Real Estate License practice questions and exam guide

An encumbrance in property law is BEST described as which of these?

1. Any burden on title, whether financial or non-financial in nature
2. Only a lease of the property with a stated fixed end date
3. Any improvement to the property, such as a fence or driveway
4. A pure ownership right without any burden or limitation

Answer: A — Any burden on title, whether financial or non-financial in nature

A) Correct — encumbrances include liens, easements, restrictions. B) Leases can be encumbrances but are not the definition. C) Improvements are additions, not burdens. D) That is not an encumbrance.

Joint tenants with right of survivorship; one dies. Under classic rule, decedent's share:

1. Passes automatically to surviving JT
2. Passes by intestacy to heirs
3. Property sold, proceeds split evenly
4. Survivor gets life estate, heirs remainder

Answer: A — Passes automatically to surviving JT

A) Correct — survivorship. B) That is TIC. C) No forced sale. D) No such conversion.

Local building codes are MOST accurately described as regulating which of the following?

1. The permitted uses allowed within each zoning district citywide
2. Minimum construction, safety, and structural standards for buildings
3. The financing terms a lender may offer for new construction loans
4. The commission a broker may charge for selling a newly built home

Answer: B — Minimum construction, safety, and structural standards for buildings

A) Permitted uses are the domain of zoning, not building codes. B) Correct — building codes set minimum safety, structural, electrical, and life-safety standards. C) Financing terms are governed by lending law, not building codes. D) Commission rates are a brokerage/contract matter, unrelated to building codes.

A municipality's comprehensive (master) plan is BEST described as?

1. A legally binding zoning map that immediately rezones every parcel
2. A federal statute preempting all local zoning authority nationwide
3. A private HOA declaration recorded against a specific subdivision
4. A long-range policy document guiding future land-use decisions and zoning

Answer: D — A long-range policy document guiding future land-use decisions and zoning

A) The plan itself is usually advisory policy, not a self-executing zoning map. B) There is no such federal preemption; zoning is primarily a local/state matter. C) HOA declarations are private, not governmental planning documents. D) Correct — it's the long-range guide that zoning and other regulations should implement.

Net operating income (NOI) on a property equals:

1. Gross income minus annual debt service on the loan amount
2. Gross income minus income tax paid by the owner-investor
3. Effective gross income minus operating expenses of the property
4. Gross income plus non-cash depreciation deductions taken

Answer: C — Effective gross income minus operating expenses of the property

A) Wrong - NOI is before debt service. B) Wrong - before income tax. C) Correct - property-level cash flow. D) Wrong - depreciation is tax.

Comparable sold $200K; monthly rent $2,000. Monthly Gross Rent Multiplier equals:

1. A GRM of 8.33 units (annual)
2. A GRM of 83.33 units approx.
3. A GRM of 100.00 units exactly
4. A GRM of 10.00 units approx.

Answer: C — A GRM of 100.00 units exactly

A) Annual-based. B) Off-by-one decimal. C) Correct — 200K ÷ 2K. D) Direction reversal.

Buyer buys a $400,000 home with a $320,000 loan. LTV is:

1. A loan-to-value ratio of 80%
2. A loan-to-value ratio of 20%
3. A loan-to-value ratio of 125%
4. A loan-to-value ratio of 40%

Answer: A — A loan-to-value ratio of 80%

A) Correct — 320 ÷ 400. B) That is down %. C) Direction reversed. D) Off-by-one.

Security-deposit rules in most U.S. states typically govern:

1. Maximum amount, required handling, itemization at move-out, return deadlines
2. No regulation at all; the landlord may retain any portion of the deposit at will
3. Only federal TRID mortgage disclosure requirements at the time of closing
4. A single national dollar cap on deposits set by the U.S. federal Congress

Answer: A — Maximum amount, required handling, itemization at move-out, return deadlines

A) Correct - statewide statutory rules. B) Wrong - regulated. C) Wrong - TRID is mortgage. D) Wrong - no federal cap.

Agency relationships in real estate are BEST described as which of these?

1. Fiduciary relationships bearing OLDCAR duties from agent to client
2. Mere sales relationships with no duties beyond honest dealing
3. Pure marketing arrangements with no duty owed by the agent
4. Simple customer service without loyalty or confidentiality duty

Answer: A — Fiduciary relationships bearing OLDCAR duties from agent to client

A) Correct — agency imposes fiduciary duties on the agent. B) Understates duties owed. C) Ignores fiduciary duties. D) Understates loyalty and confidentiality duties.

"Dual agency" occurs when the:

1. One broker represents both parties
2. Two brokers represent same seller
3. One broker represents two sellers
4. Buyer has two agents at same time

Answer: A — One broker represents both parties

A) Correct — one broker, both sides. B) Not dual agency. C) Not dual agency. D) Not dual agency.

$600K contract warrants "roof under 5 years." Buyer finds roof is 15 years. Which is NOT available to buyer?

1. Rescission of the entire contract
2. Damages equal to new roof cost
3. Specific performance forcing new roof
4. Suit for breach of express warranty

Answer: C — Specific performance forcing new roof

A) Rescission valid. B) Damages valid. C) Correct — SP does not force post-closing repair. D) Warranty valid.

Earnest money in a residential purchase contract is BEST described as:

1. The full purchase price paid up front at signing
2. The listing broker's marketing budget for the property
3. The lender's origination fee owed for the mortgage
4. A good-faith deposit held in escrow until closing

Answer: D — A good-faith deposit held in escrow until closing

A) Wrong - not full price. B) Wrong - not commission or budget. C) Wrong - lender fee. D) Correct - good-faith deposit.

'Dual agency' in real estate law is BEST described as which of the following?

1. The relationship is automatically legal in every U.S. state without notice
2. Occurs when a broker represents both seller and buyer with written consent
3. Has no disclosure requirement under any state law or ethics rule today
4. Is equivalent to representing neither party in the same transaction now

Answer: B — Occurs when a broker represents both seller and buyer with written consent

A) Some states prohibit dual agency entirely. B) Correct — dual agency requires informed written consent. C) Disclosure is required. D) That would be a transaction broker, not dual agency.

An "as-is" sale clause in a residential contract generally means the:

1. Seller has zero liability by law
2. Seller will not make any repairs
3. Buyer waives every possible inspection
4. Buyer must buy regardless of anything

Answer: B — Seller will not make any repairs

A) Not a liability shield. B) Correct — no seller repairs. C) Inspections still available. D) Contingencies still work.

A brokerage allows an unlicensed personal assistant to answer phones, schedule appointments, and hand out already-prepared flyers, but never to negotiate terms or discuss price with consumers. This division of duties is generally?

1. Unlawful, because any office task connected to a listing requires a license
2. Unlawful unless the assistant is compensated purely on a per-transaction basis
3. Permitted only if the assistant is a licensed attorney in that state
4. Permitted, since these tasks are clerical and don't require a real estate license

Answer: D — Permitted, since these tasks are clerical and don't require a real estate license

A) Purely clerical/administrative tasks generally don't require licensure. B) Per-transaction pay for unlicensed staff is actually the arrangement most likely to be problematic, not required. C) Attorney status is unrelated to this permitted clerical work. D) Correct — scheduling and handing out prepared materials without negotiating are classic permitted unlicensed-assistant tasks.

A brokerage's compliance officer audits transaction files each quarter to confirm agency disclosures were signed, offers were documented, and trust funds were deposited on time. This activity BEST illustrates?

1. A form of risk management through internal file review and supervision
2. A violation of the independent contractor status of the brokerage's agents
3. An antitrust concern because it restricts individual agent pricing decisions
4. A fair housing requirement applicable only to brokerages with 50+ agents

Answer: A — A form of risk management through internal file review and supervision

A) Correct — internal audits of files for compliance and documentation are standard risk-management/supervision practice. B) Supervision for compliance doesn't itself convert independent contractors into employees. C) File audits about documentation aren't about coordinating prices among competitors. D) Fair housing law doesn't set a brokerage-size threshold for internal audits.

A property management agreement is BEST described as which type of relationship between owner and manager?

1. A fiduciary agency relationship authorizing the manager to act for the owner
2. A general partnership sharing all profits and losses of the property equally
3. A joint tenancy giving the manager an ownership interest with survivorship
4. A simple vendor contract with no fiduciary duties owed to the owner

Answer: A — A fiduciary agency relationship authorizing the manager to act for the owner

A) Correct — the property manager acts as the owner's agent, owing fiduciary duties within the agreement's scope. B) A management agreement doesn't create a partnership sharing losses. C) Joint tenancy involves co-ownership of title, not a management role. D) Property managers generally do owe fiduciary duties, unlike an ordinary vendor.

A gross residential lease is BEST characterized by:

1. Tenant is billed separately for taxes, insurance, and building upkeep costs
2. The tenant is assigned the duty to manage the entire rental building unit
3. Tenant pays one rent amount while the landlord covers most operating costs
4. The tenant pays no rent at all but assumes management duties for the unit

Answer: C — Tenant pays one rent amount while the landlord covers most operating costs

A) Wrong - that is net lease. B) Wrong - not gross. C) Correct - common residential structure. D) Wrong - no such standard.

Lender's title insurance policy primarily protects:

1. The buyer against defects in title at time of closing
2. The lender against loss from any undiscovered defects
3. The seller against any claim made after the conveyance
4. The escrow agent against errors made in closing files

Answer: B — The lender against loss from any undiscovered defects

A) Wrong - that is owner's policy. B) Correct - lender's policy. C) Wrong - seller warranty. D) Wrong - E&O coverage.

A purchase and sale agreement (PSA) typically includes which of the following?

1. Parties, price, financing terms, contingencies, and closing date terms
2. Only the sale price of the property with no other material terms noted
3. Only the deed conveying title to the buyer at closing, nothing else
4. Only the mortgage document with terms of the buyer's loan financing

Answer: A — Parties, price, financing terms, contingencies, and closing date terms

A) Correct — those are standard PSA contents. B) Price alone would not be a valid PSA. C) The deed is a separate closing document. D) The mortgage is separate from the PSA.

How many acres are in one section of land under the PLSS?

1. 160 acres, the size of a standard quarter section
2. 320 acres, the size of a half section of land
3. 640 acres, one square mile of surveyed section
4. 1,280 acres, the size of two full sections

Answer: C — 640 acres, one square mile of surveyed section

A) That is a quarter section. B) That is a half section. C) Correct — one section = 1 sq mi = 640 acres. D) That is two sections combined.

A property valued at $250,000 with a 1.2% effective tax rate has annual tax of:

1. $300 (misapplying the rate to itself, not the property value)
2. $3,000 ($250,000 multiplied by the decimal rate of 0.012)
3. $25,000 (using 10% of the property's assessed value)
4. $1,200 ($100,000 multiplied by the same decimal rate)

Answer: B — $3,000 ($250,000 multiplied by the decimal rate of 0.012)

A) Wrong - misapplies rate. B) Correct - value × rate. C) Wrong - wrong rate. D) Wrong - wrong base.

In a §1031 exchange, the taxpayer must identify replacement in ___ days and close in ___ days:

1. 45 to identify, 180 to close deals
2. 60 to identify, 120 to close deals
3. 30 to identify, 90 to close deals
4. 45 to identify, 90 to close deals

Answer: A — 45 to identify, 180 to close deals

A) Correct — 45/180 timeline. B) Wrong pair. C) Wrong pair. D) Wrong pair.

What must a newly licensed Virginia salesperson complete within their first year, distinct from the standard ongoing renewal cycle?

1. A 30-hour post-license education program covering nine specific topics
2. Nothing — the standard 16-hour/2-year cycle begins immediately with no first-year add-on
3. A repeat of the 60-hour Principles course
4. A 90-hour broker-track course

Answer: A — A 30-hour post-license education program covering nine specific topics

Virginia requires a distinct 30-hour post-license program within the first year, covering nine specific topics (fair housing, law, ethics, contract writing, and others). (B) wrongly denies any first-year-specific requirement. (C) wrongly assumes the original course must be repeated. (D) invents an irrelevant broker-track requirement not applicable to a salesperson's first year.

A home inspection reveals the roof is 18 years old on a 20-year roof. The buyer asks the seller to replace it. Is the seller obligated?

No — unless the contract requires it or the roof is leaking/defective. Normal wear and age alone don't create an obligation. It's a negotiation point.

A property has a 7.5% cap rate and NOI of $60,000. What is the value?

$800,000. Value = NOI ÷ Cap Rate = $60,000 ÷ 0.075 = $800,000.

What is the statutory right of redemption?

In some states, the right to redeem the property AFTER the foreclosure sale within a specified period by paying the sale price plus costs.

What is a jumbo loan?

A mortgage exceeding conforming loan limits set by FHFA (currently $766,550 in most areas, higher in high-cost areas). Not eligible for purchase by Fannie Mae or Freddie Mac.

What is Arkansas's ongoing CE requirement for 2026, including hours and two named mandatory courses?

7 hours annually: a 3-hour 'Agency Representation and Compensation' course, a 1-hour 'Limiting Risk to Preserve personal safety' course, plus 6 hours of electives — renewal due September 30, with late fees October 1-December 31.

What test determines whether an item is a fixture?

The MARIA test: Method of attachment, Adaptability, Relationship of parties, Intention, Agreement.