20 free real estate salesperson practice questions

Correct answer: A · It is a fixture that conveys, since the contract did not exclude it

An item of personal property becomes a fixture, and part of the real property, when it is attached in a way that shows it was meant to stay. Courts look at the method of attachment, its adaptation to the property, the intention of the person who attached it, and any agreement between the parties. A chandelier wired into the ceiling is attached and adapted to the house, and the contract does not exclude it, so it transfers with the property. The fact that she bought it separately does not keep it personal property; most fixtures start that way. The buyer does not have to pay extra for an item already included. Sellers who want to keep such an item should exclude it in writing before the contract is signed. State law may refine these tests.

Look for this next time: Attached, adapted items are fixtures that convey unless the contract excludes them; put exclusions in writing.

Correct answer: C · 40 acres

In a government survey description, each fraction divides the area that follows it, so you multiply the fractions by the section's acreage. Step 1: a section is 640 acres. Step 2: the SW 1/4 of the section is 640 × 1/4 = 160 acres. Step 3: the NE 1/4 of that quarter is 160 × 1/4 = 40 acres. A shortcut is 640 × 1/4 × 1/4 = 640 ÷ 16 = 40. 160 acres is only the first quarter, the SW 1/4, and stops one step too soon. 80 acres would be a half of a quarter. 10 acres would require another quarter division that is not in the description. The direction letters tell you which part of the area is meant; they do not change the size.

Look for this next time: Multiply a section's 640 acres by each fraction in the description: 1/4 of 1/4 is 40 acres.

Correct answer: B · Eminent domain, and the family must receive just compensation

Eminent domain is the government's power to take private property for public use, and the Fifth Amendment to the U.S. Constitution requires just compensation when it does; condemnation is the legal process used to exercise that power. Widening a highway is a public use, so the agency can acquire the strip even over the owners' objection, but it must pay just compensation. Police power lets government regulate property for health, safety, and welfare, for example through zoning, without taking ownership, so it does not fit a transfer of land. Escheat transfers property to the state when an owner dies without a will or heirs. Taxation is the power to levy property taxes. The national outline lists police power, eminent domain, taxation, and escheat as public land use controls.

Look for this next time: Eminent domain takes private property for public use and requires just compensation; police power regulates without taking.

Correct answer: D · Ben and Cara, through the right of survivorship

The defining feature of joint tenancy is the right of survivorship: when one joint tenant dies, her interest ends and the surviving joint tenants keep the whole property. Ana's interest therefore passes to Ben and Cara automatically, outside her will, and they continue as joint tenants of the entire house. Her will cannot pass her share, because at her death there is nothing left for it to transfer. Her son would inherit a share only if the owners had held title as tenants in common, where each owner's share passes to her heirs or by will. Escheat to the state applies when an owner dies without a will or heirs, which is not the case here. Joint tenancy rules and how they are created vary somewhat by state.

Look for this next time: In a joint tenancy, a deceased owner's interest passes to the surviving joint tenants, not through her will.

Correct answer: C · Recording gives everyone constructive notice of the buyer's ownership

Title passes when a valid deed is delivered by the grantor and accepted by the grantee; between the seller and buyer, the deed is effective without recording. Recording places the deed in the public records, which gives constructive notice: everyone is treated as knowing of the buyer's interest, whether or not they actually checked. That protects the buyer against later claims, such as a second sale or a lien filed against the seller, so prompt recording matters. Saying the deed is invalid until recorded, or that recording rather than delivery transfers title, confuses notice with transfer. Recording does not guarantee a clean title; a title search and title insurance address liens and defects. How states rank competing unrecorded claims varies by state recording statute.

Look for this next time: Delivery and acceptance transfer title; recording gives constructive notice that protects the buyer against later claims.

Correct answer: A · $1,000,000

The income approach divides net operating income by the capitalization rate. Step 1: vacancy and collection loss is 5% × $120,000 = $6,000, so effective gross income is $114,000. Step 2: subtract operating expenses: $114,000 − $44,000 = $70,000 of net operating income. Step 3: $70,000 ÷ 0.07 = $1,000,000. Skipping the vacancy step gives $76,000 ÷ 0.07 ≈ $1,085,714, which overstates value. Capitalizing effective gross income without subtracting expenses gives $114,000 ÷ 0.07 ≈ $1,628,571. Multiplying NOI by 7 ($490,000) treats the rate as a multiplier instead of a divisor. Debt service is excluded from operating expenses, because NOI measures the property's income, not the owner's financing. The national outline lists the income approach, net operating income, and capitalization rate.

Look for this next time: Income approach: value = NOI ÷ cap rate, where NOI = effective gross income − operating expenses.

Correct answer: D · $395,000, subtracting the garage's value from the comparable

In the sales comparison approach, adjustments are always made to the comparable, to show what it would have sold for if it were like the subject. When the comparable has a feature the subject lacks, it is superior, so its price is adjusted down: $410,000 − $15,000 = $395,000. When the comparable lacks a feature the subject has, its price is adjusted up. Adding $15,000 reverses the direction and inflates the indicated value. Comparables are routinely adjusted for differences; that is the core of the method. Adjusting the subject instead of the comparable gets the procedure backward, since the subject's value is what the analysis is trying to find. The national outline lists the sales comparison approach among methods of estimating value.

Look for this next time: Adjust the comparable, not the subject: subtract for features the comparable has and the subject lacks.

Correct answer: B · External obsolescence, caused by factors outside the property

External, or economic, obsolescence is a loss in value caused by factors outside the property, such as noise from a new runway or highway, a nearby nuisance, or a weakening local economy. Because the owner cannot control those outside factors, it is generally considered incurable by the owner. Physical deterioration is wear and tear on the structure itself, and the stem says the house is in good condition. Functional obsolescence comes from features within the property that the market no longer wants, such as a poor floor plan or outdated systems, and this house has a modern, functional layout. Calling it curable functional obsolescence misplaces the cause. The national outline lists physical deterioration and functional and economic obsolescence under the cost approach.

Look for this next time: Value lost to forces outside the property, like airport noise, is external (economic) obsolescence.

Correct answer: A · No contract: the counteroffer ended the original offer

Acceptance must match the offer's terms exactly. When the seller changed the price, the response was a counteroffer, and a counteroffer rejects and terminates the original offer. The buyer then refused the counteroffer, which ended it as well. With no offer left on the table, the buyer cannot revive the $300,000 offer on his own; he would have to make a new offer, which the seller could accept or reject. A contract at $300,000 would require the seller to accept that offer, which she did not. Nothing creates a contract at a midpoint price. The seller's signature on a counteroffer does not bind the buyer, who rejected it. The national outline lists offer and counteroffer under the sales contract.

Look for this next time: A counteroffer rejects the original offer; once rejected, an offer cannot later be accepted.

Correct answer: C · No, because a contract to sell real estate must be in writing

The statute of frauds requires contracts for the sale of an interest in real estate to be in writing and signed by the party to be charged in order to be enforceable. This oral agreement has no writing, no signature, no payment, and no possession, so the neighbor cannot enforce it against the homeowner. Witnesses can prove that words were spoken, but they do not satisfy the writing requirement. There is no dollar threshold that exempts small land sales. An oral exchange of promises can be a bilateral agreement in form, but for land it is unenforceable without a signed writing. Some states recognize narrow exceptions, such as part performance, which do not apply to these facts. The national outline lists the statute of frauds under contract performance.

Look for this next time: Under the statute of frauds, real estate sale contracts must be in writing and signed to be enforceable.

Correct answer: D · She must sell on those terms if he exercises in time; he need not buy

An option contract is a unilateral arrangement for the period it runs: in exchange for consideration, here $2,000, the owner (optionor) promises to keep the offer open and sell on the stated terms if the optionee exercises within the option period. The developer, as optionee, has the right but not the obligation to buy. Until day 90, the landowner cannot sell to someone else in a way that defeats the developer's right, and if he exercises in time she must sell at $250,000. If he lets the option expire, she keeps the $2,000 and is free to sell. Saying both are bound describes a sales contract, not an option. The developer is not obligated to buy. She cannot revoke by refunding the money, because she was paid to keep the offer open.

Look for this next time: An option binds the owner to sell if the optionee exercises in time; the optionee is free to walk away.

Correct answer: B · Keep it confidential and present whatever offer the buyer makes

An agent owes fiduciary duties to the client, commonly summarized as obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care. The seller's willingness to take less is confidential information that would weaken her bargaining position, so revealing it to the buyer breaches loyalty and confidentiality. The agent should keep it private, tell the buyer that any offer will be presented to the seller, and present every offer promptly. Honesty and fair dealing toward a customer mean not lying or misrepresenting material facts about the property; they do not require disclosing the client's negotiating position. Changing the price without the seller's consent breaches the duty of obedience. States define agency relationships and duties in their own statutes, so check your state's version for the state portion.

Look for this next time: Keep a client's negotiating position confidential; be honest with customers without sharing the client's bottom line.

Correct answer: C · Steering, which the federal Fair Housing Act prohibits

The federal Fair Housing Act prohibits discrimination in housing because of race, color, religion, sex, national origin, familial status, and disability, and it applies to real estate companies and agents. Steering means guiding buyers toward or away from neighborhoods because of a protected characteristic, which limits their housing choices. The agent here ignored the buyers' stated criteria and picked the area because of their national origin, which is steering whatever the agent's intentions. Good intentions do not excuse it. The buyers' silence does not make it lawful, since many people do not realize they are being steered. Commission is irrelevant. The agent should show homes that meet the buyers' stated needs and let them choose. The national outline lists fair housing laws, protected classes, and illegal practices.

Look for this next time: Steering buyers toward or away from areas because of a protected characteristic violates the Fair Housing Act.

Correct answer: A · Price fixing, which the federal Sherman Act prohibits

The Justice Department's Antitrust Division explains that the Sherman Act prohibits any agreement among competitors to fix prices, rig bids, or engage in other anticompetitive activity, and that a violation is a felony with fines of up to $1 million and up to 10 years in prison for individuals. Commission rates are the price of brokerage services, so competitors agreeing on them is price fixing. The DOJ also notes that proving such a crime does not require a formal written agreement, so keeping it oral does not help. Publishing the agreed rate does not cure the agreement. It is a federal antitrust matter, though state law and licensing rules may apply too. Each brokerage must set its own rates independently, and commissions are negotiable with each client.

Look for this next time: Competing brokers agreeing on commission rates is price fixing under the Sherman Act, written or not.

Correct answer: B · Disclose it, give the report and pamphlet, and allow 10 days to inspect

EPA's real estate disclosure rule covers most housing built before 1978. Sellers must disclose known lead-based paint and lead-based paint hazards, including their location and condition, and provide available records and reports. They must give buyers the pamphlet Protect Your Family From Lead in Your Home, include a Lead Warning Statement in the contract, and give buyers 10 days to conduct a paint inspection or risk assessment; the parties may change that period in writing, and buyers may waive it. Signed disclosures must be kept for three years. Disclosure does not depend on a buyer's request. The cutoff year is 1978, not 1950. The rule requires disclosure, not removal of the paint.

Look for this next time: For pre-1978 housing, disclose known lead paint and reports, give the EPA pamphlet, and offer a 10-day inspection.

Correct answer: D · She must inform the seller of the duty and shares responsibility for compliance

EPA's guidance on the lead disclosure rule says real estate agents must inform sellers of their obligations under the rule, and that agents are responsible for compliance along with the seller, unless the seller fails to disclose lead-based paint information to the agent. Here the seller has told the agent, so the agent must explain that known lead-based paint must be disclosed and must not help leave it off the form; if the seller refuses, the agent should not proceed with a noncompliant transaction and should involve the broker. Saying the duty is the seller's alone ignores the agent's own responsibility. The rule does not require agents to test homes for lead. Loyalty to a client never extends to helping conceal a disclosure the law requires.

Look for this next time: Under the lead rule, agents must tell sellers their duties and share responsibility for compliance.

Correct answer: A · No: a fee for referring settlement business is a prohibited kickback

Regulation X, 12 CFR 1024.14(b), which implements RESPA Section 8, says no person shall give and no person shall accept any fee, kickback, or other thing of value under an agreement or understanding that settlement service business involving a federally related mortgage loan will be referred. It adds that a referral of a settlement service is not a compensable service. A payment per closed referral is exactly that, so she should decline. Disclosure on the Closing Disclosure does not make a kickback lawful, and there is no dollar amount below which kickbacks are allowed. The rule applies to any person who gives or accepts the payment, not just lenders. Payments for services actually performed are treated differently, but sending customers is not a service. The national outline lists RESPA referrals and rebates.

Look for this next time: Under RESPA Section 8, no one may pay or accept a fee for referring settlement service business.

Correct answer: C · By Monday, three business days before consummation

Under Regulation Z, 12 CFR 1026.19(f)(1)(ii), the creditor must ensure the consumer receives the Closing Disclosure no later than three business days before consummation. For this rule a business day is every calendar day except Sundays and federal legal public holidays. Counting back three business days from Thursday gives Wednesday, Tuesday, and then Monday, so the buyer should receive it by Monday. Receiving it at the table, or only 24 hours ahead, would not meet the waiting period, and the closing would have to move. Ten business days is not the rule. The three-day window gives the buyer time to compare the final terms with the Loan Estimate and ask questions. The national outline lists TRID, the Loan Estimate, and the Closing Disclosure under federal financing regulations.

Look for this next time: The buyer must receive the Closing Disclosure three business days before consummation: Monday for a Thursday closing.

Correct answer: D · $7,012.50

Work from the total commission down to the salesperson's share. Step 1: total commission is $425,000 × 0.055 = $23,375.00. Step 2: the listing brokerage receives half: $23,375.00 ÷ 2 = $11,687.50. Step 3: the salesperson receives 60% of her brokerage's share: $11,687.50 × 0.60 = $7,012.50. $23,375.00 is the entire commission, before any split. $11,687.50 is the listing brokerage's share before the salesperson's split. $14,025.00 applies her 60% to the total commission, skipping the split between brokerages. Commission rates and splits are set by agreement and negotiable; no rate is standard. The national outline lists commission and compensation calculations among real estate math topics.

Look for this next time: Commission math: sale price × rate, then the brokerage split, then the salesperson's split, in that order.

Correct answer: B · $2,172.00, debit to the seller and credit to the buyer

Step 1: the daily tax is $4,380 ÷ 365 = $12.00. Step 2: the seller owned the home from January 1 through June 30, counting closing day: 31 + 28 + 31 + 30 + 31 + 30 = 181 days. Step 3: the seller's share is 181 × $12 = $2,172.00. Because taxes are paid in arrears, the buyer will pay the whole year's bill later, so the seller's share is a debit to the seller and a credit to the buyer at closing. Half a year, $2,190, ignores the actual day count. Crediting the seller reverses the direction, which would be right only if the seller had prepaid the year. Charging the seller the full year makes him pay for months the buyer will own the home. The national outline lists prorated items and debits and credits.

Look for this next time: Taxes paid in arrears: the seller's share to closing is a debit to the seller and a credit to the buyer.