Free Tennessee Real Estate Practice Exam

Q1.Which statement correctly limits the ten-business-day broker review rule?

• A.It applies to the covered instruments identified by § 32-2151.01, not automatically to every PM record
• B.It is a universal deadline for every bank change
• C.It replaces all retention rules
• D.It applies only after an audit begins

Q2.A rental ad states 'no children, please.' What is the best analysis?

• A.Acceptable if the owner requested it.
• B.It indicates a familial-status limitation and should not be published.
• C.Acceptable if the property is small.
• D.Only images can violate fair-housing advertising rules.

Q3.After determining that a covered breach occurred, what general outside limit does A.R.S. § 18-552 state for required notices, subject to its conditions and exceptions?

• A.24 hours
• B.10 business days
• C.45 days
• D.One year

Q4.A Tennessee affiliate broker's license is approaching its expiration date. Which of the following statements CORRECTLY describes the continuing education and errors-and-omissions (E&O) insurance requirements for timely renewal under Tennessee law?

• A.The affiliate broker must complete 16 hours of continuing education per renewal cycle, and E&O insurance is optional if the broker's firm carries a blanket policy
• B.The affiliate broker must complete 16 hours of continuing education per renewal cycle, including a mandatory core course, and must maintain E&O insurance as a condition of active license renewal
• C.The affiliate broker must complete 30 hours of continuing education per renewal cycle and is exempt from E&O insurance requirements during the first renewal period
• D.The affiliate broker must complete 16 hours of continuing education only during odd-numbered renewal years, with no E&O insurance requirement imposed by state law

Q5.The Tennessee Real Estate Commission wishes to adopt a new rule requiring all licensees to complete a specific fair-housing course as a condition of license renewal. Under T.C.A. Title 62, Chapter 13 and the Tennessee Administrative Procedures Act, which statement best describes TREC's rule-making authority?

• A.TREC may adopt the rule immediately upon a majority vote of its members without any public comment period because real estate rules are exempt from the Tennessee Administrative Procedures Act
• B.TREC has authority to promulgate rules necessary to carry out T.C.A. Title 62, Chapter 13, but must follow the procedures of the Tennessee Administrative Procedures Act, including public notice and comment
• C.TREC may adopt rules only if they are first approved by the Tennessee General Assembly through a joint resolution
• D.TREC may propose the rule, but it becomes effective only after the Tennessee Real Estate Educators Association formally endorses it

Q6.A property manager refuses to allow a tenant with multiple sclerosis to install a grab bar in the bathroom at the tenant's own expense, citing a blanket 'no modifications' policy in the lease. The tenant's physician has provided written documentation of the medical need. Which of the following most accurately describes the property manager's legal obligation under the Fair Housing Act?

• A.The property manager must permit the reasonable modification at the tenant's expense, and may require restoration of the property to its original condition upon lease termination
• B.The property manager is not required to permit physical modifications under the Fair Housing Act; only reasonable accommodations in rules and policies are required
• C.The property manager must permit the modification and must pay for it as a reasonable accommodation under the Fair Housing Act
• D.The blanket 'no modifications' lease clause is enforceable and supersedes any federal fair housing obligations for physical alterations

Q7.TREC is conducting a formal investigation of a Tennessee principal broker following a consumer complaint. The broker refuses to produce trust account ledgers, claiming they contain confidential client information protected by attorney-client privilege because an attorney reviewed some of the transactions. Under T.C.A. § 62-13-307 and TREC's investigative powers, which statement BEST describes TREC's authority in this situation?

• A.TREC may subpoena the trust account records and compel their production; the fact that an attorney reviewed transactions does not create attorney-client privilege over financial records the broker is independently required to maintain under state law.
• B.TREC must obtain a court order before it can review any records that a licensee claims are privileged, and the burden of proof lies with TREC to overcome the privilege assertion.
• C.TREC's investigative authority is limited to records voluntarily provided by the licensee; it cannot compel production of documents the licensee designates as confidential.
• D.TREC must refer the records dispute to the Tennessee Department of Commerce and Insurance legal division, which has exclusive authority to resolve privilege claims during investigations.

Q8.Where should the reviewer's initials and review date appear for a covered instrument?

• A.In a separate private spreadsheet only.
• B.On the same page as the parties' signatures.
• C.Only in the CRM notes.
• D.On the commission disbursement form.

Q9.A managing broker is audited by the state real estate commission. The auditor requests the broker's trust account records and discovers that the broker routinely performs a two-way reconciliation — matching the trust account ledger to the bank statement — but has never performed a three-way reconciliation. Three months of records show a $4,200 discrepancy between the aggregate of individual client ledger balances and the reconciled bank balance. Which statement most accurately describes the broker's regulatory and legal exposure arising specifically from the failure to perform three-way reconciliation?

• A.The broker has violated standard trust account management obligations, because three-way reconciliation — comparing the bank statement, the trust account journal, and the aggregate of individual client subsidiary ledgers — is the only method that can detect shortages, overages, or conversion attributable to specific client funds, and the $4,200 discrepancy would likely constitute commingling or conversion subject to license discipline.
• B.The broker has committed no regulatory violation because two-way reconciliation satisfies federal RESPA requirements for trust account recordkeeping applicable to brokers handling escrow funds.
• C.The $4,200 discrepancy is immaterial as a matter of law because federal accounting standards permit a tolerance of up to 5% of the total trust account balance before a shortage triggers disciplinary review.
• D.The broker's exposure is limited to a written reprimand because the failure to perform three-way reconciliation is classified as a technical recordkeeping deficiency rather than a substantive violation under federal trust account regulations.

Q10.After a real estate transaction in Tennessee fails to close due to a dispute over the earnest money, neither party will sign a release. The principal broker is uncertain about the proper disbursement. Which of the following represents a legally recognized avenue for the broker to resolve the dispute without personal liability under Tennessee law?

• A.File a declaratory judgment action or interpleader action with a Tennessee court to have the court determine proper disbursement
• B.Issue the funds to the listing agent to hold pending arbitration
• C.Return the funds to the buyer's lender since financing was the reason the deal collapsed
• D.Transfer the disputed funds to TREC for safekeeping until the dispute is resolved

Q11.A rectangular lot measures 150 feet by 200 feet. If the lot sold for $12 per square foot, what was the total sale price?

• A.$360,000
• B.$42,000
• C.$4,200
• D.$30,000

Q12.A principal broker in Tennessee is audited by TREC investigators who request access to all brokerage transaction files. The broker claims the files are stored at an off-site warehouse and asks for two weeks to retrieve them. Under T.C.A. Title 62, Chapter 13, which statement best describes the broker's legal obligation?

• A.The broker may request a reasonable extension of up to 30 days because off-site storage is an acceptable reason for delay
• B.The broker must make all records available to TREC investigators upon demand, and storing records off-site does not excuse delayed production
• C.The broker is only required to produce records that relate to transactions within the past 12 months
• D.The broker may withhold records pending a subpoena from TREC because voluntary production is discretionary

Q13.In a designated agency arrangement, which statement best describes the role of the supervising broker?

• A.The broker represents both parties and provides guidance to designated agents
• B.The broker maintains overall responsibility but does not represent either party directly
• C.The broker acts as a neutral facilitator without representing either party
• D.The broker automatically becomes a dual agent in all transactions

Q14.A Tennessee affiliate broker represents a seller and receives an offer from a buyer. The broker is also the buyer's uncle but does not disclose this relationship to the seller. This failure to disclose most likely constitutes which of the following under Tennessee law?

• A.A violation of antitrust statutes because it restrains fair competition
• B.A permissible dual agency arrangement under Tennessee license law
• C.A conflict of interest and breach of fiduciary duty requiring disclosure under the Tennessee Real Estate Broker License Act
• D.A fair housing violation under the Tennessee Human Rights Act

Q15.After a residential sales transaction closes in Tennessee, for how long must the principal broker retain all transaction-related documents — including the contract, addenda, and closing settlement statements — in a manner that is readily accessible for inspection by the Tennessee Real Estate Commission (TREC)?

• A.One year from the date of closing
• B.Three years from the date of closing
• C.Five years from the date of closing
• D.Seven years from the date of closing