PA Salesperson Practice Exam.
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Answer: A
Title insurance protects the insured against losses from covered title defects that existed but were unknown at the time the policy was issued — exactly this situation. Choice B is the tempting wrong answer: a special warranty deed warrants only against defects that arose during the grantor's own period of ownership, so a defect predating the grantor's ownership falls outside its covenants (that broader protection belongs to a general warranty deed). Recording provides constructive notice and priority, not a guarantee of title quality, and choice D is wrong because the policy exists precisely to cover this loss.

Answer: B
LTV is the loan amount divided by the lesser of the appraised value or the purchase price. Because the appraisal exceeds the 300,000 dollar purchase price, the purchase price is the lesser figure and controls: 240,000 divided by 300,000 is an eighty percent LTV. Choice C is the tempting trap — a higher appraisal does not lower LTV, because the lender uses the lesser of the two figures. Choice D fails for the same reason: since the appraisal is known to be higher, its exact amount is irrelevant. Twenty percent is the down payment share, not the LTV.

Answer: A
Earnest money is a good-faith deposit that belongs in the broker's trust account, and the fiduciary duty of accounting requires safeguarding entrusted funds and prohibits commingling client money with the agent's own funds. Choice B is tempting because the funds still reach the brokerage, but an operating account holds the firm's own money — placing client funds there is exactly the commingling the accounting duty forbids.

Answer: A
The agreement described — commission owed unless the seller personally finds the buyer — is an exclusive-agency listing, and here the seller personally procured the coworker, so no commission is due. Choice B states the exclusive-right-to-sell rule, under which the broker earns a commission if the property sells during the term regardless of who procures the buyer; it is the tempting answer for anyone who confuses the two exclusive listing types. Choices C and D invent partial or conditional commissions that match neither listing type.

Answer: C
A conventional loan is not insured or guaranteed by the federal government. Choice A describes an FHA loan, which is insured by the Federal Housing Administration, and choices B and D describe a VA loan, which is guaranteed by the Department of Veterans Affairs for eligible veterans.

Answer: A
An adjustable-rate mortgage has a rate that changes periodically based on an index plus a margin. Choice D describes a fixed-rate mortgage, which keeps the same rate for the entire term — the most tempting error for anyone confusing the two loan structures. Discount points are prepaid interest paid at closing to lower the note rate, not a mechanism for later rate adjustments.

Answer: D
Under a 360-day banker's year, the daily rate is the annual amount divided by 360: 3,600 dollars divided by 360 is 10 dollars per day. The seller owned the property from January 1 through August 31 — eight 30-day months, or 240 days — so the seller's share is 2,400 dollars. Because the taxes are paid in arrears (due at year end, after the seller's period of ownership), the seller credits the buyer for the seller's share, who will later pay the full bill. Choice C is the tempting reversal — crediting the seller is the treatment for expenses the seller prepaid, not for expenses in arrears. Choices A and B use the buyer's 120-day share of 1,200 dollars instead of the seller's share.

Answer: A
The agency did terminate by expiration of the listing, but confidentiality is the duty that survives termination — it continues to bar revealing information that would harm the former principal's bargaining position, and the seller's lowest acceptable price is the textbook example. Choice B is the tempting answer because expiration genuinely is one way agency terminates; the trap is assuming every duty dies with the agency. Choice D reaches the right result for the wrong reason — the protection comes from the surviving duty of confidentiality, not from where the home is currently listed.

Answer: A
Dual agency is legal only with the informed written consent of both parties, and a dual agent cannot advocate for one party against the other. Choice B is tempting because disclosure is indeed involved, but an oral disclosure at closing falls short of the informed written consent both parties must give. Choice C overstates the rule — dual agency is restricted, not universally banned — and choice D wrongly ties consent to who pays the commission.

Answer: B
Discount points are prepaid interest paid at closing to lower the note rate, and one point equals one percent of the loan amount. One percent of 200,000 dollars is 2,000 dollars, so two points cost 4,000 dollars. Choice A is the trap for stopping after calculating a single point; C and D come from misplacing the decimal when converting the percentage.

Answer: A
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 — so the buyer's plan fails unless the lender consents. Choice C is the common confusion with acceleration upon default: a due-on-sale clause is triggered by the transfer itself, not by missed payments. Choice D confuses it with a prepayment restriction, and B understates the lender's rights.

Answer: C
Private mortgage insurance is generally required on conventional loans when the down payment is less than twenty percent of the purchase price, so the buyer should put down at least twenty percent of 300,000 dollars, which is 60,000 dollars. The tempting answer of 30,000 dollars is only a ten percent down payment — common in practice, but still below the twenty percent threshold, so PMI would generally be required.

Answer: D
Net operating income divided by the capitalization rate yields the estimated value of an income property: 27,000 dollars divided by 0.09 equals 300,000 dollars. Choice B is the tempting slip of dividing by 9 instead of 0.09, choice C comes from multiplying the NOI by 9 rather than dividing by the rate, and choice A multiplies NOI by the decimal rate — each reverses or misapplies the capitalization formula.

Answer: A
Financing, inspection, and appraisal contingencies give a buyer the right to cancel and recover the deposit if the condition is not met — here, the loan denial is exactly the unmet condition the contingency protects against. Choices B and D are tempting because a deposit can be at risk when a buyer simply walks away without a contractual basis, but a properly exercised contingency entitles the buyer to both cancellation and return of the deposit.

Answer: B
LTV is the loan amount divided by the lesser of the appraised value or purchase price, and at an eighty percent LTV the down payment equals the remaining twenty percent. Here both value figures are 200,000 dollars, so the loan is 160,000 dollars and the down payment is 200,000 × 20% = 40,000 dollars. Choice D is the loan amount itself, not the down payment — a common mix-up when the question asks for the buyer's cash contribution rather than the financed portion.

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. The special warranty deed is the tempting wrong answer, 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 a deed of trust is not a conveyance of ownership — it is a security instrument pledging the property for repayment of a debt.

Answer: A
A quitclaim deed conveys only whatever interest the grantor may have, with no warranties, and it is commonly used exactly for this purpose — clearing clouds on title. That matches the former spouse's position: releasing a possible interest without promising anything about the title. Both warranty deeds fail because they would require the former spouse to make title warranties they refuse to give. The title insurance policy is the tempting non-deed answer, but insurance only protects the insured against losses from covered defects — it does not remove the former spouse's interest or clear the cloud from the record.

Answer: A
When an expense is prepaid by the seller, the buyer reimburses the seller for the unused portion, since the buyer will enjoy the benefit of the payment after closing. Choice B is the tempting reversal: a seller credit to the buyer is the correct treatment only for expenses paid in arrears, where the seller owes for time already used. Prepaid shared expenses are still prorated, so choice C is wrong, and the broker's trust account plays no role in allocating prorated expenses between the parties.

Answer: C
Commission equals sale price multiplied by the commission rate, and the total is then split between the listing and selling brokers per their agreement. Here the total commission is 420,000 × 5% = 21,000 dollars, and an equal split gives each brokerage 10,500 dollars. Choice D is the trap for stopping at the total commission and forgetting the question asks for one brokerage's share after the split.

Answer: B
Because net operating income divided by the capitalization rate yields value, the relationship can be rearranged: the rate equals net operating income divided by value. Here, 20,000 ÷ 250,000 = 0.08, or eight percent. Choice D is the trap of dividing the price by the income — 250,000 ÷ 20,000 = 12.5 — which produces a multiplier, not a capitalization rate.

Answer: A
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 B. Choice B is the tempting wrong answer because delivery to Buyer A did occur first, but an unrecorded interest gave the world no constructive notice, which is precisely the risk the recording system addresses. Title insurance affects who bears a loss, not recording priority, and competing grantees do not simply share title.

Answer: B
The fiduciary duties summarized by OLD CAR are Obedience, Loyalty, Disclosure, Confidentiality, Accounting, and Reasonable care. Honesty and fair dealing is what a licensee owes to customers — non-clients — along with disclosure of known material defects; it is not a fiduciary duty owed to a principal. Confidentiality, accounting, and reasonable care are tempting eliminations precisely because they ARE part of OLD CAR, which makes them wrong answers to this EXCEPT question.

Answer: C
An open listing is non-exclusive: the seller may list with multiple brokers, and only the broker who procures the buyer earns a commission. Choice B is the tempting answer because an exclusive-agency listing also lets the seller avoid a commission by personally finding the buyer — but an exclusive arrangement does not allow the seller to hire several brokerages at once, which is the defining feature of the seller's plan here.

Answer: A
The unrepresented buyer is a customer, owed honesty, fair dealing, and disclosure of known material defects — so the leaking roof must be disclosed — but not fiduciary duties. The seller's lowest acceptable price is confidential information that would harm the seller-client's bargaining position and must not be revealed. Choice C is the tempting trap: owing fiduciary duties only to the seller does not eliminate the duty to disclose known material defects to a customer. B overshares confidential information, and D wrongly extends fiduciary duties to a non-client.

Answer: B
Blockbusting is inducing owners to sell by suggesting that people of a protected class are moving into the area — exactly what this licensee is doing. Steering is the tempting wrong answer, but steering involves channeling buyers toward or away from neighborhoods based on a protected class, not pressuring owners to sell. Redlining is denying loans or insurance in certain areas based on protected characteristics, and soliciting listings this way is not lawful prospecting.

Answer: A
In lien-theory states the borrower retains title and the lender holds a lien, while in title-theory states legal title is held by the lender or a trustee until the debt is repaid — exactly as choice A describes. Choice C is the tempting reversal of the two theories, and choices B and D contradict how both systems allocate title.

Answer: A
Even a deed that meets the formal validity requirements — competent parties, words of conveyance, an adequate legal description, and the grantor's signature — must also be delivered to and accepted by the grantee before title transfers. A deed sitting in the grantor's drawer has not been delivered, so no transfer has occurred. Choice D is the tempting wrong answer: recording serves to give constructive notice to the world and establish priority against competing claims, so it protects the grantee's interest — but it is not what transfers title between the parties.

Answer: B
The gross rent multiplier is found by dividing the sale price by the monthly gross rent, giving investors a quick comparison tool. Choice A is tempting because it is also a valuation formula, but net operating income divided by the capitalization rate is the income capitalization method for estimating value, not the GRM. Choice C inverts the GRM formula, and choice D describes the loan-to-value ratio, a financing measure rather than a valuation tool.

Answer: A
An agency relationship arises when a principal authorizes an agent to act on the principal's behalf in dealings with third parties — authorization by the principal is the key. Choice B is the tempting distractor because buyers often assume the licensee showing them homes automatically represents them, but touring properties, writing a deposit check, or signing an open-house register does not by itself supply the principal's authorization that creates agency.

Answer: A
Any change to the terms of an offer — even one as small as moving the closing date — is a counteroffer that rejects and terminates the original offer. Once terminated, the original offer no longer exists for the seller to enforce, so the buyer is free to walk away. Choice B is the classic trap: there is no 'minor change' exception under which an altered acceptance still binds the offeror. Choices C and D wrongly assume the original offer survived the seller's alteration.

Answer: B
The Mrs. Murphy exemption for owner-occupied buildings of four or fewer units never applies to race, and the Civil Rights Act of 1866 separately prohibits all racial discrimination in property transactions with no exemptions at all — so her refusal is illegal. Choices A, C, and D are tempting because the exemption does exist and does require avoiding discriminatory advertising and licensee involvement, but meeting those conditions cannot save conduct based on race, which is categorically outside the exemption.

Answer: C
Because the taxes were prepaid by the seller, the buyer reimburses the seller for the unused portion. The daily rate is the annual amount divided by 360: 2,400 ÷ 360 = 6.67 dollars per day. The seller owned the property from January 1 through April 30 — four 30-day months, or 120 days — leaving the buyer's unused portion at 240 days: 240 × 6.67 ≈ 1,600 dollars, credited to the seller and debited to the buyer. Choice B reverses the direction, which is the treatment for an expense paid in arrears (where the seller credits the buyer), and choice A is the seller's own 120-day share rather than the unused portion being reimbursed.

Answer: C
Commission equals the sale price multiplied by the commission rate: 300,000 dollars times six percent is 18,000 dollars, which is then split between the listing and selling brokers per their agreement. Choice A is the classic misplaced-decimal error (multiplying by 0.6 percent instead of 6 percent), and choice D results from applying a ten percent rate rather than the stated six percent.

Answer: D
The seven federally protected classes are race, color, religion, national origin, sex, familial status, and disability. Source of income is not on the federal list, so D is the exception. Familial status, national origin, and disability are tempting to pick as the 'odd one out' because they are less obvious than race or religion, but all three are expressly among the seven federal classes.

Answer: A
A deed is the written instrument that conveys title to real property from a grantor to a grantee. A mortgage is the tempting wrong answer because it is also signed and recorded in a financed purchase, but a mortgage or deed of trust only pledges the property as security for repayment of a promissory note — it does not convey ownership. A listing agreement is merely an employment contract between a seller and a broker, and a promissory note is the borrower's promise to repay a debt, not a conveyance.

Answer: B
Proration divides shared expenses like taxes, rent, or interest based on the portion of the period each party owns the property, with the closing date serving as the dividing point. A fifty-fifty split (choice A) is the tempting trap because the expense is 'shared,' but the split is proportional to each party's time of ownership, not equal — a closing early in the tax year leaves the buyer responsible for far more than half.

Answer: C
The gross rent multiplier is the sale price divided by the monthly gross rent: 240,000 ÷ 2,000 = 120. Choice A (10) is the classic error of dividing by the annual rent of 24,000 instead — this multiplier is defined using monthly rent, so keep the rent figure monthly before dividing.

Answer: B
A valid real estate contract requires competent parties, mutual assent (offer and acceptance), consideration, a lawful object, and — under the Statute of Frauds — a written and signed agreement. Choice A is the classic trap: earnest money is a good-faith deposit held in the broker's trust account, but it is not one of the required elements of a valid contract. Recording and a broker's signature are likewise not among the essential elements.

Answer: B
The mortgage or deed of trust is the instrument that pledges the property as security for repayment of the promissory note. The promissory note is the tempting wrong answer, but it is the debt obligation being secured rather than the instrument that pledges the property; the deed merely conveys title from grantor to grantee, and a listing agreement is an employment contract between a seller and a broker.

Answer: A
Amortization repays principal and interest through scheduled payments, with early payments applied mostly to interest and later payments mostly to principal — so a borrower early in the term sees only slow principal reduction even with a perfect payment history. Choice B is tempting but wrong because a fixed-rate mortgage keeps the same rate for the entire term; index-plus-margin adjustments apply to adjustable-rate mortgages. Choice D confuses scheduled payments with discount points, which are prepaid interest paid at closing to lower the note rate.