100+ Free Real Estate Practice Exam Questions (July 2022)

Surveying is the "general" technique of determining three-dimensional positions of points and the distances and angles between them. The point of a survey is to accurately measure land in a legal fair manner. While subdivision surveying is definitely a form of surveying this question is asking for the general form, which is just surveying.

A lease option is when a lease is combined with an option contract.

Hypothecation occurs when an asset is pledged as collateral to secure a loan. A rental property, for example, may undergo hypothecation as collateral against a mortgage issued by a bank.

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.

In plain terms, a bilateral contract is an agreement between two or more parties. Most business and personal contracts fall into this category.

The actual transfer of title in a real estate transaction is handled by lawyers or title agencies, not the agent. However as with other legal aspects in the transactions a real estate agent needs to understand them. Alienation is the act of transferring title, ownership, an estate, or an interest in real estate from one party to another.

This is an example of a balloon loan. A balloon loan is a mortgage which does not fully amortize over the term. Amortization is when payments divide into equal amounts for the duration of the loan. A balloon loan is different as not all payments are the equally divided and the most substantial payments are called Balloon payments.

The correct statement is: “In title theory states, banks or mortgage lenders hold the title of a property until it is paid in full. In lien theory states, however, banks or mortgage lenders never retain title to the property.” In lien theory states banks or mortgage lenders never retain title to the property. Instead, the mortgage lender holds a lien against the property.

Radon is a GAS not a liquid.

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.

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.

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.

Usually, the lender or financing organization will hire the appraiser. Technically the seller pays for the appraiser since it comes out of the final sales price, however the hiring aspect is almost always done by the lender.

A general agency in real estate is where an agent has limited power. This is very common in property management situations.

The Purchase Agreement is a contract that legally binds two or more parties together, to specific obligations, that create a legally binding contract between the buyer and the seller. So in plain terms, a Purchase Agreement is the document buyers and sellers sign with all the terms and conditions of their transaction on it.

The term “ad valorem” is Latin for “according to value,” which means that it is flexible and depends on the assessed value of an asset, product, or service. An ad valorem tax is charged by state and municipal governments and is based on the assessed value of a product or property. The most common ad valorem tax is the property tax, which is charged on real estate and personal property.

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.

Novation is the procedure in which an original contract is terminated and replaced with a new one. The legal process of novation makes it possible to transfer all contract benefits and liabilities from previous parties to a set of new ones. In plain terms, it’s a simple way to replace an old contract with a new one while maintaining most or all of its original properties.

A real estate option contract is a one-of-a-kind contract that is solely between the seller and the buyer. In this arrangement, the seller gives the buyer the option to purchase property at a given price for a set period.

Once the appraisal has been performed on a property being bought with a VA loan, the Department of Veterans Affairs (VA) issues a Certificate of Reasonable Value. A Certificate of Real Estate Value documents the price at which a property was sold as well as any unique terms that were added to the transaction prior to its completion.

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.

Dedication in property law means the donation of your land. Dedication would be considered voluntary, while the others are all involuntarily.

A warranty deed can include six forms of covenants for title. A warranty deed is a type of deed where the grantor (seller) guarantees that he or she holds clear title to a piece of real estate and has a right to sell it to the grantee (buyer). The general warranty deed offers the grantee the most protection. With this type of deed, the grantor makes a series of legally binding promises (called covenants) and warranties to the grantee agreeing to protect the grantee against any prior claims and demands of all persons whomsoever in regards to the conveyed land. Typically a warranty deed has five to six covenants.

A conventional loan is a type of loan that is not insured or guaranteed by the government. Instead, the loan is backed by private lenders, and its insurance is usually paid by the borrower. Yes, typically they are the most popular but the best definition by far is the following: A type of loan that is not insured or guaranteed by the government, but backed by private lenders.

According to the law of supply and demand, the first property sold would have sold for the lowest price. Remember generally speaking, when the supply of houses goes down, the price goes up, and vice versa.

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.

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

Novation is the procedure in which an original contract is terminated and replaced with a new one. The legal process of novation makes it possible to transfer all contract benefits and liabilities from previous parties to a set of new ones. In plain terms, it’s a simple way to replace an old contract with a new one while maintaining most or all of its original properties. When you see any name transfers just think novation.

Commingling refers to mixing brokers funds with clients funds. The opposite of commingling is separation, which is just separating the funds.

The principle of anticipation in appraisal is the principle that the value of property today is the present value of the sum of anticipated future benefits. It’s also worth noting that the principle of anticipation doesn’t always refer to monetary gain. It could also be emotional or mental gain.

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.

Each square, six miles by six miles, is called a township. Since each township is six miles by six miles, townships contain 36 square miles, each one forming a section.

When contracting parties have signed a contract and both parties have done all they promised to do, it is called an executed contract or executed agreement. It's worth noting, most real estate transactions require execution. A sales contract, for example, is executed when the seller has transferred title to the buyer and the buyer has paid the seller. Execution must occur to finalize the agreement; without execution, a transaction is incomplete and therefore doesn’t exist.

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

A special agent is an agent hired to perform a specific duty. The real estate agent’s power and authority is limited to that specific task. Example: If you list a house on behalf of a seller, you are hired for one specific job – listing the house. Once that job is complete, then the agency relationship is over.

Tax liens are imposed by the federal, state, or local government based upon back property taxes that are due. Not only can these seriously impact your credit report, but until they're paid off, they can prevent you from selling the property. Tax liens are involuntary and usually specific. The important thing to remember is the government always gets paid first in terms of money distribution.

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.

For special-purpose and public service buildings like schools, churches, and post offices the cost approach is the best choice. The reasoning is because these types of buildings usually do not have income so Income Approach is out, and there's not enough comparables to do the sales comparison approach. Cost approach is the best answer.

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

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.

Restrictive covenants, are also know as CCR's(conditions, covenants, and restrictions). The main purpose of the CCR's is to maintain the look and feel of the community. CCR’s limit the use of a particular property, a condominium, or a subdivision. Such restrictions are either written in the deeds to the property or into the bylaws for the subdivision, which the deeds will reference. In real estate transactions, restrictive covenants are binding legal obligations written into the deed of a property by the seller.

It’s important the buyer and seller clearly understand the document as it becomes legally binding as soon as both parties sign. It is an agent's duty to explain to purchase agreement and not mislead both or either parties.

Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.

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.

Color of title refers to a claim to title that appears to be legally valid but may be defective. This legal concept is often discussed in adverse possession claims. If adverse possession is claimed under color of title, usually the claims are met sooner or in an easier fashion. Read More Here

The alienation clause is a contract provision that comes into effect when ownership of a specified asset is transferred or sold. It ensures that if a transfer of property happens the lender is paid in full from the original borrower. It's a legal clause lenders add for protection.

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.

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

A balloon loan is a mortgage which does not fully amortize over the term. Amortization is when payments divide into equal amounts for the duration of the loan. A balloon loan is different as not all payments are the equally divided and the most substantial payments are called Balloon payments.

A VA loan is a mortgage loan available for military service members, veterans, and eligible surviving spouses. They often come with better terms than a traditional mortgage which is why they are commonly sought. The program was established by the United States Department of Veterans Affairs and has been a strong success ever since. VA loans are only for active military service members, veterans, and certain military spouses. Aside from that, most VA loans require moderate credit. One of the biggest advantages of a VA loan is in some circumstances people don’t even need a down deposit for the property they want. They also come packaged with lower interest rates so if you qualify VA loans are the way to go.

Appurtenant is an adjective meaning it is attached to something. If something is appurtenant, it belongs to something else, either attached to or by law. An appurtenant easement is a type of easement that “runs with the land.” These all would be considered appurtenant, other than a trade fixture. Remember, trade fixtures are pieces of equipment used in a business and can usually be easily removed.

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.

Functional obsolescence refers to the loss of property value due to an obsolete design feature. Outdated plumbing would be considered functionally obsolete because it is outdated. Who determines what is obsolete or not? Usually the buyer or homeowners. If a neighborhood is filled houses with new bathrooms and/or new plumbing, and your's isn't, It would be considered functionally obsolete. Read More Here

In order for a contract to be valid a few things must occur:

-The party must be at least 18 years old and of sound mind.

-A contract must be legal. For example, there cannot be a contract to kill, steal or anything illegal.

-The contract must hold a clear and definite consideration.

-There must be mutual consent of the contract.

Since the client has been declared incompetent by the court. The listing is now void.

Most real estate agents make money through commission. A commission is a fee paid to an agent for performing a transaction. A commission is usually a percentage of the property's selling price, although sometimes it can be a flat fee.

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.

The market data approach, also known as the sales comparison approach, involves comparing a property to other recently sold properties in the same area of similar size and condition. For residential real estate, the market data approach is typically regarded as the most accurate comparison method.

An offer from a third party does not affect someone else's offer. A counteroffer by that offeree would affect an offer, however, as well as a cancellation or death of the offeror before the offer is accepted.

The seller is usually entitled to keep the earnest money, because this is considered forfeiture of the contract. The only way the buyer can back out and get their earnest money back is if something happens with the inspection, appraisal, or they have a contract clause offering that protection.

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.

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.

If problems emerge after a sale is complete; that is not the seller's problem, and not a cause for the buyer to sue. Unfortunately, exactly when a problem started and when the seller first "knew" about it are not always clear. In this instance the seller didn't know about the issue, meaning she is not liable for failure to disclose the material defect.

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.

If a dispute is pending, the court will likely issue an injunction preventing Mr. Joe from cutting down the trees until they are entirely resolved. Injunctions can be used to protect interests in real property. A court ordered injunction can be used to prevent a harmful action, stop ongoing or repeated conduct, or force a defendant to take action to prevent harm.

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. While selling a house without a license is illegal and some of the other answers are too, the only clear antitrust violation is dividing territories. Which is when competing brokers agree to split territories, and divide interests accordingly. An example of this is if agencies meet up and agree to divide the town in to three separate areas to work in. This prevents competition which is bad for the consumer and a clear antitrust violation.

A cash reserve fund is an account set aside by an individual or business to meet any unexpected future costs, as well as the future costs of upkeep. Property managers use these funds for variable expenses.

Disclosure statements, purchase contracts, and exclusive agency contracts are all legal documents but it is the listing agreement that clearly defines the relationship between the broker and seller.

Instead of being handed down to his family(since he has none), his assets (farm included) are going to go to the government in the process called escheat. Escheat is the government's right to take ownership of unclaimed real estate or assets. Read More Here

When you borrow money to buy real estate, you give the lender a mortgage lien against the property. A mortgage lien is a voluntary, specific lien. In fact, it’s the most common type of voluntary real estate lien.

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

A land trust is a legal agreement in which a property owner transfers the title to a property to a trustee. The property owner is typically the beneficiary and directs the trustee in all matters relating to the management of the property, as outlined in the trust agreement or deed. The property owner also retains all property rights including the freedom to develop, rent and sell the property. One of the main advantages of this trust is that the actual property owner remains anonymous. Land trusts can not only bring some legal protection, but it can also help the property owner negotiate prices if he or she is particularly wealthy and wants to remain anonymous.

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

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

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.

The buyer doesn't need to know the sellers getting a divorce. Lead paint, and flooding, however, both must be disclosed (nationally). State laws differ on whether a buyer is entitled to know about deaths. In Texas, deaths from natural causes, suicides, or accidents unrelated to the property do not have to be disclosed. However, deaths related to the condition of the property or violent crime on the property must be disclosed. Other states impose a duty on a stigmatized property in which there has been a suicide or murder.

The difference between a lease option and lease purchase agreement is that the lease option only obligates the seller to sell. With a lease option the buyer is not forced to buy the property, if they change their mind or cannot obtain financing. A lease purchase agreement commits both parties to the sale barring breach of contract or the buyer's inability to secure a mortgage.

A lawsuit for specific performance would grant your client the house. Specific Performance asks the court to force the opposing party into a contract that binds them to actually perform the contract at issue, rather than award damages for breach of contract.

The Fair Housing Act is a law that prohibits discrimination in the buying, selling, renting or financing of housing. These laws prohibit discrimination based on race, religion, color, sex, disability, children, nationality and more. Changing terms of a sale because someone is Chinese is clearly illegal and a violation of The Fair Housing Act.

In this instance age doesn't really matter. What does matter is that the middle age couple has a mortgage with a high interest rate and at the current rates at much lower. They would most likely qualify for a refinance and they would definitely derive the most value from it. Bonus tip. The rule of thumb is that refinancing is a good idea if you can reduce your interest rate by at least 2%. Generally speaking, homeowners should have a solid credit score to refinance, although there are a few exceptions in government run loan assistance programs.

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.

Often agencies compete with each other like any businesses due. They also sometimes work together on big projects and such. Brokerages connect using a multiple listing service (MLS). It connects listings together under one large umbrella.

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.

When an asset is no longer useful to its owner, then it is said to be past its economic life. The economic life of an asset could be different than its actual physical life. Economic life usually is shorter than physical life, as a structure generally will still physically exist but not be viable in the marketplace.

Fixtures are personal property attached to the land to count as real property. Window blinds are screwed into the house, therefore they are considered a fixture in this example.

Covenants are agreements or promises within deeds. For example, a warranty deed can include six forms of covenants. Those six are a series of legally binding promises and warranties to the grantee agreeing to protect the grantee against any prior claims and demands of all persons whomsoever in regards to the conveyed land.

The Gross Rent Multiplier is found by dividing the price of the property by its rent.

A lien is a legal claim on an asset. Mortgages are a type of lien as it provides the lender a claim over the borrower’s assets and allows the lender the right to detain the assets, property or goods to secure payment. Read More Here

A blind offer in real estate is a purchase contract written by a buyer without seeing the property. This is common in commercial properties such as apartment complexes, and it’s not uncommon in multi-family homes such as duplexes and fourplexes. It’s not typical in single-family homes or apartments.

In order for a contract to be valid a few things must occur:

-The party must be at least 18 years old and of sound mind.

-A contract must be legal. For example, there cannot be a contract to kill, steal or anything illegal.

-The contract must hold a clear and definite consideration.

-There must be mutual consent of the contract.

Any offer to purchase real estate MUST be signed by both the buyer and seller in order to be valid. Both parties must follow these guidelines. It becomes a legal contract as soon as both parties sign.

A mechanic’s lien also called a construction lien is a lien placed on your property for nonpayment for work you had done on the property. It is a claim made against a property by a contractor or other professional who has supplied labor or materials for work on that property. They are designed to protect professionals from the risk of not being paid for services. A mechanic’s lien is involuntary and specific.

A timeshare is a property with a divided form of ownership or use rights. These properties are typically resort building units, in which multiple parties hold rights to use the property, and each owner of the same accommodation is allotted their period of time. They differ from regular condominiums as they typically are exclusively for vacations.

Most real estate sales contracts include contingency clauses, making them voidable. A voidable contract is a legal agreement between two parties that may be unenforceable for any number of reasons. If a contract has a contingency it's voidable. It still can be considered valid but only after the contingencies are met or no longer exist.

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.

In this problem we have to find the annual property taxes. First off we have to find the assessed value. In order to do that we have to take the market value which is $350,000 and then multiply it by the assessment rate which is 15%. So $350,000 x .15 = $52,500. The next step is to utilize mills. The mill rate is the amount of tax payable per dollar of the assessed value of a property. So we have to multiply the assessed value by the mill rate which is $52,500 x .02750 = $1,433.75. So the annual property taxes on the property is $1,443.75.

The Fair Housing Act is a law that prohibits discrimination in the buying, selling, renting or financing of housing. These laws prohibit discrimination based on race, religion, color, sex, disability, children, nationality and more.

Eminent domain is the government’s constitutional right to take over privately-owned real for public use (usually despite the owners’ wishes). Eminent domain for the federal government is protected under the Fifth Amendment of the Constitution, while for state governments, it is protected under the Fourteenth Amendment. Mr Jay’s example is an example of eminent domain. Read More Here

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.

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.

The overall appraisal process is based on a number of factors and appraisers usually use a combination of approaches but give weight to the most the most important. The income approach determines what a property generates in terms of income for its owner, that income, or potential for income. It is then used to calculate or identify the market value of the property. The income approach is primarily used for rental properties and this case would be given the most weight in the appraisal process.

A condominium is a type of living space which is similar to an apartment but which is independently sellable and therefore regarded as real estate. Unlike apartments, which are leased by their tenants, condominium units are owned outright. A condominium is often shortened to condo. What is the difference between a condo and a co-op? Well, a condo is a private residence in a multiunit structure that includes ownership of commonly used property. A co-op is also a multiunit building, but that’s where the similarities end. A co-op owner has an interest or share in the entire building and a contract or lease that allows the owner to occupy a unit. While a condo owner owns a unit, a co-op owner does not own the unit.