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ID Real Estate practice questions

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Question 1National real estate content

A licensee secretly buys a seller-client's property for the licensee's own account without telling the client. Which fiduciary duty has the licensee breached?

  1. Loyalty Correct answer.
  2. Confidentiality
  3. Accounting
  4. Obedience

Explanation

Loyalty requires the agent to put the principal's interests ahead of the agent's own and to disclose any self-interest in the transaction. Undisclosed self-dealing is the classic loyalty breach.

Question 2National real estate content

Which estate gives an owner the broadest bundle of rights, lasting indefinitely and descending to heirs?

  1. Fee simple absolute Correct answer.
  2. Estate for years
  3. Easement by necessity
  4. Life estate

Explanation

Fee simple absolute is the largest estate recognized; it lasts without limit, is freely transferable, and passes by inheritance or devise. Lesser estates are measured by a life or a fixed term.

Question 3National real estate content

Which deed contains both present covenants, such as seisin and the right to convey, and future covenants, such as quiet enjoyment and warranty against encumbrances?

  1. Quitclaim deed
  2. Bargain and sale deed
  3. Special warranty deed
  4. General warranty deed Correct answer.

Explanation

A general warranty deed contains the full set of statutory covenants, present and future, running from the grantor to the grantee. It gives the grantee the broadest protection against title defects.

Question 4National real estate content

A buyer pays $60,000 in cash toward a $300,000 purchase and finances the balance. What is the loan-to-value ratio?

  1. 90%
  2. 80% Correct answer.
  3. 70%
  4. 85%

Explanation

Loan-to-value equals the loan amount divided by value: $240,000 divided by $300,000 equals 0.80, or 80%.

Question 5National real estate content

Which of the following is a protected class under the federal Fair Housing Act?

  1. Disability Correct answer.
  2. Marital status
  3. Age
  4. Occupation

Explanation

The federal Fair Housing Act prohibits discrimination based on race, color, religion, sex, national origin, familial status, and disability. Handicap, now termed disability, was added in 1988.

Question 6National real estate content

Which lease requires the tenant to pay base rent plus a share of property taxes, insurance, and maintenance?

  1. Graduated lease
  2. Percentage lease
  3. Gross lease
  4. Net lease Correct answer.

Explanation

Under a net lease the tenant bears some or all of the property's operating expenses on top of base rent. A gross lease, by contrast, has the landlord paying those expenses out of the rent.

Question 7National real estate content

Which approach to value generally carries the most weight when appraising an owner-occupied single-family home?

  1. Cost approach
  2. Income capitalization approach
  3. Gross rent multiplier
  4. Sales comparison Correct answer.

Explanation

The sales comparison approach is most reliable for residential property because buyers are heavily influenced by recent prices of similar homes. The cost and income approaches are secondary where an active market of comparable sales exists.

Question 8National real estate content

Under the statute of frauds, a contract for the sale of real property must be:

  1. Approved by the broker
  2. In writing and signed Correct answer.
  3. Notarized and witnessed
  4. Recorded with the county

Explanation

The statute of frauds requires that a contract conveying an interest in land be evidenced by a writing signed by the party to be charged. Recording and notarization affect notice and priority, not basic enforceability.

Question 9National real estate content

A broker represents both the buyer and the seller in the same transaction. For this dual agency to be permissible, the broker must generally:

  1. Obtain written consent from both clients Correct answer.
  2. Refer the matter to the state regulator
  3. Disclose the dual role only to the seller
  4. Reduce the commission by half

Explanation

Dual agency requires the informed, written consent of both principals, because the broker cannot give undivided loyalty to either. Without that consent the arrangement is a breach of fiduciary duty.

Question 10National real estate content

A seller signs a listing that entitles the broker to a commission no matter who procures the buyer, including the seller. This listing is:

  1. Exclusive right to sell Correct answer.
  2. Exclusive agency listing
  3. Open listing
  4. Net listing

Explanation

An exclusive right to sell guarantees the broker a commission whenever the property sells during the listing period, even if the seller finds the buyer. It gives the broker the strongest protection of the common listing types.

Question 11National real estate content

Which title insurance policy protects the buyer for as long as the buyer or the buyer's heirs hold title?

  1. Leasehold title policy
  2. Torrens certificate
  3. Lender's title policy
  4. Owner's title policy Correct answer.

Explanation

An owner's policy is issued for the purchase price and stays in force indefinitely for the insured owner and heirs. A lender's policy protects the lender only, and its coverage declines as the loan balance is paid down.

Question 12National real estate content

An easement that benefits a neighboring parcel of land and passes automatically when that parcel is sold is called an:

  1. Prescriptive easement
  2. Easement in gross
  3. Easement appurtenant Correct answer.
  4. License

Explanation

An appurtenant easement attaches to the dominant parcel, so it runs with the land and transfers with any conveyance of that parcel. It requires both a dominant and a servient tenement.

Question 13National real estate content

Two unrelated owners take title as joint tenants. When one owner dies, that owner's share:

  1. Passes to the surviving joint tenant Correct answer.
  2. Escheats to the state government
  3. Goes to the deceased owner's heirs
  4. Must be probated before it can transfer

Explanation

The right of survivorship is the defining feature of joint tenancy: on death, the decedent's interest passes outside probate to the remaining joint tenants. Tenancy in common lacks this feature.

Question 14National real estate content

A building produces $60,000 in net operating income and sells for $750,000. What capitalization rate did the buyer accept?

  1. 8.0% Correct answer.
  2. 7.5%
  3. 6.0%
  4. 10.0%

Explanation

Capitalization rate equals net operating income divided by sale price: $60,000 divided by $750,000 equals 0.08, or 8%. The same formula rearranges to value equals income divided by rate.

Question 15National real estate content

A licensee tells homeowners that members of a minority group are moving into the neighborhood and that they should sell before values fall. This conduct is:

  1. Puffing
  2. Steering
  3. Blockbusting Correct answer.
  4. Redlining

Explanation

Blockbusting is inducing owners to sell by playing on fear that members of a protected class are entering the area. It is prohibited because it artificially destabilizes neighborhoods and exploits bias.

Question 16National real estate content

Two competing brokerage firms agree to charge the same 6% commission on all listings in their market. This agreement is:

  1. Acceptable for luxury homes
  2. Legal if approved by the local MLS
  3. A violation of antitrust law Correct answer.
  4. Permitted if disclosed to clients

Explanation

Competing brokers agreeing on commission rates is price fixing, a per se violation of the antitrust laws. Commissions must be set by competition and negotiated with each client individually.

Question 17National real estate content

For a home built in 1972, federal law requires the seller to:

  1. Obtain an EPA clearance report
  2. Test every painted surface
  3. Provide the EPA pamphlet and disclosure Correct answer.
  4. Remove all lead-based paint before closing

Explanation

Sellers of pre-1978 housing must disclose known lead-based paint hazards, give buyers the EPA pamphlet, and allow a ten-day period to test. They are not required to abate or test the property themselves.

Question 18National real estate content

A retail store keeps operating in an area that has just been rezoned for residential use only. The store is best described as a:

  1. Conditional use permit
  2. Special exception
  3. Variance
  4. Nonconforming use Correct answer.

Explanation

A use that lawfully existed before a zoning change and is allowed to continue is a nonconforming use, often called grandfathered. It may typically continue but cannot be expanded without approval.

Question 19National real estate content

Where deeds of trust are used, the lender ordinarily forecloses by:

  1. Obtaining a deficiency judgment from the court
  2. Filing suit and waiting for a court judgment of foreclosure
  3. Recording a notice of default, then a trustee's sale Correct answer.
  4. Recording a mechanic's lien against the borrower

Explanation

A deed of trust conveys title to a trustee with a power of sale, allowing nonjudicial foreclosure after notice and a public sale. Judicial foreclosure through the courts is the procedure used with mortgages in many states.

Question 20National real estate content

Under the TRID integrated disclosure rules, a lender must deliver the Loan Estimate to the applicant:

  1. Within three business days of application Correct answer.
  2. At least ten calendar days before closing
  3. Only after the appraisal is received
  4. Within 24 hours of the application

Explanation

The Loan Estimate must be provided within three business days after the lender receives the application. The Closing Disclosure carries its own separate timing rule before consummation.

Question 21National real estate content

A deed of trust is recorded in May. Site work began in March, and the contractor's mechanic's lien is recorded in July. In a state that gives mechanic's liens relation-back priority, the lien:

  1. Takes priority over the May deed of trust Correct answer.
  2. Loses priority because it was recorded last
  3. Is void because the work began before financing
  4. Ranks equally with the earlier deed of trust

Explanation

Under the relation-back doctrine, a mechanic's lien dates from visible commencement of the work rather than the recording date. Because work began in March, the lien primes an encumbrance recorded later, such as the May deed of trust.

Question 22National real estate content

Which transaction gives the borrower a right to rescind under the Truth in Lending Act?

  1. A business-purpose loan secured by real estate
  2. A loan on a non-owner-occupied rental
  3. A refinance of the borrower's principal residence Correct answer.
  4. A purchase-money loan on a new home

Explanation

The right of rescission applies to non-purchase-money loans secured by the borrower's principal dwelling. It gives the borrower three business days after consummation, extended to three years if required disclosures were never delivered.

Question 23National real estate content

A sale closes on June 15 with the seller owning the day of closing. Annual property taxes of $2,920 are unpaid and will be paid by the buyer. Using a 365-day year, what amount is charged to the seller at closing?

  1. $1,328 Correct answer.
  2. $1,448
  3. $1,168
  4. $1,592

Explanation

The seller is charged for January 1 through June 15 inclusive, which is 166 days. Daily tax is $2,920 divided by 365, or $8 per day; 166 days times $8 equals $1,328.

Question 24National real estate content

An investor trades a $500,000 rental property free of debt for a $450,000 like-kind replacement property and receives $50,000 cash. For Section 1031 purposes, the cash is:

  1. Excluded because it is like-kind property
  2. Fully tax-deferred if reinvested within 180 days
  3. Taxable boot Correct answer.
  4. A capital contribution to the new property

Explanation

Cash or other non-like-kind value received in an exchange is boot, which is taxable to the extent of realized gain. Full deferral requires reinvesting all equity and replacing the debt.

Question 25National real estate content

In a metes and bounds legal description, a call to a natural monument generally:

  1. Yields to the stated distance when they conflict
  2. Must be confirmed by a lot and block number
  3. Controls over the stated distance Correct answer.
  4. Is void unless a surveyor certifies it

Explanation

The rules of construction rank monuments above courses and distances, so a call to a natural monument prevails if the two conflict. Distances are treated as the least reliable element of the description.

Question 26National real estate content

Which fiduciary duty requires a licensee to place the client's interests above the licensee's own interests?

  1. Disclosure
  2. Loyalty Correct answer.
  3. Accounting
  4. Obedience

Explanation

Loyalty obligates the agent to put the principal's interests ahead of the agent's own, including avoiding secret profits and self-dealing. The other fiduciary duties address different obligations: telling the client material facts, handling money properly, and following lawful instructions.

Question 27National real estate content

A quitclaim deed conveys:

  1. Whatever interest the grantor may hold Correct answer.
  2. Title warranted against acts of earlier owners
  3. A life estate measured by the grantor's life
  4. Title free of encumbrances, guaranteed by the grantor

Explanation

A quitclaim deed transfers only whatever right, title, or interest the grantor actually holds, with no covenants of title. If the grantor owns nothing, the grantee receives nothing and has no warranty remedy.

Question 28National real estate content

A seller lists a property with five different brokers and agrees to pay a commission only to the broker who brings in the buyer. This arrangement is a(n):

  1. Exclusive right-to-sell listing
  2. Open listing Correct answer.
  3. Exclusive agency listing
  4. Net listing

Explanation

An open listing may be given to several brokers, and only the broker who produces a ready, willing, and able buyer earns the commission. The seller also keeps the right to sell the property personally without paying anyone.

Question 29National real estate content

In mortgage finance, one discount point equals:

  1. One month of interest paid in advance
  2. One percent of the loan amount Correct answer.
  3. One-tenth of one percent of the loan amount
  4. One percent of the purchase price

Explanation

A discount point is a fee paid to the lender at closing equal to one percent of the loan amount, used to buy down the interest rate. Points are calculated on the loan, not on the sales price.

Question 30National real estate content

When an owner dies without a will and with no known heirs, the state may take title to the real property under its power of:

  1. Taxation
  2. Police power
  3. Escheat Correct answer.
  4. Eminent domain

Explanation

Escheat is the government's right to take property when an owner dies intestate with no identifiable heirs. It is one of the state's sovereign powers over real property, along with taxation, police power, and eminent domain.

Question 31National real estate content

Which of these is a specific lien?

  1. A federal income tax lien
  2. A lien for a decedent's unpaid debts
  3. A property tax lien on one parcel Correct answer.
  4. A judgment lien on all of the debtor's real estate

Explanation

A specific lien attaches to one identified parcel, such as the lien for property taxes on that parcel or a mechanic's lien on the improved property. General liens, by contrast, attach to all real and personal property of the debtor.

Question 32National real estate content

A tenant installs shelving and display cases in a leased retail space. When the lease ends, these items are generally:

  1. Permanently attached real property owned by the landlord
  2. Personal property that becomes realty at lease expiration
  3. Trade fixtures the tenant may remove Correct answer.
  4. Emblements that the tenant may harvest

Explanation

Items a tenant attaches for a business purpose are trade fixtures and may be removed before the lease ends, provided the tenant repairs any damage. They never become the landlord's property if removed in time.

Question 33National real estate content

In the rectangular (public land) survey system, a township measuring six miles on each side contains:

  1. 64 sections
  2. 16 sections
  3. 24 sections
  4. 36 sections Correct answer.

Explanation

A township is six miles square and is divided into a grid of 36 sections, each one mile square and containing 640 acres. Sections are numbered from the northeast corner, serpentine fashion, ending with section 36 in the southeast corner.

Question 34National real estate content

A neighbor has used a strip of another owner's land openly and continuously for the statutory period and without permission. The neighbor may acquire title to the strip by:

  1. Condemnation
  2. Adverse possession Correct answer.
  3. Prescription
  4. Accretion

Explanation

Adverse possession transfers title when the use is actual, open and notorious, exclusive, hostile, and continuous for the statutory period. Prescription is related but creates an easement rather than a transfer of title.

Question 35National real estate content

A parcel becomes landlocked after being split from a larger tract, leaving no access to a public road. The owner most likely holds:

  1. A prescriptive easement
  2. An easement by necessity Correct answer.
  3. An easement in gross
  4. A revocable license

Explanation

When a division of land leaves a parcel with no access to a public way, the law implies an easement by necessity across the remaining land. The easement arises from the common ownership and the strict necessity of access.

Question 36National real estate content

Two spouses take title to their home as tenants by the entirety. Which statement is accurate?

  1. The spouses may hold unequal shares based on their contributions
  2. Either spouse may convey a half interest without the other's consent
  3. The tenancy converts to a tenancy in common when one spouse dies
  4. The survivor takes the whole, and one spouse alone cannot encumber the property Correct answer.

Explanation

Tenancy by the entirety gives each spouse an undivided interest in the whole with a right of survivorship, and neither spouse may convey or encumber the property alone. A creditor of just one spouse generally cannot reach the property.

Question 37National real estate content

A special warranty deed differs from a general warranty deed because the grantor warrants only:

  1. Nothing beyond the mere act of conveying
  2. Against all owners, past and present
  3. Against all defects for a limited period of years
  4. Against defects arising during the grantor's own ownership Correct answer.

Explanation

A special warranty deed contains covenants limited to defects and claims created by, through, or under the grantor. A general warranty deed extends those covenants back through the entire chain of title.

Question 38National real estate content

A lender refers its borrowers to a title company and receives $200 for each referral. This practice violates:

  1. The disclosure rules of the Truth in Lending Act
  2. The Sherman Antitrust Act
  3. The anti-kickback provision of RESPA Correct answer.
  4. The Fair Housing Act

Explanation

Section 8 of RESPA prohibits giving or accepting fees for the referral of settlement service business involving a federally related mortgage loan. The prohibition targets unearned referral fees, not bona fide compensation for services actually performed.

Question 39National real estate content

A widow rents rooms in her owner-occupied four-unit building and advertises a preference for female tenants. Under the federal Fair Housing Act, she:

  1. May discriminate on the basis of race but not on the basis of sex
  2. May not discriminate on any basis in this building
  3. May discriminate on the basis of sex under the Mrs. Murphy exemption Correct answer.
  4. May refuse families with children but may not consider sex

Explanation

The Mrs. Murphy exemption allows an owner who occupies a building with four or fewer units to discriminate in renting rooms, but the exemption does not permit discrimination on the basis of race. Advertising a sex preference in that setting is therefore permitted.

Question 40National real estate content

An owner seeks relief from a setback rule because an unusually shaped lot makes compliance impossible. The owner should apply for:

  1. Rezoning of the parcel
  2. A nonconforming use designation
  3. A variance Correct answer.
  4. A special use permit

Explanation

A variance grants relief from the strict application of a zoning ordinance when the property has a hardship peculiar to it, such as an odd shape or topography. The owner must usually show the hardship is not self-created and that neighbors' rights are protected.

Question 41National real estate content

A neighborhood's home values drop after a large factory expands nearby. This loss in value is best classified as:

  1. Deferred maintenance
  2. Economic obsolescence Correct answer.
  3. Curable physical deterioration
  4. Functional obsolescence

Explanation

Economic (external) obsolescence is a loss in value caused by forces outside the property, such as neighborhood decline or a nearby nuisance, and it is generally incurable by the owner. Physical deterioration and functional obsolescence originate within the property itself.

Question 42National real estate content

A duplex rents for $1,200 per month and sells for $180,000. Using monthly rent, the gross rent multiplier is:

  1. 12.5
  2. 120
  3. 180
  4. 150 Correct answer.

Explanation

The gross rent multiplier equals the sale price divided by the gross monthly rent: $180,000 divided by $1,200 equals 150. An appraiser can apply that multiplier to a comparable property's rent to estimate its value.

Question 43National real estate content

A buyer takes over the seller's existing mortgage with the lender's written consent, and the lender releases the seller from further liability. This is:

  1. A short sale
  2. A subject-to purchase
  3. A novation Correct answer.
  4. An assignment of the mortgage

Explanation

A novation substitutes a new borrower for the original one with the lender's agreement, extinguishing the original borrower's liability. Without that release, the seller stays liable even if the buyer makes the payments.

Question 44National real estate content

In an option-to-buy contract, the optionee:

  1. Is legally obligated to complete the purchase
  2. Must offer the property back to the optionor first
  3. Receives legal title when the option is signed
  4. May decline to buy and simply loses the option fee Correct answer.

Explanation

An option gives the optionee the right, but not the obligation, to buy within the stated period. If the optionee chooses not to perform, the seller keeps the option consideration and the optionee has no further liability.

Question 45National real estate content

Under the federal Homeowners Protection Act, private mortgage insurance on a residential loan must generally terminate automatically once the loan balance reaches:

  1. 78% of the original value Correct answer.
  2. 65% of the original value
  3. 90% of the original value
  4. 80% of the original value

Explanation

Automatic termination occurs on the date the principal balance is first scheduled to reach 78 percent of the original value of the property, based on the amortization schedule. A borrower may also request cancellation earlier, generally at 80 percent, with a good payment history.

Question 46National real estate content

In a state that follows the prior-appropriation doctrine, rights to use water are determined by:

  1. Ownership of the land above the aquifer
  2. Ownership of land bordering the stream
  3. The date the land was first patented
  4. The first party to put the water to beneficial use Correct answer.

Explanation

Prior appropriation, common in the arid West, awards water rights to the first user who puts the water to a beneficial use, subject to reasonable use and continued beneficial use. Riparian rights, by contrast, belong to owners of land bordering the water.

Question 47National real estate content

A river suddenly cuts a new channel during a flood, leaving a parcel on the opposite bank. The boundary generally:

  1. Shifts to the center line of the new channel
  2. Moves only if the change happened gradually
  3. Moves to the new channel because the change was natural
  4. Stays where the river originally ran Correct answer.

Explanation

Avulsion is a sudden, perceptible change in a watercourse, and it does not move property boundaries. Gradual changes through accretion or reliction do shift boundaries, so the manner of the change controls the result.

Question 48National real estate content

Under a race-notice recording statute, a later buyer defeats an earlier unrecorded interest only if the later buyer:

  1. Takes with knowledge of the prior claim but records first
  2. Buys for value and simply fails to record
  3. Takes without notice of the prior claim and records before the prior claim is recorded Correct answer.
  4. Records first, regardless of any knowledge of the prior claim

Explanation

A race-notice statute protects a subsequent purchaser who both takes without notice of the prior interest and records first. Notice defeats the later purchaser even if that purchaser records first.

Question 49National real estate content

A buyer of contaminated land seeks to rely on the bona fide prospective purchaser defense to Superfund liability. The buyer must generally:

  1. Complete pre-purchase due diligence and then exercise reasonable care Correct answer.
  2. Hold title through a separate corporate entity
  3. Buy the parcel at a discounted foreclosure price
  4. Obtain the seller's written warranty of a clean site

Explanation

The bona fide prospective purchaser defense requires all appropriate inquiries into prior uses before acquisition, plus reasonable steps to stop any continuing release and to cooperate with response actions. A warranty or a low price does not substitute for those obligations.

Question 50National real estate content

For federal income tax purposes, residential income property placed in service is depreciated over:

  1. 39 years using the straight-line method
  2. 27.5 years using the straight-line method Correct answer.
  3. 15 years using an accelerated method
  4. 31.5 years using a declining balance method

Explanation

Residential rental property is depreciated over 27.5 years on a straight-line basis under the modified accelerated cost recovery system. Nonresidential real property uses a 39-year straight-line period, and land itself is never depreciated.