Practice/Disclosures Flashcards
1
Q
What should sellers do when they are uncertain whether the property is located within one of the designated natural hazard areas?
A) - Claim (in writing) that you have no actual knowledge that the property is located in a hazardous area.
B) - Hire a third-party professional who specializes in natural hazard disclosures to find out if in fact the property is located within one of the specified hazard zones.
C) - Make a notation in the Real Estate Transfer Disclosure Statement that you have no actual knowledge that the property is located in a hazardous area.
D) - None of the above
A
B) - Hire a third-party professional who specializes in natural hazard disclosures to find out if in fact the property is located within one of the specified hazard zones.
Answer: B—If the seller (or seller’s agent) is not sure, they should hire a third-party professional who specializes in natural hazard disclosures, pay for the cost of obtaining this information, and find out if the property is located within one of the specified hazard zones.
2
Q
In the sale of a business, bulk transfer laws pertain to:
A) - fixtures.
B) - goodwill.
C) - stock-in-trade.
D) - All of the above
A
C) - stock-in-trade.
Answer: C—A “bulk sales transfer” is any transfer in bulk (not a transfer in the ordinary course of the seller’s business) of a major part of the materials, inventory, or supplies of an enterprise (stock-in-trade).
3
Q
An unlicensed secretary in a real estate office can:
A) - quote prices over the phone.
B) - type listings and sales contracts for salespeople.
C) - prepare and mail postcards for salespeople.
D) - All of the above
A
B) - type listings and sales contracts for salespeople.
Answer: B—An unlicensed secretary can only take messages and type for agents. The other choices would be considered activities that would require a real estate license.
4
Q
Realtor Ken hired an unlicensed person named Jose to hand out his brochures, fliers, and door hangers in his farm neighborhood. Ken also instructed Jose to go to his health club and hand out printed information. Property owner Mary, who has already listed her home with another broker, received a phone call from Jose talking about a possible meeting with Ken. Jose was using dialogue which was a scripted pitch written by Ken. Mary happened to record the conversation. Which of the following statements is correct?
A) - This is perfectly acceptable for the unlicensed person and the broker.
B) - The unlicensed person is performing acts for which a real estate license is required.
C) - An unlicensed person may pass out brochures, but under no circumstances talk to a prospective client.
D) - Realtors agree to work under the Realtor’s Code of Ethics. It is unethical for a Realtor to solicit business from an owner who has a listing with another broker.
A
D) - Realtors agree to work under the Realtor’s Code of Ethics. It is unethical for a Realtor to solicit business from an owner who has a listing with another broker.
Answer: D—The Realtor’s Code of Ethics considers this to be unethical behavior. One Realtor may not solicit owners who have listed their property with another licensed real estate broker.
5
Q
Accounts payable of a business would be a(n):
A) - asset.
B) - liability.
C) - prorated item in escrow.
D) - None of the above
A
B) - liability.
Answer: B—Accounts payable is considered a liability.
6
Q
Regulation of proper sewage and sanitation construction practices are enforced by the:
A) - Department of Housing and Urban Development (HUD).
B) - Department of Sanitation and Disposal.
C) - local health office.
D) - Department of Real Estate.
A
C) - local health office.
Answer: C—Drainage, plumbing, water, and sewage are under the control of the state Department of Public Health and are enforced by the local health officer.
7
Q
Mr. Wiseguy salesperson introduces himself to the seller as being employed by a large, successful real estate company because he knew that the seller would only list with a licensee who is employed by a “large company.” If Mr. Wiseguy does not work for a large company, but he said it just to be able to sell the property, his conduct would be considered:
A) - lawful.
B) - unethical.
C) - professional.
D) - fiduciary.
A
B) - unethical.
Answer: B—Since many buyers and sellers associate “bigness with safety,” it is considered unethical to represent one’s self as being protected by a large corporation franchise when such is not true.
8
Q
When a deed contains discriminatory language or clauses:
A) - the deed must be rewritten by the owner before the property may be sold.
B) - the title company must re-write the deed.
C) - the discriminatory words or clauses are unenforceable.
D) - the clauses may be enforced, since they would be considered “grandfathered” into law.
A
C) - the discriminatory words or clauses are unenforceable.
Answer: C—Clauses which were written into deeds or CC&R’s which allow discrimination are unenforceable. There is no requirement that the deeds or CC&R’s must be rewritten.
9
Q
Agent Jones has an offer on a listing contingent on the buyer’s uncle approving the property, since he will be financing the loan. Agent Jones hasn’t discussed this with the buyers, but assures the seller that there will be no problems regarding the uncle. After the seller accepts the offer, the buyers tell the agent that the uncle is out of town and they don’t know when he will return. With regard to the seller, the agent acted:
A) - illegally.
B) - unethically.
C) - practically.
D) - properly.
A
B) - unethically.
Answer: B—The listing agent has acted unethically in this case since he failed to explain the potential risks concerning the contingency. An agent must explain the meaning and probable significance of any contingency in an offer that he/she knows or reasonably believes may affect the closing date of the transaction, or the timing of vacating the property by the seller, or its occupancy by the seller.
10
Q
Commingling is one of the greatest single causes for loss of license. Which of the following would NOT be considered commingling?
A) - Holding an uncashed deposit check after acceptance of an offer when directed to do so by the seller.
B) - Cashing a deposit check (made out to the buyer) and placing the money in the broker’s safe, properly identified as being the deposit received from the buyer.
C) - Depositing either cash or a check received as a deposit in the broker’s personal account to be held until called for by the escrow officer.
D) - Depositing money received by his/her client in the broker’s personal account to pay miscellaneous expenses.
A
A) - Holding an uncashed deposit check after acceptance of an offer when directed to do so by the seller.
Answer: A—An exception to this rule is when a check is received from an offeror in connection with an offer to purchase or lease. In this case, the deposit check may be held uncashed by the broker until acceptance of the offer if the following conditions are met:
The check by its terms expressly provides that it is not to be negotiated by the broker or if the offeror has given written instructions to the broker that the check shall not be deposited or cashed until acceptance of the offer, and
The offeree is informed, before or at the time the offer is presented for acceptance that the check is being so held.
11
Q
What is the maximum amount that could be recovered from the Recovery Fund for one salesperson?
A) - $20,000
B) - $50,000
C) - $100,000
D) - $250,000
A
D) - $250,000
Answer: D—This question is asking for the maximum amount that may be recovered for any one salesperson. 50,000 for a single transaction, but $250,000 maximum for any one licensee.
12
Q
California real estate law originated from:
A) - DRE regulations.
B) - Spanish law.
C) - English common law.
D) - European law.
A
C) - English common law.
Answer: C—In general, California’s laws relating to real estate originated from English common law.
13
Q
A profit-and-loss statement would include all of the following EXCEPT:
A) - operating expenses.
B) - gross profit.
C) - interest charges.
D) - value of inventory.
A
D) - value of inventory.
Answer: D—The value of inventory would appear on the balance sheet.
14
Q
After passing the real estate license examination, a person must apply for the license within:
A) - one year of the examination.
B) - one year of notification of passing.
C) - six months of the examination.
D) - six months of notification of passing.
A
A) - one year of the examination.
Answer: A—A person must apply for their license within one year of passing the state exam.
15
Q
If a business is sold without complying with the Bulk Sales Act:
A) - the assets still belong to the vendor as far as creditors are concerned.
B) - the transfer is unenforceable by all parties.
C) - the sale is completely void.
D) - the sale is considered illegal.
A
A) - the assets still belong to the vendor as far as creditors are concerned.
Answer: A—If the Bulk Sales Law is not complied with, creditors still have a claim on the assets of the vendor (seller) purchased by the vendee (buyer). This is why it is very important for the vendee (buyer) to see that the Bulk Sales Law is complied with.
16
Q
Dividing office overhead by the number of salespersons gives:
A) - broker dollar.
B) - desk costs.
C) - company dollar.
D) - overhead.
A
B) - desk costs.
Answer: B—The term “desk costs” reflect the fact that salespeople do, in fact, make use of support staff, have telephone calls, need desk space, and take up some of the time of colleagues and managers. Overhead is divided by the number of salespersons NOT desks.
17
Q
When converting an existing residential property to a condominium, existing tenants must be given:
A) - 180 days written notice.
B) - 30 days written notice.
C) - 12 months notice.
D) - None of the above
A
A) - 180 days written notice.
Answer: A—Before approving the conversion of an existing residential property to a condominium, community apartment, or stock cooperative, the local government agency cannot give its approval unless each of the existing tenants is given written notice of the developer’s intention to convert at least 180 days prior to the termination of the tenancy.
18
Q
In order for a licensed salesperson of a broker to legally manage the office, initial contracts, and constitute proper supervision, which of the following is required:
A) - 2 years full-time experience during the (immediate) preceding 5 years.
B) - 2 years full-time experience during the (immediate) preceding 5 years plus 16 college units.
C) - 2 years full-time experience during the (immediate) preceding 10 years.
D) - Experience is not required as long as they are licensed.
A
A) - 2 years full-time experience during the (immediate) preceding 5 years.
Answer: A—The salesperson must have 2 years full-time experience during the (immediate) preceding 5 years.
19
Q
How long does a buyer have to sue the seller of a single family dwelling for something that was not disclosed but should have been disclosed after the buyer moves into the home?
A) - 1 year
B) - 5 years
C) - 2 years
D) - 7 years
A
C) - 2 years
Answer: C—A lawsuit alleging a breach of a licensee’s duty under this law must be filed within two years from the date of occupancy, the date of recordation of the deed to the buyer, or the date of close of escrow, whichever occurs first.
20
Q
When leasing a commercial property that is merely a “shell” space, the landlord often agrees to spend a specific amount for a qualified tenant. This amount is properly designated as:
A) - a rent abatement.
B) - a tenant improvement allowance.
C) - a security deposit.
D) - earnest money.
A
B) - a tenant improvement allowance.
Answer: B—When the landlord or property manager allows a certain sum of money to the tenant to be used for improvements within the rental space, it is called a “tenant improvement allowance.” This is usually only found with commercial leases.
21
Q
An unlicensed assistant puts together information and assists in writing an advertisement for a broker. For this to be legal, the broker must:
A) - write it himself.
B) - approve it.
C) - terminate the assistant immediately.
D) - proofread it.
A
B) - approve it.
Answer: B—An unlicensed assistant can gather information and help the broker create ad copy, but the broker must approve it first.
22
Q
Broker A meets the Brown family and the Browns make an offer on a house on Elm Street which is owned by Jones. The offer is contingent on the sale of the Brown’s house on Main Street which is several counties away. Seller Jones accepted the offer. Broker A refers the Browns to Broker R for the sale of their Main Street home. A written compensation referral form is executed. According to Article 7 of the Code of Ethics, Broker A must disclose:
A) - The compensation on Elm St. to both Brown and Jones
B) - The compensation on Main St. to Brown only
C) - Both the compensation on Elm St. and Main St. to Brown
D) - Both the compensation on Elm Street and Main Street to Brown and Jones
A
D) - Both the compensation on Elm Street and Main Street to Brown and Jones
Answer: D—According to Article 7 of the Code of Ethics, of the National Association of Realtors®, all compensation must be revealed to all principals in the transaction.
23
Q
What type of background check does the Real Estate Commissioner and Appraisal Commmissioner use?
A) - late rental payments
B) - personal habits
C) - credit history
D) - late child support
A
D) - late child support
Answer: D—In accordance with Section 17520 of the Family Code, DRE is precluded from issuing or renewing a full-term license if the applicant is on a list of persons (obligors) who have not complied with a court order to provide child support payments. The Department of Child Support Services compiles the list from information provided by the District Attorney of each county in California.
DRE will issue a 150-day license to an otherwise qualified applicant who is on the list of child support obligors. DRE will advise the applicant that the license applied for cannot be issued unless a release is furnished to DRE from the District Attorney’s office during the 150 days.
DRE also receives a supplemental list of obligors who are over four months delinquent in child support payments. DRE compares this list to the total real estate licensee population. If there is a match of an existing licensee and the license is not due for renewal for at least six months, the licensee will be advised that the license will be suspended if the delinquency is not cleared within 150 days. The suspension will remain in effect until the delinquency is cleared.
24
Q
Seller Smith hires broker Jones to list his home. Neither have actual knowledge that the property is located in a hazardous earthquake, flood, or fire area, and for that reason they decide they will not make the Natural Hazard disclosure. After close of escrow the buyer checks with the county and finds out that a map exists that shows the property located within a particular hazard zone. Which of the following statements is correct?
A) - Since the seller and seller’s agent had no actual knowledge that the property was located in a hazardous area, they cannot be held responsible.
B) - Since the buyer had the opportunity to hire a third-party professional to investigate this matter, the seller and seller’s agent would be without fault.
C) - Since there had never been a fire, flood, or earthquake in the area, the buyer has no recourse.
D) - Since the map was available from the county where the property is located, the seller and his agent will be considered to have knowledge of the fact that the property is in a hazardous area.
A
D) - Since the map was available from the county where the property is located, the seller and his agent will be considered to have knowledge of the fact that the property is in a hazardous area.
Answer: D—The Natural Hazard Disclosure must be made if the property is located on a list of parcels of properties located within a special hazard’s area, or a map exists that specifies the property located within a particular hazard zone. If this information has been made available to the local jurisdictions where the property is located and the property is on either the list or map, the sellers and their agents will be considered to have knowledge of the fact that the property is in one of these high-sensitivity areas. This applies whether or not they have actual knowledge of that fact.
25
The Commissioner paid from the Recovery Fund for settlement of a claim based upon a judgment against a licensed broker. If the broker is bankrupt, he/she would be required to:
A) - pay the fund back in full plus interest.
B) - make monthly payments.
C) - pay back only a certain percentage.
D) - pay back nothing.
A) - pay the fund back in full plus interest.
Answer: A—No broker or salesperson shall be granted reinstatement until he/she has repaid in full, plus interest at the prevailing legal rate, the amount paid from the Recovery Fund.
26
Neither the seller nor any listing or selling agent shall be liable for any error, inaccuracy, or omission of any information delivered to the buyer if:
A) - the seller or agent(s) did not know of the mistake.
B) - that item of information containing a mistake was provided by a public agency or third-person professional.
C) - the item of information containing the mistake was provided by a third-person expert but the mistake was known by the seller and seller's agent.
D) - Both (a) and (b) are correct.
D) - Both (a) and (b) are correct.
Answer: D—Neither the transferor nor any listing or selling agent shall be liable for any error, inaccuracy, or omission of any information delivered to the transferee as long as the transferor did not know of the mistake. The seller would also be relieved of responsibility for mistakes if the information was provided by a public agency or third-person professional as to that item of information. The receipt of a report from a third-person expert would not relieve the seller or the seller's agent from the common-law duty to disclose defects in the property which were known or reasonably should have been known.
27
When is the subdivider required to give the public report to prospective purchasers?
A) - prior to the sale of the last lot in a subdivision.
B) - prior to the sale of the first lot in a subdivision.
C) - prior to advertising the lots for sale.
D) - prior to approval of the tentative map.
B) - prior to the sale of the first lot in a subdivision.
Answer: B—No sales can be closed or transactions completed until the final public report is received by the prospective purchasers. All persons who make an offer to purchase based on a final public report must indicate in writing that they have received and read the applicable report.
28
When an agent is accused of "puffing", the agent might be guilty of which of the following:
A) - Trying to convince a potential seller of his wide popularity among local people.
B) - Convincing the appraiser to assign a higher value to the property than is justified by the comparable recent sales in the area.
C) - Exaggerating the features of the property or neighborhood when showing the property to prospective buyers.
D) - Convincing a seller to offer a higher commission than is customary for that type of property.
C) - Exaggerating the features of the property or neighborhood when showing the property to prospective buyers.
Answer: C—Puffing is the exaggerating of features of neighborhood or property.
29
You are a California real estate broker. A prospect is referred to you by an out-of-state broker and a sale is consummated by you. You want to split your commission with the cooperating broker. Under the California Real Estate Law:
A) - you may pay a commission to a broker of another state.
B) - you cannot divide a commission with a broker of another state.
C) - you can pay a commission to a broker of another state only if he/she is also licensed in California.
D) - None of the above
A) - you may pay a commission to a broker of another state.
Answer: A—A California licensed real estate broker may pay a commission to a broker of another state.
30
A material fact that must be disclosed to a purchaser would include all of the following EXCEPT:
A) - a leaky roof.
B) - a septic tank.
C) - the racial composition of the neighborhood.
D) - plans for a nearby freeway.
C) - the racial composition of the neighborhood.
Answer: C—The racial composition of a neighborhood is not considered a material fact. Discussing this with the purchaser may be considered a violation of fair housing laws.
31
The seller is required to deliver the "Homeowner's Guide to Earthquake Safety" to the buyer of any one-to-four unit property built prior to:
A) - 1953
B) - 1960
C) - 1968
D) - 1975
B) - 1960
Answer: B—In addition to the earthquake disclosure requirements contained in Civil Code Section 1102 since 1991, sellers of one-to-four unit homes built before 1960 must deliver to the buyer, "as soon as practicable before the transfer", a copy of The Homeowner's Guide to Earthquake Safety and disclose certain earthquake deficiencies. The booklet contains a reporting form that may be used for this disclosure. The seller's real estate agent is to provide the seller of such a home with a copy of the booklet for delivery to the buyer.
32
The basic regulation of the housing and construction industries is accomplished by:
A) - State Housing Law.
B) - Local Building Codes.
C) - State Contractor's License Law.
D) - All of the above
D) - All of the above
Answer: D—All three of these jurisdictions work together to regulate activities in the housing and construction industries.
33
The most common violation of the Commissioner's Regulations concern:
A) - fair housing violations.
B) - trust fund accounts and records.
C) - ethics and professional conduct.
D) - agency disclosure.
B) - trust fund accounts and records.
Answer: B—Statement of fact
34
Which of the following would be advised to obtain a clearance receipt in the sale of a business?
A) - the vendee
B) - the vendor
C) - the lender
D) - the Franchise Tax Board
A) - the vendee
Answer: A—The vendee (buyer) wants to avoid successor's liability.
35
When budgeting for a real estate office, the phrase "company dollar" means:
A) - the money required to establish an office and run it for a given period of time.
B) - the income of an office after all expenses are subtracted.
C) - the income of an office after all commissions are subtracted.
D) - None of the above
C) - the income of an office after all commissions are subtracted.
Answer: C—The term "company dollar" is the amount leftover after all commissions have been paid out.
36
A Master Plan would be concerned with all of the following EXCEPT:
A) - conservation.
B) - noise.
C) - land use.
D) - deed restrictions.
D) - deed restrictions.
Answer: D—Deed restrictions are prohibitions against a property's use that are imposed in the grantee's deed.
37
Copies of real estate transaction documents must be kept:
A) - by the broker for 4 years.
B) - by the broker only for 3 years.
C) - by the broker or salesperson for 3 years.
D) - by the salesperson only for 3 years.
C) - by the broker or salesperson for 3 years.
Answer: C—After the transaction closes, both the broker and salesperson must retain copies of all listings, deposit receipts, cancelled checks, trust records, and other documents for three years.
38
The Subdivided Lands Law controls the sale or leasing of new subdivisions to California residents:
A) - only if the property is located in California.
B) - only if the property is unimproved.
C) - regardless of the location of the property.
D) - only if the property is unimproved and located outside of California.
C) - regardless of the location of the property.
Answer: C—Subdivisions offered for sale to Californians that are either in state or out-of-state are still under the control of the Subdivision Lands Act.
39
Which of the following events would require the subdivider to notify the Real Estate Commissioner?
A) - The subdivider changes lot sizes.
B) - The subdivider changes provisions in the purchase contract.
C) - The subdivider changes financing terms.
D) - All of the above
D) - All of the above
Answer: D—Any material change involving the subdivision must be reported to the Real Estate Commissioner. Examples of material changes include physical changes, changes in contracts, or changes in deed restrictions. New ownership of the subdivision would also constitute a material change.
40
If a subdivision project will have a significant effect on the environment, the government agency that approves the project may be required to prepare a(n):
A) - Alquist-Priolo report.
B) - Earthquake fault zone report.
C) - Coastal Zone Impact Report.
D) - Environmental Impact Report.
D) - Environmental Impact Report.
Answer: D—An Environmental Impact Report (EIR), authorized by the California Environmental Quality Act of 1970 (CEQA), may be required before subdivision approval if the project will have a significant effect on the environment.
41
As to running a business, which of the following is FALSE?
A) - Assets - liabilities = net worth
B) - Income - expenses = profit
C) - Total sales = gross income
D) - Gross income - profit = net income
D) - Gross income - profit = net income
Answer: D—Statement of fact. Remember, you are looking for the incorrect choice.
42
Which of the following allows a subdivider to enter into binding contracts with purchasers for lots but does not allow transactions to be completed?
A) - final public report
B) - conditional public report
C) - white report
D) - negative declaration
B) - conditional public report
Answer: B—Because the public report may take months to compile, the subdivider may begin taking reservations for future purchases on the basis of an approved conditional public report (called the "pink report"). No sales can be closed or transaction completed, however until the final public report (called the "white report") is received.
43
A real estate broker's ad must contain:
A) - the name of the broker.
B) - that the advertiser is a broker or agent.
C) - the broker's address.
D) - either (a) or (b).
D) - either (a) or (b).
Answer: D—This is correct to avoid being classified as a "blind ad."
44
In July, Easton bought Rothchild's home through the listing broker, McGrew. In November when the first rain came, the tile roof leaked badly in many places. Easton sued Rothchild and McGrew for the cost of the new roof. Testimony in court showed that Rothchild mentioned the need for a new roof to McGrew, but McGrew did not mention it to Easton because "he had not asked about it." What would most likely occur?
A) - Easton would be successful in his suit against Rothchild who would be entitled to recover damages from McGrew.
B) - Easton could recover from Rothchild, but McGrew is not liable to Rothchild.
C) - McGrew is liable to Easton, but Rothchild is not.
D) - Easton is not entitled to recover from either Rothchild or McGrew on the basis of caveat emptor.
A) - Easton would be successful in his suit against Rothchild who would be entitled to recover damages from McGrew.
Answer: A—The principal is responsible for all acts of his agents within the authority of the contract. In this case, Rothchild would be responsible for McGrew's negligence and Easton would probably be successful in a suit against Rothchild.
45
It is important for a landlord to obtain all of the information on a rental application in order for the landlord to make a decision about renting to a particular person or to more than one person. A landlord thinks it is important to know whether or not a couple is married. Is it legal for the landlord to inquire whether or not a couple is married on the rental application?
A) - Yes, as it may affect the couple's ability to pay rent.
B) - Yes, because this is a moral issue.
C) - It is legal, but might be considered unethical.
D) - No, this would be considered discrimination.
D) - No, this would be considered discrimination.
Answer: D—It is considered discrimination to require disclosure of marital status on a rental application.
46
A statement issued by the authorizing government agency that there will be no impact on the environment significant enough to warrant preparation of an EIR is called a:
A) - negative declaration.
B) - positive declaration.
C) - neutral declaration.
D) - go-ahead declaration.
A) - negative declaration.
Answer: A—The authorizing government agency is authorized to issue a negative declaration if it determines that there will be no impact on the environment significant enough to warrant preparation of an EIR. Be careful, this one is easy to get backwards. Study Aid: Negative declaration = No impact.
47
Salesperson Kim has several listings and is an agent of Broker Ling. These listings are:
A) - Void if Salesperson Kim changes brokers
B) - The property of Salesperson Kim
C) - The property of Broker Ling
D) - The property of Salesperson Kim and Broker Ling
C) - The property of Broker Ling
Answer: C—The listing agreement is a contract between the broker and the seller. It remains the property of Broker Ling if Salesperson Kim changes brokers and the listing remains valid.
48
If a property owner splits one parcel into 25 or more parcels, the subdivider must comply with federal control under the:
A) - Interstate Land Sales Act.
B) - Real Property Acquisition Act.
C) - Common Interest Subdivision Act.
D) - None of the above
A) - Interstate Land Sales Act.
Answer: A—The words "federal control" should tip you off to recognize the Interstate Land Sales Act.
49
Which of the following would realize the greatest benefit from the Bulk Sales Law?
A) - creditors
B) - buyers
C) - sellers
D) - patrons
A) - creditors
Answer: A—The major purpose of the bulk transfer status is to afford a merchant's creditors an opportunity to satisfy their claims against a merchant who owes them money before the merchant can sell his/her assets and vanish with proceeds of the sale.
50
Each tenant of a proposed conversion of their building from residential property to a condominium has the right to:
A) - vacate the premises.
B) - cancel their lease.
C) - purchase their unit.
D) - extend their lease.
C) - purchase their unit.
Answer: C—Each tenant of a proposed conversion has an exclusive right to contract for and purchase the unit he/she lives in. The tenant must be offered the same or better terms and conditions that such unit would be initially offered to the general public.
51
Seller Jones hired broker Smith to list his property. Seller Jones excluded his washer and dryer. Buyer Dana makes an offer on the property and includes the washer and dryer in the offer. After reviewing the offer, seller Jones was still not willing to sell the appliances. Buyer Dana was out of town and unreachable. Broker Smith said he was sure that buyer Dana would not want to lose the house so he crossed out the appliances on the offer and initialed the change himself. To further induce seller Jones to accept the offer, broker Smith said he would find seller Jones another house immediately, which he never did. Which of the following is TRUE regarding broker Smith's actions?
A) - His behavior would subject him to criminal action.
B) - His behavior is considered unethical.
C) - Both (a) and (b)
D) - Neither (a) nor (b)
C) - Both (a) and (b)
Answer: C—Making an addition to or modification of the terms of an instrument previously signed or initialed by a party to a transaction without the knowledge and consent of the party is illegal. In most cases, actions that are considered illegal would also be considered unethical.
52
The Financial Discrimination Act of 1977, also known as the Holden Act, has to do with which of the following?
A) - redlining.
B) - rentals.
C) - education.
D) - subdivisions.
A) - redlining.
Answer: A—The Holden Act prohibits state financial institutions from engaging in the practice of redlining. It is also known as the Housing Financial Discrimination Act of 1977.
53
Under the Subdivision Map Act, subdivision reports must be filed with the:
A) - city or county where the land is located.
B) - Real Estate Commissioner.
C) - Division of Architecture.
D) - Division of State Lands.
A) - city or county where the land is located.
Answer: A—The Subdivision Map Act gives the local authorities control over the physical aspects of the subdivision as to zoning, building, and health codes.
54
A broker advertises properties through the World Wide Web. Rules exist making it mandatory for the broker to do which of the following?
A) - Return all messages promptly and correctly within 24 hours.
B) - Employ only real estate licensees to respond to queries.
C) - Exercise proper supervision over non-licensees responding to queries.
D) - Report all international queries to the DRE.
B) - Employ only real estate licensees to respond to queries.
Answer: B—Only licensed individuals can answer questions (queries) about properties.
55
A broker sells a house advertised "as-is". There are no obvious defects that would be evident to a prudent buyer upon inspection, but the seller and the broker know that the plumbing is very defective. The buyer moves in and discovers the defects. The buyer then sues the broker and the seller for misrepresentation. The suit will probably be:
A) - successful because the seller and the broker withheld material information that should have been disclosed.
B) - successful because an "as-is" clause does not relieve a seller or broker from liability for disclosing material facts which they knew of.
C) - unsuccessful because selling the property "as-is" gives constructive notice that there are defects.
D) - unsuccessful because the defects would have been revealed if the purchase agreement had contained an inspection clause.
B) - successful because an "as-is" clause does not relieve a seller or broker from liability for disclosing material facts which they knew of.
Answer: B—An "as-is" clause by itself does not relieve a residential property seller or broker from liability for latent defects which they knew of or latent defects which the seller or broker had a duty to inspect for and discover. This is because an "as-is" clause by itself never bars claims of fraudulent misrepresentation and does not even bar claims of negligent misrepresentation, concealment, or nondisclosure.
56
When a licensee is employed as an independent contractor, the employing broker may still have to cover the licensee for:
A) - unemployment insurance.
B) - worker's compensation insurance.
C) - errors and omissions insurance.
D) - All of the above are required.
B) - worker's compensation insurance.
Answer: B—The worker's compensation law requires all employers to provide insurance coverage for their employees in case of injury on the job. This law may apply to real estate brokers, regardless of whether the broker considers his/her salespeople to be employees or independent contractors.
57
For his/her own protection, the purchaser of a business should obtain a:
A) - resale certification.
B) - clearance receipt.
C) - sales tax exemption authorization.
D) - use tax exemption form.
B) - clearance receipt.
Answer: B—To avoid any liability for unpaid sales tax, the purchaser of a business should obtain a clearance receipt from the state Board of Equalization stating that the sales tax has been paid through a particular date.
58
The Real Estate Transfer Disclosure Statement (TDS) is NOT required when the transfer involves:
A) - transfer of a unit in a subdivision when the buyer has been given a public report.
B) - a transfer ordered by a probate court in administration of an estate.
C) - transfers by foreclosure sales after default.
D) - All of the above
D) - All of the above
Answer: D—Certain types of transfers are specifically exempted in Civil Code 1102.1. They are as follows:
Transfers requiring a public report pursuant to 11018.1 of the Business and Professions Code and transfers pursuant to 11010.8 of the Business and Professions Code where no public record is required.
Transfers pursuant to court order (such as probate sales, sales by a bankruptcy trustee, etc.)
Transfers by foreclosure (including a deed in lieu of foreclosure and a transfer by beneficiary who has acquired the property by foreclosure or deed in lieu of foreclosure).
Transfers by a fiduciary in the course of the administration of a decedent's estate, guardianship, conservatorship, or trust.
Transfers from one co-owner to one or more other co-owners.
Transfer made to a spouse or to a child, grandchild, parent, grandparent, or other direct ancestor or descendant.
Transfers between spouses in connection with a dissolution of marriage or similar proceeding.
Transfers by the State of Controller pursuant to the Unclaimed Property Law.
Transfers or exchanges to or from any government entity.
*It should be noted, however that a real estate licensee still has a duty to conduct a reasonably competent and diligent visual inspection of accessible areas in almost all of the above situations. In other words although the seller is exempted from having to provide a disclosure statement in certain situations, a licensee must conduct this inspection and disclose the results of the inspection in almost all residential transactions involving one to four units.
59
Which of the following is provided by the purchaser upon resale of a business?
A) - resale certification
B) - clearance receipt
C) - disclosure form
D) - All of the above
A) - resale certification
Answer: A—A resale certificate allows a buyer (retailer) to purchase inventory without paying sales tax as long as the goods are going to be resold to customers. In the sale of a business, sales tax is not charged on stock-in-trade which was held for resale.
60
In addition to the licensee's duty to disclose matters known to the licensee, he/she also has the duty to:
A) - provide legal advice in situations where there is not time to consult an expert.
B) - make minor repairs to a property when absolutely necessary.
C) - conduct a reasonable investigation to discover the true facts regarding the property.
D) - provide tax advice regarding the transfer of real property.
C) - conduct a reasonable investigation to discover the true facts regarding the property.
Answer: C—In addition to the licensee's statutory requirement to make certain disclosures to the buyer, both the listing agent and the selling agent have a statutory duty to conduct a reasonably competent and diligent visual inspection and disclose to a prospective purchaser all facts which materially affect the value or desirability of the property that such an investigation would reveal.
61
A public report is good for five years from the:
A) - date of issuance.
B) - date the first lot is sold.
C) - date of approval.
D) - date of delivery to the buyer.
A) - date of issuance.
Answer: A—A public report is good for five years from the date of issuance.
62
Which of the following deals with public access to buildings?
A) - Fair Housing Act
B) - Americans With Disabilities Act
C) - Federal Housing Administration
D) - None of the above
B) - Americans With Disabilities Act
Answer: B—The American With Disabilities Act (ADA) deals with public access to buildings to make sure they are readily accessible to disabled individuals.
63
The Alquist-Priolo Earthquake Fault Zone Act is concerned with:
A) - all buildings in the entire state of California.
B) - all residential buildings within an earthquake fault zone.
C) - all buildings within an earthquake fault zone.
D) - commercial buildings within an earthquake fault zone.
B) - all residential buildings within an earthquake fault zone.
Answer: B—The Alquist-Priolo Earthquake Fault Zone Act was passed to prevent buildings constructed for human occupancy from being constructed astride active faults. The State Geologist has identified earthquake fault zones called "Special Studies Zones." Any development located within one of these Special Studies Zones (which is not exempt) must have a geologic analysis.
64
Properties built before which year DO NOT need a geological report?
A) - 1963
B) - 1968
C) - 1975
D) - 1960
C) - 1975
Answer: C—Residential properties built before 1960 and masonry buildings with wood-frame floors or roofs built before 1975, require the seller or agent to deliver to the buyer the "Homeowner's Guide to Earthquake Safety," and if the property is commercial the "Commercial Property Owner's Guide". If the buyer receives these booklets, neither the agent nor the seller is required to obtain a geological report. If the property is in an earthquake fault area, a Natural Hazard Zone Disclosure Statement must be delivered to the buyer.
65
The Subdivision Lands Law is administered by:
A) - the Federal Government.
B) - the Real Estate Commissioner.
C) - city and county authorities.
D) - state government.
B) - the Real Estate Commissioner.
Answer: B—The Subdivided Lands Law is directly administered by the Real Estate Commissioner. Its objective is to protect purchasers of property in new subdivisions from fraud, misrepresentation, or deceit in the marketing of subdivided lots, parcels, units and undivided interests in California.
66
When a broker has a trust account, the name on the account must:
A) - Name broker as trustee
B) - Name an independent trustee
C) - Name each person who has money in the account as trustee
D) - Name the broker's accountant as trustee
A) - Name broker as trustee
Answer: A—A trust account must: 1) Designate the account as a trust account; 2) Name the broker as the trustee for the account; the broker may never delegate his/her accountability for the trust account.
67
In an effort to enforce trust fund handling requirements, the Real Estate Commissioner continuously:
A) - sponsors lectures on trust fund handling throughout the state.
B) - audits and examines broker's trust fund records on a state-wide basis.
C) - calls brokers to keep them up to date on trust fund handling requirements.
D) - changes the trust fund handling laws to keep brokers on their toes.
B) - audits and examines broker's trust fund records on a state-wide basis.
Answer: B—The Real Estate Commissioner continuously audits and examines broker's trust fund records on a state-wide basis.
68
Buyer Frank sued broker Sam for a misrepresentation in the sale of a single family residence. He was awarded a judgment but Broker Sam was bankrupt and unable to pay the judgment. Buyer Frank appealed to the Real Estate Recovery Account. Assuming the Recovery account agrees to pay Frank, he will receive a maximum of ______ for this single transaction.
A) - $20,000
B) - $50,000
C) - $100,000
D) - $250,000
B) - $50,000
Answer: B—The fund will pay a maximum of $50,000 for a single transaction and $250,000 maximum for any one licensee. If the broker or salesperson is bankrupt, he/she will not be granted reinstatement until the fund is repaid in full, plus interest at the prevailing legal rate.
69
Jones, who does not have a real estate license, is the owner and president of an investment firm. He advertises and sells properties for his clients. Since these transactions involve real estate, who will prosecute him for violating the real estate law:
A) - The District Attorney
B) - The State Attorney General
C) - The Real Estate Commissioner
D) - The local police
A) - The District Attorney
Answer: A—The Real Estate Commissioner can issue, suspend, or revoke a real estate license (Disciplinary action). Two individuals can sue each other (Civil Action). Only the District Attorney prosecutes criminal activity (Criminal Action).
70
A broker takes a deposit check from a buyer and deposits it in his trust account. After the offer was accepted, the broker wrote a check from the trust account in the amount of the deposit and brought it to escrow. With regard to the broker's duty to maintain proper trust account records, the records must be retained for:
A) - three years from the date the broker deposited the buyer's check in the trust account.
B) - three years from the the date escrow closes.
C) - three years from the date escrow opened.
D) - three years from the date of the offer to purchase.
B) - three years from the the date escrow closes.
Answer: B—B&P Code Section 10148: Retention of Documents; (a) A licensed real estate broker shall retain for three years copies of all listings, deposit receipts, cancelled checks, trust records, and other documents executed by him/her or obtained in connection with any transactions for which a real estate broker license is required. The retention period shall run from the date of the closing of the transaction or from the date of the listing if the transaction is not consummated.
71
How much of a broker's personal funds may be contributed to a client's trust fund bank account to offset any bank service charges?
A) - $25.00 or the amount of charges by the bank
B) - $100.00
C) - $200.00
D) - Nothing
C) - $200.00
Answer: C—Since banks sometimes have service charges, out of necessity, the broker is allowed to maintain up to $200 of personal funds in a trust account to cover these type of bank charges. Trust funds may not be used to pay for these type of expenses. The better practice is to have the bank charge the broker's office or general account for the trust account fees and charges.
72
A retired farmer decides to subdivide the 1,000 acres he owns into five 200 acre parcels to be leased for agricultural purposes. These parcels would be exempt from the requirements of the Subdivision Map Act if they contain:
A) - more than 20 acres.
B) - more than 60 acres.
C) - more than 160 acres.
D) - Any of the above
D) - Any of the above
Answer: D—Land leased for agricultural purposes is exempt from the Map Act regardless of size.
73
When a broker keeps records electronically, the program he would use for record retrieval is:
A) - RAM
B) - SCORE
C) - WORM
D) - DOS
C) - WORM
Answer: C—WORM means "write once read many." This indicates that the record cannot be changed once it is entered.
74
A "dedication" under the Map Act would happen:
A) - when the final public report is completed.
B) - when the approved subdivision map is recorded.
C) - when the last lot of a subdivision is sold.
D) - when the first lot of a subdivision is under contract.
B) - when the approved subdivision map is recorded.
Answer: B—This dedication is accomplished by recording a subdivision map approved by local officials expressly indicating those areas dedicated to the public.
75
A broker is representing a developer who has completed his project in a subdivision called "Ridgeway." The broker's advertisement states that people have "already won a free gift," but in reality, they must attend a sales seminar to receive the gift. This type of advertising is:
A) - Legal without disclosure of the sales seminar attendance requirement.
B) - Legal, because all the "winners" purchased units anyway.
C) - Legal, if the ad states they must sit through a sales seminar in order to collect the gift.
D) - Always illegal.
C) - Legal, if the ad states they must sit through a sales seminar in order to collect the gift.
Answer: C—When offering prizes or gifts, all requirements to be eligible to win must be stated in the advertisement.
76
The Subdivided Lands Act applies to:
A) - the owner of the subdivided property.
B) - any subdivider engaged by the owner of the property.
C) - any real estate licensee acting as an agent for the seller of a subdivision.
D) - All of the above
D) - All of the above
Answer: D—The Subdivided Lands Act applies both to the owner of the subdivided property and to any subdivider engaged by the owner of the property. The law also applies to any real estate licensee acting as an agent for the seller of a subdivision.
77
A seller (or seller's agent) must give the buyer a separate "Natural Hazard Disclosure Statement" if the property lies within which of the following specified areas?
A) - A special flood hazard area
B) - A very high fire hazard severity zone
C) - An earthquake fault zone
D) - All of the above
D) - All of the above
Answer: D—In addition to the usual Transfer Disclosure Statement required by Civil Code Section 1102.6, a seller (or the seller's agent) must give the prospective buyer a separate "Natural Hazard Disclosure Statement" if the residential property lies within one or more of six statutorily specified areas:
A special flood hazard area designated by the Federal Emergency Management Agency.
An area of potential flooding in the event of a dam failure, designated by the state Office of Emergency Services.
A very high fire hazard severity zone designated by the California Department of Forestry and Fire Protection.
A wildland fire area that may contain substantial forest fire risks and hazards, designated by the State Board of Forestry.
An earthquake fault zone designated by the State Geologist.
A seismic hazard zone designated by the State Geologist.
78
The Unruh Civil Rights Act prohibits discrimination in:
A) - all business establishments of every kind.
B) - public establishments only.
C) - commercial establishments only.
D) - for profit enterprises only.
A) - all business establishments of every kind.
Answer: A—The Unruh Civil Rights Act prohibits housing discrimination as to sex, race, color, religion, ancestry, or national origin in all accommodations and business establishments.
79
According to the Real Estate Law, a broker must review and initial all real estate contracts written by his/her sales personnel:
A) - immediately.
B) - by the end of the next working day.
C) - within 5 working days.
D) - within 10 working days.
C) - within 5 working days.
Answer: C—Every instrument prepared or signed by a real estate salesperson must be reviewed, initialed and dated by the broker of the salesperson within 5 working days after preparation or signing by the salesperson, whichever occurs sooner.
80
A subdivider must give a copy of the Commissioner's public report to:
A) - anyone who intends to purchase one or more lots.
B) - any person, at any time on request.
C) - only purchasers of lots just before they sign the purchase contract.
D) - only their salespeople.
B) - any person, at any time on request.
Answer: B—All prospective purchasers must be given a copy of the public report and be allowd to read it. A copy of the report must be given to anyone requesting a copy at any time.
81
A subdivider may use the public report in their advertising as long as:
A) - they only use a picture of the report and not its verbiage.
B) - they only reference certain applicable parts of the report.
C) - they use the report in its entirety.
D) - they receive permission to use specific parts of the report.
C) - they use the report in its entirety.
Answer: C—A subdivider may use a public report in their advertising as long as they use it in full.
82
A buyer makes an offer on a property but does not have available cash for the down payment. He executes a promissory note in the amount of $1,000 at 12% interest to be repaid in 10 days. The broker:
A) - may accept it as long as the broker guarantees its repayment.
B) - may only accept cash or personal check.
C) - may accept it but must disclose this fact to the seller before the offer is accepted.
D) - this method of deposit is immaterial.
C) - may accept it but must disclose this fact to the seller before the offer is accepted.
Answer: C—A down payment or deposit may be cash or non-cash. It may be cash, check, personal note made payable to the seller, or even a pink slip to a car. If it is in the form of a promissory note, the broker must disclose this fact to the seller before the offer is accepted.
83
A broker communicates information given to him by the seller to the buyer in full faith that the seller's information is true. It is later proven that the information was false, and the buyer rescinds. The broker is subject to:
A) - discipline by the licensing authority.
B) - civil action.
C) - criminal action.
D) - all of the above.
B) - civil action.
Answer: B—Even though the broker acted in good faith and was simply passing on information provided by the seller, he/she might still get sued (civil action). The real estate commissioner would not get involved unless it could be proven the broker committed fraud. This is not a criminal case.
84
An advance fee is:
A) - a listing agents commission.
B) - a bonus paid to the seller by an agent to obtain a listing.
C) - a prepaid fee to cover advertising and promotional costs.
D) - a gift to the listing broker.
C) - a prepaid fee to cover advertising and promotional costs.
Answer: C—An "advance fee" is any fee paid before any services are rendered. Specifically, it is a practice of some brokers to obtain a nonrefundable fee from the seller in advance to cover advertising of properties or businesses for sale while giving no guarantee that a buyer will be found. Such agreements must be submitted and approved by the Real Estate Commissioner at least 10 days prior to use.
85
A subdivider sold five 1-acre lots to Mr. Dalton and optioned five lots to Mr. Bernstein. What course of action does the subdivider have to take as a result of this action?
A) - Notify the Real Estate Commissioner of a material change
B) - Nothing, but Mr. Dalton and Mr. Bernstein need to contact the Commissioner.
C) - Notify the Commissioner of an intent to subdivide
D) - Report the sale now and report the option when it is exercised by Mr. Bernstein.
A) - Notify the Real Estate Commissioner of a material change
Answer: A—The Commissioner's Regulations state that if the owner of any subdivision options or sells five or more parcels to another, such option or sale constitutes a material change and the owner or original subdivider must immediately notify the Commissioner.
86
A tract developer learns that a large national cosmetics manufacturer is moving one of his plants near an area in which he is building a large number of new homes and condominiums. Since a great number of the employees of the cosmetic firm will be women, he decides to gear his sales promotion towards this group. He tells his advertising agency to aim all of their ads to reflect a preference for female buyers. Realizing he can't discriminate against any one group, he advises his sales agent to be sure to set up a quota for Caucasian, Black, Chicano, and Asian buyers. Once the quota has been reached they should discourage any further sales to that racial group by adjusting the prices. If the developer follows this plan, he violates:
A) - no fair housing laws.
B) - the fair housing laws based on his ad campaign, but not the quota system.
C) - the fair housing laws based on his racial quota system, but not the ad campaign.
D) - the fair housing laws in both his ad campaign and racial quota system.
D) - the fair housing laws in both his ad campaign and racial quota system.
Answer: D—A developer cannot gear ads to just one group. Racial quotas are also considered discriminatory. Using prices to exclude certain racial groups also violates fair housing laws.
87
A public report is required if a person is going to subdivide a lot for condominiums into:
A) - one or more units.
B) - two or more units.
C) - four or more units.
D) - five or more units.
D) - five or more units.
Answer: D—A subdivision (requiring a public report) is the dividing of improved or unimproved land for the purpose of sale, lease, or financing into five or more parcels.
88
What is the difference between the Real Estate Transfer Disclosure Statement and the Natural Hazard Disclosure Statement?
A) - Only the seller is responsible for the TDS but the buyer is responsible for the Natural Hazard Disclosure Statement.
B) - Only the buyer is responsible for the Natural Hazard Disclosure Statement but the seller is responsible for the TDS.
C) - The buyer and seller are equally responsible for both statements.
D) - The seller is responsible to check the map and make the natural hazard disclosure if necessary; on the other hand, the seller is responsible to disclose known facts only on the TDS.
D) - The seller is responsible to check the map and make the natural hazard disclosure if necessary; on the other hand, the seller is responsible to disclose known facts only on the TDS.
Answer: D—The Natural Hazard Disclosure must be made by the seller if the property is located on a list of parcels of properties located within a special hazard area or a map exists that specifies the property located within a particular hazard zone. This applies whether or not the seller has actual knowledge of that fact. The Real Estate Transfer Disclosure Statement (TDS) is the responsibility of the seller and serves to disclose known facts regarding the physical condition of the property.
89
To assure the accuracy of trust fund accounting records, they must be reconciled at least:
A) - once-a-month
B) - once every six months
C) - once-a-year
D) - once every two years
A) - once-a-month
Answer: A—To assure the accuracy of trust fund records, they must be reconciled at least once-a-month, usually at the end of each month.
90
In addition to the Subdivided Lands Law and Map Act, there is federal control of subdivisions under the:
A) - Unruh Act.
B) - Environmental Impact Act.
C) - Interstate Land Sales Act.
D) - None of the above
C) - Interstate Land Sales Act.
Answer: C—In addition to state control under the Subdivided Lands Law and control under the Map Act, the federal government controls subdivisions under the Interstate Land Sales Act. The Act requires developers to file a development statement describing the details of a subdivision with the Secretary of Housing and Urban Development. The California public report can be substituted for the federal report.
91
The Interstate Land Sales Act applies to:
A) - cemetery lots.
B) - sales to developers.
C) - developments of 25 or more unimproved residential parcels of less than five acres each.
D) - All of the above
C) - developments of 25 or more unimproved residential parcels of less than five acres each.
Answer: C—The Interstate Land Sales Act applies to developments of 25 or more unimproved residential parcels of less than five acres each that may be promoted by mail or through interstate commerce. Exempt from the act are cemetery lots and sales to developers.
92
Which of the following is required to operate as an advance-fee rental agent?
A) - a real estate broker's license
B) - a written contract with prospective tenants
C) - a real estate salesperson's license
D) - access to the Multiple Listing Service
B) - a written contract with prospective tenants
Answer: B—An advance-fee rental agent collects a fee in advance from prospective tenants to find them suitable rental properties. An advance-fee rental agent must have a Prepaid Rental Listing Service license (PRLS), but real estate brokers are exempt from this license requirement. PRLS contracts must be in writing and approved by the Real Estate Commissioner.
93
Which of the following qualifies as a "bulk transfer sale?"
A) - A judicial transfer of a business including all stock used for resale, fixtures, licenses and leases.
B) - A lumber company who transfers a substantial amount of lumber not in the ordinary course of business.
C) - A subdivider who transfers an entire 50-parcel unimproved subdivision.
D) - All of the above
B) - A lumber company who transfers a substantial amount of lumber not in the ordinary course of business.
Answer: B—A bulk sales would contain the words "not in the ordinary course of the transferor's business."
94
The installation of curbs, gutters, streets, and utilities in a new subdivision is the responsibility of:
A) - the homeowner's association.
B) - the developer.
C) - buyers as a group.
D) - the city.
B) - the developer.
Answer: B—As a condition of approval, developers must provide plans for installation and/or improvement of curbs, gutters, streets, and utilities.
95
With regard to the public report, which of the following would be considered a material change in a subdivision?
A) - change in lot sizes
B) - changes in sales contracts
C) - changes in CC&Rs
D) - All of the above
D) - All of the above
Answer: D—Examples of material changes include physical changes, changes in contracts, or changes in deed restrictions. New ownership of the subdivison would also constitute a material change.
96
Each city or county appoints a Planning Commission because:
A) - they must do so to appropriate funds.
B) - the master plan requires it.
C) - it is required by statute.
D) - the board of supervisors orders it.
C) - it is required by statute.
Answer: C—The formation of a Planning Commission is required by state law.
97
City and County Planning Commission members:
A) - have the authority to make recommendations to the City Council or Board of Supervisors on subdivisions.
B) - must possess experience and background in real estate.
C) - are appointed in cities and elected in counties.
D) - are elected officials.
A) - have the authority to make recommendations to the City Council or Board of Supervisors on subdivisions.
Answer: A—Each city and county must appoint a planning commission. Planning commission members do not need real estate experience. They are delegated the authority to make recommendations concerning the processing of subdivisions under the Subdivision Map Act.
98
Recommendations made by the city planning commission are:
A) - opinions only.
B) - advisory only.
C) - binding rulings.
D) - None of the above
C) - binding rulings.
Answer: C—Recommendations made by the Planning Commission are binding rulings mandated in the general plan.
99
If more than one licensed real estate broker is acting as an agent in a transaction, who is responsible to assure the delivery of the Real Estate Transfer Disclosure Statement (TDS) to the buyer?
A) - The broker who represents the seller.
B) - The broker who has obtained the offer made by the buyer.
C) - The broker who holds a valid Listing Agreement with the seller.
D) - The seller is ultimately responsible no matter how many agents are involved.
B) - The broker who has obtained the offer made by the buyer.
Answer: B—If more than one licensed real estate broker is acting as an agent in a transaction, the agent who has obtained the offer made by the buyer (buyer's agent) is responsible to assure the delivery of the statement to the buyer, unless the seller has given other written instructions for delivery. If the agent who obtained the offer is other than the listing agent, he/she must also fill out and sign the "Agent's Inspection" section of the form.
100
All licensees must complete 45 hours of continuing education every 4 years to renew their license. Part of the 45 hours must include:
A) - Agency and Trust Fund Handling.
B) - Ethics and Fair Housing.
C) - Risk Management.
D) - All of the above.
D) - All of the above.
Answer: D—Every four years, licensees must complete 45 hours of continuing education. Part of the 45 hours must include 18 hours in the category of consumer protection, plus separate 3-hour courses in Agency, Ethics, Fair Housing, and Trust Fund Handling, and Risk Management.
101
A property owner breaks one parcel of land into two parcels. This would fall under regulation of the:
A) - Subdivided Lands Act.
B) - Subdivision Map Act.
C) - both (a) and (b).
D) - neither (a) nor (b).
B) - Subdivision Map Act.
Answer: B—Any lot division falls under local control of the Subdivision Map Act.
102
A salesperson tells his broker that he is quitting and plans to go to work for another broker. His present employing broker should:
A) - notify the real estate commissioner and hold the license until further notice from the commissioner.
B) - give the salesperson his license and notify the real estate commissioner immediately in writing.
C) - request cancellation of the salesperson's license.
D) - call the other broker to confirm the change.
B) - give the salesperson his license and notify the real estate commissioner immediately in writing.
Answer: B—The Commissioner's Regulations state that upon termination of employment of a salesperson, the broker shall immediately return the license certificate to the salesperson and immediately notify the commissioner, thereof in writing.
103
The Bulk Transfer Law may be found in the:
A) - Real Estate Law.
B) - Commissioner's Regulations.
C) - Uniform Commercial Code.
D) - Code of Corporations.
C) - Uniform Commercial Code.
Answer: C—The Bulk Transfer Law is part of the Uniform Commercial Code.
104
A buyer signs the purchase agreement and the seller accepts. The agent personally delivers acceptance of the offer to the buyer and also drops off the seller's Transfer Disclosure Statement. How long after receiving the TDS does the buyer have to rescind the contract?
A) - 2 days
B) - 3 days
C) - 5 days
D) - 7 days
B) - 3 days
Answer: B—Section 1102.3 of the Civil Code says, "If any disclosure or any material amendment of any disclosure required to be made public by this article, is delivered after the execution of an offer to purchase, the transferee shall have three days after delivery in person or five days after delivery by deposit in the mail to terminate his or her offer by delivery of a written notice of termination to the transferor or transferor's agent."
105
The seller must disclose any material change in the condition of the property or the title that occurs or is discovered by the seller:
A) - after close of escrow and within one year of ownership by the new buyer.
B) - after close of escrow and within a reasonable amount of time, thereafter.
C) - after the contract is executed and prior to the close of escrow.
D) - None of the preceding
C) - after the contract is executed and prior to the close of escrow.
Answer: C—The seller must disclose any material change in the condition of the property or the title that occurs or is discovered by the seller after the contract is executed and prior to the close of escrow.
106
When a "release schedule" is put into a blanket mortgage for a subdivision, the amount of the loan to be paid off for each lot would likely be proportionately larger for the first lots that are sold. The reason for this practice is:
A) - to increase the security value of the remaining lots.
B) - to compensate for the loss of security as the lots under the blanket encumbrances are removed.
C) - to compensate for the loss of security due to the best lots being sold first.
D) - All of the above
D) - All of the above
Answer: D—All three of these choices are good reasons for requiring larger repayment when the first lots are sold under a blanket encumbrance.
107
When the property of the borrower is not adequate security for the loan, the instrument the lender will most likely employ is a(n):
A) - open-end mortgage.
B) - closed-end mortgage.
C) - blanket mortgage.
D) - all-inclusive mortgage.
C) - blanket mortgage.
Answer: C—A blanket encumbrance is used to place a lien simultaneously on more than one property by a single financing instrument.
108
A blanket encumbrance exists on a large subdivision. The owner negotiates to pay off the loans on certain lots as they are sold. To accomplish this the beneficiary would execute a:
A) - partial deed transfer.
B) - deed of partial reconveyance.
C) - quitclaim deed.
D) - subordination agreement.
B) - deed of partial reconveyance.
Answer: B—Under the provisions of a blanket encumbrance, as each individual lot is sold, it is released from the blanket loan which is correspondingly reduced. The beneficiary (lender) requests the trustee to execute and record a deed of partial reconveyance describing the portion of the property released from the blanket loan.
109
The notice of sale required by the Bulk Transfer Law must include all of the following EXCEPT:
A) - the name and address of the seller.
B) - the description and location of the property.
C) - the name and address where claims can be filed.
D) - the final sales price.
D) - the final sales price.
Answer: D—In certain cases the final sales price may not be known yet (i.e., sale at auction).
110
Generally, a fact concerning a transaction is considered "material" if:
A) - the seller elects to disclose the fact prior to consummation of the transacation.
B) - prior knowledge of the fact would have prevented the other party from entering into the contract.
C) - all parties to the transaction agree in advance that the fact is important.
D) - the seller's agent determines that the fact warrants disclosure.
B) - prior knowledge of the fact would have prevented the other party from entering into the contract.
Answer: B—Material Fact: Generally, a matter is considered material if the other party would not have entered into the contract had he/she known the true facts.
111
Real estate licenses are issued for:
A) - 1 year.
B) - 2 years.
C) - 4 years.
D) - life.
C) - 4 years.
Answer: C—Real estate licenses are issued for a four year term.
112
The Real Estate Transfer Disclosure Statement (TDS) provides information regarding the:
A) - physical condition of the property.
B) - properties chain of title.
C) - agency relationships between the parties to the transaction.
D) - commission split between real estate agents.
A) - physical condition of the property.
Answer: A—As required by California Civil Code Sections 1102 - 1102.14, a transferee (buyer) of residential real property is entitled to a statement from the transferor (seller) which provides information regarding the physical condition of the property. (See Real Estate Transfer Disclosure Statement)
113
When selling a business, real estate brokers need to know that the term successor's liability involves certain obligations to the:
A) - Internal Revenue Service.
B) - Department of Real Estate.
C) - State Board of Equalization.
D) - Department of Corporations.
C) - State Board of Equalization.
Answer: C—The term successor's liability refers to the purchaser's liability for the sales tax collected by the previous owner but not remitted to the state.
114
A licensee was farming a non-integrated neighborhood which was next to an integrated neighborhood by telling the owners that if minority people moved into their neighborhood, their property values would do down. This is an example of:
A) - steering.
B) - panic peddling.
C) - blockbusting.
D) - both (b) and (c)
D) - both (b) and (c)
Answer: D—Blockbusting or panic selling (or panic peddling) violate federal fair housing laws.
115
A buyer wants to know why the demographics have changed in an area causing home prices to decline. The buyer wants to know if it is due to a certain race moving in. What is the best way to answer?
A) - Disclose whatever information you have about the area.
B) - Tell the buyer to go online and do their own research.
C) - Tell the buyer you will get back to them with the information.
D) - Tell the buyer you don't know anything about this area.
A) - Disclose whatever information you have about the area.
Answer: A—It is a violation of federal Fair Housing laws to discuss changing demographics related to a certain race moving into the area. The licensee can disclose any other relevant information about the area.
116
A loan broker asks a person, applying through the broker's office for a new loan, to fill out a questionnaire which asks the borrower's race and marital status. The applicant can:
A) - refuse to disclose his race or marital status.
B) - file a complaint with the real estate commissioner.
C) - supply the information requested so his credit history can be properly checked.
D) - All of the above
A) - refuse to disclose his race or marital status.
Answer: A—With reference to a loan application, the borrower is not obligated to disclose either race or marital status.
117
Complaints involving violations of discrimination should be reported to the:
A) - Real Estate Commissioner.
B) - Labor Commission.
C) - Department of Fair Employment and Housing.
D) - Department of Housing and Community Development.
C) - Department of Fair Employment and Housing.
Answer: C—Complaints involving violations of the Fair Housing laws are submitted to the Department of Fair Employment and Housing.
118
All new salesperson licensees now receive a 4-year license. To renew the license at the end of the first 4-year term, the licensee must complete 45-hours of continuing education that includes:
A) - consumer protection.
B) - Agency, Ethics, Fair Housing, Trust Fund Handling, and Risk Management.
C) - disclosure obligations.
D) - miscellaneous subjects.
B) - Agency, Ethics, Fair Housing, Trust Fund Handling, and Risk Management.
Answer: B—A Salesperson or Broker renewing for the first time (end of 1st 4 years) with an expiration date on or after 10/1/2011, must complete 45 hours of continuing education that includes separate 3-hour courses in Agency, Ethics, Fair Housing, Trust Fund Handling, and Risk Management.
119
A developer produces the same house in each of the following locations:
1. A house across the street from a shopping center;
2. A house adjacent to a bus stop on a heavily traveled thoroughfare;
3. A house in the center of the subdivision;
4. A house on a key lot in the subdivision.
These various properties could all be purchased for the same price. Which one would you, a knowledgeable real estate licensee, advise a home buyer to purchase?
A) - In the center of the subdivision
B) - On the key lot
C) - Across from the shopping center
D) - Near the bus stop on the heavily traveled street
A) - In the center of the subdivision
Answer: A—If a buyer were looking for a home, the most desirable home location would be in the center of the development as it should afford the most pleasant situation for living.
120
A broker convinces a white family to put their home up for sale after saying that minority families are moving into the neighborhood. The broker's actions are all of the following EXCEPT:
A) - blockbusting.
B) - panic selling.
C) - illegal.
D) - legal but unethical.
D) - legal but unethical.
Answer: D—Blockbusting or panic selling violate both federal and state fair housing laws, as well as real estate licensing law.
121
To engage in retail sales you must have a:
A) - sales tax impound account.
B) - wholesale exemption certificate.
C) - sales tax permit.
D) - property tax permit.
C) - sales tax permit.
Answer: C—A sales tax permit (seller's permit) authorizes one to engage in the business of selling tangible personal property at a specific location. This permit assigns the retailer a resale number.
122
Who is required to provide the Natural Hazard Disclosure Statement to the buyer?
A) - the seller or seller's agent
B) - the buyer's agent
C) - the escrow officer
D) - the lender
A) - the seller or seller's agent
Answer: A—The responsibility to provide the Natural Hazard Disclosure Statement to the buyer lies with the seller (or seller's agent).
123
The requirement of the seller to provide a "Natural Hazard Disclosure Statement" to the buyer covers:
A) - all commercial property.
B) - vacant land.
C) - most residential property.
D) - agricultural property.
C) - most residential property.
Answer: C—The Natural Hazard Disclosure Statement is now a legally required part of most residential property transactions.
124
A real estate salesperson can sell:
A) - new mobile homes.
B) - only registered mobile homes.
C) - mobile homes over 32 feet.
D) - all mobile homes using a deed.
B) - only registered mobile homes.
Answer: B—Mobile homes that are registered with the Department of Motor Vehicles can be sold by a real estate licensee.
125
A real estate licensee sells a used mobile home. How much time does the licensee have to submit a contract of sale to the Department of Housing and Community Development (HCD)?
A) - 10 business days
B) - 10 calendar days
C) - 7 business days
D) - 7 calendar days
B) - 10 calendar days
Answer: B—A real estate licensee must give written notice to HCD of the transfer on an HCD form not later than the end of the 10th calendar day after the sale. (Real Estate Commissioner's Regulation 2861.)
126
The stock of a business sold under the bulk sales law is transferred by:
A) - trust deed.
B) - grant deed.
C) - bill of sale.
D) - quitclaim deed.
C) - bill of sale.
Answer: C—The stock of a business is personal property. Personal property is transferred by a bill of sale.
127
A city's master plan would include:
A) - circulation, including distribution of transportation facilities and public utilities.
B) - land use in terms of population and building density.
C) - noise problems, both existing and foreseeable.
D) - All of the above
D) - All of the above
Answer: D—Every city and county within California now is required by state law to adopt a comprehensive, long-term General Plan, also referred to as the Master Plan, for development within its jurisdiction. It usually includes background information on the area economy, its development, population growth, and existing land uses. The Government Code requires that every General Plan include provisions for land use, circulation, housing, open space, noise, and safety.
128
Which of the following is considered trust funds?
A) - Cash
B) - A check used as a deposit.
C) - A personal note made payable to the seller.
D) - All of the above
D) - All of the above
Answer: D—Trust funds are money or other things of value that are received by a broker or salesperson on behalf of a principal or any other person, and which are held for the benefit of others in the performance of any act(s) for which a real estate license is required. Trust funds may be cash or non-cash items. Some examples are: cash, a check used as a deposit(whether made payable to the broker or to an escrow or title company), a personal note made payable to the seller, or even a pink slip to a car that is given as a deposit.
129
All of the following are transferred by a bill of sale EXCEPT:
A) - fixtures.
B) - goodwill.
C) - stock-in-trade.
D) - lease.
D) - lease.
Answer: D—Goodwill, stock-in-trade and fixtures would all be included on the bill of sale as part of the transfer of a business. The provisions for transferring a lease would be provided in the lease or a new lease would be drawn up.
130
When a real estate licensee accepts trust funds from his/her client in connection with the purchase of real property, the licensee must place these funds into the proper place:
A) - by the next working day following receipt.
B) - within three business days following receipt.
C) - by midnight of the current business day.
D) - by midnight of the third business day following receipt.
B) - within three business days following receipt.
Answer: B—If the broker (or broker's salesperson) fails to place the funds into one of the three authorized places within three business days following receipt of the funds by the broker or by the broker's salesperson, he/she is liable for commingling the funds.
131
A real estate licensee who accepts funds from others in connection with any transaction for which a license is required must place them in:
A) - A neutral escrow depository
B) - The hands of the offeree or owner
C) - A trust account maintained by the licensee.
D) - All of the above
D) - All of the above
Answer: D—A real estate licensee who accepts funds from others in connection with any transaction for which a license is required must place them in:
a neutral escrow depository,
in the hands of the offeree or owner, or
in a trust account maintained by the licensee.
132
The real estate commissioner's authority to administer and enforce the real estate law is called:
A) - the Commissioner's Regulations.
B) - state legislation.
C) - judicial precedent.
D) - the Civil Code.
A) - the Commissioner's Regulations.
Answer: A—The real estate commissioner issues regulations (Commissioner's Regulations) to aid in the administration and enforcement of the real estate law.
133
When enforcing the Subdivision Lands Law, the Real Estate Commissioner is protecting purchasers from:
A) - the design of entrance and exit driveways.
B) - energy consumption discrepancies that may cause outages.
C) - fraud and misrepresentation in the marketing and financing of subdivisions.
D) - All of the above
C) - fraud and misrepresentation in the marketing and financing of subdivisions.
Answer: C—The Subdivision Lands Law (found in the Business and Professions Code) regulates the marketing and financing of the subdivision to protect prospective purchasers.
134
Which of the following is TRUE regarding trust fund accounting records?
A) - Only manually produced accounting records are acceptable.
B) - Only computerized accounting records are acceptable.
C) - Either manually produced or computerized accounting records are acceptable.
D) - Only professionally produced accounting records are acceptable.
C) - Either manually produced or computerized accounting records are acceptable.
Answer: C—Either manually produced or computerized accounting records are acceptable.
135
When broker Smith accepts a deposit check from a client, he forwards the check directly to escrow. According to trust fund record keeping requirements, which of the following is CORRECT?
A) - It is NOT necessary to keep a record of trust funds received and forwarded to escrow.
B) - It is NOT necessary to keep a record of trust funds not deposited into the trust account.
C) - A record of trust funds received but not deposited to the trust fund bank account must be maintained.
D) - Transaction folders maintained by a broker for each transaction showing the receipt and disposition of undeposited checks are acceptable alternatives to formal records.
C) - A record of trust funds received but not deposited to the trust fund bank account must be maintained.
Answer: C—Even if the trust funds are forwarded directly to escrow, a broker is still required to keep track of funds received and not deposited to a trust fund bank account.
136
Which of the following defines the term "reconciliation?"
A) - comparing two or more sets of records to determine whether their balances agree
B) - periodically emptying an account to obtain a zero balance
C) - making sure debits always equal credits
D) - checking the chronological sequence of trust fund receipts and disbursements
A) - comparing two or more sets of records to determine whether their balances agree
Answer: A—There is an interrelation between the trust fund bank account record, the separate beneficiary or transaction record, and the bank statement. If there is an entry made on one record, there must also be a corresponding entry on the other records. Reconciliation is the process of comparing two or more sets of records to determine whether their balances agree.
137
The Subdivision Map Act requires:
A) - delivery of a copy of the public report to purchasers.
B) - special financing terms for purchasers of subdivisions.
C) - subdividers to file tentative maps with the city or county planning commission.
D) - All of the above
C) - subdividers to file tentative maps with the city or county planning commission.
Answer: C—The Subdivision Map Act covers local control over the physical aspects of a subdivision. Under this Act, subdividers are required to file a tentative map to the local planning commission showing streets, property lines, utilities, etc.
138
Funds may be withdrawn from a real estate broker's trust account by an unlicensed employee:
A) - for payment of miscellaneous expenses.
B) - for payment of general operation expenses provided proper accounting is made and money is returned.
C) - only for payment of advertising.
D) - when the unlicensed employee has written authorization from the broker and has fidelity bond coverage.
D) - when the unlicensed employee has written authorization from the broker and has fidelity bond coverage.
Answer: D—Withdrawals may be made from a trust fund account of an individual broker only upon the signature of the broker or one or more of the following persons (if specifically authorized in writing by the broker):
a salesperson licensed to the broker;
a person licensed as a broker who has entered into a written employment agreement pursuant to Section 2726 with the broker;
an unlicensed employee of the broker with fidelity bond coverage at least equal to the maximum amount of the trust funds to which the employee has access at any time.
139
The Subdivision Map Act does NOT apply to:
A) - a single parcel of 20 acres or more with road access.
B) - out-of-state subdivisions.
C) - agricultural leases.
D) - All of the above
A) - a single parcel of 20 acres or more with road access.
Answer: A—The following table compares the Subdivision Map Act (local control) with the Subdivided Lands Law (state control). Subdivision Subdivided Map Act Lands Law Number of Parcels Two or more Five or more Size of Parcels Any size Exempt if 160 acres or larger Residential Included Exempt Subdivision within City Limits Parcels Contiguous Yes No “Proposed Division” Not included Included Condominiums Included Included Community Apartments Included Included Stock Cooperatives Included only Included if five or or more dwelling units Limited Equity Not included May be exempt Housing Co-ops Time-Shares Not included Included in 12 or more Agricultural Leases Not included Included Zoned Industrial or Included Exempt Commercial Subdivisions Long-Term Leasing Not included Included of Spaces in Mobile Home Parks or Trailer Parks Leasing of Space in Not included Not included Apartment,Industrial, or Commercial Building Out-of-State Not included Included Subdivisions
140
The potential penalties for a licensee's violation of the laws concerning the handling of trust funds include:
A) - injunctions.
B) - suspension of license.
C) - revocation of license.
D) - All of the above
D) - All of the above
Answer: D—The potential penalties for a licensee's violation of the laws concerning the handling of trust funds are diverse and may be very costly in terms of money, reputation, and ability to continue licensed real estate activities. Potential penalties range from possible violations of the Realtors Code of Ethics and Professional Conduct, and injunctions, and receivership, to suspension or revocation of the real estate license.
141
In the event the commissioner has conducted an audit which reflects commingling or conversion of trust funds in excess of $10,000, the court may:
A) - imprison the licensee for not more than thirty (30) days.
B) - automatically revoke the violator's license without a formal hearing.
C) - restrain the licensee from doing business pending a formal hearing.
D) - confiscate any and all commissions earned by that licensee during the preceding calendar year.
C) - restrain the licensee from doing business pending a formal hearing.
Answer: C—In the event the commissioner has conducted an audit which reflects commingling or conversion of trust funds in excess of ten thousand dollars ($10,000), the court may enter an order restraining the licensee from doing any act or acts in furtherance thereof, and from further exercising the privileges of his/her license pending further order of the court, provided that a hearing shall be held on the order within five days after the date thereof.
142
Which of the following need NOT comply with the requirements of the Map Act?
A) - California subdivisions sold in Nevada
B) - Nevada subdivision sold in California
C) - Both (a) and (b)
D) - Neither (a) nor (b)
B) - Nevada subdivision sold in California
Answer: B—Local control of the physical aspects of this subdivision would happen in Nevada.
143
To comply with the Bulk Sales Act, publications of the sale must be made at least_________prior to the sale in a paper of general circulation where the property is located.
A) - 5 days
B) - 10 days
C) - 12 days
D) - 30 days
C) - 12 days
Answer: C—To comply with the Bulk Sales Act, a notice of sale must be published in a newspaper of general circulation within the judicial district on which the property is located at least 12 business days before the sale is consummated.
144
Which of the following must comply with the Subdivision Map Act?
A) - noncontiguous units.
B) - parcels of 160 acres or more.
C) - leasing commercial office spaces.
D) - None of the above
B) - parcels of 160 acres or more.
Answer: B—Parcels of any size fall under the Map Act. Parcels of 160-acres or more are exempt from the Subdivisions Lands Law.
145
To enforce and administer the Map Act, the local planning commission would be interested in:
A) - streets.
B) - utilities.
C) - interior design
D) - both (a) and (b)
D) - both (a) and (b)
Answer: D—The Subdivision Map Act gives the local authorities control over the physical aspects of the subdivision. The objectives of the Act are to coordinate subdivision design, including streets and utilities with the General Plan.
146
A real estate licensee applies for a license renewal, but the DRE does a background check and finds out that the licensee is delinquent on his child support payments. Which of the following is correct?
A) - His license renewal will be denied until he is no longer in arrears with his child support?
B) - He will be given a temporary 150-day license, but if he still hasn't paid his child support in 150 days, his license will be suspended.
C) - His license renewal will be denied and he will never be able to obtain a license even if he pays his child support obligation in full.
D) - His license renewal will be denied and the DRE will turn his file over to the District Attorney.
B) - He will be given a temporary 150-day license, but if he still hasn't paid his child support in 150 days, his license will be suspended.
Answer: B—In accordance with Section 17520 of the Family Code, DRE is precluded from issuing or renewing a full-term license if the applicant is on a list of persons (obligors) who have not complied with a court order to provide child support payments. The Department of Child Support Services compiles the list from information provided by the District Attorney of each county in California.
DRE will issue a 150-day license to an otherwise qualified applicant who is on the list of child support obligors. DRE will advise the applicant that the license applied for cannot be issued unless a release is furnished to DRE from the District Attorney's office during the 150 days.
DRE also receives a supplemental list of obligors who are over four months delinquent in child support payments. DRE compares this list to the total real estate licensee population. If there is a match of an existing licensee and the license is not due for renewal for at least six months, the licensee will be advised that the license will be suspended if the delinquency is not cleared within 150 days. The suspension will remain in effect until the delinquency is cleared.
147
The transfer of privately owned land to the public under approval of the Map Act is called:
A) - gifting.
B) - condemnation.
C) - dedication.
D) - government taking.
C) - dedication.
Answer: C—Dedication is the transfer of privately owned land to the public with the intent that the land will be accepted and used for public use.
148
The fees charged for property management are usually:
A) - a flat fee and a percentage of gross rents.
B) - a percentage of net rents.
C) - flat fee plus expenses.
D) - flat rate.
A) - a flat fee and a percentage of gross rents.
Answer: A—Property managers can charge a flat fee and/or a percentage of gross rents. Usually when they take over a property, the manager may require the flat fee in order to bring the property up to market.
149
Who must sign and deliver a copy of the Real Estate Transfer Disclosure Statement to the buyer?
A) - seller's attorney
B) - escrow company
C) - seller
D) - buyer's agent
C) - seller
Answer: C—The transferor (seller) of any real property subject to the statutory requirements for delivery of the TDS must sign the written statement and deliver it to the buyer.
150
Which of the following is NOT included in Phase I of an Environmental Report?
A) - Soil analysis
B) - Interview neighbors
C) - Aerial photos
D) - Drainage patterns
A) - Soil analysis
Answer: A—The correct term is Environmental Site Assessment (ESA). In the United States, an environmental site assessment is a report which identifies potential or existing environmental contamination liabilities. The actual sampling of soil, air, groundwater and/or building materials is typically NOT conducted during a Phase I ESA.
151
In real estate transactions, the type of misrepresentation which occurs least often is:
A) - innocent misrepresentation.
B) - negligent misrepresentation.
C) - fraudulent misrepresentation.
D) - malicious misrepresentation.
C) - fraudulent misrepresentation.
Answer: C—Fraud is deliberate. Few brokers try to deliberately commit fraud.
152
A broker is showing property to a person who is an ethnic minority. The broker decided to show property in a certain area because of his customer's race. This is an example of:
A) - redlining.
B) - blockbusting.
C) - plottage.
D) - steering.
D) - steering.
Answer: D—Steering is the illegal practice of channeling prospective home purchasers or renters into homogenenous neighborhoods and actively directing them away from neighborhoods of different racial or ethnic composition.
153
Which of the following is NOT included in the Natural Hazard Disclosure Statement?
A) - fire
B) - flood
C) - earthquake
D) - weather conditions
D) - weather conditions
Answer: D—Weather conditions are NOT considered a natural hazard.
154
The Subdivision Map Act requires:
A) - neutral exterior paint colors.
B) - two-bedroom floor plans.
C) - planning commission approval.
D) - All of the above
C) - planning commission approval.
Answer: C—The Subdivision Map Act requires the subdivider to prepare and file a tentative map with the local planning commission.
155
Regarding environment standards, Federal law requires the seller of a new home to disclose which of the following to the buyer?
A) - Type of windows
B) - Thickness of the walls
C) - R-rating
D) - Type of foundation
C) - R-rating
Answer: C—Federal law requires that a "new home" seller (including a subdivider) disclose in every sales contract the type, thickness, and R-value of the insulation which has been or will be installed. (Federal Trade Regulation Section 460.16; Public Resources Code Section 25402 et seq.)
156
A broker communicates information given to him by the seller to the buyer in full faith that the seller's information is true. It is later proven that the information was false, and the buyer rescinds. The broker is subject to:
A) - discipline by the licensing authority
B) - civil action
C) - criminal action
D) - all of the above
B) - civil action
Answer: B—Even though the broker acted in good faith and was simply passing on information provided by the seller, he/she might still get sued (civil action). The real estate commissioner would not get involved unless it could be proven the broker committed fraud. This is not a criminal case.
157
A seller lists a property with an agent. The agent shows the property to a white prospect at one price, and the agent's broker shows the property to a minority couple at a higher price. The seller then sells the property to a neighbor because the neighbor does not want minorities next door. Who has NOT broken the law?
A) - The broker
B) - The seller
C) - The neighbor
D) - The white prospect
D) - The white prospect
Answer: D—The broker and anyone associated with him/her have broken the law by representing the property at a higher price to the minority couple. The white prospect is the only one who has not broken the law.
158
Which of the following can be used in an advertisement to show that the ad is being run by an agent, and not the owner.
A) - Bro
B) - Agt
C) - Neither
D) - Both
D) - Both
Answer: D—Anytime a broker advertises services for which a real estate license is required, the broker is required to indicate, by use of a term such as broker, agent, licensee or REALTOR®, or abbreviations such as bro., agt., that the advertising is being done by a real estate licensee. This requirement applies to all real estate salespersons not only brokers.
159
Which of the following is a lessor not allowed to deduct from a security deposit?
A) - Unpaid rent
B) - Reasonable cleaning
C) - Damage beyond normal wear and tear
D) - Rent expenses for storage of personal property left on the premises
D) - Rent expenses for storage of personal property left on the premesis
Answer: D—The landlord may deduct the first three choices. Rental on storage units for a tenant’s personal property left in the unit will be paid by the tenant when he takes the property out of storage. If the tenant fails to redeem the property within 90 days, it may be sold.
160
A broker may store records in which of the following formats?
A) - paper
B) - electronic
C) - microfiche
D) - all of the above
D) - all of the above
Answer: D—In California, real estate brokers must hold on to their records for three (3) years. That means all listings, deposit receipts, cancelled checks, trust fund records and other documents executed in connection with any transaction must be kept. Records can be created and kept in electronic format or they can be converted to electronic format for storage purposes.
161
The fundamental basis for Fair Housing throughout the United States stems from:
A) - the First Amendment of the Constitution.
B) - the National Association of Fair Housing.
C) - the 13th Amendment of the Constitution.
D) - the Rumford Fair Housing Act.
C) - the 13th Amendment of the Constitution.
Answer: C—The constitutionality of all Fair Housing laws is based on the 13th Amendment of the Constitution.
162
A salesperson asked the listing broker, who was not his employing broker, to advance him $600 against the commission the listing broker had agreed to pay to the selling agent. This listing broker paid the selling agent the $600 even though the deal had not yet closed escrow. In this situation:
A) - The listing broker had violated the Real Estate Law.
B) - This is permissible if it is in writing.
C) - This is fraud.
D) - None of the above
A) - The listing broker had violated the Real Estate Law.
Answer: A—A salesperson may only collect a commission from his or her employing broker. Likewise a broker may not pay a commission to anyone other than his employed salespeople. "Selling agent" means the agent who obtained the offer from the buyer.
163
A licensed real estate broker who owned a large real estate firm operating under the name ABC Realty Company, listed a property for a total price of $40,000. The broker and many of his salespersons were all principals in an investment company operating under the name of Realty Income Investment Company. The investment company decided to purchase the property so the broker presented an all cash offer to the owner for the full price, but did not disclose to the seller who the purchasers were. The seller accepted the offer and opened escrow. Under these circumstances:
A) - the broker's actions were perfectly legal since he offered the full cash price.
B) - the broker's offer would be legal provided he added to the escrow instructions the fact that the purchasing firm was composed of brokers and salespersons.
C) - the broker acted properly provided he agreed to waive any commission.
D) - the broker's action was improper because he did not reveal the true identity of the purchaser.
D) - the broker's action was improper because he did not reveal the true identity of the purchaser.
Answer: D—The broker has a duty to the seller to reveal all material facts. The fact that the buyers are licensed would be considered a material fact, and therefore, must be revealed before the buyer accepts the offer.
164
Jones, who does not have a real estate license, is the owner and president of an investment firm. He advertises and sells properties for his clients. Since these transactions involve real estate, who will prosecute him for violating the real estate law:
A) - The District Attorney
B) - The State Attorney General
C) - The Real Estate Commissioner
D) - The local police
A) - The District Attorney
Answer: A—The Real Estate Commissioner can issue, suspend, or revoke a real estate license (Disciplinary action). Two individuals can sue each other (Civil Action). Only the District Attorney prosecutes criminal activity (Criminal Action).
165
A landlord and a tenant entered into a two year lease on commercial retail space. Three months into the lease, the tenant realizes he is unable to continue paying the rent and asks the landlord to release him from the lease. The landlord agrees. This would be considered a(n):
A) - surrender.
B) - assignment.
C) - abandonment.
D) - default.
A) - surrender.
Answer: A—Surrender occurs when both the landlord and tenant agree to allow a termination of the lease. There is no financial liability on either the landlord or the tenant.
166
Which of the following must be kept on file by the broker for three years?
A) - loan broker statement
B) - real property security statement
C) - receipt for copy of public report
D) - All of the above
C) - receipt for copy of public report
Answer: C—The broker/subdivider must keep the receipt and make it available for inspection by the Commissioner for three years from the date it is signed. Do not confuse the public report (which is good for five years) with the receipt.
167
Which of the following statements is TRUE regarding public reports?
A) - A public report may be renewed under certain circumstances.
B) - A copy of the public report must be given to anyone on request.
C) - A copy of the public report must be displayed in the subdivision sales office.
D) - All of the above
D) - All of the above
Answer: D—All of the choices are true as to public reports. If all parcels have not been sold within five years of issuance of a final public report, it can be renewed for an additional five years.
168
All materials used in obtaining advance fee agreements must be submitted to the Real Estate Commissioner at least ____________ before they are used.
A) - 5 calendar days
B) - 10 calendar days
C) - 20 calendar days
D) - 30 calendar days
B) - 10 calendar days
Answer: B—The Real Estate Commissioner requires that any or all materials used in obtaining advance fee agreements, including but not limited to the contract forms, letters or cards used to solicit prospective sellers, and radio and television advertising be submitted to him or her at least 10 calendar days before they are used (B&P Code 10085).
169
A real estate broker can store records electronically as long as:
A) - electronic records are backed up on a monthly basis.
B) - the broker is able to provide a paper copy of any document or record requested by the DRE.
C) - the electronic image storage media is an erasable, "read-write" file that allow changes to the stored document or record.
D) - records copied and stored in electronic format are retained for one year.
B) - the broker is able to provide a paper copy of any document or record requested by the DRE.
Answer: B—Copies of real estate documents, such as all listings, real estate purchase agreements, trust fund records, and any other type of real estate related documents can be stored on electronic image storage media if the following requirements of Regulation 2729(a) are satisfied:
1. The electronic image storage shall be nonerasable "write once, read many," that DOES NOT allow changes to the stored document or record.
2. Records copied and stored in electronic format shall be retained for three years.
3. Electronic records should be backed up daily.
4. The broker shall provide, at his or her expense, a paper copy of any document or record requested by the DRE.
**Look out for another question relating to what storage formats are allowed. A broker may store records in paper, electronic, or microfiche.
170
A flood hazard exists when an area floods:
A) - Once a year
B) - Once in five years
C) - More than twice in ten years
D) - More than three times in ten years
C) - More than twice in ten years
Answer: C—A flood hazard is an area which floods more than twice in ten years.
