Real Estate Practice Exam
183 free Real Estate practice questions with answers and explanations. No signup required. The Real Estate Salesperson exam is a licensing exam.
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Property Ownership
29 of 57 questions loaded1. A candidate completed the required pre-licensing education hours and then scored 72% on the salesperson exam. Based only on the stated facts, which conclusion is best supported?
- A. The candidate has satisfied both the education prerequisite and the passing-score threshold
- B. The candidate failed because 72% is below the required score
- C. The candidate must retake the pre-licensing education before results are valid
- D. The candidate's education hours do not count toward exam eligibility
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Answer: A
Pre-licensing education hours are required before sitting, and 72% meets or exceeds the commonly required 70% passing score, so both conditions are satisfied. The other options contradict the stated facts.2. A candidate scored 70% on the salesperson exam. Relative to the commonly required threshold, this score is best described as:
- A. Below the passing threshold
- B. Exactly at the passing threshold
- C. Well above the passing threshold
- D. Undeterminable from any stated standard
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Answer: B
Since the commonly required passing score is 70%, a 70% result sits exactly at the threshold. The other descriptions misstate the relationship to the stated standard.3. A study guide claims a candidate may register for the salesperson exam with no coursework whatsoever. Which fact most directly contradicts that claim?
- A. A passing score is commonly required
- B. Pre-licensing education hours must be completed before sitting for the exam
- C. Exams are administered on a fixed annual schedule
- D. Candidates must hold a bachelor's degree
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Answer: B
Because completion of pre-licensing education hours is required prior to sitting for the exam, the claim of "no coursework" is contradicted. Options C and D introduce requirements not present in the facts.4. Which single value best represents the commonly required passing score for a real estate salesperson licensing exam?
- A. 75 percent
- B. 60 percent
- C. 70 percent
- D. 65 percent
Show answer & explanation
Answer: C
The commonly required passing score is 70 percent. The remaining choices are plausible-looking distractors not supported by the stated fact.5. Which ordering of steps is consistent with the stated licensing requirements?
- A. Sit for the exam first, then complete pre-licensing education hours
- B. Complete continuing education, then complete pre-licensing hours
- C. Complete pre-licensing education hours, then sit for the exam
- D. Sit for the exam and complete education hours simultaneously, in any order
Show answer & explanation
Answer: C
The stated requirement is completion of pre-licensing education hours prior to sitting for the exam, so education comes before the exam. The other orderings conflict with that sequence.6. What is the primary legal effect of recording a deed in the county land records?
- A. It guarantees the title is free of all defects
- B. It gives constructive notice to the world of the grantee's interest and establishes priority
- C. It substitutes for delivery and acceptance of the deed
- D. It converts a quitclaim deed into a warranty deed
Show answer & explanation
Answer: B
Recording a deed provides constructive notice to the world of the grantee's interest and establishes priority, generally protecting the first party to record. Recording does not change the type of deed, does not guarantee the title is defect-free, and does not replace the requirement that a deed be delivered to and accepted by the grantee.7. Which type of deed gives the grantee the GREATEST protection against title defects?
- A. Quitclaim deed
- B. Special warranty deed
- C. General warranty deed
- D. Any deed, as long as it is recorded
Show answer & explanation
Answer: C
A general warranty deed offers the greatest protection because the grantor warrants against all title defects arising at any time, even before the grantor owned the property. A special warranty deed covers only the grantor's ownership period, and a quitclaim deed carries no warranties at all. Recording provides notice and priority but does not add warranties to a deed.8. An elderly owner signs a properly drafted deed naming his nephew as grantee, then locks it in his desk drawer without telling the nephew. The owner still holds the deed at his death. Did title pass to the nephew during the owner's lifetime?
- A. No, because a deed must be signed by the grantee to be valid
- B. Yes, because a deed transfers title the moment it is drafted
- C. No, because the deed was never delivered to and accepted by the grantee
- D. Yes, because the deed was signed by a competent grantor
Show answer & explanation
Answer: C
Even a deed with competent parties, words of conveyance, an adequate legal description, and the grantor's signature does not transfer title until it is delivered to and accepted by the grantee. Because the deed stayed in the drawer and the nephew never received or accepted it, no title passed. Validity requires the grantor's signature, not the grantee's.9. A seller signs a document that transfers title to her cabin to a buyer. In this transaction, the document itself is best described as which of the following?
- A. A listing agreement between the seller and her broker
- B. A deed conveying title from the grantor to the grantee
- C. A promissory note evidencing a debt
- D. A title insurance policy protecting the buyer
Show answer & explanation
Answer: B
A deed is the written instrument that conveys title to real property from a grantor to a grantee. A listing agreement is an employment contract with a broker, a promissory note evidences debt, and title insurance is a policy against covered title defects — none of these actually convey title.10. A grantor is willing to warrant the title against problems that arose while she owned the property, but refuses to be responsible for anything that happened before she took ownership. Which deed matches her intent?
- A. General warranty deed
- B. Special warranty deed
- C. Quitclaim deed
- D. Deed of trust
Show answer & explanation
Answer: B
A special warranty deed warrants only against defects that arose during the grantor's period of ownership, which is exactly the limitation she wants. A general warranty deed would expose her to defects arising even before she owned the property, a quitclaim deed provides no warranties at all, and a deed of trust is a financing instrument that pledges property as security for a note, not a conveyance chosen for its warranties.11. After a divorce, an ex-spouse who may or may not hold a leftover interest in the family home agrees to sign over whatever interest he has so the title record is clean. Which deed is customarily used for this purpose?
- A. General warranty deed
- B. Special warranty deed
- C. Quitclaim deed
- D. A deed with covenants of seisin and quiet enjoyment
Show answer & explanation
Answer: C
A quitclaim deed conveys only whatever interest the grantor may have, with no warranties, and is commonly used to clear clouds on title — such as a possible lingering interest of an ex-spouse. Warranty deeds would obligate the grantor to defend the title, which is unnecessary and unwanted when the goal is simply to release a possible interest.12. Two years after closing, a homeowner learns that a defect in the chain of title existed before her policy was issued, though no one knew about it at the time. Which product is designed to protect her against losses from this kind of problem?
- A. Private mortgage insurance
- B. Title insurance
- C. A time is of the essence clause
- D. An appraisal contingency
Show answer & explanation
Answer: B
Title insurance protects the insured against losses from covered title defects that existed but were unknown at the time the policy was issued — precisely this situation. Private mortgage insurance relates to low-down-payment conventional loans, a time is of the essence clause makes contract deadlines strictly enforceable, and an appraisal contingency lets a buyer cancel before closing, not recover for later-discovered title defects.13. Title that is free from reasonable doubt or serious defects, such that a prudent buyer would accept it, is called:
- A. Constructive title
- B. Insured title
- C. Warranted title
- D. Marketable title
Show answer & explanation
Answer: D
Marketable title is defined as title free from reasonable doubt or serious defects that a prudent buyer would accept. The other options are distractors: constructive notice describes the effect of recording, warranties come from the type of deed used, and insurance is a separate protection against covered defects.14. A buyer finances a home in a lien-theory state. While the mortgage loan is outstanding, who holds title to the property?
- A. The lender, until the debt is fully repaid
- B. A trustee, on behalf of the lender
- C. The borrower, with the lender holding a lien on the property
- D. The county, until the deed is recorded
Show answer & explanation
Answer: C
In lien-theory states the borrower retains title and the lender holds a lien; it is in title-theory states that legal title is held by the lender or a trustee until the debt is repaid. The county never takes title through recording — recording simply gives constructive notice and establishes priority.15. A grantor conveys the same parcel twice, first to Buyer X and later to Buyer Y. Buyer Y promptly records her deed; Buyer X never records. Under a recording system that protects the first party to record, whose interest is generally protected against later claims?
- A. Buyer X, because she received her deed first
- B. Buyer Y, because recording gave constructive notice and established her priority
- C. Neither buyer, because a double conveyance voids both deeds
- D. The grantor, because unrecorded deeds return title to the grantor
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Answer: B
Recording provides constructive notice to the world of the grantee's interest and establishes priority, generally protecting the first party to record. Because Buyer Y recorded and Buyer X did not, Buyer Y's recorded interest is the one the system generally protects. Merely receiving a deed earlier does not establish recording priority, and there is no rule that a double conveyance voids both deeds or returns title to the grantor.16. A small commercial building generates $96,000 in gross annual income and has $36,000 in annual operating expenses. Investors are pricing similar buildings at an 8 percent capitalization rate. What is this building's estimated value?
- A. $1,200,000
- B. $4,800
- C. $750,000
- D. $96,000
Show answer & explanation
Answer: C
Income capitalization uses NET operating income, so the $36,000 in expenses must first be subtracted from the $96,000 gross income to get $60,000, and dividing that by the 8 percent cap rate gives $750,000. Capitalizing the gross income directly, without subtracting expenses, overstates the value substantially because it ignores the building's operating costs entirely. Treating the gross income figure itself as the property's value skips the capitalization step altogether.17. What is the fundamental difference between a lien-theory state and a title-theory state regarding a mortgaged property?
- A. Title-theory states do not require mortgages to be recorded, while lien-theory states do
- B. In lien-theory states the borrower retains title and the lender holds only a lien, while in title-theory states the lender or a trustee holds title until the loan is repaid
- C. The two terms describe identical rules under different regional names
- D. Lien-theory states do not allow deeds of trust, while title-theory states require them
Show answer & explanation
Answer: B
The core distinction is who holds legal title during the loan term: the borrower in lien-theory states, versus the lender or trustee in title-theory states. Recording requirements for mortgages are unrelated to this theory distinction, which rules out the option about recording. The two terms are not interchangeable names for the same rule; they describe genuinely different legal frameworks.18. A property investor asks which document actually transfers legal title from a seller to a buyer at closing. What is the correct term for that instrument?
- A. A promissory note
- B. A deed
- C. A purchase agreement
- D. A title insurance policy
Show answer & explanation
Answer: B
A deed is the written instrument that conveys title to real property from a grantor to a grantee, which is exactly what transfers legal ownership at closing. A promissory note tempts because it is also signed at closing, but it only evidences the buyer's debt to a lender, not the transfer of the property. A purchase agreement is the contract to sell, and a title insurance policy protects against defects; neither one conveys title itself.19. A grantor conveys a small strip of land using a quitclaim deed to resolve a boundary dispute with a neighbor. It later turns out the grantor never actually owned that strip. What happens to the grantee's claim?
- A. The grantee can sue the grantor for breach of warranty, because every deed carries an implied warranty of title
- B. The conveyance is automatically void and the county must re-record the correct boundary
- C. The grantee still receives the strip, because recording a deed guarantees the grantor's ownership
- D. The grantee receives nothing, because a quitclaim deed conveys only whatever interest the grantor actually has, which in this case was none
Show answer & explanation
Answer: D
A quitclaim deed makes no warranty about the grantor's title, so if the grantor owned nothing, the grantee receives nothing and has no warranty claim to fall back on. A candidate might assume every deed carries an implied warranty, but that duty exists only with warranty deeds, not a quitclaim. Recording a deed also does not manufacture ownership the grantor never held; it only gives notice of whatever interest was actually conveyed.20. Rank these three deed types from the LEAST buyer protection against title defects to the MOST buyer protection: quitclaim deed, special warranty deed, general warranty deed.
- A. General warranty deed, then special warranty deed, then quitclaim deed
- B. Special warranty deed, then quitclaim deed, then general warranty deed
- C. Quitclaim deed, then special warranty deed, then general warranty deed
- D. All three provide identical protection since every deed conveys whatever title the grantor holds
Show answer & explanation
Answer: C
A quitclaim deed carries no warranties at all, a special warranty deed warrants only the grantor's own period of ownership, and a general warranty deed warrants the entire history of the title, so protection rises in exactly that order. Reversing the order is a tempting slip for a candidate who confuses 'first taught' with 'strongest.' The claim that all three are identical ignores that warranty coverage is the entire point of distinguishing deed types.21. A buyer's agent only shows her Black home-buying clients listings in two specific zip codes, while showing white clients listings across the entire metro area. What illegal practice does this describe?
- A. Blockbusting, which targets sellers rather than buyers looking for homes
- B. Steering, which is channeling buyers toward or away from neighborhoods based on a protected class
- C. Redlining, which involves lenders and insurers rather than agents showing homes
- D. Puffing, which is exaggerated but non-discriminatory sales talk
Show answer & explanation
Answer: B
Steering is channeling buyers toward or away from neighborhoods based on a protected class, which is exactly what the agent is doing by limiting Black clients to two zip codes. Blockbusting targets homeowners to induce a sale, not buyers looking to purchase, so it does not match this scenario. Redlining is a lending and insurance practice, and puffing describes harmless sales exaggeration, neither of which involves discriminatory limits on where clients are shown homes.22. A buyer's attorney reviews the title report and finds an old, unreleased mechanic's lien from a contractor who was never paid for work performed fifteen years ago. Would this title typically be considered marketable?
- A. No, because an unresolved lien is a serious defect that a reasonably prudent buyer would not accept, so the title is not marketable until the lien is cleared
- B. Yes, because liens automatically expire after ten years and no longer affect title
- C. Yes, because only unpaid mortgages affect marketability, not mechanic's liens
- D. No, because marketable title requires the property to have had zero prior owners
Show answer & explanation
Answer: A
Marketable title is title free from reasonable doubt or serious defects that a prudent buyer would accept, and an unresolved lien is exactly the kind of serious defect that prevents that standard from being met until it is cleared. A candidate might assume old liens simply expire, but that is not guaranteed and cannot be relied on without confirmation. Mechanic's liens are just as capable of clouding title as mortgages, so limiting the rule to mortgages is incorrect.23. Which seven characteristics are protected under the federal Fair Housing Act?
- A. Race, color, national origin, sex, familial status, disability, and sexual orientation
- B. Race, religion, sex, disability, familial status, income level, and occupation
- C. Race, color, religion, national origin, sex, age, and marital status
- D. Race, color, religion, national origin, sex, familial status, and disability
Show answer & explanation
Answer: D
The seven federally protected classes are race, color, religion, national origin, sex, familial status, and disability, and a candidate needs this exact list memorized. Age and marital status are protected under some state laws but are not among the seven federal classes, which makes the first distractor tempting but wrong. Income level, occupation, and sexual orientation are likewise not on the federal list, even though several states add their own additional protections.24. A seller who owned a duplex for only three years is willing to promise that no title problems arose while she held the property, but will not promise anything about defects that existed before her ownership began. This limited promise describes which deed?
- A. A general warranty deed
- B. A special warranty deed
- C. A quitclaim deed
- D. A deed of trust
Show answer & explanation
Answer: B
A special warranty deed warrants only against defects that arose during the grantor's own period of ownership, matching the seller's limited promise exactly. A general warranty deed tempts a candidate who forgets the time limitation, since it also uses warranty language, but it covers the full history of the title, not just the grantor's years of ownership. A quitclaim deed would carry no warranty at all.25. A brokerage mails postcards to residents on a specific block claiming that property values are about to fall because a religious community is buying homes nearby, and urging residents to list before it is 'too late.' What is this practice called?
- A. Blockbusting, which is inducing owners to sell by suggesting that people of a protected class are moving into the area
- B. Steering, which channels buyers toward or away from areas rather than pressuring sellers
- C. Redlining, which involves denying loans or insurance rather than soliciting listings
- D. Legitimate direct-mail marketing, since brokers may solicit new listings freely
Show answer & explanation
Answer: A
Blockbusting is inducing owners to sell by suggesting that people of a protected class are moving into the area, which matches the postcard's message about a religious community exactly. Steering describes agents directing buyers to or away from certain neighborhoods, not pressuring sellers to list, so it does not fit this fact pattern. The mailing is not legitimate marketing; using a protected class to manufacture urgency is illegal regardless of the medium used.26. An owner lives in one unit of her four-unit building and personally handles all rentals herself without hiring a licensed agent or placing any discriminatory advertising. Which factor would cause her to LOSE the Mrs. Murphy exemption even though the building qualifies by size and she occupies a unit?
- A. Charging market-rate rent for the units would eliminate the exemption
- B. Using discriminatory advertising, involving a real estate licensee in the rental, or basing any decision on race would eliminate the exemption
- C. Owning the building for fewer than five years would eliminate the exemption
- D. Renting to a tenant who has children would eliminate the exemption
Show answer & explanation
Answer: B
The Mrs. Murphy exemption never applies to race and cannot be used together with discriminatory advertising or a licensee's involvement, so any of those factors would strip the exemption away even though the owner otherwise qualifies by size and occupancy. Renting to a family with children is protected conduct, not a disqualifying act, so that option is backwards. Market rent and length of ownership have no bearing on whether the exemption applies.27. A grantor signs a deed and gives it to a neutral escrow agent with instructions to deliver it to the buyer once the final loan payment clears in ninety days. The buyer never touches the document until the escrow agent releases it on schedule. Does this satisfy the delivery requirement for a valid conveyance?
- A. No, delivery requires the grantee to personally hold the deed before any conditions are satisfied
- B. No, only delivery directly from grantor to grantee in person is valid
- C. Yes, but only if the deed is re-signed on the day of release
- D. Yes, because delivery through an escrow agent under the grantor's binding instructions satisfies delivery even though the grantee does not physically hold the deed until conditions are met
Show answer & explanation
Answer: D
A deed can be validly delivered through a third party such as an escrow agent acting under the grantor's binding instructions, so title passes once the conditions are met even though the grantee never personally held the document earlier. A candidate might assume delivery requires the grantee's physical possession from the start, but that ignores how escrow closings routinely work. Re-signing on release is unnecessary since the original signed deed already satisfies the signature requirement.28. A homeowners association bylaw from the 1960s tries to restrict sales to buyers of a particular race, and its defenders argue the restriction predates the 1968 Fair Housing Act and is therefore exempt. Is there any federal exemption available under an older civil rights law?
- A. Yes, restrictions recorded before 1968 are grandfathered in under the Fair Housing Act
- B. Yes, homeowners associations are entirely exempt from federal fair housing law
- C. No, but only the 1988 amendments address racial discrimination in property sales
- D. No, the Civil Rights Act of 1866 already prohibits all racial discrimination in property transactions with no exemptions, so the restriction is illegal regardless of the 1968 Act
Show answer & explanation
Answer: D
The Civil Rights Act of 1866 prohibits all racial discrimination in property transactions with no exemptions at all, so the bylaw is illegal independent of whatever exemptions the newer 1968 Act might otherwise allow. There is no grandfather clause for pre-1968 restrictions, which makes that defense fail. The 1988 amendments to the Fair Housing Act expanded protections to familial status and disability, but racial discrimination was already banned outright by the 1866 Act well before either 1968 or 1988.29. An income property generates $42,000 in annual net operating income, and comparable properties are selling at a 7 percent capitalization rate. What is the property's estimated value using income capitalization?
- A. $300,000
- B. $2,940
- C. $642,000
- D. $600,000
Show answer & explanation
Answer: D
Net operating income divided by the capitalization rate yields the estimated value of an income property, so $42,000 divided by 7 percent gives $600,000. Multiplying the income by the rate instead of dividing produces a number far too small to be a plausible property value, which is a common formula-direction error. Simply halving the correct value or adding the income to it does not follow the income capitalization formula at all.
Financing
28 of 56 questions loaded30. A prospective licensee skipped their coursework and tried to register directly for the exam covering financing and other topics. Why would the registration be rejected?
- A. Financing questions are only released to enrolled students
- B. Pre-licensing education must be completed before sitting for the exam
- C. The exam is offered only once per year
- D. A financing internship is mandatory
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Answer: B
Because completion of pre-licensing education hours prior to sitting for the exam is required, a candidate who skipped that coursework has not met the precondition to register.31. A study advisor tells a financing-track student that finishing the required education is a precondition, not just a recommendation, for the exam. Which statement supports the advisor's point?
- A. Pre-licensing education is optional but encouraged
- B. Pre-licensing education hours must be completed prior to sitting for the exam
- C. Pre-licensing education can be completed after passing
- D. Pre-licensing education applies only to broker candidates
Show answer & explanation
Answer: B
The requirement is completion of pre-licensing education hours prior to sitting for the exam, which supports treating it as a precondition rather than optional.32. To be considered eligible to earn a passing result on the financing-inclusive salesperson exam, a candidate must satisfy which combination of conditions?
- A. Complete pre-licensing education beforehand and reach the commonly required 70% passing score
- B. Only complete education; no minimum score applies
- C. Neither education nor a minimum score is required
- D. Only reach a 70% score; no education is required
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Answer: A
Two grounded conditions apply: pre-licensing education hours must be completed prior to sitting, and the commonly required passing score is 70%. Both together describe eligibility to pass.33. A student preparing for the financing portion of the salesperson exam wants to know what must be finished before they are permitted to sit for the examination. Which requirement applies?
- A. Completion of pre-licensing education is required prior to sitting for the exam
- B. A minimum of two years of mortgage lending employment
- C. Passing a separate financing-only pre-test
- D. Nothing is required before sitting for the exam
Show answer & explanation
Answer: A
Completion of pre-licensing education hours prior to sitting for the exam is a required condition, so that requirement must be satisfied first.34. A test-prep platform summarizes the salesperson exam rules for its financing module. Which pair of statements is fully supported?
- A. Passing requires 70%, and pre-licensing education must be completed before sitting
- B. Passing requires 80%, and no education is needed
- C. Passing requires 70%, and education may be completed afterward
- D. Passing requires 50%, and pre-licensing education is optional
Show answer & explanation
Answer: A
The commonly required passing score is 70%, and completion of pre-licensing education hours prior to sitting for the exam is required. Choice A states both correctly.35. A candidate misses the commonly required passing score on the financing exam by a small margin and asks whether pre-licensing coursework can now be substituted for the shortfall in points. What is the correct response?
- A. Yes, coursework hours can be converted into exam points
- B. No; pre-licensing education is a separate precondition and does not offset a score below 70%
- C. Yes, but only for the financing section
- D. No, because no passing score is required at all
Show answer & explanation
Answer: B
Pre-licensing education completion is a precondition to sitting for the exam, and the commonly required passing score is 70%. These are distinct requirements, so coursework does not offset a score below the passing threshold.36. At closing, a borrower agrees to pay discount points to the lender. What is the borrower buying, and how is one point measured?
- A. Prepaid interest that lowers the note rate; one point equals one percent of the loan amount
- B. Title protection; one point equals one percent of the purchase price
- C. Mortgage insurance; one point equals one percent of the appraised value
- D. A refundable good-faith deposit; one point equals one percent of the down payment
Show answer & explanation
Answer: A
Discount points are prepaid interest paid at closing to lower the note rate, and one point equals one percent of the loan amount — not of the purchase price, appraised value, or down payment. Points are not title insurance, mortgage insurance, or a deposit.37. A buyer obtaining a conventional loan wants to avoid paying private mortgage insurance. Under the general rule, what must the buyer do?
- A. Make a down payment of at least 20 percent of the purchase price
- B. Choose an adjustable-rate mortgage instead of a fixed-rate mortgage
- C. Have the loan insured by the Federal Housing Administration
- D. Record the mortgage before any other liens are recorded
Show answer & explanation
Answer: A
Private mortgage insurance is generally required on conventional loans when the down payment is less than 20 percent of the purchase price, so putting at least 20 percent down avoids the requirement. The rate structure of the loan and the timing of recording do not control PMI, and FHA insurance applies to FHA loans, not conventional ones.38. A buyer would like to take over the seller's existing low-rate mortgage rather than obtain a new loan. Which loan provision most directly prevents this without the lender's approval?
- A. A time is of the essence clause
- B. A due-on-sale clause
- C. An appraisal contingency
- D. A financing contingency
Show answer & explanation
Answer: B
A due-on-sale clause allows the lender to demand full repayment if the property is sold, which prevents a buyer from assuming the loan without lender approval. A time is of the essence clause concerns contract deadlines, and appraisal or financing contingencies are purchase-contract conditions that let a buyer cancel — none of them governs loan assumption.39. A buyer signs a promissory note to borrow money for a home purchase. Which instrument pledges the property itself as security for repayment of that note?
- A. A listing agreement
- B. A mortgage or deed of trust
- C. A quitclaim deed
- D. A title insurance policy
Show answer & explanation
Answer: B
Most real estate purchases are financed through a mortgage or deed of trust, which pledges the property as security for repayment of the promissory note. A listing agreement is an employment contract with a broker, a quitclaim deed conveys an interest in title, and title insurance protects against covered title defects — none of these secures the debt.40. In a state that follows lien theory, who holds legal title to mortgaged property while the loan is being repaid?
- A. The lender, until the final payment is made
- B. A neutral trustee named in the security instrument
- C. The borrower, with the lender holding a lien against the property
- D. The county recorder, as custodian of the land records
Show answer & explanation
Answer: C
In lien-theory states the borrower retains title and the lender merely holds a lien. It is in title-theory states that legal title is held by the lender or a trustee until the debt is repaid, which makes choices A and B descriptions of title theory, not lien theory.41. Which statement correctly distinguishes the major loan categories?
- A. Conventional loans are insured by the Federal Housing Administration
- B. FHA loans are guaranteed by the Department of Veterans Affairs
- C. VA loans are guaranteed by the Department of Veterans Affairs for eligible veterans
- D. VA loans are available to any borrower who pays an insurance premium
Show answer & explanation
Answer: C
A VA loan is guaranteed by the Department of Veterans Affairs for eligible veterans. A conventional loan is not insured or guaranteed by the federal government, and it is the FHA loan — not the conventional loan — that is insured by the Federal Housing Administration, so the other choices scramble these roles.42. A borrower's mortgage interest rate changes periodically based on an index plus a margin. What kind of loan does the borrower have?
- A. A fixed-rate mortgage
- B. An adjustable-rate mortgage
- C. A loan guaranteed by the Department of Veterans Affairs
- D. A fully amortized loan that can never change its payment
Show answer & explanation
Answer: B
An adjustable-rate mortgage has a rate that changes periodically based on an index plus a margin, which is exactly what the question describes. A fixed-rate mortgage keeps the same interest rate for the entire term. Government backing (such as a VA guarantee) describes who stands behind the loan, not how its rate behaves.43. A purchase contract includes a financing contingency, and the buyer is unable to satisfy that condition. What is the buyer entitled to do?
- A. Cancel the contract and recover the earnest money deposit
- B. Cancel the contract but forfeit the earnest money deposit to the seller
- C. Force the lender to fund the loan anyway
- D. Transfer the contract to another buyer without the seller's involvement
Show answer & explanation
Answer: A
Contingencies such as financing, inspection, and appraisal give the buyer the right to cancel and recover the deposit if the condition is not met. The earnest money — a good-faith deposit held in the broker's trust account — is returned rather than forfeited, and a contingency gives no power to compel the lender to lend.44. Three years into a 30-year amortized loan, a borrower is surprised that the loan balance has barely dropped even though every scheduled payment has been made. What best explains this?
- A. The lender is required to hold all early payments in a trust account
- B. Early payments in an amortized loan are applied mostly to interest, with later payments applied mostly to principal
- C. Amortized loans apply payments to principal first and interest last
- D. The rate must have adjusted upward based on an index plus a margin
Show answer & explanation
Answer: B
Amortization repays principal and interest through scheduled payments, with early payments applied mostly to interest and later payments mostly to principal — so the balance declines slowly at first. Choice C reverses the order, and nothing in the scenario indicates a rate adjustment or a trust-account arrangement.45. A buyer purchases a property for 300,000 dollars, which is also its appraised value, using a 240,000 dollar loan. What is the loan-to-value ratio?
- A. 60 percent
- B. 70 percent
- C. 80 percent
- D. 90 percent
Show answer & explanation
Answer: C
LTV is the loan amount divided by the lesser of the appraised value or purchase price. A 240,000 dollar loan on a 300,000 dollar property is an 80 percent LTV, with the down payment making up the remaining 20 percent.46. A buyer wants a 75 percent loan-to-value ratio on a $410,000 home, where the appraisal matches the price. How much cash must she put down to hit that target?
- A. $102,500
- B. $307,500
- C. $51,250
- D. $-51,250
Show answer & explanation
Answer: A
A 75 percent LTV means the loan covers $307,500 of the $410,000 price, leaving a down payment of $102,500 once that loan amount is subtracted from the price. Reporting the loan amount itself, 75 percent of the price, as though it were the down payment mixes up the two complementary figures. Halving the down-payment percentage or applying an arbitrary multiplier to the loan amount does not correctly isolate the actual cash required at closing.47. A homeowner's interest rate stays exactly the same for the entire thirty-year term of her loan. What type of mortgage does she have?
- A. A fixed-rate mortgage
- B. An adjustable-rate mortgage
- C. A balloon mortgage
- D. An interest-only mortgage
Show answer & explanation
Answer: A
A fixed-rate mortgage keeps one rate for the entire term, matching a homeowner whose rate never changes across thirty years. An adjustable-rate mortgage changes periodically based on an index plus a margin, which is the opposite of what the homeowner has. A balloon mortgage involves a large final payment, and an interest-only mortgage defers principal payments, neither of which describes a simple unchanging rate over the full term.48. A loan carries a $150,000 balance at a 4.8 percent annual rate, and the borrower's monthly payment is $900. How much of that payment is interest, and how much goes toward the principal?
- A. $7,200 to interest, which exceeds the entire monthly payment
- B. $600 to interest and $300 to principal
- C. $900 to interest and $0 to principal, since early payments are 'mostly interest'
- D. $591.78 to interest and the rest to principal
Show answer & explanation
Answer: B
Dividing the annual rate by twelve before applying it to the balance gives the correct monthly interest: $150,000 times 4.8 percent divided by twelve equals $600, leaving $300 for principal out of the $900 payment. Using the annual rate directly against the balance produces a figure larger than the payment itself, an impossible result. Assuming 'mostly interest' means ALL interest with nothing toward principal overstates the rule, and using a 365-day daily rate misapplies a per-day method to a monthly calculation.49. A buyer purchases a $200,000 home. She puts down $20,000 of her own funds, and just before closing her parents contribute an additional $18,000 gift toward the down payment. Combining both amounts, will she need PMI on her conventional loan?
- A. No, because 19 percent rounds up to 20 percent in most lenders' policies
- B. Yes, because her total down payment is 19 percent, still just under the 20 percent threshold
- C. No, because gift funds are excluded from the PMI down-payment calculation
- D. Yes, because gift funds always disqualify a buyer from avoiding PMI entirely
Show answer & explanation
Answer: B
Adding the $20,000 and $18,000 contributions gives a $38,000 total down payment, which is 19 percent of the $200,000 price, just short of the 20 percent threshold, so PMI would generally still apply. Assuming a close percentage 'rounds up' to the threshold misunderstands that lenders apply the cutoff precisely, not by rounding. Gift funds count toward the down payment total for PMI purposes rather than being excluded, and gift funds do not categorically block a buyer from ever reaching the 20 percent threshold in other scenarios.50. Which loan type is insured by a federal agency but funded by private lenders, making it accessible to buyers with lower credit scores and smaller down payments?
- A. A VA loan
- B. An FHA loan
- C. A conventional loan
- D. A jumbo loan
Show answer & explanation
Answer: B
FHA loans are insured by the FHA, which protects the private lender and allows the program to serve buyers with lower credit scores and smaller down payments than typical conventional financing. VA loans are guaranteed rather than insured, and are limited to eligible veterans and certain service members, not the general public described here. Conventional loans are not government-backed, and jumbo loans simply exceed standard loan-size limits, unrelated to government insurance.51. A lender approves a $228,000 loan at a 76 percent loan-to-value ratio, with the appraised value equal to the purchase price. What must that price and appraised value be?
- A. $173,280
- B. $300,000
- C. $950,000
- D. $304,000
Show answer & explanation
Answer: B
Since LTV equals loan divided by value, solving for value means dividing the loan by the LTV percentage instead of multiplying: $228,000 divided by 76 percent gives $300,000. Multiplying the loan by the LTV percentage instead of dividing produces a value smaller than the loan itself, which is impossible since the loan cannot exceed the property's value at this ratio. Dividing by the complement of the LTV, or adding an arbitrary scaled term, do not correctly reverse the LTV formula.52. A borrower owes $320,000 on his mortgage at a 4.5 percent annual rate and makes a $1,600 monthly payment. What portion of that payment is interest, and what portion reduces the loan balance?
- A. $800 to interest and $800 to principal
- B. $14,400 to interest, more than the payment itself
- C. $1,200 to interest and $400 to principal
- D. $14,400 to interest, treating the annual interest as due in a single payment
Show answer & explanation
Answer: C
The correct monthly interest is the balance times the annual rate divided by twelve: $320,000 times 4.5 percent divided by twelve equals $1,200, so $400 of the $1,600 payment goes toward principal. Assuming an even fifty-fifty split ignores that the actual ratio depends on the rate and balance, not a fixed proportion. Applying the annual rate without dividing by twelve, or treating a full year of interest as due in one payment, both produce figures far larger than the actual monthly payment.53. A borrower without any military service wants a federally guaranteed loan requiring no down payment. Is she eligible for a VA loan?
- A. No, VA loans are guaranteed by the VA specifically for eligible veterans and certain service members, not the general public
- B. Yes, VA loans are available to any borrower regardless of service history
- C. Yes, but only if she pays a doubled funding fee to offset her ineligibility
- D. No, but she could still qualify for an FHA loan that also requires zero down payment
Show answer & explanation
Answer: A
VA loans are guaranteed by the VA for eligible veterans and certain service members, so a borrower with no military service does not qualify no matter what fee she might be willing to pay. Claiming VA loans are open to the general public misstates the program's core eligibility requirement. FHA loans do not eliminate the down payment requirement entirely, so directing her there as a zero-down alternative is also inaccurate.54. In a standard amortized loan, how does the split between principal and interest change as the loan matures?
- A. Early payments are mostly interest, while later payments are mostly principal, even though the total payment amount often stays the same
- B. The split depends only on the borrower's credit score, not on how much of the term has elapsed
- C. Early payments are mostly principal, while later payments are mostly interest
- D. The principal and interest portions stay perfectly equal throughout the loan
Show answer & explanation
Answer: A
Amortization repays principal and interest through scheduled payments, with early payments mostly interest and later payments mostly principal, which reflects how interest is calculated on a shrinking balance over time. Reversing that order is a common misunderstanding for borrowers surprised their balance barely moves at first. The split is also never perfectly equal throughout the term, and it is driven by the loan's amortization schedule, not by the borrower's credit score.55. A borrower's loan amount is $220,000, and she paid $4,400 in discount points at closing. How many points did she buy?
- A. 0.0200 points
- B. 2 points
- C. 44 points
- D. 50.0 points
Show answer & explanation
Answer: B
Since one point equals one percent of the loan amount, dividing the $4,400 cost by the $220,000 loan and converting to a percentage gives 2 points. Leaving the result as a raw decimal fraction instead of converting it to a percentage misses the point-to-percent conversion. Dividing the cost by 100 directly, or inverting the loan and cost figures, both produce numbers that do not represent a plausible point count.56. A seller advertises her home as having an 'assumable mortgage,' but her loan documents contain a standard due-on-sale clause. Is her advertised claim accurate?
- A. Yes, any mortgage can be assumed by a new buyer regardless of its clauses
- B. No, not without the lender's consent, because the due-on-sale clause allows the lender to demand full repayment when the property is sold, which blocks assumption unless the lender approves
- C. Yes, because due-on-sale clauses only apply to commercial loans, not residential mortgages
- D. No, because assumable mortgages were eliminated entirely under federal law
Show answer & explanation
Answer: B
Because a due-on-sale clause lets the lender call the full balance due upon sale, the seller's loan is not actually assumable without the lender first agreeing to waive that right, making her advertised claim misleading. Saying any mortgage can be assumed ignores the entire purpose of the due-on-sale clause. The clause is common in residential mortgages, not limited to commercial loans, and assumable loans still exist in some programs, so neither of those distractors is accurate either.57. A buyer wants to avoid PMI on a home appraised at and selling for $340,000 by staying at or below an 80 percent loan-to-value ratio. What is the maximum loan amount that keeps her at exactly that ratio?
- A. $68,000
- B. $425,000
- C. $204,000
- D. $272,000
Show answer & explanation
Answer: D
Multiplying the $340,000 value by the 80 percent target LTV gives a maximum loan of $272,000 while staying exactly at the PMI-avoiding threshold. Calculating 20 percent of the price instead produces the required DOWN PAYMENT amount, not the loan amount, which is a common mix-up between the two related figures. Dividing the price by 0.8 instead of multiplying inflates the result above the actual property value, which cannot be a valid loan amount here.
Contracts
28 of 55 questions loaded58. An applicant asks which of the following is a stated condition that must be satisfied before being allowed to sit for the exam covering Contracts. Which option is correct?
- A. Completing the required pre-licensing education hours
- B. Achieving a passing score before registering
- C. Waiting a fixed number of years after registration
- D. Holding a prior license in another profession
Show answer & explanation
Answer: A
Completion of pre-licensing education hours is required prior to sitting for the exam. The other options are not stated conditions; in particular, a passing score is an outcome of the exam, not a prerequisite to sitting for it.59. Before a candidate may sit for the licensing exam that covers Contracts, which of the following must be completed?
- A. A post-license apprenticeship
- B. The required pre-licensing education hours
- C. A background-only clearance with no coursework
- D. A continuing-education renewal course
Show answer & explanation
Answer: B
Completion of pre-licensing education hours is required prior to sitting for the exam. This prerequisite must be satisfied regardless of which content area, including Contracts, is being tested.60. Which statement most accurately describes the relationship between the pre-licensing education requirement and the passing-score requirement for the Contracts exam?
- A. Completing the education hours automatically satisfies the passing score
- B. The passing score replaces the education requirement
- C. Neither requirement applies to the Contracts section
- D. They are separate requirements: education must be completed before sitting, and a 70% score is commonly needed to pass
Show answer & explanation
Answer: D
The two requirements are distinct. Pre-licensing education hours must be completed before sitting, and a passing score of 70% is commonly required to pass. One does not substitute for the other, and both relate to the exam that includes Contracts.61. A purchase contract includes an appraisal contingency. The property fails to appraise at the level the contingency requires, and the buyer decides not to proceed. What is the buyer entitled to do?
- A. Cancel the contract and recover the earnest money deposit
- B. Cancel the contract but forfeit the deposit to the seller
- C. Proceed to closing only, since contingencies do not permit cancellation
- D. Demand that the seller pay the buyer's inspection costs
Show answer & explanation
Answer: A
Financing, inspection, and appraisal contingencies give the buyer the right to cancel and recover the deposit if the stated condition is not met. Because the appraisal condition failed, the buyer may cancel and take back the earnest money.62. A buyer offers to purchase a home on the seller's terms except for a longer inspection period. The seller responds in writing with the original inspection period restored plus a higher price. The buyer then tries to accept his own original offer's terms. Which analysis is correct?
- A. The buyer may revive his original offer at any time because he made it
- B. The seller's response was an acceptance, so a contract already exists on the buyer's terms
- C. The seller's response was a counteroffer that terminated the buyer's offer, so the buyer can only accept or reject the counteroffer's terms
- D. Both offers remain open simultaneously until one party withdraws
Show answer & explanation
Answer: C
Because the seller changed the terms, her response was a counteroffer, which rejects and terminates the buyer's original offer. Once terminated, the original offer cannot simply be accepted again; the buyer's options are to accept the counteroffer, reject it, or make a new offer.63. A seller receives a written offer on her condominium. She signs it after crossing out the proposed closing date and writing in a date two weeks later. What is the legal effect of the seller's response?
- A. It is an acceptance, because the change is minor
- B. It is a counteroffer that rejects and terminates the original offer
- C. It is an acceptance conditioned on the buyer's silence
- D. It keeps the original offer open while the buyer considers the new date
Show answer & explanation
Answer: B
Any change to the terms of an offer — even a seemingly small one like moving the closing date — is a counteroffer. A counteroffer rejects and terminates the original offer, so no acceptance has occurred and the original offer is no longer available.64. When a buyer submits an earnest money deposit with a purchase offer, where must those funds be kept?
- A. With the seller until closing
- B. In the listing broker's personal bank account
- C. In the buyer's attorney's operating account
- D. In the broker's trust account
Show answer & explanation
Answer: D
Earnest money is a good-faith deposit that must be held in the broker's trust account. Placing it in a personal or operating account would improperly mix client funds with other money, which the duty of accounting prohibits.65. A homeowner signs an exclusive-right-to-sell listing with a brokerage. During the listing period, the homeowner's coworker — with no broker involvement — agrees to buy the house. Is a commission owed?
- A. No, because the seller procured the buyer without the broker's help
- B. No, because the buyer was already known to the seller
- C. Yes, because under this listing type the broker earns a commission if the property sells during the term regardless of who procures the buyer
- D. Yes, but only half of the agreed commission
Show answer & explanation
Answer: C
Under an exclusive-right-to-sell listing, the broker earns the commission if the property sells during the listing period no matter who finds the buyer — including the seller personally. The seller locating the buyer does not defeat the broker's right to payment.66. A purchase agreement states that "time is of the essence." The buyer fails to deliver the required documents by the deadline written in the contract, though he is ready to perform a few days later. How is the buyer's late performance treated?
- A. As substantial performance, which satisfies the contract
- B. As a breach, because the stated deadline is strictly enforceable
- C. As an automatic extension of all remaining deadlines
- D. As a counteroffer proposing a new performance date
Show answer & explanation
Answer: B
A time is of the essence clause makes the contract's stated deadlines strictly enforceable, and missing a deadline constitutes a breach. Being ready to perform shortly after the date does not cure the failure to perform on time.67. An investor lists a rental property with three different brokerages at the same time under open listings. Broker Y produces the buyer who ultimately purchases the property. How is compensation handled?
- A. The first broker to have listed the property is paid
- B. No broker is paid, because multiple listings void each other
- C. All three brokers split the commission equally
- D. Only Broker Y, who procured the buyer, is paid
Show answer & explanation
Answer: D
An open listing is non-exclusive: the seller may list with multiple brokers, and only the broker who actually procures the buyer earns the commission. The other brokers receive nothing, and the simultaneous listings are valid.68. Which statement BEST describes the legal nature of a listing agreement?
- A. A conveyance transferring an interest in the property to the broker
- B. An employment contract authorizing a broker to market the property and find a ready, willing, and able buyer
- C. An option giving the broker the right to purchase the property
- D. A purchase contract between the seller and the eventual buyer
Show answer & explanation
Answer: B
A listing agreement is an employment contract between a seller and a broker. It authorizes the broker to market the property and to find a ready, willing, and able buyer; it conveys no ownership interest and is not itself a sale contract.69. A buyer and a seller verbally agree on all terms for the purchase of a single-family home, shake hands, and part ways without signing anything. Which requirement for an enforceable real estate purchase contract has NOT been satisfied?
- A. Mutual assent between the parties
- B. A lawful object for the agreement
- C. A written and signed agreement as required by the Statute of Frauds
- D. Consideration exchanged between the parties
Show answer & explanation
Answer: C
A valid real estate contract requires competent parties, mutual assent, consideration, a lawful object, and — because real estate is involved — a written and signed agreement under the Statute of Frauds. The parties here reached mutual assent on lawful terms with consideration, but the oral agreement fails the writing requirement, so it is not enforceable.70. A seller wants a single brokerage to handle her sale but insists on paying nothing if she personally finds the buyer herself. Which listing arrangement matches her goals?
- A. Exclusive-right-to-sell listing
- B. Exclusive-agency listing
- C. Net listing
- D. Buyer-agency agreement
Show answer & explanation
Answer: B
Under an exclusive-agency listing, one broker represents the seller, but no commission is owed if the seller personally finds the buyer. An exclusive-right-to-sell listing would obligate her to pay the broker even on a sale she procured herself.71. A buyer working with a seller's agent, without any buyer representation agreement, is shown a home. What does that seller's agent owe this buyer as a customer rather than a client?
- A. Honesty, fair dealing, and disclosure of known material defects, but not fiduciary duties such as loyalty or obedience
- B. The same full fiduciary duties owed to the seller
- C. No duties at all, since only the seller is represented in the transaction
- D. A written guarantee that the buyer is getting the lowest possible price
Show answer & explanation
Answer: A
Customers are owed only honesty, fair dealing, and disclosure of known material defects, not fiduciary duties, which describes exactly what this unrepresented buyer is entitled to from the seller's agent. Extending the full fiduciary duties to a customer confuses the customer and client relationships, which are legally distinct. Claiming no duties at all ignores that even a customer is still owed baseline honesty and disclosure, and no agent can guarantee a specific price outcome to anyone.72. A dual agent has obtained proper written consent from both the buyer and seller. During negotiations, the seller asks the agent to advocate for a higher price against the buyer's interests. May the dual agent comply?
- A. No, a dual agent cannot advocate for one party against the other, even with valid consent to the dual role itself
- B. Yes, because informed consent permits full advocacy for whichever party asks first
- C. Yes, but only if the buyer is notified of the advocacy afterward
- D. No, because dual agency is illegal in every circumstance regardless of consent
Show answer & explanation
Answer: A
Even with valid written consent authorizing the dual role, a dual agent cannot advocate for one party against the other, since consent legitimizes the dual representation itself but does not permit one-sided advocacy within it. Believing consent unlocks full advocacy for whichever party asks misunderstands the limited, neutral role a dual agent must maintain. Notifying the buyer afterward does not cure improper advocacy, and dual agency is not illegal outright; it is permitted with proper consent, just without the ability to advocate for either side.73. Under what circumstance can a single agent legally represent both the buyer and the seller in the same transaction?
- A. Whenever the agent believes it is in both parties' best interest
- B. Only with the informed written consent of both parties, since dual agency is otherwise not permitted
- C. Automatically, once both parties have signed a purchase contract
- D. Only if the commission is split evenly between both sides of the transaction
Show answer & explanation
Answer: B
Dual agency is legal only with the informed written consent of both parties, which is a strict requirement rather than something the agent can decide unilaterally. An agent's personal belief that dual representation serves both sides does not substitute for the parties' own informed consent. How the commission is split has no bearing on whether dual agency is permitted, and signing a purchase contract does not itself create or authorize dual agency.74. A home sells for $400,000 at a 6 percent commission, split evenly between the listing and selling brokerages. The selling agent's split with her own broker is 70/30 in the agent's favor. How much commission does the selling agent actually keep?
- A. $8,400
- B. $16,800, calculating her 70 percent share from the full $24,000 commission instead of her brokerage's half
- C. $12,000, assuming her brokerage keeps none of its own half
- D. $3,600, an amount that does not correspond to either party's actual share
Show answer & explanation
Answer: A
The full commission of $24,000 is split evenly to $12,000 per brokerage first, and only then does the agent take her 70 percent of that $12,000 share, landing on $8,400. Calculating 70 percent of the entire $24,000 commission before the brokerage split inflates her pay by skipping that first division. Assuming she keeps her whole brokerage's share ignores the agreed split with her own broker entirely.75. When a buyer submits a purchase offer along with a good-faith deposit, where must that deposit be held?
- A. In the broker's trust account
- B. In the seller's personal bank account immediately upon offer
- C. In a joint account controlled solely by the buyer's agent
- D. In the buyer's personal checking account until closing
Show answer & explanation
Answer: A
Earnest money is a good-faith deposit held in the broker's trust account, which keeps client funds segregated from anyone's personal accounts. Leaving the deposit in the buyer's own account defeats the purpose of demonstrating a good-faith commitment held by a neutral party. The seller has no right to the funds immediately upon receiving an offer, and a personal account controlled solely by the agent would violate the duty against commingling client funds.76. Which of the following would NOT terminate an agency relationship between a broker and a seller?
- A. Expiration of the listing term
- B. The broker taking a two-week vacation
- C. Completion of the sale
- D. Mutual agreement to cancel the listing
Show answer & explanation
Answer: B
Agency terminates by completion, expiration, mutual agreement, revocation, renunciation, or operation of law, and a temporary absence like a two-week vacation is not among those recognized triggers, so the relationship continues. Completion of the sale, expiration of the listing term, and mutual agreement to cancel are all recognized ways an agency legitimately ends, which is why each of those is a wrong answer to what would NOT terminate it.77. A seller signs a listing agreement under which her broker earns a commission if the home sells during the listing period, no matter who actually finds the buyer, including the seller herself. What type of listing is this?
- A. Exclusive-agency listing
- B. Open listing
- C. Exclusive-right-to-sell listing
- D. Net listing
Show answer & explanation
Answer: C
Under an exclusive-right-to-sell listing, the broker earns a commission if the property sells during the term regardless of who procures the buyer, which matches a seller who still owes commission even if she finds the buyer herself. An exclusive-agency listing would excuse the seller from paying if she personally found the buyer, the opposite of what is described. An open listing allows multiple brokers and pays only whoever procures the buyer, and a net listing bases the broker's pay on proceeds above a set amount, neither of which fits this fact pattern.78. Which combination of elements must be present for a real estate purchase contract to be valid?
- A. Mutual assent and consideration only, since real estate contracts do not require a writing
- B. Competent parties and a lawful object only, since consideration is optional between friends or family
- C. Competent parties, mutual assent, consideration, a lawful object, and a writing that satisfies the Statute of Frauds
- D. A notarized signature and a recorded copy, since those are the only elements state law requires
Show answer & explanation
Answer: C
A valid real estate contract requires competent parties, mutual assent, consideration, a lawful object, and a writing under the Statute of Frauds, all five of which must be present together. Claiming no writing is required directly contradicts the Statute of Frauds requirement for real estate contracts specifically. Consideration is not optional based on the parties' relationship, and notarization and recording are not themselves among the required elements of a valid contract, even though they serve other purposes.79. A buyer refuses to sign a written consent form for dual agency after learning the listing agent also represents the seller. Can that same agent still act as a dual agent for both parties in this transaction?
- A. Yes, verbal consent from the seller alone is sufficient to authorize dual agency
- B. No, dual agency requires the informed written consent of both parties, so without the buyer's consent the agent cannot serve as a dual agent
- C. Yes, as long as the agent discloses the dual role before closing
- D. No, because dual agency is banned nationwide under all circumstances
Show answer & explanation
Answer: B
Dual agency requires the informed written consent of both parties, so a buyer's refusal to consent means the agent cannot lawfully act as a dual agent in this transaction. Consent from only the seller, even if written, is not enough on its own, and verbal consent falls even further short of the written-consent standard. Dual agency is not banned everywhere; it is permitted with proper consent from both sides, which is exactly what is missing here.80. An unrepresented buyer asks the listing agent directly whether the roof has ever leaked, and the agent knows it has. Even though this buyer is only a customer of the agent, must the agent disclose the known defect?
- A. No, because the agent's fiduciary duty to the seller prohibits disclosing anything to a customer
- B. No, because only clients are owed any disclosures at all
- C. Yes, because even a customer is owed honesty, fair dealing, and disclosure of known material defects, even without a fiduciary relationship
- D. Yes, but only if the buyer signs a buyer representation agreement first
Show answer & explanation
Answer: C
Customers are owed honesty, fair dealing, and disclosure of known material defects even without a fiduciary relationship, so the agent must answer truthfully about the known roof leak regardless of the buyer's unrepresented status. Claiming disclosures are reserved only for clients ignores this baseline duty owed to every customer. The agent's loyalty to the seller does not extend to concealing known material defects from a customer, and no representation agreement is required to trigger this basic honesty obligation.81. A contract is signed by all parties and includes consideration and a lawful object, but one of the signing parties is a minor with no legal guardian involved. Is this a valid, enforceable contract?
- A. No, because a valid contract requires competent parties, and a minor generally lacks the legal capacity to be bound
- B. Yes, because a signature alone establishes legal competence regardless of age
- C. Yes, because minors may contract for real estate as long as a parent is simply notified afterward
- D. No, but only because the property's legal description was not properly certified
Show answer & explanation
Answer: A
A valid contract requires competent parties, and a minor generally lacks the legal capacity to be bound without a guardian's involvement, so the contract is not valid despite otherwise having consideration and a lawful object. A signature alone does not establish legal competence, since capacity depends on factors like age, not just the act of signing. The scenario does not raise any issue with the property's legal description, so that is not the actual defect here; the competence of the minor party is.82. A property sells for $280,000 at a 5 percent commission. The listing and selling brokerages split the total commission evenly. The buyer's agent then splits her brokerage's half with her broker 70/30 in her favor. What does the buyer's agent personally take home?
- A. $9,800, applying her 70 percent split to the full commission before splitting it between brokerages
- B. $7,000, treating her entire brokerage's half as her personal pay
- C. $3,500, dividing the total commission evenly across four unnamed parties
- D. $4,900
Show answer & explanation
Answer: D
The $14,000 total commission splits evenly to $7,000 per brokerage, and the agent's 70 percent share of that $7,000 comes to $4,900. Taking 70 percent of the full $14,000 commission first, before the brokerage split even happens, produces a figure nearly double what she actually earns. Keeping the whole brokerage share, or dividing the total into four equal unexplained parts, both skip the actual two-step split the scenario describes.83. A seller receives a full-price written offer but changes the proposed closing date before signing and returning it to the buyer. What is the legal effect of this changed closing date?
- A. It has no legal effect, since the purchase price itself was unchanged
- B. It creates a counteroffer that rejects and terminates the buyer's original offer
- C. It automatically binds the buyer to accept the new closing date
- D. It voids the entire transaction and requires the property to be relisted
Show answer & explanation
Answer: B
Any change to the terms of an offer is a counteroffer that rejects and terminates the original offer, and changing the closing date is exactly that kind of change, even though the price stayed the same. Assuming a changed date has no effect ignores that any term change, not just price, creates a counteroffer. The buyer is not automatically bound to the new date; he must accept the counteroffer for it to become binding, and nothing about this exchange requires relisting the property.84. What creates an agency relationship between a real estate broker and a seller?
- A. The principal authorizes the agent to act on their behalf in dealings with third parties
- B. The broker simply lists the property on the MLS without any signed agreement
- C. A buyer submits an offer through the broker
- D. The broker collects a commission at closing
Show answer & explanation
Answer: A
An agency relationship arises when a principal authorizes an agent to act on their behalf in dealings with third parties, which is the defining act that creates the relationship. Merely posting a listing does not by itself establish authorization from the seller to act as her agent. A buyer submitting an offer and a broker later collecting a commission are both consequences that can follow agency, not the act that creates it in the first place.85. A property's annual real estate taxes of $3,600 are paid in arrears at the end of the year. Closing occurs so that the seller has owned the property for exactly 180 days of the year so far, using the 360-day banker's year. How should the taxes be prorated at closing?
- A. The buyer owes the seller $1,800, reversing which party is owed since the taxes are unpaid
- B. The seller owes the buyer a credit of $1,800, since the seller used the property for 180 days of the unpaid tax year and the buyer will later pay the full bill covering that period
- C. The seller owes the buyer $1785.21, using a 365-day year and 181 days instead of the 360-day banker's year
- D. No proration is needed, since property taxes are always the buyer's sole responsibility once she takes title
Show answer & explanation
Answer: B
The daily rate under the banker's year is $3,600 divided by 360, or $10 a day, and multiplying by the seller's 180 days of ownership gives a $1,800 credit owed to the buyer, since the buyer will pay the full bill covering that period. For prepaid-versus-arrears expenses, the party who did not yet pay is credited for the other's share, so reversing the direction and charging the buyer is backwards. Using a 365-day year with an extra day, instead of the 360-day banker's year convention, produces a close but incorrect dollar figure.
State Law
15 questions86. A candidate registers for the examination but has not yet completed the required pre-licensing coursework. Based on the referenced requirement, what is the proper outcome?
- A. The candidate may sit and complete the coursework afterward
- B. The candidate is not eligible to sit until the pre-licensing education is completed
- C. The candidate may sit if a fee waiver is granted
- D. The candidate may sit but receives a reduced passing threshold
Show answer & explanation
Answer: B
Because completion of pre-licensing education hours is required prior to sitting, a candidate who has not finished the coursework is not yet eligible to take the exam.87. A candidate has completed all required pre-licensing education hours and scores 72 percent on the examination. Based on the referenced standards, what is the outcome?
- A. The candidate fails, because 72 percent is below the required score
- B. The candidate passes, having met both the education prerequisite and the passing score
- C. The candidate must retake the exam to confirm the score
- D. The candidate is ineligible because education must follow the exam
Show answer & explanation
Answer: B
The candidate satisfied the pre-licensing education prerequisite and scored 72 percent, which meets the commonly required 70% passing threshold, so the candidate passes.88. Before a candidate is permitted to sit for the salesperson examination, what does the referenced requirement state must be completed?
- A. A background interview with the licensing board
- B. Pre-licensing education hours
- C. A probationary period as an assistant
- D. Payment of the first-year renewal fee
Show answer & explanation
Answer: B
The referenced requirement states that completion of pre-licensing education hours is required prior to sitting for the examination.89. Which pair correctly identifies two prerequisites addressed by the referenced standards for a salesperson candidate?
- A. A minimum passing score and completion of pre-licensing education
- B. A minimum age and a residency period
- C. A surety bond and continuing education
- D. A criminal expungement and an apprenticeship
Show answer & explanation
Answer: A
The referenced standards address a minimum passing score (commonly 70%) and completion of pre-licensing education prior to sitting; the other pairs are not supported.90. When must a candidate complete the required pre-licensing education relative to the examination?
- A. Within thirty days after passing
- B. Only if the candidate fails on the first attempt
- C. Prior to sitting for the examination
- D. At any point before the first license renewal
Show answer & explanation
Answer: C
The referenced requirement specifies that pre-licensing education hours must be completed prior to sitting for the examination.91. An agent canvasses a neighborhood telling homeowners they should sell quickly because families of a particular national origin are 'moving in and changing the area.' This conduct is best described as:
- A. Redlining
- B. Permissible market commentary
- C. Steering
- D. Blockbusting
Show answer & explanation
Answer: D
Blockbusting is inducing owners to sell by suggesting that people of a protected class are moving into the area. Steering is channeling buyers toward or away from neighborhoods based on a protected class, and redlining is denying loans or insurance in certain areas based on protected characteristics — neither matches these facts.92. Why is a grantee well advised to record a deed promptly in the county land records?
- A. Recording substitutes for delivery and acceptance of the deed
- B. Recording is required for the deed to be valid between grantor and grantee
- C. Recording gives constructive notice to the world and generally protects the first party to record
- D. Recording guarantees the title is marketable
Show answer & explanation
Answer: C
Recording provides constructive notice to the world of the grantee's interest and establishes priority, generally protecting the first party to record. Title transfers upon delivery to and acceptance by the grantee — recording does not replace that step, and it does not by itself make title marketable.93. A salesperson is asked to represent both the buyer and the seller in the same transaction. Under what condition may the salesperson lawfully act as a dual agent?
- A. Only if the broker verbally notifies both parties before closing
- B. Only with the informed written consent of both parties
- C. Only if the salesperson advocates equally hard for each side
- D. Dual agency is never lawful under any circumstances
Show answer & explanation
Answer: B
Dual agency is legal only with the informed written consent of both parties. Even then, the dual agent cannot advocate for one party against the other, which is why choice C is wrong — the dual agent must remain neutral, not advocate for both sides.94. A property sells for 300,000 dollars with a six percent commission payable to the brokers. What total commission does the sale generate?
- A. 6,000 dollars
- B. 12,000 dollars
- C. 18,000 dollars
- D. 24,000 dollars
Show answer & explanation
Answer: C
Commission equals the sale price multiplied by the commission rate. A 300,000 dollar sale at six percent yields an 18,000 dollar commission, which is then split between the listing and selling brokers per their agreement.95. A buyer offers to purchase a home on the seller's terms except that the buyer changes the closing date. What is the legal effect of the buyer's response?
- A. It is an acceptance with a minor amendment that binds the seller
- B. It is a counteroffer that rejects and terminates the original offer
- C. It keeps the original offer open while the seller considers the new date
- D. It is void because closing dates cannot be negotiated after an offer
Show answer & explanation
Answer: B
Any change to the terms of an offer is a counteroffer, which rejects and terminates the original offer. The original offer does not remain open, so choices A and C are incorrect.96. A seller signs a listing, then personally finds a buyer through a neighbor and closes the sale during the listing term. Under which listing arrangement would the seller owe NO commission to the listing broker?
- A. Exclusive-right-to-sell listing
- B. Exclusive-agency listing
- C. Net listing
- D. Any exclusive listing requires payment regardless of who finds the buyer
Show answer & explanation
Answer: B
Under an exclusive-agency listing, the broker earns no commission if the seller personally finds the buyer. By contrast, under an exclusive-right-to-sell listing the broker is paid if the property sells during the term regardless of who procures the buyer — including the seller.97. A divorcing spouse wants to remove any interest she may hold in the marital home so her ex-husband can resell it with clean title. She makes no promises about the quality of the title. Which deed best fits this purpose?
- A. General warranty deed
- B. Special warranty deed
- C. Quitclaim deed
- D. Trustee's deed
Show answer & explanation
Answer: C
A quitclaim deed conveys only whatever interest the grantor may have, with no warranties, and is commonly used to clear clouds on title. A general warranty deed warrants against all defects arising at any time, and a special warranty deed covers defects arising during the grantor's ownership — both make promises this grantor does not intend to give.98. A borrower taking out a conventional loan asks when private mortgage insurance will generally be required. The best answer is when the down payment is:
- A. Less than 20 percent of the purchase price
- B. Less than 10 percent of the appraised value
- C. Required on every conventional loan regardless of down payment
- D. Only required on FHA and VA loans
Show answer & explanation
Answer: A
Private mortgage insurance is generally required on conventional loans when the down payment is less than 20 percent of the purchase price. FHA loans are insured by the FHA and VA loans are guaranteed by the VA — those are government programs, distinct from PMI on conventional loans.99. Three months after a listing agreement expired unsold, the former listing agent is chatting with a prospective buyer of the same property, now listed with another brokerage. The buyer asks what the seller's bottom-line price was. The agent should refuse because:
- A. Disclosing the price would violate the duty of accounting
- B. The agent may freely disclose it, since the agency has ended
- C. The duty of obedience requires following the new brokerage's instructions
- D. The duty of confidentiality survives termination of the agency relationship
Show answer & explanation
Answer: D
Confidentiality survives termination of the agency and specifically bars revealing information that would harm the principal's bargaining position, such as the seller's lowest acceptable price. Accounting concerns entrusted funds, and obedience runs to one's own principal — neither applies here.100. The owner of an owner-occupied triplex rents the other two units herself without a licensee. Which statement about her ability to rely on the so-called Mrs. Murphy exemption is accurate?
- A. It applies only to buildings of five or more units
- B. It allows her to refuse tenants on any basis, including race
- C. It never applies to racial discrimination and is lost if she uses discriminatory advertising or a licensee
- D. It permits discriminatory advertising so long as the transaction itself is exempt
Show answer & explanation
Answer: C
The Mrs. Murphy exemption for owner-occupied buildings of four or fewer units never applies to race, and it does not protect discriminatory advertising or a transaction handled by a real estate licensee. Moreover, the Civil Rights Act of 1866 separately prohibits all racial discrimination in property transactions with no exemptions, and advertising indicating a preference based on a protected class is illegal even when the underlying transaction would be exempt.
Showing 100 of 183 questions.
Key facts: Real Estate exam
- Passing score
- 70% or 75%, set by each state
- Governing body
- Your state real estate commission
This free Real Estate Salesperson practice test has 183 original questions written from the official sources, last checked against them on September 16, 2026, 100 of them listed on this page and the rest loaded by the drill. Every question shows a worked explanation, and nothing here requires a signup.
The questions are grouped under four outline areas: Property Ownership, Contracts, Financing and State Law.
How the Real Estate practice bank covers the outline
Counts are the live question bank, grouped by the outline area each question was written to.
About these practice questions
These are original study questions written from published exam objectives—not recalled, copied, or confidential live-exam items. Always confirm current coverage with the official sources linked on this page.
Exam format and study resources
Real Estate Salesperson licensing
In the same family
- Michigan Real Estate Salesperson Exam
- Washington, D.C. Real Estate Salesperson Exam
- Utah Real Estate Sales Agent Exam
- Nevada Real Estate Salesperson Exam
- Maryland Real Estate Salesperson Exam
- California Real Estate Salesperson Exam
- New Jersey Real Estate Salesperson Exam
- Massachusetts Real Estate Salesperson Exam
- New York Real Estate Salesperson Exam
- Connecticut Real Estate Salesperson Exam
- Oklahoma Provisional Sales Associate Exam
- Maine Real Estate Sales Agent Exam
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Official sources
The official documents our facts about this exam are taken from.
- Occupational Employment and Wage Statistics, May 2025 — Real Estate Sales Agents (SOC 41-9022)U.S. Bureau of Labor Statisticsbls.goveffective May 31, 2025
- Topic no. 701, Sale of your homeInternal Revenue Serviceirs.gov
- Housing Discrimination Under the Fair Housing ActU.S. Department of Housing and Urban Developmenthud.gov
- When will I receive my Closing Disclosure?Consumer Financial Protection Bureauconsumerfinance.gov
- Real Estate Salesperson LicensingState Real Estate Commissionarello.org
Last verified against Internal Revenue Service's official sources:
Frequently asked questions
What is mostly on the real estate salesperson exam?
The question bank on this page is organized into the same four outline areas the exam draws from: Contracts, Property Ownership, Financing, and State Law. Within those areas you will see agency relationships and fiduciary duties, listing and purchase contracts, deeds and title transfer, financing basics such as mortgages and deeds of trust, fair housing law, and real estate math covering commissions, proration, and loan-to-value. Expect definitions, such as a listing agreement being an employment contract between a seller and a broker, alongside applied scenarios that test whether you can spot a counteroffer or a dual agency without consent.
What is the best way to study for the real estate salesperson exam?
Work one outline area at a time using the topic filter on this page, so you can see whether Contracts, Property Ownership, Financing, or State Law is your weak spot before you mix them. Read the worked explanation on every question, including the ones you get right, because the explanations show the reasoning the exam rewards. Then run the review pass over your missed questions until you can answer each one without guessing. There is no signup and no card, so you can repeat the cycle as often as you need.
What does OLD CAR stand for on the real estate salesperson exam?
OLD CAR summarizes the core fiduciary duties an agent owes a client: Obedience, Loyalty, Disclosure, Confidentiality, Accounting, and Reasonable care. Loyalty means placing the principal's interests above your own and avoiding conflicts such as undisclosed self-dealing. Confidentiality survives termination of the agency and bars you from revealing the seller's lowest acceptable price. Accounting requires safeguarding entrusted funds and prohibits commingling client money with your own, and remember that a customer, unlike a client, is owed only honesty, fair dealing, and disclosure of known material defects.
What is the difference between exclusive-right-to-sell, exclusive-agency, and open listings?
Under an exclusive-right-to-sell listing, the broker earns a commission if the property sells during the term regardless of who procures the buyer, including the seller. Under an exclusive-agency listing, the broker earns no commission if the seller personally finds the buyer. An open listing is non-exclusive, so the seller may list with multiple brokers and only the broker who procures the buyer is paid. Questions in the Contracts area of this page test these distinctions by describing who found the buyer and asking whether a commission is owed.
Which type of deed gives the buyer the most protection?
A general warranty deed gives the greatest protection because the grantor warrants against all title defects arising at any time, even before the grantor owned the property. A special warranty deed warrants only against defects that arose during the grantor's period of ownership. A quitclaim deed conveys only whatever interest the grantor may have, with no warranties, and is used to clear clouds on title. Whatever the deed type, it must be delivered to and accepted by the grantee to transfer title, and recording it provides constructive notice to the world and establishes priority.
What fair housing rules does the real estate salesperson exam test?
The federal Fair Housing Act, part of the Civil Rights Act of 1968 and amended in 1988, bans discrimination in the sale, rental, and financing of housing based on race, color, religion, national origin, sex, familial status, and disability. You will be asked to recognize steering, which channels buyers toward or away from neighborhoods based on a protected class, blockbusting, which induces owners to sell by suggesting people of a protected class are moving in, and redlining, which denies loans or insurance in certain areas. The Civil Rights Act of 1866 separately prohibits all racial discrimination in property transactions with no exemptions.