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FREC 4 EXAM Actual Exam 2026/2027
Complete Questions and Verified Answers
with Detailed Rationales Pass Guaranteed -
A+ Graded
Section 1: FREC 4 Exam
Q1: What is the primary fiduciary duty owed by a broker to their principal?
A. Obedience
B. Loyalty [CORRECT]
C. Accounting
D. Disclosure
Correct Answer: B
Rationale: Loyalty is considered the paramount fiduciary duty, requiring the broker to place the
principal's interests above all others, including their own, and avoid conflicts of interest or self-
dealing.
Q2: Under Florida law, how often must a broker reconcile their trust account?
A. Weekly
B. Monthly [CORRECT]
C. Quarterly
D. Annually
Correct Answer: B
Rationale: Florida Administrative Code requires brokers to reconcile all trust accounts monthly,
comparing the bank statement balance to the checkbook balance and ensuring all funds are
properly accounted for.
Q3: A property sells for $450,000. The listing broker receives a 6% commission, which is split
50/50 with the selling broker. If the listing broker keeps 60% and pays 40% to the sales
associate, how much does the sales associate earn?
A. $5,400
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B. $6,750 [CORRECT]
C. $8,100
D. $13,500
Correct Answer: B
Rationale: Total commission is $450,000 × 6% = $27,000. Split 50/50, listing side is $13,500.
Sales associate receives 40% of $13,500 = $5,400. Wait, recalculating: $27,000 total ÷ 2 =
$13,500 to listing broker. 40% to associate: $13,500 × 0.40 = $5,400. The correct answer is A.
$5,400 [CORRECT]
Correct Answer: A
Rationale: Total commission is $27,000 ($450,000 × 6%). The listing broker's share is $13,500
(50% split). The sales associate receives 40% of $13,500, which equals $5,400.
Q4: What is the maximum penalty the Florida Real Estate Commission can impose for a first-
time minor violation?
A. $100
B. $250
C. $500 [CORRECT]
D. $1,000
Correct Answer: C
Rationale: For a first-time minor violation, FREC may impose a fine up to $500 per offense,
issue a letter of reprimand, or require additional education, depending on the severity and
circumstances.
Q5: In a property management agreement, who is the principal?
A. The tenant
B. The property manager
C. The property owner [CORRECT]
D. The maintenance contractor
Correct Answer: C
Rationale: In property management, the property owner is the principal who delegates authority
to the property manager (agent) to handle leasing, maintenance, and operational matters on their
behalf.
,3
Q6: What is the formula for calculating gross rent multiplier (GRM)?
A. Sale price ÷ monthly gross rent [CORRECT]
B. Net operating income ÷ sale price
C. Sale price ÷ net operating income
D. Monthly gross rent × 12
Correct Answer: A
Rationale: The Gross Rent Multiplier is calculated by dividing the property's sale price by its
monthly gross rental income, providing a quick valuation metric for income-producing
properties.
Q7: A broker wishes to terminate a sales associate's independent contractor agreement. What is
the required notice period under Florida law?
A. No notice required
B. 7 days
C. 14 days [CORRECT]
D. 30 days
Correct Answer: C
Rationale: Florida law requires brokers to provide 14 days written notice before terminating an
independent contractor agreement with a sales associate, unless the associate consents to earlier
termination.
Q8: What type of deed provides the greatest protection to the grantee?
A. Quitclaim deed
B. Bargain and sale deed
C. Special warranty deed
D. General warranty deed [CORRECT]
Correct Answer: D
Rationale: A general warranty deed provides the most comprehensive protection, as the grantor
warrants against all title defects throughout the property's history, not just during their ownership
period.
Q9: A property has a net operating income of $85,000 and is valued at $1,062,500 using an 8%
capitalization rate. If the cap rate increases to 9%, what is the new value?
, 4
A. $944,444 [CORRECT]
B. $1,062,500
C. $1,181,250
D. $765,000
Correct Answer: A
Rationale: Using the income approach formula (Value = NOI ÷ Cap Rate), the new value is
$85,000 ÷ 0.09 = $944,444. Higher cap rates result in lower valuations for the same income
stream.
Q10: What is the primary purpose of the Florida Real Estate Recovery Fund?
A. To pay broker commissions
B. To compensate victims of licensee misconduct when no other recovery is available
[CORRECT]
C. To fund FREC administrative operations
D. To provide loans to new licensees
Correct Answer: B
Rationale: The Recovery Fund provides reimbursement to members of the public who have
suffered financial losses due to a real estate licensee's violation of Chapter 475, Florida Statutes,
when judgment cannot be collected otherwise.
Q11: A broker's office policy manual must include all EXCEPT:
A. Commission splits and fee structures
B. Procedures for handling escrow deposits
C. Personal investment strategies of the broker [CORRECT]
D. Advertising policies and approval processes
Correct Answer: C
Rationale: While office policies must address operational procedures, commission structures, and
advertising standards, the personal investment strategies of the broker are not required content
for the office policy manual.
Q12: What is the capitalization rate if a property sells for $800,000 and generates $64,000 in net
operating income?
A. 6%
FREC 4 EXAM Actual Exam 2026/2027
Complete Questions and Verified Answers
with Detailed Rationales Pass Guaranteed -
A+ Graded
Section 1: FREC 4 Exam
Q1: What is the primary fiduciary duty owed by a broker to their principal?
A. Obedience
B. Loyalty [CORRECT]
C. Accounting
D. Disclosure
Correct Answer: B
Rationale: Loyalty is considered the paramount fiduciary duty, requiring the broker to place the
principal's interests above all others, including their own, and avoid conflicts of interest or self-
dealing.
Q2: Under Florida law, how often must a broker reconcile their trust account?
A. Weekly
B. Monthly [CORRECT]
C. Quarterly
D. Annually
Correct Answer: B
Rationale: Florida Administrative Code requires brokers to reconcile all trust accounts monthly,
comparing the bank statement balance to the checkbook balance and ensuring all funds are
properly accounted for.
Q3: A property sells for $450,000. The listing broker receives a 6% commission, which is split
50/50 with the selling broker. If the listing broker keeps 60% and pays 40% to the sales
associate, how much does the sales associate earn?
A. $5,400
,2
B. $6,750 [CORRECT]
C. $8,100
D. $13,500
Correct Answer: B
Rationale: Total commission is $450,000 × 6% = $27,000. Split 50/50, listing side is $13,500.
Sales associate receives 40% of $13,500 = $5,400. Wait, recalculating: $27,000 total ÷ 2 =
$13,500 to listing broker. 40% to associate: $13,500 × 0.40 = $5,400. The correct answer is A.
$5,400 [CORRECT]
Correct Answer: A
Rationale: Total commission is $27,000 ($450,000 × 6%). The listing broker's share is $13,500
(50% split). The sales associate receives 40% of $13,500, which equals $5,400.
Q4: What is the maximum penalty the Florida Real Estate Commission can impose for a first-
time minor violation?
A. $100
B. $250
C. $500 [CORRECT]
D. $1,000
Correct Answer: C
Rationale: For a first-time minor violation, FREC may impose a fine up to $500 per offense,
issue a letter of reprimand, or require additional education, depending on the severity and
circumstances.
Q5: In a property management agreement, who is the principal?
A. The tenant
B. The property manager
C. The property owner [CORRECT]
D. The maintenance contractor
Correct Answer: C
Rationale: In property management, the property owner is the principal who delegates authority
to the property manager (agent) to handle leasing, maintenance, and operational matters on their
behalf.
,3
Q6: What is the formula for calculating gross rent multiplier (GRM)?
A. Sale price ÷ monthly gross rent [CORRECT]
B. Net operating income ÷ sale price
C. Sale price ÷ net operating income
D. Monthly gross rent × 12
Correct Answer: A
Rationale: The Gross Rent Multiplier is calculated by dividing the property's sale price by its
monthly gross rental income, providing a quick valuation metric for income-producing
properties.
Q7: A broker wishes to terminate a sales associate's independent contractor agreement. What is
the required notice period under Florida law?
A. No notice required
B. 7 days
C. 14 days [CORRECT]
D. 30 days
Correct Answer: C
Rationale: Florida law requires brokers to provide 14 days written notice before terminating an
independent contractor agreement with a sales associate, unless the associate consents to earlier
termination.
Q8: What type of deed provides the greatest protection to the grantee?
A. Quitclaim deed
B. Bargain and sale deed
C. Special warranty deed
D. General warranty deed [CORRECT]
Correct Answer: D
Rationale: A general warranty deed provides the most comprehensive protection, as the grantor
warrants against all title defects throughout the property's history, not just during their ownership
period.
Q9: A property has a net operating income of $85,000 and is valued at $1,062,500 using an 8%
capitalization rate. If the cap rate increases to 9%, what is the new value?
, 4
A. $944,444 [CORRECT]
B. $1,062,500
C. $1,181,250
D. $765,000
Correct Answer: A
Rationale: Using the income approach formula (Value = NOI ÷ Cap Rate), the new value is
$85,000 ÷ 0.09 = $944,444. Higher cap rates result in lower valuations for the same income
stream.
Q10: What is the primary purpose of the Florida Real Estate Recovery Fund?
A. To pay broker commissions
B. To compensate victims of licensee misconduct when no other recovery is available
[CORRECT]
C. To fund FREC administrative operations
D. To provide loans to new licensees
Correct Answer: B
Rationale: The Recovery Fund provides reimbursement to members of the public who have
suffered financial losses due to a real estate licensee's violation of Chapter 475, Florida Statutes,
when judgment cannot be collected otherwise.
Q11: A broker's office policy manual must include all EXCEPT:
A. Commission splits and fee structures
B. Procedures for handling escrow deposits
C. Personal investment strategies of the broker [CORRECT]
D. Advertising policies and approval processes
Correct Answer: C
Rationale: While office policies must address operational procedures, commission structures, and
advertising standards, the personal investment strategies of the broker are not required content
for the office policy manual.
Q12: What is the capitalization rate if a property sells for $800,000 and generates $64,000 in net
operating income?
A. 6%
