Alabama Still Runs Caveat Emptor. Most Preps Miss It.

Alabama is one of the only states still operating under Caveat Emptor, and every candidate trained on national materials walks in expecting rules that don't apply here.

The Alabama Real Estate Commission governs licensing in this state. PSI administers the exam: 60 state specific questions and 80 national questions, with a 70% minimum to pass. Alabama's Caveat Emptor rule, its RECAD disclosure requirements, and its two-status license structure are the three areas where candidates most consistently lose points. The gap between what national prep teaches and what Alabama actually requires is widest here.

Caveat Emptor Rule

Here's the thing most people miss: Alabama's Caveat Emptor rule doesn't work the way most candidates expect it to, and the three narrow exceptions are exactly what the PSI exam tests.

Alabama is one of only a handful of states that still follows "buyer beware" for used homes, meaning sellers have almost no duty to disclose defects, students bomb this because they confuse the three narrow exceptions (fiduciary duty, health/safety threats, direct buyer inquiry) with the full disclosure rules taught in national prep.

The AREC exam will test whether you know all three Caveat Emptor exceptions by name: fiduciary duty, health and safety threats, and direct buyer inquiry. Knowing the general concept isn't enough; the exam asks which specific exception applies to a given scenario.

Why did the Alabama broker bring Caveat Emptor to the exam? Because the seller told him to. (I'll show myself out.)

Virginia and Wyoming both follow Caveat Emptor but define the exceptions differently from Alabama, so knowing how each state draws the line between required disclosure and buyer responsibility is useful comparative context for this exam topic.

RECAD Disclosures

RECAD is where national prep costs you the most points on the Alabama exam, because it requires two separate documents with specific timing rules that no other state replicates.

The Real Estate Consumers Agency and Disclosure Act requires both a Brokerage Services Disclosure form AND an Agency Disclosure Office Policy, and the exam tests exact timing and signature requirements that trip up students who lump all Alabama disclosure forms together.

The PSI exam will ask you to distinguish between the two RECAD forms, identify when each must be delivered, and recognize which signatures are required at each stage. Treating them as interchangeable is the error that fails candidates who otherwise know the material.

License Status

Alabama's two-status license system is simpler than most states, which is exactly why candidates trained on multi-status frameworks get the exam questions wrong.

Alabama only recognizes two license statuses, active or inactive, with no referral or retired option, and an inactive license automatically expires after 24 consecutive months, catching students who assume more flexibility.

The exam will test the 24-month expiration threshold and what a licensee must do to reactivate before that window closes. Know the specific timeline and the reactivation steps. The AREC doesn't offer extensions or grace periods that candidates from other states might expect. I know, I know: another rule with a two-year clock. But this one actually matters on the exam.