RE Practice Exam 1 questions well
answered already passed
1.Which type of insurance is used to insure against rent being stolen by an employee of a property
management company?
(A) Rent loss insurance
(B) Surety bond
(C) Business interruption insurance
(D) Liability insurance" - correct answer ✔✔(B) Chapter 3
A surety bond insures against employee misdeeds like theft. Rent loss insurance (also known as business
interruption insurance) insures against the landlord losing rent because of a disaster like a fire, and
liability insurance covers losses caused by injuries that are the result of negligence on the part of the
landlord.
2. Which of the following is not a typical way that property management fees are set?
(A) Fixed fee
(B) Commission on new leases
(C) Percentage of gross income
(D) Percentage of operating costs - correct answer ✔✔(D) Chapter 3
Did the "not" in the question throw you off? A good way to handle this question is to repeat each answer
in a positive way and ask yourself whether it's true or false. For instance, you say, "Fixed fees are a way
to set a property management fee." True or false? Well, that's true, so it can't be the right answer.
Percentage of operating costs is the only answer that doesn't fit.
3. For what activity does a person generally not need a real estate license?
(A) Collecting rents as an employee of a building owner
(B) Representing people in the exchange of properties
(C) Selling properties on behalf of several owners
,(D) Negotiating leases on behalf of several commercial building owners - correct answer ✔✔(A) Chapter
3
Real estate license laws generally require a person to hold a real estate license when performing any
number of particular duties for another person for a fee. You don't have to have a real estate license to
do any of these things for your own property. An employee of a person who owns and rents out
buildings is effectively acting directly on behalf of the owner, as if, in a sense, the employee were the
owner. This could vary slightly by state, so check yours out just in case.
4. Roof replacement is considered what type of expense in a building's budget?
(A) Capital
(B) Operating
(C) Maintenance
(D) Fixed - correct answer ✔✔(A) Chapter 3
A capital expense is usually a major expense to improve or repair something that does not last as long as
the life of a building, like a roof. An operating expense is an annual expense to keep the building running,
like the gas or oil bill. A maintenance item is usually a repair that may happen occasionally and
sometimes unpredictably like a furnace repair. A fixed expense is a term used to describe insurance and
tax payments.
5. Which of the following is true for an independent contractor working for a broker?
(A) The broker is required to pay the contractor's Social Security taxes.
(B) The broker is required to withhold income taxes from the contractor's commission checks.
(C) The broker must give workman's compensation to the contractor.
(D) The broker is required to supervise the contractor. - correct answer ✔✔(D) Chapter 3
The first three answers are characteristics of being an employee, not an independent contractor.
However, even when you're an independent contractor, the broker is responsible for your work and must
supervise you.
6. The primary duty of a property manager is to
(A) ensure that income is generated by the building.
,(B) maintain the building.
(C) protect the owner's investment in the building.
(D) maximize income while maintaining the building's value." - correct answer ✔✔(D) Chapter 3
The keys to this question are the word "primary" and avoiding confusion when partially correct answers
are among the choices. Maximizing income while maintaining the building's value encompasses the first
three answers and is considered the primary duty of a property manager. Looked at another way, the
first three answers are each a part of the more correct total answer (D).
7. A real estate broker hired to represent someone who wants to sell his house is
(A) a special agent.
(B) a general agent.
(C) a universal agent.
(D) a representative agent." - correct answer ✔✔(A) Chapter 4
A special agent represents a client for one real estate transaction. A general agent represents a client in a
range of activities, and a universal agent represents a client in all or almost all activities. I made up
"representative agent.
8. Fiduciary responsibilities are always owed to"
(A) the client.
(B) the customer.
(C) the buyer.
(D) the seller. - correct answer ✔✔(A) Chapter 4
Fiduciary responsibilities are defined as being owed to the client. A seller or a buyer can be your client. A
customer is the third party in a transaction. The only thing that is always true in this question is (A), the
client.
9. Fiduciary duties do not include
(A) care.
, (B) control.
(C) accounting.
(D) confidentiality. - correct answer ✔✔(B) Chapter 4
The duties are accounting, care, confidentiality, disclosure, loyalty, and obedience. A question about
these duties is so fundamental to being a real estate agent that I can almost guarantee you will see a
question about this on the exam.
10. The client is always
(A) the seller.
(B) the buyer.
(C) the principal.
(D) the customer. - correct answer ✔✔(C) Chapter 4
Watch out for the word "always." The buyer or seller could be the client but not always. The principal is
always the client; the two terms are interchangeable.
11. Which of the following would not end an agency relationship?
(A) The property was sold.
(B) The house was burned in a fire.
(C) The principal got married.
(D) The broker declared bankruptcy. - correct answer ✔✔(C) Chapter 4
If an individual property owner contracts with a real estate agent to sell his property, that arrangement
isn't affected by his getting married because the property ownership hasn't changed.
"12. When does a seller's agent earn a fee?
(A) She accomplishes what she was hired to do.
(B) She is the procuring cause.
(C) She finds a ready, willing, and able buyer.
answered already passed
1.Which type of insurance is used to insure against rent being stolen by an employee of a property
management company?
(A) Rent loss insurance
(B) Surety bond
(C) Business interruption insurance
(D) Liability insurance" - correct answer ✔✔(B) Chapter 3
A surety bond insures against employee misdeeds like theft. Rent loss insurance (also known as business
interruption insurance) insures against the landlord losing rent because of a disaster like a fire, and
liability insurance covers losses caused by injuries that are the result of negligence on the part of the
landlord.
2. Which of the following is not a typical way that property management fees are set?
(A) Fixed fee
(B) Commission on new leases
(C) Percentage of gross income
(D) Percentage of operating costs - correct answer ✔✔(D) Chapter 3
Did the "not" in the question throw you off? A good way to handle this question is to repeat each answer
in a positive way and ask yourself whether it's true or false. For instance, you say, "Fixed fees are a way
to set a property management fee." True or false? Well, that's true, so it can't be the right answer.
Percentage of operating costs is the only answer that doesn't fit.
3. For what activity does a person generally not need a real estate license?
(A) Collecting rents as an employee of a building owner
(B) Representing people in the exchange of properties
(C) Selling properties on behalf of several owners
,(D) Negotiating leases on behalf of several commercial building owners - correct answer ✔✔(A) Chapter
3
Real estate license laws generally require a person to hold a real estate license when performing any
number of particular duties for another person for a fee. You don't have to have a real estate license to
do any of these things for your own property. An employee of a person who owns and rents out
buildings is effectively acting directly on behalf of the owner, as if, in a sense, the employee were the
owner. This could vary slightly by state, so check yours out just in case.
4. Roof replacement is considered what type of expense in a building's budget?
(A) Capital
(B) Operating
(C) Maintenance
(D) Fixed - correct answer ✔✔(A) Chapter 3
A capital expense is usually a major expense to improve or repair something that does not last as long as
the life of a building, like a roof. An operating expense is an annual expense to keep the building running,
like the gas or oil bill. A maintenance item is usually a repair that may happen occasionally and
sometimes unpredictably like a furnace repair. A fixed expense is a term used to describe insurance and
tax payments.
5. Which of the following is true for an independent contractor working for a broker?
(A) The broker is required to pay the contractor's Social Security taxes.
(B) The broker is required to withhold income taxes from the contractor's commission checks.
(C) The broker must give workman's compensation to the contractor.
(D) The broker is required to supervise the contractor. - correct answer ✔✔(D) Chapter 3
The first three answers are characteristics of being an employee, not an independent contractor.
However, even when you're an independent contractor, the broker is responsible for your work and must
supervise you.
6. The primary duty of a property manager is to
(A) ensure that income is generated by the building.
,(B) maintain the building.
(C) protect the owner's investment in the building.
(D) maximize income while maintaining the building's value." - correct answer ✔✔(D) Chapter 3
The keys to this question are the word "primary" and avoiding confusion when partially correct answers
are among the choices. Maximizing income while maintaining the building's value encompasses the first
three answers and is considered the primary duty of a property manager. Looked at another way, the
first three answers are each a part of the more correct total answer (D).
7. A real estate broker hired to represent someone who wants to sell his house is
(A) a special agent.
(B) a general agent.
(C) a universal agent.
(D) a representative agent." - correct answer ✔✔(A) Chapter 4
A special agent represents a client for one real estate transaction. A general agent represents a client in a
range of activities, and a universal agent represents a client in all or almost all activities. I made up
"representative agent.
8. Fiduciary responsibilities are always owed to"
(A) the client.
(B) the customer.
(C) the buyer.
(D) the seller. - correct answer ✔✔(A) Chapter 4
Fiduciary responsibilities are defined as being owed to the client. A seller or a buyer can be your client. A
customer is the third party in a transaction. The only thing that is always true in this question is (A), the
client.
9. Fiduciary duties do not include
(A) care.
, (B) control.
(C) accounting.
(D) confidentiality. - correct answer ✔✔(B) Chapter 4
The duties are accounting, care, confidentiality, disclosure, loyalty, and obedience. A question about
these duties is so fundamental to being a real estate agent that I can almost guarantee you will see a
question about this on the exam.
10. The client is always
(A) the seller.
(B) the buyer.
(C) the principal.
(D) the customer. - correct answer ✔✔(C) Chapter 4
Watch out for the word "always." The buyer or seller could be the client but not always. The principal is
always the client; the two terms are interchangeable.
11. Which of the following would not end an agency relationship?
(A) The property was sold.
(B) The house was burned in a fire.
(C) The principal got married.
(D) The broker declared bankruptcy. - correct answer ✔✔(C) Chapter 4
If an individual property owner contracts with a real estate agent to sell his property, that arrangement
isn't affected by his getting married because the property ownership hasn't changed.
"12. When does a seller's agent earn a fee?
(A) She accomplishes what she was hired to do.
(B) She is the procuring cause.
(C) She finds a ready, willing, and able buyer.
