All right! You’re just minutes away from finding out how well you did on the practice exam in Chapter 19. Give yourself one point for each correct answer, and add up your total score.

Find the range that corresponds to your score in the following list:

• Between 90 and 100: Congratulations! You’re on your way to your first million as a real estate agent.
• Between 80 and 90: Take a breath, pat yourself on the back, and keep reviewing the material so you don’t forget what you’ve already picked up.
• Between 75 and 80: Too close for comfort. Check out your weakest areas, section by section, and review the corresponding chapters again, using the review questions at the end of each chapter for practice. If you got more than half of the questions wrong in any one section, that’s a good indication you need more work with that chapter.
• Below 75: Don’t be discouraged. The difference between this score and a higher one is time, and that time needs to be spent with this book. Check out your weakest areas in the exam, review the corresponding chapters, do the review questions at the end of each chapter, and try this exam again and the next three. By the way, I’ve chosen 75 percent as the passing grade, though your state may use a different one.

Don’t forget that no matter how well you did on this exam, the information here is general to most states. You still need to study the information unique to your state. Review the material noted with the State-Specific icon throughout this book as well as the list of subjects in Chapter 27. You can get state-specific information from your prelicensing course’s materials, textbook, and instructor, too.

1. (B) Chapter 3

   A surety bond insures against employee misdeeds like theft. Rent loss insurance (also known as business interruption insurance) insures against the landlord losing rent because of a disaster like a fire, and liability insurance covers losses caused by injuries that are the result of negligence on the part of the landlord.

2. (D) Chapter 3

   Did the “not” in the question throw you off? A good way to handle this question is to repeat each answer in a positive way and ask yourself whether it’s true or false. For instance, you say, “Fixed fees are a way to set a property management fee.” True or false? Well, that’s true, so it can’t be the right answer. Percentage of operating costs is the only answer that doesn’t fit.

3. (A) Chapter 3

   Real estate license laws generally require a person to hold a real estate license when performing any number of particular duties for another person for a fee. You don’t have to have a real estate license to do any of these things for your own property. An employee of a person who owns and rents out buildings is effectively acting directly on behalf of the owner, as if, in a sense, the employee were the owner. This could vary slightly by state, so check yours out just in case.

4. (A) Chapter 3

   A capital expense is usually a major expense to improve or repair something that does not last as long as the life of a building, like a roof. An operating expense is an annual expense to keep the building running, like the gas or oil bill. A maintenance item is usually a repair that may happen occasionally and sometimes unpredictably like a furnace repair. A fixed expense is a term used to describe insurance and tax payments.

5. (D) Chapter 3

   The first three answers are characteristics of being an employee, not an independent contractor. However, even when you’re an independent contractor, the broker is responsible for your work and must supervise you.

6. (D) Chapter 3

   The keys to this question are the word “primary” and avoiding confusion when partially correct answers are among the choices. Maximizing income while maintaining the building’s value encompasses the first three answers and is considered the primary duty of a property manager. Looked at another way, the first three answers are each a part of the more correct total Answer (D).

7. (A) Chapter 4

   A special agent represents a client for one real estate transaction. A general agent represents a client in a range of activities, and a universal agent represents a client in all or almost all activities. I made up “representative agent.”

8. (A) Chapter 4

   Fiduciary responsibilities are defined as being owed to the client. A seller or a buyer can be your client. A customer is the third party in a transaction. The only thing that is always true in this question is Answer (A), the client.

9. (B) Chapter 4

   The duties are accounting, care, confidentiality, disclosure, loyalty, and obedience. A question about these duties is so fundamental to being a real estate agent that I can almost guarantee you will see a question about this on the exam.

10. (C) Chapter 4

    Watch out for the word “always.” The buyer or seller could be the client but not always. The principal is always the client; the two terms are interchangeable.

11. (C) Chapter 4

    If an individual property owner contracts with a real estate agent to sell his property, that arrangement isn’t affected by his getting married because the property ownership hasn’t changed.

12. (D) Chapter 4

    The first three choices all are essentially the same thing.

13. (C) Chapter 5

    There are no exemptions for race to the 1866 law, plain and simple.

14. (A) Chapter 5

    Changing the terms of rentals for any group in a protected class is illegal, no matter how many supporting facts one may have.

15. (D) Chapter 5

    Blockbusting is the deliberate attempt to generate profits by scaring people into selling their houses under the circumstances stated in the question. The other answers are all legitimate ways to get listings of houses to sell, provided blockbusting isn’t used.

16. (B) Chapter 5

    The church housing exception, which is part of the 1968 Fair Housing Law, applies only if membership in the church or religion itself isn’t restricted. Because the church in question discriminates in its membership policies against African Americans, the housing exception does not apply; therefore, the housing can’t be restricted to only church members.

17. (B) Chapter 5

    HUD enforces the 1968 Fair Housing Act, but the federal courts enforce the 1866 law.

18. (C) Chapter 5

    Even if a homeowner has the exemption (in this case, the owner of a single-family home who doesn’t own more than three units), a real estate agent may not be used. Real estate agents are always held to higher standards when it comes to fair housing issues.

19. (A) Chapter 5

    Redlining, which is discrimination in the lending of mortgage money based on location, is always illegal.

20. (D) Chapter 6

    Land is the physical “dirt.” Real estate is the dirt and the structures attached to it. Real property is the land, everything attached to it, and the rights associated with owning it. Personal property includes tangible, movable, portable things that aren’t real estate.

21. (B) Chapter 6

    A fixture is personal property that becomes permanently attached to the real estate and is expected to stay with it when it is sold. Personal property is something tangible, moveable, and not attached to the real estate. A trade fixture is used to conduct a business and usually expected to be removed at the end of a lease period or when the property is sold. An attachment can mean anything attached to real estate.

22. (B) Chapter 6

    Fee simple condition precedent is ownership subject to a condition that must be satisfied before title is actually conveyed. Fee simple is ownership without condition. Fee simple subsequent is ownership in which the grantor has the right to reclaim the property through court action if a condition isn’t met after title is conveyed. In fee simple determinable, if a condition isn’t met, the property automatically reverts to the grantor without the necessity of court action.

23. (A) Chapter 6

    Fee simple is ownership without condition and is the most complete form of ownership. The other choices all have limitations.

24. (B) Chapter 6

    Leased fee is the most correct answer. The owner may have a fee simple interest or a fee on condition interest, but when a question involves leases, the most correct answer involves either leasehold or leased fee interests. (The tenant has the leasehold interest.)

25. (C) Chapter 6

    If the river is navigable, the property owner owns to the edge of the river or to the mean high water mark. If the river isn’t navigable, the property owner owns to the centerline of the water. You just have to remember this difference.

26. (D) Chapter 6

    The bundle of rights refers to all the rights a property owner generally gets when she receives ownership of a piece of property and is the most complete answer. The terms “fee simple” and “freehold” refer to estates or interests that a person may have in a piece of property. There really is no such thing as real estate rights in the context of this question.

27. (A) Chapter 7

    Each owner taking title at the same time refers to unity of time, each owner taking title with the same deed refers to unity of title, and each owner having the same interest in the property refers to unity of interest.

28. (B) Chapter 7

    This question can have a state-specific variation if your state does not recognize the right of survivorship in joint tenancy. But tenancy in common never has a right of survivorship.

29. (C) Chapter 7

    A joint tenant can sell his share to another person. That new owner becomes a tenant in common to the other joint tenants, unless everyone executes new documents to create a new joint tenancy.

30. (D) Chapter 7

    Condominium owners generally own the airspace encompassing their units in fee simple ownership. The land under and around the units is owned by all of the owners as tenants in common. A good way to jog your memory is to remember that condominium owners would want to leave their condo to their heirs, which is a feature of tenancy in common rather than joint tenancy.

31. (D) Chapter 7

    Of course, tenancy in severalty needs “all” the signatures because there’s only one owner, but it is not a form of co-ownership. Tenants in common and joint tenants can sell their individual interests with only their signatures. This action does not convey ownership to the whole property, so the word “interest” is crucial in this question. Tenancy by the entirety views the interest of the husband and wife as a single interest that can’t be sold separately, so both spouses have to sign the deed to sell their interest.

32. (B) Chapter 7

    The corporation owns the entire building. The individual tenant owns shares in the corporation and has a proprietary lease that enables him to occupy his apartment.

33. (B) Chapter 8

    The statement that all liens are encumbrances is true. Liens (which can be voluntary or involuntary) are just one type of encumbrance, and encumbrances in general can be financial in nature or can limit the use of property.

34. (C) Chapter 8

    Real estate taxes take first priority in all liens. After taxes are paid, liens generally are settled in the order in which they were recorded in the public record.

35. (C) Chapter 8

    A judgment lien is involuntary and general. That means that it’s placed without your consent and against all your real and personal property. There may be state-specific laws that limit the judgment being placed to property in the county where the lawsuit took place. Check this out in your state, but in the way this question was asked this answer is generally correct.

36. (B) Chapter 8

    An easement in gross benefits a person. In this case the “person” that benefits is the electric company. An easement appurtenant attaches itself to the land. An easement by necessity is one that must be given to another person by a court order. An easement by prescription occurs against your will by someone continuously using your property.

37. (D) Chapter 8

    The right of a municipality to take your property against your will for a public purpose is called eminent domain. In escheat, the state gets your land if you die without a will and without heirs. The other answers don’t involve the state or local government taking your land.

38. (B) Chapter 8

    Studies of demographics are used for planning purposes in a municipality.

39. (B) Chapter 9

    The person getting the property (the grantee) doesn’t have to sign (though he or she does have to be clearly named), but the person selling the property (the grantor) does.

40. (B) Chapter 9

    Delivery and acceptance is the handing of the deed by the grantor to the grantee, though it is not generally done in any formal manner.

41. (D) Chapter 9

    An acknowledgment proves that the person who signs a deed (the grantor) signed it voluntarily and is, in fact, who he says he is (or who she says she is). This question may be state-specific in a few places. Consideration and a granting clause are always required, and the signature of the grantee is never required.

42. (A) Chapter 9

    The metes and bounds method of description uses locations, distances, and compass directions to define property boundaries. The rectangular and government survey systems, which are two names for the same thing, describe property boundaries using squares and rectangles determined by longitude and latitude. The plat map system uses a map of a property, usually a subdivision, which is filed in the local recording office. The map divides properties into blocks and lots for description purposes.

43. (A) Chapter 9

    If you check Figure 9-1 of a township divided into sections (part of the rectangular survey system) and are able to duplicate it, you can answer any question like this.

44. (D) Chapter 9

    Benchmarks and monuments are markers used by surveyors for location and distance measurement, but a datum is specific to measuring elevation. A meridian is a feature of the government survey system and has nothing to do with elevations.

45. (A) Chapter 10

    Dedication it is! The government gives land to people with grants. Avulsion is the sudden loss of land by natural forces. A sale is, well, selling property to someone else.

46. (C) Chapter 10

    The government voluntarily gives land to people with grants. The other choices are involuntary ways of losing property.

47. (C) Chapter 10

    Partition is a legal proceeding that divides property when the owners can’t agree on how to do it themselves.

48. (D) Chapter 10

    Probate is the way that a will is legally processed. It’s done in surrogate’s court, so surrogacy may have confused you.

49. (B) Chapter 10

    The key word in this question is “give.” The government gives property to a person in a public grant, but a sale involves the exchange of money or something of value for a piece of property.

50. (C) Chapter 10

    A suit to quiet title is what you sue for when you claim ownership through adverse possession. A suit for partition involves co-owners who can’t agree on how to divide the property they own. The other two answers sound good but are made up.

51. (D) Chapter 11

    The statute of frauds governs certain kinds of contracts, including real estate contracts, and says that contracts must be in writing to be enforceable. Contract law itself has no such requirement; other kinds of contracts can be oral. RESPA deals with closing title, and as far as I know, no statute of contracts exists.

52. (B) Chapter 11

    An implied contract occurs because of the parties’ actions. An express contract clearly states what the parties agree to do or not to do, and in a unilateral contract, one party has to act only if the other party acts. An executed contract has all of its terms fulfilled. In some states the absence of a written contract may affect your ability to collect a commission.

53. (B) Chapter 11

    The contract is voidable, because Joey wasn’t of legal age when he signed the contract, but he can go ahead with it if he wants to, and it is enforceable on the other person. A void contract never actually existed because it didn’t meet some requirement to be valid. An implied contract exists because of the actions of the parties rather than any express agreement. An unenforceable contract is one that may appear valid but cannot be legally enforced by either party.

54. (B) Chapter 11

    Remember that a contract in general requires consideration. It logically requires legally competent parties and mutual agreement about what is being promised. A real estate sales contract has all this and more. Because each piece of property is unique, a real estate sales contract would have to have the description of the property being sold to be valid.

55. (A) Chapter 11

    As long as neither person accepts the other’s offer, no valid deal exists. A person absolutely can raise his offer as long as no other offer has been accepted.

56. (B) Chapter 11

    An option will enable Jim to get his approvals while the property cannot be sold. With an option, in the event that Jim can’t get the approvals, he would not have to buy the land, whereas with a standard sales contract he would.

57. (C) Chapter 11

    A novation is a new lease agreement to replace the old one. The other answers, which don’t involve completely new leases, are explained in Chapter 12.

58. (A) Chapter 12

    The key in this question is that the tenants want to move out rather than get the items repaired, so lease violation — on the part of the landlord, in this case — is not a good answer. In actual eviction, the landlord seeks to evict the tenant for some reason and goes to court to do it. I made up invalid possession.

59. (C) Chapter 12

    The best answer is percentage lease because it involves some payment based on a percentage of something, usually sales in a store. This lease may be a net lease, but you would need to know if the tenant is paying building expenses as well as rent.

60. (D) Chapter 12

    The proprietary lease entitles the cooperative owner to use the apartment for which he has purchased shares in the corporation that owns the building. A gross lease is a typical apartment lease. A net lease is often used in commercial buildings. A ground lease is one where only vacant land is leased.

61. (B) Chapter 12

    In an estate at sufferance, the tenant remains in possession of the apartment after the lease expires without the landlord’s permission. An estate at will is when the tenant can stay in the apartment with the landlord’s permission for an indefinite period of time. An estate for years is one that has a definite period of time associated with it. A periodic estate keeps automatically renewing itself from period to period.

62. (A) Chapter 12

    I use the word “tenancy” here. Remember that when talking about leases, it means the same as “estate.” In a tenancy for years, the lease is for a definite period of time, providing a beginning and ending date for the commercial tenant.

63. (D) Chapter 13

    EPA is the Environmental Protection Agency. HUD is the Department of Housing and Urban Development. The other two are environmental laws, not enforcement agencies.

64. (D) Chapter 13

    Joint and several liability means that if there is more than one owner of a contaminated property, each one is personally liable, and if only one is able to pay, he must bear the total cost and attempt to collect from the other owners. Strict liability means that the contaminated property’s owner has no excuse for any injury done by the contamination.

65. (A) Chapter 13

    The Superfund Amendments and Reauthorization Act increased funding of the Superfund, which was created by CERCLA. It also created innocent landowner status for current owners not responsible for contaminating property.

66. (B) Chapter 13

    The phases of environmental assessment are 1) a review of records and a physical inspection of the property; 2) testing; 3) cleaning up the contamination; and 4) managing the contamination.

67. (B) Chapter 13

    The main difference between the first two answers is that with sick building syndrome, the symptoms disappear on the way home, and with building-related illness, they remain even after you leave the building. Asbestosis is a disease specifically caused by exposure to asbestos. And there is no such thing as building radon illness.

68. (A) Chapter 13

    The goal of the Leaking Underground Storage Tanks program is to identify and prevent the failure of underground storage tanks. The main provision is tank registration.

69. (A) Chapter 14

    Analysis of value may sound right, but the market gets analyzed to estimate the value. A calculation of value is wrong because while calculations may be used, the result is still an estimate of value. A guess, educated or not, is still a guess. An estimate of value is the definition as used in the appraisal industry. Sometimes the word opinion is also used to mean the same thing.

70. (D) Chapter 14

    The first three answers are some of the things that real estate agents use to measure a location’s value. However, it is the fact that property cannot be moved that makes location so important as a determining factor in the property’s value.

71. (C) Chapter 14

    If the comparable is better than the subject, what must you do to make it like the subject? You take something away. So, it is a negative adjustment to the comparable. You never adjust the subject.

72. (C) Chapter 14

    There’s no such thing as straight-line deterioration. However, there is a straight-line method of estimating depreciation. Beware answers that have one or two words that sound right (like straight-line).

73. (B) Chapter 14

    Progression is the positive effect on value that larger houses have on a smaller house. Regression is the opposite or negative effect on value that smaller houses have on a larger house.

74. (C) Chapter 14

    Don’t get put off in a question like this because it doesn’t have the exact wording like “gross rent.” Rent to value is the best answer because the gross rent multiplier technique uses rents and converts them to value using the GRM. Net income to value may look right, but that’s the technique used with the income capitalization approach to value. As for the other two answers: You never convert expenses to value.

75. (C) Chapter 14

    Gross income minus vacancy and collection loss plus other income is effective gross income. When you subtract operating expenses from the effective gross income you get net operating income, so the other three answers don’t give you any meaningful numbers.

76. (A) Chapter 15

    With mortgage loans, the borrower gives the mortgage to the bank. The borrower is the mortgagor; the bank is the mortgagee. The bank is the lien holder and the note holder. The mortgage lien entitles the bank to foreclosure for nonpayment, and the note signifies that the borrower owes money to the bank.

77. (C) Chapter 15

    The discount rate has to do with loan rates established by the federal government (and has nothing to do with the APR). The other three answers are all related to the APR. Take special care not to confuse discount points and the discount rate.

78. (C) Chapter 15

    The difference between the value and the debt attributable to the property and the amount of cash taken out after the house is sold are pretty close. The difference is that you don’t have to actually sell the house to calculate equity. Note the use of the phrase “best defined” in the question; the difference between the value and the debt attributable to the property is the best answer.

79. (B) Chapter 15

    The Certificate of Reasonable Value is required for a Veterans Administration guarantee.

80. (C) Chapter 15

    Freddie Mac (not Freddie Mae) is part of the secondary market for mortgages. Always read the questions carefully.

81. (D) Chapter 15

    A variable loan refers to how the interest rates are set. A term loan and a balloon loan require a payment at the end of the term.

82. (C) Chapter 15

    A shared-equity mortgage allows for a share of the profit on the property to be given to someone else in return for help purchasing the property. You must be able to distinguish among types of mortgages by a few of their principal characteristics.

83. (A) Chapter 16

    Remember the term “equalization rate” simply with the word “equalize,” which is what it does. The capitalization rate is used to estimate value in the income capitalization approach. The mill rate is an actual tax rate in any community. The assessment ratio is the percent of market value used to calculate the assessed value.

84. (B) Chapter 16

    Divide the town budget by the total assessed value of the town, which is also called the tax base, and you get your answer.

85. (B) Chapter 16

    Here’s a trick to remember: E, for equitable right of redemption, comes early in the alphabet, so it’s what you can do before the tax sale. The statutory right of redemption (S for statutory) comes late in the alphabet; it’s what you can do after the tax sale. In rem right of redemption and post foreclosure right of redemption are made up, but the phrase “in rem” relates to taxes and means “against the thing,” meaning the property.

86. (D) Chapter 17

    A combination Real Estate Investment Trust (REIT) invests in equities, which are real estate investments, and mortgages. The others are partially correct, but REITs don’t invest in stocks and bonds. An equity REIT invests only in properties; a mortgage REIT invests only in mortgages.

87. (B) Chapter 17

    A real estate exchange is designed to defer payment of taxes on capital gains. The exchange takes the place of a regular sale.

88. (D) Chapter 17

    Remember that depreciation is the government’s way of helping you recover the cost of the building, which is wearing out, so to speak.

89. (B) Chapter 17

    A credit comes off taxes owed, whereas a deduction is subtracted from income. The other two answers don’t really apply here.

90. (B) Chapter 17

    Negative cash flow is when you have to put money into a building every month because its income cannot cover its expenses. Positive cash flow is the opposite: You have money left over each month after expenses are paid out of the building’s income.

91. (A) Chapter 17

    The answer that the harder the property is to manage may be true, but don’t overthink the question. The expected answer is “the higher the expected return.”

92. (D) Chapter 18

    What you know here is that after you deduct your commission, the owner is getting 94 percent of some dollar amount (the sales price). Just divide the dollar amount to the owner by the percentage to the owner, and presto! You have the selling price.

    100 percent – 6 percent = 94 percent

    $200,000 ÷ 0.94 = $212,765

93. (C) Chapter 18

    Multiply the length times width, and you get the area in square units (in this case, feet). To find the area in acres, you divide the number of square feet by 43,560 square feet, which is how many square feet are in an acre.

    264 feet × 264 feet = 69,696 square feet

    69,696 square feet ÷ 43,560 square feet (one acre) = 1.6 acres

94. (C) Chapter 18

    You’re looking for the volume of the peaked roof part of the barn. For you city folks, that’s like the attic. The formula for the volume of a triangular-shaped structure is

    ½ Base × Height × Length

    0.5 × 40 feet × 15 feet × 60 feet = 18,000 cubic feet

95. (C) Chapter 18

    First you find the difference between the number of houses sold this year and the number sold last year. Because you want to find the percentage of more houses sold this year than last year, you need to divide by last year’s amount.

    500 – 400 = 100

    100 ÷ 400 = 0.25 = 25 percent

96. (D) Chapter 18

    Calculate any cost recovery problem like this by dividing the number of years of cost recovery into the number 1.

    1 ÷ 25 = 0.04 or 4 percent or directly by dividing the number of years into 100.

    100 ÷ 25 = 4 percent

97. (A) Chapter 18

    Multiply the rent by the gross rent multiplier to find the value. Easy!

    $20,000 × 16 = $320,000

98. (D) Chapter 18

    You always pay interest on the unpaid balance of the mortgage, which is the whole thing in the first year.

    Mortgage amount × interest rate = total first year’s interest

    $250,000 × 0.07 (7 percent) = $17,500

99. (B) Chapter 18

    Always divide the mill rate by 1,000 to get the number you have to multiply by. Then multiply that number by the assessed value.

    22 ÷ 1,000 = 0.022

    $42,000 × 0.022 = $924

100. (C) Chapter 18

     If you have a dollar figure and the portion of 100 percent that the figure represents, you can get the total number (100 percent) by dividing the dollar figure you have by the percent it represents. In this problem, $200,000 is 80 percent of some number.

     $200,000 ÷ 0.80 (80 percent) = $250,000