Free Tennessee Real Estate Practice Exam

Q1.A broker's affiliated salesperson consistently steers minority buyers away from listings in predominantly white neighborhoods, directing them only to racially mixed or minority-majority areas. The broker has received no formal complaints but is aware of the pattern. Under the Fair Housing Act, which statement best describes the broker's liability exposure?

• A.The broker faces no liability because the salesperson, not the broker, is making the steering decisions.
• B.The broker may be held vicariously liable because a principal is responsible for the fair housing violations of affiliated licensees acting within the scope of their employment, and the broker's awareness without corrective action compounds that exposure.
• C.The broker is protected from liability as long as the brokerage has a written anti-discrimination policy posted in the office.
• D.The broker is only liable if HUD can prove the broker gave the salesperson explicit instructions to steer clients.

Q2.When a buyer breaches a real estate contract by failing to close, what is the most common remedy available to the seller?

• A.Keeping the buyer's earnest money as liquidated damages
• B.Specific performance to force the buyer to complete the purchase
• C.Suing for the full purchase price
• D.Automatically transferring title to a backup buyer

Q3.In Tennessee, which document is used to confirm in writing the agency or facilitator relationship between a licensee and the parties before or at the time an offer is made?

• A.Tennessee Consent to Dual Agency form
• B.Agency Confirmation and Acknowledgment
• C.Brokerage Engagement Agreement
• D.Principal Broker Authorization Letter

Q4.Under Tennessee law, which of the following best describes the primary supervisory obligation a principal broker has toward affiliated brokers working under their license?

• A.The principal broker must co-sign every contract drafted by an affiliate broker before it is presented to any party.
• B.The principal broker is responsible for the acts of affiliated brokers performed within the scope of their real estate activities and must provide reasonable supervision over those activities.
• C.The principal broker's supervisory duty applies only to full-time salaried employees, not to affiliate brokers operating as independent contractors.
• D.Supervision is the responsibility of the Tennessee Real Estate Commission, not the principal broker, once an affiliate broker is licensed.

Q5.Which type of deed provides the LEAST protection to the grantee?

• A.General warranty deed
• B.Special warranty deed
• C.Bargain and sale deed
• D.Quitclaim deed

Q6.A Tennessee affiliate broker collects a $5,000 earnest money check from a buyer on a Friday evening after the buyer's offer is accepted. Which action best complies with Tennessee Real Estate Commission rules regarding trust fund deposits?

• A.Hand the check to the principal broker immediately so it can be deposited no later than the next three business days
• B.Deposit the check into the affiliate broker's personal checking account for safekeeping until Monday
• C.Hold the check in the affiliate broker's desk drawer until the seller formally signs the contract
• D.Return the check to the buyer until the transaction is fully ratified, then collect it again

Q7.Under the Fair Housing Act, which of the following is NOT considered a protected class?

• A.National origin
• B.Familial status
• C.Religion
• D.Sexual orientation

Q8.A mortgage company consistently charges African American borrowers higher interest rates than similarly qualified white borrowers, even when they have identical credit profiles and loan applications. This practice primarily violates which federal law?

• A.Fair Housing Act Section 3605
• B.RESPA Section 5 (Good Faith Estimate)
• C.Truth-in-Lending Act Section 226.23
• D.Equal Credit Opportunity Act Section 701

Q9.In the income approach to valuation, what does the capitalization rate represent?

• A.The rate of return an investor expects on the investment
• B.The percentage of income retained after expenses
• C.The percentage of the property's value that is financed
• D.The annual appreciation rate of the property

Q10.A broker is the designated broker for a large residential brokerage. One of the firm's salespersons represents a buyer seeking financing for a home purchase. The salesperson recommends a specific mortgage lender to the buyer and, unknown to the buyer, receives a $500 'marketing fee' from the lender each time a client closes a loan with that lender. The salesperson reports this arrangement to the broker, who allows it to continue without disclosure to clients. Under RESPA and principles of broker supervisory responsibility, which outcome is most legally accurate?

• A.Both the salesperson and the broker are in violation of RESPA Section 8(a), because the $500 payment is an illegal kickback for a settlement service referral, and the broker's knowing allowance of the arrangement creates independent supervisory liability that may result in license discipline, civil penalties, and disgorgement of fees.
• B.The arrangement is permissible under RESPA's affiliated business arrangement exemption provided the salesperson discloses the $500 fee on the Closing Disclosure form at settlement.
• C.Only the salesperson is liable under RESPA because the Act's anti-kickback provisions apply solely to the individual who physically receives the prohibited payment, not to supervising brokers.
• D.The $500 payment is lawful as a bona fide marketing services fee under RESPA Section 8(c)(2) because the salesperson provides a referral service of value to the lender, and no further disclosure is required.

Q11.A designated agent representing a seller discovers that the buyer's Truth-in-Lending disclosure shows an APR significantly higher than what was initially quoted. Under federal law and fiduciary duty principles, what action should the agent take?

• A.Inform only the seller since the agent represents the seller's interests
• B.Suggest the buyer review the disclosure carefully as the APR appears inconsistent with initial quotes
• C.Remain silent as loan terms are between buyer and lender
• D.Advise the buyer to accept the terms to avoid delaying closing

Q12.A licensed real estate salesperson wants to practice real estate and earn commissions. Under general real estate principles, which of the following statements is TRUE regarding the salesperson's ability to operate independently?

• A.A salesperson must work under the supervision of a licensed broker and cannot operate independently.
• B.A salesperson may open their own real estate office after completing 500 hours of experience.
• C.A salesperson may independently represent buyers but must have a broker represent sellers.
• D.A salesperson may operate independently as long as they carry errors and omissions insurance.

Q13.A Tennessee principal broker maintains a property management trust account and a sales escrow trust account at the same federally insured depository institution. During the monthly three-way reconciliation required under TREC Rule 1260-02-.09, the broker discovers that the adjusted bank balance exceeds the adjusted book balance by $312. After verifying all outstanding checks and deposits in transit, the discrepancy remains. Which action best reflects the broker's statutory obligations?

• A.The broker must identify and correct the source of the discrepancy before the reconciliation is considered complete, document the corrective steps taken, and retain all reconciliation records for a minimum of three years as required by Tennessee law.
• B.The broker may carry the $312 overage forward to the next month's reconciliation because minor discrepancies under $500 are within TREC's administrative tolerance threshold.
• C.The broker should immediately disburse the $312 overage to the firm's operating account to prevent commingling, then note the transfer in the ledger.
• D.The broker is only required to reconcile the two trust accounts together as a single combined balance, so the overage is immaterial as long as the combined total equals client liability.

Q14.A lender charges a borrower three discount points at closing on a $200,000 fixed-rate mortgage. What is the total dollar amount the borrower pays in discount points?

• A.$2,000
• B.$3,000
• C.$6,000
• D.$20,000

Q15.An affiliate broker in Memphis operates under the team name 'The Shelby Elite Group.' Under TREC advertising rules, which of the following statements BEST describes how this team name must appear in all advertising?

• A.The team name may appear in any size or prominence as long as the brokerage firm's name also appears in the advertisement.
• B.The team name must appear in a font size at least equal to or smaller than the brokerage firm's name, and the brokerage firm's name must be clearly identifiable.
• C.The team name may replace the brokerage firm's name entirely, provided the team name is registered with TREC.
• D.The team name is only required in print advertising and may be omitted from digital or social-media posts.