1. A written agreement in which a purchaser agrees to buy and a seller agrees to sell is
called
a) A deed
b) A contract
c) An option
d) A listing
Correct answer: b) A contract
Rationale: A contract is a legally enforceable agreement between two or more parties, and
the purchase agreement is the specific contract for a real estate sale.
2. Antitrust laws prohibit competing brokers from all of the following EXCEPT
a) Boycotting other brokers in the marketplace
b) Dividing the market to restrict competition
c) Agreeing to set sales commissions and management rates
d) Sharing commission with a buyer who is unlicensed
Correct answer: d) Sharing commission with a buyer who is unlicensed (this is typically
illegal but not an antitrust violation per se; antitrust covers restraint of trade among
competitors).
Rationale: Antitrust laws forbid price-fixing, market allocation, and group boycotts among
brokers, as these restrain trade and reduce competition.
3. When a sewer line is installed down a rural road, the cost will probably be shared by
a) All taxpayers in the county
b) Only the properties directly connected to the sewer
c) All current owners of real estate fronting on that road
d) The local government exclusively
Correct answer: c) All current owners of real estate fronting on that road
Rationale: Special assessments for improvements like sewers are typically levied on
properties that directly benefit, often those fronting the improved road.
,4. State laws differ on whether a buyer is entitled to know about
a) A suicide that occurred in the house last year
b) A faulty foundation
c) A leaking roof
d) A termite infestation
Correct answer: a) A suicide that occurred in the house last year
Rationale: Stigmatized property issues like a death, suicide, or ghost are not universally
required disclosure, varying significantly by state law, unlike material physical defects.
5. A lawsuit for inverse condemnation may be brought by
a) A homeowner
b) A developer
c) The local government
d) A tenant
Correct answer: a) A homeowner
Rationale: Inverse condemnation is a legal action by a property owner against the
government when a taking has occurred without just compensation, typically due to
regulation or physical invasion.
6. When is racial discrimination in the rental of rooms or apartments permitted?
a) When the owner lives in the building with four or fewer units
b) When the property is a single-family home sold without a broker
c) Under no circumstances
d) In a private club
Correct answer: c) Under no circumstances
*Rationale: The Civil Rights Act of 1866 prohibits all racial discrimination in housing
without any exceptions, regardless of the number of units or owner-occupancy.*
7. The real estate broker who is listing a house for sale should personally verify
a) The buyer’s credit score
b) The number of square feet in the building
c) The seller’s motivation
d) The school district rating
Correct answer: b) The number of square feet in the building
,Rationale: Material facts like square footage must be verified by the broker to avoid
misrepresentation; relying solely on public records or owner statements is insufficient.
8. Real property can be converted to personal property by
a) Annexation
b) Severance
c) Accretion
d) Emblements
Correct answer: b) Severance
Rationale: Severance is the process of detaching an item from real property (e.g., cutting
down a tree), turning it into personal property.
9. Prospective buyers made an offer on a property. The seller did NOT accept, but made
a counteroffer. The prospective buyers signed the counteroffer and the real estate agent
delivered their acceptance to the seller. In the interim, the same buyers had found
another house that they liked better and made an offer on it, which was accepted.
Which of the following is TRUE?
a) Only the first contract is valid
b) Only the second contract is valid
c) Both contracts are valid
d) Neither contract is valid
Correct answer: c) Both contracts are valid
Rationale: Once the counteroffer was signed by buyers and delivered, it created a binding
contract. The subsequent offer on another house is a separate contract, and the buyers are
now obligated to purchase both properties unless contingencies allow exit.
10. In many states, water rights are controlled by the state under the doctrine of
a) Riparian rights
b) Littoral rights
c) Prior appropriation
d) Accretion
Correct answer: c) Prior appropriation
Rationale: Prior appropriation ("first in time, first in right") is used in water-scarce western
states, where the state allocates water rights separately from land ownership.
, 11. The purpose of requiring an earnest money deposit in a real estate sales contract is
to
a) Pay the broker's commission upfront
b) Provide evidence of the buyer's intention to carry out the contract
c) Cover the seller's moving costs
d) Reduce the seller's capital gains tax
Correct answer: b) Provide evidence of the buyer's intention to carry out the contract
Rationale: Earnest money demonstrates the buyer's good faith and sincere intent to perform
under the contract, acting as consideration for the seller’s promise to take the property off
the market.
**12. A buyer is getting a fully amortized loan for $220,000. The bank will give the buyer
the loan for 15 years at 5 1/2% or for 30 years at 6 1/2%. To the nearest cent, what is the
difference between the monthly payments for these two loans? (Use amortization factor: 15
yrs @ 5.5% = 8.17 per $1000; 30 yrs @ 6.5% = 6.32 per $1000)**
a) $409.20
b) $325.00
c) $222.50
d) $407.00
*Correct answer: d) $407.00 (220 x 8.17 = $1797.40; 220 x 6.32 = $1390.40; difference =
$407.00)*
*Rationale: Multiply the loan amount in thousands by the factor. The 15-year payment is
higher but builds equity faster; the 30-year has lower monthly cost but more total interest.*
13. A borrower has defaulted on the mortgage. The mortgage contains an acceleration
clause. This permits the lender to
a) Immediately increase the interest rate
b) Demand immediate payment of the entire note
c) Seize the property without court action
d) Force the sale of other assets of the borrower
Correct answer: b) Demand immediate payment of the entire note
Rationale: The acceleration clause allows the lender to demand the full remaining loan
balance immediately upon default, rather than suing for each missed payment.
called
a) A deed
b) A contract
c) An option
d) A listing
Correct answer: b) A contract
Rationale: A contract is a legally enforceable agreement between two or more parties, and
the purchase agreement is the specific contract for a real estate sale.
2. Antitrust laws prohibit competing brokers from all of the following EXCEPT
a) Boycotting other brokers in the marketplace
b) Dividing the market to restrict competition
c) Agreeing to set sales commissions and management rates
d) Sharing commission with a buyer who is unlicensed
Correct answer: d) Sharing commission with a buyer who is unlicensed (this is typically
illegal but not an antitrust violation per se; antitrust covers restraint of trade among
competitors).
Rationale: Antitrust laws forbid price-fixing, market allocation, and group boycotts among
brokers, as these restrain trade and reduce competition.
3. When a sewer line is installed down a rural road, the cost will probably be shared by
a) All taxpayers in the county
b) Only the properties directly connected to the sewer
c) All current owners of real estate fronting on that road
d) The local government exclusively
Correct answer: c) All current owners of real estate fronting on that road
Rationale: Special assessments for improvements like sewers are typically levied on
properties that directly benefit, often those fronting the improved road.
,4. State laws differ on whether a buyer is entitled to know about
a) A suicide that occurred in the house last year
b) A faulty foundation
c) A leaking roof
d) A termite infestation
Correct answer: a) A suicide that occurred in the house last year
Rationale: Stigmatized property issues like a death, suicide, or ghost are not universally
required disclosure, varying significantly by state law, unlike material physical defects.
5. A lawsuit for inverse condemnation may be brought by
a) A homeowner
b) A developer
c) The local government
d) A tenant
Correct answer: a) A homeowner
Rationale: Inverse condemnation is a legal action by a property owner against the
government when a taking has occurred without just compensation, typically due to
regulation or physical invasion.
6. When is racial discrimination in the rental of rooms or apartments permitted?
a) When the owner lives in the building with four or fewer units
b) When the property is a single-family home sold without a broker
c) Under no circumstances
d) In a private club
Correct answer: c) Under no circumstances
*Rationale: The Civil Rights Act of 1866 prohibits all racial discrimination in housing
without any exceptions, regardless of the number of units or owner-occupancy.*
7. The real estate broker who is listing a house for sale should personally verify
a) The buyer’s credit score
b) The number of square feet in the building
c) The seller’s motivation
d) The school district rating
Correct answer: b) The number of square feet in the building
,Rationale: Material facts like square footage must be verified by the broker to avoid
misrepresentation; relying solely on public records or owner statements is insufficient.
8. Real property can be converted to personal property by
a) Annexation
b) Severance
c) Accretion
d) Emblements
Correct answer: b) Severance
Rationale: Severance is the process of detaching an item from real property (e.g., cutting
down a tree), turning it into personal property.
9. Prospective buyers made an offer on a property. The seller did NOT accept, but made
a counteroffer. The prospective buyers signed the counteroffer and the real estate agent
delivered their acceptance to the seller. In the interim, the same buyers had found
another house that they liked better and made an offer on it, which was accepted.
Which of the following is TRUE?
a) Only the first contract is valid
b) Only the second contract is valid
c) Both contracts are valid
d) Neither contract is valid
Correct answer: c) Both contracts are valid
Rationale: Once the counteroffer was signed by buyers and delivered, it created a binding
contract. The subsequent offer on another house is a separate contract, and the buyers are
now obligated to purchase both properties unless contingencies allow exit.
10. In many states, water rights are controlled by the state under the doctrine of
a) Riparian rights
b) Littoral rights
c) Prior appropriation
d) Accretion
Correct answer: c) Prior appropriation
Rationale: Prior appropriation ("first in time, first in right") is used in water-scarce western
states, where the state allocates water rights separately from land ownership.
, 11. The purpose of requiring an earnest money deposit in a real estate sales contract is
to
a) Pay the broker's commission upfront
b) Provide evidence of the buyer's intention to carry out the contract
c) Cover the seller's moving costs
d) Reduce the seller's capital gains tax
Correct answer: b) Provide evidence of the buyer's intention to carry out the contract
Rationale: Earnest money demonstrates the buyer's good faith and sincere intent to perform
under the contract, acting as consideration for the seller’s promise to take the property off
the market.
**12. A buyer is getting a fully amortized loan for $220,000. The bank will give the buyer
the loan for 15 years at 5 1/2% or for 30 years at 6 1/2%. To the nearest cent, what is the
difference between the monthly payments for these two loans? (Use amortization factor: 15
yrs @ 5.5% = 8.17 per $1000; 30 yrs @ 6.5% = 6.32 per $1000)**
a) $409.20
b) $325.00
c) $222.50
d) $407.00
*Correct answer: d) $407.00 (220 x 8.17 = $1797.40; 220 x 6.32 = $1390.40; difference =
$407.00)*
*Rationale: Multiply the loan amount in thousands by the factor. The 15-year payment is
higher but builds equity faster; the 30-year has lower monthly cost but more total interest.*
13. A borrower has defaulted on the mortgage. The mortgage contains an acceleration
clause. This permits the lender to
a) Immediately increase the interest rate
b) Demand immediate payment of the entire note
c) Seize the property without court action
d) Force the sale of other assets of the borrower
Correct answer: b) Demand immediate payment of the entire note
Rationale: The acceleration clause allows the lender to demand the full remaining loan
balance immediately upon default, rather than suing for each missed payment.
