Real Estate Exam Cheat Sheet: 50 Facts You Must Know (2026)

1. Fee simple absolute is the highest form of ownership — it lasts forever and can be inherited, sold, or transferred without restriction.

2. Life estate ends when the life tenant dies. The property then passes to the remainderman, not to the life tenant's heirs.

3. Joint tenancy requires four unities: time, title, interest, and possession (TTIP). If any unity is broken, it converts to a tenancy in common.

4. Tenancy by the entirety is available only to married couples and includes a right of survivorship that cannot be severed by one spouse alone.

5. Community property states treat all property acquired during marriage as equally owned. There are currently 9 community property states.

6. Littoral rights apply to properties bordering standing bodies of water (lakes, oceans). Riparian rights apply to flowing water (rivers, streams).

7. An easement appurtenant runs with the land — it transfers automatically when the property is sold. An easement in gross is personal to the holder.

8. A valid contract requires: competent parties, mutual consent (offer and acceptance), lawful purpose, and consideration.

9. The Statute of Frauds requires real estate contracts to be in writing to be enforceable. Oral agreements for real estate are not enforceable in court.

10. An agent owes fiduciary duties to their client, remembered as OLDCAR: Obedience, Loyalty, Disclosure, Confidentiality, Accountability, and Reasonable care.

11. Dual agency means one agent (or brokerage) represents both buyer and seller. It must be disclosed and consented to in writing by both parties.

12. An option contract gives the buyer the right — but not the obligation — to purchase within a specified time. The seller is bound; the buyer is not.

13. Earnest money is not required for a valid contract, but it shows good faith. It is typically held in the broker's escrow account.

14. Specific performance is a legal remedy that forces a party to complete the transaction rather than pay damages.

15. Time is of the essence means deadlines in the contract are firm — missing one can be grounds for default.

16. LTV (Loan-to-Value) = Loan Amount ÷ Appraised Value. An 80% LTV on a $300,000 property means a $240,000 loan.

17. PMI (Private Mortgage Insurance) is typically required when LTV exceeds 80%. It protects the lender, not the borrower.

18. An FHA loan requires a minimum 3.5% down payment and is insured by the Federal Housing Administration.

19. A VA loan offers 0% down payment for eligible veterans and is guaranteed by the Department of Veterans Affairs.

20. Discount points are prepaid interest. One point = 1% of the loan amount. Paying points lowers the interest rate.

21. RESPA (Real Estate Settlement Procedures Act) requires lenders to disclose settlement costs and prohibits kickbacks.

22. TILA (Truth in Lending Act) requires lenders to disclose the APR, total finance charges, and payment schedule.

23. Usury laws set maximum interest rates a lender can charge. Rates above the limit are illegal.

24. Hypothecation means the borrower pledges property as collateral without giving up possession.

25. The three approaches to value: Sales Comparison (most common for residential), Cost Approach (new construction/unique properties), and Income Approach (rental/commercial properties).

26. Cap Rate = Net Operating Income ÷ Property Value. A $100,000 NOI on a $1,000,000 property = 10% cap rate.

27. GRM (Gross Rent Multiplier) = Sale Price ÷ Gross Annual Rent. Used for quick comparisons of rental property value.

28. Depreciation in appraisal has three types: physical deterioration (wear and tear), functional obsolescence (outdated design), and external/economic obsolescence (neighborhood decline).

29. The principle of substitution states a buyer will not pay more for a property than the cost of an equally desirable substitute.

30. Highest and best use is the most profitable, legally permissible, physically possible, and financially feasible use of a property.

31. Commission: Sale Price × Commission Rate = Commission. Split: Commission × Agent Split % = Agent's Share.

32. Net to Seller: Sale Price − Commission − Closing Costs = Net to Seller.

33. Cap Rate: NOI ÷ Value = Cap Rate. To find value: NOI ÷ Cap Rate = Value.

34. Proration formula: Annual amount ÷ 365 = daily rate. Daily rate × days owed = prorated amount.

35. Area of a rectangle: Length × Width. Area of a triangle: ½ × Base × Height. One acre = 43,560 square feet.

36. Mill rate: 1 mill = $0.001. Property tax = Assessed Value × Mill Rate ÷ 1,000.

37. Equity: Market Value − Mortgage Balance = Equity.

38. Appreciation: Original Value × (1 + Rate) = New Value. Depreciation: Original Value × (1 − Rate) = New Value.

39. The Fair Housing Act (1968) prohibits discrimination based on 7 protected classes: race, color, religion, national origin, sex, familial status, and disability.

40. Steering is illegally directing buyers toward or away from certain neighborhoods based on a protected class.

41. Blockbusting is inducing panic selling by suggesting a neighborhood's demographics are changing.

42. Redlining is refusing to lend in certain areas based on racial or ethnic composition.

43. The Americans with Disabilities Act (ADA) requires public accommodations to be accessible. It applies to commercial properties, not private residences.

44. The Equal Credit Opportunity Act (ECOA) prohibits discrimination in lending based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance.

45. Zoning is the government's power to regulate land use. A variance is an exception to a zoning rule. A nonconforming use is a use that existed before zoning changed.

46. Eminent domain is the government's right to take private property for public use with just compensation (Fifth Amendment).

47. Police power is the government's authority to enact laws for public health, safety, and welfare — zoning, building codes, and rent control all derive from police power.

48. Lead-based paint disclosure is required for all residential properties built before 1978.

49. CERCLA (Superfund) holds current and past property owners liable for environmental contamination cleanup, even if they did not cause it.

50. An environmental site assessment (ESA) Phase I is a records review and visual inspection. Phase II involves actual testing of soil, water, or materials.