100+ Free Real Estate Practice Exam Questions (December 2024)

The contract was established under duress, fraud, deception, or coercion making it voidable. A voidable contract is a legal agreement between two parties that may be unenforceable for any number of reasons. Voidable contracts have the necessary elements to be enforceable, so they appear to be valid, but can be rejected by one party if the contract is discovered to have any number of defects.

The agent should tell the seller to disclose the termite treatment on the property disclosure. Whether legally required or not (depending on which state you live in), you should always tell the seller to disclose termite damage. Regardless of the legality, letting buyers know about pest issues upfront protects anyone from a lawsuit down the line. Even with an “as is” sale, you'll need to disclose any known termite damage on the property.

It is customary but not required for a buyer to provide a deposit when making an offer to purchase. This deposit is referred to as earnest money. The amount is completely up to the agreement between the parties. There is no law stating an earnest deposit has to be a certain amount.

The legal document that authorizes someone to act on behalf of another person, in business or for some sort of business transaction is a power of attorney. An attorney-in-fact is someone authorized to act on behalf of another person, the legal document that authorizes that person is called a power of attorney. Read More Here

A prepayment penalty clause states that a lender can penalize a borrower if the borrower pays off the mortgage much sooner than usual. Lenders are required to disclose prepayment penalties at closing in the form of a prepayment penalty clause.

The answer is a single parent with a foster child aged 11and a son aged 19. Familial status is defined as one or more individuals younger than 18 living with a parent or guardian. It also includes pregnant women and anyone who is in the process of assuming custody of a child younger than 18.

Weather-related issues and normal wear-and-tear are generally not included in a builder's home warranty. Other items that a builder's warranty may not cover include: Household appliances. Defects resulting from work conducted by the homeowner or anyone else after the builder's work is completed. No warranty covers damages caused by natural disasters.

A life estate is an interest in real property which is held for the duration of the life of a designated person. It may be limited by the life of the person holding it or by the life of another person. This designated person is called a life tenant. Read More Here

Technically speaking, if there is a high occupancy rate (higher than usual), rent may be too low. The theory of supply and demand supports this. Property managers need to be aware of this as one of their responsibilities is to make sure the rental property is at max profitability.

A prepayment penalty clause states that a lender can penalize a borrower if the borrower pays off the mortgage much sooner than usual.

Acceleration is a term associated with mortgages. The acceleration clause is a contract provision that allows a lender to require a borrower to repay all of an outstanding loan if payments are not being made or there is a breach of contract. Usually, if a borrower isn’t making any payments on the property the acceleration clause will come into effect. Which demands immediate payment for the said property. It’s more of a legal clause that they add for protection to make sure borrowers aren’t taking advantage of them.

The Superfund Amendments and Re-authorization Act of 1986 (SARA) was passed when the original act, CERCLA, expired in 1985. It amended the comprehensive environmental response, compensation, and liability act. The big change had to do with liability. When a property owner has been innocent of all involvement with a hazardous waste site, under certain circumstances, he may claim immunity from responsibility. In plain terms it allows truly innocent landowners to have immunity from legal liability. SARA also required EPA to revise the Hazard Ranking System to ensure that it accurately assessed the relative degree of risk to human health and the environment posed.

The rescission of a contract occurs when there is an agreement between the contracting parties to waive all the remaining duties and to terminate the contract. Basically, it would be returning the parties to the same legal position they were in before entering into the contract.

A release clause is a contract provision (typically in a blanket mortgage) that allows for the freeing of all or part of a property from a claim through a proportional or full amount of the mortgage being paid off.

A double net lease is when two additional costs will be added to your base rent. Usually taxes and insurance costs are added to your monthly payment.

Remember DUST and your essential elements of value. Demand: This means the desire to buy and an ability to pay. Utility: The item satisfies a human need or desire; such as shelter, income, or recreation. Scarcity: Limited in supply, as supply diminishes, value increases. Transferability: Able to transfer from one owner to another.

Don’t overthink this. He is no longer the listing agent, he MUST inform the caller that information. Anything else would be deemed unethical and potentially illegal.

There are four main elements of a valid real estate contract: The party must be the legal age of 18 or older and deemed legally competent. The contract must be legal or hold a legal purpose. A clear and specific consideration must be included in the agreement. The contract must hold mutual consent or be agreed upon by both parties. If a minor signs the contract it is considered voidable.

Percolation is the process of a liquid slowly passing through a filter. It's how coffee is usually made. For real estate, a percolation test is a test to determine the water absorption rate of soil in preparation for the building of a septic drain field or infiltration basin. The results of a percolation test are required to properly design a septic system.

No replacement cost, is the cost of replacing an asset or property. Reproduction cost estimates how much it would cost to exactly reproduce an asset or property to exact specifications. Reproduction cost looks at the cost of creating an exact replica, and should not be confused with replacement cost, which looks at the cost of replacing an insured property with one of similar functionality. Reproduction cost is more specific.

The process of valuing real estate is a challenging one. There are many different techniques and sources that can be used to arrive at an estimate of the cost. It requires extensive experience to achieve accurate results with all relevant factors present. Reconciliation is the final step in a real estate appraisal where the appraiser weighs each appraisal approach and determines which one is most relevant and should be used.

A real estate agent is a professional who has passed the required real estate classes and licensing exams in the state where he/she intends to work. This is the starting point for most real estate professionals agents. Agents are also legally called a licensee or license holder.

The subordination clause in real estate establishes order of priorities of financial claims (liens). The subordination clause effectively makes the current claim number 1 to any existing claims that have already been recorded.

Economic obsolescence refers to the loss of property value due to external factors, meaning things off the property affecting the properties value. A new noisy highway would be considered economic obsolescence because it is an external factor. Usually, in these circumstances, homeowners cannot do anything to prevent it. Read More Here

The formula for finding commission is pretty simple. Just times whatever percentage you have by the total price of the house. So in this case take $250,000 and multiply it by .06 or 6%. Doing the math that gives you $15,000.00.

Tenancy at Will is a property tenure that can be terminated at any time by either the tenant or the owner or landlord. It exists without a contract or lease and usually does not specify the length of a tenant's duration or the exchange of payment. If you do not have a lease, but you do have your landlord's permission to live in your apartment, you are a tenant at will.

Adverse possession is a legal principle under which a person who does not have legal title to a property acquires legal ownership based on the continuous occupation of the property. If successful in proving adverse possession, the person or parties are usually not required to pay the owner for the land. Read More Here

Equal Credit Opportunity Act (ECOA) is a regulation that aims to give all legal individuals an equal opportunity to apply for loans. The act prohibits creditors and lenders from considering a consumer’s race, color, national origin, sex, religion or marital status in deciding whether to approve their credit application. This act protects consumers from being wrongfully discriminated. No matter what type of person applies for a loan they cannot be turned away due to factors that are not directly related to their credit.

In this situation, the new offer cannot be accepted unless the seller's counteroffer is withdrawn or hypothetically rejected. Remember, if a new offer is accepted two valid contracts could exist, so the first step must be to withdraw the counteroffer.

The income approach determines how much a property generates income for it’s owner, that income, or potential for income. This is used to calculate or identify the market value of the property. The income approach is primarily used for rental properties as not all properties normally generate income.

Under riparian rights, all landowners whose properties adjoin a river or stream, have the right to make reasonable use of it as it flows through or over their properties. The only limitation owners have is they cannot stop or prevent the flow of water. Riparian rights vary from state to state but most grant unrestricted use. Unrestricted use means owners have the right to access it for swimming, boating, and fishing, build docs, etc. Read More Here

Antitrust Laws are a collection of federal and state government laws that regulate the conduct and organization of business corporations, normally to promote fair competition for the benefit of consumers. In retrospect, antitrust laws protect the consumer and are healthy for a stable economy. It’s important to know and understand the ones that deal with real estate as they directly relate to how you function as an agent.

A Sole Proprietorship is one individual or married couple in business alone. Sole proprietorship's are the most common form of business structure. This type of business is simple to form and operate and may enjoy greater flexibility of management, fewer legal controls, and fewer taxes. However, the business owner is personally liable for all debts incurred by the business. A sole proprietor may purchase property for both personal and business use through his own name or through the name of his business. However, only personal property used in direct relation to business operations is viewed as a tax-deductible business expense.

By definition, a servient estate is a parcel of land that is subject to an easement.

The three main forms of depreciation are : Economic Obsolescence, Functional Obsolescence, and Physical Deterioration.

An addendum is an attachment to a contract that modifies the terms and conditions of the original contract. An example of an addendum being used would be if the parties wanted to add something to the original document. For instance, an individual who is purchasing a house may not want to purchase all of the furniture that is being left behind. However, after thinking about it further, he changes his mind.

Percentage lease which pertains to commercial real estate. A Percentage lease is a rental that is based on a percentage of the monthly or annual gross sales made on the premises. Percentage leases are common with large retail stores, especially in shopping centers.

Depreciation is any loss in the value of a property over time from any cause. There are three main forms of depreciation: Economic Obsolescence, Functional Obsolescence, and Physical Deterioration.

Appreciation, in general terms, is an increase in the value of an asset over time. The increase can occur for a number of reasons, including increased demand or weakening supply, or as a result of changes in inflation or interest rates.

Estates can be divided into two different sections: freehold estates, and less than freehold estates(or leasehold estates).The key difference between a leasehold estate and a freehold estate is the limitation of time. A freehold estate is an estate in which you have exclusive right to enjoy the possession of a property for an undefined length of time, while a leasehold estate is an estate held by one who rents or leases property for a period of time. Read More Here

Ginnie Mae exists to solely guarantee the security of the loan. Ginnie Mae is a government agency that guarantees securities backed by loans issued under other government agency programs, such as the VA and FHA. Fannie Mae, is a private corporation that buys loans from private lenders, assembles them into mortgage-backed securities to maintain an active secondary market.

As a general rule of thumb all written offers must be presented to the seller. It is a serious breach of a real estate agent's fiduciary duty to the seller not to present all purchase offers.

The proper procedure for changing a contract that has already become binding is to sign a separate amendment. Remember, separate amendments are used to modify or change executory contracts.

Typically the party who usually pays the loan origination fee on a Federal Housing Administration loan is the borrower. The origination fee covers the borrowers right to obtain FHA-backed financing, so it is traditionally a paid by the borrower. FHA Loans are mortgage issued by an FHA-approved lender and insured by the FHA which is the Federal Housing Administration. FHA loans are sought after because they require lower minimum down payments and credit scores than many conventional loans.

A bit of a trick question. Voidable contracts MAY be valid, often they appear valid but are not. Remember, voidable contracts have the necessary elements to be enforceable, so they appear to be valid, but can be rejected by one party if the contract is discovered to have any number of defects. Since the question says “may be” valid it is voidable.

The agent is not entitled to any compensation. With exclusive agency listings agents only get paid if they sell the property. No fee is earned if the owner alone sells the property. Also if it was open listing, the agent would still NOT be entitled to any compensation. This scenario only works because it is an exclusive agency listing.

Economic Obsolescence refers to the loss of property value due to external factors, meaning things off the property affecting the properties value. Examples of causes of economic obsolescence can include: flight patterns, a busy highway, and rise in local crime. Read More Here

According to the 28/36 rule, she would need to spend less than $1260 in housing costs a month to qualify for most loans. All you do is multiply .28 to her monthly income. This is useful for agents to work with clients to determine what loans they can qualify. The 28/36 Rule states: a household should spend a maximum of 28% of its gross monthly income on total housing expenses, and no more than 36% on total debt service. Lenders typically want no more than 28% of your gross monthly income to go toward your housing expenses including your mortgage payment, property taxes, and insurance. Once you add in monthly payments on other debt, the total shouldn't exceed 36% of your gross income.

An individual seeking to be excused from the requirements of a zoning ordinance needs a variance. Or a conditional use permit. A conditional use permit is a zoning exception that allows you to use your property in non-conforming ways. A variance is a request to deviate from current zoning requirements.

When a property is owned by joint tenants, the interest of a deceased owner automatically gets transferred to the remaining surviving owners. For example, if three joint tenants own a house and one of them dies, the two remaining tenants each obtain a one-half share of the property. This is called the right of survivorship.

States may require additional information, but federally at the minimum, all advertising for property or services must include the broker firm's name. This is all for all advertising, social media included.

Deed restrictions are limitations to the use of the property imposed by a past or current owner and are usually legally binded forever. Some common examples of deed restrictions are: Type and number of trees you can remove from the property, house color, window size, overall style, color, and construction materials used in a renovation.

Lead-Based Paint Disclosure Rule (Section 1018 of Title X) requires that potential buyers and renters of housing built prior to 1978 receive certain information about lead and lead hazards in the residence prior to becoming obligated to buy or rent, and provides the opportunity for an independent lead inspection for buyers. Sellers, landlords, and agents are responsible for compliance.

A lender's refusal to lend money to potential homeowners attempting to purchase property located in predominantly minority neighborhoods is redlining. Steering is the illegal practice of channeling home seekers to particular areas, either to maintain the homogeneity of an area or to change the character of an area, which limits their choices of where they can live. It is a form of redlining. Its worth mentioning that, because people often get these two things confused. Steering is a FORM of redlining, and they are not exactly the same things.

Mortgage points, also known as discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. The interest rate decreases not the down payment. They are a great option for someone who knows they will be owning a specific property for a long time. Mortgage points are directly paid to the lender or bank at closing.

An addendum would be drafted to include the furniture he is purchasing, and any additional charge(s) for that furniture. Remember an addendum ADDS terms to a contract. An amendment typically changes terms of a contract. There is a difference, make sure to understand it!

Compensation is negotiated between the broker and the seller and may be transferred and distributed in many ways. As long as the seller and broker agree compensation no matter how much, when, or in any avenue is legal.

In real estate, the increase of the actual land via a stream, lake or sea by the action of water which deposits soil upon the shoreline is accretion.

An easement in gross is basically selling rights to the land to another person, but without giving them legal ownership. An example of an easement in gross is an easement to a utility company to run a power line across a burdened piece of property.

Real estate has three physical characteristics that differentiate it from other assets in the economy: 1. Indestructibility meaning land cannot be destroyed or worn out. Its appearance may be altered but it always continues to exist. 2. Immobility meaning geographical location of the property remains the same & can never be changed, it is fixed. 3. Uniqueness or non-homogeneity meaning no parcels of real estate are exactly alike. Scarcity, improvements and permanence of investment are all economic characteristics of real estate.

The U.S. Department of Housing and Urban Development's Office (or HUD) administers and enforces federal laws and establishes policies that make sure all Americans have equal access to the housing of their choice.

They belong to Trinity Real Estate LLC. The listings belong to brokerage, not the salesperson who listed the property.

In order to qualify for the Fair Housing Act’s "Housing for Older Persons" Exemption, at least 80 percent of the units must have at least one occupant who is 55 years of age or older OR all units are occupied by residents over the age of 62.

When you hear life estate think of life and death. A life estate is an interest in real property which is held for the duration of the life of a designated person. It may be limited by the life of the person holding it or by the life of another person. This designated person is called a life tenant. This is kind of a trick question, in this case since Andrew created the life estate FOR his sister she is the life tenant, meaning it will last until her death. Read More Here

Water rights are appurtenant, meaning they run with the land and not with the original owner. In other words, if an oceanfront property is sold, the new owner gains the littoral rights and the seller relinquishes his or her rights. Read More Here

The income approach is a real estate valuation method that uses the income the property generates to estimate fair value. It's calculated by dividing the net operating income by the capitalization rate.

A comparative market analysis is an examination of the prices at which similar properties in the same area recently sold. Agents can use a comparative market analysis for their clients to help them determine a price when selling or buying a home.

A contingency clause is considered one of the most important purchase contract provisions for the potential buyer of real property. A contingency is a future event or circumstance which is possible but cannot be predicted with certainty. So in this instance, the married couple intends to purchase property, but only if they can qualify for a mortgage loan at a reasonable rate. That is a contingency.

A non-exclusive buyer agency agreement allows buyers to hire more than one agent to find their home; however, buyers must inform each agent they work with that another agent is involved and whether they have shown them specific homes.

Emblements are annual crops cultivated by a tenant that is treated as the tenant's personal property. Read More Here

Think of supply and demand like a scale usually if one side raises, the other will lower or vice versa. Generally, low supply and high demand increase price. In contrast, the greater the supply and the lower the demand, the price tends to fall. So in real estate terms, when the supply of available houses in an area decreases significantly the average cost of housing goes up.

Remember, an open listing is truly open. Each broker has an opportunity to earn the entire commission if they can come up with a buyer.

A unilateral contract is a contract in which only one party makes a promise to perform an action. An insurance contract or a reward contract are both examples of unilateral contracts. Unilateral contracts appear more often than you may think; one of the most common instances is a reward contract. Imagine you’ve lost your cat, Coco. You place an advertisement online offering a $250 reward to the person who returns Coco. By providing a reward, you’re offering a unilateral contract.

In this example the answer is 18 months. Established business relationship means a relationship between a seller and a consumer based on….. “ the consumer's purchase, rental, or lease of the seller's goods or services or a financial transaction between the consumer and seller, within the eighteen (18) months.” Per 16 CFR 310.2

Trusts can be created during an individual's lifetime, or they can be established following someone's death. A trust works as it follows: the first party, the trustor or settlor, transfers a property upon the second party for the benefit of the third party, the beneficiary. The trustee is required to manage the trust property in accordance with the trustor's wishes and in the beneficiary's best interests. A trustor can be an individual or organization.

The habendum clause is the statement in a contract that describes the rights and interests being given. It almost always begins with the words "to have and to hold."

The Environmental Protection Agency (EPA) is the federal agency responsible for dealing with environmental issues. The EPA was established in December 1970 by an executive order of United States President Richard Nixon. The agency enforces all federal environmental rules and regulations.

A landowner of land which borders a navigable waterway owns the property up to the high-water mark at the water’s edge. The government owns the water and land beneath it, and the public has an easement right to travel on the water. The owner would be unsuccessful because the owner's property extends only to the high-water mark.

Fee packing, equity stripping, and balloon payment abuses are all examples of predatory lending practices. Predatory lending typically refers to lending practices that impose unfair, deceptive, or abusive loan terms on borrowers. While these practices are wrong, unfortunately sometimes they are perfectly legal.

A Listing agreement is a document in which a property owner contracts with a real estate agent to find a buyer for the owner's property. The owner executes the listing agreement to give a real estate broker the authority to act as the owner's agent in the sale of the owner's property, for which the owner agrees to pay a commission. A listing agreement is a personal service contract. That means that should the seller die, or either party becomes incapacitated, or the property is physically destroyed in an accident, the listing agreement is terminated.

Housing prices tend to rise with inflation. While the economy is experiencing inflation, interest rates typically rise and housing prices rise. There is a correlation between inflation and house prices. In fact, there are correlations between inflation and any good with a limited supply. When interest rates are low, buying homes can be more affordable and increase the demand for homes. If the supply of homes remains constant and the demand increases, then the prices of homes will increase.

The statute of frauds is a legal concept that requires certain types of contracts to be executed in writing (real estate included). The statute specifically covers contracts for the sale of land, agreements involving goods worth over $500, and contracts lasting one year or more.

Remember, community property and tenants by the entirety is through marriage. You can't have that form of ownership with two unmarried individuals. Joint tenancy would be the best answer. Tenancy in common significantly differs from a joint tenancy, particularly in terms of survivorship rights and the degree of ownership each tenant has. Unlike with a joint tenancy, tenants in common have no rights of survivorship. So knowing that Tony and Taylor have a right to survivorship and are unmarried, we can assume they have a joint tenancy. The amount of interest really doesn't matter in this case.

Real estate has three physical characteristics that differentiate it from other assets in the economy: 1. Indestructibility meaning land cannot be destroyed or worn out. Its appearance may be altered but it always continues to exist. 2. Immobility meaning geographical location of the property remains the same & can never be changed, it is fixed. 3. Uniqueness or non-homogeneity meaning no parcels of real estate are exactly alike. An economic characteristic of real estate is scarcity meaning the total supply is fixed.

The principal is always the one whom you have an agency relationship with and therefore is the person whom you owe fiduciary responsibility.

A bit of a trick question. Crossing out part of a printed contract is actually allowed and legally enforceable as long as both parties and the original text is still readable.

Frontage is the boundary between a plot of land or a building and the road onto which the plot or building fronts. Frontage may also refer to the full length of this boundary. This length is considered especially important for certain types of commercial and retail real estate, in applying zoning bylaws and property tax.

The surface rights are the rights to use the surface of the earth. Subsurface rights are the rights to the natural resources lying below the earth's surface. Interestingly an owner may transfer rights without transferring the subsurface rights. For example, a landowner can sell his rights to an oil and gas company in his land but still can own the land itself.

In this case, the contract would be voidable by the buyer because of fraud. Voidable contracts have the necessary elements to be enforceable, so they appear to be valid, but can be rejected by one party if the contract is discovered to have any number of defects. Fraud is the act of intentionally deceiving another party for financial or personal gain.

The Americans with Disabilities Act (ADA) prohibits discrimination against people with disabilities in several areas, including employment, transportation, public accommodations, communications and access to state and local government' programs and services. The act specifically requires reasonable accommodations must be provided to people with disabilities.

A borrower is a mortgagor while the lender is the mortgagee. A mortgagee is an entity that lends money to a borrower (also known as a mortgagor) for the purpose of purchasing real estate.

It is permissible to attach legal descriptions to the contract rather than writing them into the contract itself, but they must be attached. This is common with sales contracts with extensive and detailed legal descriptions.

Partition is a term used in real estate to describe an act, by a court order, to divide up a concurrent estate into separate portions representing interests of the owners of a property.

Consideration is anything of legal value that is offered in exchange by one party for something of value from another party. Common forms of consideration include money, property in exchange, work or a promise to perform. Without consideration, a contract is not valid.

A percentage lease is a lease in which all or part of the rental is a specified percentage of gross income from the total sales made upon the property.

The fiduciary duty of confidentiality lasts forever. Confidentiality requires that you do not disclose any information learned about your clients, their business, financial or personal affairs or motivations. Again, this duty lasts forever.

In an exclusive right to sell listing the agent gets paid no matter who sells the property, regardless of whether it’s the agent or the seller. Knowing this, it's safe to assume this was an exclusive right to sell listing.

The lot and black method identifies land by reference to lot and block numbers appearing on maps or a plat map. The lot and block survey system is a method used in densely populated metropolitan areas, suburban areas and suburbs. It is sometimes referred to as the recorded plat survey system or the recorded map survey system.

An amendment typically changes terms of a contract. An addendum “adds” terms to a contract. For example, let's say a buyer and seller have agreed to an April 10th closing date but later both agreed to change the closing date to April 25th. They would use an amendment. Addendums are used to add or delete terms or conditions NOT previously agreed to. That's the difference.

A depth table is used to estimate the value of commercial properties. A depth table is a table used by real estate appraisers to show land values in percentages based on variations in the depth of the lot.