Free Florida real estate practice exam

Answer key and explanations

Every answer, with the reasoning. Work through the ones you missed — that list is your study plan.

1. Question 1 — answer D

   A real estate broker maintains a trust account to hold client funds. What is the broker's responsibility regarding the account?

   The broker has a fiduciary duty to maintain accurate records and reconcile the trust account regularly to ensure that client funds are handled properly and that the account is balanced.

2. Question 2 — answer D

   Who must be licensed to practice real estate in Florida?

   In Florida, all brokers and sales associates who engage in real estate activities must be licensed, except for certain exempt individuals such as attorneys and government employees.

3. Question 3 — answer D

   How many hours of post-licensing education are required for a sales associate before their first license renewal?

   45 hours of post-licensing education are required before the first license renewal, as mandated by FREC

4. Question 4 — answer D

   What happens to a Florida real estate sales associate licence if the associate fails to complete the required post-licensing education?

   The correct answer is it becomes null and void, as failure to complete post-licensing education results in the licence being null and void.

5. Question 5 — answer D

   How many hours of continuing education are required for Florida real estate sales associates every 2 years?

   Florida real estate sales associates are required to complete 14 hours of continuing education every 2 years.

6. Question 6 — answer D

   What is the requirement for a sales associate to maintain an active license status after the initial licensing period?

   To maintain an active license status after the initial licensing period, a sales associate must complete 45 hours of post-licensing education before the first renewal.

7. Question 7 — answer D

   What is the consequence of failing to complete the 45-hour post-licensing education requirement before the first renewal?

   If the 45-hour post-licensing education requirement is not completed before the first renewal, the license will be null and void, as stated in Chapter 475, F.S.

8. Question 8 — answer A

   What is the primary role of the Division of Real Estate in relation to the Florida Real Estate Commission?

   The Division of Real Estate provides administrative support to the Florida Real Estate Commission.

9. Question 9 — answer D

   What is the result of a broker complying with an Escrow Disbursement Order and later suffering a judgment?

   A broker who complies with an Escrow Disbursement Order and later suffers a judgment is reimbursed from the Real Estate Recovery Fund without disciplinary action.

10. Question 10 — answer A

    Can a sales associate be designated to work with a client in a commercial transaction?

    Yes, a sales associate can be designated to work with a client in a commercial transaction, but only with the client's consent.

11. Question 11 — answer D

    A sales associate is representing a seller in a residential transaction. The sales associate has a fiduciary duty to the seller. What type of brokerage relationship is this?

    Since the sales associate has a fiduciary duty to the seller, this is a Single Agent relationship. Single Agents have full fiduciary duties to their clients.

12. Question 12 — answer D

    In a commercial transaction, can a broker designate a sales associate to act as a Single Agent for a party?

    In a commercial transaction, a broker can designate a sales associate to act as a Single Agent for a party, providing full fiduciary duties to that party.

13. Question 13 — answer D

    What are the duties of a Transaction Broker in Florida?

    A Transaction Broker in Florida has 8 limited representation duties, which include dealing honestly and fairly, accounting for all funds, and disclosing all known facts that materially affect the value of the property.

14. Question 14 — answer D

    What type of brokerage relationship requires a Single Agent Notice to be provided to the parties?

    The Single Agent relationship requires a Single Agent Notice to be provided to the parties, as it involves full fiduciary duties and representation.

15. Question 15 — answer D

    When is a disclosure of the brokerage relationship required in Florida?

    A disclosure of the brokerage relationship is required in residential transactions of 4 units or fewer in Florida.

16. Question 16 — answer B

    A sales associate is acting as a Transaction Broker in a residential sale. How many duties are owed to both parties?

    A Transaction Broker owes 8 duties to both parties in a transaction, including dealing honestly and fairly, and accounting for all funds.

17. Question 17 — answer D

    A sales associate wants to advertise their team. What is required for team advertising?

    Team advertising requires the brokerage name and the team name.

18. Question 18 — answer D

    What is the role of the sales associate in a brokerage?

    A sales associate works under the supervision of a broker or owner-developer.

19. Question 19 — answer D

    How long must a brokerage firm retain records of real estate transactions?

    A brokerage firm must retain records of real estate transactions for 5 years, as required by Florida law.

20. Question 20 — answer D

    A broker has an office in a residential area and wants to put up a sign. What is the requirement for the sign?

    The sign must have the broker's name and contact information to comply with Florida's office and sign requirements.

21. Question 21 — answer D

    What happens if a broker complies with an Escrow Disbursement Order and later suffers a judgment?

    The broker is reimbursed from the Real Estate Recovery Fund without disciplinary action for complying with an Escrow Disbursement Order.

22. Question 22 — answer D

    What is the consequence of a sales associate engaging in unlicensed practice in Florida?

    Unlicensed practice is a third-degree felony in Florida, emphasizing the seriousness of practicing real estate without a license.

23. Question 23 — answer D

    A brokerage firm has a dispute over an escrow deposit and receives conflicting demands from the buyer and seller. What is the first step the broker should take?

    The broker should notify FREC of the conflicting demands, then proceed with one of the four settlement procedures: mediation, arbitration, litigation, or requesting an Escrow Disbursement Order.

24. Question 24 — answer D

    A brokerage firm is having a dispute over an escrow account. What is the first step in resolving the dispute?

    The first step in resolving an escrow dispute is to notify FREC of conflicting demands.

25. Question 25 — answer D

    A broker has a dispute over an escrow deposit and receives conflicting demands from the buyer and seller. What should the broker do first?

    The broker should notify FREC of the conflicting demands, then proceed with mediation, arbitration, litigation, or an Escrow Disbursement Order.

26. Question 26 — answer D

    A sales associate offers to pay a friend a referral fee for bringing in a client. Is this permissible?

    Only licensed brokers and sales associates can receive compensation for real estate services.

27. Question 27 — answer D

    A broker is holding an escrow deposit and receives conflicting demands from the buyer and seller. What is the first step the broker must take?

    The broker must notify FREC of the conflicting demands, then proceed with one of the four settlement procedures: mediation, arbitration, litigation, or an Escrow Disbursement Order.

28. Question 28 — answer D

    A broker is offering a referral fee to an unlicensed individual. Is this allowed?

    Offering a referral fee to an unlicensed individual is considered an unlicensed compensation and is not allowed.

29. Question 29 — answer D

    A sales associate is found to have engaged in unlicensed practice. What is the classification of this offense?

    Unlicensed practice is a third-degree felony in Florida, which carries significant penalties and consequences.

30. Question 30 — answer D

    A sales associate is found guilty of breach of trust. What type of penalty may they face?

    A sales associate found guilty of breach of trust may face any of the penalties, including a fine, probation, suspension, or revocation, as per s.475.25.

31. Question 31 — answer D

    What is the consequence for a broker who complies with an Escrow Disbursement Order and later loses a judgment related to the escrow?

    A broker who complies with an Escrow Disbursement Order and later loses a judgment is reimbursed from the Real Estate Recovery Fund without facing licence discipline, as per s.475.482.

32. Question 32 — answer A

    A real estate sales associate receives an email from a potential client who has previously opted out of receiving emails. What law does the associate need to comply with?

    The associate needs to comply with CAN-SPAM, which regulates commercial emails and requires opt-out mechanisms.

33. Question 33 — answer D

    A real estate sales associate receives an email from a consumer who has opted out of further contact. What should the associate do?

    The CAN-SPAM Act requires that senders of commercial emails honor opt-out requests and add the consumer's email address to a do-not-contact list.

34. Question 34 — answer D

    The Truth-in-Lending Act (TILA) requires lenders to disclose certain information to borrowers, including the annual percentage rate (APR). Which of the following trigger terms would require a lender to provide a TILA disclosure?

    The trigger term 'finance charge' would require a lender to provide a TILA disclosure, as it is a term that indicates the borrower will be charged interest or other fees.

35. Question 35 — answer D

    What is the bundle of rights in real property?

    The bundle of rights in real property refers to the rights of the owner to use, sell, and dispose of the property, including the right to exclude others.

36. Question 36 — answer C

    A bundle of rights includes the right to:

    A bundle of rights includes the right to use, sell, gift, and lease the property, among other rights.

37. Question 37 — answer D

    A homeowner's association (HOA) has rules that restrict the colors that can be used to paint houses in the neighborhood. What type of control is this?

    The HOA's rules are an example of covenants, conditions, and restrictions (CC&Rs), which are private controls that govern the use of property in a development.

38. Question 38 — answer D

    A free-standing refrigerator in a rental property is considered _____.

    A free-standing refrigerator is considered personal property because it is not attached to the real property.

39. Question 39 — answer D

    A free-standing refrigerator is considered what type of property?

    A free-standing refrigerator is not attached to the real estate, making it personal property.

40. Question 40 — answer C

    A cooperative owner in Florida has the right to

    Cooperative owners in Florida have the right to inspect the association's financial records.

41. Question 41 — answer D

    What is the bundle of rights that an owner of a property has?

    The bundle of rights includes the right to use, possess, and dispose of the property, among other rights.

42. Question 42 — answer D

    What is the primary purpose of the declaration in a Florida condominium?

    The declaration outlines the rights and responsibilities of unit owners, as well as the rules and regulations governing the condominium.

43. Question 43 — answer D

    What is the term for a private agreement that restricts the use of a property?

    A CC&R is a private agreement that restricts the use of a property, often found in subdivision developments.

44. Question 44 — answer D

    What is the purpose of recording a deed in the county clerk's office?

    Recording a deed provides constructive notice to subsequent purchasers, protecting the grantee's interest in the property. It does not transfer title, which occurs upon delivery and acceptance.

45. Question 45 — answer A

    A property owner installs a new fence that encroaches onto a neighboring property. What type of issue is this?

    An encroachment occurs when a property owner's improvement, such as a fence, extends onto a neighboring property without permission.

46. Question 46 — answer D

    A lender is requiring a borrower to sign a subordination agreement as a condition of approving a home equity loan. What is the purpose of this agreement?

    A subordination agreement subordinates the home equity loan to the first mortgage loan, making the first mortgage loan the primary lien on the property.

47. Question 47 — answer D

    A lien that is placed on a property due to unpaid taxes is an example of which type of lien?

    A lien that is placed on a property due to unpaid taxes is an example of an involuntary lien, which is a lien that is imposed on a property without the owner's consent.

48. Question 48 — answer D

    A lender includes an alienation clause in a loan agreement. What is the purpose of this clause?

    An alienation clause, also known as a due-on-sale clause, allows the lender to accelerate the loan if the property is sold or transferred without their consent.

49. Question 49 — answer A

    Which of the following types of deeds conveys the greatest warranty of title?

    A general warranty deed conveys the greatest warranty of title, as it guarantees the grantor's title against all claims, whereas a special warranty deed only guarantees against claims arising during the grantor's ownership.

50. Question 50 — answer D

    What is the size of the NE 1/4 of the SW 1/4 of a standard 640-acre section in the Government Survey system?

    The NE 1/4 of the SW 1/4 is 1/4 of 1/4 of 640 acres, so the size is 640 ÷ 4 ÷ 4 = 40 acres.

51. Question 51 — answer D

    Which type of legal description is typically used for properties located in urban areas?

    The lot-block system of legal description is commonly used for properties in urban areas, where land is subdivided into lots and blocks.

52. Question 52 — answer D

    What type of description is typically used for a property located within a subdivision?

    A lot and block description is typically used for a property located within a subdivision, referencing a recorded plat.

53. Question 53 — answer D

    In the Government survey system, sections are numbered in a

    In the Government survey system, sections are numbered in a serpentine pattern from the NE corner, which means that the numbering starts from the NE corner and alternates between rows.

54. Question 54 — answer D

    What is the purpose of a government survey?

    The purpose of a government survey is to determine the boundaries of a property, establishing the official record of the property's dimensions and location.

55. Question 55 — answer D

    A real estate contract must be in writing to be enforceable under the Statute of Frauds. What is the primary purpose of this requirement?

    The Statute of Frauds requires that certain contracts, including real estate contracts, be in writing to prevent fraudulent transactions and ensure that all parties are clear on the terms of the contract.

56. Question 56 — answer D

    A buyer makes an offer to purchase a property with a contingency for financing, but the seller rejects the offer and makes a counteroffer without the contingency. What is the status of the original offer?

    A counteroffer terminates the original offer, and the buyer must accept the new terms of the counteroffer if they want to proceed with the purchase.

57. Question 57 — answer D

    What is the result of a buyer's breach of a real estate contract?

    If a buyer breaches a real estate contract, the seller may sue for specific performance, forfeit the earnest money, or terminate the contract and retain the earnest money, depending on the circumstances and the terms of the contract.

58. Question 58 — answer D

    A buyer gives a seller $1,000 in earnest money as a deposit on a property. What happens to the earnest money if the buyer breaches the contract?

    If the buyer breaches the contract, the earnest money is typically forfeited to the seller as damages.

59. Question 59 — answer A

    A contract for the sale of a property includes a contingency for the buyer's financing. If the buyer is unable to secure financing, what is the effect on the contract?

    If the buyer is unable to secure financing, and the contract includes a contingency for financing, the contract is terminated, and the earnest money deposit is typically refunded to the buyer.

60. Question 60 — answer D

    What is the purpose of the statute of frauds in relation to real estate contracts?

    The statute of frauds requires contracts for the sale of real property to be in writing to be enforceable, in order to prevent disputes and fraud.

61. Question 61 — answer D

    Which of the following is a requirement for the sale of a pre-1978 residential property?

    Federal law requires sellers of pre-1978 residential properties to disclose the presence of lead-based paint to potential buyers.

62. Question 62 — answer D

    What is the effect of the statute of frauds on a real estate contract?

    The statute of frauds requires certain contracts, including those for the sale of real property, to be in writing to be enforceable.

63. Question 63 — answer A

    What is the effect of a breach of contract by one party on the other party's obligations?

    If one party breaches the contract, the other party is released from their obligations, as the breach has excused their performance.

64. Question 64 — answer D

    A buyer makes an offer on a property with a $10,000 earnest money deposit. The seller responds with a counteroffer, increasing the price by $5,000. What happens to the original offer?

    A counteroffer terminates the original offer, replacing it with a new proposal.

65. Question 65 — answer D

    A buyer makes an offer to purchase a property with a contingency for financing. The seller rejects the offer and makes a counteroffer with different terms. What happens to the original offer?

    A counteroffer terminates the original offer, and it cannot be accepted thereafter.

66. Question 66 — answer A

    What is the effect of a breach of contract by the buyer on the earnest money deposit?

    If the buyer breaches the contract, the buyer may forfeit the earnest money deposit to the seller, depending on the contract terms.

67. Question 67 — answer D

    The Truth in Lending Act (TILA) requires lenders to disclose the annual percentage rate (APR) to borrowers. What is the primary purpose of this disclosure?

    The APR disclosure under TILA informs borrowers of the total cost of the loan, including fees and interest.

68. Question 68 — answer D

    What is the main difference between a mortgage and a deed of trust?

    The main difference between a mortgage and a deed of trust is that a deed of trust involves a trustee who holds title to the property until the loan is paid off.

69. Question 69 — answer A

    A borrower obtains a loan with a subordination clause. What does this clause allow the lender to do?

    A subordination clause allows the lender to subordinate the loan to a subsequent loan, such as a home equity loan.

70. Question 70 — answer D

    A borrower is purchasing a home with a conventional loan and is paying points to lower their interest rate. What are points?

    Points are a fee paid to the lender to lower the interest rate on the loan, and are typically expressed as a percentage of the loan amount.

71. Question 71 — answer D

    What is the main difference between points and origination fees in a mortgage loan?

    Points are used to buy down the interest rate, while origination fees are used to cover loan processing costs.

72. Question 72 — answer D

    What is the primary purpose of an escrow account in the context of real estate financing?

    The primary purpose of an escrow account is to set aside funds for property tax and insurance payments, ensuring that the borrower has sufficient funds to cover these expenses when they come due.

73. Question 73 — answer D

    A borrower signs a promissory note and deed of trust to secure a loan. What is the primary difference between these two documents?

    The promissory note is the loan itself, while the deed of trust is the security instrument that pledges the property as collateral for the loan.

74. Question 74 — answer D

    A borrower pays points to lower their loan's interest rate. What is the primary benefit of paying points?

    Paying points can lower the loan's interest rate, which in turn reduces the monthly payment.

75. Question 75 — answer D

    What is the purpose of the Truth-in-Lending Act (TILA) disclosure?

    The TILA disclosure is required to disclose the terms and conditions of the loan, including the APR, to the borrower, so they can make an informed decision about the loan.

76. Question 76 — answer D

    What is the primary role of Fannie Mae in the mortgage market?

    Fannie Mae is a secondary mortgage market entity that purchases and securitizes mortgages, providing liquidity to the mortgage market.

77. Question 77 — answer D

    What is the primary difference between a conventional loan and a conforming loan?

    A conforming loan meets certain standards set by Fannie Mae and Freddie Mac, such as loan amount limits, while a conventional loan does not have these specific requirements.

78. Question 78 — answer D

    A borrower is considering a VA loan to purchase a home. What is a key benefit of this type of loan?

    VA loans do not require private mortgage insurance, which can be a significant cost savings for borrowers.

79. Question 79 — answer D

    A buyer is purchasing a property with a wraparound mortgage. What does this mean for the seller?

    A wraparound mortgage means the buyer will make payments to the seller, who will then make payments on the existing mortgage, so the seller remains responsible for the existing mortgage.

80. Question 80 — answer D

    A lender charges 1 discount point on a $160,000 loan. One point equals 1% of the loan amount. What is the cost of the points?

    1 point = 1% of $160,000 = $1,600.

81. Question 81 — answer D

    An investor bought a property for $410,000 and wants to sell it for a 15% profit. What must the sale price be?

    Sale price = cost × (1 + profit%) = $410,000 × 1.15 = $471,500.

82. Question 82 — answer D

    A tenant paid $1,600 rent for the full month. The sale closes on day 14 of a 30-day month. How much unearned rent must the seller credit the buyer at closing?

    Daily rent = $1,600 ÷ 30 = $53.33. The buyer owns the property for the 16 remaining days, so the credit = $53.33 × 16 = $853.33.

83. Question 83 — answer D

    An investor bought a property for $320,000 and wants to sell it for a 10% profit. What must the sale price be?

    Sale price = cost × (1 + profit%) = $320,000 × 1.1 = $352,000.

84. Question 84 — answer D

    An investor bought a property for $200,000 and wants to sell it for a 10% profit. What must the sale price be?

    Sale price = cost × (1 + profit%) = $200,000 × 1.1 = $220,000.

85. Question 85 — answer D

    Annual property taxes are $9,000. Using a 365-day year, the seller is responsible for 98 days. What is the seller's prorated share?

    Daily tax = $9,000 ÷ 365 = $24.66. Seller's share = $24.66 × 98 = $2,416.44.

86. Question 86 — answer D

    A sales associate is analyzing the local real estate market and notices a high vacancy rate in rental properties, as well as a decrease in building permits issued over the past year. What can be inferred about the current state of the market?

    A high vacancy rate and a decrease in building permits indicate that there is currently more supply than demand in the market, resulting in a surplus of available properties.

87. Question 87 — answer D

    A Broker Price Opinion (BPO) is typically used for which purpose?

    A BPO is a quick, informal estimate of a property's value, often used by real estate agents or brokers to help price a property for sale or to provide a rough estimate of value for marketing purposes.

88. Question 88 — answer D

    To ensure unbiased appraisal reports, appraisers must maintain their independence by avoiding which?

    Appraisers must maintain their independence by avoiding involvement in the sales process, as this can create a conflict of interest and compromise the appraiser's objectivity.

89. Question 89 — answer D

    Which of the following best describes the principle of substitution in real estate appraisal?

    The principle of substitution states that a buyer will pay no more for a property than the cost of acquiring an equally desirable substitute property, which is a fundamental concept in determining market value.

90. Question 90 — answer D

    Which type of depreciation is caused by external factors such as proximity to a highway or environmental hazards?

    External depreciation is caused by factors outside the property itself, such as proximity to a highway or environmental hazards

91. Question 91 — answer A

    A broker price opinion (BPO) is most commonly used for which of the following purposes?

    A BPO is often used by lenders to determine the market value of a property, particularly in situations where a full appraisal is not necessary.

92. Question 92 — answer D

    The process of a superior property being pulled down in value by surrounding inferior properties is known as what?

    Regression occurs when a superior property's value is negatively impacted by the presence of surrounding inferior properties.

93. Question 93 — answer D

    What is the concept of highest and best use in appraisal?

    The concept of highest and best use refers to the use that is legally permissible, physically possible, financially feasible, and maximally productive, and is a critical component of the appraisal process.

94. Question 94 — answer D

    Which approach to value estimates the cost to replace or reproduce a property, minus depreciation?

    The cost approach estimates the cost to replace or reproduce a property, minus depreciation, to determine its value.

95. Question 95 — answer D

    Which of the following is a benefit of positive leverage in real estate investing?

    Positive leverage occurs when the income from a property exceeds the mortgage payments, allowing the investor to benefit from increased potential for appreciation.

96. Question 96 — answer D

    Which of the following investments typically offers higher liquidity than real estate?

    Stocks, bonds, and mutual funds are generally more liquid than real estate, as they can be easily bought and sold on public markets. Real estate, on the other hand, can take months to sell and may require significant marketing efforts.

97. Question 97 — answer D

    What is the documentary stamp tax rate on deeds in most Florida counties?

    The documentary stamp tax rate on deeds in most Florida counties is $0.70 per $100 of price. For example, a $200,000 deed would incur a tax of $200,000 * $0.70 / $100 = $1,400.

98. Question 98 — answer A

    A property valued at $190,000 is assessed at 40% of value. The tax rate is $1.50 per $100 of assessed value. What is the annual tax?

    Assessed = $190,000 × 40% = $76,000. Tax = ($76,000 ÷ 100) × 1.5 = $1,140.

99. Question 99 — answer D

    What is the purpose of the Truth in Millage (TRIM) notice in Florida?

    The Truth in Millage (TRIM) notice informs property owners of the proposed millage rate and taxable value, allowing them to attend public hearings and provide input.

100. Question 100 — answer D

     What is the term for a governmental power to take private property for public use, requiring just compensation to be paid to the property owner?

     Eminent domain is the power of the government to take private property for public use, with the requirement that the property owner be paid just compensation for the taking.

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