Your FREE New Jersey Real Estate Salesperson Practice Test 2026 – 150+ Q&A

New Jersey Real Estate Practice Questions

1. Which state agency licenses and regulates real estate salespersons and brokers in New Jersey?
   • The New Jersey Real Estate Commission (NJREC), within the Department of Banking and Insurance
   • The New Jersey Department of State
   • The New Jersey Division of Consumer Affairs
   • The New Jersey Department of Community Affairs

   Correct answer: The New Jersey Real Estate Commission (NJREC), within the Department of Banking and Insurance

   Under N.J.S.A. 45:15-5 et seq., the New Jersey Real Estate Commission (NJREC) administers the Real Estate License Act. The Commission is housed within the Department of Banking and Insurance (DOBI), not Consumer Affairs or the Division of Revenue.

2. How many hours of approved pre-licensing education must a New Jersey real estate salesperson applicant complete?
   • 75 hours
   • 60 hours
   • 90 hours
   • 120 hours

   Correct answer: 75 hours

   New Jersey requires a salesperson applicant to complete 75 hours of pre-licensing education at a Commission-licensed school before sitting for the licensing examination, per NJREC licensing requirements under N.J.S.A. 45:15 and N.J.A.C. 11:5.

3. After completing the pre-licensing course, how long does a New Jersey applicant have to pass the licensing exam and apply for the license?
   • One year from the date of course completion
   • Six months from course completion
   • Two years from course completion
   • There is no time limit

   Correct answer: One year from the date of course completion

   Under NJREC rules, the salesperson examination must be passed and a completed license application submitted within one year of completing the 75-hour pre-licensing course; otherwise the education must be retaken.

4. What is the minimum age and education requirement for a New Jersey real estate salesperson license?
   • At least 18 years of age with the equivalent of a high school education
   • At least 21 years of age with a college degree
   • At least 18 years of age with no education requirement
   • At least 19 years of age with a high school diploma only

   Correct answer: At least 18 years of age with the equivalent of a high school education

   N.J.S.A. 45:15-9 and NJREC rules require a salesperson applicant to be at least 18 years old and to have the equivalent of a high school education.

5. Can a person hold an active New Jersey salesperson license without being affiliated with a broker?
   • No; a salesperson must be employed by or contracted with a licensed New Jersey broker, and the broker must certify the application
   • Yes; a salesperson may work independently after passing the exam
   • Yes, but only for residential rentals
   • Yes, if the salesperson posts a surety bond with the Commission

   Correct answer: No; a salesperson must be employed by or contracted with a licensed New Jersey broker, and the broker must certify the application

   Under N.J.S.A. 45:15 and NJREC rules, a salesperson license is issued only through a sponsoring broker. The employing broker must certify the application, and a salesperson cannot operate independently of a broker.

6. How many years of full-time experience as a licensed New Jersey salesperson are generally required before applying for a broker license?
   • Three years of full-time experience as a salesperson immediately preceding the application
   • One year
   • Two years
   • Five years

   Correct answer: Three years of full-time experience as a salesperson immediately preceding the application

   N.J.S.A. 45:15-9 requires a broker applicant to have held a New Jersey salesperson license and been actively engaged full time in the brokerage business for the three years immediately preceding the application (with limited reciprocity waivers).

7. In New Jersey, how many continuing education (CE) credits must an actively licensed salesperson or broker complete each two-year license term?
   • 12 CE credits
   • 6 CE credits
   • 18 CE credits
   • 24 CE credits

   Correct answer: 12 CE credits

   NJREC requires all actively licensed salespersons, broker-salespersons, and brokers to complete 12 CE credits during each two-year licensing term.

8. Within New Jersey's 12-hour CE requirement, what is the minimum number of credits required in ethics?
   • 2 credits in ethics
   • 1 credit in ethics
   • 3 credits in ethics
   • No ethics credits are required

   Correct answer: 2 credits in ethics

   NJREC requires that of the 12 CE credits, at least 6 be in core topics, and those core credits must include at least 2 credits in ethics, 1 credit in agency, and 1 credit in fair housing and the NJ Law Against Discrimination.

9. New Jersey's biennial real estate license term begins on what date?
   • July 1 of odd-numbered years
   • January 1 of even-numbered years
   • July 1 of even-numbered years
   • The licensee's birthday each year

   Correct answer: July 1 of odd-numbered years

   NJREC sets a two-year licensing term that begins July 1 of odd-numbered years (e.g., 2025) and ends June 30 of the next odd-numbered year (e.g., 2027). CE must be completed before the cycle deadline to avoid a late fee.

10. Under New Jersey law, when must the Consumer Information Statement (CIS) on real estate relationships first be addressed with a consumer?
    • At first contact, and the consumer must be informed of the possible relationships before any confidential information is disclosed
    • Only at the closing table
    • Within 10 days after signing a contract of sale
    • Only if the consumer requests it in writing

    Correct answer: At first contact, and the consumer must be informed of the possible relationships before any confidential information is disclosed

    Under N.J.A.C. 11:5-6.9, the licensee must inform the consumer of the available business relationships and provide the CIS at the first contact, before discussing the consumer's motivation, financial ability, or price, and before any confidential information is exchanged.

11. How many business relationships are described in the New Jersey Consumer Information Statement (CIS)?
    • Five: seller's agent, buyer's agent, disclosed dual agent, designated agent, and transaction broker
    • Two: listing agent and selling agent
    • Three: seller's agent, buyer's agent, and dual agent
    • Four: seller's agent, buyer's agent, dual agent, and subagent

    Correct answer: Five: seller's agent, buyer's agent, disclosed dual agent, designated agent, and transaction broker

    The NJ CIS, approved by the NJREC, describes five possible business relationships: seller's agent, buyer's agent, disclosed dual agent, designated agent, and transaction broker.

12. In New Jersey, what additional step beyond providing the CIS is required before a firm may act as a disclosed dual agent?
    • The firm must obtain the informed written consent of both the buyer and the seller
    • Verbal consent from either party is sufficient
    • Only the seller must consent in writing
    • The Commission must pre-approve the dual agency in writing

    Correct answer: The firm must obtain the informed written consent of both the buyer and the seller

    Under N.J.A.C. 11:5-6.9, the CIS alone is not enough for dual agency; a firm must obtain the informed, written consent of both the buyer and the seller before acting as a disclosed dual agent.

13. Under the New Jersey CIS, which statement best describes a transaction broker?
    • It works with a buyer and/or seller without representing either party and does not promote one party's interests over the other's
    • It represents both the buyer and the seller as a fiduciary to each
    • It represents the seller only and owes fiduciary duties to the seller
    • It is prohibited in New Jersey real estate transactions

    Correct answer: It works with a buyer and/or seller without representing either party and does not promote one party's interests over the other's

    Per the NJ CIS, a transaction broker assists a buyer and/or seller without representing anyone. The licensee must treat all parties honestly and competently but is not required to keep their information confidential or to advance one party's interests over the other's.

14. Under the New Jersey CIS, a designated agency arrangement allows what within a single brokerage firm?
    • The broker of record designates one licensee to represent the seller and another to represent the buyer, each owing full loyalty to their assigned client
    • Every licensee in the firm automatically represents both parties equally
    • Only the broker of record may represent any client in the firm
    • It eliminates the need for any written disclosure

    Correct answer: The broker of record designates one licensee to represent the seller and another to represent the buyer, each owing full loyalty to their assigned client

    Under the NJ CIS framework, designated agency lets the broker of record appoint separate designated agents within the same firm to represent the buyer and the seller individually, each owing undivided loyalty to their respective client.

15. How long must a New Jersey brokerage firm retain its records, including acknowledged Consumer Information Statements and transaction records?
    • Six years
    • Three years
    • Five years
    • Ten years

    Correct answer: Six years

    Under N.J.A.C. 11:5-5.4, brokers must maintain business and transaction records, and acknowledged CIS forms, for six years.

16. Most New Jersey residential real estate contracts prepared by a licensee contain an attorney-review clause. How long is the attorney-review period?
    • Three business days, excluding Saturdays, Sundays, and legal holidays
    • Three calendar days, including weekends
    • Five business days
    • Ten calendar days

    Correct answer: Three business days, excluding Saturdays, Sundays, and legal holidays

    Under N.J.A.C. 11:5-6.2 (and the Real Estate Commission/State Bar settlement), the standard attorney-review clause gives either party three business days (excluding Saturdays, Sundays, and legal holidays) after delivery of the signed contract to have an attorney review and cancel it.

17. When does the three-business-day attorney-review period begin to run in New Jersey?
    • After a fully signed copy of the contract has been delivered to both the buyer and the seller
    • When the buyer first views the property
    • When the listing agreement is signed
    • When the buyer's mortgage is approved

    Correct answer: After a fully signed copy of the contract has been delivered to both the buyer and the seller

    Under N.J.A.C. 11:5-6.2, the three-business-day clock starts only after a fully executed copy of the contract has been delivered to each party (counting begins the next business day after delivery).

18. During the New Jersey attorney-review period, on what grounds may an attorney disapprove the contract?
    • For any reason; the attorney may disapprove and cancel the contract at his or her discretion
    • Only if a material defect in the property is discovered
    • Only if the buyer's financing falls through
    • Only with the written consent of the other party's attorney

    Correct answer: For any reason; the attorney may disapprove and cancel the contract at his or her discretion

    Under the standard NJ attorney-review clause (N.J.A.C. 11:5-6.2), either party's attorney may disapprove the contract for any reason during the three-business-day period, propose modifications, or let it become binding by not objecting.

19. How may an attorney's notice of disapproval be transmitted during the New Jersey attorney-review period?
    • By fax, e-mail, personal delivery, or overnight mail (a recognized method with proof of delivery)
    • Only by certified mail with return receipt
    • Only by hand delivery to the listing broker
    • Notice must be given orally by telephone only

    Correct answer: By fax, e-mail, personal delivery, or overnight mail (a recognized method with proof of delivery)

    Under the NJ attorney-review clause (N.J.A.C. 11:5-6.2), notice of disapproval must be sent to the broker and the other party by a method that provides proof of transmission, such as fax, e-mail, personal delivery, or overnight mail.

20. To which types of property does the New Jersey attorney-review requirement apply when a contract is prepared by a licensee?
    • Contracts for the sale of one-to-four-family residential property and vacant one-family lots
    • All commercial and industrial property sales
    • Only newly constructed condominium units
    • Only properties priced above $500,000

    Correct answer: Contracts for the sale of one-to-four-family residential property and vacant one-family lots

    Under N.J.A.C. 11:5-6.2, the attorney-review clause must be included in licensee-prepared contracts for one-to-four-family residential dwellings and for vacant one-family lots.

21. Under New Jersey rules, what is a broker required to do with deposit money received in a real estate transaction?
    • Promptly deposit it in a special trust or escrow account in an authorized New Jersey financial institution, separate from the broker's own funds
    • Hold it as cash in the office safe until closing
    • Deposit it directly into the broker's operating account
    • Forward it immediately to the seller

    Correct answer: Promptly deposit it in a special trust or escrow account in an authorized New Jersey financial institution, separate from the broker's own funds

    Under N.J.A.C. 11:5-5.1, every resident broker must maintain a separate special trust/escrow account in an authorized New Jersey financial institution for funds of others, segregated from the broker's business or personal accounts.

22. Under N.J.A.C. 11:5-5.1, the word 'promptly' for depositing funds of others into a broker's trust account means within what period?
    • Not more than five business days following receipt of the money
    • Not more than 24 hours
    • Not more than three business days
    • Not more than ten business days

    Correct answer: Not more than five business days following receipt of the money

    N.J.A.C. 11:5-5.1 defines 'promptly' as not more than five business days following the broker's receipt of the money or property of another.

23. Under New Jersey escrow rules, what is the practice of mixing a client's escrow funds with the broker's own money called, and is it permitted?
    • Commingling, which is prohibited
    • Conversion, which is permitted with disclosure
    • Pooling, which is required for interest accounts
    • Netting, which is permitted at closing

    Correct answer: Commingling, which is prohibited

    N.J.A.C. 11:5-5.1 prohibits commingling, the mingling of a principal's money with the broker's own funds. Brokers must promptly segregate funds held for others into the trust account.

24. When a buyer and seller dispute who is entitled to escrowed deposit money, what should a New Jersey broker generally do?
    • Keep the funds in the trust account and not release them until the parties agree or a court orders disbursement
    • Release the funds to the seller after 30 days
    • Return the deposit to the buyer automatically
    • Split the deposit equally between the parties

    Correct answer: Keep the funds in the trust account and not release them until the parties agree or a court orders disbursement

    Under NJREC escrow rules (N.J.A.C. 11:5-5), a broker holding disputed deposit funds must retain them in the trust account and may not disburse them until the parties resolve the dispute in writing or a court directs disbursement.

25. Which records must a New Jersey broker's trust-account ledger identify for each transaction?
    • The payor, date and amount of each deposit, the persons for whom funds are held, and the dates, amounts, and payees of all disbursements
    • Only the total monthly balance of the account
    • Only the names of the salespersons who earned commissions
    • Only the broker's federal tax identification number

    Correct answer: The payor, date and amount of each deposit, the persons for whom funds are held, and the dates, amounts, and payees of all disbursements

    Under N.J.A.C. 11:5-5.1 and 11:5-5.4, the trust-account records and ledger must show, for each transaction, the payor and date and amount of each deposit, the property involved, the persons for whom funds are held, and the dates, amounts, and payees of all disbursements.

26. What is the purpose of the New Jersey Real Estate Guaranty Fund?
    • To reimburse persons who obtain a final court judgment against a licensee for embezzlement, conversion, or unlawful obtaining of money but cannot collect from the licensee
    • To pay licensees' continuing education costs
    • To insure buyers against ordinary defects in purchased property
    • To fund the salaries of NJREC commissioners

    Correct answer: To reimburse persons who obtain a final court judgment against a licensee for embezzlement, conversion, or unlawful obtaining of money but cannot collect from the licensee

    Under N.J.S.A. 45:15-34 et seq., the Real Estate Guaranty Fund reimburses aggrieved persons who hold an unsatisfied final judgment arising from a licensee's embezzlement, conversion, or unlawful taking of money in a brokerage transaction.

27. What is the current maximum payment from the New Jersey Real Estate Guaranty Fund for a single transaction (for causes of action accruing after the 1993 amendment)?
    • $20,000 per transaction
    • $10,000 per transaction
    • $50,000 per transaction
    • There is no maximum

    Correct answer: $20,000 per transaction

    Under N.J.S.A. 45:15-37, the maximum recovery from the Guaranty Fund is $20,000 per transaction for causes of action accruing after the effective date of P.L. 1993, c.51 (the prior limit was $10,000).

28. Before recovering from the New Jersey Real Estate Guaranty Fund, an aggrieved person must generally do what?
    • Obtain a final court judgment against the licensee, pursue available remedies, and be unable to satisfy the judgment from the licensee's assets
    • File a complaint with the Better Business Bureau
    • Simply submit a claim form to the Commission with no judgment
    • Wait two years from the date of the transaction

    Correct answer: Obtain a final court judgment against the licensee, pursue available remedies, and be unable to satisfy the judgment from the licensee's assets

    Under N.J.S.A. 45:15-37, a claimant must first reduce the claim to a final judgment, exhaust available remedies against the licensee, and show inability to collect before a court may order payment from the Fund.

29. A licensee who pays a referral fee or commission to an unlicensed person in New Jersey has violated which body of law?
    • The Real Estate License Act, N.J.S.A. 45:15, enforced by the NJREC
    • Only federal RESPA rules
    • Only the local municipal code
    • No law; this is permitted in New Jersey

    Correct answer: The Real Estate License Act, N.J.S.A. 45:15, enforced by the NJREC

    Under N.J.S.A. 45:15-16 and related provisions, a licensee may not pay a commission or valuable consideration for brokerage services to anyone who is not a licensed New Jersey broker or salesperson; doing so is grounds for NJREC discipline.

30. Which of the following is grounds for the NJREC to suspend or revoke a New Jersey real estate license?
    • Making a substantial misrepresentation or engaging in fraud, dishonest dealing, or commingling of funds
    • Charging a commission that the seller voluntarily agreed to pay
    • Advertising a property with the broker's name and license status
    • Recommending that a buyer consult an attorney

    Correct answer: Making a substantial misrepresentation or engaging in fraud, dishonest dealing, or commingling of funds

    Under N.J.S.A. 45:15-17, the Commission may suspend or revoke a license, or impose penalties, for conduct such as substantial misrepresentation, fraud, dishonest dealing, conversion, and commingling of trust funds.

31. Under New Jersey's New Residential Construction Off-Site Conditions Disclosure Act, what must a seller of newly constructed residential property provide at contract signing?
    • A notice of the availability of lists of off-site conditions maintained at the municipal clerk's office
    • A full environmental remediation report for the property
    • A list naming every registered sex offender in the county
    • A guarantee that no off-site conditions exist

    Correct answer: A notice of the availability of lists of off-site conditions maintained at the municipal clerk's office

    Under N.J.S.A. 46:3C-1 et seq., a seller of newly constructed residential real estate must give the buyer, at contract signing, notice that lists of off-site conditions (within the municipality and within one-half mile in adjoining municipalities) are available for inspection at the municipal clerk's office.

32. Within what distance must off-site conditions be disclosed as available under New Jersey's off-site conditions notice for new residential construction?
    • Within the municipality and within one-half mile in any adjoining municipality
    • Only within the property's own lot lines
    • Within a five-mile radius statewide
    • Only within the same census tract

    Correct answer: Within the municipality and within one-half mile in any adjoining municipality

    N.J.S.A. 46:3C-8 requires the notice to cover off-site conditions within the municipality where the property is located and within any other municipality located within one-half mile of the property.

33. What does the Megan's Law notice in a New Jersey real estate contract tell the buyer about a real estate licensee's role?
    • Licensees are not entitled to and cannot obtain sex-offender registry information; the buyer may consult the State's online registry maintained by the State Police
    • The listing agent must personally verify and disclose all nearby registered offenders
    • The seller must remove any nearby registered offenders before closing
    • The buyer must waive all rights to obtain registry information

    Correct answer: Licensees are not entitled to and cannot obtain sex-offender registry information; the buyer may consult the State's online registry maintained by the State Police

    The standard NJ Megan's Law statement advises that real estate licensees are not entitled to notification from the county prosecutor and cannot obtain such information for buyers; buyers are directed to the New Jersey State Police internet sex-offender registry.

34. Under New Jersey's Private Well Testing Act (PWTA), what is required when residential property served by a private potable well is sold?
    • The untreated well water must be tested for specified parameters and the results provided to and reviewed by the buyer before closing
    • The seller must connect the property to a public water main before closing
    • The well must be sealed and abandoned before transfer
    • No testing is required unless the buyer requests it

    Correct answer: The untreated well water must be tested for specified parameters and the results provided to and reviewed by the buyer before closing

    Under the PWTA (N.J.S.A. 58:12A-26 et seq.) and NJDEP rules, sales of property with a private potable well require testing of the untreated groundwater for the required parameters, with results provided to and reviewed by the buyer prior to closing.

35. The New Jersey Private Well Testing Act is best described as which type of law?
    • A right-to-know disclosure law that requires testing and disclosure but does not require the seller to remediate exceedances
    • A mandate that the seller bring the water into full compliance before closing
    • A federal Safe Drinking Water Act enforcement statute
    • A law that applies only to commercial wells

    Correct answer: A right-to-know disclosure law that requires testing and disclosure but does not require the seller to remediate exceedances

    The PWTA is a consumer right-to-know law: it requires testing and disclosure of results before closing, but it does not, by itself, require the seller to treat or remediate a parameter that exceeds a standard.

36. Who is responsible for paying the New Jersey Realty Transfer Fee on a typical sale of real property?
    • The grantor (seller), who pays the fee to the county recording officer when the deed is recorded
    • The buyer, at the time of the mortgage application
    • The listing broker, out of the commission
    • The municipality, from property tax revenue

    Correct answer: The grantor (seller), who pays the fee to the county recording officer when the deed is recorded

    Under N.J.S.A. 46:15-7, the Realty Transfer Fee is paid by the grantor (seller) to the county recording officer at the time the deed is offered for recording, based on the consideration recited in the deed.

37. The basic New Jersey Realty Transfer Fee is calculated based on what?
    • The consideration (sale price) recited in the deed, at a graduated rate per $500 of consideration
    • The square footage of the dwelling
    • The assessed value used for property taxes only
    • A flat fee regardless of price

    Correct answer: The consideration (sale price) recited in the deed, at a graduated rate per $500 of consideration

    Under N.J.S.A. 46:15-7, the Realty Transfer Fee is computed on the consideration recited in the deed, using graduated rates stated per $500 of consideration, with an additional fee on consideration over $150,000.

38. Which of the following is a protected class under the New Jersey Law Against Discrimination (LAD) in housing that is broader than the federal Fair Housing Act?
    • Sexual orientation and gender identity or expression
    • Race
    • Religion
    • National origin

    Correct answer: Sexual orientation and gender identity or expression

    The federal Fair Housing Act protects race, color, religion, national origin, sex, familial status, and disability. The NJ LAD (N.J.S.A. 10:5-1 et seq.) adds classes including sexual orientation and gender identity or expression, marital/civil-union status, ancestry, and others.

39. Under the New Jersey Law Against Discrimination, which additional protected basis applies to housing that goes beyond the federal protected classes?
    • Source of lawful income used for rent or mortgage, including Section 8 housing vouchers
    • Color
    • Disability (handicap)
    • Familial status

    Correct answer: Source of lawful income used for rent or mortgage, including Section 8 housing vouchers

    The NJ LAD prohibits housing discrimination based on the source of lawful income used to pay rent or a mortgage, including Section 8 and other lawful rental-assistance vouchers, a protection not provided by the federal Fair Housing Act.

40. Which New Jersey state agency enforces the Law Against Discrimination in housing complaints?
    • The Division on Civil Rights, within the Department of Law and Public Safety (Attorney General)
    • The New Jersey Real Estate Commission only
    • The U.S. Department of Housing and Urban Development only
    • The Department of Community Affairs only

    Correct answer: The Division on Civil Rights, within the Department of Law and Public Safety (Attorney General)

    The NJ Division on Civil Rights (DCR), within the Department of Law and Public Safety, enforces the NJ Law Against Discrimination, including housing-discrimination complaints. (Federal claims may go to HUD, but state LAD enforcement is the DCR.)

41. A New Jersey licensee who agrees to refuse to show or sell homes in a neighborhood to members of a protected class (steering) is engaged in what?
    • A violation of the NJ Law Against Discrimination and grounds for NJREC discipline
    • A lawful marketing strategy under the License Act
    • A practice permitted with the seller's written consent
    • A matter handled only by private civil suit, with no license consequence

    Correct answer: A violation of the NJ Law Against Discrimination and grounds for NJREC discipline

    Steering violates the NJ LAD (N.J.S.A. 10:5) and federal fair-housing law. Under N.J.S.A. 45:15-17 and NJREC rules, discriminatory conduct is also grounds for license suspension or revocation.

42. When does the New Jersey Bulk Sales Act most directly affect a real estate closing?
    • When income-producing or business real estate is sold, the buyer may need to notify the Division of Taxation so the State can claim any tax owed by the seller
    • When a primary residence occupied by the owner is sold
    • When a buyer purchases a vacant residential building lot
    • Only when a property sells for more than $1 million

    Correct answer: When income-producing or business real estate is sold, the buyer may need to notify the Division of Taxation so the State can claim any tax owed by the seller

    New Jersey's Bulk Sales law (N.J.S.A. 54:50-38) generally requires the purchaser of business assets, including income-producing real estate, to notify the Division of Taxation before closing so the State can protect against the seller's unpaid taxes; owner-occupied one-to-four-family homes are generally exempt.

43. Under federal law applied in New Jersey transactions, what disclosure must be made when selling a home built before 1978?
    • A lead-based paint disclosure and the EPA pamphlet must be provided, with a 10-day opportunity for the buyer to conduct an inspection
    • A disclosure is required only for homes built before 1950
    • No lead disclosure is required if the home was repainted
    • The seller must abate all lead paint before closing

    Correct answer: A lead-based paint disclosure and the EPA pamphlet must be provided, with a 10-day opportunity for the buyer to conduct an inspection

    Under the federal Residential Lead-Based Paint Hazard Reduction Act (applied in NJ), sellers of pre-1978 housing must disclose known lead-based paint and hazards, provide the EPA lead pamphlet, and give the buyer a 10-day period to inspect for lead.

44. Under New Jersey common law and disclosure practice, what must a seller (and the listing licensee) do regarding known latent material defects in a property?
    • Disclose known latent material defects that are not readily observable; a licensee may not actively conceal or misrepresent them
    • Nothing; New Jersey is a strict caveat emptor state with no disclosure duty
    • Disclose only defects the buyer specifically asks about in writing
    • Guarantee the property is free of all defects

    Correct answer: Disclose known latent material defects that are not readily observable; a licensee may not actively conceal or misrepresent them

    New Jersey case law (e.g., Weintraub v. Krobatsch) and NJREC rules require disclosure of known latent material defects not reasonably discoverable by the buyer. Licensees may not misrepresent or conceal such conditions, even though a formal seller's disclosure form is customary rather than universally mandated.

45. How must a New Jersey licensee handle advertising of a listed property?
    • Advertising must disclose that the property is listed with a broker (no blind ads), and must be truthful and not misleading
    • A salesperson may advertise listings under the salesperson's own name without the broker
    • Blind ads with only a phone number are permitted to protect the seller
    • Advertising rules do not apply to internet or social media listings

    Correct answer: Advertising must disclose that the property is listed with a broker (no blind ads), and must be truthful and not misleading

    Under N.J.A.C. 11:5-6.1, real estate advertising must include the brokerage firm's name (no blind ads) and must be honest and not misleading. A salesperson advertises only in the name of and with the authority of the sponsoring broker.

46. A subdivision developer wants the shortest, most efficient way to describe hundreds of newly created residential lots in deeds. Which legal description method is best suited for this purpose?
    • Metes and bounds with monuments
    • A narrative description of physical features
    • Government rectangular survey of each lot from a meridian
    • Lot and block referencing a recorded plat

    Correct answer: Lot and block referencing a recorded plat

    The lot and block method is best for a platted subdivision because once the plat is recorded, each lot can be identified simply by its lot and block numbers, making deeds short and precise. Metes and bounds requires lengthy directional calls, a narrative of physical features is imprecise, and surveying each small lot from a principal meridian would be unnecessarily cumbersome for a recorded subdivision.

47. An appliance dealer delivers and bolts a built-in oven into a homeowner's kitchen cabinetry, intending it to remain permanently. When the home is later sold without any contrary contract language, how is the built-in oven most likely treated?
    • As personal property the seller keeps
    • As a trade fixture removable by the dealer
    • As a fixture that transfers with the real property
    • As an emblement belonging to the buyer

    Correct answer: As a fixture that transfers with the real property

    The built-in oven is most likely a fixture that transfers with the real property because it is permanently attached to the cabinetry and adapted to the home with the intent that it remain. Fixture status turns on annexation, adaptation, and intent. It is no longer the seller's personal property once installed, it is not a trade fixture (which applies to commercial tenant equipment), and it is not an emblement, which refers to annual crops.

48. A commercial tenant installs shelving, display counters, and a walk-in cooler to operate a retail business in leased space. At lease end, how are these items generally treated under fixture law?
    • As trade fixtures the tenant may remove before the lease ends
    • As permanent fixtures that must stay with the landlord's building
    • As emblements the tenant must leave behind
    • As real property owned outright by the landlord from installation

    Correct answer: As trade fixtures the tenant may remove before the lease ends

    Items a commercial tenant installs to conduct business are trade fixtures, which the tenant generally may remove before the lease ends, provided any damage from removal is repaired. They are not treated as permanent fixtures belonging to the landlord, they are not emblements (which are annual crops), and they do not become the landlord's real property upon installation, since the trade-fixture exception protects the business tenant's equipment.

49. Which scenario most clearly demonstrates the right of an owner of land adjoining a non-flowing body of water, as opposed to a watercourse?
    • A farmer diverts water from a passing river to irrigate fields
    • A homeowner whose lot borders a lake builds a dock and uses the shore
    • A rancher takes water from a creek crossing the property
    • A factory discharges treated water into a flowing stream

    Correct answer: A homeowner whose lot borders a lake builds a dock and uses the shore

    Littoral rights belong to an owner whose land borders a stationary body of water such as a lake, allowing reasonable use of the shore and water, which the dock-building homeowner illustrates. The scenarios involving a river, creek, or flowing stream concern riparian rights, which attach to moving watercourses, so only the lakefront example demonstrates the littoral right tied to non-flowing water.

50. A city council rezones a block from light industrial to residential use, but one existing factory was lawfully operating before the change. The factory is generally permitted to continue under which concept?
    • A legal nonconforming use
    • An easement appurtenant
    • A fee simple determinable
    • A spot variance for residential use

    Correct answer: A legal nonconforming use

    The factory continues as a legal nonconforming use, a use that was lawful before the zoning change but no longer conforms to current zoning, which is typically allowed to remain rather than be immediately shut down. An easement appurtenant is a use right over another parcel, a fee simple determinable is a defeasible ownership estate, and a variance is a forward-looking permission for a new deviation, none of which describes a grandfathered prior use.

51. Which statement best describes the legal classification of growing fruit trees in an orchard versus the apples harvested from those trees and placed in crates?
    • Both the trees and the harvested apples are personal property
    • Both the trees and the harvested apples are real property
    • The growing trees are real property, while the harvested apples are personal property
    • The trees are personal property, while the harvested apples are real property

    Correct answer: The growing trees are real property, while the harvested apples are personal property

    Growing trees rooted in the ground are part of the real property because they are attached to the land, but once the apples are harvested and severed, they become movable personal property. The classification changes upon severance, so it is incorrect to call both items personal property, both real property, or to reverse the categories.

52. An owner discovers that a neighbor's newly built fence sits eighteen inches inside the owner's recorded boundary line. The most appropriate first step to confirm whether an encroachment exists is to do which of the following?
    • Obtain a survey to determine the true location of the boundary line
    • Record a new deed restriction against the neighbor
    • File for eminent domain over the fence
    • Claim the fenced strip through emblements

    Correct answer: Obtain a survey to determine the true location of the boundary line

    Obtaining a survey is the appropriate first step because an encroachment is a physical intrusion across a boundary, and only a survey can establish exactly where the true line lies relative to the fence. Recording a deed restriction does not resolve a boundary dispute, eminent domain is a government power unavailable to a private owner, and emblements concern annual crops rather than boundary intrusions.

53. Which pairing correctly matches each legal description method with the primary tool it relies on to identify a parcel?
    • Metes and bounds relies on a recorded plat number; lot and block relies on monuments
    • Metes and bounds relies on directional bearings and monuments; rectangular survey relies on meridians and base lines
    • Rectangular survey relies on a recorded plat number; lot and block relies on meridians
    • Lot and block relies on directional bearings; metes and bounds relies on a recorded plat

    Correct answer: Metes and bounds relies on directional bearings and monuments; rectangular survey relies on meridians and base lines

    Metes and bounds identifies a parcel using directional bearings, distances, and physical monuments, while the rectangular survey system locates land by reference to principal meridians and base lines that frame townships, ranges, and sections. The other pairings scramble these tools, such as wrongly assigning plat numbers to metes and bounds or bearings to lot and block, which actually relies on a recorded subdivision plat.

54. A state highway authority files to acquire a strip of a private owner's land to widen a public road, paying the owner the fair market value of the strip taken. What governmental power is being exercised?
    • Escheat
    • Eminent domain
    • Adverse possession
    • A private deed restriction

    Correct answer: Eminent domain

    Eminent domain is the correct power because it is the government's authority to take private property for a public use while paying the owner just compensation. The road-widening project for public benefit, combined with payment of fair market value, is the classic exercise of this power. Escheat applies when an owner dies without heirs, adverse possession transfers title through long-term occupancy, and a deed restriction is a private control rather than a governmental taking.

55. The actual legal proceeding through which a government exercises its power of eminent domain to acquire private property is most accurately called which of the following?
    • Condemnation
    • Foreclosure
    • Partition
    • Subordination

    Correct answer: Condemnation

    Condemnation is the formal legal process by which the government carries out eminent domain, determining the public need and the just compensation owed to the property owner. Foreclosure is a lender's process to recover a defaulted debt, partition divides co-owned property among owners, and subordination changes the priority of liens, none of which is the proceeding that effectuates a public taking.

56. A surveyor describes a parcel by starting at an iron pin at the road, then proceeding 'North 45 degrees East 200 feet to a large oak, then South 30 degrees East 150 feet,' eventually returning to the starting point. Which legal description method is being used?
    • Lot and block
    • Rectangular survey
    • Metes and bounds
    • Township and section grid

    Correct answer: Metes and bounds

    Metes and bounds is the method shown because it describes the parcel using compass directions (bearings), distances, and identifiable monuments such as an iron pin and an oak tree, tracing the boundary and closing back at the point of beginning. Lot and block references a recorded plat by number, while the rectangular survey and township-section grid use meridians, base lines, and standardized sections rather than directional calls.

57. Every valid metes and bounds legal description must do which of the following to be complete and enclose the parcel?
    • Reference a recorded subdivision plat number
    • State the property's assessed tax value
    • Identify the principal meridian for the state
    • Begin and end at the same point of beginning

    Correct answer: Begin and end at the same point of beginning

    A metes and bounds description must return to and close at its point of beginning, because only by enclosing the tract does it accurately define the parcel's boundaries. Referencing a plat number belongs to the lot and block method, citing a principal meridian belongs to the rectangular survey system, and assessed tax value is not part of any legal description method.

58. Under the rectangular survey system, a single township is divided into how many sections, and approximately how many acres does each full section contain?
    • 16 sections, each about 160 acres
    • 100 sections, each about 100 acres
    • 640 sections, each about 36 acres
    • 36 sections, each about 640 acres

    Correct answer: 36 sections, each about 640 acres

    A township in the rectangular survey system is divided into 36 sections, and each full section contains approximately 640 acres, since a section is one mile square. The other figures invert or distort these standardized measurements; the 36-section, 640-acre framework is the fixed structure used to locate land within the government survey grid.

59. In the rectangular survey system, the principal meridians and base lines serve which primary function?
    • They establish reference lines from which townships and ranges are measured
    • They mark the boundaries of recorded subdivision plats
    • They set the maximum height for buildings in each district
    • They determine the assessed value of each section

    Correct answer: They establish reference lines from which townships and ranges are measured

    Principal meridians (running north-south) and base lines (running east-west) are the master reference lines from which townships are counted north or south and ranges are counted east or west, allowing any parcel to be located on the survey grid. They are not subdivision plat boundaries, zoning height controls, or valuation tools; their role is purely to anchor the measurement of the rectangular survey system.

60. A homebuyer receiving a general warranty deed is told it includes a covenant against encumbrances. Which of the following situations would most directly breach that particular covenant?
    • The grantee is later sued by a stranger with no valid claim to the land
    • The legal description in the deed contains a typographical error the grantor refuses to fix
    • An undisclosed recorded mechanic's lien existed against the property at the time of conveyance
    • It turns out the grantor never actually owned the property at all

    Correct answer: An undisclosed recorded mechanic's lien existed against the property at the time of conveyance

    An undisclosed recorded lien at the time of conveyance breaches the covenant against encumbrances because that covenant promises the property is free of liens, easements, or other burdens except those disclosed, and a hidden lien is exactly such an undisclosed encumbrance. A suit by a stranger with no valid claim implicates quiet enjoyment or warranty, a refusal to fix a description error implicates the covenant of further assurance, and a grantor who never owned the property breaches the covenant of seisin.

61. A title company's standard owner's policy includes a list of 'standard exceptions,' such as rights of parties in possession not shown by the public records and matters a survey would reveal. A buyer wants the broadest possible protection. What is the buyer's most appropriate course of action regarding these standard exceptions?
    • Accept them as permanent and uninsurable under any policy
    • Demand that the seller record a quitclaim deed to eliminate them
    • Request an extended-coverage policy or endorsements that remove or insure over certain standard exceptions
    • File a quiet title action to delete the exceptions from the policy

    Correct answer: Request an extended-coverage policy or endorsements that remove or insure over certain standard exceptions

    The buyer should request extended coverage or endorsements because a standard owner's policy carves out common exceptions, and the insurer can often remove or insure over some of them, frequently after a current survey, in exchange for additional premium, broadening the protection. These exceptions are not necessarily permanent or uninsurable. A quitclaim deed from the seller does not change what the insurer chooses to cover, and a quiet title action addresses ownership disputes, not the terms of an insurance contract.

62. When a title insurer pays a covered claim because a defect in the insured's title was caused by a prior party, the insurer may then pursue that responsible third party to recover what it paid. This right of the insurer to step into the insured's shoes against the responsible party is known as which of the following?
    • Subrogation
    • Estoppel
    • Reformation
    • Reconveyance

    Correct answer: Subrogation

    Subrogation is correct because it is the insurer's right, after paying a covered loss, to succeed to the insured's claims and pursue the third party responsible for the title defect to recover the amount paid. It allows the insurer to shift the loss to the truly responsible party. Reconveyance is the release of a deed of trust when a loan is paid, estoppel prevents a party from asserting a position inconsistent with prior conduct, and reformation is a court's correction of a written instrument to reflect the parties' true intent.

63. A grantor signs and acknowledges a deed but locks it in a safe-deposit box, telling no one and intending to hand it to the grantee only if the grantor later decides to complete a gift. The grantor dies before doing so. Has title passed to the named grantee?
    • Yes, because the deed was signed and acknowledged
    • Yes, because naming a grantee in a deed completes the transfer
    • No, because the deed was never delivered with present intent to pass title
    • No, because a deed must always be recorded to be effective

    Correct answer: No, because the deed was never delivered with present intent to pass title

    Title did not pass because a valid conveyance requires delivery of the deed with the grantor's present intent to transfer title, and merely signing, acknowledging, and storing the deed without delivering it shows no such present intent. The grantor retained control and intended to act only later. Signing and acknowledgment alone do not complete a transfer, naming a grantee is not delivery, and recording is for notice and priority rather than being an absolute requirement for a deed's effectiveness between the parties.

64. For a deed to be valid and effective to convey real property, which of the following is a required element?
    • The signature of the grantee on the face of the deed
    • Payment of the full purchase price stated in the deed
    • Notarized signatures of two disinterested witnesses to the grantee
    • A competent grantor with legal capacity who signs the deed

    Correct answer: A competent grantor with legal capacity who signs the deed

    A valid deed requires a competent grantor with legal capacity who signs the instrument, because the grantor is the one conveying title and must have the legal ability and intent to do so. The grantee generally need not sign the deed, the stated consideration need not be the actual full purchase price and full payment is not an element of a valid deed, and witness requirements vary by state and are not a universal element, unlike the grantor's competent signature.

65. An owner dies leaving a will that gives her house to her nephew. Before the nephew can take clear title and the property can be conveyed free of estate claims, the will typically must go through which court-supervised process?
    • Partition
    • Condemnation
    • Probate
    • Foreclosure

    Correct answer: Probate

    Probate is correct because it is the court-supervised process that validates a will, settles the decedent's debts and claims, and authorizes the transfer of the decedent's real and personal property to the heirs or devisees. Until probate is completed, title to devised real estate is generally not clear for conveyance. Partition divides co-owned property, condemnation is the government's exercise of eminent domain, and foreclosure enforces a lien against a defaulting borrower.

66. A state statute provides that abandoned bank accounts, uncashed checks, and unclaimed personal property eventually pass to the state when the owner cannot be located. This is an application of the same underlying doctrine that, in real estate, causes land to pass to the state when an owner dies without a will and without heirs. That doctrine is called what?
    • Eminent domain
    • Escheat
    • Adverse possession
    • Dedication

    Correct answer: Escheat

    Escheat is correct because it is the doctrine under which property reverts to the state when there is no lawful owner to claim it, whether that is real estate of a person who dies intestate without heirs or unclaimed personal property whose owner cannot be found. The unifying idea is that property should not remain ownerless. Eminent domain is a compensated taking for public use, adverse possession transfers title through long unauthorized occupation, and dedication is a private gift of land for public use.

67. A claimant occupies a neighbor's unused back lot openly and continuously, but for the first several years she does so under a recorded but defective deed she honestly believed gave her ownership, and in some states she also pays the property taxes. Compared with a trespasser who has no document at all, what advantage does occupying under such a written instrument and paying taxes typically provide in an adverse possession claim?
    • It eliminates the need to occupy the land at all
    • It can shorten the statutory period required or strengthen the claim under 'color of title' provisions in many states
    • It allows the claimant to acquire title instantly upon recording the defective deed
    • It removes the requirement that the possession be hostile

    Correct answer: It can shorten the statutory period required or strengthen the claim under 'color of title' provisions in many states

    Occupying under a defective written instrument, known as color of title, and paying taxes can shorten the required statutory period or otherwise strengthen an adverse possession claim in many states, because the law rewards a claimant who appears to hold under a genuine, if flawed, claim of ownership. It does not eliminate the need for actual possession, it does not convey instant title upon recording the defective deed, and it does not remove the requirement that the possession still be hostile and the other elements be met.

68. A would-be adverse possessor occupied a parcel openly and hostilely, but the parcel is owned by the federal government, which uses it for a wildlife refuge. After far longer than the usual statutory period, the occupant claims title. Why will the adverse possession claim fail?
    • Because adverse possession can never be based on open occupation
    • Because government-owned public land is generally immune from adverse possession
    • Because the occupant did not first record a deed to herself
    • Because the statutory period for any claim is unlimited

    Correct answer: Because government-owned public land is generally immune from adverse possession

    The claim fails because land owned by the government and held for public use is generally immune from adverse possession, so no amount of open, hostile occupation can ripen into title against the public's land. This public-land exception is a well-established limit on the doctrine. Open occupation is in fact a required element rather than a bar, recording a self-made deed cannot manufacture ownership, and statutory periods do exist and are finite for private land.

69. A buyer touring a property notices that a family clearly lives in the home, yet the records show the seller as the only owner. The buyer fails to ask the occupants about their rights and later learns they held an unrecorded lease with a purchase option. What type of notice was the buyer charged with because of the visible occupancy?
    • Inquiry notice arising from the occupants' visible possession
    • Constructive notice arising from the public records
    • Actual notice from a document the buyer personally read
    • No notice, because the lease was never recorded

    Correct answer: Inquiry notice arising from the occupants' visible possession

    The buyer had inquiry notice because visible possession by someone other than the record owner is a fact that should prompt a reasonable buyer to investigate, and the law charges the buyer with whatever a reasonable inquiry would have revealed. The buyer is bound by the occupants' rights despite the lack of recording. Constructive notice comes specifically from the recorded documents, actual notice requires genuine personal knowledge of the lease, and it is wrong to say there was no notice, since the open possession itself triggered the duty to inquire.

70. Under a 'race-notice' recording statute, two buyers each receive a deed to the same parcel from the same seller. For the second buyer to defeat the first buyer's earlier but unrecorded deed, which two conditions must the second buyer satisfy?
    • The second buyer must record first, regardless of knowledge of the prior deed
    • The second buyer must take without notice of the prior deed and record before the first buyer does
    • The second buyer must simply have actual notice of the prior deed
    • The second buyer must pay a higher price than the first buyer paid

    Correct answer: The second buyer must take without notice of the prior deed and record before the first buyer does

    Under a race-notice statute the second buyer prevails only by both taking the deed without notice of the earlier conveyance and being the first of the two to record, combining the notice requirement and the race-to-record requirement. Recording first alone is not enough if the buyer had notice, having actual notice of the prior deed defeats protection rather than securing it, and paying a higher price is not a condition of priority under recording acts.

71. A seller's title shows a recorded easement that the seller forgot to mention, a pending lawsuit claiming ownership of part of the lot, and an old unsatisfied mortgage. Collectively, these record items prevent the seller from delivering what the purchase contract typically requires?
    • Marketable title, free from reasonable doubt and the risk of litigation
    • A physical survey of the boundary lines
    • Possession of the personal property in the home
    • A homeowners association estoppel certificate

    Correct answer: Marketable title, free from reasonable doubt and the risk of litigation

    These record items prevent delivery of marketable title because marketable title must be reasonably free from doubt and from the threat of litigation, and an undisclosed easement, a pending ownership suit, and an unsatisfied mortgage are clouds that expose a buyer to dispute. A buyer is generally entitled to refuse a title burdened by such defects. The defects do not concern providing a boundary survey, transferring personal property, or furnishing an association estoppel certificate, which are separate matters.

72. An owner discovers that a deed in the recorded chain for her property was forged by an impostor decades ago. Even though later buyers paid value and recorded their deeds, why is this forged deed a particularly serious cloud on the title?
    • Because forged deeds are automatically validated once they are recorded
    • Because a forged deed is generally void and conveys no title, so the entire later chain may be defective
    • Because recording a forged deed turns it into a valid quitclaim deed
    • Because a forged deed only affects the forger and never later owners

    Correct answer: Because a forged deed is generally void and conveys no title, so the entire later chain may be defective

    A forged deed is an especially serious cloud because forgery generally renders a deed void from the outset, meaning it conveys no title at all, so every conveyance that depends on that forged link in the chain can be defective no matter how innocent later buyers were. Recording does not cure or validate a forgery, it does not transform a forged deed into a valid quitclaim, and the defect reaches well beyond the forger because it undermines the title every successor claims through that deed.

73. An appraiser inspects a thirty-year-old home and notes peeling paint, a worn roof, and an aging furnace that are all reasonable to repair. In the cost approach, this loss in value is classified as which of the following?
    • Incurable functional obsolescence
    • External obsolescence
    • Curable physical deterioration
    • Economic obsolescence from outside the property

    Correct answer: Curable physical deterioration

    Peeling paint, a worn roof, and an aging furnace are curable physical deterioration, the ordinary wear and tear on a property's components that is economically practical to repair. Physical deterioration originates within the property and is often deferred maintenance. Functional obsolescence stems from defective design rather than wear, and external or economic obsolescence is caused by influences outside the property's boundaries, not by repairable component wear.

74. A well-maintained home loses value after a noisy interstate highway is built directly behind it. In the cost approach, this loss is best classified as which form of depreciation?
    • Curable physical deterioration
    • Functional obsolescence
    • External obsolescence
    • Deferred maintenance

    Correct answer: External obsolescence

    The loss from the new highway is external obsolescence, a decline in value caused by negative influences outside the property's own boundaries that the owner cannot fix from within the site. Curable physical deterioration and deferred maintenance involve on-site wear the owner can repair, and functional obsolescence arises from the property's own outdated design, whereas the highway is an off-site nuisance beyond the owner's control.

75. A knowledgeable buyer is choosing between two nearly identical homes on the same street; one is listed at $310,000 and the other at $335,000. According to the principle of substitution, what is the buyer most likely to do?
    • Buy the $310,000 home because it is the lower-priced equally desirable substitute
    • Buy the $335,000 home because higher price signals higher quality
    • Offer the average of the two prices on whichever home is listed first
    • Refuse to buy either home because the prices differ

    Correct answer: Buy the $310,000 home because it is the lower-priced equally desirable substitute

    Under the principle of substitution, the rational buyer purchases the $310,000 home because it is the lower-priced of two equally desirable substitutes, and an informed buyer will not pay more than necessary for comparable utility. A higher price does not automatically signal greater value when the homes are identical, averaging the prices ignores the cheaper substitute, and the price difference itself gives no reason to walk away from both.

76. In a uniform subdivision where homes are similar in size, style, and quality, values tend to be well supported and stable. Which appraisal principle explains why this consistency tends to maximize and protect value?
    • The principle of anticipation
    • The principle of contribution
    • The principle of conformity
    • The principle of substitution

    Correct answer: The principle of conformity

    This reflects the principle of conformity, which holds that property values are maximized and best protected when properties in an area are reasonably similar in size, style, quality, and use, so that homogeneity supports stable values. Anticipation ties value to future benefits, contribution measures a feature's added value, and substitution caps price at the cost of an alternative, none of which explains why neighborhood uniformity sustains value.

77. Three adjacent lots are each worth $120,000 separately, but a developer combines them into one site that, due to its size, is worth $450,000 as a unit. The act of acquiring and merging the lots and the resulting added value are known respectively as which terms?
    • Accretion and reliction
    • Assemblage and plottage
    • Reconciliation and contribution
    • Severalty and progression

    Correct answer: Assemblage and plottage

    Combining the lots into one site is assemblage, and the resulting increase in value, here the $90,000 by which the $450,000 combined site exceeds the $360,000 separate total, is plottage. Accretion and reliction describe land changes from water, reconciliation and contribution are appraisal reasoning and feature-value concepts, and severalty and progression refer to sole ownership and a value boost from grander neighbors, not combined-parcel value.

78. An appraiser reproduces a building exactly as it stands using the same materials and design. Compared with replacement cost, reproduction cost is best described as which of the following?
    • The cost to create an exact duplicate of the existing structure, including any outdated features
    • The cost to build a functionally equivalent structure using modern materials
    • The price the structure would command in an open-market sale
    • The figure a tax assessor assigns for property tax purposes

    Correct answer: The cost to create an exact duplicate of the existing structure, including any outdated features

    Reproduction cost is the cost to create an exact duplicate of the existing structure using the same materials and design, including any outdated or superadequate features. Replacement cost, by contrast, is the cost to build a structure of equivalent utility using current materials and standards. Open-market sale price reflects market value, and the assessor's figure is assessed value, neither of which is a construction-cost estimate.

79. After completing the sales comparison, cost, and income approaches on a typical owner-occupied house, an appraiser gives the greatest weight to the sales comparison result when forming a final opinion of value. What is this final weighing step called, and why is sales comparison emphasized here?
    • Capitalization, because every approach must be converted to income
    • Reconciliation, because abundant comparable sales make that approach the most reliable for a typical home
    • Depreciation, because the building's age controls the final figure
    • Assemblage, because the approaches are merged into one parcel

    Correct answer: Reconciliation, because abundant comparable sales make that approach the most reliable for a typical home

    The step is reconciliation, the appraiser's reasoned weighing of the three value indications, and sales comparison is emphasized because plentiful comparable sales make it the most reliable approach for a typical owner-occupied home. Capitalization is an income-approach calculation rather than a final weighing step, depreciation is a cost-approach component, and assemblage refers to combining parcels, none of which describes the reconciliation process.

80. An income property has a net operating income of $66,000. An appraiser studies recent sales of similar buildings and finds they sold at capitalization rates of about 6%. The appraiser uses these comparable sales chiefly to accomplish which task in the income approach?
    • Establish the subject's reproduction cost
    • Derive the market capitalization rate to apply to the subject's income
    • Calculate the subject's accrued physical depreciation
    • Determine the subject's gross rent multiplier instead of its value

    Correct answer: Derive the market capitalization rate to apply to the subject's income

    The appraiser uses the comparable sales to derive the market capitalization rate, extracted from similar properties' income-to-price relationships, and then applies that rate to the subject's $66,000 income to indicate value. Reproduction cost and accrued depreciation belong to the cost approach, and although a gross rent multiplier is also market-derived, the task here is to obtain a capitalization rate for the income approach rather than a rent multiplier.

81. An appraiser is asked to define market value for a lender. Which of the following best describes the conditions assumed in a market value estimate?
    • A sale between a willing buyer and willing seller, each acting prudently and without undue pressure, after reasonable market exposure
    • A forced sale completed within thirty days at whatever price can be obtained
    • The price a single motivated buyer offers regardless of other market activity
    • The amount the current owner paid plus all improvement costs since purchase

    Correct answer: A sale between a willing buyer and willing seller, each acting prudently and without undue pressure, after reasonable market exposure

    Market value assumes a sale between a willing buyer and a willing seller, each acting knowledgeably and prudently without undue pressure, after the property has had reasonable exposure on the open market. These typical-conditions assumptions are what separate market value from a distressed or forced figure. A thirty-day forced sale, a single motivated buyer's offer, and the owner's historical cost plus improvements all fail the willing-and-unpressured open-market standard.

82. A buyer offered $315,000 for a home, but the bank's appraisal came back at $300,000 and the seller refused to lower the price, so the buyer paid $315,000 in cash. In this transaction, the $315,000 figure represents which of the following?
    • Market value
    • Price
    • Replacement cost
    • Assessed value

    Correct answer: Price

    The $315,000 the buyer actually paid is the price, the specific sum exchanged in this particular deal, which can sit above the appraiser's opinion of value. Market value here is the appraiser's $300,000 figure reflecting typical market conditions. Replacement cost concerns construction expense, and assessed value is the figure a taxing authority assigns, neither of which describes the amount paid in the sale.

83. A homeowner spent $55,000 finishing a luxury basement, but appraisers in the area find that such finishes add only about $20,000 to what buyers will pay. The fact that this improvement returns far less than it cost is best explained by which appraisal principle?
    • The principle of anticipation
    • The principle of conformity
    • The principle of contribution
    • The principle of substitution

    Correct answer: The principle of contribution

    This is the principle of contribution, which states that the value of an improvement is measured by how much it adds to the property's overall value, not by what it cost to install. The basement contributes only about $20,000 despite the $55,000 outlay. Anticipation ties value to expected future benefits, conformity addresses neighborhood similarity, and substitution caps value at the cost of a comparable alternative, none of which explains a cost-versus-value gap on a single feature.

84. In a neighborhood of similar mid-priced homes, one owner builds a large, expensive custom mansion far grander than its neighbors. An appraiser notes the mansion is likely to sell for less than it would in an upscale area. Which pair of appraisal principles best explains this outcome?
    • Anticipation and contribution
    • Substitution and plottage
    • Progression and assemblage
    • Conformity and regression

    Correct answer: Conformity and regression

    Conformity and regression best explain the outcome. The principle of conformity holds that maximum value arises when properties are reasonably similar, and regression states that a superior property surrounded by lesser ones is dragged downward in value. Anticipation and contribution address future benefits and feature value, substitution and plottage concern comparable cost and combined parcels, and progression is the opposite effect, where a lesser home gains value from grander neighbors.

85. When an appraiser uses the sales comparison approach and a comparable property is inferior to the subject in a particular feature, what adjustment is made?
    • Add value to the comparable's sale price for that feature
    • Subtract value from the comparable's sale price for that feature
    • Add value to the subject's value for that feature
    • Make no adjustment because inferior features are ignored

    Correct answer: Add value to the comparable's sale price for that feature

    When a comparable is inferior to the subject, the appraiser adds value to that comparable's sale price, because all adjustments are made to the comparables to make them resemble the subject. An inferior comparable is adjusted upward to reflect what it would have sold for with the subject's stronger feature. Subtracting would apply only to a superior comparable, the subject is never adjusted in this approach, and inferior features are not ignored.

86. An appraiser gathers four comparable sales but discovers one of them was a sale between a parent and adult child at a below-market family price. How should the appraiser treat this sale in the sales comparison approach?
    • Use it as the single most reliable comparable
    • Average it with the others without any adjustment
    • Use it only if it is the lowest of the four sales
    • Disregard it or treat it cautiously because it was not an arm's-length transaction

    Correct answer: Disregard it or treat it cautiously because it was not an arm's-length transaction

    The appraiser should disregard or heavily discount the parent-to-child sale because it was not an arm's-length transaction between unrelated parties acting in their own interests, so its price does not reflect true market value. Reliable comparables come from open-market deals. Treating a family-priced sale as the most reliable comparable, blending it in unadjusted, or favoring it merely because it is the lowest would all distort the value indication.

87. An exclusive right-to-sell listing typically names the property, the price, the commission, and a definite expiration date. If a listing agreement omits a definite termination date, what problem does that create in many states?
    • It automatically converts to an open listing
    • It doubles the commission owed
    • It transfers the listing to the multiple listing service
    • It may be unenforceable or violate state rules requiring a definite term

    Correct answer: It may be unenforceable or violate state rules requiring a definite term

    Many states require a listing agreement to include a definite termination date, so omitting one can render the listing unenforceable or place the broker in violation of state regulations against open-ended listings. The omission does not automatically convert the listing to an open listing, double the commission, or transfer the listing to the multiple listing service.

88. Two cooperating brokers privately agree to charge all clients in their market the same commission rate so neither undercuts the other. A buyer client later learns of the arrangement. How is this agreement best evaluated under principles governing the practice of real estate within contracts and agency?
    • It is a legitimate way to standardize service and is encouraged
    • It is an unlawful price-fixing arrangement because commissions must be negotiated independently
    • It is acceptable as long as the rate is reasonable
    • It is permissible if disclosed in the listing agreement

    Correct answer: It is an unlawful price-fixing arrangement because commissions must be negotiated independently

    An agreement among competing brokers to set a uniform commission rate is unlawful price fixing, because commissions must be negotiated independently between each broker and client rather than coordinated among competitors. Such an arrangement is not a legitimate standardization of service, is not saved by being reasonable, and cannot be made lawful merely by disclosing it in a listing agreement.

89. An owner gives a broker authority to handle the entire management and sale of a portfolio of rental properties, including signing documents on the owner's behalf across many ongoing transactions. This broad authority to conduct a continuous series of transactions for the principal is best described as which type of agency?
    • Special agency
    • General agency
    • Gratuitous agency
    • Ostensible agency

    Correct answer: General agency

    General agency grants the agent authority to conduct a continuous series of transactions and act broadly for the principal, such as managing and selling a portfolio and signing documents on the owner's behalf. A special agency authorizes only a single specific task, a gratuitous agency is one created without compensation, and an ostensible agency arises from appearances rather than express broad authority.

90. A buyer's offer states it will remain open until 5 p.m. Friday, but on Thursday the buyer phones the seller and clearly revokes the offer before the seller has accepted. What is the legal effect of the buyer's revocation?
    • The revocation is effective, so there is no offer left for the seller to accept
    • The offer is irrevocable until Friday and the seller may still accept
    • The buyer owes the seller damages for revoking early
    • The seller can sue for specific performance

    Correct answer: The revocation is effective, so there is no offer left for the seller to accept

    Absent an option supported by consideration, an offeror may revoke an ordinary offer any time before acceptance, so the buyer's clear revocation before the seller accepts is effective and leaves no offer to accept. The stated open-until time does not make the offer irrevocable without consideration, the buyer owes no damages for revoking an unaccepted offer, and the seller cannot compel performance of a contract that never formed.

91. The acronym OLD CAR is often used to summarize the fiduciary duties a real estate agent owes a principal. The first three letters stand for obedience, loyalty, and which of the following?
    • Diligence
    • Disclosure
    • Discretion
    • Documentation

    Correct answer: Disclosure

    In the OLD CAR memory aid for agent fiduciary duties, the O, L, and D stand for obedience, loyalty, and disclosure, which together with confidentiality, accounting, and reasonable care describe the six core obligations to the principal. Diligence, discretion, and documentation are not the duty represented by the D in this standard summary of an agent's fiduciary responsibilities.

92. A listing agent learns that her seller is being transferred out of state next month and is desperate to sell quickly at almost any price. The fiduciary duty of loyalty most directly requires the agent to do which of the following with that information?
    • Share it with all buyers to speed up offers
    • Report it to the multiple listing service
    • Disclose it only to the buyer's lender
    • Keep it confidential so it cannot be used against the seller in negotiations

    Correct answer: Keep it confidential so it cannot be used against the seller in negotiations

    Loyalty requires the agent to place the seller's interests first and protect confidential information such as the seller's urgency, so the agent must keep that motivation private to preserve the seller's bargaining position. Sharing the seller's desperation with buyers, posting it on the multiple listing service, or revealing it to a buyer's lender would all undermine the seller's negotiating leverage and breach the duty of loyalty.

93. After a closing, a seller's agent who held the buyer's earnest money in trust must provide the principal with a full record of how those funds were received, held, and disbursed. This obligation reflects which fiduciary duty?
    • The duty of loyalty
    • The duty of obedience
    • The duty of accounting
    • The duty of confidentiality

    Correct answer: The duty of accounting

    The duty of accounting requires the agent to report and properly handle all money, documents, and property entrusted to the agent during the transaction, including a full record of trust funds. Loyalty concerns putting the principal first, obedience concerns following lawful instructions, and confidentiality concerns protecting private information, none of which describes the obligation to track and report entrusted funds.

94. A seller directs his agent to refuse to present any offer from buyers of a particular national origin. The agent recognizes this instruction is unlawful. How does the duty of obedience apply in this situation?
    • The agent must not obey, because the duty of obedience extends only to lawful instructions
    • The agent must obey because the principal's instructions always control
    • The agent must obey but document the refusal in writing
    • The agent must obey only if the seller pays an additional fee

    Correct answer: The agent must not obey, because the duty of obedience extends only to lawful instructions

    The duty of obedience requires following only the principal's lawful instructions, so an agent must refuse a directive to discriminate based on national origin because carrying it out would violate fair housing law. Obeying an unlawful order is never required, documenting an illegal refusal does not make it permissible, and no fee can authorize illegal discrimination.

95. A licensee represents the seller and, during a transaction, also separately begins representing the buyer in the same deal after both parties consent in writing. This consensual arrangement in which one licensee represents both sides is best described as which type of agency?
    • Disclosed dual agency
    • Subagency
    • Designated agency
    • Single agency

    Correct answer: Disclosed dual agency

    Disclosed dual agency is the arrangement in which one licensee represents both the buyer and seller in the same transaction with the informed written consent of both parties. Subagency involves an agent of the listing broker working through the seller's agent, designated agency assigns different in-house agents to each side, and single agency means representing only one party.

96. Why is disclosed dual agency considered inherently limiting even when both parties consent?
    • It prevents the broker from giving undivided loyalty and full advocacy to either party
    • It requires the broker to charge a double commission
    • It forces the broker to advocate fully for whichever party offers more
    • It automatically voids the purchase contract

    Correct answer: It prevents the broker from giving undivided loyalty and full advocacy to either party

    Dual agency inherently limits representation because a broker serving two opposing principals cannot give either one undivided loyalty or full advocacy without harming the other. It does not mandate a double commission, does not permit fully advocating for the higher offer, and does not automatically void the purchase contract, which remains valid when the dual agency is properly disclosed and consented to.

97. In a brokerage that uses designated agency, the broker assigns one salesperson to represent the buyer and a different salesperson to represent the seller in the same in-house transaction. What is the chief advantage of this arrangement over treating the whole brokerage as a single dual agent?
    • It eliminates the need for any agency disclosure
    • It guarantees a higher sale price for the seller
    • It removes the broker's responsibility for the transaction entirely
    • It allows each designated agent to advocate more fully for that agent's own client

    Correct answer: It allows each designated agent to advocate more fully for that agent's own client

    Designated agency lets each assigned salesperson act more like a single agent and advocate for that agent's own client, reducing the loss of advocacy that occurs in pure dual agency. It does not eliminate agency disclosure requirements, does not guarantee a higher sale price, and does not free the broker, who still supervises the firm and the transaction.

98. A homeowner signs a listing in which she agrees to accept a stated net amount from the sale and lets the broker keep anything above that figure as compensation. This compensation structure describes which listing type, which is prohibited or discouraged in many states?
    • A net listing
    • An open listing
    • An exclusive agency listing
    • An exclusive right-to-sell listing

    Correct answer: A net listing

    A net listing pays the broker any amount the property sells for above the seller's specified net, an arrangement many states prohibit or discourage because it creates a conflict between the broker's pay and the seller's interest in the highest price. An open listing pays only the procuring broker, an exclusive agency lets the owner sell commission-free, and an exclusive right-to-sell guarantees the broker a commission on any sale during the term.

99. A listing agreement generally terminates when the agreed term ends. Which of the following events would NOT typically end a listing agreement before its expiration date?
    • The death of the seller
    • Destruction of the property
    • A buyer touring the home without making an offer
    • Mutual agreement of the broker and seller to cancel

    Correct answer: A buyer touring the home without making an offer

    A buyer simply touring the home without making an offer does not terminate the listing, because showings are ordinary marketing activity that the listing contemplates. By contrast, the death of the seller, destruction of the property, and the mutual agreement of broker and seller to cancel are all events that end a listing agreement before its scheduled expiration.

100. Under an exclusive agency listing, who, in addition to the listing broker, retains the right to sell the property without the owner owing the broker a commission?
     • Any cooperating broker
     • The buyer's lender
     • The owner, who may sell it personally commission-free
     • No one; only the broker may sell it

     Correct answer: The owner, who may sell it personally commission-free

     In an exclusive agency listing, only the listing broker is engaged among brokers, but the owner reserves the right to sell the property personally without paying a commission. A cooperating broker would work through the listing broker rather than independently, the buyer's lender has no selling right, and it is incorrect that no one but the broker may sell, since the owner's personal-sale right is the defining feature of this listing.

101. A seller compares an exclusive agency listing with an exclusive right-to-sell listing. The key difference between the two is best described as which of the following?
     • Under exclusive right-to-sell the broker earns a commission even if the owner finds the buyer, whereas exclusive agency lets the owner sell commission-free
     • Only the exclusive right-to-sell requires a written agreement
     • Exclusive agency guarantees a higher commission rate
     • Exclusive right-to-sell allows multiple brokers to be hired at once

     Correct answer: Under exclusive right-to-sell the broker earns a commission even if the owner finds the buyer, whereas exclusive agency lets the owner sell commission-free

     The defining difference is that an exclusive right-to-sell listing entitles the broker to a commission on any sale during the term, including one the owner arranges, while an exclusive agency lets the owner sell personally without owing the broker. Both are written agreements, neither guarantees a particular commission rate, and exclusive right-to-sell engages a single broker rather than multiple brokers.

102. A buyer agency agreement establishes which fundamental relationship?
     • The broker represents the seller while assisting the buyer
     • The buyer waives all representation in the transaction
     • The seller's broker becomes the buyer's subagent
     • The broker represents the buyer as the buyer's agent in locating and negotiating a purchase

     Correct answer: The broker represents the buyer as the buyer's agent in locating and negotiating a purchase

     A buyer agency agreement creates a relationship in which the broker represents the buyer as the buyer's agent, owing the buyer fiduciary duties while helping locate properties and negotiate a purchase. It is not an arrangement where the broker represents the seller, where the buyer waives representation, or where the listing broker automatically becomes the buyer's subagent.

103. A buyer's broker has located the perfect home for a client under an exclusive buyer agency agreement, but the seller is unrepresented and unwilling to pay any buyer-broker fee. How is the buyer broker most appropriately compensated in this situation?
     • The buyer broker must work for free
     • The buyer pays the broker directly per the buyer agency agreement
     • The listing service automatically pays the fee
     • The seller is legally forced to pay the buyer broker

     Correct answer: The buyer pays the broker directly per the buyer agency agreement

     Because the buyer agency agreement is a contract between the buyer and broker, the buyer can compensate the broker directly when the seller will not pay a buyer-broker fee, honoring the agreement the buyer signed. The broker is not required to work for free, no listing service automatically pays the fee, and a seller cannot be legally forced to pay a buyer's broker absent an agreement to do so.

104. Earnest money deposited under a purchase contract is most accurately characterized as which of the following?
     • A non-refundable fee paid to the listing broker
     • The buyer's mortgage loan origination fee
     • A good-faith deposit showing the buyer's serious intent to perform the contract
     • A tax paid to the county at closing

     Correct answer: A good-faith deposit showing the buyer's serious intent to perform the contract

     Earnest money is a good-faith deposit a buyer submits to demonstrate a serious intent to perform the purchase contract, giving the seller assurance the buyer will follow through. It is not a non-refundable broker fee, not a loan origination fee charged by a lender, and not a county tax, all of which serve different purposes than signaling contractual commitment.

105. A buyer makes a $10,000 earnest money deposit, then defaults on the contract without any valid contingency excusing performance. Absent a liquidated damages provision, what is the most likely outcome regarding the deposit under typical contract principles?
     • The buyer automatically recovers the full deposit
     • The deposit is split evenly between the broker and the seller by law
     • The deposit must be donated to the state
     • The seller may pursue the deposit as damages for the buyer's breach

     Correct answer: The seller may pursue the deposit as damages for the buyer's breach

     When a buyer defaults without a valid contingency, the seller generally may pursue the earnest money as damages for the breach, since the deposit exists to compensate the seller if the buyer fails to perform. The buyer does not automatically recover the deposit after defaulting, the funds are not split with the broker by law, and the deposit is not forfeited to the state.

106. Sex, disability, and familial status were added as protected classes to the federal Fair Housing Act after its original passage. Which class was the most recent of these additions, enacted in the 1988 amendments?
     • Religion
     • National origin
     • Familial status and disability
     • Color

     Correct answer: Familial status and disability

     Familial status and disability were the protected classes added by the 1988 amendments to the Fair Housing Act, extending coverage to families with children and to persons with disabilities. Sex was added earlier in 1974, not in 1988. Religion, color, and national origin were among the classes already protected in 1968, so they were not part of the 1988 expansion.

107. An agent receives a call from a buyer who asks to see homes in a specific subdivision. Instead, the agent only shows the buyer listings in a different area, saying the buyer's ethnic background would fit better there. Which classification of fair-housing violation has occurred?
     • Steering
     • Blockbusting
     • Redlining
     • Commingling

     Correct answer: Steering

     Steering is the violation, because the agent redirected the buyer away from a requested area and toward another based on the buyer's ethnic background, a protected characteristic. Blockbusting induces panic selling among owners, redlining is a lender or insurer practice of denying service by geography, and commingling concerns improper handling of client funds.

108. Why is blockbusting considered especially harmful among prohibited fair-housing practices?
     • It only affects commercial transactions and not residential ones
     • It is a lawful tactic provided the agent discloses it in writing
     • It artificially depresses property values and exploits both departing owners and incoming residents through fear
     • It is identical to puffing and therefore harmless sales talk

     Correct answer: It artificially depresses property values and exploits both departing owners and incoming residents through fear

     Blockbusting is especially harmful because it uses fear about a protected group entering a neighborhood to drive owners to sell quickly at depressed prices, harming sellers who sell low and incoming buyers who may pay inflated prices. It is unlawful, not curable by disclosure, reaches residential housing, and is not the same as permissible puffing.

109. A property insurance company refuses to write homeowner policies for properties located in a particular zip code because of the predominant national origin of the residents there. This practice is best identified as which of the following?
     • Redlining
     • Steering
     • Puffing
     • Antitrust price fixing

     Correct answer: Redlining

     Redlining is the correct identification, because denying insurance to an entire geographic area based on the protected characteristics of its residents is the classic form of redlining, which applies to insurers as well as lenders. Steering involves directing prospective buyers among neighborhoods, puffing is sales exaggeration, and antitrust price fixing involves collusion among competitors on price.

110. A real estate brokerage and its three largest competitors quietly agree to divide the metropolitan area into separate territories so that each firm solicits listings only within its assigned zone. This arrangement most directly violates which body of law?
     • Fair housing law
     • Antitrust law, as an illegal market allocation
     • The Truth in Lending Act
     • The Statute of Frauds

     Correct answer: Antitrust law, as an illegal market allocation

     Antitrust law is violated because competitors agreeing to carve up territories is an illegal market or customer allocation, a per se antitrust offense that suppresses competition. Fair housing law addresses discrimination, the Truth in Lending Act addresses credit-cost disclosure, and the Statute of Frauds addresses written-contract requirements, none of which targets territorial collusion among rivals.

111. A broker deposits a buyer's earnest money check into the brokerage's trust account but then writes a check from that same trust account to pay the brokerage's monthly software subscription. What violation does paying the firm's bills from the trust account represent?
     • Lawful use of pooled funds
     • Commingling and misuse of trust funds
     • A fair-housing steering violation
     • An antitrust group boycott

     Correct answer: Commingling and misuse of trust funds

     Paying brokerage operating expenses from the trust account is commingling and misuse of trust funds, because client money in trust must never be used for the firm's own obligations. It is not lawful, and it is unrelated to fair-housing steering or to antitrust group boycotts, which concern discrimination and competitor collusion respectively.

112. Under the federal Do Not Call rules, which situation generally permits a salesperson to call a consumer whose number appears on the National Do Not Call Registry?
     • The salesperson believes the consumer might be interested in selling
     • The call is placed before 8 a.m. on a weekday
     • The consumer recently sold a home through that brokerage, creating an established business relationship
     • The salesperson blocks the caller ID before dialing

     Correct answer: The consumer recently sold a home through that brokerage, creating an established business relationship

     An established business relationship, such as having recently transacted with the brokerage within the prior 18 months, is a recognized exception that allows a call to a registered number for a limited time. A mere belief that the consumer might sell does not create an exception. Calling before 8 a.m. is itself prohibited under telemarketing rules (permitted hours are 8 a.m. to 9 p.m. local time). Blocking caller ID does not create an exception and may itself violate the rules.

113. A licensee posts a yard sign that lists only her own name and phone number with no mention of any brokerage. Which real estate practice rule does this most likely violate?
     • Trust-account separation requirements
     • Advertising rules requiring the supervising broker or brokerage be identified
     • The federal lead-based paint disclosure rule
     • Antitrust prohibitions on price fixing

     Correct answer: Advertising rules requiring the supervising broker or brokerage be identified

     Advertising rules generally require disclosure of the supervising broker or brokerage so the public understands the licensee acts under a broker, which a sign showing only the agent's name violates. Trust-account rules govern client funds, the lead-based paint rule governs pre-1978 housing disclosures, and antitrust law governs competitor collusion, none of which addresses sign attribution.

114. An apartment manager tells a prospective tenant who uses a wheelchair that he may, at his own expense, install grab bars and widen a doorway, and that he must restore the unit upon moving out. Under the Fair Housing Act, how should this be evaluated?
     • It reflects the law allowing reasonable modifications by a disabled tenant, generally at the tenant's expense
     • It is unlawful because disability is not a protected class
     • It is blockbusting because it concerns a protected group
     • It is commingling because it involves the tenant's money

     Correct answer: It reflects the law allowing reasonable modifications by a disabled tenant, generally at the tenant's expense

     This reflects the Fair Housing Act provision permitting a tenant with a disability to make reasonable physical modifications, generally at the tenant's own expense and with restoration where appropriate. Disability is in fact a protected class, the situation is not blockbusting because no panic selling is involved, and it is not commingling because no trust funds are mixed.

115. Which of the following advertising phrases would most likely be found to violate the Fair Housing Act?
     • Spacious three-bedroom home near public transit and parks
     • Recently renovated kitchen with stainless appliances
     • Perfect for a young Christian couple, no children please
     • Available for immediate occupancy with flexible lease terms

     Correct answer: Perfect for a young Christian couple, no children please

     The phrase signals a preference based on religion and excludes children, expressing bias against the federally protected classes of religion and familial status, in violation of the Fair Housing Act's prohibition on discriminatory advertising. Describing bedrooms, transit access, renovations, or lease flexibility refers to property features and availability, which are permissible because they do not indicate a protected-class preference.

116. How does an established business relationship affect a salesperson's obligations under the Do Not Call rules?
     • It permanently exempts the salesperson from all telemarketing restrictions
     • It generally allows calls to a registered number for a limited period despite registry listing
     • It requires the consumer to re-register every thirty days
     • It has no effect because the registry overrides all relationships

     Correct answer: It generally allows calls to a registered number for a limited period despite registry listing

     An established business relationship generally permits contacting a consumer on the registry for a limited period — up to 18 months after the last transaction or 3 months after an inquiry — recognizing a legitimate ongoing relationship. It does not grant permanent or unlimited exemption, does not impose re-registration duties on the consumer, and does not become irrelevant because the registry contains broad exceptions including this one.

117. A brokerage proudly advertises that it charges "the lowest commission in town." Two rival firms call the broker and propose that all three publicly commit to a uniform six percent rate to end the price competition. If the broker agrees, what has occurred?
     • Lawful coordination of industry standards
     • Illegal price fixing under antitrust law
     • A fair-housing steering violation
     • A permissible advertising practice

     Correct answer: Illegal price fixing under antitrust law

     An agreement among competing firms to commit to a uniform commission rate is illegal price fixing under antitrust law, because commission rates must be set independently by each firm. It is not lawful coordination, is unrelated to fair-housing steering, and is not merely an advertising matter, since the harm is the collusive agreement on price among competitors.

118. Which document or account practice best protects a brokerage from a commingling allegation when it receives multiple clients' earnest money deposits?
     • Combining all deposits with the broker's personal account for convenience
     • Holding deposits in cash in the office safe
     • Forwarding deposits to the listing agent's individual checking account
     • Recording each client's deposit and disbursement in a reconciled trust-account ledger separate from operating funds

     Correct answer: Recording each client's deposit and disbursement in a reconciled trust-account ledger separate from operating funds

     Maintaining a reconciled trust-account ledger that tracks each client's deposit and disbursement separately from operating funds is the strongest protection, because it keeps client money segregated and fully accountable. Combining deposits with personal funds or routing them to an agent's checking account is itself commingling, and holding cash in an office safe fails to provide the required segregation and traceability.

119. Why are wetlands given special protection that can limit a property owner's development plans?
     • Because they provide ecological functions such as wildlife habitat and water filtration
     • Because they automatically reduce a parcel's assessed value to zero
     • Because they are exempt from all forms of taxation
     • Because they convey littoral rights to adjoining owners

     Correct answer: Because they provide ecological functions such as wildlife habitat and water filtration

     The correct answer is because they provide ecological functions such as wildlife habitat and water filtration. Wetlands are protected for their environmental value, including supporting wildlife and naturally filtering and storing water, which is why their development is regulated. Protection is not about zeroing out assessed value, granting tax exemption, or conveying littoral rights, none of which is the basis for wetland regulation.

120. A home where a widely publicized homicide occurred years ago is structurally sound but draws fewer buyers because of the event's reputation. The reduced desirability stemming from the event rather than any physical flaw is best described as which of the following?
     • Functional obsolescence built into the floor plan
     • A psychological stigma attached to the property
     • A latent physical defect requiring repair
     • A recorded encumbrance clouding the title

     Correct answer: A psychological stigma attached to the property

     The correct answer is a psychological stigma attached to the property. A stigma arises from a non-physical event, such as a notorious crime, that makes some buyers view the property as less desirable even though nothing is physically wrong. Functional obsolescence concerns physical or design shortcomings, a latent defect is a hidden physical problem, and a recorded encumbrance is a title matter, none of which captures reputation-based stigma.

121. A landlord is renting out a single-family house constructed in 1981. Before signing the lease, must the landlord provide the tenant with the federal lead-based paint disclosure form and EPA pamphlet?
     • No, because the federal lead-based paint disclosure applies only to target housing built before 1978
     • Yes, because all residential rentals require the lead disclosure regardless of construction date
     • Yes, but only if the tenant has children under the age of six
     • No, because the requirement applies only to sales, never to leases

     Correct answer: No, because the federal lead-based paint disclosure applies only to target housing built before 1978

     The correct answer is that no disclosure is required because the federal lead-based paint rule applies only to target housing built before 1978. A 1981 home falls outside the pre-1978 cutoff, so the disclosure form and EPA pamphlet are not federally mandated. The rule is not triggered by every rental, does not hinge on whether the tenant has young children, and does apply to both sales and leases of qualifying older housing.

122. A broker is helping a seller market a 1965 home. Which document must the broker make sure is part of the transaction packet to satisfy the federal lead-based paint requirements?
     • A certified laboratory soil report for radon
     • The EPA-approved lead hazard information pamphlet given to the buyer
     • A Closing Disclosure showing all settlement charges
     • A wetlands delineation map from the Army Corps of Engineers

     Correct answer: The EPA-approved lead hazard information pamphlet given to the buyer

     The correct answer is the EPA-approved lead hazard information pamphlet given to the buyer. Federal law requires that buyers of pre-1978 housing receive the EPA pamphlet on protecting families from lead, along with the disclosure form and any known records. A radon soil report, a Closing Disclosure, and a wetlands delineation map address entirely different issues and do not fulfill the lead-based paint information requirement.

123. A seller signs a federal lead-based paint disclosure stating there is no knowledge of lead-based paint, but the seller actually knows the garage was coated with leaded paint in 1970 and deliberately leaves it off the form. What is the most accurate characterization of the seller's conduct?
     • It is acceptable because the garage is not living space
     • It is excused because the buyer can always order an inspection
     • It is a knowing failure to disclose that can expose the seller to liability under the lead disclosure law
     • It is permissible as long as the agent signs the form instead

     Correct answer: It is a knowing failure to disclose that can expose the seller to liability under the lead disclosure law

     The correct answer is that it is a knowing failure to disclose that can expose the seller to liability under the lead disclosure law. The federal rule requires sellers to disclose known lead-based paint and hazards anywhere in target housing, and deliberately concealing known leaded paint violates that duty and can lead to penalties and damages. Excluding the garage, shifting responsibility to the buyer's inspection, or having the agent sign does not cure a knowing concealment.

124. An agent learns that the roof of a listed home has an active leak the seller wants kept quiet, yet the leak is concealed above a finished ceiling. Regarding the agent's own duty, which statement is most accurate?
     • The agent may follow the seller's instruction to conceal the known defect
     • The agent has no duty because only the seller signs the disclosure
     • The agent's duty arises only after the buyer hires a home inspector
     • The agent generally must disclose known material defects to the buyer and cannot conceal them at the seller's request

     Correct answer: The agent generally must disclose known material defects to the buyer and cannot conceal them at the seller's request

     The correct answer is that the agent generally must disclose known material defects to the buyer and cannot conceal them at the seller's request. A licensee's duty of honesty and fair dealing requires disclosure of known material facts affecting the property, and that duty overrides a seller's instruction to hide a defect. The agent cannot hide a known defect, is not relieved simply because the seller signs the form, and the duty does not wait for a buyer's inspector.

125. A seller completes a property condition disclosure honestly but later, before closing, the furnace fails and the seller has it confirmed dead by a technician. What should the seller generally do regarding the disclosure?
     • Update or amend the disclosure to reflect the newly known defective furnace before closing
     • Wait until after closing and then refund the buyer
     • Nothing, because the original disclosure was accurate when signed
     • Cancel the contract automatically since a defect appeared

     Correct answer: Update or amend the disclosure to reflect the newly known defective furnace before closing

     The correct answer is to update or amend the disclosure to reflect the newly known defective furnace before closing. The duty to disclose known material defects is ongoing, so a material change in condition that the seller learns about before closing must be communicated to the buyer. Standing on an outdated disclosure, waiting until after closing, or treating the failure as automatic cancellation does not satisfy the continuing disclosure obligation.

126. A buyer's inspector finds termite damage hidden behind drywall that the seller had quietly patched over after a prior infestation the seller never mentioned. The seller knew the damage existed but it could not be seen on a normal walkthrough. This concealed, known condition is best classified as which type of defect?
     • A patent defect the buyer should have noticed
     • A latent defect the seller had a duty to disclose
     • An economic obsolescence affecting market value
     • A title defect appearing in the public record

     Correct answer: A latent defect the seller had a duty to disclose

     The correct answer is a latent defect the seller had a duty to disclose. A latent defect is hidden and not discoverable through ordinary inspection, and when the seller knows of it, there is a duty to disclose it to the buyer. It is not a patent defect because it was concealed and not observable, it is not economic obsolescence, which is an appraisal value concept, and it is not a title defect because it concerns a physical condition rather than the record of ownership.

127. Which scenario best illustrates a patent defect rather than a latent defect?
     • Corroded plumbing sealed inside a wall cavity
     • A buried, leaking fuel tank in the back yard
     • A large, visibly cracked and sagging front porch obvious to anyone approaching the house
     • Mold growing inside a never-opened crawlspace

     Correct answer: A large, visibly cracked and sagging front porch obvious to anyone approaching the house

     The correct answer is a large, visibly cracked and sagging front porch obvious to anyone approaching the house. A patent defect is open, apparent, and readily observable through ordinary inspection, which describes a clearly damaged porch. Plumbing sealed in a wall, a buried leaking tank, and mold in a never-opened crawlspace are all concealed conditions and therefore examples of latent defects, not patent ones.

128. A buyer with young children specifically asks an agent whether any registered sex offenders live on the block. What is the most appropriate response under the framework associated with Megan's Law?
     • Refuse to answer because any mention could violate fair housing law
     • Personally guarantee the neighborhood is offender-free to reassure the buyer
     • Tell the buyer the seller is legally required to compile and disclose the list
     • Direct the buyer to the publicly available state registry where that information can be searched

     Correct answer: Direct the buyer to the publicly available state registry where that information can be searched

     The correct answer is to direct the buyer to the publicly available state registry where that information can be searched. Megan's Law makes registered sex-offender information publicly accessible, and the accepted practice is to refer interested parties to the official registry rather than research, guarantee, or vouch for the data. Refusing entirely, personally guaranteeing the area, or claiming the seller must compile the list each misstates how the public-registry framework works.

129. Which statement most accurately describes the purpose of Megan's Law as it relates to real estate?
     • It establishes public notification and registry access regarding sex offenders so the public can obtain that information
     • It requires sellers to remediate environmental hazards before transfer
     • It mandates a uniform federal property-condition disclosure form
     • It sets the federal cutoff date for lead-based paint disclosure

     Correct answer: It establishes public notification and registry access regarding sex offenders so the public can obtain that information

     The correct answer is that it establishes public notification and registry access regarding sex offenders so the public can obtain that information. Megan's Law statutes require that information about registered sex offenders be made publicly available so buyers and the community can look it up. It does not deal with environmental remediation, does not create a uniform federal property-condition form, and does not set the lead-based paint cutoff date, which is a separate federal rule.

130. Radon enters a home primarily from which source?
     • Off-gassing from new synthetic carpeting and adhesives
     • The natural breakdown of uranium in soil and rock beneath the foundation
     • Lead solder used in older drinking-water pipes
     • Mold spores circulating through the HVAC system

     Correct answer: The natural breakdown of uranium in soil and rock beneath the foundation

     The correct answer is the natural breakdown of uranium in soil and rock beneath the foundation. Radon is a naturally occurring radioactive gas produced as uranium decays in the ground, and it migrates upward into structures through cracks and openings in the foundation. Carpet off-gassing, lead solder in pipes, and circulating mold spores are distinct indoor concerns that do not produce radon.

131. At a residential closing, the seller has prepaid the homeowners association dues and property taxes for periods extending past the settlement date. The process of fairly dividing these prepaid and accrued expenses between buyer and seller as of the closing date is best described as which of the following?
     • Subordination
     • Proration
     • Capitalization
     • Recapture

     Correct answer: Proration

     The correct answer is proration. Proration is the allocation of ongoing property expenses and income, such as taxes, interest, insurance, and association dues, between the buyer and seller so that each pays only for the portion of the period during which they own the property. Subordination concerns lien priority, capitalization converts income to value, and recapture is a depreciation tax concept, so none of those describes the fair splitting of closing-date expenses.

132. At closing, a property's annual taxes have accrued but have not yet been paid by the seller, and the buyer will pay the full bill when it comes due. On the settlement statement, how is the seller's share of those unpaid accrued taxes typically handled?
     • It is ignored because the buyer ultimately pays the bill
     • It is shown as a credit to the buyer and a debit to the seller
     • It is added to the loan principal
     • It is paid entirely by the listing broker

     Correct answer: It is shown as a credit to the buyer and a debit to the seller

     The correct answer is that it is shown as a credit to the buyer and a debit to the seller. When taxes have accrued but are unpaid, the seller owes the portion covering the time the seller owned the property, so that amount is debited to the seller and credited to the buyer, who will pay the full bill later. Ignoring the accrual would unfairly burden the buyer, the amount is not folded into loan principal, and the broker does not absorb prorated taxes, so those alternatives misstate standard proration treatment.

133. A buyer is comparing two thirty-year mortgages and wants a single disclosed figure that reflects the yearly cost of credit including interest plus certain loan fees expressed as a percentage. Under Regulation Z, which disclosed figure serves this comparison purpose?
     • The annual percentage rate
     • The principal balance
     • The escrow cushion
     • The assessed value

     Correct answer: The annual percentage rate

     The correct answer is the annual percentage rate. Regulation Z, which implements the Truth in Lending Act, requires lenders to disclose the annual percentage rate so borrowers can compare the true yearly cost of credit, blending the interest rate with certain finance charges into one figure. The principal balance is the amount owed, the escrow cushion is a reserve for taxes and insurance, and the assessed value is used for taxation, none of which expresses the comparable annual cost of borrowing.

134. A radio advertisement for a mortgage states a specific interest rate and the phrase "low monthly payments" but omits other required credit terms. Federal advertising rules that require additional disclosures once certain triggering terms appear in a consumer-credit ad come from which law?
     • The Real Estate Settlement Procedures Act
     • The Equal Credit Opportunity Act
     • The Truth in Lending Act
     • The Fair Credit Reporting Act

     Correct answer: The Truth in Lending Act

     The correct answer is the Truth in Lending Act. The Truth in Lending Act and its Regulation Z govern consumer-credit advertising, requiring that when a triggering term such as a specific rate or payment is stated, additional credit terms must also be disclosed so the advertisement is not misleading. The Real Estate Settlement Procedures Act addresses settlement services and kickbacks, the Equal Credit Opportunity Act prohibits credit discrimination, and the Fair Credit Reporting Act governs credit reports, none of which sets the triggering-term advertising rules.

135. Early in a real estate financing transaction, the Real Estate Settlement Procedures Act requires that the borrower receive a standardized estimate of loan terms and projected settlement costs shortly after applying for most residential mortgage loans. This early disclosure form is known as which of the following?
     • The Closing Disclosure
     • The promissory note
     • The Loan Estimate
     • The satisfaction of mortgage

     Correct answer: The Loan Estimate

     The correct answer is the Loan Estimate. Under the integrated disclosure rules tied to the Real Estate Settlement Procedures Act and the Truth in Lending Act, the lender must give the borrower a Loan Estimate within a few business days of application, summarizing projected loan terms and settlement costs so the borrower can shop and compare. The Closing Disclosure comes at the end before consummation, a promissory note is the repayment promise, and a satisfaction of mortgage releases a paid lien, none of which is the early estimate provided after application.

136. Under the Real Estate Settlement Procedures Act, a lender that requires the borrower to deposit money into an escrow account for taxes and insurance is generally restricted in how large a reserve cushion it may collect and hold. What is the primary purpose of this restriction?
     • To guarantee the borrower a lower interest rate
     • To prevent lenders from holding excessive borrower funds beyond what is needed to pay taxes and insurance
     • To eliminate the need for title insurance
     • To set the maximum loan-to-value ratio

     Correct answer: To prevent lenders from holding excessive borrower funds beyond what is needed to pay taxes and insurance

     The correct answer is to prevent lenders from holding excessive borrower funds beyond what is needed to pay taxes and insurance. The Real Estate Settlement Procedures Act limits the escrow cushion a lender may require so borrowers are not forced to over-fund their impound accounts. The rule does not guarantee a lower interest rate, does not affect whether title insurance is needed, and does not set the loan-to-value ratio, so those choices misstate the consumer-protection purpose of the escrow limit.

137. After a borrower receives the initial Closing Disclosure, the lender makes a change to the loan that increases the annual percentage rate beyond the allowed tolerance. Under federal settlement rules, what is the consequence of this kind of significant change?
     • The closing may proceed immediately with no further notice
     • The borrower forfeits the earnest money
     • A new three-business-day review period is triggered before consummation
     • The appraisal must be redone

     Correct answer: A new three-business-day review period is triggered before consummation

     The correct answer is that a new three-business-day review period is triggered before consummation. When certain significant changes occur, such as the annual percentage rate exceeding tolerance, a change in the loan product, or the addition of a prepayment penalty, a corrected Closing Disclosure must be issued and a fresh three-business-day waiting period restarts. The closing cannot simply proceed without that wait, the borrower does not forfeit earnest money because of a lender change, and the appraisal is not required to be redone, so those alternatives are incorrect.

138. On the Closing Disclosure for a typical purchase, amounts the buyer must bring to closing are listed as the buyer's debits, while items such as the loan proceeds and the earnest money deposit reduce what the buyer owes. How are those items that reduce the buyer's obligation classified on the buyer's side of the statement?
     • As credits to the buyer
     • As debits to the buyer
     • As seller-paid commissions
     • As discount points

     Correct answer: As credits to the buyer

     The correct answer is as credits to the buyer. On a settlement statement, amounts that reduce what the buyer must pay, such as the new loan proceeds and the earnest money already deposited, appear as credits to the buyer, while costs the buyer owes appear as debits. They are not debits, which increase the buyer's obligation, they are not seller commissions, and they are not discount points, so those classifications misidentify items that lower the buyer's cash to close.

139. A homebuyer makes only a 5 percent down payment on a conventional loan and is required to pay an extra monthly charge until enough equity is built. This charge can typically be canceled once the loan balance reaches a certain percentage of the original value. What is this charge?
     • A loan origination fee
     • A documentary transfer tax
     • A homeowners association assessment
     • Private mortgage insurance

     Correct answer: Private mortgage insurance

     The correct answer is private mortgage insurance. Private mortgage insurance is charged on conventional loans with less than a 20 percent down payment to protect the lender, and under federal rules it can generally be canceled once the loan balance is paid down to a set percentage of the property's original value. A loan origination fee is a one-time charge for processing the loan, a documentary transfer tax is a one-time government charge on conveyance, and a homeowners association assessment funds the community, none of which is the cancelable lender-protection premium on a low-down-payment conventional loan.

140. A borrower asks how private mortgage insurance differs from the mortgage insurance attached to certain government-insured loans. Which statement most accurately distinguishes private mortgage insurance?
     • Private mortgage insurance is paid by the lender and protects the borrower
     • Private mortgage insurance is required only on loans with a down payment above 20 percent
     • Private mortgage insurance applies to conventional loans and can generally be removed as equity grows, whereas some government-loan mortgage insurance lasts the life of the loan
     • Private mortgage insurance replaces the need for a promissory note

     Correct answer: Private mortgage insurance applies to conventional loans and can generally be removed as equity grows, whereas some government-loan mortgage insurance lasts the life of the loan

     The correct answer is that private mortgage insurance applies to conventional loans and can generally be removed as equity grows, whereas some government-loan mortgage insurance lasts the life of the loan. Private mortgage insurance is tied to conventional financing with low down payments and may be canceled once sufficient equity accumulates, unlike certain government-loan insurance premiums that can remain for the loan's term. It is paid by the borrower to protect the lender, it is required on low rather than high down payments, and it does not replace the promissory note, so those statements are inaccurate.

141. A loan officer explains that on a fully amortized mortgage, the scheduled payment stays level for the entire term even though the split between interest and principal shifts. What happens to the outstanding loan balance over the life of such a loan?
     • It increases steadily until a balloon payment is due
     • It declines to zero by the end of the term
     • It remains unchanged until the final payment
     • It fluctuates with a published index

     Correct answer: It declines to zero by the end of the term

     The correct answer is that it declines to zero by the end of the term. In a fully amortized loan, each level payment covers the interest due and reduces principal, so the balance steadily falls until it is completely paid off at the end of the term. The balance does not grow toward a balloon, which describes a partially amortized loan, it does not stay unchanged, which describes interest-only or term loans, and it does not move with an index, which describes an adjustable-rate loan, so those choices misdescribe amortization.

142. A house has a main floor of 1,800 square feet and a second story of 1,200 square feet. If the construction cost is estimated at $145 per square foot, what is the estimated cost to build the house?
     • $261,000
     • $174,000
     • $435,000
     • $300,000

     Correct answer: $435,000

     The estimated cost is $435,000. First add the floor areas: $1{,}800 + 1{,}200 = 3{,}000$ square feet, then multiply by the per-square-foot cost: 3,000 $\times$ $145 = $435,000. Total livable area must be summed before applying a unit cost.

143. A listing broker keeps 35% of the total commission and gives the cooperating broker the rest on a property that sells for $480,000 at a 5% total commission rate. How much does the cooperating broker receive?
     • $8,400
     • $24,000
     • $12,000
     • $15,600

     Correct answer: $15,600

     The cooperating broker receives $15,600. The total commission is $480,000 $\times$ 0.05 = $24,000; the listing broker keeps 35% ($24,000 $\times$ 0.35 = $8,400), leaving the cooperating broker the remaining 65%: $24,000 $\times$ 0.65 = $15,600. The cooperating broker's share is the complement of the listing broker's retained percentage.

144. A salesperson is on a 70/30 split with the brokerage, where the salesperson keeps 70%. After a closing the salesperson received $7,140 as their share. What was the total commission earned by the brokerage on this transaction before the split?
     • $10,200
     • $23,800
     • $2,142
     • $4,998

     Correct answer: $10,200

     The total commission was $10,200. The salesperson's $7,140 represents 70% of the total, so divide the part by the rate: $7,140 / 0.70 = $10,200. When the share and its percentage are known but the whole is not, division recovers the total.

145. A seller wants to net $300,000 after paying a 6% commission, with no other costs. At what price must the property sell for the seller to net that amount?
     • $318,000
     • $319,149
     • $282,000
     • $300,600

     Correct answer: $319,149

     The property must sell for about $319,149. After a 6% commission the seller keeps 94% of the price, so divide the desired net by 0.94: $300,000 / 0.94 = $319,148.94, which rounds to $319,149. The net must be divided by the retained percentage, not increased by the commission rate.

146. A buyer makes a $45,000 down payment and finances the rest of a $375,000 purchase. What loan-to-value ratio results from this financing?
     • 12%
     • 75%
     • 90%
     • 88%

     Correct answer: 88%

     The loan-to-value ratio is 88%. The loan equals the price minus the down payment: $375,000 − $45,000 = $330,000, and LTV equals loan divided by value: $330,000 / $375,000 = 0.88, or 88%. The down payment must first be subtracted to find the financed amount.

147. A lender approves an 80% loan-to-value loan and the borrower receives a loan of $268,000. What was the value the lender used to size this loan?
     • $335,000
     • $214,400
     • $321,600
     • $300,000

     Correct answer: $335,000

     The value used was $335,000. When the loan and the LTV ratio are known, divide the loan by the ratio: $268,000 / 0.80 = $335,000. Dividing the loan amount by the loan-to-value percentage recovers the underlying property value.

148. A property has an assessed value of $320,000 and the jurisdiction levies a tax rate of 18 mills. What is the annual property tax owed?
     • $576
     • $5,760
     • $57,600
     • $1,778

     Correct answer: $5,760

     The annual property tax is $5,760. A mill equals $0.001 per dollar of assessed value, so 18 mills is $0.018 per dollar; multiply the assessed value by that rate: $320,000 $\times$ 0.018 = $5,760. Converting mills into a decimal before multiplying prevents place-value errors.

149. A municipality needs to raise $9,000,000 from property taxes and the total assessed value of all taxable property in its boundaries is $600,000,000. What mill rate must the municipality set to raise exactly that amount?
     • 6.67 mills
     • 15 mills
     • 1.5 mills
     • 150 mills

     Correct answer: 15 mills

     The required rate is 15 mills. Divide the revenue needed by the total assessed value: $9,000,000 / $600,000,000 = 0.015, which equals 15 mills since one mill is 0.001. Translating the resulting decimal into mills requires multiplying by 1,000.

150. A county charges a documentary transfer tax of $0.55 for each $500 of value conveyed. What is the transfer tax on a sale price of $640,000?
     • $352
     • $3,520
     • $704
     • $1,280

     Correct answer: $704

     The transfer tax is $704. Divide the price into $500 increments: $640,000 $\div$ $500 = 1,280 increments, then multiply by the per-increment rate: 1,280 $\times$ $0.55 = $704. The price must be broken into the taxable units before applying the rate.

151. A state transfer tax is assessed at $2.00 per $1,000 of sale price, and a buyer paid $1,150 in transfer tax at closing. What was the sale price of the property?
     • $230,000
     • $2,300,000
     • $57,500
     • $575,000

     Correct answer: $575,000

     The sale price was $575,000. Each $1,000 of price carries $2.00 of tax, so the number of $1,000 units equals $1,150 $\div$ $2.00 = 575 units, and 575 $\times$ $1,000 = $575,000. Working the per-thousand formula backward converts the tax paid into the sale price.

152. A sale closes on April 30 and the seller has not yet paid the calendar-year property taxes of $4,380, which the buyer will pay later. Using a 365-day year and charging the seller for the days the seller owned the property (120 days, January 1 through April 30), how much is debited to the seller and credited to the buyer at closing?
     • $1,440
     • $1,200
     • $2,880
     • $3,180

     Correct answer: $1,440

     The seller is debited and the buyer credited $1,440. The daily tax is $4,380 $\div$ 365 = $12 per day, and the seller owned the property for 120 days of the unpaid taxes: 120 $\times$ $12 = $1,440. Because the taxes are unpaid (in arrears), the seller's share becomes a credit to the buyer who will pay the full bill.