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Michigan Real Estate Broker Examination — Information & Free Practice

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Michigan Real Estate Broker Examination

Provider
PSI Services LLC
Format
Computer-administered examination
Exam questions
115 scored questions, 120 points; additional unscored experimental items may be administered
Time limit
210 minutes
Passing score
75%; 90 of 120 points
Exam fee
$79
Examination outline
  • I. Property Ownership (Broker 10% of general-practice outline)
    • A. Real and personal property; conveyances
    • B. Land characteristics and legal descriptions
    • 1. Metes and bounds method of legal property description
    • 2. Lot and block (recorded plat) method of legal property description
    • 3. Government survey (rectangular survey) method of legal property description
    • 4. Measuring structures (linear and square footage)
    • 5. Land measurement
    • C. Encumbrances and effects on property ownership
    • 1. Types of liens and their effect on the title and value of real property
    • 2. Easements, rights of way and licenses, including their effect on the title, value and use of real property
    • 3. Encroachments and their effect on the title, value and use of real property
    • 4. Potential encumbrances on title, such as probate, leases, or adverse possession
    • 5. Property rights that may be conveyed separately from use of the land surface, such as mineral and other subsurface rights, air rights, or water rights
    • D. Types of ownership
    • 1. Ownership in severalty/sole ownership
    • 2. Implications of ownership as tenants in common
    • 3. Implications of ownership in joint tenancy
    • 4. Forms of common-interest ownership, such as Timeshares, Condominiums and Co-ops
    • 5. Property ownership held in a trust or by an estate
    • 6. Ownership by business entities
    • 7. Life Estate ownership
  • II. Land use Controls (Broker 5% of general-practice outline)
    • A. Government rights in land
    • 1. Government rights to impose property taxes and special assessments
    • 2. Government rights to acquire land through eminent domain, condemnation and escheat
    • B. Government controls on land use
    • C. Private controls
    • 1. Deed conditions or restrictions on property use
    • 2. Subdivision covenants, conditions and restrictions (CC&Rs) on property use
    • 3. Condominium and owners’ associations regulations or bylaws on property use
  • III. Valuation (Broker 8% of general-practice outline)
    • A. Appraisals
    • 1. Appraisals for valuation of real property
    • 2. Situations which require appraisal by a licensed or certified appraiser and brokerage-related actions that constitute unauthorized appraisal practice
    • 3. General steps in appraisal process
    • B. Estimating Value
    • 1. Economic principles and property characteristics that affect value of real property
    • 2. Sales or market comparison approach to property valuation and appropriate uses
    • 3. Cost approach to property valuation and appropriate uses
    • 4. Income analysis approach to property valuation and appropriate uses
    • C. Comparative Market Analysis (CMA)
    • 1. Competitive/Comparative Market Analysis (CMA), BPO or equivalent
    • 2. Automated Valuation Method (AVM), appraisal valuation and Comparative Market Analysis (CMA)
  • IV. Financing (Broker 9% of general-practice outline)
    • A. Basic Concepts and Terminology
    • 1. Loan financing (for example, points, LTV, PMI, interest, PITI)
    • 2. General underwriting process (e.g., debt ratios, credit scoring and history)
    • 3. Standard mortgage/deed of trust clauses and conditions
    • 4. Essential elements of a promissory note
    • B. Types of Loans
    • 1. Conventional loans
    • 2. Amortized loans, partially amortized (balloon) loans, interest-only loans
    • 3. Adjustable-rate mortgage (ARM) loans
    • 4. Government Loans
    • a. FHA insured loans
    • b. VA guaranteed loans
    • c. USDA/Rural Development loan programs
    • 5. Owner financing (for example, installment or land contract/contract for deed)
    • 6. Reverse-mortgage loans
    • 7. Home equity loans and lines of credit
    • 8. Construction loans
    • 9. Rehab loans
    • 10. Bridge loans
    • C. Financing and Lending
    • 1. Real Estate Settlement Procedures Act (RESPA), including kickbacks
    • 2. Truth-in-Lending Act (Regulation Z), including advertising
    • 3. Requirements and time frames of TRID (TILARESPA Integrated Disclosures)
    • 4. Equal Credit Opportunity Act
    • 5. Lending Process (application through loan closing)
    • 6. Risky loan features, such as prepayment penalties and balloon payments
  • V. Contracts (Broker 19% of general-practice outline)
    • A. General Contract Law
    • 1. General principles of contract law
    • 2. Elements necessary for a contract to be valid
    • 3. Effect of the Statute of Frauds
    • 4. Offer and a contract
    • 5. Enforceability of contracts
    • 6. Void, voidable and unenforceable contracts
    • 7. Bilateral and unilateral contracts
    • 8. Nature and use of option agreements
    • 9. Notice, delivery, acceptance and execution of contracts
    • 10. Appropriate use, risks, and advantages of electronic signatures and paperless transactions
    • 11. Rights and obligations of the parties to a contract
    • 12. Possible remedies for breach or nonperformance of contract
    • 13. Termination, rescission and cancellation of contracts
    • B. Purchase and Lease Contracts
    • 1. Addenda and amendments to contracts
    • 2. Purchase agreements
    • 3. Contract contingencies and methods for satisfying them
    • 4. Leases and rental agreements
    • 5. Lease-purchase agreements
    • 6. Types of leases
    • C. Proper handling of multiple offers and counteroffers
  • VI. Agency (Broker 13% of general-practice outline)
    • A. Agency and non-agency relationships
    • 1. Agency relationships and how they are established
    • 2. Types of listing contracts
    • 3. Buyer brokerage/tenant representation contracts
    • 4. Other brokerage relationships, including transaction brokers and facilitators
    • 5. Powers of attorney and other assignments of authority
    • 6. Conditions for termination of agency or brokerage service agreements
    • B. Agent Duties
    • 1. Fiduciary duties of agents
    • 2. Agent's duties to customers/non-clients, including honesty and good faith
    • C. Agency Disclosures
    • 1. Disclosure of agency/representation
    • 2. Disclosure of possible conflict of interest or selfinterest
  • VII. Property Disclosures (Broker 7% of general-practice outline)
    • A. Property Condition
    • 1. Seller's property condition disclosure requirements
    • 2. Property conditions that may warrant inspections or a survey
    • 3. Red flags that warrant investigation of public or private land use controls
    • B. Environmental and Government Disclosures
    • 1. Environmental issues requiring disclosure
    • 2. Federal, state, or local disclosure requirements regarding the property
    • C. Disclosure of material facts and material defects
  • VIII. Property Management (Broker 5% of general-practice outline)
    • A. Duties and Responsibilities
    • 1. Procurement and qualification of prospective tenants
    • 2. Fair housing and ADA compliance specific to property management
    • 3. How to complete a market analysis to identify factors in setting rents or lease rates
    • 4. Property manager responsibility for maintenance, improvements, reporting and risk management (BROKER ONLY)
    • 5. Handling landlord and tenant funds; trust accounts, reports and disbursements (BROKER ONLY)
    • 6. Provisions of property management contracts (BROKER ONLY)
    • B. Landlord and tenant rights and obligations
  • IX. Transfer of Title (Broker 6% of general-practice outline)
    • A. Types of deeds
    • B. Title Insurance and Searches
    • 1. Title insurance policies and title searches
    • 2. Potential title problems and resolutions
    • 3. Marketable and insurable title
    • C. Closing Process
    • 1. When transfer of ownership becomes effective
    • 2. Process and importance of recordation
    • 3. Settlement procedures (closing) and parties involved
    • 4. Home and new construction warranties
    • D. Special Processes
    • 1. Special issues in transferring foreclosed properties
    • 2. Special issues in short sale transactions
    • 3. Special issues in probate transactions
  • X. Practice of Real Estate (Broker 12% of general-practice outline)
    • A. Antidiscrimination
    • 1. Federal Fair Housing Act general principles and exemptions
    • 2. Protected classes under Federal Fair Housing Act
    • 3. Protections against discrimination based on gender identity and sexual orientation
    • 4. Prohibited conduct under Federal Fair Housing Act (Redlining, Blockbusting, Steering, Disparate Treatment)
    • 5. Fair housing advertising rules
    • 6. Americans with Disabilities Act (ADA) obligations pertaining to accessibility and reasonable accommodations
    • B. Legislation and Regulations
    • 1. Licensees’ status as employees or independent contractors
    • 2. Antitrust laws and types of violations, fines and penalties
    • 3. Do-Not-Call List rule compliance
    • 4. Proper use of Social Media and Internet communication and advertising
    • C. Duties and Responsibilities
    • 1. Protection of confidential personal information (written, verbal or electronic)
    • 2. Duties when handling funds of others in transactions
    • 3. Licensee responsibility for due diligence in real estate transactions
    • D. Supervisory Responsibilities (BROKER ONLY)
    • 1. Broker's supervisory responsibilities (licensees, teams and unlicensed assistants and employees) (BROKER ONLY)
    • 2. Broker relationship with licensees (employees or independent contractors and governing rules) (BROKER ONLY)
  • XI. Real Estate Calculations (Broker 6% of general-practice outline)
    • A. Calculations for Transactions
    • 1. Seller’s net proceeds
    • 2. Buyer funds needed at closing
    • 3. Real property tax and other prorations
    • 4. Real property transfer fees
    • 5. PITI (Principal, Interest, Taxes and Insurance) payments estimate given loan rate and term
    • B. General Concepts
    • 1. Equity
    • 2. Rate of return/Capitalization rate
    • 3. Loan-to-Value ratio
    • 4. Discount points and loan origination fees
  • Duties and Powers of the Department and the State Board of Real Estate (Broker-3 Items)
    • General powers
    • Investigations, conferences, hearings, and exemptions
    • Penalties
  • Licensing Requirements (Broker-4 Items)
    • Activities requiring a license and exemptions
    • Types of licenses
    • Eligibility for licensing
    • License renewal, including continuing education
    • Transfer or change in license
  • Statutory Requirements Governing the Activities of Licenses (Broker-15 Items)
    • Advertising
    • Commissions and Specific Services for Which Fees may be charged
    • Disclosure/conflict of interest
    • Handling of contracts, documents, listing and recommendations
    • Handling of monies and trust accounts
    • Place of business/branch office requirements (Broker Only)
    • Record keeping
    • Inducements
    • Alternative Dispute Resolution vs. Arbitration (Broker only)
    • No disclosure duty attaches to stigmatized property
    • Closing responsibilities
  • Contractual Relationships (Broker – 5 Items)
    • Agency relationships available in MI
    • Transaction coordinator
    • Designated agency
    • Dual agency
    • Agency disclosures
    • Broker/Salesperson relationships
    • Service Provision Agreements (Listings, Buyer Broker)
  • Additional State Topics (Broker-13 Items)
    • Land Division Act - Public Act 591 (Disclosure of Private Road)
    • Michigan fair housing
    • Elliott-Larsen Civil Rights Act
    • Persons with Disabilities Civil Rights Act
    • Landlord Tenant Relationship Act, Truth in Renting Act
    • Usury laws (Broker only)
    • State Transfer Tax
    • Michigan Condominium Act
    • Michigan State Housing Development Authority (MSHDA)
    • Uniform State Anti-trust Act
    • Michigan Right to Farm Act (Seller’s Disclosure Required)
    • Changes in the Land Contract Laws (Dodd Frank Law-federal)
Examination sources

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