Introduction to Real Estate Practice Questions
Course Introduction
Introduction to Real Estate offers students a comprehensive overview of the real estate industry, examining its key concepts, terminology, and processes. The course explores residential, commercial, and industrial property types, while covering the principles of property ownership, transfer, and valuation. Students will learn about real estate markets, financing options, investment analysis, and the legal and ethical considerations that impact real estate transactions. By the end of the course, students will have a solid foundation in the fundamentals of real estate, preparing them for further specialized study or entry-level roles in the field.
Recommended Textbook
Real Estate Principles 11th Edition by Charles
J. Jacobus
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Page 2
Chapter 1: Nature and Description of Real Estate
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Sample Questions
Q1) How many acres does a parcel of land 660' by 660' contain?
A) One-eighth acre
B) One acre
C) Ten acres
D) One hundred acres
Answer: C
Q2) Correction lines, which occur at intervals in the rectangular survey system, are necessary
A) to correct the mistakes made by surveyors.
B) to allow for magnetic fields which interfere with compasses.
C) because of the curvature of the earth.
D) because of the gravitational pull of the moon.
Answer: C
Q3) Which of the following is real property?
A) Farm equipment
B) Cotton ready to be harvested
C) Swing set from Wal-Mart set in concrete
D) Lawn mower
Answer: C
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Page 3
Chapter 2: Rights and Interests in Land
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Q1) The entitlements of fee simple ownership, which exclude those without rights from interfering, are the ____________________ of rights.
Answer: bundle
Q2) The government receives the authority to take the property of one who dies without a will and without heirs by virtue of A) laws of agency.
B) eminent domain.
C) police power.
D) escheat.
Answer: D
Q3) Developers avoid land locked properties by creating an easement A) by necessity.
B) by prescription.
C) in gross.
D) in common.
Answer: A
Q4) A properly recorded easement on real property is an ____________________. Answer: encumbrance
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Chapter 3: Forms of Ownership
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Sample Questions
Q1) Because of the survivorship feature, tenancy in common has loosely been labeled a "poor man's will."
A)True
B)False
Answer: False
Q2) Investors in real estate investment trusts are called ____________________.
Answer: beneficiaries
Q3) In a state recognizing community property, real property acquired before marriage is brought into the marriage as community property.
A)True
B)False
Answer: False
Q4) The surviving co-owner may automatically inherit the deceased co-owner's share when the property is held
A) as tenancy in common.
B) in severalty.
C) as a trust.
D) as tenancy by the entirely.
Answer: D
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Chapter 4: Transferring Title
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Sample Questions
Q1) When land is gradually added to an existing parcel by the action of water, the process is called
A) avulsion.
B) accretion.
C) erosion.
D) reliction.
Q2) A deed, which is properly completed and delivered but lacks the grantee's signature is
A) invalid until the grantee signs.
B) invalid until recorded.
C) valid if the grantee is identified.
D) void.
Q3) The actual act of conveying ownership is known as a ____________________.
Q4) Which of the following would NOT involve the documented transfer of title?
A) Avulsion
B) Eminent Domain
C) Adverse possession
D) Foreclosure
Q5) The "To have and to hold clause" is also known as the ____________________ clause.
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Chapter 5: Recordation Abstracts and Title Insurance
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Sample Questions
Q1) Which of the following most correctly describes "chain of title"?
A) Boundary descriptions of the property
B) Encumbrances which prevent use of the land
C) Succession of property owners
D) Recording laws
Q2) If a chain of title is broken, one must search outside the recorder's office by searching probate court records and civil court actions to regain the title sequence.
A)True
B)False
Q3) Title insurance has made titles to land much more ____________________.
Q4) Documents are recorded by
A) placing the original document on file in the recorder's office.
B) submitting the original document which is photocopied and placed on file.
C) copying the original document and returning it and the copy to the grantor.
D) filing the name and address of the property owner.
Q5) A formal declaration by a person signing that he or she did, in fact, sign the document is called a jurat.
A)True
B)False
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Chapter 6: Contract Law
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Sample Questions
Q1) To be legally competent, a person must reach the age of A) minority.
B) majority.
C) reasonable competence.
D) 17 years.
Q2) The broker has the power to sign documents for the principal. This is probably because she holds A) a power of attorney.
B) an agency relationship.
C) special agent status.
D) an attorney-at-law.
Q3) A contract that is in the process of being carried out is said to be ____________________, that is, in the process of being performed.
Q4) For an agreement to be enforceable it must be supported by ____________________ to demonstrate that a bargain has been struck between the parties to the contract.
Q5) Rights, benefits, and obligations under a contract can not be assigned to someone else.
A)True
B)False
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Chapter 7: Real Estate Sales Contracts
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Sample Questions
Q1) If the vendee is in default, the vendor
A) cannot pursue the right of foreclosure.
B) is in title.
C) no longer has equitable title.
D) retains color of title.
Q2) The most time consuming item in carrying out the terms of the purchase contract is the termite inspection.
A)True
B)False
Q3) In the event of default by the buyer the seller may sue for specific performance but not for money damages.
A)True
B)False
Q4) The vendor holds legal title to real property when a land sales contract has been entered into between the seller of the property and a buyer.
A)True
B)False
Q5) The process of dividing ongoing expenses and income items at closing is known as
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Chapter 8: Mortgage and Note
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Sample Questions
Q1) The right, which allows the mortgagor to regain his property following a mortgage foreclosure, is known as
A) right of redemption.
B) due on sale.
C) satisfaction of mortgage.
D) defeasance.
Q2) A mortgage or trust deed is considered to be
A) an estate in land.
B) a promissory note.
C) chattel.
D) debt security.
Q3) At the same time that a lawsuit is filled with the court, a notice of lis pendens is also filed with the court.
A)True
B)False
Q4) In the covenant of good repair the borrower promises not to remove or demolish any buildings or improvements.
A)True
B)False
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Chapter 9: Deed of Trust
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Sample Questions
Q1) The beneficiary's right, upon default, to take physical possession and collect income generated by the property is called
A) assignment of rents.
B) reconveyance.
C) power of sale.
D) the trustee has the right, not the beneficiary.
Q2) Under a deed of trust the borrower is known as the ____________________.
Q3) Under the ____________________ of ____________________ clause, if the borrower defaults, the trustee has the right to sell the property and convey ownership to the purchaser.
Q4) The borrower under a deed of trust is called the
A) trustor.
B) beneficiary.
C) trustee.
D) grantor.
Q5) A newly recorded trust deed
A) conveys the entire estate to the grantee.
B) always allows a deficiency judgement.
C) establishes a voluntary lien.
D) conveys title superior to a quitclaim deed.
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Chapter 10: Lending Practices
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Sample Questions
Q1) On a $64,000 home, which of the following would require the largest cash down payment?
A) FHA-insured loan
B) 80% loan-to-value conventional loan
C) 90% loan-to-value conventional
D) 100% DVA loan
Q2) The homeowner has made regular mortgage payments over ten years and the housing values in the neighborhood have steadily risen. The equity has steadily increased.
A)True
B)False
Q3) The role of the FHA in residential mortgage lending is
A) guaranteeing the loan.
B) insuring the loan.
C) loaning the money.
D) as a secondary lender.
Q4) Loan points increase the yield to the lender.
A)True
B)False
Q5) The word point means 1% of the _________________________.
Page 12
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Chapter 11: The Loan and the Consumer
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Sample Questions
Q1) The APR is
A) usually lower than the interest rate.
B) made up of the interest rate combined with the other costs of the loan.
C) both a and b.
D) neither a nor b.
Q2) Generally, before a lender will approve a loan, the borrower must
A) have sufficient funds for the down payment.
B) sign a statement if the borrower intends to occupy the property.
C) both a and b. .
D) neither a nor b
Q3) Under the truth in lending act, the cost of credit extended must be expressed as an actual percentage rate.
A)True
B)False
Q4) The Truth in Lending Act covers credit extended for a loan secured by a car valued at $30,000.
A)True
B)False
Q5) ____________________ loans have risk-based pricing and rates are not quoted.
Q6) A borrower has a limited right of ____________________ in a credit transaction. Page 13
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Page 14
Chapter 12: Sources of Financing
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Sample Questions
Q1) Usury laws are established by the federal statutes.
A)True
B)False
Q2) GNMA buys loans from primary market loan originators.
A)True
B)False
Q3) Commercial banks are most likely to deal heavily in
A) house boat loans.
B) mobile home purchase loans.
C) construction loans.
D) residential home loans.
Q4) One of the primary reasons for the decline in loan demand at savings and loan institutions appears to be
A) deregulation of the lending industry.
B) the poor location of many of the branch offices.
C) the high interest rates being charged by commercial banks.
D) poor supervision by regulating agencies.
Q5) Computerized Loan Origination is limited to regulated lenders.
A)True
B)False
Page 15
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Chapter 13: Types of Financing
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Sample Questions
Q1) The interest rate of an adjustable rate mortgage may rise or fall based on the A) interest rate cap.
B) adjustment period.
C) index.
D) margin.
Q2) Each of the following statements about open-end mortgage clauses is true EXCEPT A) using an open-end clause, the new amount borrowed is added to the mortgage balance.
B) they are used in government loans like DVA and FHA.
C) they are used in conventional mortgages.
D) funds borrowed using an open-end clause are reamortized over the remaining like of the mortgage.
Q3) A mortgage secured by two or more properties is called a ____________________ mortgage.
Q4) A ____________________ mortgage encompasses existing mortgages and is subordinate to them.
Q5) The index stays constant over the life of the loan but the margin will vary. A)True B)False
Q6) The interest rate on an ARM is tied to a(n)____________________ rate.
Page 16
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Chapter 14: Taxes and Assessments
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Sample Questions
Q1) Property taxes are
A) levied according to square footage.
B) a lien until paid.
C) based on income of the owner.
D) an encroachment until paid.
Q2) If the property taxes are not paid, the property is sold at a public auction.
A)True
B)False
Q3) Taxes become a lien
A) in advance.
B) only when delinquent.
C) in arrears.
D) when an assessment appeal is filed.
Q4) Local government programs and services are financed primarily through
A) property taxes.
B) federal income taxes.
C) state income taxes.
D) state sales taxes.
Q5) The first step in determining the amount of taxable gain upon the sale of an owner-occupied residence is to calculate the home's ____________________.
Page 17
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Chapter 15: Title Closing and Escrow
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Sample Questions
Q1) Escrow closings cannot be used when refinancing a property.
A)True
B)False
Q2) Under the provisions of RESPA payments outside closing are prohibited.
A)True
B)False
Q3) A settlement meeting may take place in the offices of
A) the real estate agent.
B) an attorney.
C) a title company.
D) any of the above.
Q4) Of the following, the final action to be taken to complete a closing is
A) acknowledgement of all instruments.
B) recordation of appropriate instruments.
C) signing of the deed.
D) title search.
Q5) The HUD Settlement Statement required of all federally related real estate lenders is known as the ____________________.
Q6) RESPA prohibits ____________________ and fees for services not performed during the closing process.
Page 18
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Chapter 16: Real Estate Leases
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Sample Questions
Q1) When a property owner offers a premium to entice a prospective tenant to move in, this is known as a rent ____________________.
Q2) If a renter complains to public health officials about conditions on the premises which violate codes, the landlord may legally react by giving the tenant an eviction notice.
A)True
B)False
Q3) The lessee's right to quiet enjoyment allows the landlord no right of entry.
A)True
B)False
Q4) A right of possession for a fixed term that allows for automatic renewals for additional terms is called a periodic tenancy.
A)True
B)False
Q5) Under a net lease, the tenant pays a rate based on the net mortgage payment. A)True
B)False
Q6) A lease wherein the owner receives a percentage of the tenant's gross receipts as rent is called a ____________________ lease.
Page 19
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Chapter 17: Real Estate Appraisal
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Sample Questions
Q1) A residential lot purchased 3 years ago for $10,000 has doubled in value. The house on the lot cost $40,000 and it increased $20,000 in value. If the house and lot are sold at market value today, how much profit will be realized?
A) $30,000
B) $40,000
C) 33 1/3%
D) 100%
Q2) The process of combining two or more parcels of land into one larger parcel is called ____________________.
Q3) Loss of value of a structure because it is in a deteriorating neighborhood would be called economic obsolescence.
A)True
B)False
Q4) When real property loses value due to social or economic changes, this loss is called A) obsolescence.
B) depreciation.
C) chattel loss.
D) recapture.
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Chapter 18: Licensing Laws and Professional Affiliation
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Q1) When a broker joins a franchise organization, the financial arrangements usually include
A) a salary paid to the broker.
B) a percentage of income paid to the franchiser.
C) free jackets to the sales associates.
D) salary to the agents.
Q2) The sales associate, affiliated with a broker, who brings about a sale is paid by the title company.
A)True
B)False
Q3) Which of the following is NOT a real estate license category?
A) Salesperson
B) Broker
C) Attorney-in-fact
D) Both a and c
Q4) Which of the following is a copyrighted term owned by NAR?
A) Realty
B) Realtist
C) REALTOR®
D) Narob
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Chapter 19: The Principal-Broker Relationship: Employment
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Q1) In an area where the multiple listing commission split is 50/50, a broker sells another broker's 6% listing for $105,000. How much commission will the selling broker receive?
A) $1,896
B) $2,790
C) $3,150
D) $6,300
Q2) The amount of commission to be paid the broker for selling a property is A) set by law.
B) negotiated at the time a buyer is found.
C) set forth in the rules of the state real estate commission.
D) stated in the listing contract.
Q3) A broker is attempting to collect a commission on a property after his exclusive right to sell listing expires. If he ends up in court, he must prove that he was the procuring cause.
A)True
B)False
Q4) A listing automatically will expire when the listing salesperson dies.
A)True
B)False
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Chapter 20: The Principal-Broker Relationship: Agency
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Q1) The purpose of a trust account is to
A) hold money belonging to clients and customers.
B) assure that a broker can be trusted.
C) to act as a neutral depository.
D) convert client's money to broker's account.
Q2) A buyer makes an initial deposit of $10,000 to buyer a $400,000 house. The buyer withdraws the offer before the seller accepts it. The broker should dispose of the buyer's earnest money by splitting it with the seller according to the terms of their commission agreement.
A)True B)False
Q3) When an agent's authority arises from custom in the industry, it is identified as A) implied authority.
B) ostensible authority.
C) customary authority.
D) conventional authority.
Q4) Price fixing and monopolies are prohibited by federal fair housing laws.
A)True B)False
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Chapter
Reinvestment
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Q1) Comparing the 1968 Fair Housing Law and the Civil Rights Act of 1866, which is true?
A) The Act of 1968 prohibits discrimination based on sex, religion, national origin and marital status.
B) The Act of 1866 has no exceptions but it covers only racial and religious discrimination.
C) The Act of 1968, called the Fair Housing Law, exempts properties offered for commercial use.
D) Both acts prohibit steering and block busting.
Q2) The Americans with Disabilities Act (ADA)is a federal law giving disabled individuals the right of access to commercial facilities open to the public.
A)True
B)False
Q3) The federal Fair Housing Law is officially known a Title VIII of the Civil Rights Act of 1968, as amended.
A)True
B)False
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Page 24
Chapter 22: Condominiums, Cooperatives, Puds, and Timeshares
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Q1) Ownership by a corporation that in turn leases space to its shareholders best describes a cooperative.
A)True
B)False
Q2) ____________________ timesharing is a method of dividing up and selling a living unit at a vacation facility for specified lengths of time each year.
Q3) Of the two principal forms of timeshare formats, the largest percent of the market is comprised of the right-to-use format.
A)True
B)False
Q4) Those parts of a condominium that are owned by all the unit owners are known as common elements.
A)True B)False
Q5) The maintenance fees for a condominium project are also called ____________________ dues.
Q6) A common element where the use is restricted to a specific unit owner is called a ____________________ common element.
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Chapter 23: Property Insurance
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Q1) A property damage or public liability policy
A) can be cancelled at any time by the insured.
B) cannot be cancelled by the insured.
C) can be cancelled at any time by the insurer.
D) can be cancelled only after 30 day's notice by either party.
Q2) As an owner of real estate, one is exposed to losses by
A) damage to the property.
B) other persons being injured on the property.
C) both a and b.
D) neither a nor b.
Q3) An agreement by the insurer to modify a basic policy, also called a rider or attachment, is known as a(n)____________________.
Q4) Actual cash value is the new price minus accumulated depreciation and is, in effect, "new for old".
A)True B)False
Q5) A landlord policy combines property damage, liability, medical payments, and loss of ____________________.
Q6) ____________________ insurance is the foundation of property damage policies.
Page 26
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Chapter 24: Land-Use Control
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Q1) Zoning is
A) a power originating from the sovereign state governments.
B) exercised to regulate types of uses, use densities, subdivision requirements, and racial and ethnic quotas.
C) exercised by building inspectors.
D) little used and of declining importance in real estate.
Q2) Through zoning, a community can protect existing land users from all of the following EXCEPT
A) encroachment by undesirable uses.
B) uncontrolled development.
C) incompatible uses of land.
D) competitive business establishments.
Q3) Kelly finds that her intended improvement, a veterinary clinic, is allowed by the zoning classification of her land only if she gets specific approval for that single use. This is most likely an example of
A) a nonconforming use.
B) a variance.
C) an illegal spot zoning.
D) a conditional use permit.
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Page 27
Chapter 25: Real Estate and the Economy
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Q1) Through the Federal Reserve Banks, the Federal Reserve Board can create money.
A)True
B)False
Q2) Which of the following is more likely to be the LEAST demanding of appreciation potential in the ownership of real estate?
A) The owner of a rental residence
B) An owner who occupies a property as a principal
C) A business which owns apartment buildings
D) A corporation which owns office buildings
Q3) Over a period of years, there will be periods of rapid price changes mixed with periods of mild price changes.
A)True
B)False
Q4) The real estate brokerage industry is an example of a
A) base industry.
B) secondary industry.
C) export industry.
D) primary industry.
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Chapter 26: Investing in Real Estate
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Q1) The cash-on-cash ratio for a property that has a cash flow of $16,900 and could be purchased with a down payment of $130,000 would be 7.69%.
A)True
B)False
Q2) A property is purchased for $50,000 with a $45,000 loan. Several years later the loan has been reduced to $40,000 and the property is sold for $55,000. What is the seller's equity build-up at the time of sale?
A) none
B) $5,000
C) $10,000
D) $15,000
Q3) In an effort to encourage individuals to rebuild older structure, Congress has had a policy of giving ____________________ tax credits.
Q4) If an investor wanted to put leverage to its best advantage, he would purchase property by investing all of his own cash and borrowing as little as he can.
A)True
B)False
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