Real Estate Licensing Preparation Exam Preparation Guide
Course Introduction
This course is designed to prepare students for success on the real estate licensing examination and for entry into the real estate profession. Covering critical topics such as property ownership, land use controls, valuation, contracts, financing, and agency relationships, the curriculum provides an in-depth overview of real estate principles and practices. Students will engage with real-world scenarios and test-taking strategies to reinforce their understanding of legal, ethical, and procedural concepts essential for licensure. Upon completion, students will be equipped with the knowledge and confidence necessary to pass the state licensing exam and begin their careers in real estate.
Recommended Textbook
Real Estate Principles 11th Edition by Charles J. Jacobus
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Chapter 1: Nature and Description of Real Estate
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Q1) A condominium parking stall would be considered to "run with the land" and would be considered to be an ____________________.
Answer: appurtenance
Q2) Improvements made to real property become part of the real property because of A) reliction.
B) attachment.
C) devise.
D) descent
Answer: B
Q3) Which of the following are considered to be real estate?
A) Trade Fixtures
B) Emblements
C) Mulberry bush
D) Garden hose
Answer: C
Q4) Monuments and points of beginning are used with the metes and bounds type of land description.
A)True
B)False
Answer: True
Page 3
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Chapter 2: Rights and Interests in Land
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Q1) The power of _________________________ can be used to take land for a public road, public parking or an irrigation district.
Answer: Eminent domain
Q2) Property taxes are characteristic of the
A) allodial system of land ownership.
B) feudal system of land ownership.
C) Napoleonic system of land ownership.
D) English common system of land ownership.
Answer: A
Q3) A woman who lived in a retirement home and had no relatives, told her friend that she wanted her to have all of her property after she died, however she never made a will. Upon her death, her estate would
A) pass to the friend, since that was her wish.
B) pass to the retirement home where she lived.
C) escheat to the state.
D) pass to an entity determined by the probate court.
Answer: C
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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Q1) In several states, a land trust allows an owner to create a trust wherein he is both the trustor and the trustee.
A)True
B)False
Answer: False
Q2) Hallie and Wally, husband and wife, owned property as tenants by the entirely. Wally sold the property without his wife's signature. One day later, he died. The property goes to
A) the purchaser.
B) the purchaser and Hallie share equally.
C) Hallie who owns the entire estate.
D) no one, there is a cloud on the title.
Answer: C
Q3) A trust is an arrangement whereby title to real and/or personal property is transferred by its owner (the Trustor)to a beneficiary.
A)True
B)False
Answer: False
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Chapter 4: Transferring Title
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Q1) A person who makes a will is called
A) a devisee.
B) a testator.
C) a legatee.
D) an executor.
Q2) A landowner can break an adverse claim by all of the following EXCEPT
A) forcibly removing the adverse occupant.
B) giving the adverse occupant permission to stay.
C) preventing the trespassers from entering.
D) observing the adverse occupant.
Q3) For land title to be passed, the deed must be recorded.
A)True
B)False
Q4) Elaine wants to leave her real estate to her nephew, Farquart, but desires the flexibility to change her mind in the future. She can accomplish this goal with a joint tenancy with her nephew.
A)True
B)False
Q5) Real property that is willed is known as a ____________________ and the recipient is the ____________________.
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Chapter 5: Recordation Abstracts and Title Insurance
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Q1) To be certain that the seller is actually the owner of the property, the buyer should order
A) an estoppel certificate.
B) a general warranty deed.
C) a survey.
D) a title search.
Q2) Owner's title insurance covers the mortgagee. A)True B)False
Q3) Documents to be recorded are photocopied and then placed in alphabetic order. A)True
B)False
Q4) An acknowledgement can be witnessed by a notary public A) in person.
B) by mail.
C) by fax.
D) by proxy.
Q5) A lender's title insurance policy is also known as a ____________________ policy.
Q6) Title insurance has made titles to land much more ____________________.
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Chapter 6: Contract Law
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Q1) A lawsuit for _________________________ is an action in court by the innocent party to force the breaching party to carry out the remainder of the contract according to the precise terms, price and conditions agreed upon.
Q2) An offeree who wishes to bind the offeror to the contract may do which of the following with an offer?
A) Accept it
B) Modify it slightly before acceptance
C) Withdraw it prior to acceptance
D) Accept and counter with conditions
Q3) The buyer agreed to buy the property at the seller's asking price. They shook hands on the deal. Later, the seller refused to sell. If the buyer still wants to buy, he can
A) hire an attorney and sue for non-performance.
B) go to a small claims court and sue for damages.
C) consult a real estate broker and ask her to explain that the seller must honor the agreement.
D) do nothing.
Q4) A(n)____________________ contract results when a promise is exchanged for performance.
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Page 8
Chapter 7: Real Estate Sales Contracts
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Q1) "Time is of the essence" means that the time limits set by the contract must be faithfully observed or the contract is voidable by the defaulting party.
A)True
B)False
Q2) The phrase "time is of the essence" means
A) that the broker must present the offer quickly.
B) that the transaction must close as soon as possible.
C) that punctual performance of the time limits set by the contract is essential.
D) little, since the phrase has no specific meaning.
Q3) The phrase "as is" when used in real estate contracts means the buyer is accepting the property without
A) a survey.
B) a title report.
C) new financing.
D) warranty as to physical condition.
Q4) Under a(n)____________________ contract, the buyer has a right to purchase the property but with no obligation to do so.
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Chapter 8: Mortgage and Note
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Q1) Any mortgage with a lower priority than the first mortgage is known as a ____________________ mortgage.
Q2) ____________________ means the borrower retains the right to possess and use the property while it serves as collateral.
Q3) The right of the mortgagor to reclaim his property upon payment in full of the obligation is
A) reconveyance.
B) redemption.
C) recapture.
D) right of deficiency.
Q4) A mortgagee allows a clause in his contract stating that another lender's interest will be allowed to take precedence over his own. This clause is a subordination clause.
A)True
B)False
Q5) A deed in lieu of foreclosure relieves the lender of foreclosing and waiting out any required redemption period.
A)True B)False
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Chapter 9: Deed of Trust
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Q1) Upon default by the borrower under a deed of trust, the trustor issues a notice of default.
A)True
B)False
Q2) The borrower under a deed of trust is called the beneficiary.
A)True
B)False
Q3) Under a deed of trust, reconveyance is issued by the A) beneficiary.
B) trustor.
C) trustee.
D) borrower.
Q4) A trust deed can be used to secure a mortgage.
A)True
B)False
Q5) One of the main differences between a regular mortgage and a deed of trust is A) the number of parties.
B) rights of possession.
C) recording.
D) ownership.
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Chapter 10: Lending Practices
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Q1) A conventional mortgage is neither insured nor guaranteed by the government.
A)True
B)False
Q2) A(n)____________________ loan is any loan that has a final payment that is larger than any of the previous payments on the loan.
Q3) Discount points are more likely to be used during periods of A) tight money.
B) available money.
C) cash sales.
D) seller financed sales.
Q4) To determine benefits, a veteran should make application to the Department of Veteran Affairs for a certificate of ____________________.
Q5) The expenses, which a lender incurs while processing a mortgage loan application, are recovered from the borrower as A) discount points.
B) origination fees.
C) mortgage insurance premium.
D) private mortgage insurance.
Q6) The word point means 1% of the _________________________.
Page 12
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Chapter 11: The Loan and the Consumer
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Q1) Regulation Z deals with A) annual percentage rates.
B) escrow fees.
C) truth-in-lending.
D) statue of frauds.
Q2) The practice of lenders to refuse to make loans in certain areas regardless of the quality of the structure or the borrower's ability to repay the loan is called ____________________.
Q3) In analyzing a mortgage loan application, a lender considers all EXCEPT A) job stability.
B) income adequacy.
C) credit rating.
D) sales price.
Q4) The right of individuals to inspect their file at a credit bureau is found in the A) Truth-in-Lending Act.
B) Fair Credit Reporting Act.
C) Regulation Z.
D) Federal Consumer Credit Protection Act.
Q5) ____________________ loans have risk-based pricing and rates are not quoted.
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Chapter 12: Sources of Financing
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Q1) The term "usury" in the field of real estate lending means charging an interest rate over and above
A) the legal limit.
B) the prime rate.
C) 10%.
D) 20%.
Q2) _________________________ loans provide a "piece of the action" for insurance companies as well as more inflation protection than a fixed rate of interest.
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) Usury laws are established by the federal statutes.
A)True
B)False
Q5) Pension funds and trust funds offer money for real estate loans.
A)True
B)False
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Chapter 13: Types of Financing
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Q1) The benefit of an ARM is that ARMs carry an initial interest rate that is lower than the interest rate on a fixed-rate mortgage of similar maturity.
A)True
B)False
Q2) An overencumbered property would be one with a market value of
A) $125,000 with a first mortgage of $75,000 and a second mortgage of $26,000.
B) $375,000 with a first mortgage of $25,000 and a second mortgage of $200,000.
C) $120,000 with a first mortgage of $110,000 and a second mortgage of $15,000.
D) $49,500 with a first mortgage of $20,000 and a second mortgage of $1,000 and a third mortgage of$2,000.
Q3) A ____________________ mortgage encompasses existing mortgages and is subordinate to them.
Q4) By far the most common adjustment period in an ARM is six months.
A)True
B)False
Q5) The type of ARM loan with an enticingly attractive below-market initial rate is called a ____________________ rate adjustable.
Q6) The interest rate on an ARM is tied to a(n)____________________ rate.
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Chapter 14: Taxes and Assessments
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Q1) A home with a cost basis of $40,800 in 2003 is resold today for $80,000. Commissions and closing expenses are $5,600. What is the adjusted sales price?
A) $5,600
B) $33,600
C) $72,300
D) $74,400
Q2) Local government programs and services are financed primarily through A) property taxes.
B) federal income taxes.
C) state income taxes.
D) state sales taxes.
Q3) How is the priority of property tax liens established?
A) By the county tax assessor's decision which is final
B) By the amount of the lien compared to others
C) They have priority no matter when recorded
D) By the date of recording
Q4) In a residential neighborhood, the assessment for installation of storm sewers, curbs, and gutters is made on a _________________________ basis.
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Chapter 15: Title Closing and Escrow
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Q1) 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.
Q2) A seller received a net amount of $29,817 after paying off a $53,000 loan balance, $1,213 in miscellaneous costs, and a 7% brokerage fee. What was the sale price of the house? (round to nearest dollar)
A) $77,020
B) $84,030
C) $90,355
D) $90,360
Q3) Under the Real Estate Settlement and Procedures Act, all of the following are required of the lender EXCEPT
A) submission to the borrower of the booklet "Settlement Costs and You".
B) submission of a "good faith estimate" of loan closing costs.
C) disclosure of the "Annual Percentage Rate".
D) use of the Uniform Settlement Statement for closing.
Q4) The person placed in charge of an escrow is called an escrow
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Chapter 16: Real Estate Leases
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Q1) A written lease agreement is still legal even though it fails to include the terms of the lease.
A)True
B)False
Q2) Who holds a less than freehold estate under a valid lease?
A) Lessor
B) Lessee
C) Landlord
D) Owner
Q3) A valid, written lease will automatically be terminated by
A) death of the lessor.
B) sale of the leased premises.
C) court eviction of the tenant.
D) imprisonment of tenant.
Q4) A ____________________ eviction is one whereby a landlord evicts a tenant because of a complaint made by the tenant.
Q5) A(n)____________________ is the total transfer of the lessee's rights to another person.
Q6) To ____________________ means to transfer only a portion of the rights under a lease.
Page 18
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Chapter 17: Real Estate Appraisal
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Q1) The conversion of future income into present value is known as hypothecation.
A)True
B)False
Q2) The value of vacant land is commonly stated in any of the following terms EXCEPT value per
A) square foot.
B) acre.
C) front foot.
D) square yard.
Q3) Which of the following operating expense ratios indicate one dollar of total operating expenses for every two dollars of effective gross income?
A) 33.3%
B) 50%
C) 200%
D) 25%
Q4) A popular market comparison method that is used when a property produces income is the gross rent ____________________, or GRM.
Q5) A market where there is an excess of supply over demand is known as a ____________________ market.
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Chapter 18: Licensing Laws and Professional Affiliation
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Q1) The ultimate responsibility for a mistake in a document prepared by a real estate salesperson rests equally upon the salesperson and the employing broker.
A)True
B)False
Q2) Which of the following could be licensed as a real estate broker?
A) A corporation
B) A partnership
C) An actual person
D) Any of the above
Q3) A license may be revoked upon proof of violation of fair housing laws.
A)True
B)False
Q4) A real estate ____________________ is a state board that advises and sets policies regarding real estate licensees and transaction procedures.
Q5) Executors of estates are specifically exempt from holding a real estate license. A)True
B)False
Q6) The party holding a franchise such as a franchised brokerage office is called a
Page 20
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Chapter 19: The Principal-Broker Relationship: Employment
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Q1) Under the terms of an exclusive right to sell listing, a commission is due the listing broker if a buyer is found by
A) the listing broker.
B) a sales associate employed by the listing broker.
C) another broker.
D) any of the above.
Q2) With a net listing, the sales commission is a fixed dollar amount.
A)True
B)False
Q3) Under an exclusive authority to purchase agreement, the buyer must pay the real estate commission.
A)True
B)False
Q4) A ____________________ broker is a full service broker who charges less than the prevailing commission rates in his community.
Q5) A broker who is the primary cause of a transaction is known as the ____________________ cause.
Q6) A buyer's broker would use an exclusive right to ____________________ listing agreement.
21
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Chapter 20: The Principal-Broker Relationship: Agency
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Q1) Kitty, a broker, has an option to purchase a residence which the owner has also employed Kitty to sell for a commission. Before Kitty can exercise the option, she must give notice to the seller that she will collect two commissions.
A)True
B)False
Q2) Two buyers purchase a home through a broker. After the close of escrow, the buyers discover a structural problem with the property, which the seller had not disclosed to anyone, including the broker. The buyers attempted to rescind their agreement. If they succeed, what commission is the broker entitled to in this case?
A) Full commission
B) Expenses only
C) None
D) Full commission minus expenses
Q3) Price fixing and monopolies are prohibited by federal fair housing laws.
A)True
B)False
Q4) Making statements a reasonable person would recognize as non-factual or extravagant is known as ____________________.
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Chapter
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Q1) Discrimination in the availability of housing on the basis of race is prohibited by the A) Civil Rights Act of 1866.
B) Fair Housing Law of 1968.
C) both a and b.
D) neither a nor b.
Q2) A victim of discrimination in housing may seek enforcement of the Fair Housing Law by filing a complaint with the state real estate department.
A)True
B)False
Q3) The Civil Rights Act of 1866 prohibits A) racial discrimination.
B) steering.
C) block busting.
D) discrimination for any reason.
Q4) The "Americans With Disabilities Act" deals primarily with A) single family residences.
B) multi family residences.
C) commercial properties.
D) all real estate.
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Chapter 22: Condominiums, Cooperatives, Puds, and Timeshares
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Q1) The rules that govern how an owner's association will be run are called
Q2) Rules governing how a condominium owners' association will be run would be found in the
A) master deed.
B) CC&Rs.
C) bylaws.
D) house rules.
Q3) The sale of a timeshare is regulated in a growing number of states. These regulations typically include requiring that
A) a timeshare developer and his staff must have a broker's license.
B) there is a "cooling off" period before sales are final.
C) timeshares to be conveyed by deed.
D) developers purchase a bond to insure against a loss in exchange privileges.
Q4) The term CC&Rs stands for
A) covenants, condominiums and restrictions.
B) conditions, chattels and regulations.
C) commission, conditions and regulations.
D) covenants, conditions and restrictions.
Page 24
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Chapter 23: Property Insurance
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Q1) An insurance endorsement is also known as
A) a rider.
B) an attachment.
C) an assignment.
D) both a and b.
Q2) ____________________ liability, also called public liability, is the financial responsibility one has toward others as a result of one's actions or failure to take action.
Q3) The concept of insurance is to
A) reimburse the insured for financial losses.
B) insure that a loss-causing event will not occur.
C) both a and b.
D) neither a nor b.
Q4) A typical HO-A homeowner's policy covers damage caused by A) mudflow.
B) civil war.
C) freezing water pipes.
D) earthquakes.
Q5) The insured is one who is ____________________ by insurance.
Q6) ____________________ insurance is the foundation of property damage policies.
Page 25
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Chapter 24: Land-Use Control
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Q1) Local residents may best gain control over the future development of their community by paying attention to A) land use covenants.
B) eminent domain purchases by private individuals.
C) restricting the trade of developers and real estate agents.
D) public zoning decisions.
Q2) The difference between a variance and a nonconforming use is that A) a variance changes the permitted use; nonconforming use does not.
B) nonconforming use changes zoning; a variance does not.
C) the nonconforming use first occurs after the zoning changes.
D) the variance was in effect before the zoning.
Q3) A subdivider wants to limit the height to which trees can grow so as to preserve views in the neighborhood. This would most likely be done with a zoning amendment. A)True
B)False
Q4) A zoning variance allows an owner to deviate from the existing zoning law. A)True
B)False
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Chapter 25: Real Estate and the Economy
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Q1) The extent to which regions and cities are vulnerable to changes in the economic base depends on the number and kinds of base industries that are present.
A)True B)False
Q2) The tourist industry in Florida or oil wells on Alaska's North Slope would be examples of base industries.
A)True B)False
Q3) The ECOA has contributed to greater numbers of homeowners among A) single persons.
B) divorced persons.
C) employed women.
D) all of the above.
Q4) ____________________ inflation results in higher prices due to increased costs of labor and supplies.
Q5) Real-cost inflation can be cooled by environmental controls and depletion of natural resources.
A)True B)False
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Chapter 26: Investing in Real Estate
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Q1) Which of the following age groups should be the most cautious in terms of investment risk taking?
A) 35-45 years
B) 45-55 years
C) 55-65 years
D) 65+ years
Q2) In a partnership, the risk of losing one's money is referred to as a ____________________ risk.
Q3) An owner is using straight-line depreciation over a 27 1/2 year period on a $65,000 rental unit. If the improvements are worth $55,000, what is the depreciation in the first year?
A) $2,000.00
B) $2,181.81
C) $2,363.63
D) $4,363.63
Q4) One of the main advantages of being a limited partner is A) the profits of a limited partner are tax free.
B) limited partners can help with management. C) limited partners are not held responsible for management. D) limited partners are separate legal persons.
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