GA Salesperson Practice Exam.
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1. 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
Show answer & explanation
Answer: C
A quitclaim deed conveys only whatever interest the grantor may have, carries no warranties, and is commonly used to clear clouds on title — exactly what a party releasing a doubtful interest without making promises would sign. The special warranty deed is the tempting wrong answer, but it still warrants against defects that arose during the grantor's period of ownership. A general warranty deed goes further, warranting against all defects arising at any time, and a deed of trust is a financing instrument that pledges property as security for a note, not a tool for releasing a doubtful interest.2. 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
Show answer & explanation
Answer: B
Marketable title is title free from reasonable doubt or serious defects that a prudent buyer would accept. A general warranty deed does offer the greatest protection — the grantor warrants against all defects arising at any time — but those covenants are promises of recourse against the grantor; they do not erase a serious known defect from the title, so the title remains unmarketable. Choice C fails because title insurance protects against losses from covered defects that existed but were unknown when the policy issued — a defect already revealed by the search is not an unknown one. Choice D is backwards: a quitclaim deed conveys whatever interest the grantor has with no warranties at all.3. 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
Show answer & explanation
Answer: C
Commission equals the sale price multiplied by the commission rate: 300,000 dollars times six percent is 18,000 dollars. Choice B is the tempting error — it assumes the question asks for one broker's share after an even split, but the question asks for the total commission; the split between listing and selling brokers happens afterward, per their agreement. Choice A results from a misplaced decimal, and choice D would require a ten percent rate.4. 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
Show answer & explanation
Answer: C
Under the income capitalization approach, value equals net operating income divided by the capitalization rate: 45,000 dollars divided by 0.09 is 500,000 dollars — below the seller's asking price, so the income does not support the asking figure. Choice B is the tempting shortcut of dividing by a rounded ten percent rate, choice A comes from multiplying by nine instead of dividing by nine percent, and choice D simply accepts the asking price, which is not derived from the property's income.5. 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
Show answer & explanation
Answer: D
A listing agreement is an employment contract between the seller and the broker: it hires the broker to market the property and produce a ready, willing, and able buyer. Choice A is the classic trap — the instrument that conveys title is a deed, not a listing; the listing transfers no ownership interest and (as choice C wrongly implies) guarantees no sale.6. 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
Show answer & explanation
Answer: A
Dual agency is legal only with the informed written consent of both parties, and even then the dual agent cannot advocate for one party against the other. Choice C reflects the common misconception that duties follow the commission — consent must come from both principals regardless of who pays, and oral or after-the-fact disclosure (choice B) is not enough.7. 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.
Show answer & explanation
Answer: A
Private mortgage insurance is generally required on conventional loans when the borrower's down payment is less than twenty percent of the purchase price, and a ten percent down payment falls below that threshold. Choice C is the tempting confusion: FHA insurance applies to FHA loans, not conventional ones — a conventional loan is by definition not insured by the federal government, which is exactly why private mortgage insurance fills the gap. Whether the rate is fixed or adjustable (choice D) has nothing to do with the PMI requirement.8. 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. Yes — the owner-occupied exemption for buildings of four or fewer units covers this refusal.
- B. No — the exemption applies only to single-family homes, never to multi-unit buildings.
- C. Yes — but only because she avoided using a licensee and ran no discriminatory advertising.
- D. 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.
Show answer & explanation
Answer: D
The so-called Mrs. Murphy exemption for owner-occupied buildings of four or fewer units does not apply to race, and the Civil Rights Act of 1866 independently prohibits all racial discrimination in property transactions with no exemptions at all — so the refusal is unlawful on two separate grounds. Choice C is the tempting trap: avoiding discriminatory advertising and licensees is indeed a condition of using the exemption, but satisfying those conditions never extends the exemption to racial discrimination. Choice B misstates the exemption's scope — it does reach owner-occupied buildings of up to four units, just never for race.9. 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.
Show answer & explanation
Answer: A
An open listing is non-exclusive: the seller may list with multiple brokers at once, and only the broker who actually procures the buyer earns a commission. Choice B is tempting because all three brokers held listings, but merely holding an open listing earns nothing — procuring the buyer is what triggers payment. Multiple open listings are perfectly valid, so C is wrong.10. 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
Show answer & explanation
Answer: B
Commission equals sale price multiplied by the commission rate, and the total is then split between the listing and selling brokers per their agreement: 400,000 dollars × 5% = 20,000 dollars total, and an equal split leaves the selling broker 10,000 dollars. Choice C is the common slip — stopping at the total commission and forgetting to apply the split. Choice D reflects a misplaced decimal.11. 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
Show answer & explanation
Answer: C
A special warranty deed warrants only against title defects that arose during the grantor's period of ownership. Because this claim predates Marta's ownership, her warranties do not reach it. Choice A is the classic trap: it describes a general warranty deed, which does warrant against defects arising at any time — even before the grantor owned the property. Choice D confuses the special warranty deed with a quitclaim deed, which conveys whatever interest the grantor has with no warranties.12. 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
Show answer & explanation
Answer: B
Recording a deed in the county land records provides constructive notice to the world of the grantee's interest and establishes priority, generally protecting the first party to record — here, Blake. The tempting answer is Ana, since her deed was delivered first, but by leaving it unrecorded she gave the world no notice of her interest and risks losing priority. Title insurance is a separate protection against losses from covered defects that were unknown when the policy issued; it does not determine priority between competing deeds.13. 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
Show answer & explanation
Answer: D
A time-is-of-the-essence clause makes stated deadlines strictly enforceable, so failing to perform by the date is a breach. Choice A is the tempting answer because informal grace periods are common in practice — but that customary flexibility is precisely what the clause eliminates; nothing requires the seller to grant an extension first.14. 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.
Show answer & explanation
Answer: A
In lien-theory states the borrower retains title and the lender holds a lien — which matches State X. In title-theory states legal title is held by the lender or a trustee until the debt is repaid — which matches State Y. Choice B simply reverses the two labels, the most common error; choices C and D wrongly assume a single nationwide rule when the two theories differ on precisely this point: who holds legal title while the loan is outstanding.15. 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.
Show answer & explanation
Answer: A
A due-on-sale clause allows the lender to demand full repayment if the property is sold, which is exactly what prevents a buyer from assuming the loan without lender approval — the parties' informal takeover exposes the entire balance to being called due. Choice D is the tempting wrong answer: the clause is an acceleration device, not a rate-adjustment device; it permits the lender to demand the full balance, not merely reprice the loan. Notice alone (choice C) does not substitute for the lender's approval.16. 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.
Show answer & explanation
Answer: C
Under an exclusive-right-to-sell listing, the broker earns a commission if the property sells during the listing period no matter who procures the buyer — including the seller personally. Choice A describes an exclusive-agency listing, where the seller escapes the commission by personally finding the buyer; that is precisely the misconception this seller is relying on, but it is the wrong listing type. Choice B describes an open listing, the non-exclusive arrangement in which only the procuring broker is paid.17. 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.
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. Because the loan was denied, the financing contingency lets this buyer cancel and take back the earnest money — the good-faith deposit that has been sitting in the broker's trust account. Choice B reflects the common misconception that any failure to close costs the buyer the deposit; an unmet contingency is exactly the situation in which the deposit comes back. Choice D is wrong because the contingency itself confers the cancellation right — the seller's consent is not required.18. 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.
Show answer & explanation
Answer: C
A valid real estate contract requires competent parties, mutual assent, consideration, a lawful object, AND compliance with the Statute of Frauds, which mandates a written, signed agreement. Choice A is tempting because assent and consideration genuinely existed, but for real estate the writing is an additional required element, and the oral handshake fails it. No rule requires a broker's involvement, so D is wrong.19. 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
Show answer & explanation
Answer: C
One discount point equals one percent of the loan amount, so two points on a 250,000 dollar loan cost two percent of 250,000 dollars, which is 5,000 dollars. The tempting wrong answer is 5,600 dollars (choice D), which computes the points on the 280,000 dollar purchase price — points are a percentage of the loan, not the price. Choice A (2,500 dollars) charges only one point instead of two. Remember that discount points are prepaid interest paid at closing to buy down the note rate.20. 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
Show answer & explanation
Answer: B
A valid real estate contract requires competent parties, mutual assent, consideration, a lawful object, and — under the Statute of Frauds — a written and signed agreement. Earnest money is tempting because it appears in nearly every deal, but it is only a good-faith deposit held in the broker's trust account; a contract can be fully valid without any deposit at all.21. 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
Show answer & explanation
Answer: A
A deed is the written instrument that conveys title to real property from a grantor to a grantee. The title insurance policy is the tempting distractor because it concerns title, but it only protects the insured against losses from covered defects that existed but were unknown when the policy issued — it transfers nothing. A listing agreement is an employment contract authorizing a broker to market the property, and a promissory note with a mortgage evidences and secures a debt; none of these conveys title.22. 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. Net operating income divided by the capitalization rate
- C. Monthly gross rent divided by the sale price
- D. Sale price multiplied by the annual gross rent
Show answer & explanation
Answer: A
The gross rent multiplier is found by dividing the sale price by the monthly gross rent, giving investors a quick tool for comparing rental properties. Choice B is tempting because it is also a valuation formula, but it is the income capitalization approach (which estimates value from net operating income), not the gross rent multiplier. Choice C inverts the formula, and choice D multiplies instead of divides.23. 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
Show answer & explanation
Answer: C
The visitor is a customer, not a client, so the salesperson owes honesty, fair dealing, and disclosure of known material defects — but not fiduciary duties, which run only to the principal (the seller). Choice B is the tempting overcorrection: 'not my client' does not mean 'no duties at all'; customers are still owed the baseline duties.24. 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
Show answer & explanation
Answer: A
Because the tax is paid in arrears, the buyer will later pay the full bill, so the seller must credit the buyer for the seller's share at closing. Under the banker's year, the daily rate is 3,600 dollars divided by 360, or 10 dollars per day. The seller's period runs January 1 through April 15 — three 30-day months plus 15 days, or 105 days — so the seller's share is 105 times 10, a 1,050 dollar credit to the buyer. Choice B tempts by flipping the direction; crediting the seller is the treatment for expenses the seller prepaid, not those paid in arrears. The 2,550 dollar figures represent the buyer's 255-day share, which is not what changes hands.25. 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
Show answer & explanation
Answer: C
OLD CAR stands for Obedience, Loyalty, Disclosure, Confidentiality, Accounting, and Reasonable care and diligence — the core fiduciary duties owed to a client. Honesty is tempting because licensees do owe it, but it belongs to the baseline duties owed to customers (honesty, fair dealing, and disclosure of known material defects), not to the fiduciary acronym itself.26. 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
Show answer & explanation
Answer: B
Accounting requires the agent to safeguard and account for all money entrusted to the agent and specifically prohibits commingling client funds with the agent's own funds — which is exactly what depositing the check into a personal account does, however briefly. Earnest money belongs in the broker's trust account. Loyalty is the tempting alternative, but loyalty governs conflicts of interest and self-dealing; the duty that governs handling entrusted funds is accounting.27. 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
Show answer & explanation
Answer: B
Any change to the terms of an offer — even one term, like the closing date — is a counteroffer, and a counteroffer rejects and terminates the original offer. Once terminated, the original offer cannot be revived by the seller's later 'acceptance'; at that point she is merely making a new offer the buyer is free to ignore. Choice C is the classic trap: there is no 'minor change' exception. Choice D is wrong because earnest money is a good-faith deposit, not what makes an offer or contract binding.28. 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
Show answer & explanation
Answer: A
Agency can terminate by expiration, but the duty of confidentiality survives termination and specifically bars revealing information that would harm the former principal's bargaining position, such as the seller's lowest acceptable price. Choice B is the tempting misconception — that all duties die with the agency; confidentiality is the exception. Choice D overreaches: the agent may work with the buyer, they simply cannot disclose the former client's confidences.29. 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.
Show answer & explanation
Answer: B
A mortgage or deed of trust pledges the property itself as security for repayment of the promissory note. Choice A is the tempting wrong answer: the promise to repay resides in the promissory note, while the mortgage or deed of trust is the security instrument that backs it. A deed (choice C) is the instrument that conveys title, and title insurance (choice D) is what protects against unknown title defects existing at the time a policy is issued.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. Steering
- B. Blockbusting
- C. Redlining
- D. Lawful prospecting, because no one was refused housing
Show answer & explanation
Answer: B
Blockbusting is inducing owners to sell by suggesting that people of a protected class are moving into the area — exactly what this canvassing does. Steering is the tempting wrong answer, but steering targets buyers: it means channeling buyers toward or away from neighborhoods based on a protected class, whereas here the licensee is pressuring owners to sell. Redlining is a lending practice — denying loans or insurance in certain areas based on protected characteristics. The conduct is prohibited even though no one was denied housing, because the inducement itself is the violation.31. 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.
Show answer & explanation
Answer: A
Customers are owed honesty, fair dealing, and disclosure of known material defects — recurring basement flooding is such a defect, so it must be disclosed. But confidentiality to the seller-client prohibits revealing information that would harm the seller's bargaining position, such as the lowest acceptable price. Choice B is the trap: honesty to customers never extends to betraying the client's confidential pricing position, while choice C ignores that even customers are owed defect disclosure.32. 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.
Show answer & explanation
Answer: B
An agency relationship is created when a principal authorizes an agent to act on the principal's behalf in dealings with third parties. Choice A is tempting because showing a property looks like agency-type activity, but activity alone does not create agency — the defining event is the principal's authorization, not the licensee's conduct or a buyer's offer.33. 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.
Show answer & explanation
Answer: A
Earnest money is a good-faith deposit held in the broker's trust account. Choice B is the classic trap: earnest money is not by itself evidence of consideration, and it is not among the essential elements of a valid contract, so it is not what binds the agreement (which also rules out D). Holding it in a general operating account, as in C, would improperly mix client funds with brokerage funds.34. 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
Show answer & explanation
Answer: A
Among the OLD CAR fiduciary duties (Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable care), obedience is the duty that binds the agent to the principal's lawful instructions even when the agent's professional judgment differs. Choice B is the tempting wrong answer — reasonable care concerns the agent's competence and diligence, but professional opinion does not override a client's lawful directions.35. 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.
Show answer & explanation
Answer: C
A VA loan is guaranteed by the Department of Veterans Affairs for eligible veterans. A conventional loan is, by definition, not insured or guaranteed by the federal government, and an FHA loan is insured by the Federal Housing Administration — so choices A, B, and D each attach the wrong government role (or a nonexistent one) to the loan type. The classic trap is swapping 'insured' (FHA) with 'guaranteed' (VA).36. 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
Show answer & explanation
Answer: C
An exclusive-agency listing appoints one broker who earns the commission on a sale — unless the seller personally finds the buyer, in which case no commission is owed. That is exactly the seller's request. The exclusive-right-to-sell listing (choice A) is the tempting near-miss because it also uses one broker, but under it the broker is paid if the property sells during the term regardless of who procures the buyer, including the seller. An open listing fails the seller's 'only you' condition, since it is non-exclusive and allows listing with multiple brokers.37. 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. Familial status
- B. National origin
- C. Age
- D. Religion
Show answer & explanation
Answer: C
The seven federally protected classes under the federal Fair Housing Act are race, color, religion, national origin, sex, familial status, and disability. Age does not appear on that list. Familial status is the tempting elimination because it is the least familiar term, but it is expressly protected — it covers households with children under eighteen and pregnant persons.38. 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.
Show answer & explanation
Answer: B
Dual agency is legal only with the informed written consent of both parties — which exists here — but even a properly consented dual agent cannot advocate for one party against the other. Pressuring the seller to drop the price is precisely that forbidden one-sided advocacy. Choice A is tempting because agents ordinarily follow client instructions, but this instruction demands something the dual-agency role itself prohibits; and since consented dual agency remains legal, withdrawal (D) is not required.39. 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
Show answer & explanation
Answer: C
Even a deed that satisfies every formal requirement — competent parties, words of conveyance, an adequate legal description, and the grantor's signature — must still be delivered to and accepted by the grantee to transfer title. A deed locked away and never handed over was not delivered, so title never passed. Choice D is the tempting trap: recording provides constructive notice and establishes priority against other claimants, but it is delivery and acceptance, not recording, that transfers title.40. 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
Show answer & explanation
Answer: B
LTV is the loan amount divided by the lesser of the appraised value or the purchase price. Here the appraised value of 300,000 dollars is lower than the 310,000 dollar contract price, so the lender divides 240,000 by 300,000, which is an eighty percent LTV. Choice A tempts buyers who assume the contract price always controls, but the lesser-of rule means a low appraisal — not the agreed price — sets the lending base. No averaging is used, so choice D is wrong.41. 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
Show answer & explanation
Answer: A
Proration divides shared expenses like property taxes between buyer and seller based on each party's ownership period, using the closing date as the dividing point. When the seller has prepaid an expense, the buyer reimburses the seller for the unused portion. Choice B is the tempting reversal — a seller credit to the buyer is the correct treatment only when the expense is paid in arrears, meaning the buyer will pay a bill covering the seller's period of ownership. Choices C and D ignore proration entirely.42. 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.
Show answer & explanation
Answer: B
Agency may terminate by completion, expiration, mutual agreement, revocation, renunciation, or operation of law — and death or incapacity of either party is the classic operation-of-law example. The seller's death ended the agency automatically, regardless of the unexpired term. Choice A is tempting because a listing agreement is indeed an employment contract between seller and broker, but no contract term keeps an agency alive after the principal's death; revocation and renunciation (choices C and D) are separate, voluntary ways an agency can end and are not required here.43. 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
Show answer & explanation
Answer: B
Loyalty requires the agent to place the principal's interests above the agent's own and to avoid conflicts of interest such as undisclosed self-dealing. Secretly positioning a friend to capture the seller's lost value — with the agent sharing the profit — is self-dealing that puts the agent's gain ahead of the client's. Reasonable care is the tempting alternative because the underpricing suggests sloppy advice, but the heart of this violation is the hidden conflict of interest, which is loyalty's domain.44. Which of the following terminates an agency relationship by operation of law, rather than by an act or agreement of the parties?
- A. The seller and broker mutually agree to cancel the listing.
- B. The listing's stated term expires without a sale.
- C. The principal is declared legally incapacitated.
- D. The broker renounces the agency and returns the listing paperwork.
Show answer & explanation
Answer: C
Agency may terminate by completion, expiration, mutual agreement, revocation, renunciation, or by operation of law such as death or incapacity of either party. Incapacity is the operation-of-law event — it ends the agency automatically, regardless of anyone's intent. Choice B is the tempting distractor because expiration also feels 'automatic,' but the term was set by the parties' own agreement; mutual cancellation and renunciation are likewise acts of the parties.