I assume you’ve already taken the first two practice exams, so by the time you’re done reviewing your answers for this exam there should be a big smile on your face. Once again, review the answers carefully. I wrote the explanations of the correct answers in such a way as to give you a little more than the basic information, so study these answers as another way to learn and remember the material.

As you did with the last two exams, go through all the answers and give yourself one point for each one correct. After you’ve noted all your correct and incorrect answers go through the exam answers one more time and note how many wrong answers you got by chapter. Both your overall score and your chapter-by-chapter score should be getting higher at this point. But keep studying. You’ve put a lot of effort in so far, and the finish line is almost in sight.

1. (C) Chapter 3

   The key to this answer is that only the correct answer has any actual control over what happens to a piece of real estate. The three incorrect answers are all specific functions that an agent or other real estate professional may perform to provide a limited service that would have no ongoing impact to the property.

2. (D) Chapter 3

   There’s a tendency when answering questions to look for the most complicated answer as the correct one. This question is an example of the simplest answer being correct. The idea of dealing with risk by transferring it is that no individual involved in the property has to assume the risk. One must always comply with municipal laws.

3. (A) Chapter 3

   This can be a tricky question because of the titles of some of the other insurances. You might think that words like hazard or errors would relate to the fact that you didn’t clean the sidewalk, and that casualty might be correct because the person who fell was a casualty of your negligence. Just remember that liability insurance covers the owner for injury that someone sustains due to negligence.

4. (B) Chapter 3

   The generally recommended minimum is one year. This gives the manager time to recoup his initial investment in setting up systems to manage the building and provides sufficient time for the owner to adequately judge the performance of the manager.

5. (B) Chapter 4

   Review the other types of agents. There is no such thing as an individual agent unless you consider the fact that every agent is an individual.

6. (A) Chapter 4

   Not only do you not owe confidentiality to the customer, but your duty to your client requires that you reveal all information to your client that you may learn from your customer.

7. (D) Chapter 4

   A latent defect is something not readily visible and may or may not affect a buyer’s decision. A material defect is one that may affect a buyer’s decision and, therefore, a reasonable buyer would want to know about and will most likely affect a buyer’s decision. Latent defects may be material or not.

8. (C) Chapter 4

   Answers (A) and (D) are made up. Answer (B) doesn’t apply as long as the client is kept fully informed of all financial dealing. Remember net listings may or may not be illegal in your state or if legal may be subject to specific requirements which you should learn about for the exam.

9. (D) Chapter 4

   The terms principal and client mean the same thing. A seller can be the client of the broker he hires to represent him and the customer of the buyer’s broker.

10. (D) Chapter 4

    Answer (B) is made up, though descriptive of what happens in the case described. The open buyer agency agreement allows the buyer to work with multiple brokers and pay only the one, if any, who finds him a house. The exclusive agency buyer agency agreement, Answer (C), is with one broker, but compensation is earned only if the broker finds the buyer a house.

11. (D) Chapter 4

    An admittedly tricky question that should be read through carefully and all answers considered. When you see client instead of buyer or seller in this kind of question, it’s a good bet that client is the answer. Remember you owe fiduciary duty to the client and this question did not provide enough information to determine if the buyer or seller was the client. Answers (C) and (D) are both correct, but (D) is more correct because you should disclose any and all information to your client that might affect the transaction and allow the client to decide what is material or not.

12. (D) Chapter 4

    Procuring cause and producing the buyer (Answers [B] and [C]) describe the agent’s role. The meeting of the minds describes the point at which all the sale conditions are agreed to and met.

13. (A) Chapter 5

    The 1974 and 1988 Acts in effect amended the 1968 Act by expanding the protected classes but the 1968 exceptions remained in place. The 1866 Act is the only one with no exceptions.

14. (D) Chapter 5

    This is generally always discriminatory. The exception is when an owner of three or fewer single-family houses offers them for rent.

15. (C) Chapter 5

    Any language directing people to or from a neighborhood based on a protected class is steering, and it is illegal whether based on facts or not.

16. (A) Chapter 5

    A real estate agent may not participate in any exceptions even if they are legal to an individual. There are no exceptions to the 1866 Act.

17. (C) Chapter 5

    Answer (A) is incorrect in that there are never any exceptions with respect to race. For rentals, the exception in Answer (B) applies to owner-occupied, two- to four-unit houses. Answer (D) is incorrect. Provided one is not discriminating or is partaking of an acceptable exception to the law, one need not provide a reason for not renting to someone.

18. (B) Chapter 6

    Answer (A) is made up but I made it sound like the prior appropriations theory related to water rights. Eminent domain has to do with government rights of taking. Answer (D) is also made up. Remember that the bundle of rights theory explains the ability of someone to separate rights like ownership and occupancy or possession.

19. (D) Chapter 6

    The term estate refers to the extent or type of interest someone has in a piece of land. It includes any interest including non-ownership interests like a lease or an easement.

20. (A) Chapter 6

    Answers (B) and (C) are almost the same thing. Answer (D) is a form of conditional estate.

21. (A) Chapter 6

    This is a tricky question because at least two of the answers — (C) and (D) — are partially correct. Community property deals with the rights of either spouse. Curtesy deals with the husband’s rights specifically, so Answer (A) is the most correct answer.

22. (D) Chapter 7

    Technically all of the answers are correct but the first three answers are limited because they each deal with only one aspect of tenancy. The most inclusive and therefore best answer is (D).

23. (B) Chapter 7

    Only property purchased during the marriage is considered community property and would require joint action to sell it.

24. (A) Chapter 7

    The missing one is unity of interest. I have no idea what unity of trust is but it sounded like a good false answer.

25. (B) Chapter 7

    Don’t get confused here by Answer (A). Condo owners usually own the common areas as tenants in common but they own their individual units — or more accurately the air space their unit occupies — as sole tenants or tenants in severalty. The proprietary lease is associated with cooperative ownership.

26. (D) Chapter 8

    This is a classic description of the cluster zoning subdivision. The density zoning subdivision would have lots of varying sizes. Some town may have something called limited zoning, but it’s generally not a common term associated with zoning.

27. (D) Chapter 8

    Inverse condemnation is essentially the owner claiming that the government has taken away her land value without due process or proper use of eminent domain.

28. (B) Chapter 8

    There is no such thing as prior authority. Escheat has to do with the government claim of ownership. Adverse possession actually conveys ownership of property that has been used against the owner’s will.

29. (D) Chapter 8

    Answers (A) and (C) are incorrect; the easement disappears because it’s no longer needed. It could be considered abandoned, though that’s not precisely what’s happened because an easement could be abandoned if the properties were not joined.

30. (B) Chapter 8

    A shared driveway could be created in a number of ways, but generally speaking (and the best answer because you don’t have any other facts) the answer is (B). Remember an easement appurtenant or appurtenant easement is one where the adjacent property benefits from the easement. In this case the property on the right half side of the property has an easement for use of the left side. The left side owner has an easement for the right side.

31. (D) Chapter 8

    Keep in mind what a judgment lien is. A judgment lien is usually the result of a lawsuit someone has filed (and won) against you for money. This is certainly involuntary. And because it’s about money, it’s not about a specific piece of property like a mortgage.

32. (A) Chapter 8

    There is always a dominant and servient party in any easement. The servient tenement (remember to serve) is the one giving the easement even if it was not given voluntarily.

33. (D) Chapter 8

    Demographic studies are associated with creating master plans for the community. Things like age, salary, gender, and marital status are typically studied.

34. (A) Chapter 9

    A contract is an agreement to transfer title to the property at some future date. Title insurance insures against any problems with the title after it’s conveyed. The acknowledgement is witnessing the grantor’s signature for filing purposes.

35. (B) Chapter 9

    The sales contract would not contain these words. The consideration deals with what things of value are being exchanged for the property. The acknowledgment is a witnessing of the signature of the grantor.

36. (C) Chapter 9

    These words are peculiar to the consideration clause in the deed when a property is a gift since there has to be something of value mentioned even if it’s not monetary. The words would not normally be found in property conveyed in an estate or owned by a married couple. It’s possible that the property could be conveyed as a gift AND be required to be held in a life estate, but (C) is the best answer with the information given.

37. (D) Chapter 9

    All of the incorrect answers are types of deeds, which are distinguished by the warrantees they provide. The situation described would have the grantor use a deed in trust to accomplish creating security for the loan.

38. (C) Chapter 9

    The term legal description has a specific meaning, which none of the other answers fit.

39. (A) Chapter 9

    The correct order of division is quadrangle to townships to sections. A quadrangle has 16 townships; a township has 36 sections.

40. (C) Chapter 9

    Datums are the primary points used for measuring elevations, but benchmarks — which are used primarily for ground surveys — are also used to help surveyors measure elevations.

41. (D) Chapter 9

    This is a tricky question, mostly because of the last two choices. You need to read this question and the answer choices carefully. It would be impossible for the buyer and the seller to receive credit for the same item, though a buyer and seller could receive a credit for different items for the same property.

42. (D) Chapter 10

    Just remember that RESPA — the Real Estate Settlement and Procedures Act — has to do with closing for homebuyers as in housing.

43. (D) Chapter 10

    The first two answers are made up and are derived from the words testate (with a will) and intestate (without a will). Probate occurs when there is a will. Your state may call these statutes of descent and distribution.

44. (B) Chapter 10

    This is a tough question unless you memorize the answer because all the answers seem logical except Answer (D), which wouldn’t solve the problem. But you are going to be real estate agents and need to know proper terminology, which is a suit to partition the property.

45. (D) Chapter 10

    Erosion is gradual loss of land. I made up declination. Accretion is actually adding land through natural processes.

46. (D) Chapter 11

    A contract formed by the actions of the parties instead of a written or oral agreement (express) is considered implied. A contract formed by two parties implying promises made to each other is bilateral. Unilateral would be if only one party promised anything.

47. (D) Chapter 11

    I got very creative here with three answers that sound good but are made up.

48. (D) Chapter 11

    The most correct answer is “voidable” because in a very short time the person could choose to void the contract or go ahead with it. You could argue that the contract is void, but because it can be validated in a few weeks, (D) is the better answer. The contract itself isn’t fraudulent because there’s nothing in the question that implies that the underage party was agreeing to something they had no intention of doing.

49. (A) Chapter 11

    Two parties agreeing in writing to do something is the definition of an express bilateral contact. Remember unilateral means only one party promises, and implied usually means that no agreement has ever been discussed or signed.

50. (B) Chapter 11

    The contract is express because they have both reached the agreement. The contract is unilateral because A must act if B wants the house, but Answer (B) has the choice not to act. This kind of agreement would go by the more common name — option.

51. (D) Chapter 12

    The leasehold is the interest the tenant has. Note that in the questions on leases I use both the terms tenancy and estate because I don’t know which terms your particular exam will use. As noted in Chapter 12, the terms are interchangeable. When the lease expires the lease interest in the property reverts (goes back) to the landlord. So answers B and C are both correct.

52. (B) Chapter 12

    A tenancy or estate at will is where the landlord allows the tenancy to occupy the premises but there is no definite point at which the arrangement will expire. A tenancy or estate at sufferance is where a tenant remains in the premises after the lease has expired against the landlord’s will. An estate for years has a definite beginning and ending date.

53. (A) Chapter 12

    All states have adopted some form of the statute of frauds. The Uniform Residential Landlord and Tenant Act has other provisions that should be addressed in the lease. The Uniform Commercial Code, which all states have in some form, governs personal property transactions. The real estate commission — your state may have a different name for it — generally handles license law issues rather than real estate transactions themselves.

54. (D) Chapter 12

    In the case of tenancy at sufferance, in which the tenant remains against the landlord’s will, the landlord doesn’t collect the rent. In effect no tenancy, therefore, exists.

55. (D) Chapter 13

    This is an easy question if you remember the meaning of all the acronyms, which you should. The Department of Housing and Urban Development; The Comprehensive Environmental Response, Compensation, and Liability Act; and the Hazardous Material Transportation Act are all important but not the correct answer.

56. (B) Chapter 13

    Answers (C) and (D) are made up, but they sound good, don’t they. Answer (A) was the original Superfund funding act, but innocent landowner immunity was not conveyed until SARA.

57. (D) Chapter 13

    Phase 1 is examination of the site records; phase 2 is testing; phase 3 is remediation.

58. (B) Chapter 13

    Carbon monoxide and chlorofluorocarbons don’t come from rocks, and are byproducts of other materials or processes. Electromagnetic fields are just that, not gasses.

59. (C) Chapter 13

    Connecting to a sewer system is usually a matter of location. The use of well water is governed by quality and quantity of water available through a well. The amount of sanitary waste produced is generally a function of the number of people in the house.

60. (B) Chapter 14

    None of the other answers have any bearing. For tax purposes the value of the estate on the date of death must be established.

61. (D) Chapter 14

    If Answer (A) were correct, it would affect all locations. Mortgage money is now available from regional banks that may not even be in the same community as the property. Dependence on the automobile is certainly one factor that contributes to the idea that location is very important, but it’s not the only factor. Remember exam writers expect you to know the meaning of words like immobility as they apply to real estate.

62. (D) Chapter 14

    You probably were tempted to go for Answer (A) because this is a case where value in use would apply. But there may be an occasion to want market value to see how it compares to value in use or assessed value to fight a high assessment.

63. (C) Chapter 14

    These questions about the economic factors at work in real estate value can be tough because the various factors can be hard to distinguish. In all cases, try to go for the best answer that most closely fits the definition and examples given in the book. In this case, builders, the supply side, usually go in when they see a demand until that demand is satisfied. The building cycle is slow, however, so by the time the last project is built there is often a surplus.

64. (D) Chapter 14

    The investor may eventually want assessed value, and it is unlikely that he would want a value in use appraisal. He wants to know what the property should cost him in order to make his project successful — investment value. He also should want to find out whether the market value is higher or lower than the investment value because he might be getting a bargain if it’s lower, or the property may not be a good investment if the market value is higher than the investment value.

65. (C) Chapter 14

    Conformity creates value by houses being similar. Competition often results in a surplus, driving values down. Regression is the opposite of progression. Remember, in progression a smaller house benefits from being near larger, more expensive homes.

66. (D) Chapter 14

    Curability when speaking of deterioration is an economic concept not necessarily a physical one. Answer (C) could be applied to incurable deterioration; it can be fixed but costs more than the value it would add to the property.

67. (D) Chapter 14

    Okay. Stop yelling. If you answered this question correctly, I won’t worry about you passing the state exam. This is probably not the normal way a question like this would be asked, but just in case some state examiners decide to get cute you’re ready. You may wonder why Answer (D) wasn’t correct because the cost approach calls for determining the replacement or reproduction cost of the building. You’re half right, and that’s why this answer is wrong. Without subtracting depreciation and adding land value, you won’t even come close to the appraised value of the property.

68. (C) Chapter 14

    Answer (D) is wrong because you never add or subtract the adjustment to or from the subject. In Answer (A) the market has already increased the value of the comparable (added) due to its superior features. The same is true in reverse for Answer (B). The adjustment process is designed to compensate for what the market has already done.

69. (D) Chapter 15

    This is a basic question of definitions. Real estate brokers may recommend sources for mortgage loans but generally don’t actually arrange loans unless they are also certified in some way by their state to be mortgage brokers.

70. (C) Chapter 15

    The lender gives the money to the borrower, but the borrower gives the mortgage to the lender. Remember — the mortgage is the document that the borrower signs to allow the lender to take the property in the event of a foreclosure.

71. (A) Chapter 15

    Answers (C) and (D) are made up. The due on sale clause which is typical in most mortgages is that the loan must be paid off if the property is sold.

72. (D) Chapter 15

    The Government National Mortgage Association (Ginnie Mae) is a secondary market organization that buys mortgage loans.

73. (A) Chapter 15

    All lenders require an appraisal to determine the value of the property. The CRV, which is based on an appraisal, is unique to the VA.

74. (B) Chapter 15

    This is a tricky question because Answer (A) could be correct at the time at which the property is purchased. A good way to understand this is to think of the amount of money one might get out of a sale or refinance even though it’s not necessary to sell or refinance to calculate equity. As the mortgage is paid off and the property’s value changes (hopefully upward), the equity changes. Investment value is an appraisal concept.

75. (A) Chapter 15

    A construction loan is used to build a house and is expected to convert to a conventional mortgage at the end of construction. A home equity loan can be refinanced into a new mortgage, but that’s not the general expectation. A package loan covers the real estate and personal property and continues without the necessity of conversion to anything else. The expectation with a reverse mortgage is that it will be paid off (not converted) upon the death of the property owner.

76. (A) Chapter 15

    Given the information in the question, Answer (A) is the best answer because it’s always a feature of these loans and is part of the way the interest rate is calculated. Any of the other types of loans could have adjustable rates, but an index would not be considered a standard feature of these loans because they could just as well be fixed interest rate loans.

77. (D) Chapter 15

    First of all, I’m finding more of these no-number math questions in exams. So you need to know how the math works without having to actually do any calculations. Don’t worry — I’ve got plenty of math questions with numbers coming in a little while. Meanwhile, the amount of interest due on this type of mortgage is always calculated on the unpaid balance of the principal at any point in time. No need to divide by the number of years because the mortgage rate is an annual rate.

78. (B) Chapter 15

    I tried to make all the wrong answers seem plausible, especially Answer (D). The fact of the matter is that the interest payments (not the interest rate) would likely decrease over time because you pay off a reducing balance. See the answer to Question 77.

79. (C) Chapter 15

    An adjustable rate loan deals with how the interest rate is calculated. The other two incorrect answers are types of loans for special purposes. The straight loan, also called a term loan, calls for payment of interest only until the end of the loan when the whole principal is due.

80. (A) Chapter 16

    I’m afraid you’re going to have to remember this. One hint might be that taxes are expressed as dollars of taxes per thousand (or hundred) of assessed value, which means that assessed value is always the bottom number in a fraction, or the number you’re dividing by.

81. (C) Chapter 16

    Answers (A) and (B) could be possibilities under certain circumstances, none of which are mentioned in this question. So the best answer given the information is (C). In fact, this is the purpose of the equalization rate.

82. (B) Chapter 16

    Market value × assessment ratio = assessed value

83. (D) Chapter 16

    There are so few circumstances in which something is always or never, it’s a good bet these answers are incorrect. You need to think through this question, or just remember it. When municipalities assess properties at full market value, they’re essentially using a 100 percent assessment ratio. In that case, the assessed value used to calculate taxes is the same as the market value, making (D) the answer.

84. (A) Chapter 16

    Assessed value ÷ market value = the assessment ratio. This is a reverse of the formula to find assessed value: market value × assessment ratio = assessed value. Answers (C) and (D) must be incorrect because the answers to these equations are in dollars. Remember a number representing a rate or ratio is always a percentage.

85. (C) Chapter 17

    Liquid means that you can get your cash relatively quickly. If you’re wondering about certificates of deposit, you can usually cash them in any time; you most likely have to pay a penalty to access it, but the money is readily available.

86. (A) Chapter 17

    A syndicate is a descriptive term rather than a legal entity. Corporations and partnerships are two forms a syndicate may take but not at the same time.

87. (A) Chapter 17

    You may have been fooled by some of the other answers that implied use of other people’s money like selling shares. The difference is shares are not borrowed money. Investors in syndicates and corporations expect a direct return on their money. In a sense they are actual owners of the real estate investment.

88. (B) Chapter 17

    You might argue that leveraging applies because he’s using refinanced (borrowed) money to build his empire. But of the four choices Answer (B) is the most correct.

89. (D) Chapter 17

    You might have gotten fooled into thinking that (A) was the answer because equities are the properties themselves, but all of these are ways to invest in the real estate market.

90. (C) Chapter 17

    Real estate isn’t liquid, but that doesn’t make it stable or unstable; that’s the work of the economy having nothing to do with liquidity.

91. (A) Chapter 18

    Assessed value × equalization factor (rate) = equalized value

    $225,000 × 2.35 = $528,750

92. (D) Chapter 18

    Remember that the monthly payment in an amortized mortgage consists of principal and interest, so each month a portion of the payment goes to reducing the principal balance.

    Mortgage amount × Interest rate = Annual interest owed

    $100,000 × .06 (6 percent) = $6,000

    Annual interest ÷ 12 months = first month’s interest because the whole balance is due at this point

    $6,000 ÷ 12 = $500

    Monthly payment – monthly interest = principal portion of the payment

    $600 – $500 = $100

    Total principal due – monthly principal payment = balance due

    $100,000 – $100 = $99,900

    The fact that the loan is for 30 years is irrelevant.

93. (D) Chapter 18

    You’re being asked to work backwards to arrive at the market value of the property. Generally these kinds of problems involve division rather than multiplication.

    Taxes ÷ the tax rate = assessed value

    $3,575 ÷ $30/$1,000 ($30 of taxes per $1000 of assessed value) = 119,166.67

    The logic of this equation is that each $30 in taxes represents $1,000 in assessed value. So divide by $30 and multiply by $1,000.

    Assessed value ÷ assessment ratio = market value

    $119,166.67 ÷ .70 (70 percent) = $170, 238.10

    If you know the number and the percentage it represents, divide to find the whole.

94. (B) Chapter 18

    Net operating income ÷ capitalization rate = value

    $156,000 ÷ .12 (12 percent) = $1,300,000

95. (D) Chapter 18

    This is a trick question. I know how much you love them. You don’t need to know the expenses to calculate effective gross income.

    Potential gross income – vacancy and collection loss = effective gross income

    $350,000 – 5 percent = $332,500

    Note that I also didn’t include any “other income” in this question. Some buildings may not have any.

96. (A) Chapter 18

    The rule for this is comparable better, subtract. And you never, ever touch the subject regardless of what you think it’s worth.

    Sales price of comparable – adjustment amount = indicated value of subject

    $280,000 – $20,000 = $260,000

97. (C) Chapter 18

    After you’ve calculated the commission, the easiest way to do this unless you’re very comfortable with math is to break down the entire commission into everyone’s shares. Also you need to read this question carefully because the information leads you to believe that they want to know the listing salesperson’s share when in fact they want to know the listing broker’s share.

    Sale price × commission rate = commission

    $480,000 × .04 (4 percent) = $19,200

    The first split is between the buyer’s broker and the seller’s broker. Because they each get 50 percent you can just divide by 2.

    $19,200 ÷ 2 = $9,600

    Commission × percentage shares = dollar amounts

    $9,600 × .40 (40 percent salesperson’s share) = $3,840

    Total listing side commission – salesperson’s share = broker’s share

    $9,600 – $3,840 = $5,760

    Saving one step, you could also conclude that if the salesperson gets 40 percent, the broker gets 60 percent, and multiply the $9,600 by that.

98. (B) Chapter 18

    Proration questions always seem more complicated than they really are. It comes down to finding out the monthly and daily amounts of money involved and apportioning it out taking into account whether the buyer or the seller has paid. I kept the numbers themselves easy because I want you to see the methodology clearly. Expect more difficult numbers on the exam.

    Because taxes are paid in arrears and the house has closed prior to the tax due date, you know that the buyer (the new owner) has to pay the entire year’s taxes a few months after he’s moved in even though he’s only lived in the house for less than the full year. So the seller is going to owe the buyer money at closing — a debit to the seller and a credit to the buyer.

    Annual taxes ÷ 12 months = monthly taxes

    $3,600 ÷ 12 = $300

    Monthly taxes ÷ 30 = Daily taxes

    $300 ÷ 30 = $10

    The buyer owns the property on the day of closing so the seller owns the property for 8 months (January through August) and 22 days of September.

    8 months × $300 (monthly taxes) = $2,400

    22 days × $10 (daily taxes) = $220

    $2,400 + $220 = $2,620 that the seller owes the buyer for the time he owned the house without paying the taxes which the buyer had to pay later.

99. (B) Chapter 18

    This question requires you to remember the format for arriving at the net operating income.

    Potential gross income – vacancy and collection loss + other income = effective gross income

    Effective gross income – expenses = net operating income

    Note that the question already provides the effective gross income. The vacancy and collection rate is an unnecessary number to solve the problem.

    $180,000 – $73,000 = $107,000

100. (B) Chapter 18

     Income ÷ value = rate

     This formula assumes the value and sales price are the same. In questions like this, you can assume that value and sales price are the same.

     $130,000 ÷ $1,200,000 = .11 or 11 percent