Which government power allows property to be taken for public use if legal requirements are met and just compensation is paid?
A. Police power
B. Escheat
C. Taxation
D. Eminent domain
Show answer and reasoning
Correct answer: D. Eminent domain
- A: Police power regulates property use for public health, safety, morals, and welfare; it is not the taking power itself.
- B: Escheat concerns property reverting to the state when an owner dies without heirs or a valid disposition.
- C: Taxation is the power to impose property taxes and assessments, not the condemnation/taking process.
Source: Cornell Legal Information Institute — U.S. Constitution, Fifth Amendment, text prohibiting a taking for public use without just compensation; https://www.law.cornell.edu/constitution/fifth_amendment
An agent learns a fact that could materially affect the principal's decision in a transaction. Under basic agency principles, what should the agent do?
A. Keep the fact private unless the other party asks directly
B. Share it only after closing
C. Decide personally whether the principal would care
D. Disclose the material information to the principal promptly
Show answer and reasoning
Correct answer: D. Disclose the material information to the principal promptly
- A: A fiduciary agent owes disclosure to the principal; waiting for a third party to ask does not satisfy that duty.
- B: Disclosure after closing may be too late to protect the principal's decision-making.
- C: The agent should not substitute personal judgment for the principal's right to material information.
Source: National Association of REALTORS® — 'Fiduciary Duties,' headings 'Loyalty,' 'Confidentiality,' 'Disclosure,' 'Obedience,' 'Reasonable Care and Diligence,' and 'Accounting'; https://www.nar.realtor/sites/default/files/handouts-and-brochures/2014/nar-fiduciary-duty-032213.pdf?mod=article_inline
A listing agent represents the seller, not the buyer. Which duty does the agent still owe to the buyer as a non-client?
A. A fiduciary duty to put the buyer's interests ahead of the seller's
B. A duty to guarantee the buyer gets the lowest possible price
C. A duty to treat the buyer honestly and avoid material misrepresentation
D. A duty to disclose the seller's confidential bottom-line price
Show answer and reasoning
Correct answer: C. A duty to treat the buyer honestly and avoid material misrepresentation
- A: The seller's agent owes fiduciary duties to the seller, not to the buyer as principal.
- B: The seller's agent does not owe the buyer a duty to obtain the lowest price.
- D: Disclosing the seller's confidential negotiation position would violate the agent's duty to the seller.
Source: National Association of REALTORS® Code of Ethics — Article 2, obligation not to exaggerate, misrepresent, or conceal pertinent facts; https://www.nar.realtor/about-nar/governing-documents/code-of-ethics/2026-code-of-ethics-standards-of-practice
Which valuation approach is most directly based on comparing a subject property with similar properties that recently sold?
A. Cost approach
B. Income approach
C. Sales comparison approach
D. Depreciation-only approach
Show answer and reasoning
Correct answer: C. Sales comparison approach
- A: The cost approach focuses on land value plus replacement/reproduction cost less depreciation.
- B: The income approach emphasizes the income a property can generate.
- D: Depreciation is an adjustment concept, not a standalone valuation approach.
Source: Fannie Mae Selling Guide — B4-1.3-07, heading 'Overview,' sales comparison and factors affecting value; https://selling-guide.fanniemae.com/sel/b4-1.3-07/sales-comparison-approach-section-appraisal-report
The income approach is generally most useful when valuing which type of property?
A. A property primarily purchased for its ability to produce rental income
B. A vacant residential lot with no income history and no projected rent
C. A newly built owner-occupied house with no rental market comparison
D. A family heirloom with sentimental rather than market value
Show answer and reasoning
Correct answer: A. A property primarily purchased for its ability to produce rental income
- B: A vacant lot may be valued by other methods unless reliable income potential is being analyzed.
- C: Owner-occupied homes are commonly valued with sales comparison; income is not usually the central driver.
- D: Sentimental value is not the market-income basis used in the income approach.
Source: Fannie Mae Selling Guide — B4-1.3-10, headings 'Cost Approach to Value' and 'Income Approach to Value'; https://selling-guide.fanniemae.com/sel/b4-1.3-10/cost-and-income-approach-value
