Free Georgia Real Estate Practice Exam: 30 Questions

Correct answer: D. A counteroffer

Any change to the terms of an offer rejects the original and creates a counteroffer. The buyer is now free to accept, reject or counter again, and the original offer is dead.

• A. Acceptance must match the offer exactly; a changed term means no contract formed.
• B. Voidable describes a formed contract with a defect; no contract formed here.
• C. An option requires separate consideration to hold an offer open; none was given.
• D. Correct. Changing any term rejects the offer and makes a new one.

Remember: Change any term and you have rejected the offer and made a new one.

Correct answer: B. Designated agency

Georgia permits designated agency, where each designated agent represents only that agent's own client. A proper designation does not make the broker or firm a dual agent, and knowledge is not imputed between the designated agents.

• A. Misconception: any two-sided firm deal is transaction brokerage. A transaction broker represents neither party; here each agent represents a client.
• B. Correct. Assigning separate agents to each client is designated agency.
• C. Misconception: one firm on both sides is always dual agency. A proper designation does not make the broker a dual agent.
• D. Misconception: in-house cooperation is subagency. Subagency involves another broker helping the listing broker.

Remember: Designated agency lets one firm serve both sides through separate agents without becoming a dual agent.

Correct answer: C. Decline to answer, since it is confidential

The seller asked that her bottom line stay confidential, and a seller's broker must keep such information confidential. Honesty to a customer means not giving false information; it never requires handing over the client's negotiating position. The agent can decline to answer without lying.

• A. A hint discloses the same information indirectly, which still breaches the confidentiality the seller requested.
• B. Putting it in writing is still a disclosure the seller has forbidden.
• C. Correct. The seller's bottom line is confidential, and the agent may decline without saying anything false.
• D. Honesty forbids lying. It does not require giving up the client's confidential position.

Remember: Honesty to a customer never requires revealing a client's confidential negotiating position.

Correct answer: A. Twice the standard fee

A candidate who applies within three months of the exam pays the standard fee. After three months the fee is two times the original application fee, and after twelve months the candidate must retake the exam.

• A. Correct. After three months the application fee doubles.
• B. Misconception: any timing gets the base fee. The standard fee applies only within three months of the exam.
• C. Misconception: lateness adds a surcharge. The rule doubles the fee rather than adding a penalty.
• D. Misconception: a late application voids the score. A retake is required only after twelve months.

Remember: Apply within three months for the standard fee; after that it doubles, and after twelve months you retest.

Correct answer: B. Illegal price fixing under antitrust law

Competitors agreeing on price is price fixing, which is illegal per se under the Sherman Act. Disclosure does not cure it, and neither does leaving room to negotiate, because the agreement itself is the violation.

• A. Disclosure does not cure an agreement among competitors on price.
• B. Correct. Competing brokerages agreeing on commission rates is price fixing.
• C. The violation is the agreement itself, whether or not clients can bargain afterward.
• D. Shared MLS membership does not permit competitors to set rates together.

Remember: Competitors may never agree on price. Disclosure or room to negotiate does not fix it.

Correct answer: A. An encroachment

An encroachment is an unauthorized physical intrusion of a structure onto another parcel. An easement is a right to use someone else's land, a license is revocable permission, and a deed restriction is a recorded limit on use. Encroachments often surface on a survey and can affect marketability.

• A. Correct. A structure crossing onto another lot is an encroachment.
• B. A license is revocable permission, and no permission was given here.
• C. A deed restriction limits use by recorded covenant, not by a physical intrusion.
• D. An easement is a right to use land. A fence built over the line without any right is not one.

Remember: Physical intrusion is an encroachment. A right to use is an easement.

Correct answer: D. A Georgia-licensed attorney

Georgia is an attorney-closing state because conveyancing is the practice of law. This also limits what a licensee may say about the legal effect of documents.

• A. Misconception: title companies close everywhere. They may insure title, but a nonlawyer cannot run a Georgia closing.
• B. Misconception: the broker who coordinates the deal also closes it. Conducting the closing is the practice of law.
• C. Misconception: escrow-officer closings, common in other states, do not apply in Georgia.
• D. Correct. A Georgia-licensed attorney must conduct the closing.

Remember: Georgia closings are conducted by Georgia-licensed attorneys.

Correct answer: C. Recording at the courthouse

Recording protects an interest against third parties. It has nothing to do with whether the contract is valid between the two people who signed it.

• A. Offer and acceptance (mutual assent) is a required element.
• B. Consideration is a required element.
• C. Correct. Recording protects against third parties but is not needed for validity.
• D. Legal purpose is a required element.

Remember: Recording gives notice to the world. It does not create validity.

Correct answer: A. 60 days before application

The applicant must obtain a certified criminal history report from the Georgia Crime Information Center no more than 60 days before applying for the license. A report ordered too early must be replaced.

• A. Correct. The GCIC report may be no more than 60 days old when the applicant applies.
• B. Misconception: a six-month-old report is stale. It must be reordered once it passes 60 days.
• C. Misconception: guessing the strictest window. The rule allows a report up to 60 days old.
• D. Misconception: 90 days is a common validity window for other documents, but the GCIC report expires at 60.

Remember: The GCIC criminal history report must be issued no more than 60 days before the license application.

Correct answer: C. 80%

First find the loan: $250,000 price minus $50,000 down is $200,000. Then divide loan by value: $200,000 / $250,000 = 80 percent.

• A. 20% is the down payment divided by the price, the buyer's equity share.
• B. 25% divides the down payment by the loan amount.
• C. Correct. $200,000 / $250,000 = 80%.
• D. 125% inverts the ratio, dividing value by loan.

1. $250,000 - $50,000 = $200,000 loan
2. $200,000 / $250,000 = 0.80, so 80%

Remember: LTV is the loan amount divided by the property value.

Correct answer: D. Before 1978

The rule generally covers housing built before 1978. Sellers must disclose known lead information, provide available records and the approved pamphlet, and offer buyers a 10-day inspection opportunity that may be changed or waived in writing. Defined exemptions apply, so the date alone does not make every transaction subject to the rule.

• A. Homes built before 1950 carry the highest lead risk, but the disclosure rule reaches all housing built before 1978.
• B. 1992 is when the disclosure law was enacted, not the housing cutoff.
• C. 1986 is when federal law banned lead pipes and solder in drinking water systems, not the paint cutoff.
• D. Correct. 1978 is the year residential lead paint was banned.

Remember: The federal lead disclosure rule generally covers pre-1978 housing, subject to its defined exemptions.

Correct answer: B. Deposited in a designated trust account

Under Rule 520-1-.08, the broker must promptly deposit the funds in a federally insured trust account registered with GREC unless the interested parties agree otherwise in writing. Here, they have given no different instructions. Depositing trust funds in the operating account is commingling.

• A. Putting trust funds in the operating account is commingling.
• B. Correct. A broker holds earnest money in a designated trust account.
• C. The deposit is held for both parties, not handed to the seller.
• D. Affiliated licensees must turn trust funds over to the broker promptly.

Remember: Unless the interested parties agree otherwise in writing, the broker promptly deposits earnest money in a designated, federally insured trust account registered with GREC.

Correct answer: B. Sales comparison approach

Sales comparison relies on recent sales of similar nearby homes, which an active subdivision supplies. The cost approach suits new or special-purpose buildings, and the income approach suits rental property.

• A. Income suits property bought for its rental income.
• B. An active subdivision supplies many recent comparable sales.
• C. GRM is an income technique, not the primary approach for a home.
• D. Cost suits new or special-purpose buildings.

Remember: Houses use sales comparison. Income property uses income. Unique buildings use cost.

Correct answer: D. 7.5%

Cap rate is annual NOI divided by value: $52,500 / $700,000 = 7.5 percent. Gross income is a distractor; expenses come out before capitalizing.

• A. Wrong. 10.0% uses gross income instead of NOI.
• B. Wrong. 13.3 is value divided by NOI, a multiplier.
• C. Wrong. 75% divides NOI by gross income, an expense-ratio complement, not a cap rate.
• D. Correct. $52,500 / $700,000 = 7.5%.

1. $52,500 / $700,000 = 0.075
2. 0.075 = 7.5%

Remember: Cap rate equals annual NOI divided by value.

Correct answer: A. General warranty deed

A general warranty deed warrants title against all defects for the entire history of the property. A special warranty covers only the grantor's own period of ownership.

• A. Correct. A general warranty deed warrants title against defects from any period.
• B. A bargain and sale deed implies the grantor holds title but gives few or no warranties.
• C. Candidates confuse simplicity with safety, but a quitclaim deed carries no warranties at all.
• D. A special warranty deed covers only defects arising during the grantor's ownership.

Remember: General warranty covers all of history. Special warranty covers only the grantor's time.

Correct answer: C. A nonconforming use

A nonconforming use was lawful before the ordinance changed and is allowed to continue, often with limits on expansion or rebuilding. A variance is permission to depart from the ordinance because strict application would cause hardship, and a special use permit allows a use the ordinance lists as conditional.

• A. Spot zoning singles out one parcel for treatment unlike its surroundings.
• B. Candidates call any exception a variance, but a variance is permission to deviate because strict rules cause hardship.
• C. Correct. A lawful prior use allowed to continue is nonconforming.
• D. A special use permit allows a use the ordinance lists as conditional in that zone.

Remember: A lawful use that predates the new zoning is nonconforming. A variance is permission to depart from the rules for hardship.

Correct answer: B. Achieve the owner's goals under the agreement

A property manager acting for the owner follows the management agreement and applicable law. Tenant satisfaction, cost control, and occupancy support the agreed goals. None justifies ignoring legal duties or the owner's instructions.

• A. Filling units at any rent can lower total income.
• B. The manager's duty is to the owner's goals within the agreement.
• C. Tenant satisfaction serves the owner's return but is not the primary duty.
• D. Cutting every expense can let the property decline and lose value.

Remember: The property manager works for the owner, within the management agreement.

Correct answer: A. Executory

A contract stays executory while any party still has something left to do. Here both sides still owe performance at closing, so the contract is executory; it becomes executed once everyone has fully performed.

• A. Correct. Obligations remain to be performed, so the contract is executory.
• B. Executed means every party has fully performed, which happens at closing.
• C. Nothing suggests missing capacity, illegality, or another defect.
• D. A purchase agreement exchanges promises on both sides, so it is bilateral.

Remember: Executed means everybody has performed. Anything less is executory.

Correct answer: C. Deadlines are strictly enforceable

A time-is-of-the-essence clause makes timely performance material. Missing an applicable deadline can be a breach. The parties may still agree to an extension or waive a deadline; the clause itself does not provide an automatic extension.

• A. The clause gives neither party an automatic right to extend a deadline. An agreed extension is a separate matter.
• B. Misconception: only closing counts. The clause applies to every stated deadline.
• C. Correct. The clause makes each stated deadline a material term.
• D. Misconception: the clause sets a term. It sets no expiration date of its own.

Remember: Time is of the essence turns every deadline into a material term.

Correct answer: D. No, the duty survives the listing

After an engagement ends, a broker must still account for money and property and keep confidential any information the client asked to keep confidential. That duty ends only if the client permits disclosure, the law requires it, or the information becomes public from someone other than the broker.

• A. Candidates assume all duties end with the listing. Confidentiality is one of the duties that survives.
• B. Only the former client can permit disclosure. A later listing agent has no power to waive it.
• C. There is no waiting period. Time passing does not release the duty.
• D. Correct. Confidentiality survives unless the client permits disclosure, the law requires it, or the information becomes public from another source.

Remember: Information a client asked you to keep confidential stays confidential after the engagement ends.

Correct answer: A. Remains effective if the principal is incapacitated

Under the traditional rule, a nondurable power of attorney ends when the principal becomes incapacitated, which is exactly when it may be needed most. A durable power of attorney stays in force through incapacity, which is why it is used in estate planning. Georgia now treats a power of attorney as durable unless the document says otherwise.

• A. Correct. Durability means the power survives the principal's incapacity.
• B. A power of attorney grants authority to act for the principal. It never transfers ownership to the attorney-in-fact.
• C. A competent principal can generally revoke a power of attorney. Durable describes surviving incapacity, not being irrevocable.
• D. Durable does not mean permanent. The authority is tied to the principal, and it ends at the principal's death.

Remember: Durable means it survives the principal's incapacity. In Georgia, a power of attorney is durable unless it says otherwise.

Correct answer: D. In writing

Georgia defines a brokerage engagement as a written contract in which a seller, buyer, landlord, or tenant becomes the broker's client. Without that written agreement, the person is a customer, not a client.

• A. Brokerage engagements are not recorded in the county records.
• B. GREC does not approve individual engagements.
• C. An oral agreement does not create a brokerage engagement.
• D. Correct. The engagement must be a written contract.

Remember: The brokerage engagement is written, or there is no client.

Correct answer: B. Is required by statute, and the broker must develop and enforce it

BRRETA requires every broker to develop and enforce a policy that either permits or rejects disclosed dual agency. A policy that exists only on paper does not satisfy the law, and the duty applies to every firm regardless of size, with no GREC filing step.

• A. The statute requires the policy but not a filing with or approval by GREC.
• B. Correct. The broker must both develop and enforce the policy.
• C. The requirement applies to every broker regardless of firm size.
• D. It is a legal requirement, not a voluntary practice.

Remember: Every Georgia broker must develop and enforce an office policy that permits or rejects disclosed dual agency.

Correct answer: C. Security deed

A security deed, also called a deed to secure debt, conveys legal title to the lender as collateral. The borrower retains equitable rights. The direct borrower-to-lender conveyance distinguishes it from a three-party deed of trust.

• A. A Georgia mortgage creates a lien rather than making the legal-title conveyance described.
• B. A deed of trust uses a third-party trustee; this question expressly excludes one.
• C. Correct. Georgia uses the security deed (deed to secure debt).
• D. Wrong. A land contract is seller financing where the seller keeps title, not a lender's security instrument.

Remember: A Georgia security deed conveys legal title as security for the debt; a Georgia mortgage creates a lien.

Correct answer: D. $410.10

After the first $1,000, $409,050 remains. Divide by $100 and round 4,090.5 up to 4,091 units. Add $1 to $409.10.

• A. Wrong. Rounds the price up to the next $1,000.
• B. Wrong. Drops the fractional $100 unit.
• C. Wrong. Applies $1 per $1,000 to the exact price.
• D. Correct. $1 + 4,091 x $0.10 = $410.10.

1. $410,050 - $1,000 = $409,050
2. $409,050 / $100 = 4,090.5, rounded up to 4,091
3. $1 + 4,091 x $0.10 = $410.10

Remember: Transfer tax uses taxable consideration and counts each fractional statutory unit.

Correct answer: C. Setting the commission rate licensees may charge

GREC licenses and disciplines licensees, investigates complaints, and approves schools and courses. No Georgia law lets it set commissions. Commission rates are negotiated between each broker and client, and agreements among competitors to fix them violate antitrust law.

• A. GREC investigates complaints against licensees.
• B. GREC may suspend or revoke licenses after due process.
• C. Correct. Commissions are negotiable; GREC does not set them.
• D. GREC approves prelicense schools, instructors, and courses.

Remember: GREC regulates licensees and schools. It never sets commission rates, which are negotiable.

Correct answer: A. A remainder interest

The son is a third party named in the grant to take when Anne's life estate ends, so he holds a remainder. If the deed had named no one to take after Anne, the property would return to the grantor as a reversion.

• A. Correct. A third party named to take after the life estate holds a remainder.
• B. A reversion returns to the grantor, not to a named third party.
• C. A leasehold is a tenant's right under a lease, not a future ownership interest.
• D. Candidates see Anne's life in the grant and think pur autre vie. It is Anne who holds the life estate; the son holds the future interest.

Remember: Future interest to a third party is a remainder. Back to the grantor is a reversion.

Correct answer: B. $302,000

Adjust the comparable, never the subject. The comparable has a feature the subject lacks, so subtract its value: $310,000 - $8,000 = $302,000.

• A. Adding rewards the comparable for a feature the subject lacks.
• B. $310,000 - $8,000 = $302,000.
• C. Leaving it unadjusted ignores a known difference.
• D. $294,000 subtracts the $8,000 twice.

1. Comparable is better by $8,000
2. $310,000 - $8,000 = $302,000

Remember: Adjust the comparable. Better comparable means subtract.

Correct answer: C. A due-on-sale clause

A due-on-sale, or alienation, clause allows the lender to require repayment when the borrower transfers the property. It can prevent an assumption without consent, but federal law protects certain transfers from enforcement. In Georgia, look for the clause in the security deed.

• A. Subordination changes a lien's priority, not its due date.
• B. Defeasance releases the security instrument when the debt is paid.
• C. A due-on-sale clause accelerates the debt when title transfers.
• D. A prepayment clause covers paying the loan off early.

Remember: Due-on-sale may let a lender accelerate after a transfer, subject to legal exceptions. Defeasance releases the security when the debt is paid.

Correct answer: B. Steering

Steering is channeling buyers or renters toward or away from areas because of a protected class. Blockbusting and redlining also involve race and neighborhoods, but blockbusting induces owners to sell and redlining denies credit or insurance by area.

• A. Blockbusting pressures owners to sell by claiming a protected class is moving in. Nobody is being urged to sell here.
• B. Correct. Directing a buyer toward or away from areas because of race is steering.
• C. Redlining is a lender or insurer refusing service by area. The agent is choosing which homes to show, not denying credit.
• D. Reverse redlining targets certain areas with unfair loan terms. It is a lending practice, not a showing practice.

Remember: Steering directs people, blockbusting scares them into selling, redlining refuses them credit.