal and accessible alterations
• B. The Fair Housing Act, which governs commercial accessibility
• C. The Occupational Safety and Health Act
• D. No federal law addresses commercial accessibility

35. A subdivision developer sells lots across state lines through interstate marketing. Which federal law may require registration and disclosure?

• A. The Interstate Land Sales Full Disclosure Act, requiring a property report to purchasers for covered subdivisions
• B. The Real Estate Settlement Procedures Act
• C. The Fair Credit Reporting Act
• D. The Truth in Lending Act

36. A buyer is considering a property with an underground storage tank previously used for heating oil. What is the principal concern?

• A. Potential soil and groundwater contamination, with remediation costs falling on the property owner
• B. Only the cost of removing the tank itself
• C. No concern once the tank is emptied
• D. The tank increases the property's value as a fuel reserve

37. A property has an on-site septic system and a private well. What should a buyer be advised to investigate?

• A. Septic capacity, condition and permitted bedroom count, and well water quality, quantity and construction
• B. Only the well, since septic systems require no evaluation
• C. Neither, since these are covered by a standard home inspection
• D. Only the septic system, since well water is regulated municipally

38. A small corner grocery has operated at the same location for forty years. The city then rezones the entire neighborhood exclusively residential. May the grocery keep operating?

• A. No; it must close or relocate within a reasonable grace period set by the city
• B. Yes, but only if the owner obtains a variance renewing annually
• C. Yes; it may continue as a legal nonconforming use, though expansion or rebuilding after abandonment is typically restricted
• D. Only if a majority of the surrounding homeowners consent in writing

39. A home is encumbered by a first mortgage recorded eight years ago, a home-equity line recorded three years ago, and this year's unpaid ad valorem property taxes. If the property is sold to satisfy the debts, which claim is generally paid first from the proceeds?

• A. The property tax lien, which takes priority over previously recorded private liens
• B. The first mortgage, because priority always follows the order of recording
• C. The home-equity line, because the most recent creditor relied on the newest information
• D. All three claims share the proceeds in proportion to the amounts owed

40. A donor conveys land to a school district 'so long as the land is used for a public school.' Decades later the district closes the school and leases the site to a private warehouse operator. What interest did the donor retain, and what happens now?

• A. A possibility of reverter; title automatically returns to the donor or the donor's heirs when the school use ends
• B. A right of re-entry; the donor must sue within a reasonable time or the district keeps the land
• C. A remainder interest; the land passes to whomever the donor designated as remainderman
• D. No interest; a completed gift of real property cannot be undone by a change in use

41. A purchaser buys a unit in a condominium community. Which statement accurately describes what the purchaser owns after closing?

• A. A proprietary lease in the unit plus shares in the corporation that owns the building
• B. Fee simple title to the individual unit plus an undivided interest in the common elements
• C. A fractional interest in the entire project, with the right to occupy any available unit
• D. Title to the airspace only, with the association owning all walls and land

42. A licensee lists a property in which the licensee's spouse holds an ownership interest. What is required?

• A. Disclosure of the licensee's interest to all parties, in writing, before an offer is accepted
• B. Nothing, since the interest belongs to the spouse rather than the licensee
• C. Disclosure only if a buyer specifically asks about ownership
• D. Referral of the listing to another firm entirely

43. A Georgia licensee wishes to operate under a team name within the brokerage. What limitation typically applies?

• A. The team name may not imply that the team is a separate brokerage, and the firm name must still appear
• B. Team names are prohibited entirely
• C. A team may hold its own trust account
• D. A team may enter brokerage agreements in its own name

44. A Georgia broker's trust account is found to be short by 4,000 dollars during a Commission audit. What is the likely characterization?

• A. A trust account shortage, which is a serious violation regardless of whether the broker intended to misuse funds
• B. A bookkeeping matter with no license consequence
• C. Acceptable if the broker replaces the funds before the audit concludes
• D. The bank's responsibility rather than the broker's

45. A Georgia licensee has accumulated 36 hours of coursework during the renewal cycle but none of it covered license law. What is the consequence?

• A. The requirement is not satisfied, because a portion of the hours must cover license law content specifically
• B. The requirement is satisfied, since only the total hour count matters
• C. The shortfall may be carried into the next cycle
• D. License law content is optional for salespersons

46. A Georgia licensee advertises a property using only a personal brand name and phone number. What does Georgia require?

• A. Advertising must include the brokerage's name in a meaningful and conspicuous way
• B. A personal brand name alone is sufficient if registered with the Commission
• C. Only the property address is required
• D. Advertising rules apply only to print media

47. A Georgia licensee fails to complete the required continuing education before the renewal date and the license lapses. What is the effect on activity conducted afterward?

• A. Activity during the lapse is unlicensed practice and commissions earned then are generally unrecoverable
• B. A ninety-day grace period permits continued practice
• C. The license converts to inactive status permitting continued practice under supervision
• D. Activity remains valid provided education is completed later

48. Georgia's Brokerage Relationships in Real Estate Transactions Act governs licensee relationships. Which relationship does it define where a licensee assists without representing either party?

• A. A transaction broker, who performs ministerial acts without agency representation
• B. A dual agent representing both parties
• C. A subagent of the listing broker
• D. A universal agent for both parties

49. A Georgia licensee is convicted of a felony unrelated to real estate. What obligation does Georgia license law impose?

• A. The licensee must report the conviction to the Commission within the prescribed period, and the Commission may sanction the license
• B. No report is required for offenses unrelated to real estate
• C. The licensee must report only if imprisoned
• D. The conviction results in automatic permanent revocation

50. Under Georgia law, what must exist before a licensee may claim a commission from a party?

• A. A written brokerage engagement signed by the party, since Georgia requires written agreements for brokerage relationships
• B. A verbal understanding confirmed by a witness
• C. Only proof that the licensee introduced the buyer
• D. Registration of the relationship with the Commission

51. A licensee's client asks about a property's school district quality and crime statistics. What is the appropriate response?

• A. Direct the client to objective sources rather than characterizing areas, since such statements can steer and implicate fair housing law
• B. Describe which neighborhoods are better for the client's family
• C. Decline to discuss the property at all
• D. Provide the licensee's personal assessment of area safety

52. A Georgia broker holds trust funds. What is the general requirement for handling them?

• A. Deposit into a designated trust or escrow account in a Georgia financial institution by the end of the next banking day following acceptance, with the account separate from broker funds
• B. Deposit within fifteen banking days
• C. Retention in the broker's operating account with separate bookkeeping
• D. Immediate transfer to the closing attorney upon receipt

53. A licensed real estate salesperson is engaged in listing and selling property on behalf of clients. What is the general purpose of errors and omissions insurance in this line of work?

• A. It provides financial protection against claims of professional mistakes, negligence, or omissions made while performing licensed real estate activities.
• B. It replaces the need for a licensee to carry any general liability insurance.
• C. It guarantees a licensee's commission will be paid even if a transaction falls through.
• D. It covers physical damage to a listed property during the marketing period.

54. A Georgia licensee places her license on inactive status while she takes a few years off from the business. During this inactive period, can she legally list a property or negotiate a real estate transaction for compensation?

• A. Yes, as long as she discloses her inactive status to all parties involved.
• B. Yes, but only for transactions involving family members.
• C. No, an inactive licensee cannot perform activities requiring a license, or earn a commission for them, until the license is reactivated.
• D. Yes, provided she completes the transaction within 30 days of going inactive.

55. A licensee wants to pay a referral fee to a friend, who holds no real estate license, for referring a buyer who ultimately purchased a home through the licensee. Is this generally permissible under real estate license law?

• A. Yes, as long as the fee is under a certain dollar amount.
• B. Yes, provided the unlicensed friend signs a simple referral agreement.
• C. No, real estate license law generally prohibits paying a commission or referral fee for licensed activities to anyone who is not properly licensed.
• D. Yes, but only if the referral fee is paid directly to the buyer instead of the friend.

56. A broker closes a series of real estate transactions throughout the year. What general obligation does the broker have regarding the records generated by those transactions?

• A. The broker must maintain and retain transaction records for a period specified by the Commission, making them available for review if requested.
• B. The broker may destroy all transaction records immediately after closing, since retention is entirely optional.
• C. Only the buyer's attorney is responsible for maintaining any transaction records.
• D. Transaction records need only be kept if the transaction involved a dispute.

57. A buyer and seller both submit conflicting written demands to a broker for release of earnest money being held in the brokerage's trust account after a contract dispute arises. What should the broker generally do?

• A. Immediately release the funds to whichever party demanded them first.
• B. Refrain from unilaterally disbursing the funds and instead seek resolution through the parties' agreement, mediation, interpleader, or guidance from the licensing authority.
• C. Split the funds evenly between both parties without further inquiry.
• D. Release the funds to whichever party the broker personally represents in the transaction.

58. A real estate licensee holds an active license in a neighboring state and wants to represent a client in a transaction involving property located in Georgia. What is generally required for that licensee to lawfully practice on this Georgia transaction?

• A. Nothing further is required, since any active license from any state automatically authorizes practice anywhere in the country.
• B. The licensee may practice freely in Georgia for up to one transaction per year without any Georgia licensure.
• C. The licensee must simply notify the Georgia Real Estate Commission by email before proceeding.
• D. The licensee generally must obtain the appropriate Georgia license or otherwise become properly licensed or affiliated to practice on transactions involving Georgia real estate.

59. A buyer and seller both sign a purchase agreement during a meeting at the brokerage office. What is the licensee's general obligation regarding the fully executed copies of that agreement?

• A. Promptly deliver copies of the fully signed agreement to all parties to the transaction.
• B. Retain the only signed copy in the brokerage file and provide copies only if requested in writing.
• C. Deliver a copy only to the party the licensee personally represents.
• D. Wait until closing to distribute any copies of the signed agreement.

60. A busy salesperson hires an unlicensed personal assistant to help manage the business. Which of the following tasks may the unlicensed assistant generally perform?

• A. Negotiating price and contract terms directly with a prospective buyer.
• B. Scheduling showings, preparing marketing flyers, and handling other clerical or administrative tasks that do not require a license.
• C. Independently hosting an open house and answering substantive questions about contract terms.
• D. Discussing and explaining the details of a specific purchase offer with a client.

61. The Georgia Real Estate Commission regulates and enforces license law for real estate professionals in the state. What is the general role of this regulatory body?

• A. It licenses real estate professionals, establishes and enforces license law requirements, and disciplines licensees for violations.
• B. It functions only as a voluntary trade association with no enforcement authority.
• C. It exists solely to collect membership dues from real estate professionals.
• D. It sets local property tax rates for real estate transactions.

62. A buyer purchases a home for 280,000 dollars using a 250,000 dollar loan. To lower the note rate, the buyer agrees at closing to pay two discount points. How much will the buyer pay for the discount points?

• A. 2,500 dollars
• B. 2,800 dollars
• C. 5,000 dollars
• D. 5,600 dollars

63. Two neighboring states treat mortgage financing differently. In State X, a borrower who finances a home keeps title to the property while the lender holds only a lien against it. In State Y, legal title is held by the lender or a trustee until the debt is repaid. How are these two states properly classified?

• A. State X is a lien-theory state, and State Y is a title-theory state.
• B. State X is a title-theory state, and State Y is a lien-theory state.
• C. Both are lien-theory states, because a borrower who occupies the property always retains title.
• D. Both are title-theory states, because every mortgage transfers legal title to the lender.

64. A seller's existing mortgage carries an attractive interest rate, and its documents include a due-on-sale clause. A buyer proposes to purchase the home and simply take over the seller's monthly payments without ever contacting the lender. What is the likely consequence of this plan?

• A. The lender may demand full repayment of the loan balance upon the sale, so the buyer cannot assume the loan without lender approval.
• B. The plan works, because a due-on-sale clause binds only the original seller, not a new buyer.
• C. The parties need only notify the lender after closing; the assumption then becomes automatic.
• D. The lender may raise the interest rate to the current market rate but cannot call the entire balance due.

65. A loan officer describes three financing options to a homebuyer. Which of the officer's statements is accurate?

• A. A conventional loan is insured by the Federal Housing Administration.
• B. An FHA loan is guaranteed by the Department of Veterans Affairs.
• C. A VA loan is guaranteed by the Department of Veterans Affairs for eligible veterans.
• D. A conventional loan is guaranteed by the federal government for first-time buyers.

66. In a typical financed home purchase, the buyer signs both a promissory note and a mortgage (or deed of trust). What is the function of the mortgage or deed of trust?

• A. It contains the borrower's personal promise to repay the debt.
• B. It pledges the property as security for repayment of the promissory note.
• C. It conveys title to the property from the seller to the buyer at closing.
• D. It insures the lender against title defects that existed when the loan was made.

67. A buyer is purchasing a home with a conventional loan and plans to make a ten percent down payment. The buyer asks the salesperson whether any mortgage insurance will be involved. What should the salesperson explain?

• A. Private mortgage insurance is generally required because the down payment is less than twenty percent of the purchase price.
• B. No mortgage insurance applies, because only FHA loans ever involve mortgage insurance.
• C. The Federal Housing Administration will automatically insure the loan since the down payment is under twenty percent.
• D. No mortgage insurance is required as long as the buyer chooses a fixed-rate loan.

68. A borrower makes the very first monthly payment on a newly originated 30-year fixed-rate amortizing mortgage. How is that payment generally allocated between principal and interest?

• A. The payment is allocated entirely to principal, with interest deferred until later years.
• B. The payment is split exactly evenly between principal and interest every month of the loan.
• C. A relatively large portion of the payment goes toward interest, with only a small portion reducing principal.
• D. The entire payment goes toward property taxes and insurance rather than the loan balance.

69. A borrower selects an adjustable-rate mortgage whose interest rate is tied to a published financial index plus a fixed margin set by the lender. After the initial fixed period ends, what generally happens to the borrower's interest rate?

• A. It remains fixed for the life of the loan regardless of market conditions.
• B. It adjusts periodically based on changes in the underlying index, subject to any rate caps in the loan terms.
• C. It is renegotiated entirely from scratch by mutual agreement at each adjustment date.
• D. It permanently converts to the national average fixed rate at the time of origination.

70. An eligible veteran is purchasing a home using a VA-guaranteed loan. Which feature is most closely associated with this loan program compared to a typical conventional loan?

• A. The ability to finance the purchase with no down payment, since the VA guaranty reduces the lender's risk.
• B. A mandatory minimum 20 percent down payment on every transaction.
• C. Eligibility open to any borrower regardless of military service history.
• D. Automatic disqualification for any borrower with prior military service.

71. A property has a first mortgage recorded in 2020 and a home equity second mortgage recorded in 2023. If the borrower defaults and the property is foreclosed and sold, in what order are the two liens generally paid from the sale proceeds?

• A. The second mortgage is paid first because it is the more recent and therefore more urgent debt.
• B. The first mortgage recorded in 2020 is generally paid ahead of the second mortgage, based on the priority established by the earlier recording date.
• C. Both mortgages are paid simultaneously and proportionally regardless of recording date.
• D. Whichever lender forecloses first automatically has priority regardless of recording date.

72. A buyer is comparing an FHA-insured loan to a conventional loan. Regarding mortgage insurance, which statement accurately distinguishes the two?

• A. Neither loan type ever requires mortgage insurance under any circumstances.
• B. Conventional loans always require mortgage insurance regardless of the down payment amount.
• C. FHA loans never require mortgage insurance, unlike conventional loans.
• D. FHA loans generally require mortgage insurance premiums regardless of down payment size, while conventional loan private mortgage insurance can often be avoided with a sufficiently large down payment.

73. In Georgia, real estate financing commonly uses a security deed rather than a traditional mortgage, and the security deed typically includes a power-of-sale clause. What does this arrangement generally allow upon a borrower's default?

• A. The security deed grants the lender only a lien interest and no conveyance of any title interest whatsoever.
• B. The lender can typically foreclose through a nonjudicial power-of-sale process without first obtaining a court judgment.
• C. The borrower automatically forfeits any right to redeem the property under any circumstances.
• D. The lender must always obtain a full judicial foreclosure judgment before any sale can occur.

74. A borrower with a conventional loan originally financed 90 percent of the purchase price and has been paying private mortgage insurance. As the loan balance is paid down over time, at what point does federal law generally require the lender to automatically terminate the PMI requirement?

• A. PMI can never be removed once it is placed on a conventional loan.
• B. Once the loan balance is scheduled to reach 78 percent of the home's original value, PMI must generally be automatically terminated.
• C. PMI automatically terminates the moment the borrower makes twelve consecutive on-time payments, regardless of loan balance.
• D. PMI can only be removed if the borrower completely refinances into a new loan.

75. A borrower takes out a loan with monthly payments calculated as if the loan would amortize over 30 years, but the entire remaining balance actually comes due in a single lump sum after just seven years. What type of loan is this, and what risk does it create for the borrower?

• A. A fully amortizing loan, with no special risk since payments never change.
• B. An interest-only loan, with the risk being that no principal is ever paid down at all.
• C. A graduated payment mortgage, with the risk of steadily increasing monthly payments.
• D. A balloon mortgage, creating the risk that the borrower must refinance or otherwise pay off a large remaining balance when it comes due.

76. A seller who owns a home free and clear agrees to act as the lender, allowing the buyer to make monthly payments directly to the seller instead of obtaining a bank loan, with the seller holding a security interest in the property until it is paid off. What is this financing arrangement generally called?

• A. A wraparound mortgage
• B. A blanket mortgage
• C. Purchase-money seller financing
• D. A subordination agreement

77. A buyer contracts to purchase a home for 310,000 dollars and applies for a 240,000 dollar loan. The appraisal comes back at 300,000 dollars. Which figure does the lender use as the denominator for the loan-to-value ratio, and what LTV results?

• A. 310,000 dollars, producing an LTV of about 77 percent
• B. 300,000 dollars, producing an LTV of 80 percent
• C. 310,000 dollars, producing an LTV of 80 percent
• D. The average of the appraised value and purchase price, producing an LTV of about 79 percent

78. An investor is evaluating a small commercial building that produces a net operating income of 45,000 dollars per year. The investor will only pay a price consistent with a nine percent capitalization rate, but the seller is asking 540,000 dollars. Using the income capitalization approach, what value does the investor's analysis support?

• A. 405,000 dollars
• B. 450,000 dollars
• C. 500,000 dollars
• D. 540,000 dollars

79. A seller paid the entire year's property taxes in advance, and the sale closes partway through that tax year. Under standard proration, how is this expense handled on the closing statement?

• A. The buyer reimburses the seller for the unused portion of the year that the buyer will own the property
• B. The seller credits the buyer for the seller's share of the taxes
• C. No adjustment is made because the taxes have already been paid in full
• D. The seller requests a refund from the taxing authority, so no closing adjustment is needed

80. An investor wants a quick way to compare several small rental houses that recently sold in the same neighborhood. Which calculation produces the gross rent multiplier used for this kind of comparison?

• A. Sale price divided by the monthly gross rent
• B. Sale price multiplied by the annual gross rent
• C. Net operating income divided by the capitalization rate
• D. Monthly gross rent divided by the sale price

81. A home sells for 300,000 dollars under a listing that provides for a six percent commission on the sale price. What is the total commission generated by this sale?

• A. 1,800 dollars
• B. 9,000 dollars
• C. 18,000 dollars
• D. 30,000 dollars

82. A sale closes on April 15. The annual property tax bill of 3,600 dollars is paid in arrears at the end of the year, and the contract makes the seller responsible for taxes through the closing date. Using a 360-day banker's year with 30-day months, what entry appears on the closing statement?

• A. Credit the buyer 1,050 dollars
• B. Credit the seller 1,050 dollars
• C. Credit the buyer 2,550 dollars
• D. Credit the seller 2,550 dollars

83. A large older home offers five bedrooms but only one bathroom, and buyers consistently discount it for the awkward layout. In appraisal terms, what kind of value loss does this floor plan represent?

• A. Functional obsolescence, a loss in value from an outdated or poor design within the property
• B. External obsolescence, a loss in value caused by factors outside the property
• C. Physical deterioration, the ordinary wear and tear of the structure
• D. Economic depreciation, the accounting write-down of the building over time

84. An appraiser is determining the highest and best use of a vacant downtown lot. A proposed luxury tower would earn the most money but violates the height limit, and a permitted parking lot would earn the least. Which statement reflects the correct analysis?

• A. The tower is the highest and best use because it is the most profitable option
• B. The parking lot is the highest and best use because it can begin operating immediately
• C. The lot has no highest and best use until the zoning changes
• D. The highest and best use is the most profitable use among those that are legally permissible, physically possible, and financially feasible

85. A well-maintained house sits directly under a newly expanded flight path, and roaring jet noise has measurably cut its market value. Why do appraisers classify this loss as incurable depreciation?

• A. Because noise damage compounds over time like physical wear
• B. Because the cause lies outside the property, and no expenditure on the property itself can eliminate it
• C. Because the owner failed to object when the flight path was approved
• D. Because soundproofing is prohibited by most building codes

86. An appraiser must value a newly built public library, a property type that essentially never sells and produces no rental income. Which appraisal approach will the appraiser rely on most heavily?

• A. The cost approach, summing land value and depreciated replacement cost of the improvements
• B. The gross rent multiplier technique, using civic buildings as comparables
• C. The sales comparison approach, using libraries from other regions
• D. The income capitalization approach, using imputed rents

87. A couple builds a 6,000 square foot custom mansion in a neighborhood of modest 1,500 square foot starter homes. When they later sell, the price falls far short of what the same mansion would bring in an upscale area. Which valuation principle does their experience illustrate?

• A. Progression, because the small homes gain value from the mansion nearby
• B. Competition, because excess profits attract rival builders
• C. Regression, because the value of a superior property is pulled down by lesser surrounding properties
• D. Change, because neighborhoods constantly move through life cycles

88. A homeowner preparing to list asks a salesperson for help setting an asking price. The salesperson analyzes recent nearby sales, current competing listings, and expired listings, then presents a suggested price range. What has the salesperson prepared, and what is its key limitation?

• A. An appraisal, which the salesperson may perform for any property the brokerage lists
• B. A broker's certification of value, which lenders may use to approve the buyer's loan
• C. A comparative market analysis, which guides pricing but is not an appraisal and cannot be represented as one
• D. An automated valuation, which is legally equivalent to a certified appraisal

89. A buyer is weighing two nearly identical townhomes on the same street: one is priced at 289,000 dollars and the other at 315,000 dollars. The buyer refuses to consider the higher-priced unit at all. Which principle of value explains the buyer's behavior?

• A. Substitution — a buyer will not pay more for a property than the cost of acquiring an equally desirable alternative
• B. Anticipation — value reflects the expected future benefits of ownership
• C. Contribution — a feature is worth only what it adds to overall value
• D. Plottage — combining parcels can produce a value greater than the sum of the parts

90. An appraiser's three approaches to value produce indications of 402,000, 415,000, and 396,000 dollars for the same house. In arriving at a single final opinion of value, what does the appraiser do during reconciliation?

• A. Compute the arithmetic mean of the three indications
• B. Weigh each approach according to its reliability for this property type and the quality of its data, then select a supported value
• C. Discard the two outliers and adopt the middle figure automatically
• D. Report the highest figure, since it best protects the seller's equity

91. An appraiser using the sales comparison approach analyzes a comparable that sold for 350,000 dollars. The comparable has a finished basement the subject property lacks, and the market pays about 15,000 dollars for that feature. How should the appraiser handle the adjustment?

• A. Average the subject and comparable values to split the difference
• B. Subtract 15,000 dollars from the comparable's sale price, adjusting it to 335,000 dollars
• C. Ignore the difference because basements are personal preference items
• D. Add 15,000 dollars to the subject's estimated value to reflect what it could be worth

92. A seller is a foreign person disposing of US real property. What federal withholding obligation may apply at closing?

• A. Withholding under the foreign investment in real property tax provisions, generally the buyer's responsibility to remit
• B. Withholding is the listing broker's personal obligation
• C. No withholding applies to real property transfers
• D. Withholding applies only to commercial property

93. A buyer's lender requires a survey. What does a boundary survey establish that a title search does not?

• A. The physical location of boundaries and improvements, revealing encroachments and setback issues
• B. The chain of recorded ownership
• C. The existence of recorded liens
• D. The property's assessed value

94. A Georgia property conveys for 280,000 dollars. Georgia imposes a transfer tax at a rate of one dollar per one thousand dollars of consideration. What is the tax?

• A. 280 dollars
• B. 2,800 dollars
• C. 560 dollars
• D. 28 dollars

95. A closing agent reports the gross proceeds of a real estate sale to the federal government. What form is generally used?

• A. Form 1099-S, reporting gross proceeds from the sale or exchange of real estate
• B. Form W-2
• C. Form 1098, reporting mortgage interest
• D. No reporting is required for residential sales

96. A buyer records her deed in the county land records immediately after closing. What is the general legal purpose served by recording the deed?

• A. It provides constructive notice to the public of the buyer's ownership interest, helping protect that interest against later competing claims.
• B. It is the act that actually transfers title from the seller to the buyer, without which no valid conveyance occurs.
• C. It automatically insures the buyer against any future title defects.
• D. It is required only if the buyer intends to resell the property within one year.

97. A buyer and seller agree to close their transaction through an escrow process, using a neutral third party to hold documents and funds. What is the general role of that escrow agent?

• A. To represent the buyer's interests exclusively throughout the closing process.
• B. To represent the seller's interests exclusively throughout the closing process.
• C. To act as a neutral party holding documents and funds, disbursing them only once all the agreed-upon conditions of the transaction have been satisfied.
• D. To determine which party is at fault if the transaction later falls through.

98. A homeowner has already paid the current quarter's homeowners association dues in full before the home is sold, and the closing date falls in the middle of that same quarter. How are these prepaid HOA dues typically handled on the closing statement?

• A. They are ignored entirely, since HOA dues are never prorated at closing.
• B. The seller forfeits the prepaid amount with no reimbursement, since dues are considered nonrefundable once paid.
• C. The buyer generally reimburses the seller for the portion of the prepaid dues covering the period after closing.
• D. The homeowners association automatically refunds the unused portion directly to the seller.

99. At closing, a buyer is offered both a lender's title insurance policy and an optional owner's title insurance policy. What is the key difference in what each policy protects?

• A. They are identical policies that simply have different names for marketing purposes.
• B. The owner's policy protects the lender's loan amount, while the lender's policy protects the buyer's full equity.
• C. Only the lender's policy provides any protection at all; owner's policies provide no real protection.
• D. The lender's policy protects the lender's interest up to the loan amount, while the owner's policy protects the buyer's equity in the property against covered title defects.

100. A buyer is financing a home purchase with a federally regulated mortgage loan. Under federal disclosure requirements, when must the buyer generally receive the Closing Disclosure detailing final loan terms and closing costs?

• A. At the closing table itself, at the same moment as signing the loan documents.
• B. Generally at least three business days before closing, giving the buyer time to review the final terms and costs.
• C. Only after closing has already been completed, as a post-closing confirmation.
• D. There is no federally required timing at all; timing is left entirely to each individual lender's discretion.