2017 EDITION

Real Estate Broker Practice Test

This free practice test was written by Karen Bohler, Real Estate Broker and Instructor.  It will give you an idea of the types of questions that will appear on a real estate broker licensing exam.  All states require real estate brokers to take an exam to get licensed.  Such subjects as operation of a brokerage, contract law and agency concepts will be tested.

Karen is a licensed real estate broker and certified real estate instructor.  She has worked in real estate sales for over 20 years.  She teaches real estate sales and contract law for a real estate sales education company that specializes in the licensing of real estate sales agents and brokers across the country.

You can also try Karen's Complete 300 question Real Estate Broker Practice Exam with answers fully explained, testing tips, exam review and a real estate broker flash card study system.


General Operation of a Real Estate Brokerage

1. A real estate broker should educate clients to protect the client's best interests and ensure a knowledgeable negotiating position. However, client education involves a certain amount of risk, because whatever information the broker (or salesperson in the firm) conveys must be accurate and reliable. With regard to managing the risk associated with client education, all of the following statements are true EXCEPT:
2. Consider why a brokerage experiences financial difficulty even in prosperous times. One of the main reasons financial difficulty for a brokerage occurs is that the broker fails to stay abreast of the economic climate and direction of the real estate market. With regard to financial planning for a real estate brokerage, which of the following statements is (are) TRUE? Statement #1: Even in prosperous times, the economic climate changes daily. Brokerages need to plan expenditures based on factual assessment of the economic climate. Statement #2: The competitors may reduce commission levels, and thus to compete, a brokerage may need to reduce commission levels within the firm. Statement #3: Advertising is vital to the success of a brokerage. A broker should take advantage of all products designed to promote real estate sales.

Agency Concepts and Managerial Duties

3. A _____ agency particularly exists when there is a delegation of authority to do a single act.
4. Legally, what is the nature of agency relationships between listing brokers and sellers?

Contracts and Contract Law

5. Which of the following lists the essential elements of an enforceable real estate contract?
6. A listing agreement did not include an authorization to accept a deposit. Which of the following is correct?

Real Property Characteristics

7. Which of the following is considered personal property?
8. Homeowner Howard's home was foreclosed. Understandably, Howard was quite upset, and just before he was ordered to vacate the home, he removed all of the plumbing fixtures, lighting fixtures and built-in appliances from the home. When Howard's lender listed the property for sale, the listing agent realized that the fixtures had been removed. What is the act of removing the fixtures from the home called?

Water Law

9. The rights of a landowner whose property line touches on a lake or non-navigable river are called _____.
10. Which of the following correctly defines the doctrine of prior appropriation?

Freehold Estates

11. The lessee of an apartment and the owner of a condominium have many things in common. Which of the following is true for both?
12. When Evan and Camelia decided to buy a home in Deer Run subdivision, they were required to take title to the home under certain covenants, conditions and restrictions (CC&Rs). Their real estate agent explained to them that during the term of their ownership, they must comply with the CC&Rs or they would lose their ownership. Their estate was a _____.

Holding and Transferring Title

13. Severalty ownership _____.
14. Sisters Amanda, Beatrice, and Constance Smith purchased a commercial building from Steven. The deed specified as grantees simply as "Amanda Smith, Beatrice Smith, and Constance Smith" but did not specify the tenancy created. The three sisters are _____.

Environmental Law

15. A real estate licensee has out-of-town relatives come to visit. He shows them several listings, but they simply are not interested in purchasing any of the listings he shows them. Finally, after several long days of viewing listings, the licensee writes up a lease proposal with an option to purchase. The licensee should make a disclosure to _____.
16. When an environmental hazard such as mold exists on a subject property, a typical remedy to cure the defect is abatement of the defect. All of the following correctly define the term "abatement" EXCEPT:

Land Descriptions

17. Which of the following is the method of legal description that uses carefully measured distances, angles and directions to define the boundaries of a parcel of real estate?
18. Which of the following correctly defines the term "baseline"?

Development and Construction

19. Which model of city planning and development is defined by a central business district is in the middle of the model, with the city expanding in rings with different land uses?
20. Which model of land development is based on the theory that even though a city may have begun with a central business district (CBD), other smaller CBDs develop on the outskirts of the city near the more valuable housing areas to allow shorter commutes from the outskirts of the city?

Tax Implications on Real Estate

21. Mr. Carpenter, a single man age 50, sells his personal residence for $600,000. He originally purchased it 9 years ago for $550,000. What portion of the sales proceeds is taxable?
22. The adjusted basis of a taxpayer's residence would be _____.

Federal Law

23. The maximum commission a broker may charge for the sale of residential property is _____.
24. _____ are agreements between competitors to divide the market geographically, by price range, type of property, or some other segmentation. These types of agreements are considered anti-competitive because they conspire to establish dominance in a particular market.

Leases and Leasehold Estates

25. If one uses the words "of definite duration" to describe a lease, it is most likely a(n) _____.
26. A month-to-month lease is considered _____.

Appraisal

27. The "Statement of Purpose" section of a narrative appraisal report would contain which of the following?
28. Where in the range of market value, from low to high end, is a listing price likely to fall?

Financing

29. With regard to lien theory versus title theory, which of the following statements is FALSE? Statement #1: In some states, the borrower who finances the purchase of property hypothecates title to a property and does not actually keep title to the property during the term of the loan. States that employ this custom are lien theory states. Statement #2: In some states, the borrower who finances the purchase of property holds both actual title and equitable title to a property during the term of the loan, and the lender's interest is secured with a deed of trust. These states are title theory states. Statement #3: In some states, the seller gives title to the buyer, and the buyer/borrower then signs a deed of trust which conveys only naked title to a trustee; and the lender is the beneficiary in the deed of trust. These states are lien theory states.
30. A lender uses an impound account to protect against non-payment of all of the following EXCEPT _____.

Investment Real Estate

31. The monthly net income on an investment of $315,000, if the rate of return is 12 ½ percent, is _____. (Round your answer to the nearest dollar)
32. Donna Trumply, an investor, has approximately one million dollars to invest; and wants to choose an investment with at least a 12% rate of return. Donna's financial advisor tells her that based in the forecasts; she could realize a rate of return of up to 11% if she invests in gold bullion or 9% if she invests in a certain mutual funds. Donna calls real estate broker Ben to discuss the possibility of investing her money in real estate. Broker Ben knows of a 5-unit office building that is listed for $715,000; and generates an annual gross income of $79,680, with an annual operating and maintenance cost of $15,320. Ben believes he can negotiate a purchase price for Donna that, if accepted, will enable Donna to meet her desired 12% rate of return on her money over the next ten years – even if Donna must pay a 4% commission to Ben. The maximum purchase price Ben should negotiate for Donna is _____. (Round all calculations to the nearest penny.)

Settlement

33. At close of escrow, a buyer/borrower's closing costs will include interest on the loan that accrues from _____.
34. The _____ customarily pays the fees for legally recording the new note and deed of trust or mortgage.

Real Estate Broker Practice Test


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