PRINCIPLES OF REAL ESTATE II
PRACTICE EXAM QUESTIONS
& ANSWERS(ERATED A+)
Geraldine runs a credit report on William, an applicant wishing to become a tenant in one of her
units. Based on William's credit report, Geraldine decides to reject William's application. The Fair
Credit Reporting Act states Geraldine MUST:** - ANSWER give William the name of the credit
reporting agency used
Which of the following is FALSE about a sales comparison approach? - ANSWER A sales comparison
approach does NOT utilize the principle of contribution
If a landlord wishes to charge a tenant a late fee, the landlord MUST do all of the following EXCEPT:*
- ANSWER give the tenant 30 days to pay the late fee
An abbreviated history of a property, including information on any transfers, grants, wills,
conveyances, liens, and encumbrances is known as a(n): - ANSWER abstract of title
Rory wants to invest some of his money. He debates between investing in commercial real estate and
investing in the stocks of a technology startup. What would be a potential benefit of investing in
commercial real estate?* - ANSWER investing in commercial real estate typically produces a
predictable cash flow
The possession of a property reverts back to the landlord after a lease term has expired. This is
known as: - ANSWER reversionary right
A buyer purchased property from a seller. Shortly after closing, the buyer discovered that there were
serious flaws in the title that made it unlikely that the property could be resold in the future. What is
the buyer's best course of action?* - ANSWER Because the buyer has accepted the deed, the only
resource is to sue the seller under any covenants contained in the deed.
,A variable lease is a leasehold agreement in which the base rent changes. Variable leases can take
the form of: - ANSWER a graduated lease or an index lease
What protects consumers from abusive settlement practices and provides them with information
pertinent to all settlement costs? - ANSWER RESPA
Which type of loan is exempt from RESPA?* - ANSWER loans on vacant land
Karissa is buying a gulf front property and deposits the necessary funds to complete the sale into
escrow. The seller's title has not yet been declared acceptable, and Karissa is nervous she could lose
her money. Evaluate Karissa's fear.* - ANSWER Karissa doesn't need to worry, as her funds will not
be paid to the seller until the seller's title is deemed acceptable.
How is market value decided for a property?* - ANSWER It is based on collected data taken about
the property.
Which of the following is NOT one of the minimum requirements for a deed to be valid in Texas:* -
ANSWER the deed must be signed by a municipal agent
Conducting periodic inspections to catch minor issues before they become major failures is: -
ANSWER preventative maintenance
What are restrictive covenants? - ANSWER non-governmental limitations that control how buyers of
lots within residential subdivisions use their land
Property managers will need to provide reports for their property owner, such as a maintenance
report, a rent roll, and an operating statement. The frequency with which the property manager will
need to file these reports should be outlined in the: - ANSWER management agreement
A tenant has been unable to get hot water due to the faulty water heater which the landlord has
failed to repair for over a month. What recourse is NOT available to the tenant?* - ANSWER Sue the
landlord for breach of the covenant of seisin
Ava is worried, as she is having difficulty securing her credit report and she wishes to complete the
pre-qualification process for a loan. Analyze Ava's situation. - ANSWER Ava should NOT worry; for
pre-qualification she'll report on her income, assets, and debts, but her credit report won't be pulled
until pre-approval
, Ownership transfers from the grantor to the grantee when the deed is:** - ANSWER delivered to
and accepted by the guarantee
On the Closing Disclosure, prorated interest paid before closing on an existing assumed mortgage is
a:* - ANSWER credit to the buyer and debit to the seller
A landlord has failed to maintain the HVAC unit in an apartment during below freezing temperatures.
What is TRUE of this situation? - ANSWER The tenant could seek constructive eviction.
Which of the following is NOT a requirement for a deed to be considered valid? - ANSWER words of
departure
Sean is not a real estate agent, but has always helped friends find tenants for their spare rooms. Now
Sean has begun receiving payment, working as a residential locator for several different large
apartment complexes. Sean's work consists of finding apartments, referring tenants, negotiating
leases, and much more. Is Sean in violation of TRELA?* - ANSWER Yes, Sean must be a licensed real
estate agent.
To find the net operating income, a property manager will: - ANSWER subtract the operating
expenses from the effective gross income
What is a ground lease? - ANSWER lease of bare, undeveloped land
Joshua is a new license holder who is trying to make the transaction process easy for his clients.
Though he is not a licensed appraiser, he decides to perform appraisals so he (and his clients) don't
have to work with another party (an appraiser). Evaluate if this was a good idea and why/why not. -
ANSWER This was not a good idea; Joshua is not a licensed appraiser and therefore cannot perform
appraisals
Which appraisal principle states that maximum value is realized when land use is in harmony with
surrounding standards?** - ANSWER principle of conformity
What does the DUST acronym stand for, and what does it relate to? - ANSWER Demand, Utility,
Scarcity, Transferability; DUST recalls the characteristics that make real estate valuable.
PRACTICE EXAM QUESTIONS
& ANSWERS(ERATED A+)
Geraldine runs a credit report on William, an applicant wishing to become a tenant in one of her
units. Based on William's credit report, Geraldine decides to reject William's application. The Fair
Credit Reporting Act states Geraldine MUST:** - ANSWER give William the name of the credit
reporting agency used
Which of the following is FALSE about a sales comparison approach? - ANSWER A sales comparison
approach does NOT utilize the principle of contribution
If a landlord wishes to charge a tenant a late fee, the landlord MUST do all of the following EXCEPT:*
- ANSWER give the tenant 30 days to pay the late fee
An abbreviated history of a property, including information on any transfers, grants, wills,
conveyances, liens, and encumbrances is known as a(n): - ANSWER abstract of title
Rory wants to invest some of his money. He debates between investing in commercial real estate and
investing in the stocks of a technology startup. What would be a potential benefit of investing in
commercial real estate?* - ANSWER investing in commercial real estate typically produces a
predictable cash flow
The possession of a property reverts back to the landlord after a lease term has expired. This is
known as: - ANSWER reversionary right
A buyer purchased property from a seller. Shortly after closing, the buyer discovered that there were
serious flaws in the title that made it unlikely that the property could be resold in the future. What is
the buyer's best course of action?* - ANSWER Because the buyer has accepted the deed, the only
resource is to sue the seller under any covenants contained in the deed.
,A variable lease is a leasehold agreement in which the base rent changes. Variable leases can take
the form of: - ANSWER a graduated lease or an index lease
What protects consumers from abusive settlement practices and provides them with information
pertinent to all settlement costs? - ANSWER RESPA
Which type of loan is exempt from RESPA?* - ANSWER loans on vacant land
Karissa is buying a gulf front property and deposits the necessary funds to complete the sale into
escrow. The seller's title has not yet been declared acceptable, and Karissa is nervous she could lose
her money. Evaluate Karissa's fear.* - ANSWER Karissa doesn't need to worry, as her funds will not
be paid to the seller until the seller's title is deemed acceptable.
How is market value decided for a property?* - ANSWER It is based on collected data taken about
the property.
Which of the following is NOT one of the minimum requirements for a deed to be valid in Texas:* -
ANSWER the deed must be signed by a municipal agent
Conducting periodic inspections to catch minor issues before they become major failures is: -
ANSWER preventative maintenance
What are restrictive covenants? - ANSWER non-governmental limitations that control how buyers of
lots within residential subdivisions use their land
Property managers will need to provide reports for their property owner, such as a maintenance
report, a rent roll, and an operating statement. The frequency with which the property manager will
need to file these reports should be outlined in the: - ANSWER management agreement
A tenant has been unable to get hot water due to the faulty water heater which the landlord has
failed to repair for over a month. What recourse is NOT available to the tenant?* - ANSWER Sue the
landlord for breach of the covenant of seisin
Ava is worried, as she is having difficulty securing her credit report and she wishes to complete the
pre-qualification process for a loan. Analyze Ava's situation. - ANSWER Ava should NOT worry; for
pre-qualification she'll report on her income, assets, and debts, but her credit report won't be pulled
until pre-approval
, Ownership transfers from the grantor to the grantee when the deed is:** - ANSWER delivered to
and accepted by the guarantee
On the Closing Disclosure, prorated interest paid before closing on an existing assumed mortgage is
a:* - ANSWER credit to the buyer and debit to the seller
A landlord has failed to maintain the HVAC unit in an apartment during below freezing temperatures.
What is TRUE of this situation? - ANSWER The tenant could seek constructive eviction.
Which of the following is NOT a requirement for a deed to be considered valid? - ANSWER words of
departure
Sean is not a real estate agent, but has always helped friends find tenants for their spare rooms. Now
Sean has begun receiving payment, working as a residential locator for several different large
apartment complexes. Sean's work consists of finding apartments, referring tenants, negotiating
leases, and much more. Is Sean in violation of TRELA?* - ANSWER Yes, Sean must be a licensed real
estate agent.
To find the net operating income, a property manager will: - ANSWER subtract the operating
expenses from the effective gross income
What is a ground lease? - ANSWER lease of bare, undeveloped land
Joshua is a new license holder who is trying to make the transaction process easy for his clients.
Though he is not a licensed appraiser, he decides to perform appraisals so he (and his clients) don't
have to work with another party (an appraiser). Evaluate if this was a good idea and why/why not. -
ANSWER This was not a good idea; Joshua is not a licensed appraiser and therefore cannot perform
appraisals
Which appraisal principle states that maximum value is realized when land use is in harmony with
surrounding standards?** - ANSWER principle of conformity
What does the DUST acronym stand for, and what does it relate to? - ANSWER Demand, Utility,
Scarcity, Transferability; DUST recalls the characteristics that make real estate valuable.
