The five traps
National instinct
The answer that is correct in most states is wrong in Georgia. These are the questions a national question bank actively trains you to fail.
ContractsUnder the standard Georgia REALTORS purchase and sale agreement, the due diligence period primarily gives the buyer the right to:
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Answer: Terminate the contract for any or no reason
The due diligence period is a negotiated window in which the buyer may terminate by written notice for any or no reason. It does not obligate the seller to repair anything; repairs happen only if the parties amend the contract. A buyer who lets the period expire without terminating takes the property as-is.
The Rule
Due diligence buys the right to leave for any or no reason, not the right to demand repairs.
AgencyAn agent shows homes to a buyer for a month. No brokerage agreement is signed. Under BRRETA, the buyer is:
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Answer: A customer, because no written engagement exists
BRRETA defines a brokerage engagement as a written contract, and a client as someone represented under one. Time and effort do not create a client relationship. The buyer is a customer: the agent may perform ministerial acts, must not knowingly give false information, and must disclose known adverse material facts about the property's condition.
The Rule
No written engagement, no client. A customer is still owed honesty and known adverse material facts.
AgencyUnder BRRETA, the brokerage engagement is between the client and:
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Answer: The broker
The brokerage engagement runs to the broker, and affiliated agents act on the broker's behalf. That is why designated agency works inside one firm, and why an agent who changes firms does not automatically take the client relationship along.
The Rule
The engagement belongs to the broker, not the agent.
Real Estate Practice in GeorgiaUnder Georgia's brokerage relationships law, a broker working with a customer owes that customer:
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Answer: Truthful information and known adverse material facts
A customer has no brokerage engagement with the broker, so the broker does not advocate for the customer. The broker still may not knowingly give false information and must disclose known adverse material facts about the property's physical condition. Confidentiality and promoting interests are owed to clients.
The Rule
Customers get honesty and known adverse material facts. Clients also get confidentiality and advocacy.
Real Estate Practice in GeorgiaA Georgia licensee tells a buyer client what a contract clause legally means for the buyer's rights. This conduct is best described as:
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Answer: The unauthorized practice of law by the licensee
Licensees may fill in blanks on forms prepared by legal counsel, but interpreting the legal effect of a clause is the practice of law. The licensee should tell the buyer to consult an attorney, even when the licensee is confident of the answer.
The Rule
Fill in the blanks, do not explain the law.
Real Estate Practice in GeorgiaWhich forms are most commonly used in Georgia residential sales transactions?
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Answer: Forms published by Georgia REALTORS
Georgia does not promulgate contract forms. Forms prepared by the Georgia Association of REALTORS are the widely used industry standard, unlike states where the regulator issues mandatory forms.
The Rule
Georgia does not promulgate forms. GAR forms are industry standard.
Finance and ClosingThe instrument most commonly used in Georgia to secure a real estate loan is a:
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Answer: Security deed
Georgia is a title theory state and uses a security deed, also called a deed to secure debt. Legal title passes to the lender as security until the debt is repaid.
The Rule
Georgia uses a security deed, not a mortgage, and the lender holds legal title until payoff.
Finance and ClosingWho must conduct a real estate closing in Georgia?
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Answer: 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.
The Rule
Georgia closings are conducted by Georgia-licensed attorneys.
Finance and ClosingA Georgia borrower's home was sold yesterday at a power-of-sale foreclosure. The borrower now has enough money to pay the full debt. The borrower:
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Answer: Has no statutory right to redeem the property
Georgia provides no statutory right of redemption after a power-of-sale foreclosure. The borrower's chance to save the property ends when the gavel falls, so money that arrives the next day comes too late.
The Rule
No statutory redemption after a Georgia power-of-sale foreclosure; the right to cure ends at the sale.
EXCEPT and NOT
The stem inverts the question. You know the material, you answer the question you expected, and you lose the mark.
ContractsAll of the following are required for a valid real estate contract EXCEPT:
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Answer: 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.
The Rule
Recording gives notice to the world. It does not create validity.
Practice of Real EstateAll of the following are prohibited under the federal Fair Housing Act EXCEPT:
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Answer: Declining an applicant for poor payment history
Creditworthiness is not a protected class, so declining someone for a documented payment history, applied the same way to every applicant, is lawful. The other three each turn on a protected class: national origin, religion, and race.
The Rule
Fair housing protects classes of people. Neutral screening such as payment history, applied equally, is lawful.
Property DisclosuresUnder Georgia law, which fact is a seller's agent generally NOT required to volunteer to a buyer?
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Answer: A natural death in the home years ago
Georgia law does not require an owner or licensee to volunteer that a property was the site of a death, but a direct question must be answered truthfully. Hidden physical defects are different: a seller's broker must disclose adverse physical conditions the broker actually knows about that a reasonably diligent buyer inspection would not reveal, such as a roof that leaks only in heavy rain or termite damage concealed in the joists.
The Rule
A past death need not be volunteered in Georgia, but a direct question gets a true answer. Known hidden defects must be disclosed.
State Laws and RulesAll of the following are within the Georgia Real Estate Commission's authority EXCEPT:
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Answer: 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.
The Rule
GREC regulates licensees and schools. It never sets commission rates, which are negotiable.
Wrong setup
The arithmetic is easy. The question is testing whether you pick the right formula before you touch the calculator.
Property OwnershipA parcel measures 660 feet by 660 feet. How many acres is it?
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Answer: 10 acres
Multiply the sides for square feet, then divide by 43,560 square feet per acre. Here 660 x 660 = 435,600 square feet, and 435,600 / 43,560 = 10 acres.
The Rule
An acre is 43,560 square feet. Multiply the sides, then divide by 43,560.
FinancingA buyer purchases a home for $250,000, which is also its appraised value, with $50,000 down. What is the loan-to-value ratio?
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Answer: 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.
The Rule
LTV is the loan amount divided by the property value.
FinancingA buyer purchases a $225,000 home with a $180,000 loan. What does one discount point cost?
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Answer: $1,800
A discount point is 1 percent of the loan amount, paid at closing to lower the interest rate. The price is a distractor: 1 percent of the $180,000 loan is $1,800.
The Rule
A point is 1% of the loan, never 1% of the price.
Valuation and Market AnalysisA property has $72,000 in gross income and $48,000 in net operating income. It sells for $600,000. What is the capitalization rate?
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Answer: 8%
Cap rate is net operating income divided by value: $48,000 / $600,000 = 0.08, or 8 percent. Gross income is a distractor, because operating expenses must come out before capitalizing.
The Rule
Cap rate is NOI divided by value.
Valuation and Market AnalysisA comparable sold for $310,000 and has an extra bathroom worth $8,000 that the subject lacks. The adjusted value of the comparable is:
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Answer: $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.
The Rule
Adjust the comparable. Better comparable means subtract.
Real Estate CalculationsA seller wants $280,000 net after paying a 6% commission. What must the property sell for, to the nearest dollar?
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Answer: $297,872
The commission comes out of the sale price, so the seller keeps 94 percent of it. Divide the desired net by what the seller keeps: $280,000 / 0.94 = $297,872. Adding 6 percent to the net falls short, because 6 percent of the higher price is more.
The Rule
Net to seller means divide by what the seller keeps, never multiply the net.
Real Estate CalculationsCalendar-year property taxes of $3,600 are paid in arrears and have not been paid. Closing is March 31, and the seller owns the day of closing. Using a 360-day year, what credit does the buyer receive?
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Answer: $900
Unpaid taxes in arrears mean the seller owes for the days owned, so the seller is debited and the buyer credited. On a 360-day year the daily rate is $10, and January 1 through March 31 is 90 days, so the credit is $900.
The Rule
Taxes in arrears means the seller credits the buyer for time already owned.
Finance and ClosingA Georgia home sells for $285,000, and the buyer finances $228,000 with a new loan. No existing loan is assumed. What is the state transfer tax?
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Answer: $285.00
Transfer tax follows the consideration, not the loan. $1 covers the first $1,000 and $0.10 applies to each additional $100, which works out to $1 per $1,000 on an even amount.
The Rule
Transfer tax follows the price ($1 first $1,000, $0.10 per added $100). Intangible tax follows the loan.
Finance and ClosingA Georgia property has a fair market value of $300,000. What is its assessed value for property tax?
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Answer: $120,000
Georgia assesses at 40% of fair market value before the millage rate is applied. Miss the ratio and every downstream figure is wrong.
The Rule
Georgia assesses at 40% of fair market value.
Close distractor
Two options are defensible until you read the stem properly. One word decides it.
ContractsA seller changes the closing date on a buyer's offer, signs it, and returns it to the buyer. What has the seller created?
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Answer: 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.
The Rule
Change any term and you have rejected the offer and made a new one.
ContractsA person whom a court has adjudicated mentally incompetent, and for whom a guardian has been appointed, signs a purchase agreement. The contract is:
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Answer: Void
A person adjudicated incompetent, with a guardian managing the estate, has no legal capacity to contract, so no contract ever formed. This differs from a mentally impaired person never adjudicated, or a minor: those contracts are voidable, and only the person lacking capacity may disaffirm.
The Rule
Adjudicated incompetent with a guardian means void. A minor or an unadjudicated impaired person means voidable.
ContractsA buyer assigns their purchase contract to a third party. Absent a clause forbidding it, the assignment:
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Answer: Is generally valid, but the original buyer remains liable
Contracts are generally assignable unless they say otherwise. Assignment moves the benefit, but the original party stays on the hook unless the seller releases them by novation.
The Rule
Assignment moves the benefit. Only novation moves the liability.
AgencyA broker represents both buyer and seller in one transaction. In Georgia this is lawful only when:
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Answer: All clients give written informed consent
Georgia permits dual agency, but every client must consent in writing, and the written consent must contain the disclosures the law requires. Oral notice, however early, does not satisfy the rule, and neither do attorneys or payment arrangements.
The Rule
Dual agency needs written informed consent from every client.
AgencyA seller tells the listing agent she will accept far less than the asking price and asks the agent to keep that to herself. An unrepresented buyer asks about it. The agent must:
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Answer: 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.
The Rule
Honesty to a customer never requires revealing a client's confidential negotiating position.
AgencyA seller asked her listing agent to keep her financial troubles confidential. The listing expires, and months later someone asks the agent about the seller's finances. May the agent reveal what they learned?
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Answer: 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.
The Rule
Information a client asked you to keep confidential stays confidential after the engagement ends.
Practice of Real EstateA landlord tells an agent not to show a unit to families with children. The agent should:
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Answer: Refuse, since familial status is a protected class
Familial status, meaning households with children under 18, is protected under the federal Fair Housing Act. A client instruction to discriminate is not a lawful instruction, so the agent's duty to follow instructions does not reach it.
The Rule
Obedience covers lawful instructions only. An order to exclude children is not one.
Property OwnershipA grantor deeds property to Anne for life, and on Anne's death to Anne's son. While Anne is alive, the son holds:
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Answer: 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.
The Rule
Future interest to a third party is a remainder. Back to the grantor is a reversion.
FinancingWhich loan type is insured by the federal government to protect the lender against borrower default?
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Answer: FHA
FHA, part of HUD, insures the lender against loss if the borrower defaults. VA guarantees part of the loan instead, PMI is private insurance rather than federal, and Fannie Mae buys loans on the secondary market without insuring them.
The Rule
FHA insures, VA guarantees, conventional does neither.
Real Estate CalculationsA home sells for $340,000 with a 6% total commission split evenly between two brokerages. The listing brokerage receives:
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Answer: $10,200
Multiply price by the total rate first: $340,000 x 0.06 = $20,400. Then apply the split, giving half, $10,200, to the listing brokerage. Stopping at the total or splitting again as if paying an agent are the usual traps.
The Rule
Total commission first, then split. Read which party the question wants.
Property DisclosuresA radon test shows an elevated reading. The seller instructs the agent to say nothing. The agent should:
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Answer: Disclose the known result to prospective buyers
Elevated radon is a condition a buyer cannot see, and a seller's agent who knows about it must disclose it. An instruction to conceal is not lawful, so the duty to follow instructions does not reach it.
The Rule
Known adverse material facts get disclosed, whatever the client wants.
Land Use Controls and RegulationsA property use that was lawful before a zoning change and is allowed to continue is:
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Answer: 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.
The Rule
A lawful use that predates the new zoning is nonconforming. A variance is permission to depart from the rules for hardship.
State Laws and RulesA candidate passes the Georgia salesperson exam and applies for a license four months later. The application fee will be:
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Answer: 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.
The Rule
Apply within three months for the standard fee; after that it doubles, and after twelve months you retest.
State Laws and RulesThe Georgia Real Estate Education, Research and Recovery Fund primarily exists to:
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Answer: Compensate consumers harmed by licensee violations
The fund reimburses members of the public who win a court judgment against a licensee for a violation and cannot collect it. It is not insurance for the licensee: payment from the fund leads to revocation of the license, and the licensee must repay the fund.
The Rule
The Recovery Fund protects the public, not the licensee.
Real Estate Practice in GeorgiaA licensee accepts a fee from a mortgage broker for each buyer the licensee refers who closes a home loan with that mortgage broker. This is:
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Answer: A kickback that violates RESPA
RESPA prohibits giving or accepting a fee or thing of value for referring settlement service business on a federally related mortgage loan. Disclosure does not cure a payment made for a referral when no actual service was performed.
The Rule
No fee for a referral of settlement services. Disclosure does not save it.
Extra information
The stem hands you a number you do not need. Using it produces a wrong answer that appears in the options.
Finance and ClosingA buyer purchases at $400,000 with a $320,000 loan. The intangible recording tax is calculated on:
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Answer: $320,000
The intangible recording tax applies to the face amount of the long-term note secured by the property. The transfer tax applies to the sale price. A stem giving you both numbers is testing exactly this.
The Rule
Intangible tax on the loan, transfer tax on the price.
How to train against them
Slow down on the stem, not the options. Four of the five traps are set before you reach the answers: an inverted question, a number you do not need, or a scenario whose Georgia rule differs from the national one. Reading the stem twice costs ten seconds and prevents most of them.
Drill the underlying material at practice by topic, and read the Georgia versus national ledger for the national-instinct trap specifically.