National Real Estate Broker Supplemental Exam

Key Concepts

Real vs. Personal Property Real property is land and anything permanently attached to it (improvements, fixtures). Personal property (chattels) is movable. Fixtures convert personal property to real property; use the MARIA test to determine fixture status: Method of attachment, Adaptability, Relationship of parties, Intent, Agreement. When in doubt, a written agreement controls. Trade fixtures remain personal property and are removed by tenants before lease end.

Land Characteristics & Legal Descriptions - Metes & Bounds: Uses a Point of Beginning (POB), compass bearings, and distances to trace a boundary. Must close back to the POB. Oldest method; used in original 13 states. - Lot & Block (Recorded Plat): References a recorded subdivision map by lot number, block number, subdivision name, county, and state. Most common…

Key Concepts

Government Rights in Land (PETE)

The four government powers over private land are remembered as PETE:

• P — Police Power: Right to regulate land use for public health, safety, and welfare (basis for zoning and building codes). No compensation required.
• E — Eminent Domain: Government's right to take private property for public use. Requires just compensation (fair market value). The process is called condemnation. An inverse condemnation occurs when government action damages or effectively takes property without formal proceedings — the owner must sue.
• T — Taxation: Ad valorem (value-based) property taxes create a lien on real property. Failure to pay can result in a tax sale. Special assessments are charges levied against specific properties that directly benefit from a…

Key Concepts

Appraisals: When Required and Who Can Perform Them - Federally related transactions (loans from federally regulated lenders) require a licensed or certified appraiser under FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act of 1989). - Licensed appraiser: handles non-complex residential transactions under $1 million. - Certified residential appraiser: handles any 1–4 unit residential property regardless of complexity or value. - Certified general appraiser: handles all property types including commercial. - Appraisers must be state-licensed/certified and follow USPAP (Uniform Standards of Professional Appraisal Practice). Brokers cannot perform appraisals for federally related transactions.

Appraisal Process (USPAP-compliant) Define the problem → Collect data → Analyze data → Apply the three approaches → Reconcile value → Issue report.

Key Concepts

Loan Terminology - Points: 1 point = 1% of the loan amount. Discount points buy down the interest rate; origination points are lender fees. - LTV (Loan-to-Value): Loan amount ÷ appraised value (or purchase price, whichever is lower). Higher LTV = higher lender risk. - PMI (Private Mortgage Insurance): Required on conventional loans when LTV exceeds 80%. Automatically cancels at 78% LTV under the Homeowners Protection Act. - PITI: Principal, Interest, Taxes, Insurance — the four components of a total monthly mortgage payment. - Underwriting criteria: Lenders evaluate credit score, debt-to-income ratio (DTI), employment history, and assets. Front-end DTI (housing expense ratio) and back-end DTI (all debts) are key metrics.

15 questions | 19% of exam

Key Concepts

Valid Contract Elements (COLIC)

A enforceable contract requires all six elements: - Competent parties — legal age, mental capacity - Offer and acceptance (mutual assent/meeting of the minds) - Lawful object — purpose must be legal - In writing — required for real estate under the Statute of Frauds - Consideration — something of value exchanged by both parties - Consent — free from fraud, misrepresentation, duress, undue influence, or mistake

Statute of Frauds

Real estate contracts must be in writing to be enforceable. This includes purchase agreements, leases over one year, and option contracts. Oral real estate contracts are unenforceable — not void, but cannot be enforced in court.

10 questions | 12% of exam

Key Concepts

Agency vs. Non-Agency Relationships

Agency creates a fiduciary relationship — the broker legally represents a client and owes full fiduciary duties. Non-agency (transaction brokerage/facilitation) means the broker assists parties without representing either; duties are limited to honesty, fairness, and basic disclosure.

Listing Contract Types

Key Concepts

Seller Disclosure Requirements

Sellers must disclose all material facts — any information that would affect a reasonable buyer's decision to purchase or the price they would pay. Disclosure is required regardless of whether the buyer asks. Most states use a standardized Seller's Property Disclosure Statement (SPDS). Sellers disclose based on their actual knowledge; they are not required to investigate, but they cannot conceal or misrepresent.

Brokers carry an independent duty to disclose material facts they know or should have known — even if the seller fails to disclose. This duty extends to latent defects (hidden, not obvious) but not to patent defects (visible, discoverable through reasonable inspection).

Key Concepts

Tenant Procurement and Qualification

• Brokers managing property must use consistent, objective screening criteria for all applicants: credit score thresholds, income-to-rent ratios (typically 2.5–3x monthly rent), rental history, and criminal background checks.
• Screening criteria must be applied uniformly — varying standards between applicants exposes the broker and landlord to discrimination liability.
• Tenant applications must be retained for a defined period (varies by state; often 3 years) as evidence of non-discriminatory selection.
• A property manager acting as agent for the landlord owes fiduciary duties to the landlord but must still comply with fair housing law in all dealings with prospective tenants.

Key Concepts

Types of Deeds

Deeds transfer title from grantor to grantee. The type of deed determines the level of protection (warranties) the grantor extends to the grantee.

• General Warranty Deed – Highest protection. Grantor warrants title against all defects, including those arising before the grantor owned the property. Contains six covenants: seisin, quiet enjoyment, further assurance, warranty forever, against encumbrances, and right to convey.
• Special Warranty Deed – Grantor warrants only against defects arising during their period of ownership. Common in commercial transactions and estate sales.
• Quitclaim Deed – No warranties whatsoever. Transfers only whatever interest the grantor currently holds — which may be nothing. Used to clear title defects, transfer between family members, or correct errors.
• **Bargain and…

Key Concepts

Federal Fair Housing Act (Title VIII of the Civil Rights Act of 1968)

Seven protected classes: Race, Color, Religion, National Origin, Sex, Familial Status, Handicap (disability). Added by 1988 amendments: Familial Status and Handicap.

Prohibited conduct: Refusing to sell/rent, discriminatory advertising, blockbusting, steering, redlining, and applying different terms/conditions based on a protected class.

Exemptions (narrow — know these precisely): - Owner-occupied buildings with 4 or fewer units (Mrs. Murphy exemption) - Single-family homes sold/rented without a broker and without discriminatory advertising - Religious organizations and private clubs for non-commercial purposes - No exemption applies to race or color (Civil Rights Act of 1866 covers all property transactions regardless of exemptions)

Key Concepts

Real estate math on the broker exam tests your ability to move fluidly between multiple calculation types within a single transaction scenario. The broker-level questions are more complex than salesperson-level — expect multi-step problems that combine prorations with net proceeds, or commission splits with buyer closing costs.

Seller Net Proceeds: Start with the sale price, then subtract everything the seller pays: mortgage payoff balance, commissions, transfer taxes, attorney fees, prorated taxes owed, and any seller concessions. What remains is the net.

Buyer Funds Required at Closing: Start with purchase price, subtract the loan amount and earnest money already paid, then add closing costs (origination fees, points, prepaid insurance, prepaid interest, prorated taxes due from buyer, title insurance, recording fees). This is distinct from down…