Real Estate Final Exam: Set C With Correct Answers A+ Graded (2026/2027)

Real Estate Final Exam: Set C With Correct Answers A+
Graded (2026/2027)

1. A "Cloud on Title" is best described as:

 A) A physical defect in the roof

 B) Any encumbrance or claim that may impair the owner's title

 C) A storm that damages the property before closing

 D) A lien that has been paid in full
CORRECT ANSWER: B) Any encumbrance or claim that may impair the owner's title

2. Which of the following would be a "Credit to the Buyer" on a closing statement?

 A) Sales price

 B) Prepaid property taxes by the seller

 C) Earnest money deposit

 D) Recording fees
CORRECT ANSWER: C) Earnest money deposit

3. The "Doctrine of Prior Appropriation" relates to:

 A) The right of the first user to divert water for beneficial use

 B) The right to build a fence on a neighbor's land

 C) The order in which liens are paid

 D) The first person to sign a listing agreement
CORRECT ANSWER: A) The right of the first user to divert water for beneficial use

4. A "Safety Clause" (Protection Period) in a listing agreement protects the broker from:

 A) Being sued for negligence

 B) Losing a commission if the seller sells to someone the broker introduced after the listing
expires

 C) Physical injury during an open house

 D) A buyer who backs out of a deal
CORRECT ANSWER: B) Losing a commission if the seller sells to someone the broker
introduced after the listing expires

5. "Liquidated Damages" are most commonly found in which document?

 A) The Deed

 ) The Purchase Agreement

 C) The Appraisal Report

,  D) The Listing Agreement
CORRECT ANSWER: B) The Purchase Agreement

6. A "Negative Amortization" loan is one where:

 A) The interest rate is 0%

 B) The loan balance increases because the monthly payment doesn't cover the interest due

 C) The loan is paid off early

 D) The borrower receives a refund at the end
CORRECT ANSWER: B) The loan balance increases because the monthly payment doesn't
cover the interest due

7. If a property is "Landlocked," the owner may be granted an:

 A) Easement in Gross

 B) Easement by Prescription

 C) Easement by Necessity

 D) Encroachment
CORRECT ANSWER: C) Easement by Necessity

8. The "Recording" of a deed provides:

 A) Actual Notice

 B) Constructive Notice

 C) Legal Capacity

 D) Proof of Value
CORRECT ANSWER: B) Constructive Notice

9. Which of the following is an example of "Physical Deterioration"?

 A) A home located near a new loud highway

 B) A home with outdated shag carpeting and wood paneling

 C) A home with a leaking roof and termite damage

 D) A home with a floor plan that requires walking through a bedroom to get to the kitchen
CORRECT ANSWER: C) A home with a leaking roof and termite damage

10. An "Injunction" is a court order to:

 A) Pay a fine

 B) Stop a certain activity (such as violating a deed restriction)

 C) Sell a property immediately

 D) Grant a mortgage
CORRECT ANSWER: B) Stop a certain activity (such as violating a deed restriction)

, 11. A "Straight Note" (Interest-Only Loan) means:

 A) The principal is paid first

 B) Only interest is paid during the term, with a balloon payment at the end

 C) The loan is for personal property only

 D) No interest is charged
CORRECT ANSWER: B) Only interest is paid during the term, with a balloon payment at the
end

12. "Hypothecation" is the process of:

 A) Selling a house for more than it's worth

 B) Pledging property as security for a loan without giving up possession

 C) Over-improving a property

 D) Using a lot of leverage
CORRECT ANSWER: B) Pledging property as security for a loan without giving up
possession

13. "Subordination" is an agreement where:

 A) A tenant agrees to move out early

 B) A lender agrees to take a lower lien priority than a later lender

 C) An agent works for two brokers

 D) A buyer pays more than the asking price
CORRECT ANSWER: B) A lender agrees to take a lower lien priority than a later lender

14. A "Listing" is a contract between:

 A) The Buyer and the Seller

 B) The Seller and the Broker

 C) The Salesperson and the Seller

 D) The Broker and the Buyer
CORRECT ANSWER: B) The Seller and the Broker

15. The "Parol Evidence Rule" generally prevents:

 A) Criminals from buying real estate

 B) Verbal testimony from contradicting the terms of a written contract

 C) People from using cash for deposits

 D) Salespeople from working in two states
CORRECT ANSWER: B) Verbal testimony from contradicting the terms of a written contract

16. "Probate" refers to the legal process of: