- Which body within New York State government licenses real estate salespersons and brokers and administers Article 12-A of the Real Property Law?
- The Department of State, Division of Licensing Services
- The Department of Financial Services
- The Office of the Attorney General
- The Division of Housing and Community Renewal
Correct answer: The Department of State, Division of Licensing Services
Under NY Real Property Law Article 12-A, the Department of State (DOS), through its Division of Licensing Services, issues real estate licenses, enforces the law, and adopts regulations found in 19 NYCRR.
- How many hours of approved qualifying education must an applicant complete before sitting for the New York real estate salesperson licensing exam?
- 77 hours
- 63 hours
- 90 hours
- 45 hours
Correct answer: 77 hours
Effective December 21, 2022, NY requires 77 hours of approved salesperson qualifying education (increased from the former 75 hours), per the DOS Division of Licensing Services.
- In New York, what minimum percentage of questions must a candidate answer correctly to pass the salesperson licensing examination?
Correct answer: 70%
The DOS salesperson exam consists of multiple-choice questions, and a candidate must answer at least 70% correctly to pass.
- What is the minimum age to obtain a real estate salesperson license in New York?
- 18 years old
- 21 years old
- 19 years old
- 20 years old
Correct answer: 18 years old
Per DOS requirements, a salesperson applicant must be at least 18 years old; a broker applicant must be at least 20.
- A newly licensed New York real estate salesperson must work under the supervision of whom in order to conduct licensed activity?
- A licensed sponsoring real estate broker
- Any other licensed salesperson with more experience
- A Department of State field examiner
- A licensed attorney admitted to the New York bar
Correct answer: A licensed sponsoring real estate broker
Under Article 12-A, a salesperson may only act on behalf of and be supervised by a single licensed sponsoring broker, who must be named on the license application.
- For how long is a New York real estate salesperson license valid before it must be renewed?
- Two years
- One year
- Three years
- Four years
Correct answer: Two years
Under Article 12-A, NY real estate licenses are issued for a two-year term and must be renewed with the Department of State before expiration.
- How many hours of continuing education must most New York real estate licensees complete during each two-year renewal cycle?
- 22.5 hours
- 14 hours
- 30 hours
- 12 hours
Correct answer: 22.5 hours
Effective July 1, 2021, NY requires 22.5 hours of continuing education per two-year renewal cycle. Attorneys admitted to the NY bar are exempt.
- Within New York's 22.5-hour continuing education requirement, how many hours of fair housing instruction are mandated?
- 3 hours
- 1 hour
- 6 hours
- 2 hours
Correct answer: 3 hours
NY's mandatory CE includes 3 hours of fair housing, plus components such as implicit bias, cultural competency, law of agency, ethical business practices, and legal matters.
- Which New York attorneys are exempt from the 22.5-hour real estate continuing education requirement?
- Attorneys admitted to the New York State bar
- Attorneys licensed in any U.S. state
- No licensee is exempt
- Attorneys who hold a broker license only
Correct answer: Attorneys admitted to the New York State bar
Under Article 12-A, attorneys admitted to practice in NY are exempt from the real estate CE requirement; the exemption does not extend to out-of-state attorneys.
- To qualify for a New York real estate broker license, an applicant generally must have at least how many years of experience as a licensed salesperson?
- Two years
- One year
- Five years
- Three years
Correct answer: Two years
Per DOS broker requirements, an applicant must have at least two years of experience as a licensed salesperson (or three years in the general real estate field) plus 152 hours of qualifying education.
- How many total hours of qualifying education are required to obtain a New York real estate broker license?
- 152 hours
- 77 hours
- 120 hours
- 90 hours
Correct answer: 152 hours
The DOS requires 152 hours of approved broker qualifying education, which includes the 77-hour salesperson course plus an additional 75-hour broker course.
- Under NY Real Property Law section 443, a seller's agent or listing agent must present the New York agency disclosure form to a prospective buyer at what point?
- At the time of first substantive contact with the buyer
- Only at the closing table
- After an accepted offer is signed
- Within 30 days after first showing the property
Correct answer: At the time of first substantive contact with the buyer
RPL 443 requires the agency disclosure form be provided to a buyer/tenant at the time of first substantive contact, and to a seller/landlord before entering a listing agreement.
- New York's mandatory agency disclosure form under RPL 443 applies to which type of transaction?
- Residential real property of one to four units
- All commercial office leases
- Only new-construction condominiums
- Industrial and warehouse sales only
Correct answer: Residential real property of one to four units
RPL 443 governs agency disclosure for residential real property, defined as improved one-to-four-family dwellings, condominium, or cooperative apartments.
- In New York, what is a 'dual agent' as described in the RPL 443 agency disclosure form?
- An agent who, with the informed written consent of both parties, represents both the buyer and the seller in the same transaction
- An agent who holds both a salesperson and broker license
- An agent who works for two different brokerage firms
- An agent representing two buyers competing for the same property
Correct answer: An agent who, with the informed written consent of both parties, represents both the buyer and the seller in the same transaction
Under RPL 443, a dual agent represents both seller and buyer in the same transaction and may do so only with the informed written consent of both principals, and cannot provide undivided loyalty to either.
- Under New York's RPL 443 'dual agency with designated sales agents,' what occurs?
- With both parties' written consent, the broker appoints one sales agent to represent the seller and a different sales agent to represent the buyer
- Two brokers from competing firms split a single commission
- The seller and buyer share the same designated agent equally
- The Department of State assigns an independent agent to both parties
Correct answer: With both parties' written consent, the broker appoints one sales agent to represent the seller and a different sales agent to represent the buyer
RPL 443 permits a broker acting as a dual agent to designate one sales agent for the seller and another for the buyer, but only with the informed written consent of both principals.
- If a New York buyer or seller refuses to sign the agency disclosure form required by RPL 443, what should the agent do?
- Set forth in writing the facts of the refusal and keep it for the agent's records
- Decline to proceed with the transaction entirely
- Sign the form on the consumer's behalf
- Report the refusal to the Department of State within 24 hours
Correct answer: Set forth in writing the facts of the refusal and keep it for the agent's records
RPL 443 provides that if a party refuses to sign the acknowledgment, the agent must note the refusal in writing on the form and retain it; the agent is not required to abandon the transaction.
- Which fiduciary duty must a New York designated sales agent specifically explain it CANNOT provide?
- Undivided loyalty
- Confidentiality of price information after closing
- Accounting for funds
- Obedience to lawful instructions
Correct answer: Undivided loyalty
Under RPL 443, because a designated sales agent works within a brokerage that is a dual agent, the agent must disclose that it cannot provide undivided loyalty to its principal.
- As of March 20, 2024, what change did New York make to the Property Condition Disclosure Act regarding the former $500 credit?
- The $500 credit option was eliminated, so a seller of a 1-to-4 family home can no longer avoid delivering the disclosure statement by giving the buyer a $500 credit at closing
- The credit was increased to $1,000
- The credit became mandatory for every residential sale
- The credit now applies to commercial property as well
Correct answer: The $500 credit option was eliminated, so a seller of a 1-to-4 family home can no longer avoid delivering the disclosure statement by giving the buyer a $500 credit at closing
Effective March 20, 2024, NY amended RPL Article 14 to remove the $500 credit alternative under section 465; sellers of one-to-four family homes must now deliver the Property Condition Disclosure Statement and remain liable for failing to do so.
- The New York Property Condition Disclosure Statement is required for the sale of which type of property?
- Residential real property of one to four dwelling units
- Vacant commercial land of any size
- Apartment buildings with more than ten units
- Only newly constructed homes
Correct answer: Residential real property of one to four dwelling units
Under RPL Article 14, the Property Condition Disclosure Statement applies to the transfer of residential real property consisting of one to four family dwelling units.
- The 2024 amendments to New York's Property Condition Disclosure Statement added a new mandatory disclosure about what hazard?
- Flooding and flood insurance history of the property
- Proximity to cell phone towers
- Past use as a methamphetamine lab
- Crime statistics for the neighborhood
Correct answer: Flooding and flood insurance history of the property
The amended PCDS effective March 20, 2024 added questions requiring sellers to disclose flooding history and flood insurance information for the property.
- When must a New York seller deliver the Property Condition Disclosure Statement to a buyer?
- Prior to the buyer signing the contract of sale
- At the closing
- Within five days after closing
- Only if the buyer requests it in writing
Correct answer: Prior to the buyer signing the contract of sale
Under RPL Article 14, the seller must deliver the completed and signed disclosure statement to the buyer before the buyer signs the binding contract of sale.
- Under 19 NYCRR Part 175, what must a New York broker do with money belonging to clients, such as escrow deposits?
- Maintain it in a separate, special escrow account and not commingle it with the broker's own funds
- Hold it in the broker's personal checking account for convenience
- Deposit it directly into the seller's bank account
- Convert it to a cashier's check made out to the broker
Correct answer: Maintain it in a separate, special escrow account and not commingle it with the broker's own funds
19 NYCRR 175.1 prohibits commingling money of a principal with the broker's own funds; client money such as down payments must be kept in a separate special bank account.
- A New York broker holds an earnest-money deposit in escrow and the seller and buyer later dispute who is entitled to it. What is the broker's proper course of action?
- Continue to hold the funds in escrow and not release them until the parties agree in writing or a court directs disbursement
- Release the funds to whichever party the broker believes is right
- Keep the funds as the broker's commission
- Send the funds to the Department of State for safekeeping
Correct answer: Continue to hold the funds in escrow and not release them until the parties agree in writing or a court directs disbursement
Under 19 NYCRR Part 175 and DOS guidance, an escrow agent must safeguard disputed funds and may not unilaterally release them; the broker holds them pending written agreement or a court order.
- Under NY Real Property Law 441-c, what is the MAXIMUM monetary fine the Department of State may impose for a violation by a licensee?
Correct answer: $2,000
RPL 441-c authorizes the DOS to impose a fine not exceeding $2,000 (a portion directed to the anti-discrimination in housing fund), in addition to suspension or revocation.
- After the New York Department of State REVOKES a real estate license under RPL 441-c, when may the person generally be relicensed?
- Not until at least one year after the date of revocation
- Immediately upon paying a reinstatement fee
- After 30 days
- Never, the bar is permanent
Correct answer: Not until at least one year after the date of revocation
RPL 441-c provides that a person whose license is revoked is ineligible to be relicensed as a broker or salesperson until at least one year from the date of revocation.
- Which of the following is a ground for the New York Department of State to discipline a licensee under Article 12-A?
- Demonstrated untrustworthiness or incompetency to act as a broker or salesperson
- Earning a commission above the local board's average
- Representing more than one buyer in a calendar year
- Working for a brokerage located in another county
Correct answer: Demonstrated untrustworthiness or incompetency to act as a broker or salesperson
RPL 441-c allows discipline for fraud, misrepresentation, dishonest dealing, and demonstrated untrustworthiness or incompetency, among other grounds.
- Under New York's RPL section 442, what is generally prohibited regarding the sharing of real estate commissions?
- A broker may not pay a commission or fee to any person who is not a licensed real estate broker or salesperson
- A broker may never split a commission with a cooperating broker
- A salesperson may collect commissions directly from the buyer
- A broker must pay all commissions to the Department of State first
Correct answer: A broker may not pay a commission or fee to any person who is not a licensed real estate broker or salesperson
RPL 442 prohibits a broker from paying any part of a fee or commission to an unlicensed person; compensation may only flow to licensed brokers and to the salespersons the broker sponsors.
- In New York, to whom may a licensed salesperson lawfully be paid a commission?
- Only by the salesperson's own sponsoring broker
- Directly by the seller at closing
- By any broker involved in the deal
- By the buyer's attorney
Correct answer: Only by the salesperson's own sponsoring broker
Under Article 12-A, a salesperson may receive compensation only from the broker who sponsors and supervises the salesperson, not directly from a principal or another broker.
- Which of these activities can be performed in New York WITHOUT a real estate license under Article 12-A?
- An owner selling or renting his or her own real property
- Negotiating the sale of another person's home for a fee
- Listing a neighbor's property for a commission
- Collecting rents for several different landlords for compensation
Correct answer: An owner selling or renting his or her own real property
RPL Article 12-A exempts owners dealing with their own property; a license is required when a person performs licensed acts for another for compensation.
- New York's Real Property Law Article 9-A primarily regulates the sale or lease of what?
- Subdivided vacant lands offered to the public
- Cooperative apartment conversions
- Rent-stabilized apartments in New York City
- Commercial office condominiums
Correct answer: Subdivided vacant lands offered to the public
Article 9-A governs the sale and lease of subdivided lands to protect buyers from fraud, requiring subdividers to file an offering statement with the Department of State.
- Before a subdivider may offer subdivided lands to the public in New York under Article 9-A, what must occur?
- An offering statement must be filed with the Department of State
- The land must be appraised by a county tax assessor
- A real estate broker must purchase the first lot
- The local zoning board must approve the sale price
Correct answer: An offering statement must be filed with the Department of State
Under RPL Article 9-A (section 337-a/337-b), a subdivider may not sell or lease subdivided lands to the public until an offering statement with required disclosures is filed with the DOS.
- Which protected class is covered by the New York State Human Rights Law but is NOT a protected class under the federal Fair Housing Act?
- Lawful source of income
- Race
- Religion
- Disability
Correct answer: Lawful source of income
The NY State Human Rights Law adds protected classes beyond the federal Fair Housing Act, including lawful source of income, age, marital status, sexual orientation, gender identity or expression, and military status.
- Under the New York State Human Rights Law, refusing to rent an apartment to an applicant because the rent would be paid with a Section 8 housing voucher is generally:
- Unlawful discrimination based on lawful source of income
- Permitted, because vouchers are not protected
- Permitted only for buildings of fewer than four units
- Allowed if the landlord prefers cash rent
Correct answer: Unlawful discrimination based on lawful source of income
The NY State Human Rights Law makes lawful source of income, including Section 8 vouchers and other public assistance, a protected class in housing.
- Which state agency enforces the New York State Human Rights Law in housing discrimination matters?
- The New York State Division of Human Rights
- The Department of State, Division of Licensing Services
- The Department of Financial Services
- The Office of Court Administration
Correct answer: The New York State Division of Human Rights
The NY State Division of Human Rights enforces the State Human Rights Law (Executive Law Article 15); a related housing violation can also lead the DOS to discipline a licensee under RPL 441-c.
- What is the rate of the New York State real estate transfer tax on a conveyance of real property?
- $2 for each $500 of consideration (or fraction thereof)
- $5 for each $1,000 of consideration
- 1% of the total sale price
- $1 for each $100 of consideration
Correct answer: $2 for each $500 of consideration (or fraction thereof)
The NY State real estate transfer tax is imposed at $2 for each $500 (or fraction) of consideration on conveyances where consideration exceeds $500, equal to 0.4% of the price.
- In a typical New York residential sale, who is primarily responsible for paying the New York State real estate transfer tax?
- The seller (grantor)
- The buyer (grantee)
- The listing broker
- The title insurance company
Correct answer: The seller (grantor)
Under NY Tax Law, the State transfer tax is paid by the grantor (seller); if the seller fails to pay or is exempt, the buyer becomes liable.
- New York's 'mansion tax' applies to the conveyance of residential real property when the consideration is at least:
- $1,000,000
- $500,000
- $2,000,000
- $750,000
Correct answer: $1,000,000
NY imposes an additional 1% mansion tax on conveyances of residential real property where the consideration is $1,000,000 or more; this base tax is generally paid by the buyer.
- The base New York State 'mansion tax' on qualifying residential sales of $1 million or more is generally paid by whom?
- The buyer (grantee)
- The seller (grantor)
- Split equally between buyer and seller by statute
- The mortgage lender
Correct answer: The buyer (grantee)
Unlike the base transfer tax (paid by the seller), the 1% mansion tax is imposed on and generally paid by the buyer/grantee.
- New York rent stabilization generally applies to which category of apartments?
- Apartments in buildings of six or more units built before 1974 in localities that have adopted rent stabilization
- All single-family homes statewide
- Newly constructed luxury condominiums
- Owner-occupied two-family houses
Correct answer: Apartments in buildings of six or more units built before 1974 in localities that have adopted rent stabilization
NY rent stabilization typically covers apartments in buildings of six or more units constructed before 1974 in NYC and certain other localities; it limits rent increases and provides renewal rights administered through DHCR.
- In New York, which agency administers rent regulation, including rent stabilization and rent control?
- The Division of Housing and Community Renewal (DHCR)
- The Department of State, Division of Licensing Services
- The Division of Human Rights
- The Department of Taxation and Finance
Correct answer: The Division of Housing and Community Renewal (DHCR)
NY's DHCR administers rent stabilization and rent control; this is distinct from the DOS, which administers real estate licensing under Article 12-A.
- Under 19 NYCRR Part 175, when a New York broker advertises a property listing, the advertisement must:
- Clearly indicate that the advertiser is a real estate broker (no blind ads)
- Omit the broker's name to protect the seller
- State the seller's home phone number
- Include the exact commission rate
Correct answer: Clearly indicate that the advertiser is a real estate broker (no blind ads)
19 NYCRR 175.25 prohibits 'blind' advertising; ads placed by a broker must indicate that the party is a real estate broker, not give the impression an owner is advertising.
- Under New York law, a salesperson who wishes to change sponsoring brokers must:
- Have the new sponsoring broker file the change with the Department of State and obtain a license amendment
- Simply begin working for the new broker without notifying the DOS
- Wait until the next two-year renewal to change brokers
- Surrender the license and reapply from the beginning
Correct answer: Have the new sponsoring broker file the change with the Department of State and obtain a license amendment
Under Article 12-A, the salesperson's association with a broker is recorded with the DOS; a change of sponsoring broker must be filed with the Department of State so the license reflects the current broker.
- Which of the following persons is exempt from the New York real estate license requirement under Article 12-A?
- An attorney admitted to the New York bar acting within the scope of his or her law practice
- An unlicensed person who negotiates sales for a commission
- A salesperson whose license has lapsed
- A property manager collecting rents for several owners for a fee
Correct answer: An attorney admitted to the New York bar acting within the scope of his or her law practice
RPL Article 12-A exempts NY-admitted attorneys acting in their professional capacity, public officials, and certain others; unlicensed persons performing licensed acts for compensation are not exempt.
- Under New York's RPL 443, before signing a listing agreement, the listing agent must provide the agency disclosure form to whom?
- The seller or landlord
- The local multiple listing service
- The Department of State
- The buyer's attorney
Correct answer: The seller or landlord
RPL 443 requires the listing agent to present the agency disclosure form to the seller/landlord and obtain a signed acknowledgment before entering into the listing agreement.
- According to the RPL 443 disclosure form, which of the following is NOT a fiduciary duty a New York buyer's agent owes to the buyer?
- Disclosing the buyer's confidential information to the seller to speed the deal
- Undivided loyalty to the buyer
- Maintaining the confidentiality of the buyer's information
- Exercising reasonable care on the buyer's behalf
Correct answer: Disclosing the buyer's confidential information to the seller to speed the deal
Under RPL 443, a buyer's agent owes the buyer undivided loyalty, confidentiality, full disclosure (to the principal), obedience, reasonable care, and accounting. The agent must NOT disclose the buyer's confidential information to the seller, so that is not a duty owed.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- Four siblings own a farm as joint tenants. One sibling becomes financially troubled, and a creditor obtains and forces the sale of that sibling's interest at a judicial sale to satisfy a judgment. After the forced sale, how does the buyer at that sale hold title relative to the three remaining siblings?
- As a joint tenant with all three siblings, preserving survivorship for everyone
- As a tenant by the entirety with the three siblings
- As sole owner in severalty of the entire farm
- As a tenant in common with the three siblings, who remain joint tenants among themselves
Correct answer: As a tenant in common with the three siblings, who remain joint tenants among themselves
The buyer holds as a tenant in common with the siblings because a forced sale of one joint tenant's interest destroys the unities of time and title as to that share, severing the joint tenancy only for the transferred portion. The three remaining siblings still satisfy the unities among themselves and continue as joint tenants with survivorship. The new owner cannot be a joint tenant because the unities were broken on transfer, tenancy by the entirety requires marriage, and no one owns the whole in severalty because multiple owners remain.
- A deed conveys a parcel to two brothers as joint tenants with right of survivorship. Years later one brother, without telling the other, mortgages only his own interest, and that mortgage is later released before either brother dies. What is the most accurate statement about the survivorship feature during this period in a state following the lien theory of mortgages?
- A mere lien on one joint tenant's interest generally does not by itself sever the joint tenancy
- Granting the mortgage immediately gives the lender full title to the parcel
- The mortgage permanently converts the ownership into a tenancy in common
- The other brother automatically loses his entire interest to the lender
Correct answer: A mere lien on one joint tenant's interest generally does not by itself sever the joint tenancy
In a lien-theory state, a mortgage on one joint tenant's interest is treated as a lien rather than a transfer of title, so it generally does not by itself destroy the unities or sever the joint tenancy. The survivorship feature typically continues unless the lien is foreclosed and the interest actually conveyed. The mortgage does not permanently convert the estate, does not give the lender full title, and does not strip the non-borrowing brother of his interest.
- A married couple who hold their home as tenants by the entirety want to add their adult daughter to the title so all three share ownership going forward. What is generally required for the daughter to be placed on title?
- Nothing, because a child is automatically added to a tenancy by the entirety
- The daughter may record an affidavit of family relationship to join the title
- The couple must first divorce before any new owner can be added
- A new deed must be executed conveying the property into a form of co-ownership that can include the daughter
Correct answer: A new deed must be executed conveying the property into a form of co-ownership that can include the daughter
A new deed is required because tenancy by the entirety can exist only between two spouses, so adding a third owner means re-conveying the property into a form such as joint tenancy or tenancy in common that allows three owners. The change in ownership form must be accomplished by a written, delivered deed. A child is never automatically added, an affidavit of relationship does not transfer or create an ownership interest, and divorce is not a prerequisite to deeding the property to additional owners.
- Three co-owners hold a vacation cabin as tenants in common in shares of 50 percent, 30 percent, and 20 percent. One owner wants to sell and end the co-ownership, but the others refuse to buy out or cooperate. What legal action allows the unwilling-to-continue owner to force a division or sale of the property?
- A partition action
- A quiet title action
- A foreclosure action
- An escheat proceeding
Correct answer: A partition action
A partition action is correct because any tenant in common has the right to file for partition, which asks a court to physically divide the property or, if division is impractical, order a sale and distribute the proceeds according to each owner's fractional share. This remedy lets an owner exit a co-ownership the others will not voluntarily end. A quiet title action resolves competing title claims, a foreclosure enforces a lien against a defaulting borrower, and escheat is the state's taking of ownerless property.
- Two tenants in common own a rental house equally, but one of them paid the full year's property taxes and a major roof repair out of pocket. When the property is later sold, how are these expenses most commonly treated between the co-owners?
- The paying owner is solely responsible because each owner manages the whole property
- The expenses are ignored entirely and proceeds are split by fractional share with no adjustment
- The paying owner may generally seek contribution from the other for that owner's proportionate share of the expenses
- The paying owner automatically gains a larger ownership percentage equal to the amount spent
Correct answer: The paying owner may generally seek contribution from the other for that owner's proportionate share of the expenses
The paying co-owner may generally seek contribution because tenants in common are each responsible for their proportionate share of necessary carrying costs such as taxes and needed repairs, so one who advances those costs can recover the others' shares, often at sale or through an accounting. The expenses are not the sole burden of the payer, they are not simply ignored when settling the proceeds, and advancing money does not by itself increase that owner's fractional ownership percentage.
- A deed states that it conveys property 'to John Smith and Mary Smith, husband and wife, as tenants by the entirety.' This form of co-ownership is distinguished from an ordinary joint tenancy primarily by which additional requirement?
- That the owners hold unequal fractional shares
- That the co-owners be legally married to each other
- That the deed omit any right of survivorship
- That a court approve the conveyance in advance
Correct answer: That the co-owners be legally married to each other
Tenancy by the entirety is distinguished from a joint tenancy by the added requirement that the co-owners be legally married to each other, layering a unity of marriage on top of the four unities. This marital requirement is what separates it from joint tenancy, which any two or more qualifying owners may use. The form does not call for unequal shares, it includes rather than omits a right of survivorship, and it requires no advance court approval to be created by deed.
- A grantor's deed promises that the grantor will obtain and deliver any additional documents later needed to perfect the grantee's title, such as correcting a minor error in the legal description. Which covenant of a general warranty deed is the grantor making?
- The covenant against encumbrances
- The covenant of seisin
- The covenant of warranty forever
- The covenant of further assurance
Correct answer: The covenant of further assurance
The covenant of further assurance is correct because it is the grantor's promise to take any further actions or execute any additional documents reasonably necessary to perfect or correct the grantee's title after the conveyance. This directly matches a promise to supply later instruments fixing a description error. The covenant against encumbrances assures the property is free of undisclosed burdens, the covenant of seisin assures ownership and the right to convey, and the covenant of warranty forever promises to defend the grantee against lawful claims.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- The statute of frauds requires that contracts for the sale of real estate be evidenced by a signed writing primarily to accomplish which purpose?
- To prevent fraudulent claims based on alleged oral agreements about land
- To set a standard commission rate
- To require recording of every contract
- To guarantee financing for the buyer
Correct answer: To prevent fraudulent claims based on alleged oral agreements about land
The statute of frauds requires real estate contracts to be in a signed writing chiefly to prevent fraudulent or mistaken claims based on disputed oral agreements concerning land. It does not set commission rates, require that every contract be recorded, or guarantee that the buyer will obtain financing.
- Which of the following real estate-related agreements is generally enforceable even if it is made only orally, without violating the statute of frauds?
- A contract to sell a house
- A 30-year lease
- A contract conveying a vacant lot
- A month-to-month lease for a short period
Correct answer: A month-to-month lease for a short period
A short-term lease, such as a month-to-month tenancy that can be performed within one year, is generally enforceable even if oral and does not run afoul of the statute of frauds. A contract to sell a house, a 30-year lease, and a contract conveying a vacant lot all create or transfer interests in land for more than a year and must be in a signed writing.
- In an option contract, the optionor receives option consideration from the optionee in exchange for what obligation?
- To buy the property at a set price
- To keep the offer to sell open and irrevocable for the option period
- To finance the optionee's purchase
- To pay the optionee's closing costs
Correct answer: To keep the offer to sell open and irrevocable for the option period
In exchange for the option consideration, the optionor is obligated to keep the offer to sell open and irrevocable during the option period, giving the optionee time to decide whether to buy. The optionor is not obligated to buy the property, to finance the optionee's purchase, or to pay the optionee's closing costs.
- What is the key distinction between a typical purchase contract and an option contract to buy real estate?
- An option contract obligates the buyer to purchase, while a purchase contract does not
- An option contract requires no consideration, while a purchase contract does
- A purchase contract creates a mutual obligation to buy and sell, while an option only gives the optionee a right, not a duty, to buy
- Only purchase contracts must be in writing
Correct answer: A purchase contract creates a mutual obligation to buy and sell, while an option only gives the optionee a right, not a duty, to buy
A purchase contract binds both parties to buy and sell, whereas an option contract gives the optionee the right but not the obligation to buy within the option period. It is incorrect that an option obligates the buyer, that an option requires no consideration, or that only purchase contracts must be in writing, since both involving interests in land generally fall under the statute of frauds.
- Most agency disclosure laws require a licensee to provide written disclosure of the agency relationship at which point in a transaction?
- At or before a specified early point, such as first substantive contact or before confidential information is exchanged
- Only at the closing table
- Only after the contract is signed
- Never, because disclosure is optional
Correct answer: At or before a specified early point, such as first substantive contact or before confidential information is exchanged
Agency disclosure laws generally require the licensee to disclose the agency relationship in writing at an early point, such as first substantive contact or before confidential information is shared, so consumers know whom the licensee represents. Waiting until closing or until after the contract is signed would defeat the purpose, and disclosure is not optional.
- A salesperson meets a prospective buyer at a property and, before any substantive discussion, hands the buyer a form explaining that the salesperson represents the seller. What is this form an example of?
- A listing agreement
- A liquidated damages clause
- A buyer agency agreement
- An agency disclosure
Correct answer: An agency disclosure
A form provided to a prospective buyer explaining whom the salesperson represents is an agency disclosure, satisfying the requirement to inform consumers of the agency relationship. It is not a listing agreement, which engages a broker to market a seller's property, not a liquidated damages clause, which sets preset damages, and not a buyer agency agreement, which would create representation of the buyer.
- An agent tells a prospective buyer, "You will absolutely love living in this neighborhood; it's the best area in the whole city." This statement is most accurately classified as which of the following?
- Puffing, a non-actionable statement of opinion
- A material misrepresentation
- Fraud
- A latent defect disclosure
Correct answer: Puffing, a non-actionable statement of opinion
Saying a buyer will love the area and calling it the best in the city is puffing, an exaggerated statement of opinion that a reasonable person would not treat as a verifiable fact. It is not a material misrepresentation or fraud, which require false statements of fact, and it is not a disclosure of a latent physical defect in the property.
- An agent states, during a sale, that the property's septic system was inspected and passed last month, when in fact no inspection occurred. If a buyer reasonably relies on this and is harmed, how does this differ from permissible puffing?
- It is still puffing because all sales talk is protected
- It is a false statement of material fact that can create liability for misrepresentation
- It is acceptable as long as the agent later corrects it
- It becomes puffing if the buyer is sophisticated
Correct answer: It is a false statement of material fact that can create liability for misrepresentation
Claiming the septic system was inspected and passed when it was not is a false statement of material fact that a buyer can reasonably rely on, exposing the agent to liability for misrepresentation rather than being protected puffing. Not all sales talk is protected, a later correction does not erase reliance-based harm, and the buyer's sophistication does not transform a false factual statement into mere opinion.
- When one party to a real estate contract fails to perform a material obligation without legal excuse, that party is said to have committed which of the following?
- A novation
- An assignment
- A breach of contract
- A contingency
Correct answer: A breach of contract
A party who fails to perform a material contractual obligation without legal excuse has committed a breach of contract, exposing that party to remedies sought by the other side. A novation substitutes a new party, an assignment transfers contractual rights, and a contingency is a condition limiting the duty to perform, none of which describes a failure to perform itself.
- A buyer transfers her rights and interest under a purchase contract to a third party but is not released from her obligations by the seller. This transfer of contractual rights is best described as which of the following?
- A novation
- Rescission
- Specific performance
- An assignment
Correct answer: An assignment
Transferring one's rights and interest under a contract to a third party without being released from the underlying obligations is an assignment, which leaves the assigning party potentially liable if the assignee does not perform. A novation would substitute a new party and release the original, rescission cancels the contract, and specific performance compels completion of the deal.
- A buyer is later found to have been a minor when she signed a purchase contract. Which essential element of a valid contract was most likely missing, potentially making the contract voidable?
- Consideration
- A lawful objective
- Legal capacity of the parties
- Offer and acceptance
Correct answer: Legal capacity of the parties
A minor generally lacks the legal capacity to be bound, so a contract signed by a minor is missing the element of legal capacity and is typically voidable by the minor. Consideration, a lawful objective, and offer and acceptance could all be present in the agreement, but it is the party's lack of contractual capacity that makes the contract subject to disaffirmance.
- A buyer emails a written offer to purchase. The seller signs it without changes and notifies the buyer of acceptance within the offer's stated time. At what point does a binding contract typically form?
- When acceptance of the exact terms is communicated to the offeror
- When the property is recorded
- When the buyer's loan is approved
- When the deed is delivered at closing
Correct answer: When acceptance of the exact terms is communicated to the offeror
A binding contract typically forms when the offeree accepts the offer's exact terms and communicates that acceptance to the offeror, completing mutual assent. Recording occurs after closing, loan approval is a separate financing step, and deed delivery transfers title at closing, none of which is the moment the agreement becomes a binding contract.
- 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.
- 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.
- Two brokers privately agree that neither will hire the other's departing agents and that both will refuse to cooperate on transactions with any firm offering buyer cash rebates. Evaluating both parts of this pact, which characterization is most accurate?
- Both parts are lawful business judgment calls
- The no-hire pact and the refusal to cooperate with rebate firms are both antitrust violations
- Both parts are fair-housing violations
- Only the rebate boycott is unlawful while the no-hire pact is fully permissible
Correct answer: The no-hire pact and the refusal to cooperate with rebate firms are both antitrust violations
Both parts are antitrust violations, because an agreement among competitors not to hire each other's employees is an illegal no-poach agreement and a collective refusal to deal with rebate firms is an illegal group boycott. They are not lawful independent judgment calls because they are concerted, and they are antitrust rather than fair-housing matters since no protected class is involved.
- An agent describes a modest listing in an online ad as "the finest home you will ever own." A buyer later claims this was a misrepresentation. Distinguishing lawful sales talk from a violation, how is this statement best characterized in the practice of real estate?
- Permissible puffing, because it is general opinion rather than a statement of verifiable fact
- Illegal steering, because it influences the buyer's choice
- Commingling, because it concerns the agent's marketing budget
- A Do Not Call violation, because it appears in an advertisement
Correct answer: Permissible puffing, because it is general opinion rather than a statement of verifiable fact
The statement is permissible puffing, because calling a home "the finest you will ever own" is general, non-factual opinion that a reasonable buyer would not rely on as a verifiable claim. It is not steering, which channels buyers by protected class; not commingling, which involves client funds; and not a Do Not Call issue, which concerns telemarketing rather than ad puffery.
- Which federal statute was the original 1968 law that first prohibited discrimination in housing based on race, color, religion, and national origin?
- The Real Estate Settlement Procedures Act
- The Equal Credit Opportunity Act
- The Americans with Disabilities Act
- The Civil Rights Act of 1968, Title VIII, commonly called the Fair Housing Act
Correct answer: The Civil Rights Act of 1968, Title VIII, commonly called the Fair Housing Act
The Civil Rights Act of 1968, Title VIII, known as the Fair Housing Act, is the original federal law that first prohibited housing discrimination based on race, color, religion, and national origin. The Equal Credit Opportunity Act governs credit applications, the Americans with Disabilities Act addresses access to public accommodations, and the Real Estate Settlement Procedures Act covers closing procedures, none of which is the foundational fair-housing statute.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- A short-term radon test on a property returns a result above the EPA's recommended action level. What does this result most directly indicate to the parties to the transaction?
- The home automatically fails any building code and cannot be sold
- The seller must demolish and rebuild the lowest level of the home
- Elevated radon is present and mitigation should be considered or performed
- The buyer must waive all inspection rights to proceed
Correct answer: Elevated radon is present and mitigation should be considered or performed
The correct answer is that elevated radon is present and mitigation should be considered or performed. A reading above the EPA action level signals that radon has accumulated to a level where reducing it through a mitigation system is advisable. A high reading does not automatically void the sale under building code, does not require demolition and rebuilding, and does not force the buyer to waive inspection rights.
- Asbestos in a building generally poses the greatest health risk under which condition?
- When it remains fully intact, undisturbed, and in good condition
- When it is exposed only to outdoor sunlight
- When it is permanently sealed behind unbroken wall surfaces
- When its fibers are disturbed and become airborne so they can be inhaled
Correct answer: When its fibers are disturbed and become airborne so they can be inhaled
The correct answer is when its fibers are disturbed and become airborne so they can be inhaled. Asbestos becomes dangerous primarily once it is friable or disturbed and releases microscopic fibers that people breathe in, leading to respiratory disease. Intact, undisturbed, sealed, or merely sun-exposed asbestos that is not releasing fibers presents far less immediate risk.
- In which type of building is asbestos-containing material most likely to be encountered?
- Older buildings constructed before asbestos was largely phased out of building products
- Newly constructed homes built within the last five years
- Only commercial buildings, never residential structures
- Only structures located in coastal flood zones
Correct answer: Older buildings constructed before asbestos was largely phased out of building products
The correct answer is older buildings constructed before asbestos was largely phased out of building products. Asbestos was widely used in insulation, tiles, and other materials in older construction, so it is most commonly found in those structures rather than newer ones. Brand-new homes are unlikely to contain it, it is not limited to commercial buildings, and its presence is tied to construction era and materials rather than to coastal flood zones.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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?
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.
- 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.
- 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?
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 × 0.018 = $5,760. Converting mills into a decimal before multiplying prevents place-value errors.
- 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.
- 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?
Correct answer: $704
The transfer tax is $704. Divide the price into $500 increments: $640,000 / $500 = 1,280 increments, then multiply by the per-increment rate: 1,280 × $0.55 = $704. The price must be broken into the taxable units before applying the rate.
- 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 / $2.00 = 575 units, and 575 × $1,000 = $575,000. Working the per-thousand formula backward converts the tax paid into the sale price.
