Real Estate Salesperson License Exam (General Structure) — Questions and Answers

Question 1: What is a promissory note?

is the major proof of a debt. (Correct answer)
is an agreement to perform or refrain from performing specific activities.
cannot be carried out in connection with a real estate loan.
is a government agency's guarantee.

Correct answer: is the major proof of a debt.

A promissory note is a written promise by a borrower to repay a specific sum of money to a lender under specified terms. It serves as the primary legal evidence of the debt and outlines the repayment schedule, interest rate, and other conditions of the loan.

Question 2: The license period is currently

4 years.
2 years. (Correct answer)
3 years
1 year.

Correct answer: 2 years.

In Florida, real estate licenses are issued for a specific duration. The current license period for real estate professionals is two years. Licensees must renew their licenses before the expiration date to maintain an active status and continue practicing real estate.

Question 3: The agent's fiduciary duty of accounting requires the agent to:

Prepare the seller's tax returns related to the property sale
Properly account for all funds received or held on behalf of the client (Correct answer)
Provide complete financial records to the state licensing board
Verify the buyer's financial qualifications before each showing

Correct answer: Properly account for all funds received or held on behalf of the client

The duty of accounting obligates the agent to accurately manage all client funds, such as earnest money deposits, preventing commingling or misappropriation.

Question 4: Voluntary transfer of privately owned land to the public, such as for streets in a subdivision, is called:

Dedication (Correct answer)
Alienation
Escheat
Eminent domain

Correct answer: Dedication

Dedication is the voluntary granting of private land for public use.

Question 5: The recording of a deed in the public records primarily serves to:

Give constructive notice of the owner's interest (Correct answer)
Transfer ownership to the buyer
Pass the physical possession of property
Pay the transfer taxes

Correct answer: Give constructive notice of the owner's interest

Recording a deed gives constructive notice to the public of the owner's interest in the property.

Question 6: A listing agency agreement most commonly terminates when:

The property is shown to its first prospective buyer
The listing price is reduced at the seller's request
The agreed listing period expires or the transaction closes (Correct answer)
The agent submits the listing to the MLS

Correct answer: The agreed listing period expires or the transaction closes

A listing agreement typically ends upon expiration of its agreed term, completion of the sale, mutual agreement to cancel, or termination by operation of law.

Question 7: Which loan feature protects an ARM borrower by limiting how much the rate can rise?

Index
Interest rate cap (Correct answer)
Buydown
Margin

Correct answer: Interest rate cap

An interest rate cap limits how much an ARM's rate can increase per adjustment or over the loan's life.

Question 8: One discount point equals

1% of the sales price
1% of the loan amount (Correct answer)
None of the above
1% of the interest sale

Correct answer: 1% of the loan amount

One discount point is a fee paid to the lender at closing to reduce the interest rate on a mortgage loan. Each discount point is equivalent to 1% of the total loan amount, not the sales price of the property. For example, on a $200,000 loan, one discount point would cost $2,000.

Question 9: The ____ is the instrument that is used to transfer title to personal property.

The bill of sale (Correct answer)
Deed of quitclaim
Deed of chattel.
agreement on security

Correct answer: The bill of sale

A bill of sale is the standard legal document used to transfer ownership of personal property, also known as chattels, from one party to another. Unlike deeds, which are used for real property, a bill of sale provides evidence of the transfer of title for movable items. A security agreement, conversely, is used to create a lien on personal property, not to transfer ownership outright.

Question 10: Mr. Rodrigo's duplex had a $750,000 cost base when he bought it. According to the tax assessor, the value breakdown is 80 percent renovations and 20 percent land. Mr. Rodrigo depreciated the improvements at a rate of 2% per year for the first five years. Mr. Rodrigo then paid $50,000 to a licensed contractor to install a swimming pool. How much will the property's modified cost base be once the pool is finished?

790,000
700,000
730,000
740,000 (Correct answer)

Correct answer: 740,000

The modified cost base is calculated by taking the original cost, subtracting accumulated depreciation on the improvements, and then adding the cost of any new capital improvements. Mr. Rodrigo's initial cost base was $750,000, with $600,000 for improvements (80%) and $150,000 for land (20%). After 5 years of 2% depreciation on improvements ($12,000/year), total depreciation is $60,000. The adjusted basis for improvements is $600,000 - $60,000 = $540,000. Adding the land value ($150,000) and the new swimming pool ($50,000) results in a modified cost base of $540,000 + $150,000 + $50,000 = $740,000.

Question 11: Express agency in real estate is best described as an agency relationship:

Processed and approved within 24 hours of listing
Clearly established through a written or oral agreement (Correct answer)
Where the principal grants the agent unlimited authority
Created through the parties' behavior and conduct alone

Correct answer: Clearly established through a written or oral agreement

Express agency is explicitly created by a written or oral agreement between principal and agent, distinguishing it from implied agency which arises from conduct.

Question 12: A hardware store owner, who is neither a real estate licensee nor a licensed or certified appraiser, was appointed by the court to appraise another hardware store. The person can

appraise any hardware store in the state without a license.
be compensated for the appraisal. (Correct answer)
not be compensated for the appraisal unless licensed or certified.
apply for a temporary license from the Commission.

Correct answer: be compensated for the appraisal.

Individuals appointed by a court to perform an appraisal are generally exempt from real estate appraiser licensing requirements. When acting under court order, their authority stems from the judicial appointment, not from a state professional license. Therefore, the hardware store owner can be compensated for the appraisal performed under court appointment without holding a specific appraisal license.

Question 13: A reasonably good balance between supply and demand of apartments is

87% occupancy.
5% occupancy.
90% vacancy.
95% occupancy. (Correct answer)

Correct answer: 95% occupancy.

A reasonably good balance between the supply and demand of apartments is generally considered to be around 95% occupancy. This 5% vacancy rate allows for a healthy market where landlords can fill vacancies without excessive competition, while also providing enough available units for renters and facilitating tenant turnover.

Question 14: The principle that a property's value is influenced by the cost of acquiring an equally desirable substitute is the principle of:

Substitution (Correct answer)
Anticipation
Contribution
Conformity

Correct answer: Substitution

The principle of substitution holds that a buyer will pay no more than the cost of an equally desirable alternative.

Question 15: Who is in charge of deciding on a property's listing price?

broker of real estate
the assessor
the mortgage company
the owner of the property (Correct answer)

Correct answer: the owner of the property

The property owner ultimately has the right and responsibility to decide the listing price for their property. While a real estate broker can provide professional advice, market analysis, and recommendations, the final decision on the asking price rests with the seller. The broker acts as an agent, carrying out the seller's instructions.

Question 16: A contract which states that one promise is given in exchange for another can best be described as a:

Voidable contract.
Executed contract.
Unilateral contract.
Bilateral contract. (Correct answer)

Correct answer: Bilateral contract.

A bilateral contract is characterized by a 'promise for a promise,' where both parties make a commitment to perform an action in the future. For example, a real estate purchase agreement is bilateral because the buyer promises to pay, and the seller promises to deliver the deed. This mutual exchange of promises creates a legally binding agreement.

Question 17: Broker Jacqui decides to move her branch office from Fort Walton to Panama City. The proper procedure is for Jacqui to

report the move to the Board of Realtors.
cancel the existing branch license and submit the request and a new fee for the Panama City branch office (Correct answer)
wait until it is time to renew the branch office license.
request that the Division transfer the license to the new location.

Correct answer: cancel the existing branch license and submit the request and a new fee for the Panama City branch office

Branch office licenses are issued for a specific physical location. If a broker decides to move a branch office, the existing license for the old location becomes invalid. The proper procedure is to cancel the current branch office license and then submit a new application and fee for a new branch office license at the desired Panama City location. This ensures that each branch operates under a valid, location-specific license.

Question 18: It is an example of ____ when a current contract is replaced by a completely new contract.

Novation. (Correct answer)
Assignment
Rescission
Reconstruction.

Correct answer: Novation.

Novation is the legal act of replacing an existing contract with a completely new one, often involving a new party or new terms, and extinguishing the obligations of the old contract. It requires the consent of all parties involved in both the old and new agreements. This differs from an assignment, which transfers rights without necessarily creating a new contract or releasing the original party.

Question 19: In most FHA and VA loans, the discount points are paid by the

Lender
Broker
Seller (Correct answer)
Purchaser

Correct answer: Seller

In most FHA (Federal Housing Administration) and VA (Department of Veterans Affairs) loans, discount points are typically paid by the seller. This is often done to make the loan more attractive to the buyer by reducing their upfront costs or to help the buyer qualify for a lower interest rate, which can be a negotiating point in the sale.

Question 20: A listing agreement between a seller and a real estate broker creates which type of agency?

Buyer's agency
Dual agency
Seller's agency (Correct answer)
Transaction brokerage

Correct answer: Seller's agency

A listing agreement establishes a seller's agency, meaning the broker is engaged to represent the seller's interests throughout the transaction.

Question 21: The covenant of quiet enjoyment most directly relates to:

a court action to clear title.
tenant freedom from owner harassment. (Correct answer)
natural hazards.
fair housing protections for the mute.

Correct answer: tenant freedom from owner harassment.

The covenant of quiet enjoyment is an implied promise in every lease that assures the tenant the right to possess and use the leased premises without interference from the landlord or anyone claiming paramount title. This includes freedom from unreasonable disturbances, harassment, or actions by the landlord that substantially interfere with the tenant's peaceful occupancy. It ensures the tenant can enjoy their property without undue interruption.

Question 22: Vicarious liability holds a real estate broker legally responsible for:

Joint liability shared equally between a buyer and seller
Wrongful acts committed by the agents the broker supervises (Correct answer)
Structural defects in the properties the broker lists
Liability arising when an agent is licensed in two states simultaneously

Correct answer: Wrongful acts committed by the agents the broker supervises

Vicarious liability means a broker can be held legally responsible for their agents' misconduct even if the broker did not participate directly, because of the supervisory relationship.

Question 23: In a _, implied warranties are not included.

Deed of quitclaim (Correct answer)
Deed of gift
grant deed.
Deed of warranty

Correct answer: Deed of quitclaim

A quitclaim deed transfers only whatever interest the grantor currently has in the property, without offering any warranties or guarantees regarding the title's validity or completeness. This means it explicitly does not include implied warranties, such as the grantor having good title or the legal right to convey it. In contrast, grant deeds and warranty deeds typically provide certain assurances or guarantees about the title.

Question 24: Acquiring title to land by openly and continuously occupying it without the owner's permission for a statutory period is called:

Accretion
Avulsion
Dedication
Adverse possession (Correct answer)

Correct answer: Adverse possession

Adverse possession allows a trespasser to gain title through open, notorious, continuous use over time.

Question 25: A resident manager in an apartment building is required to have a contractor’s license for any repairs exceeding:

$1,000.
No contractor’s license is needed so long as the work is personally performed by the resident manager.
$300.
$500. (Correct answer)

Correct answer: $500.

In California, a resident manager performing repairs on the property they manage is generally exempt from needing a contractor's license for minor work. However, if the total cost of the work, including both labor and materials, exceeds $500, a licensed contractor is required. This threshold ensures that more substantial repairs are handled by qualified professionals.

Question 26: An appraisal report that simply states a value without supporting analysis would most likely violate the requirement for:

A property survey
Adequate documentation and credible support (Correct answer)
A title insurance policy
A signed listing agreement

Correct answer: Adequate documentation and credible support

Appraisal standards require that the value opinion be credible and supported by adequate analysis and documentation.

Question 27: A small apartment property is estimated to have potential gross income of $ 25,000. Vacancy and collection losses are expected to average 5 percent over the life of the property. Operating expenses are expected to average about 30 percent of effective gross income. An overall capitalization rate of 12 percent is derived from market transactions of similar properties. What is the market value?

$197,917
$145,833
$208,333
$138,542 (Correct answer)

Correct answer: $138,542

First, calculate the Effective Gross Income (EGI) by subtracting vacancy losses: $25,000 * (1 - 0.05) = $23,750. Next, determine the Net Operating Income (NOI) by subtracting operating expenses from EGI: $23,750 * (1 - 0.30) = $16,625. Finally, divide the NOI by the capitalization rate to find the market value: $16,625 / 0.12 = $138,541.67, which rounds to $138,542.

Question 28: How many acres are in a lot described as E 1/2 of NW 1/4 of SE 1/4

160
640
40
320
20 (Correct answer)

Correct answer: 20

A standard section of land contains 640 acres. To calculate the acreage of a described parcel, you multiply the fractions of the section. The description 'E 1/2 of NW 1/4 of SE 1/4' means you take 1/2 of 1/4 of 1/4 of the total section. Therefore, (1/2) * (1/4) * (1/4) * 640 acres = (1/32) * 640 acres = 20 acres.

Question 29: . Which brokerage relationship status requires that a broker disclose known facts that materially affect the value of residential property?

single agents
any status requires the disclosure. (Correct answer)
licensees with no official brokerage relationship
transaction brokers

Correct answer: any status requires the disclosure.

In Florida, all real estate licensees, regardless of their specific brokerage relationship status (single agent, transaction broker, or no official brokerage relationship), have a fundamental statutory duty to disclose all known facts that materially affect the value of residential real property and are not readily observable to the buyer. This duty is a core consumer protection measure designed to ensure transparency and fairness in real estate transactions, preventing licensees from withholding crucial information from potential purchasers.

Question 30: Agency terminates 'by operation of law' automatically upon:

The death, bankruptcy, or incapacity of either the principal or the agent (Correct answer)
The agent voluntarily withdrawing from the transaction
The seller rejecting all offers submitted during the listing period
Either party filing a complaint with the real estate commission

Correct answer: The death, bankruptcy, or incapacity of either the principal or the agent

Certain events — death, bankruptcy, or mental incapacity of either party — automatically end the agency relationship by law without requiring formal notice or agreement.

Question 31: When a seller finances the buyer's purchase directly, it is called a:

Purchase-money mortgage (Correct answer)
Bridge loan
Construction loan
Wraparound loan

Correct answer: Purchase-money mortgage

A purchase-money mortgage is seller financing where the seller acts as the lender.

Question 32: An escrow agent opened a preliminary title report order for the sale of a property on April 1, 2020. The seller bought the house in 1998 with the help of a Federal Housing Administration (FHA) loan, which they are still paying down. On April 5, 2020, a preliminary title report will ____.

show a trust deed with the seller as the trustor (Correct answer)
show title vested within the buyer’s name.
obligate the title company to obtain insurance in the amount of the purchase price.
include the same information as a future standard title insurance policy issued at escrow's conclusion.

Correct answer: show a trust deed with the seller as the trustor

A preliminary title report provides a snapshot of the current status of a property's title, including any existing liens or encumbrances. Since the seller purchased the house with an FHA loan in 1998 and is still making payments, there would be an active trust deed recorded against the property. In this arrangement, the seller (borrower) is identified as the trustor, indicating an outstanding loan secured by the property.

Question 33: Title insurance protects the insured against losses arising from:

Defects in the title that existed before the policy date (Correct answer)
Future zoning changes
Physical damage to the structure
Declines in property value

Correct answer: Defects in the title that existed before the policy date

Title insurance covers covered title defects that existed prior to the policy's issuance.

Question 34: A typical listing contract gives a broker the authority to ____

The real estate that is the subject of the listing must be transferred.
Find a buyer and accept a deposit with a purchase offer. (Correct answer)
Find a buyer and bind their principal to a sale contract
Assure a third party that their principal will accept an offer that meets the listing's terms.

Correct answer: Find a buyer and accept a deposit with a purchase offer.

A typical listing contract authorizes a broker to market the property and find a ready, willing, and able buyer. It also generally allows the broker to accept an earnest money deposit from a potential buyer along with their purchase offer. However, a broker does not have the authority to bind the principal (seller) to a sale contract or transfer the property themselves; only the seller can do that.

Question 35: Which of the following best defines market value?

The most probable price a property should bring in a competitive open market (Correct answer)
The price a specific buyer is willing to pay
The replacement cost of improvements
The amount of the outstanding mortgage

Correct answer: The most probable price a property should bring in a competitive open market

Market value is the most probable price under typical, arm's-length conditions in an open and competitive market.

Question 36: When a real estate agent tells a prospective buyer, 'This is absolutely the best neighborhood in the entire city,' without factual support, the agent is engaging in:

Fraudulent misrepresentation
Breach of fiduciary duty
Material omission
Puffing (Correct answer)

Correct answer: Puffing

Puffing refers to exaggerated, subjective promotional statements that are not considered legally actionable because reasonable buyers understand them as opinions rather than fact.

Question 37: If you finance a home with a long-term loan and make equal monthly payments, the amount of each payment applied to the remaining principle balance will be as follows:

Increases by a fixed amount during the life of the loan
Decreases at a consistent rate
Drops as the interest payment rises.
Increases as the interest payment falls (Correct answer)

Correct answer: Increases as the interest payment falls

In a long-term, equal monthly payment (amortized) loan, the initial payments are heavily weighted towards interest. As the loan matures, the outstanding principal balance decreases, meaning less interest accrues each month. Consequently, a larger portion of each fixed payment is then applied to reduce the principal balance.

Question 38: Which estate gives an owner the most complete form of ownership with rights of inheritance?

Fee simple defeasible
Leasehold estate
Life estate
Fee simple absolute (Correct answer)

Correct answer: Fee simple absolute

Fee simple absolute is the highest and most complete form of ownership recognized by law.

Question 39: An appraiser observes that homes lose value because a busy highway was built behind them. This is best classified as:

External (economic) obsolescence (Correct answer)
Physical deterioration
Functional obsolescence
Curable depreciation

Correct answer: External (economic) obsolescence

External obsolescence is a loss in value caused by factors outside the property boundaries.

Question 40: Dual agency in real estate occurs when:

A listing agent splits commission evenly with a buyer's agent
A buyer works with two different buyer's agents simultaneously
Two brokerages co-list the same property
One broker represents both the buyer and seller in the same transaction (Correct answer)

Correct answer: One broker represents both the buyer and seller in the same transaction

Dual agency arises when a single broker or brokerage represents both the buyer and seller in one transaction, requiring full disclosure and consent from both parties.

Question 41: A prospective buyer is interested in purchasing a vacant lot in a rural subdivision. The buyer wishes to know about sewer assessments, liens, utilities to the lot, blanket encumbrances and street maintenance. The source that provides all of this information is the:

county Board of Supervisors.
Real Estate Commissioner (Correct answer)
county planning director.
county engineer.

Correct answer: Real Estate Commissioner

The Real Estate Commissioner, through the California Bureau of Real Estate (CalBRE), is responsible for regulating the sale of subdivided lands. When a developer creates a subdivision, they must obtain a Public Report from the Commissioner, which discloses crucial information about the lots, including assessments, liens, utilities, and other material facts relevant to prospective buyers.

Question 42: Upon sale, the instrument that conveys ownership rights to personal property is a and that dealing with real property is a .

land sales contract, deed
deed, bill of sale
deed, land sales contract
bill of sale, deed (Correct answer)

Correct answer: bill of sale, deed

A bill of sale is the legal document used to transfer ownership of personal property from one party to another. Conversely, a deed is the legal instrument used to convey title and ownership rights of real property, which includes land and anything permanently attached to it. These distinct documents reflect the different legal classifications of property.

Question 43: Adverse possession is:

giving up property voluntarily to the governmen
the sudden loss of land by an act of nature like a landslide.
When someone uses your property for a period of time and you lose the property or have your rights to the property restricted. (Correct answer)
a legal proceeding to divide property owned by two or more people.

Correct answer: When someone uses your property for a period of time and you lose the property or have your rights to the property restricted.

Adverse possession is a legal doctrine that allows a person to acquire ownership of land by openly, continuously, exclusively, actually, and notoriously occupying it for a statutory period, even if they do not have legal title. Essentially, if a property owner fails to remove a trespasser or assert their rights for a specified duration, they may lose their property or have their rights restricted to the person who has been using it adversely.

Question 44: An FHA loan is insured by the:

Federal Housing Administration (Correct answer)
Department of the Treasury
Federal Reserve
Veterans Affairs

Correct answer: Federal Housing Administration

FHA loans are insured by the Federal Housing Administration, allowing lower down payments.

Question 45: The primary objectives of a property manager are:

Generate the highest possible gross income over the economic life of the property
Generate the highest possible gross income over the economic life of the property
Generate the highest possible net income over the economic life of the property
A & C (Correct answer)

Correct answer: A & C

The primary objectives of a property manager are to generate the highest possible net income over the economic life of the property and to preserve or increase the property's value. Option A correctly states generating the highest possible net income. Option C is identical to option A, making D (A & C) the correct choice, indicating both are objectives.

Question 46: All the following are methods of transferring legal title to real property except by

a sales contract. (Correct answer)
eminent domain.
a patent.
a will.

Correct answer: a sales contract.

A sales contract (or purchase agreement) is a legally binding agreement to transfer property, but it does not *itself* transfer legal title. It creates an equitable interest for the buyer and outlines the terms of the sale. Legal title is actually transferred later, typically by a deed, will, or through government action like eminent domain or a patent.

Question 47: If a tenant moves in and pays one month’s rent prior to receiving a written copy of a verbally agreed-on two-year lease, the tenant has a(n):

periodic tenancy. (Correct answer)
estate at will.
tenancy at sufferance.
estate for years.

Correct answer: periodic tenancy.

A verbal agreement for a lease longer than one year is typically unenforceable under the Statute of Frauds, which requires leases over a year to be in writing. When a tenant moves in and pays rent based on such an unenforceable agreement, and no written lease is provided, a periodic tenancy is created. This means the tenancy automatically renews for the period for which rent is paid (e.g., month-to-month) until proper notice is given by either party.

Question 48: Market value is the same as ____.

insurable value
investment value
mortgage value (Correct answer)
assessed value

Correct answer: mortgage value

Market value is often considered synonymous with mortgage value because lenders base the amount they are willing to loan on the property's market value. While other values exist (insurable, assessed, investment), market value represents the most likely selling price, which is crucial for determining the collateral's worth for a mortgage.

Question 49: The legal process by which a city divides land into districts for residential, commercial, and industrial use is:

Deed restriction
Zoning (Correct answer)
Subdivision
Eminent domain

Correct answer: Zoning

Zoning is the exercise of police power to regulate land use within designated districts.

Question 50: Which principle states that maximum value is achieved when a property conforms with surrounding properties?

Substitution
Regression
Conformity (Correct answer)
Anticipation

Correct answer: Conformity

The principle of conformity holds that uniformity among nearby properties supports maximum value.

Question 51: Which of the following is not a common type of short-term mortgage loan?

Inability to maintain property in good condition
The tenant's relocation
A loan for a single-family home (Correct answer)
The most complete type of ownership

Correct answer: A loan for a single-family home

Short-term mortgage loans are typically used for specific purposes like construction, bridge financing, or property rehabilitation, where the loan is expected to be repaid or refinanced quickly. A loan for a single-family home is generally a long-term commitment, often 15 or 30 years, making it not a common type of short-term mortgage.

Question 52: Which is the least curable form of obsolescence:

Super adequacy
Functional obsolescence
Economic obsolescence (Correct answer)
Physical deterioration

Correct answer: Economic obsolescence

Economic obsolescence, also known as external obsolescence, is caused by factors outside the property itself, such as a declining neighborhood, changes in zoning, or economic downturns. These external forces are typically beyond the property owner's control and are therefore the most difficult, or least curable, form of depreciation. In contrast, physical deterioration and functional obsolescence are generally curable by repairs or upgrades to the property.

Question 53: A written summary of the chain of title is known as a (n) ____ once the public records have been reviewed.

a title acknowledgement
Affidavit of Title
the title's abstract (Correct answer)
guarantee of title

Correct answer: the title's abstract

An abstract of title is a condensed history of all recorded documents affecting a particular parcel of real estate. It is prepared by an abstractor after reviewing public records and summarizes the chain of ownership, liens, encumbrances, and other relevant legal instruments. This document helps determine the current status of the title.

Question 54: A lot measures 420' x 670' sold for $633,150. What was the cost per square foot?

$2.00
$2.50
$1.50
$1.75
$2.25 (Correct answer)

Correct answer: $2.25

First, calculate the total square footage of the lot: 420 feet * 670 feet = 281,400 square feet. Then, divide the total sale price by the total square footage to find the cost per square foot: $633,150 / 281,400 sq ft = $2.25 per square foot.

Question 55: A Transaction Broker (also called a Facilitator or Non-Agent) is a licensee who:

Specializes in commercial transactions exceeding $1 million
Is a dual agent who has received written consent from both parties
Assists both parties in a transaction without serving as a fiduciary for either (Correct answer)
Only prepares paperwork and does not show properties

Correct answer: Assists both parties in a transaction without serving as a fiduciary for either

A transaction broker provides limited assistance to both parties without owing full fiduciary duties to either the buyer or seller.

Question 56: Which of the following individuals or entities is prohibited from working in the escrow industry?

An lawyer
A corporation that is either domestic or international.
The transaction's principal (Correct answer)
Broker in real estate

Correct answer: The transaction's principal

An escrow holder must maintain strict neutrality and impartiality in a real estate transaction. The principals (buyer and seller) are directly involved and have vested interests, which would compromise the unbiased role required of an escrow agent. Therefore, a principal in the transaction is prohibited from acting as the escrow holder for that specific transaction.

Question 57: The legal act of giving and receiving a deed is referred to as .

Passing Title (Correct answer)
Transfer of Sale
Transfer of Goods
Transfer Title

Correct answer: Passing Title

'Passing title' refers to the legal process of transferring ownership of real property from one party to another, typically through the delivery and acceptance of a deed. This act signifies the conveyance of legal rights and interests in the property. It is the culmination of a real estate transaction where the seller's interest is extinguished and the buyer's is established.

Question 58: The most common method used by the Federal Reserve Board to control the supply of money is by

Urban Development Block Grants (UDAG).
Open Market Operations. (Correct answer)
Tandem Plan.
affirmative action.

Correct answer: Open Market Operations.

The Federal Reserve Board primarily controls the money supply through Open Market Operations (OMO), which involve the buying and selling of government securities in the open market. When the Fed buys securities, it injects money into the banking system, increasing the money supply. Conversely, selling securities removes money from the system, decreasing the money supply, making OMO the most frequently used and effective tool for monetary policy.

Question 59: A condensed summary of the public records affecting title, prepared by a title company, is known as a/an:

Abstract of title (Correct answer)
Estoppel certificate
Deed of trust
Habendum clause

Correct answer: Abstract of title

An abstract of title is a summarized history of all recorded documents on a property.

Question 60: Which of the following expenses is not deducted from effective gross income in calculating net operating income?

depreciation (Correct answer)
utilities
management
advertising

Correct answer: depreciation

Net Operating Income (NOI) is calculated by subtracting all operating expenses from the effective gross income. Depreciation is an accounting expense that reflects the loss of value over time and is deducted for tax purposes, but it is not a cash operating expense and is therefore not included in the calculation of NOI.

Question 61: The principle of anticipation in appraisal is most directly related to which approach?

Income capitalization approach (Correct answer)
Cost approach
Reproduction cost method
Square-foot method

Correct answer: Income capitalization approach

Anticipation, the expectation of future benefits, underlies the income approach which capitalizes expected income.

Question 62: What is designated agency in real estate?

A buyer selects their preferred agent from an MLS-provided list
The state designates which brokerage must handle a particular transaction
A broker assigns separate agents from their office to each party in the same transaction (Correct answer)
An agent is appointed as the sole representative for all properties in a defined area

Correct answer: A broker assigns separate agents from their office to each party in the same transaction

Designated agency allows a managing broker to appoint different licensees within the same firm to represent the buyer and seller separately, reducing dual agency conflicts.

Question 63: When does the seller agree or disagree to allow sub-agency

Purchasing agreement
Management agreement
Listing agreement (Correct answer)
Lease agreement

Correct answer: Listing agreement

The question of whether to allow sub-agency is typically addressed and agreed upon in the listing agreement between the seller and their listing broker. The listing agreement outlines the terms of the agency relationship, including how the property will be marketed and whether the seller authorizes other brokers (subagents) to represent them in the sale. This ensures the seller's consent to the agency structure.

Question 64: When a real estate license expires, how long is the agent’s grace period in which they may reinstate their license?

Two years (Correct answer)
Four years
Three years.
One year

Correct answer: Two years

In many jurisdictions, including California, a real estate license can typically be reinstated within two years after its expiration date by completing renewal requirements and paying any late fees. If the license is not renewed within this grace period, it becomes permanently lapsed. In such a case, the individual would generally need to re-qualify and pass the licensing exam again to obtain a new license.

Question 65: A contingency in a purchase agreement is best described as:

The earnest money deposit
A condition that must be met for the contract to proceed (Correct answer)
A type of deed
A penalty clause

Correct answer: A condition that must be met for the contract to proceed

A contingency is a condition (such as financing or inspection) that must be satisfied for the contract to close.

Question 66: Which of the notices shown below MUST be signed by a buyer or a seller

Transaction Broker Notice.
Notice of Nonrepresentation.
Consent to Transition to Transaction Broker Notice. (Correct answer)
Single Agent Notice.

Correct answer: Consent to Transition to Transaction Broker Notice.

When a single agent relationship transitions to a transaction broker relationship, it represents a significant change in the level of fiduciary duties owed to the client. Because this change impacts the client's representation, Florida law requires the client's explicit, written consent, typically obtained through a 'Consent to Transition to Transaction Broker Notice,' ensuring they understand and agree to the altered relationship.

Question 67: The F.R.E.C. is composed of

five brokers and two lay members
three brokers, two brokers or sales associates, and two lay members.
four brokers and three lay members.
seven members. (Correct answer)

Correct answer: seven members.

The Florida Real Estate Commission (FREC) is composed of seven members. These include four licensed brokers who have held active licenses for at least five years, one licensed broker or sales associate who has held an active license for at least two years, and two lay members who have never been licensed as real estate brokers or sales associates.

Question 68: A listing agent discovers a serious structural defect in the property they represent. What is the agent's primary obligation?

Disclose it only if a buyer's agent asks a direct question about it
Report it solely to the state real estate commission
Disclose it to potential buyers as a material fact (Correct answer)
Keep it confidential to protect the seller's negotiating position

Correct answer: Disclose it to potential buyers as a material fact

Agents must disclose all known material facts to potential buyers; concealing a structural defect violates the duty of disclosure and can expose the agent to legal liability.

Question 69: The best guideline to determine whether an action is ethical can be found in:

what is in the best interest of the real estate licensee
the Business and Professions Code. (Correct answer)
state legislation
the Preamble of the National Association of REALTORS®

Correct answer: the Business and Professions Code.

In California, the Business and Professions Code contains the Real Estate Law, which sets forth the ethical and legal standards for real estate licensees. While other sources like the NAR Preamble offer ethical guidance, the Business and Professions Code provides the legally enforceable framework and specific guidelines that licensees must adhere to, making it the primary determinant of ethical and lawful conduct.

Question 70: A bridge loan is typically used to:

Pay property taxes
Refinance at a lower rate
Finance new construction
Cover the gap between buying a new home and selling the old one (Correct answer)

Correct answer: Cover the gap between buying a new home and selling the old one

A bridge loan provides short-term financing until the borrower's existing property sells.

Question 71: An executory contract is one in which:

The contract is void
All obligations are completed
Only one party has signed
Something remains to be performed by one or both parties (Correct answer)

Correct answer: Something remains to be performed by one or both parties

An executory contract still has obligations remaining to be performed, such as a signed sale before closing.

Question 72: A married couple owning property as a single legal unit with survivorship in states that permit it hold title as:

Community property
Tenancy in common
Tenancy by the entirety (Correct answer)
Joint tenancy

Correct answer: Tenancy by the entirety

Tenancy by the entirety is a form of ownership available only to married couples with right of survivorship.

Question 73: A seller's agent learns confidential negotiation information from an unrepresented buyer during showings. The agent's correct course of action is to:

Enter the information into the MLS remarks for transparency
Report the information to the state real estate board for guidance
Share the information with the seller to fulfill the fiduciary duty of disclosure and loyalty (Correct answer)
Keep the information confidential and not disclose it to any party

Correct answer: Share the information with the seller to fulfill the fiduciary duty of disclosure and loyalty

A seller's agent owes fiduciary duties of loyalty and disclosure to the seller (their principal), which requires sharing information received from third parties that could benefit the seller in negotiations.

Question 74: A licensee should make no changes to the promulgated contracts except a change which is:

Desired by the principals. (Correct answer)
Desired by the broker.
Not involving money.
Reasonable.

Correct answer: Desired by the principals.

Licensees are generally prohibited from making unauthorized changes to promulgated forms. The only permissible changes are those specifically desired by the principals (the buyer and seller) to reflect their agreement. Any modifications must be made in a clear and conspicuous manner, often by adding an addendum or striking through and initialing changes, ensuring the principals' intent is accurately documented.

Question 75: Exclusive agency listing is when

agents get paid only if they sell the property. No fee is earned if the owner alone sells the property. (Correct answer)
the agent gets paid no matter who sells the property, regardless of whether it's the agent or the seller.
sellers have the right to use as many brokers as they want. The seller is not, however, obligated to pay any of them if he or she sells the property without the broker's help.
the agent gets to keep everything he can get that's more than the sale price the owner wants.

Correct answer: agents get paid only if they sell the property. No fee is earned if the owner alone sells the property.

An exclusive agency listing agreement grants one broker the exclusive right to sell the property, and they earn a commission if they or any other broker finds a buyer. However, a key characteristic is that the seller retains the right to sell the property themselves without owing any commission to the listing broker. This differs from an exclusive right-to-sell listing, where the broker earns a commission regardless of who sells the property.

Question 76: In a buydown, what is reduced for the borrower?

The principal balance
The interest rate (Correct answer)
The loan term
The property taxes

Correct answer: The interest rate

A buydown pays points upfront to lower the borrower's interest rate, often temporarily.

Question 77: Amy, Betty and Charlie are siblings and own a property as joint tenants. Charlie decide to sell his share to Larry for a reduced amount. Upon closing, Larry is a

tenant in common with Amy and Betty. (Correct answer)
tenant at will with Amy and Betty.
tenant by the entirety with Amy and Betty.
joint tenant with Amy and Betty.

Correct answer: tenant in common with Amy and Betty.

Joint tenancy requires the unities of time, title, interest and possession. When Jayne sells her property to Maggie, the unity of time and title is breached. Agnes and Zelma are still joint tenants, but Maggie would be a tenant in common with them.

Question 78: Marilyn is applying for a loan to finance her new home in an area where there are minorities. The loan officer tells her that she should try to find another location, since the loan committee would prefer not to lend in that area. The lender may be involved in the illegal practice called

redlining. (Correct answer)
steering.
failure to disclose under RESPa.
blockbusting.

Correct answer: redlining.

Redlining is the illegal practice where lenders refuse to make loans or impose stricter terms in certain geographic areas, often based on the racial or ethnic composition of the neighborhood, regardless of the applicant's creditworthiness. This discriminatory practice limits housing opportunities for residents in those areas and is a violation of fair housing laws.

Question 79: A right to later buy a property at an undetermined price given to a tenant that does not compel the owner to sell is an example of a(n):

right of first refusal. (Correct answer)
contract of adhesion.
land contract.
lease with an option to purchase.

Correct answer: right of first refusal.

A right of first refusal gives a party, such as a tenant, the opportunity to purchase a property before the owner sells it to someone else. The owner is not compelled to sell, but if they decide to, they must first offer it to the holder of the right, usually at the same terms offered by a third party. This differs from an option, which gives the holder the right to buy at a predetermined price within a specific timeframe.

Question 80: When a person dies leaving a valid will, they are said to have died:

Testate (Correct answer)
Intestate
By devise
In escheat

Correct answer: Testate

Dying testate means the deceased left a valid will directing distribution.

Question 81: A father conveys ownership of his residence to his son but reserves for himself a life estate in the residence. The interest the son owns during the father's lifetime is

A remainder. (Correct answer)
Pur autre vie.
Reversionary.
A life tenancy.

Correct answer: A remainder.

When a father conveys ownership to his son but reserves a life estate for himself, the father holds a life tenancy, meaning he can live on or use the property for his lifetime. The son, in this scenario, holds a "remainder" interest. This means the son will receive full ownership (fee simple absolute) of the property upon the termination of the father's life estate, typically upon the father's death.

Question 82: Which of the following is NOT one of the fiduciary duties an agent owes to their principal?

Disclosure
Confidentiality
Loyalty
Profitability (Correct answer)

Correct answer: Profitability

Fiduciary duties include loyalty, obedience, disclosure, confidentiality, accounting, and reasonable care — profitability is not among them.

Question 83: If the landlord and the tenant do not specify the rental period, the manner in which the rent is paid creates this type of occupancy:

Tenancy in common
Tenancy for years
Estate from year to year (Correct answer)
Tenancy at will

Correct answer: Estate from year to year

When a landlord and tenant do not specify a rental period, but rent is paid periodically (e.g., monthly or weekly), an Estate from Year to Year (or periodic tenancy) is created. This tenancy automatically renews for successive periods until proper notice to terminate is given by either party. The payment schedule dictates the period of the tenancy.

Question 84: The degree, quantity, or nature of a person’s interest in real property is called his

estate (Correct answer)
dower
possession
curtesy

Correct answer: estate

In real estate, an 'estate' refers to the degree, quantity, nature, and extent of interest a person has in real property. It defines the specific rights and the duration of an individual's ownership or possessory interest in land. Dower and curtesy are specific marital rights, and possession is just one component of a broader estate.

Question 85: Physical deterioration that is economically feasible to repair is referred to as:

Incurable depreciation
External obsolescence
Curable physical deterioration (Correct answer)
Functional inutility

Correct answer: Curable physical deterioration

Curable physical deterioration is wear and tear whose repair cost is justified by the value it restores.

Question 86: An agent's fiduciary duty of loyalty primarily requires the agent to:

Disclose all material property facts to all parties
Follow all lawful instructions from any party in the transaction
Maintain accurate financial records for every transaction
Place the client's interests above all others, including the agent's own (Correct answer)

Correct answer: Place the client's interests above all others, including the agent's own

The duty of loyalty obligates the agent to act exclusively in the client's best interest, even when doing so conflicts with the agent's own financial gain.

Question 87: The total positive balances due to all beneficiaries of a broker’s trust account need to at all times equal the account’s:

balance (Correct answer)
overage
shortage.
fidelity bond coverage.

Correct answer: balance

A broker's trust account holds funds belonging to others, such as earnest money deposits or rents. It is a strict legal requirement that the sum of all individual client balances (beneficiaries) must always precisely match the total balance of the trust account. This ensures proper accounting, prevents commingling of funds, and protects client money from misuse or shortage.

Question 88: Which approach to value would an appraiser rely on most heavily for a single-family home in an active subdivision?

Gross income multiplier
Income capitalization approach
Sales comparison approach (Correct answer)
Cost approach

Correct answer: Sales comparison approach

Abundant comparable sales make the sales comparison approach the most reliable for typical residential homes.

Question 89: The government's power to take private property for public use upon payment of just compensation is:

Escheat
Police power
Eminent domain (Correct answer)
Taxation

Correct answer: Eminent domain

Eminent domain lets the government take private land for public use with just compensation.

Question 90: Which of these characteristics does NOT describe a fee simple estate?

Unlimited duration
Definite duration (Correct answer)
Freely inheritable
Freely transferable

Correct answer: Definite duration

A fee simple estate represents the highest and most complete form of ownership in real property, characterized by its unlimited duration. It is freely transferable and inheritable, meaning the owner can sell, gift, or will the property without significant restrictions. The characteristic that does NOT describe a fee simple estate is "definite duration," as that applies to leasehold estates or other limited interests, not perpetual ownership.

Question 91: Highest and best use analysis requires that the use be legally permissible, physically possible, financially feasible, and:

Tax-exempt
Historically consistent
Owner-preferred
Maximally productive (Correct answer)

Correct answer: Maximally productive

The four tests of highest and best use conclude with the use that is maximally productive.

Question 92: In the sales comparison approach, if the comparable is superior to the subject, the appraiser should:

Add value to the comparable
Subtract value from the comparable (Correct answer)
Make no adjustment
Subtract value from the subject

Correct answer: Subtract value from the comparable

When a comparable is superior, you subtract from its price to make it equivalent to the inferior subject.

Question 93: Which is correct about Regulation Z?

all of the above
It is published by the Federal National Mortgage Association
It requires the disclosure of pertinent information such as down payment and annual percentage rate if a "triggering" item such as interest rate is advertised (Correct answer)
It requires disclosure of estimate of settlement costs by the lender

Correct answer: It requires the disclosure of pertinent information such as down payment and annual percentage rate if a "triggering" item such as interest rate is advertised

Regulation Z, which implements the Truth in Lending Act (TILA), requires lenders to disclose all costs of financing a loan. If certain 'triggering terms' (like the interest rate or down payment) are used in advertising, Regulation Z mandates the disclosure of additional pertinent information, such as the annual percentage rate (APR) and other specific loan terms, to prevent misleading consumers.

Question 94: Your seller says that he doesn't want to accept any offers from buyers who are represented by a buyer's agent. What should you do when a buyer's agent brings an offer on the listing on behalf of his/her client?

Send it back to the buyer's agent.
Throw it away.
File it and forget about it.
Present it to the seller. (Correct answer)

Correct answer: Present it to the seller.

A listing agent has a fiduciary duty to their seller client to present all offers, regardless of the source or the seller's stated preferences, unless the seller has explicitly instructed otherwise in writing. Even if the seller expresses a general dislike for buyer's agents, a verbal preference does not override the agent's obligation to present a legitimate offer for consideration. Failure to present an offer can lead to disciplinary action.

Question 95: Miguel recorded a grant deed to Tom. Miguel afterward changed his mind and attempted to cancel the delivery, saying there had been no delivery to Tom. Why did Miguel's attempt fail?

The deed is acknowledged by recording it.
With recording, delivery and acceptance are assumed. (Correct answer)
He was unsuccessful only if Tom can prove he took possession.
The act of recording establishes an entry in the title chain.

Correct answer: With recording, delivery and acceptance are assumed.

When a deed is recorded in public records, it creates a legal presumption that the deed has been delivered by the grantor and accepted by the grantee. This act provides constructive notice to the world of the transfer of ownership. Therefore, once recorded, Miguel cannot unilaterally claim there was no delivery to invalidate the transfer.

Question 96: A property has a building value of $250,000 and an effective age of 10 years with a 50-year economic life. Using straight-line depreciation, how much value has been lost?

$125,000
$25,000
$5,000
$50,000 (Correct answer)

Correct answer: $50,000

Straight-line depreciation is 10/50 = 20% of $250,000, equaling $50,000 lost.

Question 97: Under an Exclusive Right to Sell listing agreement, the listing broker earns a commission:

Regardless of who procures the buyer, including the seller themselves (Correct answer)
Only if the property sells at or above the original listing price
Only if a cooperating MLS agent procures the buyer
Only if the broker personally introduces the buyer to the seller

Correct answer: Regardless of who procures the buyer, including the seller themselves

An exclusive right to sell listing guarantees the listing broker a commission no matter who ultimately produces the buyer — the broker, a cooperating agent, or even the seller acting independently.

Question 98: What is the loan-to-value (LTV) ratio if a buyer borrows $160,000 on a $200,000 home?

70%
60%
80% (Correct answer)
90%

Correct answer: 80%

LTV equals loan divided by value: 160,000 / 200,000 = 80%.

Question 99: The federal law requiring lenders to disclose the true cost of credit, including APR, is:

RESPA
ECOA
Truth in Lending Act (Regulation Z) (Correct answer)
Fair Housing Act

Correct answer: Truth in Lending Act (Regulation Z)

The Truth in Lending Act, implemented by Regulation Z, mandates APR and finance-charge disclosure.

Question 100: What is a release clause in a mortgage?

Allows for the release of sections of the property supplied as security from the mortgage lien upon performance of a specified act. (Correct answer)
Releases a guarantor from additional obligation if certain requirements are met.
Allows for the extension of its due date.
Creates a lien that is second only to the lien created by taxes and assessments.

Correct answer: Allows for the release of sections of the property supplied as security from the mortgage lien upon performance of a specified act.

A release clause, often found in blanket mortgages covering multiple parcels of land, allows individual parcels to be released from the mortgage lien as specific portions of the loan are repaid. This enables the borrower to sell or develop parts of the property without having to pay off the entire loan.

Real Estate Salesperson License Exam (General Structure)

The Real Estate Salesperson License Exam assesses knowledge of real estate principles, practices, and laws required to become a licensed real estate agent.

100

Questions

150 min

Time Limit

70%

To Pass

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