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Perry Real Estate Final Exam Version 2 Questions Actual Test |
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OVERVIEW
This practice exam is designed to simulate a full Perry Real Estate College Final Exam ( questions) using realistic licensing-style wording , long-form scenarios, and detailed explanations. It covers all major real estate topics including: Property ownership (fee simple, life estates, estates) Deeds and title transfer Contracts and agency relationships Financing and mortgages Liens, encumbrances, and legal claims Valuation methods and appraisal principles Government powers (police power, eminent domain, taxation, escheat) Leases and landlord-tenant law Real estate ethics and practice rules
1. A property owner enters into a legally binding agreement to sell their home to a buyer at an agreed price. Before closing, the owner decides not to proceed with the sale and refuses to transfer the property, even though the buyer has met all contract conditions. What legal concept best describes this situation?
A Misrepresentation B Breach of contract C Novation D Specific performance Answer: B Explanation: Breach of contract occurs when one party fails to perform obligations under a valid agreement without legal justification.
2. A homeowner owns a property outright with no time limitations, restrictions on transfer, or conditions placed by previous owners or the government. They are free to sell, lease, or will the property to heirs at any time. Which type of ownership does this describe? A Life estate B Fee simple absolute C Leasehold estate D Determinable estate Answer: B Explanation: Fee simple absolute is the most complete form of ownership, granting full and indefinite rights 3. A utility company is granted permission by law to install and maintain electrical lines across multiple privately owned properties. The company does not own the land but has legal access rights that remain in effect indefinitely. What type of property interest is this? A Easement appurtenant B Easement in gross C Encroachment D License Answer: B Explanation: Easement in gross benefits an entity rather than a specific parcel of land, such as utility companies 4. A city government passes regulations that divide land into residential, commercial, and industrial zones, restricting how property owners may use their land. These laws are intended to promote safety, order, and public welfare. What governmental authority is being exercised?
A General lien B Specific lien C Voluntary lien D Judgment lien Answer: B Explanation: A specific lien applies only to a particular property, such as a mechanic’s lien.
8. A property owner signs a legal document that officially transfers ownership of their home to a buyer. This document must be properly executed, delivered, and accepted to be valid. What is this document called? A Mortgage B Deed C Title insurance policy D Lease agreement Answer: B Explanation: A deed is the legal instrument used to transfer ownership of real property. 9. A residential subdivision is developed and recorded with a county government. Each property is identified using a lot number and block number referenced on a recorded plat map. What method of legal description is this? A Metes and bounds B Government survey system C Lot and block system D Rectangular survey Answer: C Explanation: The lot and block system is used in recorded subdivisions to identify parcels. 10. A borrower stops making payments on their mortgage loan. After legal proceedings, the lender takes possession of the property to recover the unpaid debt. What process is this? A Redemption B Foreclosure C Eviction D Attachment
Answer: B Explanation: Foreclosure is the legal process where a lender repossesses property after borrower default.
11. A buyer and seller enter into a written agreement for the sale of a residential property. The contract includes all essential terms such as price, property description, and closing date. What element is required for this agreement to be legally enforceable in court? A Emotional intent B Consideration C Oral confirmation D Broker signature Answer: B Explanation: Consideration is the exchange of value between parties and is required for a valid and enforceable contract. 12. A property owner hires a real estate professional to market and sell their home. In return, the agent agrees to list the property and attempt to find a qualified buyer. What type of agreement is this? A Purchase agreement B Listing agreement C Lease agreement D Option contract Answer: B Explanation: A listing agreement is a contract between a property owner and a real estate broker authorizing the sale of property. 13. A seller signs an agreement giving one brokerage the exclusive right to earn a commission if the property sells during a specified period, regardless of who finds the buyer. What type of listing agreement is this? A Open listing B Exclusive agency listing C Exclusive right-to-sell listing D Net listing
Answer: A Explanation: Equity is calculated as property value minus outstanding debt ($300,000 − $180,000 = $120,000).
17. A borrower has a mortgage where the interest rate can increase or decrease periodically based on market conditions. What type of loan is this? A Fixed-rate mortgage B Adjustable-rate mortgage C Balloon mortgage D Interest-only mortgage Answer: B Explanation: Adjustable-rate mortgages have interest rates that change over time based on market indexes. 18. A federal law is designed to ensure that borrowers are informed about all settlement costs and to prohibit illegal kickbacks during real estate transactions. What law is this? A Fair Housing Act B RESPA C Truth in Lending Act D ADA Answer: B Explanation: RESPA regulates settlement procedures and prohibits kickbacks in real estate transactions. 19. A real estate contract includes a clause stating that the agreement will only proceed if the buyer is approved for financing. What is this clause called? A Escrow clause B Contingency clause
C Warranty clause D Default clause Answer: B Explanation: A contingency clause makes the contract dependent on certain conditions being met.
20. A property owner discovers that there is a dispute over previous ownership history and possible errors in the chain of title. What type of insurance protects against financial loss from such issues? A Hazard insurance B Title insurance C Flood insurance D Liability insurance Answer: B Explanation: Title insurance protects against losses due to defects in ownership or title disputes. 21. A lender places a legal claim on a borrower’s property to secure repayment of a debt. The claim does not transfer ownership but ensures the lender has rights to the property if the borrower defaults. What is this legal claim called? A Deed restriction B Lien C Easement D Encumbrance release Answer: B Explanation: A lien is a legal claim against property used as security for a debt or obligation. 22. A property owner wants the highest level of protection when transferring ownership and wants to guarantee that there are no defects in title from previous owners. Which type of deed provides the strongest protection?
25. An individual has occupied a piece of land openly, continuously, and without permission for many years and is now seeking legal ownership. What doctrine applies? A Adverse possession B Easement by necessity C License agreement D Condemnation Answer: A Explanation: Adverse possession allows ownership through continuous, open, and hostile use for a statutory period. 26. A borrower takes out a mortgage loan that requires small monthly payments for a set period, followed by a large final payment at the end of the term. What type of mortgage is this? A Fixed-rate mortgage B Balloon mortgage C FHA loan D Reverse mortgage Answer: B Explanation: A balloon mortgage has regular payments with a large lump-sum payment due at maturity. 27. A borrower is required to pay an additional monthly insurance fee because they made a down payment of less than 20% on their home loan. What is this insurance called? A Hazard insurance B Title insurance C Private Mortgage Insurance (PMI) D Flood insurance
Answer: C Explanation: PMI protects the lender when the borrower has a low down payment and higher risk.
28. A court judgment against a property owner allows creditors to claim any property owned by the debtor to satisfy the debt. What type of lien is this? A Specific lien B General lien C Voluntary lien D Equitable lien Answer: B Explanation: A general lien attaches to all assets owned by the debtor, not just one property. 29. A contractor files a claim against a specific property for unpaid construction work done on that property alone. What type of lien is this? A General lien B Specific lien C Blanket lien D Statutory lien Answer: B Explanation: A specific lien applies only to a particular property, such as a mechanic’s lien. 30. A tenant signs an agreement allowing them to occupy an apartment for one year in exchange for monthly rent payments, without gaining ownership rights. What type of interest does this represent? A Fee simple estate B Leasehold estate C Freehold estate D Life estate
C Amortization D Inflation Answer: B Explanation: Depreciation is the loss in value of a property due to physical deterioration, functional issues, or external factors.
34. A borrower makes regular payments on a mortgage, where each payment includes both interest and a portion that reduces the principal balance. What is this repayment process called? A Refinancing B Amortization C Escrow D Foreclosure Answer: B Explanation: Amortization is the gradual repayment of a loan through scheduled payments over time. 35. A real estate agent uses recently sold properties in the same neighborhood, adjusting for differences in size, condition, and features, to estimate a property’s value. What valuation method is being used? A Cost approach B Income approach C Sales comparison approach D Gross rent multiplier method Answer: C Explanation: The sales comparison approach uses comparable recent sales to estimate property value.
36. A property is subject to a mortgage, a zoning restriction, and a right-of-way granted to a utility company. What general term describes these limitations on ownership? A Encroachments B Encumbrances C Easements D Covenants Answer: B Explanation: Encumbrances are claims, liens, or restrictions that affect the use or transfer of property. 37. A homeowner permanently attaches a custom-built bookshelf to the wall of their home. When selling the property, the bookshelf is included in the sale unless otherwise stated. What is this type of property called? A Trade fixture B Fixture C Personal property D Chattel Answer: B Explanation: A fixture is personal property that has become permanently attached to real property. 38. A buyer records their deed with the county government after purchase. What is the main purpose of recording this document? A To determine property value B To provide public notice of ownership C To reduce property taxes D To transfer mortgage rights Answer: B Explanation: Recording a deed provides legal public notice of ownership and protects against future claims.
42. A homeowner grants permission to a neighbor to temporarily park a vehicle on their driveway, but the permission can be revoked at any time. What type of property right is this? A Easement B License C Encroachment D Leasehold estate Answer: B Explanation: A license is a temporary, revocable permission to use another person’s property. 43. A property is located in a flood zone, and the lender requires the buyer to obtain additional insurance coverage before approving the loan. What type of insurance is this? A PMI B Title insurance C Flood insurance D Hazard waiver insurance Answer: C Explanation: Flood insurance is required in high-risk flood zones to protect against water damage losses. 44. A real estate investor purchases a building primarily for the rental income it generates rather than for its resale value. Which valuation method is most appropriate for this type of property? A Cost approach B Income approach C Sales comparison approach D Replacement cost method
Answer: B Explanation: The income approach values property based on the income it generates.
45. A tenant remains in a property after their lease expires without the landlord’s permission but continues paying rent. What type of tenancy is this? A Tenancy at sufferance B Tenancy at will C Tenancy for years D Periodic tenancy Answer: D Explanation: A periodic tenancy continues from one rental period to the next, often with rent payment accepted by the landlord. 46. A property owner’s land is located between two highways, but the only access to the property is through a neighboring parcel. The owner is granted legal access through that neighbor’s land. What is this called? A Easement by necessity B Easement in gross C Encroachment D License agreement Answer: A Explanation: An easement by necessity is created when a property has no legal access except through another property. 47. A mortgage loan allows the borrower to make interest-only payments for the first few years before switching to full principal and interest payments. What type of loan structure is this? A Adjustable-rate mortgage B Graduated payment mortgage
A Foreclosure B Escrow C Amortization D Short sale Answer: A Explanation: Foreclosure is the legal process by which a lender takes ownership or forces sale of a property due to loan default.
51. A property owner sells their home but includes a clause that the buyer must use the property only for residential purposes and not operate any business from it. What is this restriction called? A Easement B Restrictive covenant C License D Encroachment Answer: B Explanation: A restrictive covenant is a binding condition placed on a property that limits how it may be used. 52. A buyer agrees to purchase a home, but the sale is contingent on a professional inspection revealing no major structural defects. What type of clause is this? A Escalation clause B Inspection contingency C Acceleration clause D Subordination clause Answer: B Explanation: An inspection contingency allows the buyer to cancel or renegotiate based on inspection results. 53. A lender allows a borrower to refinance their mortgage with a new loan that pays off the existing loan. What is this process called? A Amortization B Refinancing C Foreclosure D Escrow Answer: B Explanation: Refinancing replaces an existing loan with a new one, usually to improve terms or interest rates.
54. A property’s value increases because a new shopping center, schools, and transportation systems are built nearby. What type of appreciation is this? A Physical appreciation B External appreciation C Functional depreciation D Economic obsolescence Answer: B Explanation: External appreciation occurs due to improvements in the surrounding area that increase property value. 55. A lender requires a borrower to place property taxes and insurance payments into a separate account managed by the lender. What is this account called? A Trust account B Escrow account C Reserve account D Impound account Answer: B Explanation: An escrow account holds funds for taxes and insurance until they are due. 56. A homeowner wants to sell their property but still retain the right to use a portion of the land for access to a nearby road. What legal right allows this? A License B Easement C Lease D Covenant Answer: B Explanation: An easement allows the use of another person’s land for a specific purpose. 57. A buyer purchases a property where ownership is transferred but the seller does not guarantee that there are no title defects. What type of deed is this most likely? A General warranty deed B Quitclaim deed C Special warranty deed D Fee simple deed Answer: C Explanation: A special warranty deed guarantees title only during the seller’s ownership period.
