Tennessee Real Estate Affiliate Broker License, Practice Exams

A licensee retired her license during this renewal period and now wants to reactivate it. What education must she show?

1. None; retired licenses reactivate freely.
2. 16 classroom hours this renewal period. ✓
3. 30 hours of new-affiliate training.
4. The full 60-hour pre-license course.

Why: T.C.A. 62-13-318(b)(2): REACTIVATION OF A TEMPORARILY RETIRED LICENSE SHALL NOT BE PERMITTED UNTIL THE LICENSEE PROVIDES PROOF OF COMPLETION OF SIXTEEN (16) CLASSROOM HOURS IN REAL ESTATE COURSES ... DURING THE CURRENT LICENSE RENEWAL PERIOD.

A buyer of a 1968 house tells the listing agent he does not want a lead inspection at all. How is the inspection opportunity handled?

1. He may waive it by so indicating in writing ✓
2. It cannot be waived by a buyer of target housing
3. He waives it simply by not scheduling one in time
4. The seller must still order one before closing

Why: 40 CFR 745.110(b) lets a purchaser waive the opportunity to conduct the risk assessment or inspection "by so indicating in writing," and 745.113(a)(5) has the purchaser state that he either received the opportunity or waived it. Silence is not a waiver, and the seller has no duty to conduct an evaluation (745.107(a)).

A licensee first contacts the other agent in a prospective deal. What must he disclose to that agent?

1. His role, including any agency. ✓
2. His commission split with his own firm.
3. His client's lowest acceptable price.
4. Nothing until an offer is written.

Why: T.C.A. 62-13-405(d): UPON INITIAL CONTACT WITH ANY OTHER LICENSEE INVOLVED IN THE SAME PROSPECTIVE TRANSACTION, THE LICENSEE SHALL IMMEDIATELY DISCLOSE THE LICENSEE'S ROLE IN THE TRANSACTION, INCLUDING ANY AGENCY RELATIONSHIP, TO THIS OTHER LICENSEE.

Who must maintain a separate escrow or trustee account for trust money received in a fiduciary capacity?

1. Each affiliate broker in the firm.
2. The listing seller.
3. Each principal broker. ✓
4. The closing attorney.

Why: Rule 1260-02-.09(2): EACH PRINCIPAL BROKER SHALL MAINTAIN A SEPARATE ESCROW OR TRUSTEE ACCOUNT FOR THE PURPOSE OF HOLDING ANY TRUST MONEY WHICH MAY BE RECEIVED IN HIS FIDUCIARY CAPACITY.

A loan's principal and interest is $1,896.20 a month. Annual taxes are $5,400 and annual hazard insurance is $1,380, both paid monthly into escrow. What is the monthly PITI?

1. $2,011.20
2. $2,346.20
3. $2,461.20 ✓
4. $8,676.20

Why: Reference Book chapter 12 defines PITI as principal and interest, property taxes and hazard insurance. Taxes are $5,400 / 12 = $450 and insurance $1,380 / 12 = $115, so $1,896.20 + $450 + $115 = $2,461.20. Adding the annual amounts unconverted gives $8,676.20.

A listing agent tells buyers a lot can be split into two building sites, without checking. It cannot, and the agent honestly believed it could. Can the agent be liable?

1. No; misrepresentation requires intent to deceive
2. No; buyers must verify such matters for themselves
3. Only the seller can be liable, not the agent
4. Yes, even though the agent believed it true ✓

Why: Reference Book chapter 10 states that misrepresentation may be negligent as well as fraudulent, and that a broker may make no representation without a reasonable basis for believing it true. It describes an agent held liable for statements about a lot's size and subdivision prospects that he had not investigated.

How must a firm make its brokers' and affiliate brokers' licenses available to the public?

1. Framed on the wall of every branch office.
2. Printed on the back of every business card.
3. Only on request made in writing to the firm.
4. Available, in electronic or paper form. ✓

Why: T.C.A. 62-13-309(a)(2): the licenses shall be “DISPLAYED OR OTHERWISE AVAILABLE FOR PUBLIC INSPECTION, IN ELECTRONIC FORM OR HARD COPY” (quoted words verbatim).

An orchard owner contracts to sell this year's apple crop to a packer, who will pick it before the sale closes. How are the apples classified?

1. As real property, part of the land
2. As goods, that is, personal property ✓
3. As a fixture until the day of picking
4. As an appurtenance to the orchard

Why: Reference Book chapter 4 states that things attached to or forming part of the land which are agreed to be severed before sale or under a contract of sale are treated as goods. The agreement to sever turns the crop into personal property, so it is not sold as part of the land.

A deal falls through. The buyer and seller sign a document, apart from the purchase contract, telling the broker how to split the earnest money. May the broker disburse on it?

1. Yes; a separate agreement signed by all parties allows it. ✓
2. No; only the purchase contract may direct a disbursement.
3. No; only a court order may release a failed deal's deposit.
4. Yes, but only after the Commission has approved the split.

Why: Rule 1260-02-.09(7)(b): A PRINCIPAL BROKER MAY PROPERLY DISBURSE TRUST MONEY UPON SECURING A WRITTEN AGREEMENT WHICH IS SIGNED BY ALL PARTIES HAVING AN INTEREST IN SUCH AND IS SEPARATE FROM THE CONTRACT WHICH AUTHORIZES HIM TO HOLD THE TRUST MONEY.

Which of these is one of the criteria that 42 U.S.C. 9601(35)(B)(iii) requires EPA's all appropriate inquiries standards to include?

1. A zoning variance that allows the intended new use
2. A title policy with an environmental endorsement
3. The lender's written approval of the purchase
4. A search for recorded environmental cleanup liens ✓

Why: Under 42 U.S.C. 9601(35)(B)(iii) the criteria include an inquiry by an environmental professional, interviews with past and present owners and occupants, reviews of historical sources such as chain of title and aerial photographs, searches for recorded environmental cleanup liens, reviews of government, waste disposal and underground storage tank records, and visual inspections of the facility and adjoining properties. Zoning, title insurance and lender approval are not on the list.

Under general agency principles, two salespersons licensed with the same broker represent the seller and the buyer in one sale. Absent a state statute providing otherwise, who is the dual agent?

1. Neither, as each salesperson represents a different party
2. Only the salesperson who wrote the buyer's offer
3. Only the salesperson who took the listing
4. The broker with whom both salespersons are licensed ✓

Why: Reference Book chapter 10 states that dual agency commonly arises when two licensees associated with the same broker represent both parties: the broker is the dual agent and the salespersons are the broker's agents, and assigning separate salespersons does not alter that. Some states change this result by a designated-agency statute, which is why the stem excludes one.

Why is a deed usually acknowledged before a notary, even though an acknowledgment is not needed for the deed to be valid between the parties?

1. It makes the deed take effect before it is delivered to the grantee.
2. It replaces the grantor's signature when the grantor is absent.
3. It guards against forgery and is usually needed to record the deed. ✓
4. It proves that the price stated in the deed was actually paid.

Why: DRE Reference Book ch. 7: A DEED NEED NOT BE ACKNOWLEDGED, NOR NEED IT BE RECORDED. An acknowledgment is a way of proving the writing was signed by the person who purported to sign it and IS A SAFEGUARD AGAINST FORGERY AND FALSE IMPERSONATION; MANY INSTRUMENTS ARE NOT ENTITLED TO BE RECORDED UNLESS ACKNOWLEDGED.

An affiliate broker's flyer shows her name in large type and the firm name in smaller type beneath it. Does it comply?

1. Yes, as long as the firm name appears somewhere.
2. Yes, if her license number also appears on it.
3. No, because an agent's name may not appear at all.
4. No; the firm name must be at least as large. ✓

Why: Rule 1260-02-.12(3)(b): THE FIRM NAME MUST APPEAR IN LETTERS THE SAME SIZE OR LARGER THAN THOSE SPELLING OUT THE NAME OF A LICENSEE OR THE NAME OF ANY TEAM, GROUP OR SIMILAR ENTITY.

A buyer's attorney reviews the abstract of title for a farm. What does the attorney then give the buyer?

1. A policy paying the buyer for losses from defects
2. A decree settling any claims against the title
3. An opinion on the documents in the chain of title ✓
4. A deed from the attorney warranting the title

Why: Reference Book chapter 5 explains that the abstract of title and a lawyer's opinion of the documents in the abstract's chain of title were the basis of the earliest efforts to establish marketable title, a method that still exists. An opinion is not insurance: it pays nothing if the lawyer's reading turns out to be wrong.

Which does the Reference Book say a written property management agreement should set out?

1. The term, the policies, the fees, and the manager's powers ✓
2. Only the fee, since agency law supplies all other terms
3. The tenants' names and the rent each tenant has to pay
4. The owner's income tax position and plans for the property

Why: Reference Book chapter 22 says it is good business practice to have a written contract with the owner that clearly sets forth the responsibilities of both parties, including the terms and period of the contract, the policies for managing the premises, management fees, and the authority and powers given by the owner to the agent.

After the Closing Disclosure is delivered, a few charges change, none needing a new waiting period. The day before closing, the buyer asks to see the updated form. What must the creditor allow?

1. Inspection of the form as then completed, during that day ✓
2. Nothing, as corrections are due only at the closing table
3. A fresh three-business-day review before closing
4. Inspection, but only of items in the seller's transaction

Why: 12 CFR 1026.19(f)(2)(i) requires corrected disclosures at or before consummation, and requires the creditor to let the consumer inspect the disclosures, completed with the items then known, during the business day immediately before consummation. Items relating only to the seller's transaction may be left out.

In a proceeding against a licensee, what civil penalty range may the Commission assess for each separate violation under its rules?

1. $0 to $500.
2. $0 to $1,000. ✓
3. $0 to $2,500.
4. $0 to $5,000.

Why: Rule 1260-02-.32(1): THE COMMISSION MAY ... ASSESS A CIVIL PENALTY FOR EACH SEPARATE VIOLATION OF A STATUTE, RULE, OR ORDER PERTAINING TO THE COMMISSION IN THE AMOUNT OF $0–$1,000.00 (amendment effective 23 Sep 2025).

In 2024 a developer buys a closed factory site it knows is contaminated, after making all appropriate inquiries. All dumping happened before the purchase, and the developer gives the required notices, takes reasonable care and cooperates with the cleanup. What is its status?

1. It may qualify as a bona fide prospective purchaser ✓
2. It is liable, as it bought knowing of contamination
3. It is an innocent landowner, having made inquiries
4. It is excluded as a contiguous property owner

Why: 42 U.S.C. 9601(40) defines a bona fide prospective purchaser as one who acquires after January 11, 2002 and proves the listed criteria, including disposal before acquisition, all appropriate inquiries, notices, appropriate care, cooperation and no affiliation with a liable party, and 9607(r)(1) limits its liability as owner. Knowledge is no bar: 9607(q)(1)(C) says a person who knew may still qualify, whereas the innocent landowner route requires no reason to know.

An affiliate broker sells her own home without listing it with her firm. What must she do?

1. Use her firm's listing agreement.
2. Get her principal broker to co-sign.
3. Identify herself as a real estate licensee. ✓
4. Tell the Commission within 10 days.

Why: Rule 1260-02-.11(2): ALL LICENSEES SHALL IDENTIFY THEMSELVES AS A LICENSEE WHEN BUYING OR SELLING PROPERTY FOR THEMSELVES.

A comparable sold for $415,000. It has a garage the subject lacks, worth $8,000, and lacks an extra bathroom the subject has, worth $15,000. What is the comparable's adjusted price?

1. $392,000
2. $400,000
3. $408,000
4. $422,000 ✓

Why: Reference Book chapter 15: the adjustment is always made to the comparable; subtract where the comparable is superior and add where it is inferior. $415,000 - $8,000 (garage) + $15,000 (bathroom) = $422,000. Reversing both signs gives $408,000.

A listing broker presents an offer and tells the seller he is also acting for the buyer. He does not mention that the buyer is an investor planning a quick resale through him, and he advises the seller not to counter. What is the best view?

1. Disclosing the dual agency alone did not satisfy his duty ✓
2. His duty was met once he disclosed the dual agency
3. The buyer's resale plans were confidential and not his to tell
4. A dual agent owes the seller only honesty, not full disclosure

Why: Reference Book chapter 10 describes a case on these facts holding that the broker did not discharge his duty merely by disclosing the dual agency; he had to disclose all material facts that might affect the seller's decision, including the buyer's investment purpose and his own stake. A disclosed dual agent still owes each party full disclosure of material facts.

A buyer hires her own broker, who is paid solely by the buyer, to purchase a 1958 house. Is that broker an agent with duties to ensure compliance under the lead disclosure rule?

1. Yes, every licensee in a target housing sale has those duties
2. Yes, because the buyer's broker must deliver the lead pamphlet
3. No, a buyer's representative paid only by the buyer is excluded ✓
4. No, only a listing agent working under an exclusive right to sell

Why: 40 CFR 745.103 defines agent as a party who contracts with a seller or lessor, or with the seller's representative, to sell or lease target housing, and says the term does not apply to purchasers or any purchaser's representative who receives all compensation from the purchaser. Any agent contracting with the seller, not only an exclusive listing agent, carries the duties in 745.115.

Of what two parts does a zoning ordinance consist?

1. A master plan and a list of recorded deed restrictions.
2. A tax roll and a schedule of special assessments.
3. A building code and a list of approved contractors.
4. A zoning map and a text setting each zone's rules. ✓

Why: DRE Reference Book ch. 18: A ZONING ORDINANCE CONSISTS OF A MAP AND A TEXT. The map shows the boundaries of the zones; the text sets out procedures and each zone's permitted uses, conditional uses, lot sizes, height limits, setbacks and densities.

According to the Reference Book, on what are property management fees most often based?

1. A percentage of the property's market value
2. The owner's net profit after all expenses
3. An hourly rate for the manager's time spent
4. A percentage of the gross rents collected ✓

Why: Reference Book chapter 22 says management fees may be a flat monthly amount, a percentage of gross rents collected, or a combination, and that property managers usually base their fees on a percentage of the gross rents collected. Additional compensation is often paid for lease renewals and supervising major repairs.

A licensee missed renewal by more than 60 days because of a family health problem and seeks a medical waiver. What must she provide?

1. A signed doctor's statement and her own signed explanation. ✓
2. Only a letter from her principal broker confirming the illness.
3. Proof of hospital admission lasting at least 30 days.
4. Nothing; health lapses are waived automatically.

Why: Rule 1260-01-.21(1)(a): the licensee MUST: 1. PROVIDE A SIGNED DOCTOR'S STATEMENT ATTESTING TO THE NATURE AND LENGTH OF THE ILLNESS; AND 2. SUBMIT A STATEMENT EXPLAINING THE LAPSE, WHICH MUST BE SIGNED BY THE PERSON SEEKING REINSTATEMENT.

A comparable sold last month for $398,000 and has an in-ground pool the subject lacks. The market values the pool at $12,000. How is the adjustment made?

1. Add $12,000 to the comparable's sale price.
2. Add $12,000 to the subject's value estimate.
3. Subtract $12,000 from the subject's value.
4. Subtract $12,000 from the comparable. ✓

Why: Reference Book chapter 15 states that the adjustment is always made to the comparable, not to the subject, and is subtracted where the comparable is superior. The pool makes the comparable superior, so its price is adjusted down to $386,000. Adjusting the subject reverses the method the chapter sets out.

A recorded deed is found among the grantee's papers. The grantor's heirs claim it was never delivered. What does the law generally presume?

1. Delivery, though the heirs may try to rebut it. ✓
2. No delivery, unless a witness saw the handover.
3. Delivery, and the heirs may not dispute it at all.
4. No delivery, since the grantor is now dead.

Why: DRE Reference Book ch. 7: THE LAW PRESUMES A VALID DELIVERY IF THE DEED IS FOUND IN THE POSSESSION OF THE GRANTEE OR IS RECORDED, BUT SUCH PRESUMPTION IS REBUTTABLE. Delivery requires the grantor's intention to pass title immediately.

An owner privately tells her property manager not to sign any lease longer than one year, but lets tenants deal with the manager as having normal leasing authority. The manager signs a two-year lease with a tenant who knows nothing of the limit. In most cases:

1. The owner is bound; the limit was never communicated ✓
2. The lease is void, because the manager exceeded authority
3. The lease binds the manager alone as the landlord
4. The lease is cut back to one year automatically

Why: Reference Book chapter 10 explains that apparent authority, or ostensible authority by estoppel, arises when the principal's conduct creates the appearance of authority and a third party reasonably relies on it. Where the principal limits the agent's normal authority and fails to tell the third party, in most cases the third party is not bound by the limitation.

A licensee with a franchise firm hands out business cards bearing the franchise trade name. What must the cards also show?

1. Only the franchise's national phone number.
2. Her license number and date of expiry.
3. Nothing more; business cards are exempt.
4. Her name, firm name and firm phone number. ✓

Why: Rule 1260-02-.12(4)(b): ANY LICENSEE USING A FRANCHISE TRADE NAME ON BUSINESS CARDS, CONTRACTS, OR OTHER DOCUMENTS RELATING TO REAL ESTATE TRANSACTIONS SHALL CLEARLY AND UNMISTAKABLY INDICATE HIS NAME, FIRM NAME, AND FIRM TELEPHONE NUMBER.

An owner sold a buyer a 90-day option for consideration. On day 40 a higher offer arrives and the owner tries to withdraw the option. May the owner do so?

1. Yes; any offer may be revoked before acceptance
2. Yes, by refunding the option money with interest
3. No, unless the optionee has not recorded the option
4. No; the option keeps the offer open for its term ✓

Why: Reference Book chapter 6 explains that for consideration the seller is deprived of the right and power to revoke the underlying offer, which is rendered irrevocable for the period specified; the owner cannot withdraw the option during the time agreed. The general rule that an offer may be revoked before acceptance does not apply to a paid option.

A firm advertises a second office, has a registered mail drop there and invites calls to it. How does the rule treat that office?

1. As a branch office. ✓
2. As a model home.
3. As a mere mail drop.
4. As the main office.

Why: Rule 1260-02-.03(3)(a): a licensee is deemed to maintain a 'branch' if the licensee ADVERTISES THE OFFICE IN ANY MANNER FOR THE PURPOSE OF ATTRACTING THE PUBLIC; HAS A MAIL DROP AT THE OFFICE ...; OR INVITES OR SOLICITS TELEPHONE CALLS TO THE OFFICE.

What do the duties listed in T.C.A. 62-13-403 and 62-13-404 replace?

1. The Commission's rules on trust accounts.
2. Common law and fiduciary duties. ✓
3. The seller's duty to disclose known defects.
4. The federal fair housing requirements.

Why: T.C.A. 62-13-402(c): THE DUTIES ENUMERATED IN §§ 62-13-403 AND 62-13-404 SHALL SUPERSEDE ANY FIDUCIARY OR COMMON LAW DUTIES OWED BY A LICENSEE TO THE LICENSEE'S CLIENT.

An affiliate and her former firm disagree over a commission split after she leaves. Will the Commission settle it?

1. Yes; it sets the split by rule in such cases.
2. Yes, if either party files a written complaint.
3. No; it stays out of such disputes. ✓
4. Yes, by withholding her license until it is paid.

Why: Rule 1260-02-.02(8): THE COMMISSION WILL NOT INTERVENE IN THE SETTLEMENT OF DEBTS, LOANS, DRAWS, OR COMMISSION DISPUTES BETWEEN FIRMS, BROKERS AND/OR AFFILIATES.

A licensee's client wants to lower her offer; the licensee thinks it unwise but the instruction is lawful and within the agency agreement. What is her duty?

1. Refuse until the client agrees.
2. Obey the instruction. ✓
3. Ask the other agent to decide.
4. Tell the seller the client's limit.

Why: T.C.A. 62-13-404(1): a licensee acting as agent owes the client the duty to OBEY ALL LAWFUL INSTRUCTIONS OF THE CLIENT WHEN THE INSTRUCTIONS ARE WITHIN THE SCOPE OF THE AGENCY AGREEMENT BETWEEN LICENSEE AND LICENSEE'S CLIENT.

A rental applicant uses a wheelchair. The manager asks about the nature and severity of her condition before deciding. What may the manager lawfully ask every applicant instead?

1. Whether the applicant has any medical condition at all.
2. Whether the applicant can meet tenancy requirements. ✓
3. Whether the applicant's condition is likely to worsen.
4. Whether the applicant's doctor approves of the unit.

Why: 24 CFR 100.202(c): it is unlawful to INQUIRE AS TO THE NATURE OR SEVERITY OF A HANDICAP, but the rule does not bar INQUIRY INTO AN APPLICANT'S ABILITY TO MEET THE REQUIREMENTS OF OWNERSHIP OR TENANCY, if such inquiries are made of all applicants.

A slab 60 feet by 24 feet is poured 6 inches thick. Concrete costs $135 per cubic yard. What does the concrete cost?

1. $3,600 ✓
2. $10,800
3. $43,200
4. $97,200

Why: Reference Book chapter 26: volume = length x width x height and 1 cubic yard = 27 cubic feet. 6 inches is 0.5 foot, so 60 x 24 x 0.5 = 720 cubic feet; 720 / 27 = 26.67 cubic yards; x $135 = $3,600. Dividing by 9 (square feet in a square yard) gives $10,800, and treating 6 inches as 6 feet gives $43,200.

A property management company learns that its maintenance worker is harassing a tenant because of her religion. Which response could NOT count as the prompt corrective action the HUD rule requires?

1. Removing the worker from the building
2. Evicting the tenant to end the conflict ✓
3. Disciplining the worker in writing
4. Firing the worker who harassed her

Why: 24 CFR 100.7(a)(1)(ii) makes a person directly liable for failing to take prompt action to correct and end a discriminatory practice by its employee where it knew or should have known of it, and 100.7(a)(2) provides that such action may not include any action that penalizes or harms the aggrieved person, such as eviction.

A seller dies after signing a purchase contract that binds the parties' heirs and assigns, before title passes. What can the buyer do?

1. Nothing; the seller's death ended the contract
2. Only recover the deposit from the estate
3. Compel the seller's heirs or executor to close ✓
4. Take title at once, without any deed being given

Why: Reference Book chapter 6 explains that a properly drawn real estate contract binds the heirs, executors, administrators and assigns of the parties, so the buyer's rights against them are the same as against the seller, and the buyer may compel specific performance by them. Death ends an unaccepted offer, not a formed contract.

What vote does the Commission need to revoke or suspend a license?

1. An affirmative vote of a majority. ✓
2. A unanimous vote of all members.
3. A two-thirds vote of those present.
4. A vote of the licensee members only.

Why: T.C.A. 62-13-313(c): THE AFFIRMATIVE VOTE OF A MAJORITY OF THE COMMISSION SHALL BE NECESSARY TO REVOKE OR SUSPEND A LICENSE.

The borrower received the Closing Disclosure four business days before the scheduled closing. Which later change requires a new three-business-day waiting period?

1. A prepayment penalty is added to the loan ✓
2. The seller agrees to pay more transfer tax
3. The closing is moved back by a single day
4. A misspelled street name is corrected

Why: 12 CFR 1026.19(f)(2)(ii) requires a new three-business-day wait only if the APR becomes inaccurate, the loan product changes, or a prepayment penalty is added. Other changes before consummation need only corrected disclosures at or before closing under 1026.19(f)(2)(i), and non-numeric clerical errors may be fixed after closing.

A distant heir may have a claim to a lot. The title company asks her to sign a deed releasing whatever interest she has, with no warranties. What deed is used?

1. A quitclaim deed ✓
2. A special warranty deed
3. A bargain and sale deed
4. A gift deed

Why: Reference Book chapter 7 describes the quitclaim deed as transferring only whatever interest the grantor has, with no express or implied warranty, and says it is generally used to clear a cloud on the title. The heir is not selling a warranted title; she is releasing a possible claim.

A brokerage's telemarketing system blocks its number from showing on recipients' caller ID screens. Is this allowed under the Telemarketing Sales Rule?

1. Yes; transmitting caller ID information is optional.
2. Yes, if the caller gives the number during the call.
3. No; the telemarketer must transmit its number to caller ID. ✓
4. No, but only for calls made after 8:00 p.m. local time.

Why: 16 CFR 310.4(a)(8): it is an abusive practice to fail to TRANSMIT OR CAUSE TO BE TRANSMITTED THE TELEPHONE NUMBER, AND, WHEN MADE AVAILABLE BY THE TELEMARKETER'S CARRIER, THE NAME OF THE TELEMARKETER, TO ANY CALLER IDENTIFICATION SERVICE IN USE BY A RECIPIENT.

A buyer at a sheriff's sale, held to satisfy a money judgment against the owner, receives a sheriff's deed. What warranties of title come with it?

1. Full warranties against all defects in the title.
2. None; it carries no warranties or representations. ✓
3. Warranties against defects arising after the judgment.
4. The same warranties as the owner's own deed carried.

Why: DRE Reference Book ch. 7: a SHERIFF'S DEED is given on foreclosure or under a money judgment; THE TITLE CONVEYED IS ONLY THAT ACQUIRED BY THE STATE OR THE SHERIFF UNDER THE FORECLOSURE AND CARRIES NO WARRANTIES OR REPRESENTATIONS WHATSOEVER.

A broker holds earnest money in an interest-bearing account. Does the broker own the interest it earns?

1. Yes, as soon as the bank credits it.
2. Yes, if the interest is under $100.
3. No; all of it must go to the state.
4. Not until properly disbursed. ✓

Why: Rule 1260-02-.09(14)(b): AS A DEPOSITOR OF THE TRUST MONEY, THE LICENSEE DOES NOT OWN THE TRUST MONEY OR INTEREST EARNED THEREON UNTIL PROPERLY DISBURSED TO THE LICENSEE.

Using Reference Book chapter 26's table of monthly payments per $1,000 (factor 6.99 at 7.5% for 30 years; 7.39 for 25 years), what is the monthly payment on a $260,000 30-year loan at 7.5%?

1. $181.74
2. $1,817.40 ✓
3. $1,921.40
4. $18,174

Why: Reference Book chapter 26's table gives the payment per $1,000 borrowed, so multiply the factor by the number of thousands: 260 x 6.99 = $1,817.40. The 25-year factor gives $1,921.40, and miscounting the thousands as 26 or 2,600 gives $181.74 or $18,174.

A manager is paid 6.5% of gross rents collected plus $175 a month. The building has 24 units at $1,250, and 2 units stood vacant all year. What is the annual fee?

1. $1,962.50
2. $21,450
3. $23,550 ✓
4. $25,500

Why: Reference Book chapter 22: fees may be a percentage of gross rents collected, a flat amount, or both. Collected rent is 22 x $1,250 x 12 = $330,000; 6.5% is $21,450, plus $175 x 12 = $2,100, total $23,550. Charging the percentage on all 24 units' rent gives $25,500, and $1,962.50 is one month's fee.

What is the first step of the appraisal process as USPAP Standard 1, summarized in the Reference Book, lays it out?

1. Collecting and analyzing market data.
2. Applying the three approaches to value.
3. Determining the scope of work.
4. Defining the appraisal problem. ✓

Why: Reference Book chapter 15 summarizes Standard 1: (A) define the appraisal problem, identifying the client, intended use, type of value, effective date and relevant characteristics; (B) determine the scope of work; (C) collect and analyze data; (D) apply the approaches; (E) reconcile to a final opinion. Scope of work follows once the problem is defined.

A Loan Estimate shows a note rate of 6.25% and an annual percentage rate of 6.48%. The buyer asks why they differ. Which explanation is right?

1. The APR adds the taxes and insurance paid into the escrow
2. The APR is the rate that will apply after the first reset
3. The APR also counts finance charges such as points and fees ✓
4. The APR adds the closing costs the seller pays for the buyer

Why: 12 CFR 1026.22(a)(1) describes the APR as a measure of the cost of credit, expressed as a yearly rate, and the Closing Disclosure statement under 1026.38(o)(4) adds that it is not the interest rate. It reflects the finance charge of 1026.4, which excludes escrow deposits and seller's points.

How does the Reference Book describe value, in terms of ownership?

1. The historic cost of the land and the buildings on it.
2. The price most recently paid for the property.
3. The cost to replace the improvements today.
4. The present worth of rights to future benefits. ✓

Why: Reference Book chapter 15: "value is the present worth of all rights to future benefits, arising out of property ownership, to typical users or investors." Historic cost and the last price paid are facts about the property, not its value, and replacement cost is only one input to one approach.

What must each Tennessee real estate office have?

1. A notary public and a separate trust account for each agent.
2. At least three licensees and a street-level entrance.
3. A firm license, a principal broker and a fixed location. ✓
4. A Commission inspection before every license renewal.

Why: T.C.A. 62-13-309(a)(1)(A): “EACH OFFICE SHALL HAVE A REAL ESTATE FIRM LICENSE, A PRINCIPAL BROKER AND A FIXED LOCATION WITH ADEQUATE FACILITIES FOR AFFILIATED LICENSEES” (quoted words verbatim; see the source file note).

A licensee keeps breaking the same rule for five days in a row. How may the Commission treat it?

1. As one violation, whatever its length.
2. Each day may be a separate violation. ✓
3. As a single violation, with the fine doubled.
4. As no violation until a written warning is ignored.

Why: Rule 1260-02-.32(3): EACH DAY OF A CONTINUED VIOLATION MAY CONSTITUTE A SEPARATE VIOLATION.

In the government survey, a lake cuts a quarter section into a fractional piece. How is such a piece identified?

1. As a township, which always holds 36 full sections
2. As a range, which always holds exactly 160 acres
3. As a section, which is renumbered from the lake shore
4. As a government lot, not always of standard size ✓

Why: Reference Book chapter 4 explains that lakes and streams created fractional pieces of land less than a quarter section, identified by number and called government lots, and that a government lot does not necessarily contain a standard number of acres.

A community is intended for and solely occupied by persons aged 62 or older. May it exclude families with children?

1. No, familial status is protected.
2. Only if 80 percent are over 62.
3. Only if it receives federal aid.
4. Yes, as housing for older persons. ✓

Why: 42 U.S.C. 3607(b)(1)-(2): no provision regarding familial status applies to HOUSING FOR OLDER PERSONS, which includes housing INTENDED FOR, AND SOLELY OCCUPIED BY, PERSONS 62 YEARS OF AGE OR OLDER. The 80 percent test belongs to the separate 55-and-over category.

A city adopts a building code requiring smoke detectors in all new homes. Which government power is it exercising?

1. Eminent domain
2. Police power ✓
3. Escheat
4. Taxation

Why: Reference Book chapter 27 defines police power as the right of the state to enact and enforce laws for the order, safety, health, morals and general welfare of the public, and chapter 18 says local zoning also derives from it. Eminent domain is the taking of property for public use.

A home is worth $380,000. Its first loan was originally $240,000 and now has a balance of $214,000; a home equity line has a $31,000 balance. What is the owner's equity?

1. $109,000
2. $135,000 ✓
3. $166,000
4. $245,000

Why: Reference Book chapter 15 describes equity as the difference between the loan amount and the value. All liens count, at their current balances: $380,000 - $214,000 - $31,000 = $135,000. Using the original loan amount gives $109,000, and leaving out the equity line gives $166,000.

A licensee who is not a member of the trade association calls herself a “Realtor” in ads. How does the Act treat this?

1. As lawful, since the word is in general use.
2. As a matter only for the trade association.
3. As lawful if she joins within one year.
4. As misleading advertising. ✓

Why: T.C.A. 62-13-312(b)(4): grounds for discipline include MISLEADING OR UNTRUTHFUL ADVERTISING, INCLUDING USE OF THE TERM “REALTOR” BY A PERSON NOT AUTHORIZED TO DO SO.

Which characteristic of real estate subjects a parcel to the influence of its surroundings?

1. Transferability
2. Fixity of location ✓
3. Principle of change
4. Conformity

Why: Reference Book chapter 27 defines fixity of location as the physical characteristic of real estate that subjects it to the influence of its surroundings. Because land cannot be moved, what happens around it affects its value.

What is an abstract of title?

1. A policy that insures the owner against losses from title defects
2. A summary of the recorded documents on which a title rests ✓
3. A court judgment declaring who holds title and removing any cloud
4. A lawyer's written opinion that the title is good and marketable

Why: Reference Book chapter 5 defines an abstract of title as a summary statement of the successive conveyances and other facts in the public records on which a person's title rests. Historically the abstract was paired with a lawyer's opinion of the documents in the chain of title; the opinion and the abstract are two different things.

Using a 360-day year, what is the simple interest on $5,000 at 9% for 1 year and 2 months?

1. $450
2. $525 ✓
3. $4,500
4. $5,250

Why: DRE Reference Book ch. 26: for a period over one year use an improper fraction of 360: $5,000 x 0.09 x 420/360 = $525.

A seller facing foreclosure accepts a quick all-cash offer from a relative, well below what similar homes bring. How is the amount paid best described?

1. As the market price, not necessarily market value. ✓
2. As the market value, since a sale took place.
3. As the assessed value for the next tax year.
4. As the investment value of the property.

Why: Reference Book chapter 27 defines market price as the price paid regardless of pressures, motives or intelligence, while market value (chapter 15) assumes buyer and seller acting prudently and knowledgeably, with the price unaffected by undue stimulus. A pressured sale to a relative fails those conditions, so the price paid is a fact of the sale, not proof of market value.

An owner in a single-family zone builds a garden shed behind her house. How would the zoning ordinance usually classify the shed?

1. As an accessory use, incidental to the permitted home. ✓
2. As a conditional use, needing a permit after a hearing.
3. As a nonconforming use, allowed only because it predates zoning.
4. As a variance, since sheds are not a use listed in the zone.

Why: DRE Reference Book ch. 18: zoning districts typically have permitted, conditional and accessory uses. ACCESSORY USES ARE USES INCIDENTAL TO A PRIMARY USE PERMITTED WITHIN THE ZONING DISTRICT SUCH AS A SHED IN A RESIDENTIAL DISTRICT.

A lease runs from March 1 to August 31 of the same year. What kind of leasehold estate does it create?

1. A periodic tenancy
2. An estate for years ✓
3. An estate at will
4. An estate at sufferance

Why: Reference Book chapter 9 defines an estate for years as one that continues for a definite period fixed in advance, and notes the name misleads because the period may be less than a year. A six-month lease with fixed start and end dates is therefore an estate for years, not a periodic tenancy, which renews period after period.

Under general agency law, a listing broker meets a buyer at the seller's open house and, with the buyer's consent, agrees to help the buyer find a different home. Nothing is put in writing. What relationship has been created?

1. An actual agency with the buyer, created without a writing ✓
2. None, because a buyer agency must be in a signed writing
3. A subagency under which the buyer is the seller's subagent
4. A customer relationship only, owing the buyer no duties

Why: Reference Book chapter 10 gives this example: a listing broker who meets a buyer at an open house and later undertakes, with the buyer's consent, to help the buyer find another home has established an actual agency with the buyer, notwithstanding that no written agreement exists. If the buyer then offers on the listing, the broker is a dual agent. State licensing laws may separately require a written agreement before a licensee shows a buyer residential property or presents an offer (Texas does, in Occupations Code 1101.563), but that is a licensing duty, not a condition of creating an agency.

Which duty does a Tennessee licensee owe to every party in a transaction, not only to a client?

1. Honesty and good faith. ✓
2. Loyalty above all others.
3. Obeying all instructions.
4. Keeping the client's price secret.

Why: T.C.A. 62-13-403(4): A LICENSEE ... SHALL OWE ALL PARTIES TO THE TRANSACTION the duty to PROVIDE SERVICES TO EACH PARTY TO THE TRANSACTION WITH HONESTY AND GOOD FAITH; loyalty and obedience are duties to the client under 62-13-404.

A new regulation denies an owner all economically beneficial use of her land. What may she claim?

1. Nothing, since regulation is never a taking
2. A taking, through inverse condemnation ✓
3. Escheat of the land back to the state
4. A nonconforming use of the land

Why: Reference Book chapter 17 says regulation that merely lowers value is usually not a taking, but where regulation denies all economically beneficial or productive use of the land it constitutes a taking requiring compensation, which the owner may pursue as inverse condemnation.

A town passes a zoning rule that applies to one tract only, drafted to shut out a rival of a local developer. Why is it open to challenge?

1. Zoning may only be adopted by the state, never a town
2. Zoning applies only to land that is not yet built on
3. Zoning must be uniform and serve the public welfare ✓
4. Zoning must be approved by every owner in the zone

Why: Reference Book chapter 5 says zoning restrictions, to be valid, should be substantially related to the protection of public health, safety, morals or general welfare, and must be uniform and not created for the benefit of any particular group. Cities and counties do have the power to zone.

A firm's managing broker appoints one affiliate to represent the seller and another to represent the buyer in the same sale. Is the managing broker a dual agent?

1. Yes, whenever both parties are clients of one firm.
2. Yes, unless the buyer and seller sign a waiver.
3. No, if each agent represents only one party. ✓
4. No, but the two affiliates become dual agents.

Why: T.C.A. 62-13-406(a): A MANAGING BROKER PROVIDING SERVICES UNDER THIS CHAPTER SHALL NOT BE CONSIDERED A DUAL AGENT IF ANY INDIVIDUAL LICENSEE SO APPOINTED AS DESIGNATED AGENT IN A TRANSACTION ... DOES NOT REPRESENT INTERESTS OF ANY OTHER PARTY TO THE SAME TRANSACTION.

Which describes an agent's fiduciary duty to the principal?

1. Ordinary honesty, the same duty owed to every customer in the deal.
2. Loyalty only in matters the listing agreement lists in writing.
3. Care in handling money, but no duty of loyalty or disclosure.
4. The highest good faith, taking no advantage by even the slightest concealment. ✓

Why: DRE Reference Book ch. 27: FIDUCIARY DUTY is THAT DUTY OWED BY AN AGENT TO ACT IN THE HIGHEST GOOD FAITH TOWARD THE PRINCIPAL AND NOT TO OBTAIN ANY ADVANTAGE OVER THE LATTER BY THE SLIGHTEST MISREPRESENTATION, CONCEALMENT, DURESS OR PRESSURE.

A homeowner closes a home equity loan secured by her principal dwelling and receives all the material disclosures and rescission notices at closing. Until when may she rescind?

1. Midnight of the third calendar day after closing
2. Midnight of the third business day after closing ✓
3. Midnight of the seventh business day after closing
4. Only until the loan funds are disbursed to her

Why: 12 CFR 1026.23(a)(3) allows rescission until midnight of the third business day after consummation, delivery of the notice or delivery of the material disclosures, whichever is last. For rescission, 1026.2(a)(6) counts all calendar days except Sundays and federal legal holidays, and 1026.23(c) holds disbursement until the period ends.

A licensee keeps money belonging to others in the same bank account as her own business funds. What do the Tennessee rules call this?

1. Commingling. ✓
2. Conversion.
3. Escrow.
4. Interpleader.

Why: Rule 1260-02-.09(1)(a): “COMMINGLING” IS DEFINED AS THE ACT OF A LICENSEE MAINTAINING FUNDS BELONGING TO OTHERS IN THE SAME BANK ACCOUNT THAT CONTAINS HIS OR HER PERSONAL OR BUSINESS FUNDS.

A buyer hopes to use a USDA Rural Development guaranteed loan. Which combination meets that program's rules?

1. A modest principal residence in a designated rural area, on a fixed rate ✓
2. A rural weekend cabin kept as an investment, on an adjustable rate
3. A small farm with income-producing fields, on a fixed-rate balloon loan
4. A rural duplex she will rent out in full, on a fixed-rate 30-year note

Why: 7 CFR 3555.201 limits guarantees to areas Rural Development designates as rural, 3555.151 requires that the applicant occupy the dwelling as a principal residence and excludes investment properties, and 3555.104 requires a fixed rate and makes adjustable-rate and balloon loans ineligible. Income-producing land is barred by 7 CFR 3555.102.

An oddly shaped lot cannot meet the zone's side-yard setback, so the owner cannot build as neighbors can. What relief may the owner seek?

1. A variance granting more than the neighbors have
2. A variance with the same privileges as neighbors ✓
3. A nonconforming use certificate for the new house
4. An easement by necessity over the neighbor's yard

Why: Reference Book chapter 18 describes a zoning variance as a waiver of the strict application of a standard, such as a side-yard setback, where size, shape or topography prevents compliance, and says it gives the owner the same, but not additional, privileges as neighboring parcels.

A home bought for $240,000 sells three years later for $282,000. What is the total appreciation over the three years, as a percentage of the purchase price?

1. 5.8%
2. 14.9%
3. 17.5% ✓
4. 117.5%

Why: Reference Book chapter 26: Rate = Part / Base, with the purchase price as the base. The gain is $282,000 - $240,000 = $42,000, and $42,000 / $240,000 = 17.5%. Dividing by the sale price gives 14.9%, and 5.8% is the average for one year, not the total.

A firm will place a buyer's deposit in an interest-bearing escrow account. What must happen when the contract is signed?

1. Nothing, as long as the interest is paid to the seller at closing.
2. Notify the Commission of the account and its rate of interest.
3. Tell the payor and sign a written interest agreement. ✓
4. Obtain the lender's consent to hold the deposit at interest.

Why: Rule 1260-02-.09(14)(a): AT THE TIME OF CONTRACT EXECUTION, THE LICENSEE SHALL DISCLOSE TO THE PAYOR THAT HIS OR HER DEPOSIT WILL BE PLACED IN AN INTEREST-BEARING ESCROW OR TRUSTEE ACCOUNT, AND THE LICENSEE AND THE PAYOR SHALL EXECUTE A WRITTEN AGREEMENT INDICATING THE MANNER OF DISPOSITION OF ANY INTEREST EARNED.

A property manager is setting rents for a newly acquired apartment building. What should the rent schedule mainly be based on?

1. A survey of rents at comparable buildings nearby. ✓
2. The owner's mortgage payment plus a fixed profit margin.
3. The rents the previous owner charged, raised by inflation.
4. The highest rent any tenant has offered for any unit.

Why: DRE Reference Book ch. 22: IN ESTABLISHING THE RENTAL SCHEDULE, THE PROPERTY MANAGER MUST MAKE A THOROUGH NEIGHBORHOOD ANALYSIS BY DOING A MARKET SURVEY OF RENTS FOR COMPARABLE BUILDINGS. RENT LEVELS, GENERALLY, ARE ESTABLISHED ON THE BASIS OF SCARCITY AND COMPARABILITY OF VALUES.

A maintenance supervisor puts off repair requests from tenants of one national origin while promptly fixing others' units. What does this violate?

1. The bar on discriminatory terms, conditions and services. ✓
2. Nothing, as long as every repair request is done eventually.
3. Only the lease, which the tenants must sue to enforce.
4. Only local building codes on the timing of repairs.

Why: 24 CFR 100.65(b)(2): prohibited actions include FAILING OR DELAYING MAINTENANCE OR REPAIRS OF SALE OR RENTAL DWELLINGS BECAUSE OF RACE, COLOR, RELIGION, SEX, HANDICAP, FAMILIAL STATUS, OR NATIONAL ORIGIN.

A veteran agrees to pay more for a home than the reasonable value VA has set for it. How can the purchase still close with a VA-guaranteed loan?

1. The seller carries back the excess on a second loan
2. The lender adds the excess to the guaranteed loan
3. It cannot; the contract price must be reduced
4. He pays the excess in cash from his own resources ✓

Why: 38 CFR 36.4339(a) allows a guaranty only where the loan does not exceed the reasonable value VA determines and the veteran certifies that he has paid in cash from his own resources any difference between the price and that value. The loan cannot simply be enlarged, and the sale may proceed on those terms.