Real Estate Licensing Preparation
Practice Questions
Course Introduction
This course is designed to prepare students for the real estate licensing examination by providing comprehensive coverage of essential topics, including property ownership, land use controls and regulations, valuation and market analysis, financing, transfer of property, and the practices and principles of real estate. Emphasis is placed on understanding state and national real estate laws, ethical considerations, agency relationships, contracts, and the rights and responsibilities of licensees. Through lectures, practice exams, and interactive activities, students develop the knowledge and test-taking strategies necessary to successfully pass the licensing exam and begin a professional real estate career.
Recommended Textbook Real Estate Principles 11th Edition by Charles J. Jacobus
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Chapter 1: Nature and Description of Real Estate
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Q1) Prior to offering his property for sale, Sal was within his rights in removing the sink from the master bath.
A)True
B)False
Answer: True
Q2) The number of feet of wire required to enclose 1/4 of 1/4 of a section of land with two strands of wire is
A) 5,280 feet.
B) 10,560 feet.
C) 21,120 feet.
D) 34,848 feet.
Answer: B
Q3) When there are two valid property descriptions of a piece of real property,
A) metes and bounds descriptions take precedence.
B) government survey descriptions take precedence.
C) older descriptions take precedence over subsequent descriptions.
D) any description that adequately describes and distinguishes the property will apply.
Answer: D
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3
Chapter 2: Rights and Interests in Land
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Q1) An encumbrance affects the loan to value ratio.
A)True
B)False
Answer: False
Q2) Railroads have the right to condemn private property for public use.
A)True
B)False
Answer: True
Q3) The government receives the authority to take the property of one who dies without a will and without heirs by virtue of
A) laws of agency.
B) eminent domain.
C) police power.
D) escheat.
Answer: D
Q4) The bundle of rights includes the right of escheat.
A)True
B)False
Answer: False
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Chapter 3: Forms of Ownership
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Sample Questions
Q1) Investors in real estate investment trusts are called ____________________. Answer: beneficiaries
Q2) One of the key characteristics of a tenancy by the entireties is that neither spouse has a disposable interest in the property during the lifetime of the other.
A)True
B)False
Answer: True
Q3) The basic concept of community property law is that the husband and wife are merged into one by marriage.
A)True
B)False
Answer: False
Q4) Property owned before marriage and property acquired after marriage by gift, inheritance, or purchase with separate funds are all considered the couple's community property.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Transferring Title
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Sample Questions
Q1) A gift deed conveys legal title.
A)True
B)False
Q2) Title to real property passes to the grantee at the time the deed is
A) written.
B) delivered and accepted.
C) executed.
D) notarized.
Q3) For a deed to convey title to real property, it must contain the legal description of the property.
A)True
B)False
Q4) How many covenants does a bargain and sale deed contain?
A) None
B) Two
C) Three
D) Five
Q5) The person giving up ownership is called the grantee.
A)True
B)False
Page 6
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Chapter 5: Recordation Abstracts and Title Insurance
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Q1) A report on the claims to title is prepared. It contains a listing of the full chain of title for 80 years. It concludes with a statement of an attorney stating the current condition of the title and who presently has claim to it. In most states this document would be known as a
A) title report.
B) certificate of title.
C) jurat.
D) abstract of title.
Q2) To be certain that the seller is actually the owner of the property, the buyer should order
A) an estoppel certificate.
B) a general warranty deed.
C) a survey.
D) a title search.
Q3) ____________________ notice is knowledge that one has actually gained based on what one has seen, heard, read, or observed.
Q4) A report made by a title insurance company showing current title condition is called a _________________________.
Q5) A title defect is also known as a title ____________________.
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Chapter 6: Contract Law
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Q1) For an agreement to be enforceable it must be supported by ____________________ to demonstrate that a bargain has been struck between the parties to the contract.
Q2) Partial performance may never be accepted as a remedy for breach of contract. A)True
B)False
Q3) Which of the following are considered to be legally competent?
A) Corporations
B) Persons of unsound mind
C) Minors
D) A 15 year old woman
Q4) A promise not to act by one or more of the parties to a contract is known as ____________________.
Q5) When one party to a contract makes a promise without first receiving any promise of performance from the other, it is called
A) a bilateral contract.
B) an implied contract.
C) a unilateral contract.
D) an executory contract.
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Chapter 7: Real Estate Sales Contracts
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Sample Questions
Q1) When buying property under a land sales contract, which of the following does the buyer receive immediately?
A) Possession
B) Title
C) Encumbrances
D) Estate in fee simple
Q2) The vendor holds legal title to real property when a land sales contract has been entered into between the seller of the property and a buyer.
A)True
B)False
Q3) In a brokered real estate transaction, the amount of earnest money is determined by the
A) buyer.
B) seller.
C) by agreement between the buyer and seller.
D) by agreement between the buyer and broker.
Q4) The most important feature of a(n)____________________ contract is that the seller does not deliver a deed to the buyer at closing.
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Page 9
Chapter 8: Mortgage and Note
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Q1) A nonjudicial foreclosure does not go to court and is not heard by a judge.
A)True
B)False
Q2) An acceleration clause most nearly means to speed up the payments.
A)True
B)False
Q3) In a promissory note, the term "principal" refers to the borrower.
A)True
B)False
Q4) Who benefits the most by the inclusion of a subordination clause in a mortgage?
A) Borrower
B) Lender
C) Selling broker
D) Trustee
Q5) Barry purchased Bob's home without accepting obligation for the existing loan. Barry is said to be buying the house
A) subject to the loan.
B) with an assumption of the loan.
C) with an assumption by substitution of the loan.
D) by contract for equitable title.
Page 10
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Chapter 9: Deed of Trust
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Sample Questions
Q1) The borrower under a deed of trust arrangement is called the A) trustor.
B) beneficiary.
C) trustee.
D) holder in due course.
Q2) In a deed of trust, if the borrower defaults, the lender can take possession of the property and collect the rents.
A)True
B)False
Q3) If the borrower defaults, the trustee has the right to sell the property and convey ownership to the purchaser with a ______________________________.
Q4) The beneficiary's right, upon default, to take physical possession and collect income generated by the property is called
A) assignment of rents.
B) reconveyance.
C) power of sale.
D) the trustee has the right, not the beneficiary.
Q5) Under a deed of trust, the lender is known as the ____________________.
Q6) The trustee in a deed of trust is a neutral ____________________ party.
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Chapter 10: Lending Practices
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Sample Questions
Q1) What is the annual interest on $50,000 calculated at a rate of 8.125% per annum?
A) $331.00
B) $406.25
C) $3,310.00
D) $4,062.50
Q2) The relationship between the amount of money a lender is willing to loan and192 the lender's estimate of _________________________ of the property that will serve as security is called the loan-to-value ratio.
Q3) On a $64,000 home, which of the following would require the largest cash down payment?
A) FHA-insured loan
B) 80% loan-to-value conventional loan
C) 90% loan-to-value conventional
D) 100% DVA loan
Q4) The role of the FHA in residential mortgage lending is loaning the money.
A)True
B)False
Q5) A certificate of reasonable value is issued by a VA staff appraiser.
A)True
B)False
Page 12
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Chapter 11: The Loan and the Consumer
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Q1) When considering loan applications, lenders like to see good ____________________ records.
Q2) The Fair Credit Reporting Act gives individuals several rights EXCEPT
A) correct any errors on their report.
B) inspect their file at a credit bureau.
C) delete any reference to bankruptcy.
D) make explanatory statements to supplement the file.
Q3) Which of the following loans would be exempt from the disclosure requirements of the truth-in-lending laws?
A) An unsecured personal loan of $3,000
B) An educational loan from a commercial bank
C) A second mortgage loan on a residence
D) A $30,000 loan for the purchase of a $40,000 automobile
Q4) Regulation Z requires a lender to disclose
A) interest charges expressed as dollars and percent.
B) dollar amount of any finance charge.
C) APR as a dollar amount.
D) all charges only as a percent.
Q5) ____________________ loans have risk-based pricing and rates are not quoted.
Page 13
Q6) A borrower has a limited right of ____________________ in a credit transaction.
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Chapter 12: Sources of Financing
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Q1) Which of the following specializes in making loans and reselling them?
A) FNMA
B) Mortgage brokers
C) Mortgage bankers
D) VA
Q2) Automated underwriting systems have dramatically overhauled the mortgage loan underwriting process.
A)True
B)False
Q3) Computerized Loan Origination is limited to regulated lenders.
A)True
B)False
Q4) Participation Certificates (PCs)are instruments used by A) GNMA.
B) FNMA.
C) FHLMC.
D) Farmer Mac.
Q5) Pension funds and trust funds offer money for real estate loans.
A)True
B)False
Page 15
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Chapter 13: Types of Financing
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Q1) For a successful wraparound, it is necessary to have an existing mortgage with A) a below-market interest rate.
B) a due-on-sale clause.
C) an above market interest rate.
D) an alienation clause.
Q2) The most popular index is the local bank prime rate.
A)True
B)False
Q3) A mortgage secured by two or more properties is called a ____________________ mortgage.
Q4) Under the terms of a shared appreciation mortgage
A) the loan is made at a below-market interest rate.
B) the lender received a portion of the property's appreciation.
C) both a and b.
D) neither a nor b.
Q5) With a ____________________ mortgage, the lender makes monthly payments to the homeowner.
Q6) "Rich uncle " financing is a variation of equity sharing.
A)True
B)False
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Chapter 14: Taxes and Assessments
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Q1) If a home sold for $124,000 and was assessed at 80% of its value, how much would the property taxes be at a rate of $18.20 per thousand dollars of assessed value?
A) $992.00
B) $1,444.35
C) $1,805.44
D) $2,256.80
Q2) A charge or hold by the government against a property to ensure the payment of taxes is called a ____________________.
Q3) All of the following benefit from property taxes EXCEPT A) school budget.
B) municipal stadium.
C) public libraries.
D) parks.
Q4) The first step in determining the amount of taxable gain upon the sale of an owner-occupied residence is to calculate the home's ____________________.
Q5) The assessed value of all lands and buildings are made available for public inspection in what is known as the ____________________ rolls.
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Page 17
Chapter 15: Title Closing and Escrow
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Q1) A 9% amortized loan with a November 1 balance of $40,000 requires the payment of principal and interest at the first of each month. If prorating is done as of the 20 of November, the
A) buyer owes the seller $100.
B) buyer owes the seller $200.
C) seller owes the buyer $100.
D) seller owes the buyer $200.
Q2) A seller received a net amount of $29,817 after paying off a $53,000 loan balance, $1,213 in miscellaneous costs, and a 7% brokerage fee. What was the sale price of the house? (round to nearest dollar)
A) $77,020
B) $84,030
C) $90,355
D) $90,360
Q3) A settlement statement, also called a ____________________ statement, is given to the buyer and seller to summarize the financial aspects of their transaction.
Q4) A(n)____________________ statement is a statement by an owner or lienholder as to the balance due on an existing lien against the property.
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Page 18
Chapter 16: Real Estate Leases
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Q1) A lease contract that calls for rent increases that keep abreast with changes in property taxes and utility costs contains a participation clause.
A)True
B)False
Q2) A broker leasing property for a seller for a fee is a trustee.
A)True
B)False
Q3) If a renter complains to public health officials about conditions on the premises which violate codes, the landlord may legally react by giving the tenant an eviction notice.
A)True
B)False
Q4) The designation of "certified property manager" means an IREM graduate property manager.
A)True B)False
Q5) When a property owner offers a premium to entice a prospective tenant to move in, this is known as a rent ____________________.
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Chapter 17: Real Estate Appraisal
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Q1) The operating expense ratio of a building is determined by dividing the total operating expenses by the effective gross income.
A)True
B)False
Q2) When real property loses value due to social or economic changes, this loss is called A) obsolescence.
B) depreciation.
C) chattel loss.
D) recapture.
Q3) Adjustments for advantageous financing would be made in the A) market comparison approach to appraisal.
B) cost approach to appraisal.
C) income approach to appraisal.
D) revised market price.
Q4) A market where there is an excess of supply over demand is known as a ____________________ market.
Q5) ____________________ are made for price changes since each comparable was sold, as well as for differences in physical features, amenities, and financial terms.
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Chapter 18: Licensing Laws and Professional Affiliation
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Q1) Over time, states have established licensing requirements dealing with all EXCEPT A) minimum age.
B) education.
C) residency.
D) Intelligence Quotient (IQ).
Q2) A ____________________ license is required of a real estate broker in order to conduct negotiations within another state.
Q3) A person who sells real estate for others
A) must be licensed in order to collect compensation.
B) need not be licensed if no compensation is involved.
C) both a and b.
D) neither a nor b.
Q4) A(n)____________________ contractor is one who contracts to do work according to their own methods and is responsible to his employer only for the results of that work.
Q5) Any person who earns a real estate commission and is not licensed is guilty of breaking the law.
A)True
B)False
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Chapter 19: The Principal-Broker Relationship: Employment
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Q1) In an area where the multiple listing commission split is 50/50, a broker sells another broker's 6% listing for $105,000. How much commission will the selling broker receive?
A) $1,896
B) $2,790
C) $3,150
D) $6,300
Q2) A listing that gives the broker the right to collect a commission no matter who sells the property during the listing period is called a(n)____________________ right to sell listing.
Q3) A licensed real estate salesperson can accept a commission from more than one broker
A) if both brokers are fully informed in writing.
B) when brokers are cooperating through the multiple listing service.
C) at no time.
D) if the salesperson was the procuring cause in each transaction.
Q4) Most brokers are reluctant to accept net listings even when they are permitted to do so.
A)True
B)False
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Chapter 20: The Principal-Broker Relationship: Agency
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Q1) If a broker is a little short of funds and "borrows" some money from his escrow account to pay monthly bills, this activity is called A) commingling and is illegal.
B) conversion and is illegal.
C) misrepresentation and may be illegal.
D) shrewd business and is legal.
Q2) It is the responsibility of the real estate broker to A) submit only those offers that meet the listing price. B) decide which offers are in the principal's best interest. C) quote only the listing price, but present all offers. D) say whatever is necessary to get an offer.
Q3) The main problem that can arise with a dual agency is the agent may experience a conflict of interest.
A)True
B)False
Q4) Two sellers lead a buyer to believe that broker Charlotte is their agent without notifying Charlotte of the fact. This is an example of express agency.
A)True
B)False
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Chapter 21: Fair Housing, Ada, Equal Credit, and Community Reinvestment
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Q1) Under federal law, the owner of one single-family dwelling in which the owner has resided for 10 years, who does not employ an agent and does not use discriminatory advertising, may discriminate in the sale or rental of the property on any of the following EXCEPT
A) religion.
B) race.
C) color.
D) national origin.
Q2) The penalties for violation of federal fair housing laws include fines of not more than
Q3) The Americans with Disabilities Act (ADA)is a federal law giving disabled individuals the right of access to commercial facilities open to the public.
A)True
B)False
Q4) The "Americans With Disabilities Act" deals primarily with A) single family residences.
B) multi family residences. C) commercial properties.
D) all real estate.
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Chapter 22: Condominiums, Cooperatives, Puds, and Timeshares
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Q1) In a condominium, the authority to raise homeowner fees (association dues)rests with the management company.
A)True
B)False
Q2) In a planned unit development, a developer would be likely to dedicate to the public all of the following EXCEPT
A) streets.
B) roads.
C) parks.
D) common elements.
Q3) The purchaser of a condominium unit is obligated to abide by the development's A) covenants, conditions, and restrictions.
B) house rules.
C) both a and b.
D) neither a nor b.
Q4) Individual units in a condominium development are classed as A) separate property. B) common elements.
C) cooperative elements.
D) limited common elements.
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Chapter 23: Property Insurance
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Q1) Coverage for additional perils can be obtained by
A) purchasing a separate policy.
B) adding an endorsement to a regular fire insurance policy.
C) both a and b.
D) neither a nor b.
Q2) The New York fire insurance form
A) was originally enacted by the legislature of New York state.
B) provides the foundation for most property damage insurance policies in this country.
C) both a and b.
D) neither a nor b.
Q3) An insurance policy which fixes the insurance company's liability to the insured to the actual cash value of the insured property is said to provide
A) "old for new" coverage.
B) "new for old" coverage.
C) "old for old" coverage.
D) "new for new" coverage.
Q4) If one rents rather than owns, they would choose the ____________________ form (HO-4).
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Chapter 24: Land-Use Control
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Q1) A government-issued document that states a structure meets local zoning and building code requirements and is ready for use is called a Certificate of
Q2) When an existing structure does not conform with a new zoning law, it is "grandfathered-in" as a nonconforming use.
A)True
B)False
Q3) Applied to land use, zoning laws may dictate construction standards for buildings. A)True
B)False
Q4) An existing structure that would be prohibited under current zoning laws is called A) a restrictive zone use. B) a nonconforming use.
C) an impact statement property.
D) a land use restriction.
Q5) A zoning variance allows an owner to deviate from the existing zoning law. A)True B)False
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Chapter 25: Real Estate and the Economy
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Q1) ____________________ inflation results in higher prices due to increased costs of labor and supplies.
Q2) Over a period of years, the supply of residential housing is one of temporary shortages and temporary excesses.
A)True
B)False
Q3) The future demand for housing as seen by looking at the population and the ability of people to obtain income at various age levels is known as ____________________ demand.
Q4) The real cost of interest is the
A) rate stated on the promissory note.
B) inflation-adjusted cost.
C) annual percentage rate.
D) rate stated on the promissory note plus any discounts.
Q5) By the year 1980, in order to curb inflation, the policy of the Federal Reserve became one of
A) generous monetary growth.
B) negative monetary growth.
C) restrained monetary growth.
D) constant, no-growth monetary supply.
28
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Chapter 26: Investing in Real Estate
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Q1) An owner-occupied residence cannot be depreciated for federal income tax purposes.
A)True B)False
Q2) An individual investor who is seeking the advantages of a partnership, but who wishes to avoid unlimited financial liability would join a limited partnership.
A)True B)False
Q3) Negative leverage occurs when an investment property depreciates in value. A)True B)False
Q4) One of the main advantages of being a limited partner is A) the profits of a limited partner are tax free. B) limited partners can help with management. C) limited partners are not held responsible for management. D) limited partners are separate legal persons.
Q5) In a typical limited partnership, the organizers are ____________________ partners.
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