Frequently asked National Real Estate Exam Prep questions & answers

What is the primary purpose of real estate licensing laws? ☑️☑️ To protect the public by ensuring practitioners meet minimum competency and ethical standards. What document outlines the duties of a real estate agent toward a client? ☑️☑️ The agency agreement. What does “agency” mean in real estate? ☑️☑️ A legal relationship where one party acts on behalf of another. What is a fiduciary duty in real estate? ☑️☑️ A legal obligation to act in the best interest of another party. What is the role of a listing agreement? ☑️☑️ It authorizes a broker to represent a seller in marketing and selling a property. What type of listing gives the broker the exclusive right to earn a commission regardless of who sells the property? ☑️☑️ Exclusive right-to-sell listing. What is dual agency? ☑️☑️ When a broker represents both the buyer and the seller in the same transaction. What is required to establish a valid real estate contract? ☑️☑️ Offer, acceptance, consideration, legal purpose, and competent parties. What is consideration in a contract? ☑️☑️ Something of value exchanged between parties. What does “title” refer to in real estate? ☑️☑️ Legal ownership of property. What is a deed? ☑️☑️ A legal document used to transfer ownership of real property. What is the purpose of a title search? ☑️☑️ To verify ownership and check for liens or encumbrances. What is a mortgage? ☑️☑️ A loan secured by real property. What is a lien? ☑️☑️ A legal claim against property as security for a debt. What is foreclosure? ☑️☑️ The legal process by which a lender takes ownership of a property due to nonpayment. 2 What is equity in real estate? ☑️☑️ The difference between the property’s market value and the outstanding loan balance. What is amortization? ☑️☑️ The gradual repayment of a loan through scheduled payments. What is a down payment? ☑️☑️ The initial payment made toward the purchase of a property. What is an appraisal? ☑️☑️ An estimate of a property’s value based on market data. What is market value? ☑️☑️ The most probable price a property would sell for in a competitive market. What is comparative market analysis (CMA)? ☑️☑️ A method of estimating property value using comparable recent sales. What is zoning? ☑️☑️ Regulations that control land use and development. What is eminent domain? ☑️☑️ The government’s power to take private property for public use with compensation. What is adverse possession? ☑️☑️ Acquiring ownership of property through continuous, open, and hostile use over time. What is a fixture? ☑️☑️ An item attached to property that becomes part of the real estate. What is a lease? ☑️☑️ A contract granting the right to use property for a specified time in exchange for rent. What is gross rent? ☑️☑️ The total rent paid without deductions. What is net operating income (NOI)? ☑️☑️ Income after operating expenses but before debt service and taxes. What is capitalization rate? ☑️☑️ A rate used to estimate property value based on income. What is depreciation in real estate? ☑️☑️ A decrease in property value over time due to wear and tear or obsolescence. What is physical deterioration? ☑️☑️ Loss in value due to age or wear. What is functional obsolescence? ☑️☑️ Loss in value due to outdated design or features. 3 What is economic obsolescence? ☑️☑️ Loss in value caused by external factors like neighborhood decline. What is a broker? ☑️☑️ A licensed professional who can manage transactions and employ agents. What is a salesperson (agent)? ☑️☑️ A licensed individual who works under a broker. What is earnest money? ☑️☑️ A deposit showing the buyer’s serious intent to purchase. What is escrow? ☑️☑️ A neutral third-party account holding funds or documents during a transaction. What is closing? ☑️☑️ The final step where ownership is transferred. What is a closing statement? ☑️☑️ A document detailing all financial aspects of a real estate transaction. What is a contingency? ☑️☑️ A condition that must be met for a contract to proceed. What is a counteroffer? ☑️☑️ A response to an offer that modifies its terms. What is acceptance? ☑️☑️ Agreement to the terms of an offer. What is an option contract? ☑️☑️ A contract giving a buyer the right, but not the obligation, to purchase property. What is a market analysis used for? ☑️☑️ To determine a competitive listing or offer price. What is a multiple listing service (MLS)? ☑️☑️ A database of properties shared among real estate professionals. What is a showing? ☑️☑️ A scheduled viewing of a property for potential buyers. What is a disclosure statement? ☑️☑️ A document informing buyers of known property conditions. What is property tax based on? ☑️☑️ Assessed value of the property. What is an assessment? ☑️☑️ The valuation used by authorities to calculate property taxes. What is homestead exemption? ☑️☑️ A tax reduction for primary residences.