OH Salesperson Practice Exam.
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1. A buyer purchasing a home wants the deed offering the greatest protection, including warranties covering title defects that arose before the current seller ever owned the property. Which deed should the buyer request?
- A. A general warranty deed
- B. A special warranty deed
- C. A quitclaim deed
- D. Any type of deed, as long as it is promptly recorded
Show answer & explanation
Answer: A
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 — through covenants such as seisin, quiet enjoyment, and warranty forever. A special warranty deed is the tempting wrong answer because it sounds protective, but it warrants only against defects that arose during the grantor's own period of ownership. A quitclaim deed carries no warranties at all, and recording provides constructive notice and priority but does not add any warranties to a deed.2. A salesperson's brokerage represents the seller of a condo. An unrepresented buyer — a customer — asks the salesperson what duties the salesperson owes her. Which answer is correct?
- A. Honesty, fair dealing, and disclosure of known material defects
- B. The full set of fiduciary duties, including loyalty and obedience
- C. The same duties owed to the seller, because she is a party to the transaction
- D. No duties at all until she signs a written representation agreement
Show answer & explanation
Answer: A
Customers, unlike clients, are owed only honesty, fair dealing, and disclosure of known material defects — not fiduciary duties. Choice B is the tempting error: fiduciary duties such as loyalty and obedience run only to the principal (here, the seller). Choice D is wrong because these baseline duties are owed to customers even with no representation agreement.3. A buyer finances a home purchase by signing a promissory note together with a mortgage. Which statement best describes the role of the mortgage in this arrangement?
- A. The mortgage is the primary evidence of the debt, and the note pledges the property as collateral.
- B. The mortgage pledges the property as security for repayment of the promissory note.
- C. The mortgage is a good-faith deposit demonstrating the buyer's serious intent to purchase.
- D. The mortgage permanently conveys ownership of the property to the lender in every state.
Show answer & explanation
Answer: B
A mortgage or deed of trust pledges the property as security for repayment of the promissory note. Choice A reverses the roles of the two documents: the note evidences the debt, while the mortgage provides the security. Choice C confuses the mortgage with an earnest money deposit, and choice D overstates the lender's interest — the mortgage is a security arrangement, not a permanent conveyance of ownership.4. A buyer obtains a conventional loan and makes a down payment equal to 10 percent of the purchase price. The lender informs the buyer that an additional insurance charge will be required on the loan. Which of the following most likely explains this requirement?
- A. Private mortgage insurance is required because the down payment is less than 20 percent of the purchase price.
- B. Federal insurance applies automatically because every low-down-payment loan is insured by the FHA.
- C. Private mortgage insurance is required on all conventional loans no matter how large the down payment is.
- D. The charge represents discount points, which must be paid to lower the note rate.
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 10 percent down payment falls below that threshold. Choice B is wrong because a conventional loan is by definition not insured by the federal government — FHA insurance applies to FHA loans, not automatically to any low-down-payment loan. Choice C overstates the rule, since PMI is tied to the size of the down payment rather than applying to every conventional loan, and choice D confuses PMI with discount points, which are prepaid interest paid to lower the note rate rather than an insurance requirement.5. A borrower finances a home in a state where, under the financing arrangement, legal title to the property is held by a trustee until the debt is fully repaid, even though the borrower lives in and uses the home. Which statement correctly characterizes this arrangement?
- A. The state follows lien theory, because the borrower has possession and use of the property.
- B. The state follows title theory, because legal title is held by a trustee until the debt is repaid.
- C. The arrangement is invalid, because only the borrower may hold legal title to mortgaged property.
- D. The borrower holds legal title, and the trustee merely holds a lien against the property.
Show answer & explanation
Answer: B
In title-theory states, legal title is held by the lender or a trustee until the debt is repaid, which is exactly the arrangement described. Choice A is the tempting error: possession and use by the borrower does not determine the theory — what matters is who holds legal title, and in a lien-theory state the borrower would retain title while the lender holds only a lien. Choice D restates the lien-theory arrangement, which contradicts the facts given, and choice C is wrong because the trustee arrangement is a recognized way of securing the debt, not an invalid one.6. A buyer is closing on a home with a $240,000 loan. To lower the note rate, the buyer agrees to pay the lender 2 discount points at closing. How much will the buyer pay for the points, and how are the points best characterized?
- A. $2,400, characterized as prepaid interest.
- B. $4,800, characterized as prepaid interest paid at closing to lower the note rate.
- C. $4,800, characterized as a reduction of the loan's principal balance.
- D. $2,400, characterized as a refundable good-faith deposit held in trust.
Show answer & explanation
Answer: B
One discount point equals one percent of the loan amount, so one point on a $240,000 loan is $2,400 and two points total $4,800. Discount points are prepaid interest paid at closing to lower the note rate. Choice A uses the right characterization but computes only one point instead of two. Choice C is a common misconception — points buy down the interest rate; they are not applied to reduce the principal balance. Choice D confuses points with an earnest money deposit.7. A buyer submits a written offer on a house. The seller crosses out the proposed closing date, writes in a date two weeks later, signs the form, and returns it to the buyer. Which statement best describes the legal effect?
- A. The seller has accepted the offer, and the buyer is bound to the new closing date because the change is minor
- B. The seller has made a counteroffer, which rejects and terminates the buyer's original offer
- C. The buyer's original offer remains open, so the buyer may choose between the original terms and the seller's revised terms
- D. The seller's handwritten change is disregarded, and a contract is formed on the buyer's original terms
Show answer & explanation
Answer: B
Any change to the terms of an offer — even just the closing date — is a counteroffer that rejects and terminates the original offer. Choice C is the tempting one: because the original offer was terminated by the counteroffer, it no longer exists for the buyer to fall back on; the buyer can only accept or reject the seller's new terms. There is no 'minor change' exception (A).8. Two years after closing, a homeowner discovers a serious title defect that existed at the time the owner's title insurance policy was issued but was unknown to all parties at that time. Assuming the defect is of a type covered by the policy, which statement is correct?
- A. The policy protects the owner against losses from the defect, because title insurance covers defects that existed but were unknown when the policy issued
- B. The policy provides no protection, because the defect arose before the policy was purchased
- C. The policy provides no protection, because the seller delivered marketable title at closing
- D. The policy protects the owner only for defects that first arise after the policy's issue date
Show answer & explanation
Answer: A
Title insurance protects the insured against losses from covered title defects that existed but were unknown at the time the policy issued — that is precisely this scenario. Choices B and D are tempting because most insurance covers future events, but title insurance works in the opposite direction: it covers pre-existing, unknown defects. Choice C fails because marketable title means title free from reasonable doubt or serious defects a prudent buyer would accept; a defect unknown to everyone at closing can still surface later, which is the very loss the policy addresses.9. An appraiser values an income-producing property using the income capitalization approach. After the initial estimate, market conditions lead investors to apply a higher capitalization rate, while the property's net operating income remains unchanged. What happens to the estimated value?
- A. The estimated value decreases, because value equals net operating income divided by the capitalization rate
- B. The estimated value increases, because a higher capitalization rate reflects a stronger market
- C. The estimated value stays the same, because value depends only on net operating income
- D. The estimated value cannot be determined without knowing the property's monthly gross rent
Show answer & explanation
Answer: A
Under the income capitalization approach, net operating income divided by the capitalization rate yields the estimated value. With the same net operating income divided by a larger capitalization rate, the result is a smaller estimated value. Choice B is tempting because a higher rate sounds favorable, but mathematically a larger divisor shrinks the value estimate. Choice C ignores the capitalization rate's role in the formula, and choice D confuses this approach with the gross rent multiplier, which is the tool that uses monthly gross rent (sale price divided by monthly gross rent).10. A seller signs an exclusive-right-to-sell listing at a 6 percent commission rate. During the listing period, the seller's neighbor — found entirely through the seller's own efforts, with no broker involvement — buys the home for $300,000. How much commission, if any, does the broker earn?
- A. $0, because the seller personally procured the buyer
- B. $9,000, because the broker is entitled to only the listing side of the commission
- C. $18,000, because under an exclusive-right-to-sell listing the commission is earned regardless of who procures the buyer
- D. $18,000, but only if the broker proves the neighbor first learned of the home through the broker's marketing
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 regardless of who procures the buyer — including the seller. The commission is sale price times rate: $300,000 × 6% = $18,000. Choice A is the tempting trap because it states the exclusive-agency rule, under which a seller who personally finds the buyer owes nothing; that rule does not apply to an exclusive-right-to-sell listing.11. A buyer's purchase contract includes a financing contingency requiring loan approval by June 1 and a 'time is of the essence' clause. On May 20, the buyer's lender issues a final loan denial, and the buyer promptly cancels the contract under the contingency. What happens to the buyer's earnest money deposit?
- A. The seller keeps it as compensation for taking the home off the market
- B. It is returned to the buyer, because a financing contingency lets the buyer cancel and recover the deposit when the condition fails
- C. The seller keeps it, because the 'time is of the essence' clause makes any failure to close a breach
- D. It is divided between the seller and the broker according to the listing agreement
Show answer & explanation
Answer: B
Financing, inspection, and appraisal contingencies give the buyer the right to cancel and recover the deposit if the condition is not met — here, the loan denial triggered exactly that right. Choice C is the tempting trap: a time-is-of-the-essence clause makes stated deadlines strictly enforceable, so missing a date is a breach — but the buyer canceled under the contingency before the June 1 deadline, so no deadline was missed and no breach occurred. The earnest money, held in the broker's trust account, goes back to the buyer.12. A buyer purchases a property for $300,000, and the appraisal comes in at the same amount. The buyer obtains a loan of $240,000. What is the loan-to-value (LTV) ratio on this purchase?
- A. 80 percent
- B. 20 percent
- C. 125 percent
- D. 8 percent
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Answer: A
LTV is the loan amount divided by the lesser of the appraised value or the purchase price — here both are $300,000, so a $240,000 loan produces an 80 percent LTV. Choice B is the classic trap: 20 percent is the down payment portion (the remainder after the loan), not the loan-to-value ratio. Choice C inverts the ratio by dividing value by the loan, and choice D is a decimal-placement error.13. Which of the following correctly states how the gross rent multiplier (GRM) for a property is calculated?
- A. Divide the sale price by the monthly gross rent
- B. Divide the monthly gross rent by the sale price
- C. Divide the net operating income by the capitalization rate
- D. Multiply the sale price by the monthly 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 income properties. Choice C is the tempting wrong answer because it is also an income-based formula, but net operating income divided by the capitalization rate estimates a property's value under the income capitalization approach — it does not produce the GRM. Choice B inverts the correct ratio, and choice D multiplies instead of divides.14. Many licensing exams use a "banker's year" convention for proration problems. Under this convention, how is the daily rate of an annual expense determined?
- A. Divide the annual amount by 360, treating each month as having 30 days
- B. Divide the annual amount by the actual number of days in the calendar year
- C. Divide the annual amount by the number of months in the year
- D. Divide the monthly amount by the actual number of days in the month of closing
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Answer: A
The banker's year is a 360-day year made up of 30-day months, so the daily rate equals the annual amount divided by 360. Choice B describes an actual-calendar-day method, which is a different convention from the banker's year the question asks about. Choice C produces a monthly amount, not a daily rate, and choice D mixes a monthly figure with an actual-day count rather than applying the 30-day-month convention.15. Which of the following best describes marketable title?
- A. Title that is completely free of every lien, claim, or defect of any kind in its history
- B. Title free from reasonable doubt or serious defects that a prudent buyer would accept
- C. Title that is protected by an owner's title insurance policy
- D. Title that has been recorded in the county land records
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Answer: B
Marketable title is title free from reasonable doubt or serious defects that a prudent buyer would accept — the standard is a prudent buyer's acceptance, not absolute perfection, which makes choice A too strict. Title insurance is a separate product that protects against losses from covered defects that existed but were unknown when the policy issued, and recording provides constructive notice and priority; neither insurance nor recording is what defines marketability.16. A home sells for $300,000. The listing agreement provides for a 6 percent commission, which the listing broker and the selling broker will split per their agreement. What is the total commission generated by the sale?
- A. $18,000
- B. $9,000
- C. $1,800
- D. $30,000
Show answer & explanation
Answer: A
Commission equals the sale price multiplied by the commission rate: $300,000 at 6 percent generates an $18,000 total commission. Choice B is the tempting trap — it assumes an equal split and gives only one broker's share, but the question asks for the total commission generated before any split between the listing and selling brokers. Choice C reflects a misplaced decimal, and choice D results from applying the wrong rate.17. Which type of deed transfers only whatever interest the grantor may currently hold, makes no warranties of title, and is commonly used to clear a cloud on title?
- 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, with no warranties, and is commonly used to clear clouds on title. A special warranty deed is the tempting wrong answer, but it still contains a warranty — it warrants against defects that arose during the grantor's period of ownership. A general warranty deed provides the broadest warranties, and a deed of trust is a financing instrument that pledges property as security for a note, not a conveyance used to cure title problems.18. A seller paid the annual property taxes for the entire tax period in advance. The transaction closes partway through that period, so the buyer will own the property for the remainder of it. Under standard proration rules, how should the closing statement handle the taxes?
- A. The buyer reimburses the seller for the unused portion of the prepaid taxes
- B. The seller credits the buyer for the seller's share of the taxes
- C. No adjustment is made, because taxes are the sole responsibility of whoever owns the property on the closing date
- D. The taxes are divided equally between buyer and seller regardless of when the closing occurs
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Answer: A
Proration divides shared expenses between buyer and seller based on the portion of the period each party owns the property, using the closing date as the dividing point. Because the seller prepaid the taxes, the buyer must reimburse the seller for the unused portion. Choice B is the tempting reversal — a seller credits the buyer only when the expense is paid in arrears, the opposite of this scenario. Choices C and D ignore proration entirely: the split follows each party's ownership portion, not an all-or-nothing or equal division.19. Which of the following correctly describes a conventional loan?
- A. It is insured by the Federal Housing Administration.
- B. It is guaranteed by the Department of Veterans Affairs for eligible veterans.
- C. It is not insured or guaranteed by the federal government.
- D. It always requires private mortgage insurance, regardless of the down payment.
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Answer: C
A conventional loan is defined by what it lacks: it is not insured or guaranteed by the federal government. Choice A describes an FHA loan, which is insured by the Federal Housing Administration, and choice B describes a VA loan, which is guaranteed by the Department of Veterans Affairs for eligible veterans. Choice D is wrong because private mortgage insurance is generally required on conventional loans only when the down payment is less than twenty percent, not in every case.20. An owner signs a deed naming a nephew as grantee. The deed contains words of conveyance and an adequate legal description. The owner places the deed in a home safe without telling anyone and later dies. The nephew then discovers the deed while settling the estate. Did the deed transfer title to the nephew?
- A. Yes, because the deed was signed by a competent grantor and adequately described the property
- B. Yes, because the nephew's discovery of the deed constitutes acceptance
- C. No, because the deed was never delivered to and accepted by the grantee
- D. No, because the deed was never recorded in the county land records
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Answer: C
A valid deed requires competent parties, words of conveyance, an adequate legal description, and the grantor's signature — but it must also be delivered to and accepted by the grantee to transfer title. Here the deed sat undelivered in a safe, so title never passed, making choices A and B wrong: a properly drafted, signed deed still fails without delivery and acceptance. Choice D is the tempting misconception — recording provides constructive notice and priority, but it is not among the elements required for a deed to transfer title.21. A salesperson receives an earnest money check from a buyer on Friday afternoon. To keep the funds 'safe' over the weekend, the salesperson deposits the check into his personal checking account, planning to move the money to the brokerage on Monday. Which duty has the salesperson violated?
- A. Accounting, because client funds may not be commingled with the licensee's own funds
- B. Loyalty, because the salesperson placed his own convenience above the client's interests
- C. No duty was violated, because the funds were safeguarded and would be transferred promptly
- D. Disclosure, because the buyer was not told where the deposit would be held
Show answer & explanation
Answer: A
The duty of accounting requires the agent to safeguard entrusted funds and prohibits commingling client money with the agent's own funds; earnest money belongs in the broker's trust account, not a personal account. Choice C is tempting because the salesperson's intent was protective and the delay short, but the act of commingling is itself the violation regardless of intent or duration.22. A broker's listing on a home expires unsold, and the sellers relist with a different brokerage. Months later, the broker takes on a buyer as a client, and the buyer becomes interested in that same home. The buyer asks the broker to share the lowest price the sellers said they would accept during the earlier listing. What should the broker do?
- A. Reveal the price — the broker's fiduciary duty of disclosure to the current buyer client requires it
- B. Refuse to reveal it — the duty of confidentiality to the former sellers survives termination of that agency
- C. Reveal it — the duty of confidentiality ended when the listing expired
- D. Reveal it, but only if the buyer agrees in writing to keep the information confidential
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Answer: B
Confidentiality survives termination of the agency and specifically prohibits revealing information that would harm the former principal's bargaining position, such as the seller's lowest acceptable price. Choice A is the hard trap: disclosure is indeed a fiduciary duty owed to the current buyer client, but it does not override the continuing confidentiality owed to the former principal. Choices C and D both wrongly assume the duty lapsed or can be passed along.23. A licensee proposes to represent both the buyer and the seller in the same transaction as a dual agent. Under the general rule for dual agency, which of the following is required for this arrangement to be legal?
- A. Informed written consent from both the buyer and the seller
- B. Oral disclosure of the dual agency to both parties before closing
- C. Written consent from the seller only, since the seller pays the commission
- D. Nothing additional — dual agency is legal as long as the licensee treats both parties fairly
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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 D is the tempting misconception: treating both sides fairly does not substitute for consent — the parties must knowingly agree in writing to the limited representation. Oral disclosure (B) and one-sided consent (C) fall short of the written, two-party requirement.24. A seller conveys a parcel to Buyer 1, who never records the deed. The seller later conveys the same parcel to Buyer 2, who promptly records. Under a typical recording system, whose interest generally has priority?
- A. Buyer 1, because that deed was delivered first
- B. Buyer 2, because recording provides constructive notice to the world and priority generally goes to the first party to record
- C. Buyer 1, because a grantor cannot legally convey the same property twice
- D. Buyer 2, but only if Buyer 2 also purchased an owner's title insurance policy
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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, Buyer 2. Choice A is the tempting misconception: delivery is what transfers title between the parties, but an unrecorded deed gives the world no constructive notice, so the earlier grantee can lose priority to a later grantee who records first. Title insurance protects against losses from unknown covered defects; it does not create recording priority.25. Which of the following events creates an agency relationship between a licensee and a party to a transaction?
- A. The party authorizes the licensee to act on the party's behalf in dealings with third parties
- B. The licensee shows the party several homes and answers questions about them
- C. The party pays the licensee a fee or commission
- D. The licensee treats the party with honesty and fair dealing throughout the transaction
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Answer: A
An agency relationship is created when a principal authorizes an agent to act on the principal's behalf in dealings with third parties. Choice C is the classic trap: agency arises from authorization, not from who pays compensation. Showing homes (B) and honest, fair treatment (D) do not signal agency either — honesty and fair dealing are owed even to customers who have no agency relationship at all.26. The core fiduciary duties a real estate agent owes a client are commonly summarized by the acronym OLD CAR. In this acronym, the letter 'A' stands for which duty?
- A. Advertising
- B. Accounting
- C. Advocacy
- D. Appraisal
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Answer: B
OLD CAR stands for Obedience, Loyalty, Disclosure, Confidentiality, Accounting, and Reasonable care and diligence. The 'A' is Accounting — the duty to safeguard and account for all money and property entrusted to the agent. 'Advertising' is tempting because agents do market listings, but marketing is a service activity, not one of the fiduciary duties in the acronym.27. A seller signs an exclusive-agency listing with a broker. During the listing term, the seller's coworker — whom the seller told about the house directly, with no broker involvement — buys the property. Is the broker owed a commission?
- A. Yes — under any exclusive listing, the broker is paid regardless of who finds the buyer
- B. No — under an exclusive-agency listing, no commission is owed when the seller personally finds the buyer
- C. No — under any listing type, a commission is owed only to a broker who actually procures the buyer
- D. Yes — an exclusive listing prohibits the seller from finding a buyer personally, so the sale breached the agreement
Show answer & explanation
Answer: B
Under an exclusive-agency listing, the broker earns a commission unless the seller personally finds the buyer — which is exactly what happened here, so no commission is owed. Choice A is the tempting one: it states the exclusive-right-to-sell rule, where the broker is paid regardless of who procures the buyer. Choice C overgeneralizes the open-listing rule (payment only to the procuring broker) to all listing types.28. A homeowner's existing mortgage loan contains a due-on-sale clause. A prospective buyer proposes to purchase the home and simply take over the seller's existing loan without contacting the lender. What is the effect of the due-on-sale clause on this plan?
- A. The clause automatically transfers the loan to the buyer on the same terms once the sale closes.
- B. The clause allows the lender to demand full repayment upon the sale, so the buyer cannot assume the loan without lender approval.
- C. The clause merely requires the parties to notify the lender after closing; the assumption is otherwise unaffected.
- D. The clause requires the seller to pay discount points at closing before the loan can be assumed.
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Answer: B
A due-on-sale clause allows the lender to demand full repayment of the loan if the property is sold, which prevents a buyer from assuming the loan without the lender's approval. Choice A describes the opposite of the clause's purpose — it blocks automatic assumption rather than enabling it. Choice C is tempting because it sounds procedural, but the clause gives the lender the right to call the entire debt due, not just a right to notice. Choice D confuses the clause with discount points, which are prepaid interest and unrelated to loan assumption.