Tennessee Real Estate Practice Exam.
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1. A 19-year-old Tennessee resident who never finished high school wants to apply for an affiliate broker license. Which requirement is most likely to stand in the way of that application?

• A. The age requirement, since applicants must be at least 21
• B. The residency requirement, since only out-of-state applicants may apply
• C. Proof of high school graduation (or its equivalent), which is a standard credential requirement for licensure
• D. A requirement to already hold a broker's license first

2. The Tennessee Real Estate Commission receives a signed complaint alleging that a Memphis affiliate broker forged a client's signature on a purchase agreement. Which action falls squarely within the Commission's regulatory authority?

• A. Awarding the client monetary damages equal to the property's purchase price
• B. Suspending or revoking the affiliate broker's license after an investigation and hearing
• C. Filing a criminal forgery charge against the affiliate broker in circuit court
• D. Ordering the affiliate broker's principal broker to personally repay the client

3. A Nashville company helps renters find apartments for a fee, without ever taking title to any property. This is a category the Tennessee Real Estate Commission has regulated since its creation. What is that category called?

• A. Title insurance agent
• B. Rental location agent
• C. Property management corporation
• D. Escrow agent

4. An affiliate broker in Knoxville accepts an earnest money check from a buyer and, rather than delivering it to her principal broker for deposit, cashes it and places the funds in her personal checking account temporarily. What has she done?

• A. Correctly exercised her authority as a licensed affiliate broker
• B. Created a legally required reserve account
• C. Commingled client funds with personal funds, a trust-fund violation
• D. Properly safeguarded the funds until closing

5. Beyond disciplining individual licensees, the Tennessee Real Estate Commission also has authority to do which of the following?

• A. Adopting rules governing licensed real estate firms and their operations
• B. Setting mortgage interest rates statewide
• C. Approving or rejecting individual purchase and sale contracts before closing
• D. Setting property tax assessments for each county

6. A Chattanooga affiliate broker closes a sale and the seller, impressed with her work, wants to hand her a personal check as a bonus in addition to the commission already agreed upon with the firm. What is the correct course of action?

• A. She must split the bonus evenly with the buyer's agent
• B. She must decline or route the payment through her principal broker, since affiliate brokers may not accept compensation for real estate activity from anyone but their employing broker
• C. She may keep the bonus check since the seller offered it directly
• D. She must report the bonus to the buyer before accepting it

7. An affiliate broker in Murfreesboro places a yard sign and online listing that show only her personal cell number and first name, with no mention of the real estate firm she is licensed under. This advertising practice is problematic because

• A. it violates copyright law by using a personal photo
• B. it constitutes a "blind ad" that fails to identify the licensed firm responsible for the advertisement
• C. it exceeds the maximum number of signs allowed per listing
• D. it requires a separate advertising license from the Commission

8. A buyer calls an affiliate broker's phone number after seeing a listing sign, not realizing the affiliate broker actually represents the seller in the transaction. At what point should the affiliate broker clarify who she represents?

• A. Only after an offer has been accepted
• B. Only if the buyer asks directly
• C. Only at the closing table
• D. As early as practical in the conversation, before any confidential information is exchanged

9. After a sale closes in Jackson, Tennessee, the principal broker's office shreds every document related to the transaction that same afternoon to save storage space. What is the concern with this practice?

• A. Records may only be destroyed with the buyer's written permission
• B. Brokerage records must generally be retained for a defined period in case of later disputes or Commission review
• C. Records must be transferred to the county register of deeds instead of destroyed
• D. Nothing — brokers may dispose of closed-file records immediately once funds have disbursed

10. An affiliate broker leaves her firm on a Friday afternoon after a dispute with her principal broker. On Monday morning, without yet affiliating with a new firm, she accepts a listing directly from a homeowner. What is wrong with this?

• A. An affiliate broker's license is only active while sponsored by a principal broker; she cannot lawfully conduct licensed activity while unaffiliated
• B. She may only take listings, not represent buyers, while unaffiliated
• C. She needed the Commission's individual pre-approval for the specific listing
• D. Nothing, since affiliate brokers may practice independently between firms

11. A principal broker in Knoxville receives earnest money from a buyer on a Tuesday but does not deposit it into the firm's trust account until the following Tuesday because the office was busy. What is the issue with this delay?

• A. The delay only matters if the transaction later fails to close
• B. There is no issue; brokers may hold funds indefinitely before depositing
• C. Trust funds are expected to be deposited promptly rather than held for an extended, unexplained period
• D. The delay is fine as long as the buyer is not informed

12. Besides brokers and affiliate brokers, which of the following entities does the Tennessee Real Estate Commission also regulate?

• A. Home inspectors licensed under a separate state board
• B. Certified public accountants
• C. State court judges handling property disputes
• D. Vacation clubs and timeshare-related developments

13. A homeowner in Bristol has a recorded right to cross her neighbor's driveway to reach the main road, a right that transfers automatically to whoever buys her house in the future. This right is best described as

• A. An encroachment
• B. A license
• C. An easement in gross
• D. An easement appurtenant

14. A man has openly farmed a strip of his neighbor's unused land for many consecutive years, without permission but also without the neighbor objecting or evicting him. If all legal requirements are ultimately met, what could result?

• A. The neighbor automatically loses all rights to the entire parcel, not just the strip
• B. The man may acquire legal title to the strip through adverse possession
• C. The man automatically owes back rent to the neighbor
• D. The arrangement creates a permanent easement but never transfers title

15. A property owner along the bank of the Cumberland River wants to know what rights come with owning that riverside land. Which term describes the water-related rights of a landowner bordering a flowing natural waterway?

• A. Littoral rights
• B. Riparian rights
• C. Air rights
• D. Subsurface rights

16. Two sisters buy an investment property together and want it so that if one of them dies, her share automatically passes to the surviving sister rather than through probate. What form of co-ownership provides this feature?

• A. Tenancy in common
• B. A partnership interest
• C. Tenancy by the entirety, only available to unmarried co-owners
• D. Joint tenancy with right of survivorship

17. At a Murfreesboro brokerage, the managing broker appoints one affiliate broker to work exclusively for the purchaser and a different, unrelated affiliate broker to work exclusively for the property owner, with each licensee's fiduciary loyalty running only to the party that licensee was appointed to serve. What term describes this setup?

• A. Customer-level representation only
• B. Undisclosed dual agency
• C. Designated agency
• D. Subagency

18. An affiliate broker misrepresents a property's square footage to a buyer during a showing. Under general agency principles, who else may bear responsibility for that misrepresentation besides the affiliate broker herself?

• A. No one; only the individual affiliate broker can ever be held responsible
• B. The buyer's lender, since it approved the loan
• C. The seller, since the seller owns the property
• D. The principal broker who supervises her, under vicarious liability principles

19. A seller signs a 90-day exclusive listing agreement, then the property burns down in a fire during month two. What happens to the agency relationship created by that listing agreement?

• A. It converts into an open listing automatically
• B. It continues unaffected because the listing period has not expired
• C. It terminates automatically because its subject matter has been destroyed
• D. It transfers to a new property the seller may purchase later

20. A walk-in visitor at an open house asks the listing agent general questions about square footage and neighborhood schools, without entering into any representation agreement. In agency terms, this visitor is best described as the agent's

• A. Subagent
• B. Principal
• C. Client
• D. Customer

21. A licensee never signs a buyer representation agreement but spends weeks driving a buyer to showings, drafting offers on her behalf, and negotiating price terms, all while the buyer believes the licensee represents her interests. What can result from this pattern of conduct?

• A. The buyer automatically owes the licensee a commission regardless of any agreement
• B. Nothing; agency can only be created through a signed written agreement
• C. An implied agency relationship may arise from the parties' conduct, even without a signed agreement
• D. The licensee automatically becomes a dual agent

22. A buyer and seller agree verbally on a price for a home, but the buyer later refuses to sign anything in writing before backing out. What legal principle most directly explains why the seller cannot enforce this verbal deal in court?

• A. The statute of frauds, which requires real estate contracts to be in writing to be enforceable
• B. The parol evidence rule
• C. The doctrine of equitable estoppel
• D. The mailbox rule

23. A property owner in Johnson City transfers her commercial building using a deed whose warranty covers only title problems that arose while she held the property, offering no protection against defects that existed before she acquired it. Which deed type matches this description?

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

24. A seller who signed a valid purchase agreement backs out at the last minute because a competing buyer offered more money after the contract was signed. What remedy might the original buyer pursue given that real estate is considered legally unique?

• A. Rescission of all future contracts the seller signs
• B. Specific performance, compelling the seller to complete the sale
• C. Criminal charges against the seller
• D. Punitive damages only

25. A buyer submits a written offer of $215,000 on a home in Cleveland, Tennessee. The seller responds in writing with a counteroffer of $228,000. Before the buyer replies, can the buyer still go back and accept the original $215,000 offer?

• A. Yes, but only if the seller's counteroffer is unsigned
• B. No, a counteroffer rejects and terminates the original offer, so it no longer exists to be accepted
• C. No, because verbal acceptance was required within 24 hours
• D. Yes, the original offer remains open until its stated expiration date

26. A sales contract on a home in Morristown provides that, should the purchaser breach, the only remedy available to the seller is to keep the earnest money as liquidated damages. The purchaser later breaches the agreement, and the seller then wants to file a separate lawsuit seeking additional compensatory damages on top of the deposit. What is the most likely outcome?

• A. The purchaser may unilaterally cancel the liquidated damages clause after signing
• B. The seller may freely pursue both the earnest money and additional damages
• C. The clause is automatically void because liquidated damages clauses are illegal in real estate contracts
• D. The liquidated damages clause typically limits the seller to the earnest money as the agreed remedy, precluding a separate suit for more

27. A buyer purchases a condo in Chattanooga appraised at $180,000, financing it with a loan of $153,000. What is the loan-to-value ratio?

• A. 95%
• B. 75%
• C. 65%
• D. 85%

28. A lender calculates a borrower's monthly housing payment by adding principal, interest, property taxes, and homeowners insurance together. This combined figure is commonly abbreviated as

• A. LTV
• B. PITI
• C. APR
• D. PMI

29. A lender forecloses on a defaulted loan without needing to go through the court system, using a power-of-sale clause contained in the security instrument. This process is generally known as

• A. Deed in lieu of foreclosure
• B. Strict foreclosure
• C. Non-judicial foreclosure
• D. Judicial foreclosure

30. A homeowner in Sevierville is comparing her very first monthly payment to her very last monthly payment on a fixed-rate, fully amortizing loan, even though both payments are the identical dollar amount. Which statement correctly explains why the split between interest and principal differs between those two payments?

• A. Interest and principal make up an equal share of every payment from the first month to the last
• B. Because interest accrues on the shrinking loan balance, the earliest payment is weighted mostly toward interest while the final payment is weighted mostly toward principal
• C. The earliest payment is weighted mostly toward principal, and that share steadily shrinks as the loan matures
• D. Both the interest share and the principal share rise together as the loan approaches payoff

31. A borrower is comparing two loan offers with the same interest rate, but Loan X charges two discount points at closing while Loan Y charges none. Which disclosed figure would best reveal the true cost difference between the two loans to the borrower?

• A. The annual percentage rate (APR), which factors in points and other finance charges over the loan term
• B. The monthly principal and interest payment alone
• C. The stated note rate, since it is identical on both loans
• D. The property's appraised value

32. An agent consistently shows minority home buyers listings only in certain neighborhoods while showing similarly qualified white buyers a broader range of neighborhoods across the metro area. This practice is known as

• A. Redlining
• B. Blockbusting
• C. Puffing
• D. Steering

33. Before a homeowner in Gallatin lists her house for sale, her agent assembles a pricing report drawn from recently sold and currently listed comparable homes nearby. In what key way does this kind of report differ from a certified appraisal?

• A. It is required by law before every residential listing
• B. It is legally identical to an appraisal and carries the same certification
• C. It is an agent's informal pricing opinion, not a certified, independently regulated valuation like an appraisal performed by a licensed appraiser
• D. It can only be prepared by a licensed appraiser

34. A vacant lot zoned for either residential or light commercial use would generate significantly more net income as a small retail building than as a house. Appraisal principles suggest which use should be considered in valuing the land?

• A. The use that requires the least construction cost
• B. The highest and best use that is legally permissible, physically possible, financially feasible, and maximally productive
• C. Residential use only, since that is the original zoning intent
• D. Whatever use the current owner personally prefers

35. A 1960s home has an outdated floor plan with only one small bathroom for four bedrooms, a layout that no longer matches buyer expectations even though the home is structurally sound. This kind of value loss is best classified as

• A. Physical deterioration
• B. Functional obsolescence
• C. Economic obsolescence
• D. Curable physical depreciation only

36. A duplex in Kingsport sells for $225,000 and produces $1,800 in gross monthly rental income. What is the gross rent multiplier?

• A. 10
• B. 140
• C. 125
• D. 95

37. A buyer asks whether a previous occupant of a home died of natural causes inside the house several years ago. In most jurisdictions, how is this type of information typically treated?

• A. It automatically voids any future sale of the home
• B. It must always be disclosed regardless of state law, as a physical defect
• C. It is often treated as a non-material "stigmatized property" fact that many states do not require disclosing
• D. It must be recorded permanently on the property's deed

38. A listing agent describes a home as having a "gorgeous, spacious backyard" in marketing materials, a subjective opinion about an ordinary-sized yard. Later, the buyer claims this was misrepresentation. How would this statement most likely be characterized?

• A. Negligent misrepresentation requiring a full refund
• B. Fraudulent misrepresentation, since it was factually false
• C. Puffing, an expression of opinion or exaggeration that is not treated as an actionable misrepresentation
• D. A violation of federal fair housing law

39. An agent discovers a small crack in a foundation wall during a showing but decides not to mention it because she is not a structural engineer and does not want to alarm the buyer unnecessarily. What is the concern with this approach?

• A. There is no concern, since agents cannot be expected to identify structural issues
• B. Only licensed engineers may ever mention visible cracks to a buyer
• C. A known, visible material condition generally should be disclosed even if the agent cannot diagnose its cause, and buyers can be advised to seek a professional inspection
• D. The agent must repair the crack personally before allowing the showing to continue

40. A seller is preparing to list a home built in 1965. Under federal law concerning a specific environmental hazard, what disclosure obligation applies to homes built before 1978?

• A. Only commercial property sellers face this disclosure obligation
• B. Sellers must disclose known lead-based paint hazards and provide buyers an EPA-approved pamphlet on the topic
• C. Sellers must remove all paint from the home before any showings
• D. The disclosure requirement only applies to homes built after 1978

41. A mortgage lender denies a loan application specifically because the applicant receives income from public assistance, even though the applicant otherwise meets the lender's underwriting standards. Which federal law most directly addresses this kind of credit discrimination?

• A. The Equal Credit Opportunity Act, which prohibits credit discrimination based on income source, among other factors
• B. The Real Estate Settlement Procedures Act
• C. The Fair Housing Act
• D. The Truth in Lending Act

42. A homeowner lives in one unit of a small owner-occupied duplex and rents out the second unit without using any real estate agent or discriminatory advertising. Under the federal Fair Housing Act, what is generally true about this situation?

• A. A limited exemption may apply to certain small owner-occupied dwellings, though discriminatory advertising is still prohibited even where an exemption exists
• B. The property is entirely outside all housing discrimination law once the owner exceeds four total units
• C. Exemptions apply only to commercial rather than residential rentals
• D. The owner has no exemptions and must comply with every Fair Housing Act provision exactly as a large apartment complex would

43. An apartment complex adopts a blanket policy denying occupancy to anyone with any criminal conviction, regardless of the nature, severity, or timing of the offense. Fair housing enforcement bodies have scrutinized such blanket policies because they can result in what kind of legal exposure?

• A. Disparate impact liability, if the blanket policy disproportionately screens out applicants of a protected class without justification tied to actual safety concerns
• B. Automatic criminal liability for the property owner
• C. Exposure only if the policy explicitly names a racial group
• D. No exposure at all, since criminal history is never a protected characteristic itself

44. An apartment building in Clarksville generates $42,000 in annual net operating income and sells for $600,000. Based on these figures, what is the capitalization rate?

• A. 9%
• B. 11%
• C. 7%
• D. 5%

45. An uncle in Jackson, Tennessee deeds his lake cabin to his nephew "for as long as he lives, then to his niece." What kind of interest does the nephew receive?

• A. A leasehold estate
• B. An easement in gross
• C. Fee simple absolute
• D. A life estate

46. A subdivision's recorded covenants prohibit homeowners from parking commercial trucks in driveways, even though the city's zoning ordinance for that area permits it. Which statement correctly describes the effect?

• A. Private covenants become unenforceable once a zoning ordinance exists
• B. Only the Commission can resolve the conflict between the two rules
• C. The private covenant can impose a stricter limit than zoning allows, and homeowners must comply with both
• D. The zoning ordinance automatically overrides the private covenant

47. A new survey reveals that a homeowner's detached garage in Cookeville extends eighteen inches onto the neighbor's lot, a condition neither owner noticed for over a decade. What has occurred, and what is a typical way to resolve it without litigation?

• A. This is an encroachment; the parties may negotiate a boundary line agreement or easement to formally address the overlap
• B. The garage owner must demolish the structure within 24 hours by law
• C. Title to the strip automatically transfers to the garage owner the moment the survey is recorded
• D. This is a valid easement by necessity requiring no resolution

48. A buyer's agent in Chattanooga learns that her buyer client is willing to pay up to $310,000 for a home listed at $285,000. During negotiations, she casually mentions this ceiling to the seller's agent to "speed things along." What duty has she violated?

• A. The duty of confidentiality owed to her own client
• B. The duty of accountability for funds
• C. The duty of obedience to lawful instructions
• D. The duty of reasonable care and skill

49. A listing agent privately learns from the seller that the seller is in financial distress and must sell quickly. A buyer's agent later asks, on behalf of her buyer client, whether the seller has any urgency to sell. What should the listing agent do?

• A. Disclose the seller's financial distress freely, since buyers deserve to know everything
• B. Lie and say the seller has no urgency at all
• C. Protect the confidentiality of the seller's motivation to sell, absent the seller's consent to disclose it
• D. Refer the question directly to the buyer's lender

50. In a cooperating transaction, a buyer works with a broker from Firm B who is actually acting as a subagent of the listing broker at Firm A, though the buyer is unaware of this arrangement. To whom does the subagent broker owe fiduciary duties?

• A. To the seller, through the listing broker, since a subagent's duties flow to the original principal
• B. To the buyer, since the buyer is the one working directly with the subagent
• C. To Firm B's principal broker only, and no one else
• D. Fiduciary duties are split evenly between the buyer and seller

51. A homeowner in Clarksville hires a firm under a listing contract stating that the firm is owed its commission regardless of who ultimately brings the buyer, even if the homeowner sells the house to a friend without any agent's involvement. This arrangement is best classified as

• A. A net listing
• B. An exclusive right-to-sell listing
• C. An exclusive agency listing
• D. An open listing

52. A sales contract for a home in Kingsport states that closing depends on the purchaser securing a mortgage commitment within 21 days of signing. The purchaser submits applications to several lenders in good faith but is turned down by each one before that deadline passes. What generally happens next?

• A. The seller may sue the purchaser for specific performance despite the contingency
• B. The purchaser forfeits the earnest money regardless of the contingency
• C. The contract automatically converts to a cash sale
• D. The purchaser may terminate the contract and recover the earnest money under the financing contingency

53. When a Tennessee grantor prepares a deed to legally transfer ownership of a parcel to a buyer, which combination of elements must the document contain for the transfer to be effective?

• A. A notarized photograph of the property
• B. Recording at the county register of deeds before the deed has any legal effect between the parties
• C. A competent grantor, an identifiable grantee, a legal description of the property, and the grantor's signature
• D. Payment of the full purchase price in cash at signing

54. A title company routinely pays a referral fee to real estate agents for every closing referred to them, without disclosing this arrangement to the buyers and sellers involved. What federal law is most directly implicated?

• A. The Truth in Lending Act
• B. The Fair Housing Act
• C. The Equal Credit Opportunity Act
• D. The Real Estate Settlement Procedures Act, which prohibits undisclosed kickbacks for referrals of settlement business

55. A house sale in Elizabethton is scheduled to close on October 3. The seller already paid the entire year's property tax bill earlier in the year. At the closing table, what is the buyer generally expected to do about those taxes?

• A. Wait until the following tax year to settle any amount with the seller
• B. Nothing, since the seller already paid them in full
• C. Reimburse the seller a prorated amount covering the portion of the year the buyer will own the property
• D. Pay the entire next year's taxes in advance at closing

56. To estimate the market value of a single-family residence in Oak Ridge, an appraiser analyzes four comparable homes that recently sold nearby and adjusts each sale price for differences in condition, size, and amenities. Which valuation method is being used?

• A. Sales comparison approach
• B. Gross rent multiplier approach
• C. Cost approach
• D. Income approach

57. A seller tells her listing agent privately that the roof leaks during heavy storms, then asks the agent not to mention it to any buyers. What should the agent do?

• A. Advise the seller that known material defects generally must be disclosed, since concealing them can expose both the seller and agent to liability
• B. Report the seller to the police for concealment
• C. Honor the seller's request completely and never mention the leak to any buyer
• D. Mention the leak only if a buyer specifically asks about roof condition

58. An agent representing the seller shows a customer-buyer a home and, when asked directly, truthfully confirms that the basement previously flooded, even though this might discourage the buyer's offer. Which principle explains why the agent must answer honestly despite representing the seller?

• A. Agents owe a general duty of honesty and fair dealing to all parties, even customers they do not represent
• B. The agent is legally required to switch to representing the buyer once asked a direct question
• C. Disclosure duties only apply to written questions, not spoken ones
• D. The agent owes the buyer full fiduciary loyalty as if the buyer were also a client

59. An affiliate broker wants to purchase a listed property herself, using her own brokerage to represent her as the buyer. What is the appropriate practice in this situation?

• A. She is legally barred from ever purchasing a property listed by her own firm
• B. She must resign her license before making any offer
• C. She must fully disclose her licensee status and any personal interest in the transaction to all parties involved
• D. She may proceed without telling anyone, since she is a licensed professional

60. A property manager in Kingsport denies a rental application from a household of two parents and their three children, telling them the unit "isn't set up for that many kids." Under the federal Fair Housing Act, which protected class does this decision most directly implicate?

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

61. A bank systematically denies mortgage applications and refuses to lend at all within specific zip codes with predominantly minority residents, regardless of individual applicants' creditworthiness. This lending practice is known as

• A. Steering
• B. Blockbusting
• C. Underwriting
• D. Redlining