Real Estate Exam Cheat Sheet

1. Key Formulas & Math Shortcuts

Math accounts for 10–15% of most state exams. Memorize these formulas and practice solving them under time pressure. See our full math cheat sheet for worked examples of every formula.

Practice with our interactive calculator →

2. Agency Relationships

Agency law is one of the highest-weighted exam topics. Know the fiduciary duties, when agency is created, and how each type works. The mnemonic OLD CAR covers the six fiduciary duties.

Seller's Agent (Listing Agent)

Represents the seller exclusively. Owes all fiduciary duties to the seller. Must disclose material facts to all parties but keeps the seller's negotiating position confidential.

Buyer's Agent

Represents the buyer exclusively. Created by a buyer-broker agreement. Owes all fiduciary duties to the buyer, including disclosing the seller's motivation to sell if known.

Dual Agency

One agent (or brokerage) represents both buyer and seller in the same transaction. Requires written informed consent from both parties. The agent cannot advocate for either side or share confidential information. Prohibited in some states.

Designated Agency

The brokerage assigns one agent to represent the buyer and a different agent to represent the seller within the same firm. Reduces the conflict-of-interest problems of dual agency.

Transaction Broker (Facilitator)

Assists both parties without representing either as a fiduciary. Provides limited services — does not owe loyalty or confidentiality to either side. Used in some states as the default relationship.

Agency Creation

Agency can be created by express agreement (written contract), implied agreement (conduct), ratification (after the fact), or estoppel (third-party reliance). A listing agreement is the most common express agency creation.

Agency Termination

Agency ends by: completion of the purpose, expiration of the agreement, mutual consent, revocation by the principal, renunciation by the agent, death or incapacity of either party, or destruction of the property.

3. Fair Housing

Fair housing is tested heavily on every state exam. Know the federal protected classes, the prohibited practices, and the narrow exemptions. Many states add additional protected classes — check your state's page for details.

Steering

Directing buyers toward or away from neighborhoods based on protected-class characteristics. Violates Section 804 of the Fair Housing Act.

Redlining

Refusing to lend, insure, or provide services in certain geographic areas based on the demographic composition of the neighborhood. Violates the FHA, ECOA, and CRA.

Blockbusting (Panic Peddling)

Inducing homeowners to sell by suggesting that protected-class members are moving into the area and property values will decline. Violates Section 804(e).

Reasonable Accommodation

A change in rules, policies, or services necessary for a disabled person to use and enjoy a dwelling. The housing provider pays for accommodations (e.g., allowing a service animal in a no-pet building).

Reasonable Modification

A physical change to the unit made at the tenant's expense (e.g., grab bars, wider doorways). The landlord may require restoration upon move-out.

Mrs. Murphy Exemption

Owner-occupied buildings with 4 or fewer units are exempt from the FHA (but NOT from the Civil Rights Act of 1866 regarding racial discrimination, and NOT from advertising restrictions).

HUD Complaint Timeline

File with HUD within 1 year of the discriminatory act. Private civil lawsuit within 2 years. Penalties: approximately $21,000+ for a first violation (adjusted periodically for inflation).

4. Contracts

Contracts are the backbone of every real estate transaction. Know the required elements, the types of contracts, and the remedies for breach.

Statute of Frauds

Requires real estate contracts to be in writing and signed by the party to be charged. Oral real estate contracts are generally unenforceable.

Listing Agreements

Exclusive right-to-sell (broker earns commission regardless of who finds the buyer), exclusive agency (broker earns commission unless the seller finds the buyer), and open listing (only the procuring-cause broker earns commission).

Purchase Agreement

The bilateral contract between buyer and seller. Contains the price, closing date, contingencies, and property description. Becomes binding when both parties sign.

Option Contract

The buyer pays for the right (but not the obligation) to purchase at a set price within a set time. The seller is bound; the buyer is not — making this a unilateral contract until exercised.

Contingencies

Conditions that must be met for the contract to proceed: financing, inspection, appraisal, sale of buyer's current home. If a contingency fails, the buyer can typically withdraw and recover the earnest money.

Breach Remedies

Specific performance (court orders completion), compensatory damages (money for losses), liquidated damages (forfeiture of earnest money), or rescission (cancel the contract and restore both parties).

Time Is of the Essence

When this clause is in a contract, deadlines are absolute. Missing a deadline constitutes a breach. Without this clause, courts may allow a 'reasonable time' after the stated date.

5. Property Ownership

Understand the bundle of rights, estates in land, and how ownership is held. These concepts appear in both the national and state portions.

Fee Simple Absolute

The highest form of ownership. The owner has all rights in the bundle of rights with no conditions or time limits. It is inheritable and can be sold, leased, or encumbered freely.

Fee Simple Defeasible

Ownership that can be terminated if a condition is violated. Fee simple determinable ends automatically; fee simple on condition subsequent requires the grantor to take action to reclaim the property.

Life Estate

Ownership limited to the lifetime of a designated person. The life tenant may use, lease, and enjoy the property but cannot commit waste. Upon death, the property passes to the remainderman.

Joint Tenancy (TTIP)

Co-ownership with right of survivorship. Requires four unities: Time, Title, Interest, and Possession. When one joint tenant dies, their share automatically passes to the surviving joint tenant(s) — not through probate.

Tenancy in Common

Co-ownership without survivorship. Each owner holds an undivided interest that can be different in size and can be sold, willed, or mortgaged independently. The default form of co-ownership in most states.

Community Property

Used in 9 states (AZ, CA, ID, LA, NV, NM, TX, WA, WI). Property acquired during marriage is owned equally by both spouses. Property owned before marriage or received as a gift/inheritance remains separate.

Easement vs. License

An easement is a permanent, non-possessory right to use another's land (runs with the land). A license is temporary, revocable permission (does not run with the land).

6. Finance & Lending

Know the major loan types, the key federal lending laws, and how the secondary mortgage market works.

Conventional Loans

Not government-insured or guaranteed. Conforming loans meet Fannie Mae/Freddie Mac guidelines. Typically require 80% LTV to avoid PMI. Jumbo loans exceed conforming limits.

FHA Loans

Insured by the Federal Housing Administration. Minimum 3.5% down (with 580+ credit score). Require upfront and annual mortgage insurance premium (MIP). More flexible qualifying criteria than conventional.

VA Loans

Guaranteed by the Department of Veterans Affairs for eligible veterans. No down payment required. No PMI. Competitive interest rates. VA charges a funding fee (can be financed into the loan).

TILA (Truth in Lending Act / Regulation Z)

Requires lenders to disclose the APR, total finance charges, and payment schedule. Gives borrowers 3-day right of rescission on refinances of their primary residence. Does NOT apply to purchase money mortgages on primary residences.

RESPA (Real Estate Settlement Procedures Act)

Requires a Loan Estimate within 3 business days of application and a Closing Disclosure at least 3 business days before closing. Prohibits kickbacks and unearned referral fees between settlement service providers.

ECOA (Equal Credit Opportunity Act)

Prohibits credit discrimination based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance. Lenders must notify applicants of adverse action within 30 days.

Secondary Market

Fannie Mae (FNMA), Freddie Mac (FHLMC), and Ginnie Mae (GNMA) buy loans from primary lenders, freeing capital for new loans. Fannie and Freddie buy conventional conforming loans; Ginnie Mae guarantees pools of FHA/VA/USDA loans.

7. Appraisal & Valuation

Appraisal questions test your understanding of value concepts and the three approaches to value. See our glossary for detailed definitions of each term.

Sales Comparison Approach

Most common for residential properties. Compares the subject to recently sold similar properties (comps). Adjustments are always made TO the comparable: if the comp has a feature the subject lacks, subtract its value from the comp's price.

Cost Approach

Value = Land Value + (Replacement/Reproduction Cost − Depreciation). Best for new construction or special-purpose properties (churches, schools). Land is never depreciated.

Income Approach

Value = NOI ÷ Cap Rate. Used for income-producing properties. NOI = Effective Gross Income − Operating Expenses (excluding debt service and income taxes).

Highest and Best Use

The use that is legally permissible, physically possible, financially feasible, and maximally productive. This is the foundation of all appraisal — the appraiser must determine highest and best use before applying any approach.

Three Types of Depreciation

Physical deterioration (wear and tear, curable or incurable), functional obsolescence (outdated layout, too few bathrooms), and external/economic obsolescence (nearby highway, declining neighborhood — always incurable).

Key Principles

Substitution (a buyer won't pay more than the cost of an equivalent property), anticipation (value reflects expected future benefits), conformity (value is maximized when properties are similar), and contribution (an improvement's value is what it adds to the property, not what it costs).

8. Escrow & Title

Know the types of deeds, how title insurance works, and the closing process. This varies significantly by state — some states use attorneys, others use title companies or escrow agents.

General Warranty Deed

Provides the greatest protection. The grantor warrants title against all defects, including those from before their ownership. Contains covenants of seisin, quiet enjoyment, against encumbrances, further assurance, and warranty of title.

Special Warranty Deed

Grantor warrants title only against defects that arose during their period of ownership. Commonly used by fiduciaries, corporations, and in foreclosure sales.

Quitclaim Deed

Conveys only whatever interest the grantor may have — with zero warranties. Used between family members, to clear cloud on title, or in divorce transfers. Provides the least protection.

Title Insurance

Protects against losses from defects in title that existed before the policy date but were unknown at closing. Unlike other insurance, it covers past events, not future ones. Owner's policy protects the buyer; lender's policy protects the mortgage holder.

Lien Priority

Generally first in time, first in right — liens are paid in the order they were recorded. Exception: property tax liens and special assessment liens have super-priority regardless of when they were recorded.

Closing Process

The buyer receives the deed, the seller receives the proceeds, the lender records the mortgage, title transfers, and prorations are settled. The closing agent ensures all documents are signed, funds are disbursed, and the deed and mortgage are recorded.

9. Environmental Hazards

Environmental questions are heavily tested. Know the major hazards, the federal laws, and the disclosure requirements.

Lead-Based Paint

Federal disclosure required for all residential properties built before 1978. Sellers must provide the EPA pamphlet 'Protect Your Family from Lead in Your Home' and disclose known lead hazards. Buyers get 10 days for a lead inspection.

Asbestos

Found in insulation, floor tiles, roofing, and siding in buildings constructed before 1980. Friable (crumbling) asbestos is the most dangerous. Encapsulation is often preferred over removal.

Radon

A colorless, odorless radioactive gas from the natural decay of uranium in soil. Second leading cause of lung cancer. Enters buildings through cracks in the foundation. Testing is the only way to detect it. Mitigation systems are effective and affordable.

CERCLA (Superfund)

Comprehensive Environmental Response, Compensation, and Liability Act. Governs cleanup of hazardous waste sites. Imposes strict, joint-and-several, retroactive liability on current owners, past owners, transporters, and generators of hazardous waste — even innocent purchasers may be liable.

Phase I ESA (Environmental Site Assessment)

A records review and site inspection to identify recognized environmental conditions (RECs). Does not involve sampling or testing. Required to establish the 'innocent landowner' defense under CERCLA. A Phase II ESA involves actual soil and groundwater testing.

Underground Storage Tanks (USTs)

Common at former gas stations and industrial sites. Leaking USTs can contaminate soil and groundwater. EPA requires registration, monitoring, and cleanup of UST releases. Buyers should always inquire about current or former USTs on commercial properties.

10. Licensing & Disclosure Rules

The state portion of your exam will test your knowledge of state-specific licensing requirements, continuing education, trust fund handling, and mandatory disclosures.

License Types

Salesperson (works under a broker), broker (can operate independently and supervise salespersons), and in some states, associate broker (holds a broker license but works under another broker). Requirements vary by state.

Trust Fund / Escrow Account Rules

Client funds (earnest money, security deposits) must be deposited into a separate trust account — never commingled with personal or business funds. Commingling and conversion (using client funds for personal purposes) are grounds for license revocation.

Material Fact Disclosure

Agents must disclose all known material facts that could affect a buyer's decision — structural defects, water damage, neighborhood nuisances, and in most states, the presence of mold, lead paint, or environmental hazards. Failure to disclose is fraud.

Agency Disclosure

Most states require agents to disclose their agency relationship in writing to all parties at or before the first substantive contact. The specific form and timing vary by state.

Continuing Education

Required for license renewal in all states. Hours, topics, and renewal cycles vary. Common mandatory topics include ethics, fair housing, legal updates, and agency law. Check your state's requirements.

11. Exam-Day Tips

12. Most-Missed Concepts

Based on analysis of 75,000+ practice questions, these are the concepts students get wrong most often. If you master these, you have a significant edge on exam day.