A developer buys an empty lot next to a new light-rail stop expecting

Tennessee Real Estate Exam

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Question 1 of 5.

A developer buys an empty lot next to a new light-rail stop expecting rents to rise once the station opens. This illustrates which principle of value?

A. change

B. contribution

C. anticipation

D. highest and best use

Explanation: The principle of anticipation holds that present value is based on future benefits. The developer pays today based on expected future rent increases once the rail service begins. Contribution (B) concerns the value added by improvements, while highest and best use (D) is a broader concept.

Question 2 of 5.

The Real Estate Commission does NOT have the power to

A. suspend or revoke real estate licenses

B. subpoena witnesses for its investigations

C. regulate commission rates

D. review broker's escrow or trustee accounts

Explanation: Real Estate Commission (TREC) is empowered to suspend/revoke licenses (A), issue subpoenas (B) and audit escrow accounts (D). Regulating commission rates (C) is anti-competitive and is left to the marketplace; TREC has no statutory authority to dictate what brokers may charge.

Question 3 of 5.

A real estate broker wrote a full-price offer of $350000 for a buyer. The earnest-money deposit was $25000. The offer was accepted and the broker placed the deposit in her escrow account. The next week the parties cancelled the contract in writing and asked the broker to return the deposit. Which is TRUE?

A. The broker must negotiate for her commission out of the deposit

B. The broker must return the deposit unless specifically authorized otherwise

C. The broker may subtract one-half of her commission before returning the deposit

D. The broker has earned a commission and may automatically subtract the entire amount before returning the balance

Explanation: Under TREC and general trust-account law, earnest money is held for the parties, not the broker. Until the parties instruct otherwise or a court orders disbursement, the broker has no right to unilaterally withhold any portion for commission. Hence the broker must return the full $25,000 unless the parties expressly authorize a different disposition.

Question 4 of 5.

A firm has six branch offices. Each branch office MUST have

A. a separate principal broker for each branch office

B. a designated office manager

C. at least one affiliate broker at each branch office

D. an affiliate broker to supervise each branch office

Explanation: allows one principal broker to oversee multiple branches, but every branch must have a person (manager) responsible for that location. The manager need not be a principal broker (A) nor an affiliate broker (D), and there is no requirement that every branch have at least one affiliate broker (C).

Question 5 of 5.

A licensee can advertise property solely under their own name

A. with the principal broker's approval

B. if they own the property

C. as long as the listing price is included in the ad

D. under no circumstances

Explanation: Tennessee rules permit a licensee to advertise a property in their own name only when the licensee is the owner and the ad discloses the licensee's interest. Absent ownership, all advertising must be in the firm's name or with conspicuous firm identification. Therefore owning the property (B) is the correct trigger; approval (A) or price inclusion (C) does not suffice.