Practice Exam

Question 1

In real estate, which of the following is correct about the term “title?”

A) A contract that transfers ownership is a title
B) The term title is a concept referencing the rights associated with ownership.
C) Title is a legal definition describing a leasehold estate.
D) All of the above.

Answer 1

B) The term title is a concept referencing the rights associated with ownership.

Question 2

Who serves the Writ of Possession needed to evict when a tenant has not paid rent?
A) The sheriff
B) A judge
C) Any broker
D) The landlord

Answer 2

A) The sheriff

After the court’s final judgment for non- payment, the sheriff will serve the writ, and the property owner is given possession of the property within 24 hours.

Question 3

A seller tells a listing associate that he will not sell to members of a certain religion. Can the listing associate follow the seller’s instructions?
A) No, only the broker can make this decision
B) No, this is discriminatory and would be a violation of the Federal Fair Housing Act
C) Yes, the fiduciary duty requires the associate to follow the seller’s instruction
D) Yes, as long as the associate doesn’t advertise this

Answer 3

B) No, this is discriminatory and would be a violation of the Federal Fair Housing Act

Question 4

Which of the following actions could not be performed by an unlicensed assistant?
A) Hold an open house for a new listing
B) Prepare the flyers for the open house
C) Have keys made and return the originals to the owner
D) Enter the new listing information into the MLS data bank

Answer 4

A) Hold an open house for a new listing

Question 5

The secondary market and participants provide stability for home financing in what way?
A) Fannie Mae makes loans to banks so that banks can lend more mortgage money
B) Secondary market participants purchase an existing paper which frees up cash for lenders
C) Congress has provided dollars to the secondary market participants so buyers can achieve the dream of homeownership
D) The warehousing agencies determine the amount of money that can be lent for housing without risk

Answer 5

B) Secondary market participants purchase an existing paper which frees up cash for lenders

Because the note is assignable, secondary mortgage participants can purchase mortgage paper from original lenders, which provides liquidity and ensures money is available.

Question 6

A closing is March 5 for a rental property with an annual tax bill of $2800. Calculate and show the debit and credits for the tax proration between the buyer and seller using the 365-day method, the day of closing belongs to the buyer.
A) debit seller $483.29; credit buyer 2316.71
B) credit seller $483.29; debit buyer $2316.71
C) debit seller $483.29; credit buyer $483.29
D) debit seller $2,316.71; credit buyer $2,316.71

Answer 6

C) debit seller $483.29; credit buyer $483.29

The purpose of proration is to assign the amount owed to the responsible party. The taxes will be paid by the buyer at the end of the year. The buyer needs money from the seller for the days that the seller owned. $2800/365 = $7.67 per day. Jan = 31 days, Feb. = 28 days and March = 4 day total 63 X $7.67 = $483.21 that the seller owes for the time he owned. NOTE: The amount taken from the seller is given to the buyer – it is the same amount. Use 3 decimal places and don’t clear the calculator between steps.

Question 7

A primary difference between post-license education and continuing education (CE) is:
A) post-license education is required every two years, and CE is required once.
B) CE and post-license education are both mandated each license period as long as one has a license
C) post-license education is for brokers, and CE is for sales associates.
D) post-license education is required for the first renewal, and CE is owed each renewal thereafter.

Answer 7

D) post-license education is required for the first renewal, and CE is owed each renewal thereafter.

Question 8

When a complaint is filed against a licensee, what criteria determine if an investigator is assigned?
A) The complaint must be legally sufficient, and there must be evidence that a FREC or DBPR law or rule was violated
B) The moral and ethical severity of the complaint determines if an investigator is assigned
C) A grievous violation must have occurred
D) The complaint must rise above the notice of non-compliance level

Answer 8

A) The complaint must be legally sufficient, and there must be evidence that a FREC or DBPR law or rule was violated

Question 9

A difference between commingling escrowed funds and conversion of escrowed funds is:
A) commingling is not lawful, and conversion is.
B) conversion is using escrow funds for business operation while commingling is poor accounting.
C) commingling is mixing business funds and escrow funds while conversion is using escrow funds for personal or business purchases.
D) commingling is lawful, and conversion is not.

Answer 9

C) commingling is mixing business funds and escrow funds while conversion is using escrow funds for personal or business purchases.

Escrow funds are other people’s money. A broker who mixes funds with his own is commingling, and a broker who practices conversion has taken funds from escrow for personal or business needs. Both are violations of FL law.

Question 10

The purpose of the owner’s title policy is to protect the:
A) owner from forgery in the record and claims that may not have surfaced prior to closing.
B) lender from forged documents and dishonest sellers.
C) seller and buyer from unknown or undisclosed facts about the property.
D) title insurance company from liability for closing the transaction.

Answer 10

A) owner from forgery in the record and claims that may not have surfaced prior to closing.

The owner’s title policy is for the buyer and protects the buyer from unknown claims that may not have surfaced as of closing or from false items in the record.

Question 11

Taxes and insurance are often prepaid at closing to establish the escrow account. On which page of the Closing Disclosure form will the buyer see an accounting of the escrow account set up?
A) Page one, under buyer’s totals
B) Page two, under other costs
C) Page three, with loan disclosures
D) Page five, Confirmation receipt

Answer 11

B) Page two, under other costs

On page two of the form, other costs are itemized for buyers and sellers. Taxes, prepaids, and initial escrow payment at closing – usually two months’ worth, are paid by the buyer and shown on page 2.

Question 12

The seller and buyer have countered back and forth for several days. The two parties have verbally agreed on a price, but neither has signed anything. At this point, the status of this negotiation is:
A) legally binding at the agreed price for 24 hours.
B) lacking legality
C) an enforceable agreement
D) not a contract until the parties have signed the necessary documents.

Answer 12

D) not a contract until the parties have signed the necessary documents.

Question 13

Which characteristic of value and component would cause the lender to refuse to make a new loan for a buyer?
A) Situs – the location is not desirable
B) Transferability – the title is not marketable
C) Demand – there are many other properties like this one
D) Utility – the property is on a golf course, and the buyer is not a golfer

Answer 13

B) Transferability – the title is not marketable

Question 14

A broker’s records must be available for inspection during business hours. Who inspects the records?
A) A DBPR employee or authorized representative
B) A FREC member
C) A DRE employee
D) An officer of the court

Answer 14

A) A DBPR employee or authorized representative

All business records must be available for inspection during business hours; inspections are done by the DBPR investigator or an authorized representative.

Question 15

Real property taxes in Florida are paid to:
A) the federal government.
B) the state of Florida.
C) cities and counties.
D) the value adjustment board.

Answer 15

C) cities and counties.

The Federal government does not tax real estate; neither does the state of Florida. The local governments, cities, and counties depend on real estate taxes to pay for local necessities such as fire and police protection, libraries, parks, and municipal buildings.

Question 16

John is a sales associate who has complaints against him for making false statements about the property and for giving advice about the purchase contract. This is the third time these same violations have been investigated. If John is found guilty of violating these two practices at the formal hearing, the maximum fine John can face is:
A) $1000
B) $2000
C) $5000
D) $10,000

Answer 16

D) $10,000

Question 17

Davis is selling an investment condo he has owned for several years. He has never lived in the unit, and he has not visited the unit in 5 years. He shares these facts with Broker Bob, who suggests that he list the condo “as is.” In this case:
A) the buyer knows to perform due diligence and Davis has no responsibility to disclose.
B) Davis can avoid liability because the property manager is responsible for disclosure.
C) both the listing broker and Davis have no legal obligation to disclose material facts.
D) Davis is still required by law to reveal any important information and material facts about the condo unit.

Answer 17

D) Davis is still required by law to reveal any important information and material facts about the condo unit.

Question 18

Which statement is correct regarding disclosed dual agency in Florida?
A) It is lawful when permission is given from the buyer and seller
B) It is lawful with written consent from the buyer and seller
C) Buyers cannot be represented in Florida, so the relationship is not possible
D) Disclosed dual agency is not an authorized brokerage under Florida law.

Answer 18

D) Disclosed dual agency is not an authorized brokerage under Florida law.

Question 19

The purpose of the Mortgage Insurance Premium (MIP) charged to a buyer with an FHA loan is to:
A) set a minimum standard for lending with an FHA loan product.
B) protect the lender due to the low down payments made by FHA borrowers.
C) cover the cost of the FHA appraisal
D) pay the Federal Government for help with the mortgage lending process.

Answer 19

B) protect the lender due to the low down payments made by FHA borrowers.

An FHA loan may be obtained with a down payment of 3.5%, which puts the lender at risk. The insurance provides security over and above the real estate if the buyer defaults.

Question 20

A primary difference between preventative maintenance performed by an apartment manager and routine maintenance is:
A) preventative maintenance involves fixing something and routine maintenance doesn’t.
B) routine maintenance involves regular tasks, and preventative maintenance saves money or minimizes risk.
C) routine maintenance is expensive and preventative maintenance is not.
D) Preventive maintenance is expensive, and routine maintenance is not.

Answer 20

B) routine maintenance involves regular tasks, and preventative maintenance saves money or minimizes risk.

Question 21

Which appraisal approach to value would be most suitable for a waterfront home with a high-end remodel on a lot that cannot be duplicated, in an area with many other remodels and sales?
A) The cost approach
B) A market data or sales comparison approach
C) The income approach to value
D) The highest and best use approach

Answer 21

B) A market data or sales comparison approach

Question 22

FREC members of the Probable Cause panel act as a:
A) judge and jury.
B) a prosecuting attorney.
C) a grand jury.
D) a staff attorney.

Answer 22

C) a grand jury.

Two FREC members – one of which is a licensee must determine within 30 days if a law or rule violation has occurred. They do not establish guilt or innocence.

Question 23

Which items listed below are required for a valid deed?
A) The date and signatures of the grantee
B) Signatures of the grantee and grantor
C) An accurate legal description and the signature of the grantor
D) A date and a promise of undue influence

Answer 23

C) An accurate legal description and the signature of the grantor

A date is not a requirement. The deed must have words of conveyance, a legal description, a signature of the grantor, who is of sound mind, and two witnesses in Florida. Because it is a contract, there must be consideration, and the deed must be delivered and accepted.

Question 24

Broker Joe has a listing for a distressed seller. He finds a buyer for the property who enters into a contract for purchase. Ten-days prior to closing, the seller calls Joe to share that he has had to file for bankruptcy. This filing may:
A) have no effect on the sale.
B) terminate the contract.
C) delay the closing.
D) require Joe to sue his seller for specific performance.

Answer 24

B) terminate the contract.

Bankruptcy is a court action – or operation of law that has the power to terminate existing contracts.

Question 25

The two voluntary forms of title transfer are:
A) installment contract and will.
B) a living trust and a deed.
C) foreclosure and a deed.
D) by will and by deed.

Answer 25

D) by will and by deed.

Question 26

A homestead exemption in Florida is available to those who qualify and file documents making the Florida home a primary residence. The base homestead exemption is:
A) $25,000
B) $35,000
C) $50,000
D) $50,000 less school taxes

Answer 26

A) $25,000

The base homestead exemption is $25,000. There is an additional $25,000 available for qualified property owners; however, the additional $25,000 does NOT apply to school taxes.

Question 27

Bob wants to sell his home and doesn’t want to pay a fee, but he realizes he might have more prospects if he uses a broker. Bob puts the following ad in the paper, “Large lot, three bedrooms, energy features, 121 Gilmore court – Broker’s welcome, will pay 3%.” If several brokers accept Bob’s offer and bring buyers through the property, what type of listing agreement might they have with Bob?
A) Exclusive right to sell
B) Exclusive agency
C) Open listing
D) Net listing

Answer 27

C) Open listing

An open listing is a unilateral agreement that allows the seller to hire any number of brokers. The broker who gets paid is the broker who produces a ready, willing, and able purchaser.

Question 28

An investor is looking at a four-plex that is priced at $500,000 and has a 7% cap rate. The investor told the sales associate to write up the offer using a 9% cap rate. To the nearest dollar, what is the investor willing to pay?
A) $350,000
B) $388,889
C) $500,000
D) $714,285

Answer 28

B) $388,889

$500,000 X .07 = $35,000. NOI = rate X value. To find the value use NOI divided by the desired Cap rate. $35,000/.09 =$388,889.

Question 29

Personal property is being transferred with the sale. Which document transfers personal property?
A) The Real Estate purchase agreement
B) A bill of sale
C) The trade fixture assignment
D) A fixture agreement

Answer 29

B) A bill of sale

Lenders do not like personal property transferred as part of a purchase agreement. It is hard to assign a value and may be taxed separately. In general, it is best to transfer personal items by separate bill of sale.

Question 30

Which phrase below best describes the meaning of the term Annual Percentage Rate (APR)?
A) The amount of the purchase price in relationship to the amount borrowed
B) A contract that reveals the cost paid when a house is purchased
C) A RESPA rule that requires a special document at closing
D) The true and actual cost of the amount financed

Answer 30

D) The true and actual cost of the amount financed

The annual percentage rate is a standardized disclosure required by Truth in Lending that reveals the costs actually paid for the amount borrowed.

Question 31

Which of the following items are necessary to create an agency relationship?
A)A fiduciary, a broker, and a task
B) A client, an agent, and a representation to a third party
C) A representative, an agent, and money changing hands
D) None of the above.

Answer 31

B) A client, an agent, and a representation to a third party

Agency is a consensual representation agreement involving an agent, a client or principal, and a task – where representations are made about something of value to a third party.

Question 32

Which of the items listed below is NOT a tax advantage of real estate ownership?
A) Mortgage interest is deductible for a primary residence
B) Real property taxes are deductible on the federal tax return
C) Property can depreciate
D) Exclusion of a certain amount of capital gain when the primary home is sold

Answer 32

C) Property can depreciate

Property can also go down in value which may leave the homeowner owing more than he borrowed. Property taxes and interest are deductible, and the capital gain exclusion benefits most homeowners when the primary residence is sold.

Question 33

A licensee has been notified that there is a formal complaint against him as a result of findings by the probable cause panel. How long does the licensee have to answer the complaint?
A) 5 days
B) 20 days
C) 35 days
D) 50 days

Answer 33

B) 20 days

The licensee must answer the complaint and has the choice between a formal or informal hearing. The answer must be filed within 20 days of receipt of the notice.

Question 34

Which items below are expenses associated with the property that are used to arrive at NOI by deducting from Effective Gross Income?
A) Mortgage interest, taxes, and insurance.
B) Mortgage payment, taxes, and insurance
C) Insurance, maintenance, management fees, and interest
D) Taxes, insurance, management fees, maintenance, utilities, and reserves.

Answer 34

D) Taxes, insurance, management fees, maintenance, utilities, and reserves.

Expenses used to calculate NOI are: Taxes, Insurance, management fees, maintenance, utilities, and reserves. The mortgage is an expense related to financing, not the property.

Question 35

In real estate, which of the following is correct about the term “title?”
A) A contract that transfers ownership is a title
B) The term title is a concept referencing the rights associated with ownership.
C) Title is a legal definition describing a leasehold estate.
D) All of the above.

Answer 35

B) The term title is a concept referencing the rights associated with ownership.

In real estate, there is no document called a title – the term references ownership and the rights that accompany ownership. The deed transfers ownership.

Question 36

A buyer is closing with a purchase price of $232,000 and a down payment of 10%. He will pay the doc stamps on the note and the intangible tax on the mortgage. What are the transfer tax charges to the buyer?
A) $731 for the note; $417.60 for the mortgage
B) $1460 for the note and $418 for the mortgage
C) $1582 for the note; $212 for the mortgage
D) $1824 for the note and $407.60 for the mortgage

Answer 36

A) $731 for the note; $417.60 for the mortgage

Florida transfer taxes at closing are 35 cents per 100 or fraction thereof. The note is $232,000 less 10% = $208,800/100 = 2088 one hundreds X .35 = $730.80. This is rounded to $731 (fraction thereof). The intangible tax on the mortgage is: $208,800 X .002 = $417.60.

Question 37

Jim, a licensee in Florida, moved to Georgia and retired. Before leaving Florida, Jim placed his real estate license on inactive status. What will happen if Jim doesn’t renew the license after two years?
A) The status will change from voluntarily inactive to involuntarily inactive
B) The license will automatically renew
C) The license will expire
D) The license will be suspended

Answer 37

A) The status will change from voluntarily inactive to involuntarily inactive

George must complete the requirements and renew the license, or his status will switch from voluntarily inactive to involuntarily inactive.

Question 38

Which phrase below describes the meaning of the word “contract” expressed in simple terms?
A) A verbal agreement
B) All mutual understandings
C) A promise to do or not to do something
D) Any legal documents

Answer 38

C) A promise to do or not to do something

An agreement between two parties, basically one promise in exchange for another. This is sometimes described as “offer and acceptance.”

Question 39

The two voluntary forms of title transfer are:
A) installment contract and will.
B) a living trust and a deed.
C) foreclosure and a deed.
D) by will and by deed.

Answer 39

D) by will and by deed.

Voluntary alienation is a transfer willingly. There are only two ways: during the lifetime of the grantor, a deed is used; and if the owner is deceased, a will is used.

Question 40

In Florida, Joint Tenancy MUST be identified in this manner to show that it was purposeful
A) Joint Tenancy By Law
B) Tenancy in Common (Survivable)
C) JTWROS
D) Joint Owners Surviving

Answer 40

C) JTWROS

Any “joint tenancy” formed in Florida MUST be identified as Joint Tenancy with right of survivorship” (JTWROS) as the chosen form of ownership between the parties:

Question 41

When a homeowner is delinquent on property taxes, the first step taken by the government in correcting the late payment is:
A) the delinquent taxpayer names are published in the local paper.
B) the property is foreclosed by the lender.
C) a tax certificate auction is open to the public
D) the property is foreclosed by the holder of the tax certificate.

Answer 41

A) the delinquent taxpayer names are published in the local paper.

Property taxes are delinquent on April first of the year following non-payment. A list of delinquent payers is published in a local county wide-newspaper.

Question 42

Which statement is true regarding the quasi-legislative power of the FREC?
A) Quasi-legislative power gives FREC authority to make rules to enhance the law
B) This power allows FREC to discipline licensees who commit improper acts
C) Quasi -legislative power is not a power that FREC has
D) Quasi-legislative power gives FREC the authority to subpoena

Answer 42

A) Quasi-legislative power gives FREC authority to make rules to enhance the law

Quasi-judicial power gives FREC administrative power to suspend, revoke or fine, while quasi-legislative power gives FREC authority to make rules which follow the statute and govern the acts of licensees.

Question 43

A homestead for a personal residence may be described as a (an):
A) estate in reversion.
B) less than freehold estate.
C) tenancy by the entireties.
D) legal life estate.

Answer 43

D) legal life estate.

Created by law, a homestead filing protects the personal residence from forced sale by certain creditors.

Question 44

When one owns a condo, the type of ownership that exists is a:
A) leasehold interest with a share in the common elements.
B) deed to the undivided elements and a life estate.
C) fee simple interest with an undivided interest in common elements.
D) none of the above.

Answer 44

C) fee simple interest with an undivided interest in common elements.

Condo ownership is fee simple interest with a deed to the unit. The interest in the common elements

Question 45

VA loans require less cash from veteran borrowers because there is:
A) a small down payment.
B) a down payment, but no closing costs.
C) no closing costs and no down payment.
D) no down payment, but there are closing costs.

Answer 45

D) no down payment, but there are closing costs.

A veteran borrower may borrow up to 100% of the property value.

Question 46

A Planned Unit Development (PUD) is best described as a (an):
A) HOA where the ownership has fewer deed restrictions than other types of associations.
B) zoning classification used by cities to designate low-income housing.
C) area with more density than residential zoning, designed to maximize development by using green space.
D) shared ownership of common area and expenses.

Answer 46

C) area with more density than residential zoning, designed to maximize development by using green space.

Denser than regular residential property, the PUD uses common areas and green spaces to connect various unit/ homes. An association owns the common areas –not unit owners.

Question 47

Which appraisal approach to value would be most suitable for a waterfront home with a high-end remodel on a lot that cannot be duplicated, in an area with many other remodels and sales?
A) The cost approach
B) A market data or sales comparison approach
C) The income approach to value
D) The highest and best use approach

Answer 47

B) A market data or sales comparison approach

The market data approach compares like property and makes adjustments based on the date of sale, physical features, and location. The income approach evaluates income and expenses. Where the cost approach is used for properties where costs to duplicate can be calculated, and there are no comparables. In this case, there are like properties.

Question 48

Which of the following estate has a definite ending date?
A) A freehold estate
B) A life estate
C) An estate in remainder
D) An estate for years

Answer 48

D) An estate for years

In an estate for years, property is conveyed by lease for a definite period of time. Both lessor and less know when payment is due and when the lease terminates.

Question 49

Taxes and insurance are often prepaid at closing to establish the escrow account. On which page of the Closing Disclosure form will the buyer see an accounting of the escrow account set up?
A) Page one, under buyer’s totals
B) Page two, under other costs
C) Page three, with loan disclosures
D) Page five, Confirmation receipt

Answer 49

B) Page two, under other costs

On page two of the form, other costs are itemized for buyers and sellers. Taxes, prepaids, and initial escrow payment at closing – usually two months’ worth, are paid by the buyer and shown on page 2.

Question 50

The NW 1/4 of section 16 and the NE 1/4 of section 17 contain how many acres?
A) 20
B) 60
C) 200
D) 320

Answer 50

D) 320

A section contains 640 acres; when divided by ¼ = 160 acres. The word “And” in a legal description means that parts of two sections are added together. 160 acres in section 16 and 160 acres in section 17 = 320 acres.