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NM Real Estate practice questions

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Question 1Real Estate Principles and Practices

Which form of ownership gives the holder the broadest bundle of rights for an unlimited duration, with no conditions attached?

  1. Estate for years
  2. Fee simple absolute Correct answer.
  3. Fee simple determinable
  4. Life estate

Explanation

A fee simple absolute estate lasts indefinitely, can be inherited, and carries no conditions or limitations, making it the fullest form of private land ownership. Lesser freehold and leasehold estates either end at a set time or event or are subject to conditions.

Question 2Real Estate Principles and Practices

A landowner grants a neighbor a permanent right to drive across the owner's parcel to reach a public road, and the right benefits and runs with the neighbor's land. This right is best described as:

  1. A lien
  2. A profit à prendre
  3. A license
  4. An easement appurtenant Correct answer.

Explanation

An easement appurtenant benefits a dominant parcel and burdens a servient parcel, and it passes with the land when either parcel is transferred. A license is personal permission that may be revoked, while a profit à prendre is a right to take something from the land.

Question 3Real Estate Principles and Practices

A general warranty deed differs from a special warranty deed because the general warranty deed:

  1. Must be recorded within 30 days to be valid
  2. Covers only the period of the grantor's ownership
  3. Transfers only a life estate to the grantee
  4. Covers defects arising at any time in the chain of title Correct answer.

Explanation

A general warranty deed contains present and future covenants that reach back through the entire chain of title, including defects created by prior owners. A special warranty deed limits the grantor's promises to defects arising during the grantor's own period of ownership.

Question 4Real Estate Principles and Practices

A licensee who promotes the principal's interests above the licensee's own and above those of third parties is satisfying the duty of:

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

Explanation

Loyalty requires the agent to place the principal's interests first and to avoid self-dealing or secret profit. Accounting, disclosure, and confidentiality are separate fiduciary duties that address funds, material facts, and private information.

Question 5Real Estate Principles and Practices

Under an exclusive-right-to-sell listing, the seller owes the broker a commission if:

  1. The seller personally procures a ready, willing, and able buyer Correct answer.
  2. The broker finds a buyer only after the listing expires
  3. The property fails to sell for any reason
  4. The seller lists the property with a second broker

Explanation

An exclusive-right-to-sell listing entitles the broker to a commission if the property sells during the listing term through anyone, including the seller personally. An exclusive agency listing excludes the seller's own buyer, and an open listing pays only the broker who produces the buyer.

Question 6Real Estate Principles and Practices

Earnest money deposited by a buyer under a purchase agreement is best described as:

  1. A good-faith deposit held under the contract Correct answer.
  2. Rent paid for the period before closing
  3. An unenforceable penalty if the buyer defaults
  4. A commission paid to the broker at closing

Explanation

Earnest money is a deposit demonstrating the buyer's good faith; it is held in trust and applied to the purchase price at closing or disbursed according to the contract if the transaction fails. It is not the broker's compensation and is not automatically a penalty.

Question 7Real Estate Principles and Practices

In New Mexico, a house purchased during a marriage with wages earned during the marriage is generally:

  1. Community property owned by both spouses Correct answer.
  2. The separate property of the spouse named on the deed
  3. The separate property of the spouse who earned the wages
  4. Property held in joint tenancy with right of survivorship

Explanation

New Mexico is a community property state, so earnings during marriage and property bought with those earnings belong to the community and are owned by both spouses. Separate property is property owned before marriage or acquired by gift, devise, or inheritance, and it remains separate if it stays traceable.

Question 8Real Estate Principles and Practices

For appraisal purposes, market value is the most probable price a property should bring when:

  1. The property is sold at a forced foreclosure auction
  2. Both parties are fully informed and neither is under duress Correct answer.
  3. Buyer and seller are related parties
  4. The seller must sell within 30 days

Explanation

Market value assumes a willing, informed buyer and seller, neither under undue pressure, with the property exposed to the open market for a reasonable time. Forced, related-party, or distress sales do not meet that definition.

Question 9Real Estate Principles and Practices

A tenant installs a walk-in cooler in a leased restaurant. When the lease ends, the cooler is generally:

  1. Real property because it is attached to the building
  2. A trade fixture the tenant may remove before the lease ends Correct answer.
  3. A lien on the leased premises
  4. A fixture that automatically becomes the landlord's property

Explanation

Trade fixtures are items a tenant installs to conduct business, and the tenant may remove them before the lease ends if removal does not materially damage the premises. Ordinary fixtures that become part of the realty stay with the building.

Question 10Real Estate Principles and Practices

Title to land acquired through open, notorious, hostile, and continuous possession for the period set by state statute is called:

  1. Adverse possession Correct answer.
  2. Eminent domain
  3. Prescription
  4. Escheat

Explanation

Adverse possession is a statutory method of acquiring title by possessing another's land in a manner that meets the required elements for the statutory period. Prescription creates an easement rather than title, and the other two terms describe government acquisitions.

Question 11Real Estate Principles and Practices

After closing, a buyer learns of unpaid real property taxes, a recorded mortgage, and a mechanics lien for work done before closing. In the usual priority scheme, which is satisfied first from a foreclosure sale?

  1. The mechanics lien
  2. The real property tax lien Correct answer.
  3. The recorded mortgage
  4. All three share equally

Explanation

Real property tax liens generally take priority over all other liens, even a mortgage recorded earlier. A mechanics lien may relate back to the start of work and outrank the mortgage, but it still ranks behind the tax lien.

Question 12Real Estate Principles and Practices

To be enforceable under the statute of frauds, a contract for the sale of real property must generally be:

  1. Oral if the parties have known each other for years
  2. Filed with the county clerk to be binding
  3. Sealed by a notary before it is valid
  4. In writing and signed by the party to be charged Correct answer.

Explanation

The statute of frauds requires that a contract for the sale of an interest in land be in writing and signed by the party against whom enforcement is sought. Notarization and recording are not required for the contract to bind the parties.

Question 13Real Estate Principles and Practices

A seller refuses to close after signing a valid purchase agreement. The buyer's strongest remedy to obtain the property itself is:

  1. Cancellation of the contract by the buyer
  2. Filing a broker's lien on the property
  3. A suit for punitive damages
  4. A suit for specific performance Correct answer.

Explanation

Because each parcel of land is unique, a buyer may sue for specific performance to compel the seller to convey under a valid contract. Money damages do not give the buyer the land, and punitive damages are generally unavailable in contract actions.

Question 14Real Estate Principles and Practices

How many acres are contained in the NW 1/4 of the SE 1/4 of a section?

  1. 40 acres Correct answer.
  2. 80 acres
  3. 20 acres
  4. 160 acres

Explanation

A section contains 640 acres, and each quartering divides the area by four. Two quarter divisions leave one-sixteenth of 640 acres, which is 40 acres.

Question 15Real Estate Principles and Practices

A New Mexico qualifying broker receives a buyer's earnest money check under a purchase agreement. The broker should:

  1. Hold it in the broker's personal account until closing
  2. Deposit it in a separate trust account Correct answer.
  3. Deposit it in the brokerage's general operating account
  4. Cash it and keep the currency in the office safe

Explanation

Money belonging to others must be held in a trust or escrow account kept separate from the broker's operating funds, and the broker must account for and disburse it as authorized. Commingling and conversion of trust funds are grounds for disciplinary action.

Question 16Real Estate Principles and Practices

Under the federal Fair Housing Act, which practice is unlawful?

  1. Refusing to rent to a household with children Correct answer.
  2. Requiring a credit check of all applicants
  3. Charging a higher security deposit to applicants with pets
  4. Limiting occupancy to two persons per bedroom under a uniform policy

Explanation

The Fair Housing Act prohibits discrimination based on race, color, religion, sex, national origin, familial status, and disability, so rejecting families with children violates the law. Neutral screening rules applied uniformly to all applicants are permitted.

Question 17Real Estate Principles and Practices

A broker who represents both the buyer and the seller in the same transaction must:

  1. Appoint a subagent for the seller without telling either party
  2. Keep the seller's bottom-line price from the buyer while urging the buyer to bid high
  3. Make timely written disclosure and obtain the parties' informed consent Correct answer.
  4. Represent only the party who pays the larger share of the commission

Explanation

Dual agency arises when one brokerage represents both sides, and the licensee must disclose it in writing and obtain informed consent before proceeding. In dual agency the broker must be neutral and cannot give either party an advantage over the other.

Question 18Real Estate Principles and Practices

A buyer borrows $240,000 at 6% annual interest with monthly interest-only payments. What is the first month's interest?

  1. $1,440
  2. $1,200 Correct answer.
  3. $2,000
  4. $900

Explanation

Annual interest equals $240,000 multiplied by 0.06, or $14,400. Dividing by twelve months gives $1,200 for the first month under an interest-only payment.

Question 19Real Estate Principles and Practices

Property taxes of $3,650 for the calendar year are paid in arrears. The sale closes April 10, with the seller responsible through the day of closing. Using a 365-day year, what amount is charged to the seller (100 days)?

  1. $1,000 Correct answer.
  2. $365
  3. $1,100
  4. $730

Explanation

With a 365-day year the daily rate is $3,650 divided by 365, or $10 per day. Because taxes are paid in arrears, the seller is charged for the 100 days of ownership before closing, totaling $1,000.

Question 20Real Estate Principles and Practices

A retail store that was legally operating in a residentially zoned area before the zoning ordinance was adopted is an example of:

  1. A legal nonconforming use Correct answer.
  2. Spot zoning
  3. A variance
  4. A conditional use permit

Explanation

A use that was lawful when it began may continue after a new ordinance makes it illegal; this is a legal nonconforming use. Such a use generally cannot be expanded and is lost through abandonment.

Question 21Real Estate Principles and Practices

Which element is essential to a valid transfer of title by deed?

  1. Approval by the county assessor
  2. Recording by the grantee within 30 days
  3. Delivery with intent to convey, plus acceptance Correct answer.
  4. Notarization of the grantee's signature

Explanation

A deed must identify the parties, contain words of conveyance, describe the land, be signed by the grantor, and be delivered with intent to convey and accepted by the grantee. Recording protects priority but is not required for the transfer to be effective between the parties.

Question 22Real Estate Principles and Practices

An owner delivers a deed to Buyer A, who never records. The owner then conveys the same parcel to Buyer B, who pays value and records without knowledge of A's deed. In a notice or race-notice jurisdiction, B prevails because B is:

  1. A donee who paid nothing
  2. A purchaser for value who recorded first without notice Correct answer.
  3. A creditor of the grantor
  4. A tenant holding over

Explanation

Under notice and race-notice recording statutes, a later purchaser who pays value, takes without notice of the prior unrecorded deed, and records first takes priority. The first grantee loses priority by failing to record.

Question 23Real Estate Principles and Practices

Under New Mexico water law, the right to use surface water is generally obtained by:

  1. Ownership of land bordering the stream
  2. A permit issued by the State Engineer Correct answer.
  3. First capture without any permit
  4. A grant from the county commission

Explanation

New Mexico follows prior appropriation, so a surface water right comes from a State Engineer permit based on beneficial use and priority of appropriation, often summarized as first in time, first in right. Owning land along a stream does not by itself create a water right.

Question 24Real Estate Principles and Practices

A subject property has an in-ground pool; the comparable sale does not. How should the appraiser treat this difference?

  1. Adjust the comparable's price upward Correct answer.
  2. Adjust the subject's estimated value downward
  3. Adjust the comparable's price downward
  4. Make no adjustment for amenities

Explanation

Adjustments are always made to the comparable sale, never to the subject. Because the comparable is inferior to the subject for lacking a pool, its price is adjusted upward toward the subject's value.

Question 25Real Estate Principles and Practices

In New Mexico, real property is generally valued for property tax purposes at what fraction of market value?

  1. One-third of market value Correct answer.
  2. One-half of market value
  3. Full market value
  4. One-quarter of market value

Explanation

New Mexico's constitution sets taxable value for real property at one-third of market value, which the county assessor determines before applying the applicable tax rates. Separate limits also cap annual valuation increases for owner-occupied homes.

Question 26Real Estate Principles and Practices

Ownership of real property vested in a single individual, with no co-owners, is known as:

  1. Tenancy in common
  2. Joint tenancy
  3. Severalty Correct answer.
  4. Community property

Explanation

Severalty describes ownership by one person or entity alone. Joint tenancy and tenancy in common each require two or more co-owners, and community property is a form of spousal co-ownership recognized in New Mexico.

Question 27Real Estate Principles and Practices

Which type of listing agreement guarantees the broker a commission even if the owner personally finds the buyer?

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

Explanation

Under an exclusive right to sell, the broker earns a commission no matter who procures the buyer, including the owner. An exclusive agency listing reserves the owner's right to sell without paying a commission, and an open listing pays only the broker who actually produces the buyer.

Question 28Real Estate Principles and Practices

Which government power permits the state to take private land for a public use, provided just compensation is paid?

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

Explanation

Eminent domain is the power to take private property for a public purpose upon payment of just compensation, as limited by the Fifth Amendment. Police power regulates use without compensation, escheat transfers property when an owner dies intestate with no heirs, and taxation raises revenue.

Question 29Real Estate Principles and Practices

Federal disclosure requirements concerning lead-based paint apply to the sale or lease of most residential housing built before which year?

  1. 1978 Correct answer.
  2. 1970
  3. 1960
  4. 1975

Explanation

The Residential Lead-Based Paint Hazard Reduction Act requires sellers and landlords to disclose known lead-based paint hazards and provide the EPA pamphlet for housing constructed before 1978. Later construction is presumed not to contain lead-based paint under the rule.

Question 30Real Estate Principles and Practices

New Mexico lenders commonly secure home loans with a deed of trust rather than a mortgage. A key feature of the deed of trust is that it:

  1. requires the lender to obtain a court judgment before foreclosing on the home
  2. uses three parties and permits nonjudicial foreclosure by trustee's sale Correct answer.
  3. is signed only by the borrower and the lender, with no third party involved
  4. conveys full fee title to the lender for as long as the debt remains unpaid

Explanation

A deed of trust involves a borrower, a lender, and a neutral trustee who holds bare legal title as security. Because of the trustee's role, default can be handled by a trustee's sale under the power of sale rather than through a court foreclosure suit.

Question 31Real Estate Principles and Practices

A buyer who purchases a condominium unit generally receives:

  1. fee simple title to the unit plus an interest in common areas Correct answer.
  2. shares of stock in a corporation plus a proprietary lease of the unit
  3. a timeshare interval for a fixed week each year
  4. a renewable long-term leasehold in the unit only

Explanation

Condominium ownership combines a separate fee simple estate in the individual unit with ownership as a tenant in common of the common elements. The corporation-and-proprietary-lease arrangement describes a cooperative, not a condominium.

Question 32Real Estate Principles and Practices

A tenant pays $1,800 rent in advance on the first of each month. The property is sold and closes on May 18, with the seller keeping rent for the days through May 18 (18 days) and the buyer receiving rent from May 19 through May 31. Using a 30-day month, how much of the May rent belongs to the seller?

  1. $900
  2. $720
  3. $1,080 Correct answer.
  4. $1,200

Explanation

Divide the monthly rent by 30 to get a daily rate of $60, then multiply by the 18 days the seller owned the property: 18 x $60 = $1,080. Rent is prorated because the seller is entitled only to the portion of the month during which it owned the property.

Question 33Real Estate Principles and Practices

On a fully amortizing fixed-rate mortgage with level monthly payments, which statement is accurate?

  1. The split between principal and interest stays the same each month.
  2. The interest portion of each payment rises over the life of the loan.
  3. The payment amount increases each year as the loan balance falls.
  4. The principal portion of each payment grows as the loan matures. Correct answer.

Explanation

With level payments, interest is charged on the declining balance, so the interest portion shrinks each month while the principal portion grows. The total payment stays constant over the term.

Question 34Real Estate Principles and Practices

An easement by necessity most typically arises when:

  1. the government takes a strip of land for a highway project
  2. a deed expressly grants a right-of-way to a utility company
  3. a neighbor uses a path across another's land openly for the statutory period
  4. a grantor divides land and leaves a parcel landlocked with no road access Correct answer.

Explanation

When a common owner divides land and one parcel is left without any reasonable access to a public road, the law implies an easement by necessity over the remaining land. The right ends when the necessity ends.

Question 35Real Estate Principles and Practices

A purchase contract for a home signed by a 16-year-old buyer is generally:

  1. void from the outset
  2. unenforceable because it lacks consideration
  3. voidable by the minor Correct answer.
  4. enforceable against both parties

Explanation

A contract made by a person lacking legal capacity is voidable at the election of that party, who may disaffirm it. The other party generally cannot avoid the contract on that ground alone.

Question 36Real Estate Principles and Practices

A salesperson licensed with a brokerage wants to buy a home that her own firm has listed. She should:

  1. disclose her status as a licensee in writing and get the seller's consent Correct answer.
  2. purchase the home through a relative to avoid any conflict of interest
  3. wait until the listing expires and then buy the property without disclosing anything
  4. have a colleague write the offer so that no disclosure becomes necessary

Explanation

A licensee who buys property listed with her firm has a conflict of interest and must disclose her licensed status and intent to purchase in writing, then obtain the seller's informed consent. Using a colleague or relative does not eliminate the duty to disclose.

Question 37Real Estate Principles and Practices

A deed describes a boundary as running "to the iron pin set in 1970, thence two hundred feet north." A survey shows the distance from the pin to the next corner is 208 feet. The deed should be interpreted using:

  1. the acreage figure stated in the deed
  2. the recorded plat map for the subdivision
  3. the location of the iron pin on the ground Correct answer.
  4. the stated distance of two hundred feet

Explanation

In land description rules, natural and artificial monuments control over courses, distances, and area. The set iron pin is a monument, so it governs over the recited 200-foot distance, which is treated as the less reliable call.

Question 38Real Estate Principles and Practices

A duplex generates annual net operating income of $28,800. Comparable properties are selling at a 9 percent capitalization rate. What is the indicated value of the duplex?

  1. $259,200
  2. $2,592,000
  3. $345,600
  4. $320,000 Correct answer.

Explanation

The income approach divides net operating income by the capitalization rate: $28,800 / 0.09 = $320,000. The cap rate expresses the relationship between a property's income and its value.

Question 39Real Estate Principles and Practices

A first deed of trust is foreclosed through a trustee's sale, and no surplus funds remain. A second deed of trust on the same property is:

  1. wiped out as a lien on the property Correct answer.
  2. payable in full by the trustee conducting the sale
  3. advanced to first-lien position against the property
  4. unaffected and stays on the property as a lien

Explanation

Foreclosure of a senior lien eliminates junior liens because they are joined in the action and their interests are cut off by the sale. The underlying debt may survive as a personal obligation, but the junior lienholder loses its security in the property.

Question 40Real Estate Principles and Practices

The four tests used to identify a property's highest and best use are legal permissibility, physical possibility, financial feasibility, and:

  1. zoning compliance
  2. conformity with the neighborhood
  3. marketability to owner-occupants
  4. maximum productivity Correct answer.

Explanation

Highest and best use must be legally permissible, physically possible, financially feasible, and maximally productive, meaning it produces the greatest net return among the feasible options. Zoning is only one part of the legal test.

Question 41New Mexico Real Estate License Law and Commission Rules

How many members serve on the New Mexico Real Estate Commission?

  1. Five Correct answer.
  2. Seven
  3. Nine
  4. Three

Explanation

State statute creates a five-member Commission made up of four licensed real estate brokers and one public member, all appointed by the governor. The Commission administers the license law and adopts the rules that govern licensees.

Question 42New Mexico Real Estate License Law and Commission Rules

Which activity requires a New Mexico real estate license?

  1. Selling a home you own yourself
  2. Leasing a home for another person for a fee Correct answer.
  3. Buying a home for your own use
  4. Renting out a house you own

Explanation

Providing brokerage services for another person for compensation, including leasing, requires a license. Acting on your own behalf as an owner or purchaser does not.

Question 43New Mexico Real Estate License Law and Commission Rules

A New Mexico associate broker license authorizes the licensee to provide brokerage services only while the licensee is:

  1. maintaining a separate trust account for clients
  2. working in a title company's closing department
  3. affiliated with a qualifying broker Correct answer.
  4. holding two years of full-time experience

Explanation

New Mexico no longer issues salesperson licenses; entry-level licensees are associate brokers who must work under a qualifying broker. Without that affiliation the license is inactive and no brokerage services may be provided.

Question 44New Mexico Real Estate License Law and Commission Rules

How many hours of continuing education must a New Mexico licensee complete during each three-year license cycle?

  1. 24 hours
  2. 12 hours
  3. 36 hours Correct answer.
  4. 48 hours

Explanation

The Commission requires 36 hours of approved continuing education in each three-year licensing cycle, and a license cannot be renewed unless the requirement is met. The hours may be earned through Commission-approved courses.

Question 45New Mexico Real Estate License Law and Commission Rules

New Mexico real estate licenses are renewed on which schedule?

  1. Every two years
  2. Every three years Correct answer.
  3. Every year, on the licensee's birthday
  4. Every five years

Explanation

New Mexico licenses run on a three-year cycle, and renewal is conditioned on completing the required continuing education. A license that is not renewed cannot be used to provide brokerage services.

Question 46New Mexico Real Estate License Law and Commission Rules

Every advertisement a New Mexico licensee places for listed property must:

  1. name the seller and the title company handling the closing
  2. state the listing price and the licensee's license number
  3. be approved in advance by the Commission
  4. identify the licensee's brokerage Correct answer.

Explanation

Commission rules require advertising to identify the brokerage under which the licensee is licensed, so the public knows who is responsible for the advertisement. Advance approval, price disclosures, and naming the parties are not advertising requirements.

Question 47New Mexico Real Estate License Law and Commission Rules

Earnest money and other client funds held by a New Mexico brokerage must be:

  1. held in a trust account apart from broker funds Correct answer.
  2. deposited in the broker's general business account until closing
  3. used to cover office expenses when the transaction stalls
  4. held by the broker personally and repaid on demand

Explanation

Client money must be segregated in a trust account, and mixing it with the broker's operating funds is commingling, which is grounds for discipline. The broker holds those funds as a fiduciary until they are properly disbursed.

Question 48New Mexico Real Estate License Law and Commission Rules

A New Mexico broker may share a commission with:

  1. the seller's unlicensed cousin who negotiated the price
  2. another properly licensed broker Correct answer.
  3. an unlicensed assistant who introduced the buyer
  4. any person, if the client consents in writing

Explanation

Compensation for brokerage activity may be paid only to licensed persons, so paying an unlicensed person for a referral or for negotiating is a violation. The client's consent cannot authorize an otherwise unlawful payment.

Question 49New Mexico Real Estate License Law and Commission Rules

Which task may an unlicensed assistant perform for a New Mexico brokerage?

  1. Negotiate the price and terms of a listing agreement
  2. Discuss the property's listing price with prospective buyers
  3. Answer the office telephone and schedule appointments Correct answer.
  4. Explain the contingencies in a purchase agreement to a buyer

Explanation

Unlicensed staff may perform clerical and administrative work but may not do anything that requires a license, such as negotiating terms, interpreting contract provisions, or discussing price with buyers. The supervising licensee remains responsible for the assistant's activities.

Question 50New Mexico Real Estate License Law and Commission Rules

A qualifying broker holding earnest money in trust may release it to the seller when:

  1. the broker concludes that the buyer has breached the contract
  2. the broker's commission has been earned
  3. all parties to the transaction authorize the release in writing Correct answer.
  4. thirty days have passed since the contract was signed

Explanation

Trust funds may be disbursed only as the parties direct or as a court orders; the broker does not decide who is entitled to disputed money. Paying out a deposit unilaterally exposes the broker to discipline and to civil liability.