Quick Quiz 7

Question 1

Smith built a $250,000 house in a neighborhood in which houses are valued between $75,000 and $85,000. Any resulting loss of value would be an example of
A) functional obsolescence.
B) physical obsolescence.
C) economic and functional obsolescence.
D) physical depreciation.

Answer 1

C) economic and functional obsolescence.
Economic obsolescence is a loss in value due to factors away from or outside of the subject property. Additionally, the appraiser must look at the fact the property in question over functions for the area. It is rare to have only one factor affect the property value. This is a good example of two types of obsolescence impacting the property.

Question 2

Two pest control inspection companies submitted pest control reports on the same property during escrow. The escrow officer should
A) request one of the pest control companies to withdraw its report.
B) use the report that requires the least work to be done.
C) return the reports to the broker and have him get written instructions from the seller and buyer as to which report to use.
D) return the reports to the broker and request written instructions from the seller as to which report to use.

Answer 2

C) return the reports to the broker and have him get written instructions from the seller and buyer as to which report to use.
The escrow officer should return both reports to the broker because a licensee must disclose to any and all purchasers and sellers any knowledge he may have of any infestation on the premises.

Question 3

Functional utility in a dwelling is dependent upon
A) zoning in the area.
B) the desires of its occupants.
C) its floor plan and equipment.
D) the condition of heating system.

Answer 3

B) the desires of its occupants.
For a dwelling to have utility, it must have the power to give satisfaction or arouse desire for possession. The functional utility of a property is the sum of its (1) attractiveness (e.g., architecture) and (2) usefulness or utility. Therefore, the functional utility in a dwelling is dependent upon the desires of its occupants.

Question 4

A listing agent gave part of his commission to the buyer. He
A) is guilty of committing a civilly wrong act.
B) must disclose this to the seller.
C) may be disciplined by the real estate commissioner.
D) is guilty of criminal action.

Answer 4

B) must disclose this to the seller.

Question 5

In a sales transaction, an agent is paid by both parties but he did not reveal his dual agency. What could happen in these circumstances?
A) The agent would be subject to discipline by the real estate commissioner.
B) The sale could be rescinded.
C) All of these
D) The agent may not be able to enforce payment of his commission.

Answer 5

C) All of these
Acting for more than one party in a transaction without the knowledge and consent of all parties thereto is a violation of California Real Estate Law and the Civil Code and could therefore result in all the penalties recited.

Question 6

What type of organization is formed in order to create a real estate investment trust (REIT)?
A) General partnership
B) Syndication
C) Corporation
D) Limited partnership

Answer 6

B) Syndication
The REIT is a form of syndication. It can be organized as a corporation, but that is not essential, as it can also be an unincorporated trust or association of investors organized to take advantage of the federal Real Estate Investment Trust Act in the Internal Revenue Code.

Question 7

In establishing an estimate of value by appraisal, it is very important to differentiate between the purpose of the appraisal and the
A) principles of appraisal.
B) amenities to the owner.
C) appraisal process.
D) function for which the appraisal is being made.

Answer 7

D) function for which the appraisal is being made.
The purpose of the appraisal determines the type of value being sought. It is not the same as function or use. The function of the appraisal is the reason for which the appraisal is made or is intended to be used. It relates to the character of the decision to be based on the appraisal, for example, price at which to buy or sell, amount of mortgage to be made, et cetera. The appraiser under USPAP must state the intended use of users.

Question 8

Which form of ownership consists of an undivided interest with the right of survivorship?
A) Life estate
B) Severalty
C) Joint tenancy
D) Tenancy in common

Answer 8

C) Joint tenancy
Joint tenancy’s most distinguishing characteristic is its right of survivorship. Upon the death of a co-owner, interest of the deceased is dissolved and goes to the co-owner(s) without probate. Joint tenancy requires the four unities of time, title, interest, and possession.

Question 9

Who is entitled to examine the records of the county recorder, without being an employee of the county recorder’s office?
A) A bank employee
B) Any of these
C) Any interested citizen
D) Employees of the Office of the County Recorder

Answer 9

B) Any of these

The records of the Office of the County Recorder are public records, with access available to all persons.

Question 10

A fee appraiser
A) assesses land for the government.
B) is a self-employed appraiser, who, for a fee, appraises property.
C) works full time for a lender.
D) works full time for a broker.

Answer 10

B) is a self-employed appraiser, who, for a fee, appraises property.
A fee appraiser is one qualified by education, training, and experience who is hired to estimate the value of real and personal property based on experience, judgment, facts, and use of formal appraisal processes and is paid a fee for such services. A fee appraiser must now be state licensed or state certified.

Question 11

An offer is terminated by
A) rejection by the offeror.
B) revocation by the offeror.
C) a change in the offer made by the offeror.
D) revocation by the offeree.

Answer 11

B) revocation by the offeror.
An understanding of the terms revoke and reject is essential in these answers. An offeror revokes an offer, but an offeree can accept or reject an offer.

Question 12

A landlord and tenant mutually agree to terminate a lease. This is often referred to as
A) release.
B) surrender.
C) abandonment.
D) rescission.

Answer 12

B) surrender.
Surrender is a mutual agreement between the landlord and tenant to terminate a lease. Rescission is a mutual agreement to release each other from any contract before performance, under which the parties must restore each other to their former positions.

Question 13

A real estate salesperson who advertises a property must provide in the advertisement
A) at least the salesperson’s name.
B) the broker’s name.
C) both the broker’s name and address and the salsperson’s name.
D) the broker’s name and address.

Answer 13

A) at least the salesperson’s name.
Advertising of any service for which a license issued under provision of the Real Estate Law is required shall at least set forth the name of a salesperson as an agent.

Question 14

Mr. Martin contacted Broker Katz to list a property for sale for $200,000. Martin indicated to the broker that he needed a quick sale of the property. The broker contacted a prospective buyer and told him that Martin would sell the property for $180,000. The buyer made an offer in the amount of $180,000, which Mr. Martin did accept when the broker presented it to him. Under these conditions, Katz
A) did not violate the fiduciary relationship as Katz was employed by Martin and acted under such authority.
B) violated the fiduciary relationship but did no harm as the offer was accepted.
C) did not violate the fiduciary relationship as the offer was accepted.
D) violated the fiduciary relationship as he acted in excess of authority given him.

Answer 14

D) violated the fiduciary relationship as he acted in excess of authority given him.
When Broker Katz told the prospective buyer that the owner would sell for less than the listing price, when the broker had not been specifically instructed to disclose that confidential information, the broker violated his fiduciary obligation to his principal.

Question 15

A proper acknowledgment may be taken by a notary public who is
A) the grantee of a deed.
B) the mortgagee of a mortgage.
C) an employee of a corporation for which the instrument needs to be acknowledged if he has no interest in the property.
D) the grantor of a deed.

Answer 15

C) an employee of a corporation for which the instrument needs to be acknowledged if he has no interest in the property.
An employee or officer of a corporation may take an acknowledgment if such individual is not personally interested and does not execute the instrument as an officer of the corporation. Duties as a notary public or as an officer of the corporation are distinct.

Question 16

A low loan-to-value ratio indicates a
A) large loan.
B) government-guaranteed loan.
C) low down payment.
D) high equity.

Answer 16

D) high equity.
A low loan-to-value ratio indicates a high equity. A loan to value ratio of $60,000 to $100,000 is lower than one of $80,000 to $100,000. In the first case, the owner has an equity of $40,000; in the second case, the equity is only $20,000.

Question 17

Mr. Able borrowed money to build an apartment building and wanted to place advertising in the newspaper that would solicit the following: (1) Married Couples Only (2) No Minorities. He was correct in his advertising in
A) neither 1 nor 2.
B) 1 only.
C) both 1 and 2.
D) 2 only.

Answer 17

A) neither 1 nor 2.
Government Code Section 12955: “It shall be unlawful…for any person to make, print, or publish, any notice, statement, or advertisement, with respect to the sale or rental of any housing accommodation that indicates any preference, limitation, or discrimination based on race, color, religion, sex, marital status, national origin, or ancestry or any intention to make any such preference, limitation, or discrimination.” Title VIII, Section 804 (Federal Fair Housing Act) is almost the identical wording.

Question 18

When Atkins is selling his trade fixtures, which instrument must he execute?
A) Chattel real
B) Warranty deed
C) None of these
D) Bill of sale

Answer 18

D) Bill of sale
Since trade fixtures are personal property, a bill of sale would be the proper instrument to use to convey the title. A chattel real describes a lease. A warranty deed conveys title to real property.

Question 19

Certain contracts to be held enforceable in court under the statute of frauds must be in writing. Which of these would be required to be in writing?
A) Employment of a real estate broker to find a business to purchase
B) Any agreement not to be performed within one year
C) Employment of a real estate broker to sell stock-in-trade and goodwill of a business
D) Employment of a real estate broker to negotiate one year leases on business property

Answer 19

B) Any agreement not to be performed within one year
The statute of frauds requires that certain contracts be in writing to be enforceable in court; contracts that cannot be performed within one year as well as most contracts dealing with real property are included in this statute. Since the other three choices concern themselves with business opportunities, which are personal property, these transactions fall outside the writing requirements of the statute.

Question 20

Involuntary alienation of an estate means
A) aliens are forbidden to own estates in fee simple in California.
B) ownership of estates may be transferred by operation of law.
C) no one can be compelled to transfer title without giving consent.
D) the estate cannot be transferred without the consent of the owner.

Answer 20

B) ownership of estates may be transferred by operation of law.
Alienate means to transfer the title to real property from one person to another. To involuntarily alienate could occur by the operation of law as in the case of foreclosure due to nonpayment of taxes or other lawful debts.

Question 21

A seller sued a real estate broker for misrepresentation of a material fact that the broker had made to him during the sale transaction. In defending the suit, the broker was able to prove that the listing contract with the seller had been an oral agreement. Under these circumstances
A) this is a valid defense based on the statute of frauds.
B) the broker is only liable for misrepresentation to buyers.
C) this defense is not a bar because it was not the issue.
D) the statute of frauds is not a bar in any real estate transaction litigation.

Answer 21

C) this defense is not a bar because it was not the issue.
The broker cannot use the statute of frauds as a defense in this situation. The statute requires the listing contract be in writing to be enforceable in court but has nothing to do with misrepresentation.

Question 22

A broker and a buyer went to Western Hills Title Company. The buyer made out a $1,000 deposit check to Western Hills Title Company. What record, if any, does the broker have to keep of this deposit?
A) Keep separate records for each beneficiary
B) Not make any record of this in his trust account
C) Make an entry in his journal of the entry and exit
D) Make a record in his trust account but not his general ledger

Answer 22

B) Not make any record of this in his trust account
Since the buyer went with the broker to the escrow company and the buyer made out the check there and handed it directly to the escrow, the check did not pass through the broker’s hands and is not a trust fund. The broker is not required to make any record of this.

Question 23

Four people own a property as joint tenants. If two joint tenants die, what would be a TRUE statement?
A) One title will be held by the remaining joint tenants
B) The devisees and heirs could rent the property as tenants in common with the other two
C) Each survivor would own a separate and divided interest
D) A separate legal title to a tenancy in common would be held

Answer 23

A) One title will be held by the remaining joint tenants
A characteristic of a joint tenancy is that it is a “single” estate, that is, the original joint tenants, or the surviving joint tenants, own the estate as though they were one person.

Question 24

A prospective buyer pays $2,000 for a four-month option to purchase a $300,000 property. All of these statements are true EXCEPT
A) the optionee has acquired a legal interest in the property.
B) a unilateral contract has been established.
C) the optionor’s temporary surrender of the right to sell is valuable consideration.
D) the agreement imposes no obligation on the optionee to purchase the property.

Answer 24

A) the optionee has acquired a legal interest in the property.
An optionee acquires a contractual right but acquires no legal interest in the property until after the optionee exercises the option.

Question 25

The basic legal tool a city will use for a layout plan is
A) zoning.
B) a variance.
C) exceptions to general land usage.
D) a conditional use permit.

Answer 25

The governing authority of a city has the power to adopt ordinances for the preservation and protection of public health, safety, morals, or general welfare. The basic legal tool a city will use for a layout plan is zoning, an exercise of the police power of government.

Question 26

Property is
A) personal if not real.
B) personal if a fixture.
C) all of these.
D) real if tangible.

Answer 26

A) personal if not real.

All property is either real property or personal property.

Question 27

The date of priority of a mechanic's lien on any construction project is
A) commencement of construction.
B) acceptance by owner.
C) completion of construction.
D) occupation by owner.

Answer 27

A) commencement of construction.
The effective date of any mechanic’s lien relates back to the date construction began on the project. This could include the delivery of construction materials to the site.

Question 28

A real estate licensee went into a neighborhood and attempted to solicit a listing by stating to the property owner that "non-whites" would be moving into the neighborhood and that property values would thereby go down. Such conduct would be considered all of these things EXCEPT
A) blockbusting.
B) legal but unethical.
C) illegal conduct.
D) panic selling.

Answer 28

B) legal but unethical.

Blockbusting and panic selling are terms to describe the illegal conduct of the licensee’s activities in this question.

Question 29

In the matter of a broker’s commission to be paid by a seller, which statement is TRUE?
A) A listing agreement signed only by the seller is unenforceable.
B) The seller and buyer may rescind sale, thus relieving the seller of the obligation to pay the broker’s commission.
C) Action for the broker’s commission must be brought within four years of earning the commission.
D) The broker’s commission earned but not paid creates a lien on the seller’s property.

Answer 29

C) Action for the broker’s commission must be brought within four years of earning the commission.
According to the statute of limitations, action for performance of a written contract for a commission must be brought within four years of earning the commission.

Question 30

When a structural pest control report is a condition of a transfer by the buyer, the report must be delivered to the
A) lender.
B) escrow company.
C) buyer.
D) broker.

Answer 30

C) buyer.
If it is a condition placed in the contract by the buyer, then he or she must receive a copy of the report. Typically the lender will make it a condition of financing, but this question specifically addresses the issue of the buyer, not the lender.

Question 31

In order for a contract for the transfer of real property to be binding on the buyer and seller, it must
A) satisfy all of these.
B) have an offer, acceptance, and communication to the offeror.
C) be recorded.
D) be acknowledged.

Answer 31

B) have an offer, acceptance, and communication to the offeror.
A contract, to be valid, must have offer, acceptance, and communication to the offeror. Either party may withdraw from the contract any time prior to communication. Neither recording nor acknowledgment is required for a contract or for a deed.

Question 32

What would never appear as a debit to the buyer on a closing statement?
A) Insurance prorations
B) FHA discount points on an FHA loan
C) Tax prorations
D) Interest on an assumed loan

Answer 32

D) Interest on an assumed loan
Interest payments are paid in arrears, that is, the payments are made to the lender only for the period during which the borrower had full use of the funds. Therefore, when a loan is taken over by the buyer, let’s say in the middle of the interest-paying period, one half would be owed by the seller and the remaining one half by the buyer. Since the buyer will be obligated to pay the lender at the end of the scheduled payment period, and for the whole amount even though he owes only for one half of it, the debit made to the seller in escrow will therefore be credited to the buyer. Discount points on a new FHA loan would likely be a debit on the buyer’s closing statement. Prepaid insurance premiums could be prorated and would be a debit to the buyer. Tax prorations could go either way.