Alabama real estate practice test, every option explained

Incorrect: The six months of inactive validity are already part of the one year; nothing follows them.

Incorrect: Inactive status covers only the second half of the year; after that the license lapses.

Incorrect: The law says plainly that a temporary license cannot be renewed.

Incorrect: Suspension is a disciplinary penalty; missing this deadline ends the license outright.

Correct: A temporary license not converted within a year after the first of the month following issue expires and lapses; it cannot be renewed.

Incorrect: Negotiating a purchase for another person for pay requires a license.

Incorrect: Listing someone else's property for pay is a core licensed act.

Correct: Owners handling their own real estate, or that of a spouse, child or parent, are exempt from licensing.

Incorrect: Rental and management services for others require a license.

Incorrect: Property tax rates are set by taxing authorities, not by the Commission.

Incorrect: Commission rates are negotiated between the parties.

Incorrect: Purchase contracts are private agreements; the Commission does not approve them.

Correct: The Commission adopts rules and regulations, such as the chapter 790-X rules, to carry out the license law.

Incorrect: Being paid for referrals is procuring prospects, which also needs an active license.

Correct: No act that requires a license may be performed under an inactive license.

Incorrect: Coordinating transactions as a licensee is still licensed activity.

Incorrect: Showing property for a buyer is a licensed act, so it is barred too.

Incorrect: A license in another state can actually help, through the reciprocal license route.

Correct: A false answer or misstatement on an application lets the Commission reject it.

Incorrect: Other employment does not affect eligibility.

Incorrect: A college degree is not required, so lacking one cannot disqualify.

Incorrect: The rule covers temporary, original and broker applicants alike.

Incorrect: Permanent residents and other lawfully present people can be licensed.

Incorrect: Every applicant documents status, resident or not.

Correct: Applicants certify that they are citizens, permanent residents or otherwise legally present, and attach a document that shows it.

Incorrect: A conviction is reviewed case by case; it is not a permanent bar.

Incorrect: No waiting period appears in the rule; unpaid restitution is the issue.

Correct: Commission staff may reject an applicant who still owes restitution for a felony; the applicant may then request a hearing on the rejection.

Incorrect: Finishing probation is not enough while restitution is still owed.

Incorrect: Passing the exam does not settle fitness; the criminal history is reviewed separately.

Incorrect: Revocation is a disciplinary sanction, not the result of missing CE.

Correct: Missing the CE deadline puts the license on inactive status on October 1, subject to the reactivation requirements.

Incorrect: Practicing is not allowed once the license goes inactive.

Incorrect: Nobody retakes the exam for missing CE.

Correct: A company can act only through an active qualifying broker, so when that broker's license goes inactive the company license goes inactive too.

Incorrect: Revocation is a disciplinary result, not a status change.

Incorrect: Licenses do not move between brokers on their own; a transfer has to be filed.

Incorrect: No 30-day grace period applies when a qualifying broker goes inactive.

Incorrect: A city business license is separate from the real estate license.

Incorrect: Registering an LLC does not license it to do real estate business.

Correct: A real estate company needs a company license issued through a qualifying broker.

Incorrect: No minimum number of salespeople is required.

Correct: While active, a temporary licensee may list and sell like any salesperson, under the qualifying broker.

Incorrect: A branch office must be run by a qualifying broker.

Incorrect: Commissions come through the qualifying broker, never straight out of a trust account.

Incorrect: Only a qualifying broker supervises licensees.

Correct: The Commission may fine a licensee $100 to $5,000, require extra education, reprimand, or suspend or revoke licenses.

Incorrect: Jail can only come from a criminal court.

Incorrect: Seizing property needs a court process the Commission does not have.

Incorrect: Convictions come from criminal courts, not a licensing board.

Incorrect: Damages, punitive or not, are awarded by courts.

Incorrect: The hearing comes after the formal complaint is served, with at least 15 days' notice.

Incorrect: A criminal conviction is never a precondition to license discipline.

Correct: Once staff finds probable cause, a formal complaint naming the charges is drawn and served, which starts the case.

Incorrect: The Commission does not have to wait for a civil judgment, though it can hold its order while a court case is pending.

Incorrect: No summary suspension waits on a criminal finding; the case is administrative.

Incorrect: Contacting buyers once their contract has expired breaks no contract.

Incorrect: Referring a client to proper representation breaks no contract.

Correct: Urging a buyer to drop an existing contract for a better deal through you is inducing a breach for personal gain.

Incorrect: Respecting existing agency relationships is the opposite of the violation.

Incorrect: Filing documents in order is good practice, not a violation.

Incorrect: Keeping originals secure is good practice.

Correct: Licensees must give every party a copy of each listing, contract, lease and document they sign, with reasonable promptness.

Incorrect: Electronic backups are permitted.

Incorrect: There is no listing at all, net or otherwise.

Correct: Marketing someone's property without the owner's consent is a ground for discipline.

Incorrect: No rebate is offered in the facts.

Incorrect: Nothing in the facts involves a defect.

Incorrect: The seller can sue, but that does not keep the Commission from disciplining the licensee.

Incorrect: Lowering the price without consent is just as unauthorized.

Correct: Changing a signed agreement without the signer's consent is the kind of dishonest dealing the Commission disciplines.

Incorrect: A price is a material term, not a clerical detail.

Incorrect: Terms like 'for sale' are expressly left out of the size comparison.

Incorrect: The name has to appear on the ad itself, not only on a linked page.

Correct: The company name must be in a font at least as large as any other name, text or logo, other than terms like 'for sale'.

Incorrect: Bold type is not what the statute measures; font size compared with other names and logos is.

Incorrect: Since HB382, size matters: the name must be at least as large as other names in the ad.

Incorrect: The Commission, not the court clerk, issues subpoenas for its hearings.

Incorrect: The request has to be made in advance so the witness can be served.

Incorrect: Witness fees must be deposited; an attorney cannot skip that step.

Correct: The Commission issues subpoenas at the accused's request once the required funds are deposited by cashier's or certified check.

Incorrect: Fees are deposited with the Commission up front, not paid later by hand.

Incorrect: The statute says an appeal does not act as supersedeas.

Incorrect: A late record can bring other court relief, but it does not stay the order on its own.

Incorrect: The order stays in force unless the court acts.

Correct: An appeal does not suspend the order by itself; only the court can stay it.

Incorrect: The bond is a condition of appealing, not a stay.

Correct: Business records and files must be kept at the place of business, where they can be produced for inspection.

Incorrect: The Commission inspects records; it does not store them.

Incorrect: The law ties records to the place of business, not to any site.

Incorrect: The attorney's file does not satisfy the company's own duty.

Incorrect: A home is not the place of business unless it is the licensed rural home office.

Correct: The appeal is decided without a jury, on the record, and the court does not reweigh the evidence on questions of fact.

Incorrect: There is no jury and no new trial.

Incorrect: Review is confined to the record made before the Commission.

Incorrect: Remand is only one option; the court can also affirm, reverse or modify.

Incorrect: The court cannot substitute its judgment for the Commission's on the weight of the evidence.

Incorrect: There is nothing to appeal until the final order exists.

Incorrect: An informal request does not extend the 30-day deadline.

Incorrect: Ninety days is too late; the window is 30 days.

Incorrect: Review starts in circuit court, not in an appellate court.

Correct: Findings become final unless a notice of appeal is filed in circuit court within 30 days of the final order, with a $200 bond.

Correct: The accused is served with the formal complaint and given at least 15 days' notice of the time, date and place of the hearing.

Incorrect: Five days is shorter than the statute allows.

Incorrect: Thirty days is more than the statute requires for hearing notice.

Incorrect: No 60-day notice period exists.

Incorrect: Consumers are paid by the fund; they do not pay into it.

Correct: Every licensee pays a Recovery Fund fee with the original license (or when an inactive license is activated), and more when the Commission orders it.

Incorrect: Prior discipline has nothing to do with who pays.

Incorrect: Salespersons pay the fee too; it is not limited to qualifying brokers.

Incorrect: Showing a property does not create agency.

Incorrect: The disclosure form is not a contract and creates no agency.

Incorrect: Sharing information does not make the consumer a client.

Correct: No agency exists without a written bilateral agreement signed by the licensee and the consumer; until then the licensee is a transaction facilitator.

Incorrect: No 24-hour window exists in the rule.

Incorrect: Alabama allows no three-day holding period for the salesperson.

Correct: A salesperson or associate broker must turn trust funds over to the qualifying broker immediately upon receipt.

Incorrect: Acceptance is not the trigger; funds go to the broker the moment the salesperson receives them.

Incorrect: The Recovery Fund pays only on a court judgment, after the claimant's other steps.

Incorrect: This is a statutory duty, not a best practice.

Correct: The disclosure is due before any confidential information is shared; the Commission may respond with a reprimand, a fine or other discipline after a hearing.

Incorrect: Discipline is chosen case by case; no automatic revocation exists for a RECAD violation.

Incorrect: The Commission does not have to refer RECAD cases for prosecution, and the buyer's civil options are separate.

Incorrect: Bank statements alone do not show whose money is whose.

Incorrect: The record duties stand on their own, apart from the shortage.

Incorrect: The accused always gets a hearing, and revocation is never automatic.

Incorrect: Rebuilding records later does not undo the failure to keep them.

Correct: Missing slips, checks and reconciliations break the trust record duties, and an unexplained shortage adds to it; penalties include fines and suspension.

Incorrect: The lender's Loan Estimate is a separate federal disclosure, not the Commission's estimate.

Correct: The licensee furnishes the estimate each time a written offer or counteroffer is prepared or presented.

Incorrect: Title companies prepare settlement figures at closing, but the estimate rule binds the licensee.

Incorrect: Closing is too late, and the duty belongs to the licensee.

Incorrect: Whether the unit could be removed does not matter once a buyer without notice takes title.

Correct: Without a recorded fixture filing, the creditor's interest loses to a later buyer who had no notice.

Incorrect: A purchase money interest has priority only if it is perfected by a fixture filing.

Incorrect: The buyer does not have to take on the debt to keep the unit.

Incorrect: The seller holds nothing once the sale closes.

Incorrect: Tenants in common need not be related or married.

Correct: Tenancy by the entirety can be held only by a married couple, and it carries the right of survivorship.

Incorrect: Joint tenants do not have to be married.

Incorrect: Severalty is ownership by one person alone.

Incorrect: Disposition, the right to sell or give away, is in the bundle.

Incorrect: Possession is a core right of the bundle.

Incorrect: Exclusion, keeping others out, is in the bundle.

Correct: The bundle is usually listed as possession, control, enjoyment, exclusion and disposition; assignment is not one of the five.

Incorrect: Agricultural zones are for farming.

Incorrect: Residential zones are for housing.

Correct: Industrial zones are where manufacturing is allowed.

Incorrect: Commercial zones are for retail and offices.

Incorrect: Notice describes how recording protects buyers; it does not issue certificates.

Correct: Under the Torrens system, title is registered and shown by a certificate instead of a chain of recorded deeds.

Incorrect: Recording systems rely on recorded deeds, the opposite approach.

Incorrect: An abstract summarizes recorded documents; it is not a registration system.

Incorrect: Tax rates are set by government, not by vacancy.

Incorrect: Falling values go with rising vacancies.

Incorrect: Vacancy is a direct signal of demand, so values are affected.

Correct: Few vacancies mean demand is high relative to supply, which pushes values up.

Incorrect: Dates change only by agreement.

Incorrect: The clause does not change the price.

Incorrect: Earnest money rules come from the contract's financing terms, not from a kick-out clause.

Correct: The seller keeps marketing; if a better offer comes, the buyer must remove the contingency or step aside.

Incorrect: Tax reporting is not the issue; the undisclosed interest is.

Correct: A licensee acting for himself or herself, or through an entity the licensee owns, must give all parties timely written disclosure first.

Incorrect: The LLC's registration status is not what the licensee failed to do.

Incorrect: The licensee is buying a property, not owning a brokerage.

Correct: Licensees may pay a commission or fee only to another licensee (or an MLS), so a finder's fee to an unlicensed person is barred.

Incorrect: Splitting within the same company between licensees is allowed.

Incorrect: Paying a licensed out-of-state broker through a proper co-brokerage agreement is allowed.

Incorrect: Co-brokered splits between licensees are routine.

Incorrect: The full record is reported, not just fines.

Correct: Other states ask about prior discipline, and a fraud finding can lead them to deny a license.

Incorrect: Reciprocity does not override another state's fitness review.

Incorrect: Discipline records are public, not sealed.

Incorrect: Discipline records travel; other states ask applicants about them.

Correct: Physical deterioration is 20 ÷ 40 = 50% of 1,000,000, or 500,000; add 50,000 functional, subtract 550,000 from cost and add land: 900,000.

Incorrect: That figure uses actual age (10 ÷ 40 = 25%) instead of effective age; the age-life method uses effective age.

Incorrect: That figure leaves out the 50,000 of functional obsolescence.

Incorrect: That figure takes only half of the functional obsolescence.

Incorrect: That figure takes far too much depreciation; no reading of the age-life data produces it.

Incorrect: That overstates the area; no reading of the call distances gives about 270,000 sq ft.

Incorrect: That understates the area; it matches no reading of the description.

Incorrect: That uses only the 326-foot side, as if the lot were 326 × 600.

Correct: The parcel is a trapezoid: (400 + 326) ÷ 2 × 600 = 217,800 sq ft, and 217,800 ÷ 43,560 = 5.00 acres.

Incorrect: That treats the lot as a 400 × 600 rectangle and ignores the shorter east side.

Incorrect: That multiplies NOI by 8 instead of dividing by 8%.

Incorrect: That would need a cap rate of 7.5%.

Incorrect: That is NOI times 10, a 10% cap rate.

Correct: Value equals NOI divided by the cap rate: 60,000 ÷ 0.08 = 750,000.

Correct: Apply each change in turn: 320,000 × 1.15 = 368,000, then 368,000 × 0.95 = 349,600.

Incorrect: That figure does not follow from applying the two changes in either order.

Incorrect: That nets the changes to +10% of the original value; the 5% drop applies to the higher value.

Incorrect: That applies a flat 8% to the original value.

Incorrect: That is the whole commission, before the split.

Incorrect: That would be a 4% commission rate.

Incorrect: That would be a 2% share of the price.

Correct: The total commission is 325,000 × 6% = 19,500, and half goes to the selling broker: 9,750.

Correct: The loan is 80% of 275,000, or 220,000, and 1% of that is 2,200.

Incorrect: That is half of the correct fee.

Incorrect: That takes 1% of the price instead of the loan.

Incorrect: That is 2% of the price: the wrong rate on the wrong base.

Incorrect: The former broker only gets a copy of the notice; no release is needed.

Correct: The new qualifying broker files the transfer request and a statement taking responsibility for the licensee; a $25 fee applies.

Incorrect: The background check was done at licensing and is not repeated for a transfer.

Incorrect: CE belongs to renewal and activation, not to a change of company.

Incorrect: The six-month limit applies to a temporary license's active period, not to an original license.

Incorrect: Revocation is a disciplinary penalty and has nothing to do with inactive status.

Incorrect: A license lapses only when it goes unrenewed, not because it is inactive.

Correct: An inactive license is renewed the same way as an active one, and it can stay inactive as long as it keeps being renewed.

Correct: Activating an inactive license for the first time in a license period takes 15 hours of approved continuing education, plus the change-of-status fee.

Incorrect: The post-license course is taken once, for the first original license.

Incorrect: No exam is needed to activate a license that has been kept renewed.

Incorrect: There is a fixed activation fee, not a doubled renewal fee.

Correct: The company may operate under a temporary qualifying broker for no more than six months after that license is issued.

Incorrect: No 120-day period appears in the law.

Incorrect: Thirty days is the time to designate someone to apply as temporary qualifying broker, not how long the arrangement lasts.

Incorrect: A year is longer than the law allows.

Incorrect: Property condition is not on the brokerage services form.

Incorrect: Compensation is covered only in general terms, by the company's office policy, not as a rate on the form.

Incorrect: Financing is outside this disclosure.

Correct: The form explains single agency, dual agency and transaction facilitator services, plus the duties every licensee owes all parties.

Correct: An application for rehearing, stating specific grounds, must be filed within 30 days of receiving notice of the decision.

Incorrect: Forty-five days is longer than the statute allows.

Incorrect: Ten days is the deadline for reporting a lawsuit, not for rehearing.

Incorrect: Ninety days has no role in rehearing.

Incorrect: The cap is higher than $10,000.

Correct: Payments for claims from the same transaction are capped at $25,000 in total, regardless of the number of claimants.

Incorrect: No $75,000 cap exists.

Incorrect: Fifty thousand dollars is the cap for all claims against one licensee, not one transaction.

Correct: A complaint is investigated, the accused is served and given notice, the hearing is held, then rehearing and court appeal are available.

Incorrect: Notice of a hearing cannot come before the complaint it is about.

Incorrect: Notice has to come before the hearing, not at the end.

Incorrect: There is no suspension before the hearing, and rehearing comes before appeal.

Correct: The court orders payment of the amount still unpaid on the judgment, after money already recovered from the licensee is credited.

Incorrect: Money already collected is credited first, so the full judgment is not claimable.

Incorrect: Nothing increases a claim; the fund pays actual damages only, without interest or court costs.

Incorrect: That turns the rule upside down: the fund covers what is still owed, not what was collected.

Incorrect: Courts do not write terms into a deal; the obligation is created by law.

Incorrect: There is no agreement at all; that is what separates it from an express or implied-in-fact contract.

Correct: A quasi-contract is implied by law so that one party does not keep a benefit it would be unfair to keep without paying.

Incorrect: No promises were exchanged, so there is no consideration to reward.

Incorrect: A power of attorney lets someone act for another; it has nothing to do with foreclosure.

Incorrect: Rescission is a short right to cancel certain refinance loans after signing, not a default remedy.

Correct: Before the sale, the equity of redemption lets a borrower save the property by paying everything owed.

Incorrect: Subrogation lets a payer step into a creditor's rights, as an insurer does.

Correct: Alabama bars licensees from paying or receiving any rebate from any person in a real estate transaction, so handing part of the commission to the buyer is a violation.

Incorrect: A net listing is a seller's agreement on how the commission is figured; nothing here involves the seller.

Incorrect: A lottery needs an element of chance; this promise goes to every buyer who purchases.

Incorrect: Disclosure does not save it; the Alabama ban on rebates has no disclosure exception.

Correct: Commission rules forbid any provision for automatic extensions in a listing contract.

Incorrect: The listing price is a normal part of any listing.

Incorrect: A fixed expiration date is required; leaving it out is the violation.

Incorrect: A percentage commission is an ordinary, lawful term.

Incorrect: Being a party to the deal does not let the seller or buyer pay the salesperson directly.

Incorrect: No consent from the other party makes direct payment lawful.

Correct: A salesperson or associate broker may accept a commission or other valuable consideration for licensed acts only from his or her qualifying broker.

Incorrect: The statute sets no dollar threshold; any amount must come through the qualifying broker.