Real estate exam sample questions, with worked answers

C: one brokerage represents both the buyer and the seller in the same transaction. Where it is allowed, dual agency needs the informed, written consent of both parties, and the agent cannot advocate fully for either.

The trap: Thinking dual agency needs two brokerages. It is one brokerage, or one agent, representing both sides.

A: terminated, and the buyer has made a counteroffer. Any change to the terms is a counteroffer, which rejects and ends the original offer.

The trap: Treating a small change as an acceptance. Any change to the terms, even the date, makes it a counteroffer.

A: steering. Steering channels buyers toward or away from areas because of a protected class. It is illegal even if the buyer does not object.

The trap: Excusing it because the agent meant well. Steering is judged by what the agent did, not by intent.

B: The law requiring certain contracts, including sales of real estate, to be in writing. Statute of frauds means the law requiring certain contracts, including sales of real estate, to be in writing.

C: A listing the owner may give to several brokers, paying only the one who finds the buyer. Open listing means a listing the owner may give to several brokers, paying only the one who finds the buyer.

A: That she cannot share either party's confidential information. A dual agent owes both clients confidentiality and cannot reveal one party's bargaining position to the other, including how low a seller will go or how high a buyer will pay. Saying the price is firm would be a false statement.

1. Both parties are clients, so both are owed confidentiality.
2. The seller's lowest price is confidential.
3. She can neither reveal it nor lie about it.

The trap: Saying "the price is firm". Protecting a confidence never permits a false statement.

A: No: an offer, including a counteroffer, can be withdrawn before acceptance is communicated. The counteroffer rejected the buyer's $300,000 offer and became a new offer from the seller. Any offer may be revoked before the other side communicates acceptance, so the withdrawal ends it and there is no contract.

1. The counter rejected the $300,000 offer, which is gone.
2. The counter is a new offer that the buyer had not accepted.
3. Revoked before acceptance was communicated: no contract.

The trap: Reviving the $300,000 offer. Once countered, the original offer is dead.

A: A lease of a building for running an illegal gambling operation. A contract with an illegal purpose is void: it never had legal effect and neither party can enforce it. The others are voidable: valid until the protected party (the minor, the threatened seller, the misled buyer) chooses to end them.

1. Ask whether an essential element is missing.
2. An illegal purpose means no legal purpose: void.
3. Minors, duress and misrepresentation give one party a choice: voidable.

The trap: Calling a minor's contract void. The minor may cancel it, but until then it binds the adult.

A: Steering. Steering is channeling buyers toward or away from areas because of a protected class. National origin is protected under the federal Fair Housing Act, whatever the agent's intentions.

1. The buyers' criteria were price and commute, not neighborhood.
2. The agent narrowed the homes because of national origin.
3. Directing buyers by a protected class is steering.

The trap: Choosing redlining. Redlining is a lender refusing loans in an area; steering is what an agent does with buyers.

A: Market allocation, an antitrust violation. Competitors agreeing to divide a market by territory or customers is market allocation, illegal under the Sherman Antitrust Act. Price fixing would be agreeing on fees; a group boycott would be agreeing not to deal with a competitor.

1. Two competitors, one agreement.
2. They split the area between them.
3. Dividing a market is market allocation.

The trap: Calling it price fixing. Nothing here sets a fee; it divides territory.

B: Ownership that lasts only as long as a named person lives. Life estate means ownership that lasts only as long as a named person lives.

A: Cal owns two-thirds and Dee one-third, as tenants in common. A sale by one joint tenant breaks the unity of time and title for that share, so Dee holds a third as a tenant in common. Ben and Cal are still joint tenants with each other for the other two-thirds, so when Ben dies his share passes to Cal by survivorship. Cal has two-thirds and Dee one-third, as tenants in common.

1. Ana sells: Dee takes one-third as a tenant in common, not a joint tenant.
2. Ben and Cal remain joint tenants of two-thirds.
3. Ben dies: survivorship gives his share to Cal, who now has two-thirds.

The trap: Giving Ben's share to his heirs. Joint tenancy's right of survivorship passes it to the surviving joint tenant, whatever his will says.

A: It stays: it runs with the land and binds the new owner of Lot B. An easement appurtenant benefits a parcel (Lot A, the dominant estate) and burdens another (Lot B, the servient estate). It runs with the land, so a sale of either lot does not end it.

1. Two parcels, one benefited and one burdened: an easement appurtenant.
2. An appurtenant easement runs with the land.
3. So the new owner of Lot B takes subject to it.

The trap: Treating it like a personal permission (a license), which does end on a sale. A recorded easement appurtenant does not.

A: A variance. A variance is permission to depart from a zoning rule, such as a setback, because the rule would cause a hardship particular to the lot. A nonconforming use is one that existed lawfully before the rule, which does not fit a new garage.

1. A new structure that breaks a dimension rule: not a pre-existing use.
2. The reason is a hardship from the lot's shape.
3. That is what a variance is for.

The trap: Choosing nonconforming use. That covers what was already there before the rule changed, not something new.

A: No: a deed must be delivered and accepted during the grantor's life. Title passes when a deed is delivered by the grantor and accepted by the grantee while the grantor is alive. A deed kept in the grantor's own control was never delivered, so it does not convey title.

1. Signed and acknowledged: yes, but those do not pass title.
2. Delivered to the niece or her agent? No, it stayed in his desk.
3. No delivery during life, so no transfer.

The trap: Thinking recording completes the deed. Recording gives notice of a transfer; it cannot create one that never happened.

A: 1% of the loan amount. Points are always figured on the loan amount. Discount points prepay interest to lower the note rate.

The trap: Basing points on the sale price. A point is 1% of the loan amount.

A: $28,000. Commission = price × rate: $560,000 × 5% = $28,000.

D: $172,500. Use the lower of $245,000 and $230,000, which is $230,000. $230,000 × 75% = $172,500.

D: $7,224. Total commission $215,000 × 7% = $15,050. Listing broker's share 60% = $9,030. Salesperson's 80% of that = $7,224.

A: $1,056,000. Gross rent 10 × $1,600 × 12 = $192,000. Less 5% vacancy = $182,400. Less expenses $76,800 = NOI $105,600. $105,600 ÷ 0.1 = $1,056,000.

B: $14,175. Total commission $525,000 × 6% = $31,500. Listing broker's share 60% = $18,900. Salesperson's 75% of that = $14,175.

A: $7,315. Total commission is $380,000 × 5.5% = $20,900. The selling brokerage gets half, $10,450, and the agent gets 70% of that, $7,315.

1. Total: $380,000 × 0.055 = $20,900.
2. Selling side: $20,900 × 50% = $10,450.
3. Agent: $10,450 × 70% = $7,315.

The trap: Stopping at $10,450, the brokerage's share. The question asks for the agent's cut of it.

A: $1,200 credit to the buyer. Taxes paid in arrears mean the buyer will pay the whole year's bill later, so the seller owes the buyer for the days the seller owned the home. January 1 to April 10 is 31 + 28 + 31 + 10 = 100 days. $4,380 ÷ 365 = $12 a day, × 100 = $1,200, a debit to the seller and a credit to the buyer.

1. Daily rate: $4,380 ÷ 365 = $12.
2. Seller's days, closing day included: 31 + 28 + 31 + 10 = 100.
3. Seller owes $12 × 100 = $1,200, credited to the buyer.

The trap: Crediting the seller. In arrears means unpaid, so the seller has used days the buyer will pay for; the credit goes to the buyer.

A: $192,000. Lenders apply the loan-to-value ratio to the lower of the price and the appraised value. 80% of $240,000 is $192,000.

1. The lower of price ($250,000) and appraisal ($240,000): $240,000.
2. $240,000 × 80% = $192,000.

The trap: Using the contract price: 80% of $250,000 is $200,000, which the lender will not lend on a $240,000 appraisal.

A: $298.65. The first month's interest is $300,000 × 6% ÷ 12 = $1,500. The rest of the payment, $1,798.65 − $1,500 = $298.65, goes to principal.

1. Interest for the month: $300,000 × 0.06 ÷ 12 = $1,500.
2. Principal: $1,798.65 − $1,500 = $298.65.

The trap: Answering $1,500, the interest. The principal is what is left after the interest is paid.

A: $60,000. 660 × 330 = 217,800 square feet. An acre is 43,560 square feet, so the tract is 217,800 ÷ 43,560 = 5 acres, worth 5 × $12,000 = $60,000.

1. Area: 660 × 330 = 217,800 sq ft.
2. Acres: 217,800 ÷ 43,560 = 5.
3. Value: 5 × $12,000 = $60,000.

The trap: Multiplying square feet by the price per acre. Convert to acres first.

A: $800,000. Net operating income is gross income less vacancy and operating expenses: $96,000 × 95% = $91,200, minus $31,200 = $60,000. Value = $60,000 ÷ 7.5% = $800,000.

1. Effective gross income: $96,000 × 0.95 = $91,200.
2. NOI: $91,200 − $31,200 = $60,000.
3. Value: $60,000 ÷ 0.075 = $800,000.

The trap: Capitalising the gross income ($1,280,000) or forgetting the expenses ($1,216,000). Only net operating income is capitalised.

A: $651. $325,250 ÷ $500 = 650.5 units. "Or fraction thereof" means a part unit counts as a whole one, so 651 units × $1.00 = $651.

1. Units: $325,250 ÷ $500 = 650.5.
2. Round up a fraction: 651.
3. Tax: 651 × $1.00 = $651.

The trap: Rounding down or keeping the half. "Or fraction thereof" always rounds up.

A: $400,000. Adjust the comparable to look like the subject. Take away what the comparable has and the subject does not (the pool, −$20,000), and add what the subject has and the comparable does not (the bathroom, +$8,000): $412,000 − $20,000 + $8,000 = $400,000.

1. Comparable better (pool): subtract $20,000.
2. Comparable worse (no extra bath): add $8,000.
3. $412,000 − $20,000 + $8,000 = $400,000.

The trap: Adjusting the subject instead, which flips both signs and gives $424,000.

A: Within 3 business days of the application. The Loan Estimate goes out within 3 business days of receiving the application. The Closing Disclosure is the one the borrower must receive at least 3 business days before closing.

1. Which form? The Loan Estimate, the early one.
2. Its deadline counts from the application.
3. Within 3 business days.

The trap: Swapping the two 3-day rules. The Loan Estimate is 3 business days after the application; the Closing Disclosure is 3 business days before closing.