Real Estate - The CE Shop Exam 2026/2027
– Complete Study Guide, Practice
Questions & Verified Answers
1031 tax-deferred exchange - correct answer-"Section 1031 of the Internal
Revenue Code allows the owner of real property to sell that property and then
reinvest the proceeds in a "like-kind" property and defer paying any capital gains
taxes.
Ex. Real estate investors can take advantage of the 1031 tax-deferred exchange to
defer capital gains taxes when selling a property provided the money is rolled into
another """"like"""" purchase
"
abutting - correct answer-"Land sharing a common border
Ex. Many neighbors find that fences make abutting properties more tolerable.
"
acceleration clause - correct answer-"Allows a lender to demand immediate and
full payment of all debt owed if a buyer defaults
Ex. When Wendy stopped making home loan payments, her lender told her she
must pay off her entire balance or risk foreclosure.
"
,accession - correct answer-"The addition of value to property through labor or
the addition of new materials, including an increase in land through natural
processes
Ex. Jonathan's property borders a bay. The bay receded, and Jonathan gained an
extra 10 feet of property to his land through accession.
"
accessory use - correct answer-"An incidental or subordinate use to the primary
use of the property
Ex. Andy's military bunker in his back yard constituted an accessory use of the
property.
"
accounting - correct answer-"One of the fiduciary duties, accounting means an
agent is accountable for any funds or properties entrusted to the agent. This is a
duty that survives termination of an agency agreement.
Ex. Cameron accepted an earnest money deposit from his buyer. His duty of
accounting means that he must safeguard the funds and handle them according
to the agreement with his client and the policies of his firm.
"
accretion - correct answer-"Land build up over water by sand, silt, or gravel
Ex. Jillian's property grew through accretion when a landslide wiped out an
adjacent creek.
"
accrued items - correct answer-"Expenses that are accruing but are not yet
payable (e.g., property taxes)
,Ex. At closing, accrued items must be accounted for on the settlement statement.
If the seller has accrued expenses not yet payable, the amount accrued will be a
seller debit and buyer credit.
"
acknowledgment - correct answer-"A requirement for deed transfer; a public
official must acknowledge the grantor's signature
Ex. Gary purchased a duplex. The grantor signed the deed; a notary public
acknowledged his signature.
"
acre - correct answer-"43,560 square feet
Ex. The Jones farmhouse was on 10 acres. Their parcel had 435,600 square feet.
"
active fraud - correct answer-"Intentional misstatement of a material fact
Ex. ""Sure, the foundation is perfectly safe!"" Lisa said, even though she knew full
well that there was a crack the size if Toledo in it.
"
act of waste - correct answer-"Abuse of a property by a person who holds
possession through a life estate
Ex. When Minerva inherited the historic mansion and turned it into an illegal
video gaming parlor, this was an act of waste that caused her to lose title to the
property.
"
, actual notice - correct answer-"Express notice given directly to a person
Ex. Karen told her neighbors she would be moving; this was actual notice.
"
addendum - correct answer-"An addition to a real estate contract that's added
before contract acceptance
Ex. Steve decided to ask for the washer and dryer after all, so he asked his broker
to write up an addendum to the sales contract.
"
adjustable rate mortgage (ARM) - correct answer-"A mortgage with a rate that
adjusts based on changes in a market index
Ex. Caleb had a 5/1 ARM. His loan had a fixed interest rate for the first five years,
and after 5 years, it could change annually depending changes to the market
index.
"
adjusted basis - correct answer-"The final basis for taxing purposes computed by
taking acquisition costs plus capital improvements and subtracting depreciation
taken
Ex. When Mark computed the adjusted basis in his property, he had to subtract
$10,000 in depreciation he had taken over the years.
"
adjustment - correct answer-"The dollar value or percentage added to or
subtracted from the sales price of a comparable to arrive at an indicated value for
the subject
– Complete Study Guide, Practice
Questions & Verified Answers
1031 tax-deferred exchange - correct answer-"Section 1031 of the Internal
Revenue Code allows the owner of real property to sell that property and then
reinvest the proceeds in a "like-kind" property and defer paying any capital gains
taxes.
Ex. Real estate investors can take advantage of the 1031 tax-deferred exchange to
defer capital gains taxes when selling a property provided the money is rolled into
another """"like"""" purchase
"
abutting - correct answer-"Land sharing a common border
Ex. Many neighbors find that fences make abutting properties more tolerable.
"
acceleration clause - correct answer-"Allows a lender to demand immediate and
full payment of all debt owed if a buyer defaults
Ex. When Wendy stopped making home loan payments, her lender told her she
must pay off her entire balance or risk foreclosure.
"
,accession - correct answer-"The addition of value to property through labor or
the addition of new materials, including an increase in land through natural
processes
Ex. Jonathan's property borders a bay. The bay receded, and Jonathan gained an
extra 10 feet of property to his land through accession.
"
accessory use - correct answer-"An incidental or subordinate use to the primary
use of the property
Ex. Andy's military bunker in his back yard constituted an accessory use of the
property.
"
accounting - correct answer-"One of the fiduciary duties, accounting means an
agent is accountable for any funds or properties entrusted to the agent. This is a
duty that survives termination of an agency agreement.
Ex. Cameron accepted an earnest money deposit from his buyer. His duty of
accounting means that he must safeguard the funds and handle them according
to the agreement with his client and the policies of his firm.
"
accretion - correct answer-"Land build up over water by sand, silt, or gravel
Ex. Jillian's property grew through accretion when a landslide wiped out an
adjacent creek.
"
accrued items - correct answer-"Expenses that are accruing but are not yet
payable (e.g., property taxes)
,Ex. At closing, accrued items must be accounted for on the settlement statement.
If the seller has accrued expenses not yet payable, the amount accrued will be a
seller debit and buyer credit.
"
acknowledgment - correct answer-"A requirement for deed transfer; a public
official must acknowledge the grantor's signature
Ex. Gary purchased a duplex. The grantor signed the deed; a notary public
acknowledged his signature.
"
acre - correct answer-"43,560 square feet
Ex. The Jones farmhouse was on 10 acres. Their parcel had 435,600 square feet.
"
active fraud - correct answer-"Intentional misstatement of a material fact
Ex. ""Sure, the foundation is perfectly safe!"" Lisa said, even though she knew full
well that there was a crack the size if Toledo in it.
"
act of waste - correct answer-"Abuse of a property by a person who holds
possession through a life estate
Ex. When Minerva inherited the historic mansion and turned it into an illegal
video gaming parlor, this was an act of waste that caused her to lose title to the
property.
"
, actual notice - correct answer-"Express notice given directly to a person
Ex. Karen told her neighbors she would be moving; this was actual notice.
"
addendum - correct answer-"An addition to a real estate contract that's added
before contract acceptance
Ex. Steve decided to ask for the washer and dryer after all, so he asked his broker
to write up an addendum to the sales contract.
"
adjustable rate mortgage (ARM) - correct answer-"A mortgage with a rate that
adjusts based on changes in a market index
Ex. Caleb had a 5/1 ARM. His loan had a fixed interest rate for the first five years,
and after 5 years, it could change annually depending changes to the market
index.
"
adjusted basis - correct answer-"The final basis for taxing purposes computed by
taking acquisition costs plus capital improvements and subtracting depreciation
taken
Ex. When Mark computed the adjusted basis in his property, he had to subtract
$10,000 in depreciation he had taken over the years.
"
adjustment - correct answer-"The dollar value or percentage added to or
subtracted from the sales price of a comparable to arrive at an indicated value for
the subject
