Multiple Choice Questions

[QUESTION]
1. Real estate brokers serve as intermediaries by bringing buyers and sellers together in the
real estate market. For this service, brokers are paid what is commonly referred to as a:
A. commission
B. licensing fee
C. recovery fee
D. listing fee
Ans: A
Difficulty: Basic
Learning Objective: 1
[QUESTION]
2. The importance of brokers in the real estate market is often overlooked. In the absence of a
real estate broker, one would expect all of the following to be true EXCEPT:
A. The asking price would most likely be higher, on average, than in the case where a broker
was involved because the seller is in total control of the sale
B. A seller would most likely rely on a thinner market (i.e. the seller has access to fewer
prospective buyers)
C. It would be more difficult for an individual to buy a property
D. Buyers would be more inclined to negotiate prices downward by at least the value of a
typical commission.
Ans: A
Difficulty: Intermediate
Learning Objective: 2
[QUESTION]
3. Real estate brokers operate under the law of agency, which gives a broker the right to act
for a principal in trying to buy or sell a property. In the basic principal-agent relationship of
real estate brokerage, real estate brokers act in the capacity of a:
A. Universal agent
B. General agent
C. Special agent
D. Undercover agent
Ans: C
Difficulty: Basic
Learning Objective: 7
[QUESTION]
4. In acting as an agent for another person, the broker carries several special responsibilities,
which by law must be adhered here to throughout the transaction process. These
responsibilities constitute what is commonly referred to as a:
A. Subagency relationship

B. Dual agency relationship

C. Fiduciary relationship
D. Open listing relationship
Ans: C
Difficulty: Basic
Learning Objective: 7
[QUESTION]
5. Modern real estate brokerage normally relies on a multiple listing service (MLS) through
which brokers have access to each others listings. Which of the following types of agency
agreements is established with the use of a MLS?
A. Single agency agreement
B. Subagency agreement
C. Dual agency agreement
D. Designated agent agreement
Ans: B
Difficulty: Basic
Learning Objective: 7
[QUESTION]
6. In dual agency, conflicts of interest may arise since a single broker has both the listing
contract with the seller and a buyer agency agreement with the purchaser. One way that states
have attempted to deal with this issue is to develop a new type of brokerage relationship in
which the broker assists the buyer and seller, but does not represent either party. This type of
brokerage relationship is commonly referred to as:
A. unintended dual agency
B. universal agency
C. transaction brokerage
D. multiple listing
Ans: C
Difficulty: Basic
Learning Objective: 7
[QUESTION]
7. State licensing laws generally prescribe two levels of real estate brokerage licensing: the
broker license and the salesperson license. Which of the following responsibilities is an
individual with a salesperson license permitted to do?
A. Own and operate a real estate brokerage business
B. Handle money in trust for clients
C. Negotiate listing contracts or contracts for sale
D. Complete legal documents used in sales and leases in their own name
Ans: C
Difficulty: Intermediate

Learning Objective: 3
[QUESTION]
8. All 50 states have licensing laws that regulate persons and companies that engage in the
brokerage business. Interpreting and enforcing state licensing laws falls under the
responsibilities of which of the following parties?
A. Broker
B. Real estate commission
C. National Association of Realtors
D. Salesperson
Ans: B
Difficulty: Basic
Learning Objective: 3
[QUESTION]
9. One of the traditional requirements for individuals who wish to obtain a brokerage license
has been to demonstrate financial capacity to cover damage judgments brought against them
by clients. In order to address this concern, some states have required licensees to first obtain:
A. Private mortgage insurance (PMI)
B. Errors and omission insurance
C. Deposit insurance
D. Hazard insurance
Ans: B
Difficulty: Basic
Learning Objective: 3
[QUESTION]
10. State licensing laws prescribe behavioral requirements with which licensees must comply
to keep their licenses. Licensing laws generally seek to prevent brokers from partaking in all
of the following activities EXCEPT:
A. Handling money in trust for clients
B. Taking kickbacks without the employers knowledge
C. Offering the property at terms other than those specified by clients
D. Failure to submit all offers to the client
Ans: A
Difficulty: Intermediate
Learning Objective: 3
[QUESTION]
11. It is common for real estate firms to identify submarkets, such as property types or
particular sections of a city, in which they can specialize and concentrate their transaction
activity. This practice is referred to as:
A. internet marketing

B. open listing
C. discount brokerage
D. market segmentation
Ans: D
Difficulty: Basic
Learning Objective: 1
[QUESTION]
12. Although the function of commercial brokerage is the same as that of residential
brokerage, the activities of commercial brokers usually differ considerably from those of
residential brokers due to fundamental differences in these two markets. All of the following
statements regarding commercial brokerage are true EXCEPT:
A. Relative to residential transactions, commercial transactions tend to be larger
B. The parties in commercial mortgage transactions are typically less knowledgeable than
those in residential transactions.
C. An important part of the commercial brokers service is to provide the prospective buyer
with reports that enable him to complete due diligence for the property
D. Commercial brokers are often required to lower their commission in order to negotiate
compromises between buyers and sellers when they reach an impasse over price.
Ans: B
Difficulty: Intermediate
Learning Objective: 1
[QUESTION]
13. Blockbusting, which involves persuading an individual to sell her home by telling her that
minority groups are moving into the neighborhood, is one form of discrimination in housing
that is prohibited by which of the following acts of Congress?
A. Riegle Community Development and Regulatory Improvement Act
B. Secure and Fair Enforcement for Mortgage Licensing Act
C. Fair Housing Act (Title VIII of the Civil Rights Act)
D. Equal Credit Opportunity Act
Ans: C
Difficulty: Basic
Learning Objective: 8
[QUESTION]
14. In recent years, many U.S. investors have expanded their purchases of real estate into
foreign countries, and many foreign investors have held interests in U.S. real estate. This is an
example of what is commonly referred to as ________________ of real estate markets.
A. deregulation
B. globalization
C. disintermediation
D. industrialization

Ans: B
Difficulty: Basic
Learning Objective: 1
[QUESTION]
15. Critical to any listing contract is the question of when the broker becomes entitled to a
commission. Traditionally, the broker is still entitled to a commission in all of the following
scenarios EXCEPT:
A. If the seller refuses to sell upon being presented with an offer meeting the original terms
and conditions
B. If the seller cannot deliver the property for any reason due to his or her fault.
C. If both the buyer and seller sign a contract but then agree to cancel it.
D. If a contract is contingent upon the buyer obtaining financing and the buyer is unable to do
so.
Ans: D
Difficulty: Intermediate
Learning Objective: 5
[QUESTION]
16. There are a number of different types of listing contracts that can be used when marketing
a property. Which of the following types of listings requires the broker to be paid a
commission if any other broker, or even the owner, sells the property during the contract
period?
A. Open listing
B. Single listing
C. Exclusive agency listing
D. Exclusive right of sale listing
Ans: D
Difficulty: Basic
Learning Objective: 6
[QUESTION]
17. The recent emergence of discount brokerage services has had a modest effect on the price
of brokerage services. The average commission that a broker could expect to receive today
would most likely range between:
A. 1-2%
B. 3-4%
C. 5-6%
D. 7-10%
Ans: C
Difficulty: Basic
Learning Objective: 5

[QUESTION]
18. Federal and state laws prohibit discrimination in housing. However, exemptions do exist
depending on the particular type of property that is being considered. All of the following
activities could be considered exempt in specific scenarios EXCEPT:
A. Refusing to sell or rent to a person because of race.
B. Refusing to sell or rent based on familial status (i.e. having children).
C. Refusing to sell or rent to persons based on age.
D. Refusing to sell or rent a single-family home based on religion provided the owners do not
employ the services of a broker or agent.
Ans: A
Difficulty: Intermediate
Learning Objective 8
[QUESTION]
19. According to the law of agency, real estate brokers are required to observe several duties
as they act as an agent for an individual trying to buy or sell a property. Which of the
following duties refers to a brokers obligation to be completely open and honest with the
principal?
A. Disclosure
B. Confidentiality
C. Loyalty
D. Obedience
Ans: A
Difficulty: Basic
Learning Objective: 7
[QUESTION]
20. In determining the appropriate listing contract to be used, it is important to know whether
a multiple listing service (MLS) will be employed. The MLS only accepts which of the
following types of listing contracts?
A. Open listing
B. FSBO listing
C. Exclusive agency listing
D. Exclusive right of sale listing
Ans: D
Difficulty: Intermediate
Learning Objective: 6
[QUESTION]
21. As an agent for the buyer or seller, a broker has 6 basic fiduciary responsibilities. Which
of the following definitions best describes the responsibility of Obedience?
A. Broker must follow the instructions of the principal to the limits of what is legal and
ethical

B. Broker must keep principal informed of all changes in the financials of the negotiation
C. Broker must not convey information about principals financial status or motivations
D. Broker must never subordinate the best interest of the principal to the interests of others,
including himself/herself
Ans: A
Difficulty: Basic
Learning Objective: 7
[QUESTION]
22. There are a number of different types of listing contracts that can be used when marketing
a property. Which of the following types of listings requires the broker to be paid a
commission if anyone, other than the owner, sells the property during the contract period?
A. Open listing
B. FSBO listing
C. Exclusive agency listing
D. Exclusive right of sale listing
Ans: C
Difficulty: Basic
Learning Objective: 6
Multiple Choice Problems
[QUESTION]
23. Suppose you are interested in selling your home and would like to clear a net value of
$300,000. If you have agreed to pay your broker a commission of 5.5% (no matter who
ultimately is responsible for finding the buyer), what price must you sell the home for in order
to meet your net profit (rounded to the nearest dollar)?
A. $282,540
B. $300,000
C. $316,500
D. $317,460
Ans: D
Difficulty: Intermediate
Learning Objective: 5
[QUESTION]
24. Christopher has hired a real estate broker to help facilitate the sale of his home. Realizing
that Christopher is most likely going to realize a loss on his investment due to the recent
decline in housing values in his neighborhood, the broker has agreed to charge Christopher a
lower commission rate as long as Christopher enters into an exclusive right of sale listing
contract. If Christopher ends up selling his house for $364,583 and takes home $350,000 after
paying the real estate brokers commission, what was the commission rate that the broker
ended up charging?

A. 4.0%
B. 4.2%
C. 8.0%
D. 14.6%
Ans: A
Difficulty: Intermediate
Learning Objective: 5
[QUESTION]
25. Jonathan recently sold his home and was able to take home $423,000 after paying the real
estate brokers commission of 6%. If the buyer was ultimately found through a buyer broker,
the dollar commission will need to be split between the listing broker and buyer broker. If the
buyer broker is entitled to 40% of the commission, what is her share of the commission
rounded to the nearest dollar?
A. $10,800
B. $13,500
C. $16,200
D. $27,000
Ans: A
Difficulty: Advanced
Learning Objective: 5
[QUESTION]
26. Jim has hired a real estate broker to help facilitate the sale of his home. If the broker
requires a commission of 6%, how much will Jim clear from the sale (after the commission
has been paid) if he is able to sell his house for $478,723 (Assume that Jim has already paid
off his mortgage)?
A. $424,528
B. $450,000
C. $478,723
D. $507,446
Ans: B
Difficulty: Basic
Learning Objective: 5
[QUESTION]
27. Amy is trying to decide whether or not it would be beneficial to employ the services of a
real estate broker in order to facilitate the sale of her home. She has estimated that the
marketing costs and opportunity cost associated with time spent dealing with prospective
buyers amounts to $5,000. If Amy were to sell the house on her own for $200,000, but a
broker would have been able to negotiate a higher price of $206,350, what commission rate
should Amy have been willing to accept from a real estate broker to make her indifferent
between selling the house on her own and hiring a real estate broker?

A. 2.4%
B. 3.1%
C. 5.0%
D. 5.5%
Ans: D
Difficulty: Advanced
Learning Objective: 5