Free Indiana Real Estate Practice Test (2026) — LicenseIQ

Question 1

Lenders commonly prefer a borrower's front-end (housing) ratio not to exceed ___ and back-end (total debt) ratio not to exceed ___ of gross monthly income.

Accepted Answer

Conventional guidelines are 28% for housing expense and 36% for total debt. Reversing them is the common trap.

Question 2

A modest home located among larger, more expensive homes tends to increase in value due to the principle of:

Accepted Answer

Progression: a lower-value property benefits from surrounding higher-value properties. Regression is the opposite effect on the most expensive home.

Question 3

Before placing a sign on a property or advertising it for sale, a broker must have

Accepted Answer

876 IAC 8-1-8(f) requires written consent of the owner or the owner's authorized agent.

Question 4

A borrower's monthly payment does not cover the interest due, and the unpaid interest is added to the loan balance. This is:

Accepted Answer

When unpaid interest is added to principal, the balance grows - negative amortization. An interest-only loan pays all interest, so the balance stays flat.

Question 5

The principle that value is the present worth of expected future benefits, which underlies the income approach, is:

Accepted Answer

Anticipation: buyers/investors pay today for anticipated future income or benefits.

Question 6

A real estate licensee who is not an attorney may:

Accepted Answer

Licensees may complete attorney-prepared forms but may not draft contracts, amendments or addenda or give legal advice - that is the unauthorized practice of law.

Question 7

A buyer's agent owes the seller (a customer)

Accepted Answer

IC 25-34.1-10-11(c) limits duties to the seller to honest treatment and not knowingly giving false information. Subsection (d) says there is no duty to investigate the buyer's finances.

Question 8

Combining two adjacent lots into one larger parcel that is worth more than the two lots separately is called:

Accepted Answer

Assemblage is the act of combining parcels; the resulting increase in value is plottage.

Question 9

Who may perform an appraisal of real property for a lender?

Accepted Answer

Only licensed or certified appraisers perform appraisals. Licensees may prepare a CMA, which is not an appraisal.

Question 10

A borrower facing default voluntarily conveys the property to the lender in exchange for release of the debt. This is a:

Accepted Answer

In a deed in lieu, the borrower voluntarily deeds the property to the lender, which avoids the foreclosure process; the lender must agree, and the borrower should get a written release of any remaining debt. In a short sale, the property is sold to a third party for less than owed with lender approval. Credit-reporting effects vary by lender and situation, so licensees should not promise a borrower any particular credit outcome.

Question 11

When must the seller deliver the completed disclosure form to a prospective buyer?

Accepted Answer

IC 32-21-5-10 requires the owner to complete, sign, and deliver the form before accepting an offer.

Question 12

A seller wants the buyer to take over her low-rate mortgage, but the mortgage contains an alienation clause. This clause allows the lender to:

Accepted Answer

An alienation (due-on-sale) clause lets the lender call the loan due upon transfer, preventing assumption without lender approval.

Question 13

After a residential tenancy ends and possession is delivered, an Indiana landlord must provide the itemized deposit notice and any refund within

Accepted Answer

IC 32-31-3-12 and 32-31-3-14 set a 45-day deadline.

Question 14

A property owner who wants to deviate from a zoning requirement (e.g., a setback) would seek a:

Accepted Answer

A variance grants relief from a specific zoning requirement; a setback deviation is an area variance. A building permit only authorizes construction that complies with the rules.

Question 15

A life estate is measured by:

Accepted Answer

A life estate lasts for the duration of a specified person's life, then passes to the remainderman or reverts to the grantor. A fixed term describes an estate for years (a leasehold).

Question 16

Private mortgage insurance (PMI) is typically required on a conventional loan when the down payment is:

Accepted Answer

PMI protects the lender and is generally required when the borrower puts down less than 20% (LTV over 80%).

Question 17

A seller has already accepted an offer, and another buyer submits a higher offer. The listing agent should:

Accepted Answer

Listing agents must present all offers through closing, but should not give legal advice about the seller's obligations under the existing contract.

Question 18

Four valid judgments are pending against one licensee: $25,000, $20,000, $10,000, and $10,000. After applying the per-judgment cap, the fund prorates against the per-licensee cap. Approximately how much will the holder of the $25,000 judgment receive?

Accepted Answer

Cap each judgment at $20,000: eligible amounts are 20,000 + 20,000 + 10,000 + 10,000 = $60,000. That exceeds the $50,000 per-licensee cap, so each is prorated by 50,000/60,000. 20,000 × 50,000/60,000 = $16,667. $19,231 comes from prorating uncapped amounts (25,000 × 50,000/65,000).

Question 19

Since July 1, 2024, Indiana law requires that an agreement to represent a buyer or tenant

Accepted Answer

IC 25-34.1-12-2 (P.L. 47-2024) applies the writing, expiration-date, three-business-day copy, and retention rules to buyer and tenant representation. Nothing is filed with the Commission.

Question 20

A religious organization operating housing for non-commercial purposes may give preference to members of its own religion, but it may NOT:

Accepted Answer

Religious organizations and private clubs have partial exemptions, but cannot discriminate on other protected classes, and the religion itself cannot restrict membership by race, color or national origin.

Question 21

A buyer contracts to buy a home for $300,000, but it appraises at $290,000. The lender offers 75% LTV. What is the maximum loan?

Accepted Answer

LTV is applied to the LESSER of price or appraised value: $290,000 x 0.75 = $217,500. Using the $300,000 price ($225,000) is the common mistake.

Question 22

Which statement is NOT one of the six items that make limited agency consent presumed informed under IC 25-34.1-10-12?

Accepted Answer

The six items cover transactions, adverse interests, nondisclosure, no imputed knowledge, right to refuse, and voluntary consent. Undivided loyalty is impossible when representing both sides.

Question 23

A broker's license has been expired for four years. To reinstate, the broker must

Accepted Answer

IPLA: more than 3 years expired requires 36 hours of CE plus the state portion. The 90-hour course and both exams apply after more than 9 years.

Question 24

A broker wants to buy a home listed with her own company. Under 876 IAC 8-2-5, she may do so only if she

Accepted Answer

876 IAC 8-2-5 bars buying or acquiring an interest in property listed with the broker or associated brokers unless the broker first makes her true position clearly known.

Question 25

An investor buys a single-family rental with a gross assessed value of $200,000 and no deductions. The local rate is $3.10 per $100. What tax does the investor pay after the circuit breaker credit?

Accepted Answer

Tax before credit = 200,000 ÷ 100 × 3.10 = $6,200. A non-homestead residential property is capped at 2%: 0.02 × 200,000 = $4,000. Credit = $2,200. The investor pays $4,000. $2,000 wrongly applies the 1% homestead cap.

Indiana real estate practice test

1. Lenders commonly prefer a borrower's front-end (housing) ratio not to exceed _ and back-end (total debt) ratio not to exceed _ of gross monthly income.

2. A modest home located among larger, more expensive homes tends to increase in value due to the principle of:

3. Before placing a sign on a property or advertising it for sale, a broker must have

4. A borrower's monthly payment does not cover the interest due, and the unpaid interest is added to the loan balance. This is:

5. The principle that value is the present worth of expected future benefits, which underlies the income approach, is:

6. A real estate licensee who is not an attorney may:

7. A buyer's agent owes the seller (a customer)

8. Combining two adjacent lots into one larger parcel that is worth more than the two lots separately is called:

9. Who may perform an appraisal of real property for a lender?

10. A borrower facing default voluntarily conveys the property to the lender in exchange for release of the debt. This is a:

11. When must the seller deliver the completed disclosure form to a prospective buyer?

12. A seller wants the buyer to take over her low-rate mortgage, but the mortgage contains an alienation clause. This clause allows the lender to:

13. After a residential tenancy ends and possession is delivered, an Indiana landlord must provide the itemized deposit notice and any refund within

14. A property owner who wants to deviate from a zoning requirement (e.g., a setback) would seek a:

15. A life estate is measured by:

16. Private mortgage insurance (PMI) is typically required on a conventional loan when the down payment is:

17. A seller has already accepted an offer, and another buyer submits a higher offer. The listing agent should:

18. Four valid judgments are pending against one licensee: $25,000, $20,000, $10,000, and $10,000. After applying the per-judgment cap, the fund prorates against the per-licensee cap. Approximately how much will the holder of the $25,000 judgment receive?

19. Since July 1, 2024, Indiana law requires that an agreement to represent a buyer or tenant

20. A religious organization operating housing for non-commercial purposes may give preference to members of its own religion, but it may NOT:

21. A buyer contracts to buy a home for $300,000, but it appraises at $290,000. The lender offers 75% LTV. What is the maximum loan?

22. Which statement is NOT one of the six items that make limited agency consent presumed informed under IC 25-34.1-10-12?

23. A broker's license has been expired for four years. To reinstate, the broker must

24. A broker wants to buy a home listed with her own company. Under 876 IAC 8-2-5, she may do so only if she

25. An investor buys a single-family rental with a gross assessed value of $200,000 and no deductions. The local rate is $3.10 per $100. What tax does the investor pay after the circuit breaker credit?

Sources

1. Lenders commonly prefer a borrower's front-end (housing) ratio not to exceed ___ and back-end (total debt) ratio not to exceed ___ of gross monthly income.