Licensed Real Estate Agent Exam cheat sheet

Real property includes land, fixtures, and the bundle of rights (surface, air, subsurface, and water rights); personal property is movable and transferred by bill of sale.

Fixture test: annexation (attachment), adaptation (fit to the realty), and intention of the parties; trade fixtures installed by a tenant for business remain removable if removal leaves no material damage.

Freehold estates: fee simple absolute (perpetual, inheritable), fee simple defeasible (determinable, condition subsequent, executory limitation), and life estate (measured by a named life, with reversion or remainder).

Leasehold estates: estate for years (fixed term, no notice needed to end), periodic tenancy (renews automatically, notice to terminate), tenancy at will, and tenancy at sufferance (holdover).

Concurrent ownership: joint tenancy requires unity of time, title, interest, possession, and (historically) survivorship language; tenancy in common has no right of survivorship; tenancy by the entirety exists only for married couples in some states.

Easements: appurtenant benefits a dominant parcel; in gross benefits a person or entity. Created by express grant, implication, necessity, prescription, or estoppel; terminated by merger, release, abandonment, or nonuse where statutory.

Encumbrances and title issues: liens, mortgages, easements, encroachments, licenses (revocable, not an interest in land), and adverse possession elements (actual, open and notorious, exclusive, hostile, continuous for the statutory period).

Deeds: general warranty (five covenants), special warranty, bargain and sale, and quitclaim. Delivery with intent to convey plus acceptance is required; recording gives constructive notice under race, notice, or race-notice statutes.

Agency is a fiduciary relationship created by express agreement, implication, estoppel, or ratification; the principal authorizes the agent to act on the principal's behalf and subject to the principal's control.

Fiduciary duties owed to the principal: care, obedience, loyalty, disclosure, confidentiality, accounting, and reasonable skill and diligence.

Single agency represents one party; dual agency (or intermediary/transaction broker in some states) requires informed written consent of all parties and limits advocacy for either side.

A broker's compensation is set by contract, not by law, and is negotiable; a listing agreement must be in writing and signed to be enforceable in most states.

Types of listings: exclusive right to sell (broker paid regardless of who procures the buyer), exclusive agency (seller retains right to sell unrepresented), open listing, and net listing (often restricted or prohibited).

Termination of agency: expiration, performance, mutual agreement, revocation by principal, renunciation by agent, death or incapacity, or bankruptcy; termination does not eliminate accrued obligations such as confidentiality.

A subagent is engaged by the broker but owes fiduciary duties to the original principal; a buyer's agent owes duties to the buyer, not the seller.

Disclosure rules require agents to disclose known material defects and any personal interest in a transaction, and to avoid misrepresentation even when not acting as agent for the other party.

Valid contract elements: competent parties, mutual assent (offer and acceptance), lawful purpose, and consideration. Statute of Frauds requires a writing signed by the party to be charged for real estate sales.

Offer terminates by revocation (before acceptance), rejection, counteroffer, lapse of time, or death/incapacity of an offeror before acceptance.

Contingencies (financing, inspection, appraisal, sale of buyer's home, attorney review) must be satisfied or waived by stated deadlines; failure to perform a contingency can forfeit earnest money.

Earnest money is held in trust; liquidated damages clauses must be reasonable and are not penalties. Specific performance is an equitable remedy available because land is unique.

Title and risk: equitable title passes at contract execution in many states; risk of loss and possession follow the contract terms; the deed conveys legal title at closing.

Required disclosures commonly include seller's property disclosure of known material defects, lead-based paint (pre-1978), agency relationship disclosure, and state-specific items such as natural hazard or water rights disclosures.

Remedies for breach: rescission, damages (compensatory, consequential), liquidated damages, and specific performance; misrepresentation may be fraudulent (intentional), negligent, or innocent.

Contract assignment and novation differ: assignment transfers rights and duties; novation substitutes a new party and releases the original obligor.

Mortgage vs. deed of trust: a mortgage is a two-party lien with judicial foreclosure; a deed of trust uses a trustee and permits nonjudicial foreclosure with power-of-sale notice requirements.

Loan instruments: promissory note (the debt obligation), mortgage/deed of trust (security instrument), and rider/addendum for adjustable-rate or condominium terms.

Loan types: conventional (conforming or nonconforming/jumbo), FHA-insured, VA-guaranteed, USDA, and private; conforming limits are set annually by the regulator.

Amortization: monthly payment on a fixed-rate loan P = L × [i(1+i)^n] / [(1+i)^n − 1], where L is principal, i is monthly rate, n is number of payments.

Loan-to-value = loan amount ÷ property value (or purchase price, whichever is lower); down payment = value − loan. PMI is generally required above 80% LTV on conventional loans.

Closing costs include origination, discount points, appraisal, title insurance, recording, prepaid interest, and escrows; the Loan Estimate and Closing Disclosure must be delivered within federally prescribed timing.

RESPA Section 8 prohibits kickbacks and unearned fees for settlement services; Section 9 limits seller payment of buyer's broker fees to a bona fide commission.

Escrow/impound accounts collect 1/12 of annual taxes and insurance; proration at closing uses the seller's and buyer's respective days of ownership.

Sales comparison approach: estimate value by adjusting comparable sales for differences (location, size, condition, date of sale); adjust the comparable, not the subject.

Cost approach: value = replacement or reproduction cost − depreciation + land value. Depreciation types: physical deterioration, functional obsolescence, and external (economic) obsolescence.

Income approach: value = net operating income ÷ capitalization rate; NOI = gross income − vacancy/credit loss − operating expenses (excludes debt service, depreciation, capital improvements).

Gross rent multiplier = sale price ÷ gross monthly (or annual) rent; used for quick income-property comparisons.

Price per square foot = price ÷ square footage; useful for screening but must account for differences in lot, view, and condition.

Highest and best use must be legally permissible, physically possible, financially feasible, and maximally productive.

Market analysis vs. appraisal: CMA is a broker's pricing opinion; a licensed appraiser issues a defensible value opinion, often on a standard form.

Adjustment direction: if the comparable is superior to the subject, subtract value from the comparable; if inferior, add. Net adjustments should be small relative to sale price.

Fair Housing Act protects against discrimination based on race, color, religion, sex, national origin, familial status, and disability; many states and localities add protected classes.

Prohibited acts include refusing to rent or sell, different terms or conditions, discriminatory advertising, steering, blockbusting, redlining, and denying reasonable accommodation or modification.

Reasonable accommodation is a change in rules, policies, or services for a person with a disability; reasonable modification is a physical change to the unit or common areas, with cost allocation rules.

Disability includes a physical or mental impairment substantially limiting one or more major life activities; housing for older persons can be exempt from familial status requirements under specific statutory conditions.

HUD advertising rules: no words or symbols implying preference, limitation, or discrimination; target marketing must not exclude protected groups.

Equal Credit Opportunity Act and Fair Credit Reporting Act regulate credit decisions and reporting; adverse action notices are required.

Real estate agents must disclose agency relationships and any interest in a property, and must not make false or misleading statements about a property's condition or value.

Anti-discrimination enforcement: complaints may be filed with HUD, a state/local agency, or in court; remedies can include damages, injunctive relief, and civil penalties.

Licensing requires meeting state education, examination, and background requirements; licenses must be renewed and continuing education completed on schedule.

Activities requiring a license typically include listing, selling, leasing, negotiating, and holding oneself out as a broker or agent for compensation.

A broker supervises affiliated licensees; salespersons/associate brokers must work under a licensed broker and cannot independently collect commissions.

License law violations include commingling (mixing client funds with personal funds), conversion (misuse of trust funds), undisclosed dual agency, and failure to disclose material facts.

Trust/escrow accounts must be maintained separately, reconciled regularly, and disbursed only per contract; records are subject to state audit.

Advertising must include the broker's licensed name and be under the broker's supervision; unlicensed assistants may perform clerical, not negotiating, tasks.

Grounds for discipline include fraud, misrepresentation, incompetence, and failure to cooperate; penalties include fines, suspension, revocation, and probation.

Independent contractor status for tax purposes does not remove the broker's supervisory responsibility under license law.

Zoning regulates use, height, bulk, density, and setbacks; nonconforming uses may continue but generally cannot expand; variances (area or use) and special/conditional use permits are granted by local boards.

Subdivision and platting require compliance with local ordinances, dedication of streets and utilities, and often impact fees; the master plan guides long-term land use.

Eminent domain requires public use and just compensation; police power (zoning, building codes) does not require compensation unless it goes too far (regulatory taking).

Environmental issues: wetlands, flood zones, lead-based paint, asbestos, radon, mold, underground storage tanks, and CERCLA/state cleanup liability for contaminated property.

Phase I environmental site assessment reviews records and site history; Phase II involves sampling and testing when recognized environmental conditions are found.

Property management duties: lease enforcement, rent collection, maintenance, accounting, and compliance with habitability, security deposit, and fair housing rules.

Lease types: gross (landlord pays operating expenses), net (tenant pays some or all expenses), percentage lease (rent tied to sales), and ground lease (land only).

Security deposit rules vary by state and typically require separate accounting, itemized deductions, and return within a statutory period.

Commission = sale price × commission rate; split amounts are divided per the brokerage agreement.

Loan-to-value = loan ÷ value; down payment = value − loan; loan amount = value × LTV.

Monthly payment (fixed-rate) = L × [i(1+i)^n] / [(1+i)^n − 1], with i = annual rate ÷ 12 and n = years × 12.

Interest-only payment = loan × (annual rate ÷ 12); total interest = principal × rate × time (in years).

Discount points: 1 point = 1% of the loan amount; buying points lowers the rate and increases closing costs.

Proration: daily rate = annual amount ÷ 365 (or 360 if specified); seller typically pays through the day of closing or per contract.

Area and value: rectangle area = length × width; acre = 43,560 sq ft; value per front foot = value ÷ frontage.

Capitalization: value = NOI ÷ cap rate; cap rate = NOI ÷ value; NOI = gross income − vacancy − operating expenses.