Practice Exam (Textbook) Flashcards
1
Q
A “loss in value from any cause” is a definition of:
a. economic obsolescence
b. depreciation
c. leverage
d. goodwill
A
b. depreciation (ch. 10)
2
Q
A couple recently married and each person had children from a previous marriage. They wish to take title to property so they can pass their share to their own children by will. The best form of title would be:
a. joint tenancy
b. severalty
c. community property
d. tenancy in whole
A
c. community property (ch. 6)
3
Q
A valid deed passes title when it is:
a. signed
b. sealed
c. delivered and accepted
d. acknowledged
A
c. delivered and accepted (ch. 6)
4
Q
In July, a buyer bought a home through the listing broker at ABC Realty and received a property disclosure. After a hard rain in November, the roof developed a severe leak. The buyer sued the seller and listing broker for the cost of a new roof. Testimony in court revealed that the seller mentioned needing to add the roof leak to the disclosure, which the listing broker failed to do. The listing broker also failed to inform the buyer of the issue. What was most likely the outcome of the court case?
a. the broker, not the seller, is liable for payment and for not disclosing the material fact
b. the buyer cannot collect since the house has closed escrow
c. the buyer could only recover from the seller since the broker is not liable for disclosures
d. the buyer cannot recover from either the seller or buyer based on the principle of caveat emptor
A
a. the broker, not the seller, is liable for payment and for not disclosing the material fact (ch 4.)
agents/brokers must ALWAYS disclose of material facts!
5
Q
The main purpose of the Truth-in-Lending Law is to:
a. prevent usury
b. require disclosure of credit terms
c. reduce the cost of credit
d. regulate annual percentage rates
A
b. require disclosure of credit terms (ch. 8)
6
Q
The difference between judgment liens and mechanics’ liens is that:
a. mechanics’ liens are general liens
b. mechanics’ liens can take priority before they are recorded
c. mechanics’ liens are voluntary liens
d. judgment liens are involuntary liens
A
b. mechanics’ liens can take priority before they are recorded (ch. 8)
7
Q
Broker Santos is in the process of listing a home. The agency disclosure must be given:
a. within five days
b. prior to close of escrow
c. prior to the seller signing the listing agreement
d. immediately after the seller signs the listing agreement
A
c. prior to the seller signing the listing agreement (ch. 4)
8
Q
On October 1, 2014, Garcia agreed to purchase Chan’s home. Both parties agreed that escrow would close on December 1, 2014, and that property taxes would be prorated taxes for the year 2014-2015. According to the escrow closing statement, which of the following is true?
a. Garcia paid Chan for seven months’ taxes
b. Garcia paid Chan for one months’ taxes
c. Chan paid Garcia for eight months’ taxes
d. Chan paid Garcia for one months’ taxes
A
a. Garcia paid Chan for seven months’ taxes (appendix b)
escrow closes December 1, 2014; tax year runs July 1 to June 30
count proration months from December 1 to July 1
= 7 months
9
Q
A quitclaim deed conveys only the present rights of the:
a. grantor
b. servient tenant
c. grantee
d. trustee
A
a. grantor (ch. 6)
grantor: the seller of property; one who signs the deed
quitclaim deed: to relinquish grantor’s interest in property
10
Q
To have a valid recorded homestead, certain elements are essential. Which of the following is not essential?
a. a description of the property
b. a statement of residence
c. to be a married person
d. to be recorded
A
c. to be a married person (ch. 8)
11
Q
A licensed loan broker arranged for a loan on a home purchase and has the borrower sign the required statement. The title work shows clouds on the title that the seller cannot clear in a timely manner. If the loan cannot be closed, the borrower is liable for:
a. cost and expenses incurred to date
b. no cost and expenses
c. all cost and expenses and half the commission
d. none of the above
A
b. no cost and expenses (ch. 8)
12
Q
A person purchased a property for $200,000, which was equal to $4.75 per square foot. The rectangular lot was 300 feet deep. The cost per front foot was:
a. $1425
b. $950
c. $827
d. $793
A
a. $1425
200,000 / 4.75 = 42,105
42,2015 / 300 = 140.35
200,000 / 140.35 = 1425
13
Q
Which of the following is not essential to form an agency?
a. a fiduciary relationship
b. agreement of the parties
c. consideration
d. competent parties
A
a. a fiduciary relationship
14
Q
An owner sells a lot for cash and receives $67,100 from escrow. The only expenses were a 6% commission and $517 in other expenses. The property sold for:
a. $71,643
b. $71,933
c. $72,591
d. $73,137
A
b. $71,933
$67,100 + $517 = $67, 617
$67,100 / 0.94 = $71,933
15
Q
A real estate agent must disclose all material facts to a seller principal. Which of the following is considered a material fact?
a. the buyer’s racial background
b. the agent’s knowledge of a pending better offer
c. the lender’s requirement that a buyer pay a loan fee
d. that the buyer has a medical problem
A
b. the agent’s knowledge of a pending better offer (ch. 5)
material fact: anything that would affect 1) the value of the property or 2) a buyer/tenant’s decision to purchase/lease the property or how much to offer to purchase or lease the property
- buyer’s racial background is not a material fact
- the agent’s knowledge of a pending better offer deals with a buyer deciding what to offer to purchase
- buyer’s requirement to pay a loan fee does not affect the value of property or the buyer’s decision to purchase
- medical problems are personal; not a material fact
16
Q
In appraising improved property, the least important factor is:
a. sales price
b. highest and best use
c. price of comparables
d. assessed value
A
d. assessed value (ch. 10)
17
Q
Common interest developments in the form of community apartments and condominium projects fall within the California Subdivision Act and:
a. are illegal
b. are regulated by state law
c. are rarely approved
d. have fewer units per acre
A
b. are regulated by state law (ch. 13 subdivision map act; 2 or more units)
18
Q
Studs are attached to rest upon the:
a. mud sill
b. subfloor
c. header
d. sole plate
A
d. sole plate (ch. 15)
19
Q
A person borrowed 80 percent of the value of a studio condo. The loan interest rate was 7%. The first year interest was $10,500. The value of the condo was:
a. $173,500
b. $182,900
c. $187,500
d. none of the above
A
c. $187,500
20
Q
Adams, Brown, and Chow are owners of commercial land as joint tenants. Adams dies and is survived by Brown and Chow. Which is correct?
a. Brown and Chow receive title by succession
b. the joint tenancy is terminated
c. Adam’s interest terminates
d. Brown and Chow are now tenants in common
A
c. Adam’s interest terminates (ch. 6)
joint tenancy:
- upon death, right of survivorship applies
- still joint tenancy; Adam’s interest only terminates
21
Q
How many acres are in the NW 1/2 of the SW 1/4 of the NE 1/4 of Section 10?
a. 40
b. 20
c. 80
d. 640
A
b. 20 (ch. 6)
1st quadrant size: 160 acres
1/2 quadrant: 80 acres
1/4 quadrant: 40 acres
22
Q
When the landlord and the tenant mutually agree to cancel a lease, their action is called a(n):
a. mutually agreed upon termination
b. rescission
c. release
d. abandonment
A
a. mutually agreed upon termination (ch. 12)
23
Q
An amortized loan has equal monthly installments consisting of:
a. interest alone
b. principal alone
c. principal and interest
d. principal, interest, taxes, and insurance
A
c. principal and interest (ch. 8)
amortized loan: level payments loan; equal payments of BOTH principal and interest
24
Q
Which of the following is an operating expense to be subtracted from gross income when appraising a property using the income approach?
a. interest payments
b. principal payments
c. property taxes
d. all of the above
A
c. property taxes (ch. 10)
operating expenses:
property taxes insurance repairs/maintenance property management fees supplies/utlities accounting/legal advertising reserves
25
The word emblements refers to:
a. attachments to a contract
b. annual crops
c. machinery
d. fixtures on a building
b. annual crops (ch. 2)
| emblements: growing vegetable crops (bells & mints... veggies?)
26
A salesperson working for a broker had been wrongfully selling information to a loan company. When the broker, who had been using reasonable supervision, discovered this, the salesperson was fired. Based upon the information given:
a. the broker is probably not liable if he or she had no knowledge of the wrongdoing
b. both the salesperson and the broker are liable
c. there is no liability
d. a salesperson is licensed to sell loan information in his or her name only
b. both the salesperson and the broker are liable (ch. 4)
broker and seller must work as one entity; being under supervision, all acts if seller must be known to broker
27
The primary function of the secondary mortgage market is to:
a. originate loans for the primary mortgage market
b. supply private mortgage insurance to borrowers
c. buy loans to fund the primary mortgage market
d. protect consumers from fraudulent lenders
c. buy loans to fund the primary mortgage market (ch. 9)
Federal National Mortgage Association (FNMA or Fannie Mae): private corporation whose primary function is to buy and sell existing mortgages in secondary market
ex: mortgage-backed securities, etc
28
Williams entered into a nine-month oral lease on July 1 to start on September 1 at a rate of $1,000 per month. On August 15, Williams backed out of the lease. The lease is:
a. unenforceable
b. enforceable
c. void
d. restricted by the statute of frauds
b. enforceable (ch. 12)
- termination of lease must be given in advance
- if lease is greater than a year, lease MUST be in writing
29
Title insurance does not protect a buyer against:
a. forgery in the chain of title
b. lack of capacity of the grantor
c. recorded easements
d. zoning restrictions
d. zoning restrictions (ch. 11)
title insurance (CLTA, ALTA, ALTA-R) normally do not insure:
- undisclosed matters
- environmental laws, zoning, other governmental ordinances
- mining and water claims
- defects known to the insured before property was purchased and not revealed to title company before the sale
30
If state housing codes conflict with local codes, usually:
a. state codes prevail
b. local codes prevail
c. the stricter of the two prevails
d. the more lenient of the two prevails
c. the stricter of the two prevails (ch. 13)
31
A broker received deposits from principals and incorrectly placed the funds in the firms operations account for several days before moving the funds to the broker's trust fund account at the bank. The broker is guilty of:
a. conversion
b. commingling
c. misrepresentation
d. fraud
b. commingling (ch. 4)
| commingling: illegal mixing of broker and principal's funds
32
A husband dies intestate in California. How is his separate property distributed to his wife and two children?
a. all to the wife
b. half to the wife and half to the children
c. all to the children
d. one-third to the wife, and the rest to the children
d. one-third to the wife, and the rest to the children (ch. 6)
separate property is distributed equally.
33
Under the Subdivided Lands Law, the real estate commissioner is primarily concerned with:
a. physical design and layout
b. health facilities
c. financing and marketing arrangements
d. none of the above
c. financing and marketing arrangements (ch. 13)
34
Jones leases a home from Santos under a three-month written lease. Upon expiration of the lease, Jones retains possession. Santos has not decided on the next step. Jones has an estate at:
a. will
b. sufferance
c. years
d. tenancy
b. sufferance (ch. 12)
estate at sufferance: tenant wrongfully holds over after expiration of term
- landlord can evict tenant as trespasser
- landlord can tenant accept for similar term
35
An investor has an apartment building with no vacancies in which reach unit rents for $600. The investor raises the rent 15% and suffers a 15% vacancy factor. Rental income:
a. increases
b. decreases
c. remains the same
d. the question cannot be answered with the information
b. decreases (ch. 10)
15% rent increase will not cover 15% vacancy.
36
A real estate agent is asked to hold the buyer's deposit uncashed until acceptance of the offer by the seller. Upon the seller's acceptance, the agent must put the deposit in escrow or in a trust fund or give the deposit to the seller within how many business days?
a. 5
b. 3
c. 2
d. 1
b. 3 (ch. 4)
37
The maximum amount of personal funds a broker may have in a trust fund account to cover charges and not be guilty of commingling is:
a. $50
b. $200
c. $500
d. $1,000
b. $200 (ch. 4)
38
Property is being sold where the buyer is going to take over the seller's existing loan. To avoid legal conflict before closing, the real estate agent should check to be sure the loan does not include a(n):
a. release clause
b. prepayment penalty
c. alienation clause
d. subordination clause
c. alienation clause (ch. 8)
alienation clause: prohibits transfer of a loan obligation
- gives lender right to call loan upon sale of real estate
- also called due-on-sale clause
39
The stated policy of the real estate commissioner is to create an equal opportunity industry. This means agents should:
a. maintain an attitude free from bias
b. realize that race, creed, and color are not material facts
c. do unto others as you would have them do unto you
d. do all of the above
d. do all of the above (ch. 13)
40
A California subdivider sold five lots to one buyer and optioned five others lots to another buyer. The subdivider must:
a. notify the Bureau of Real Estate of a material change
b. close the option sales within three business days
c. record the sales within five business days
d. not sell five lots to a single purchaser
a. notify the Bureau of Real Estate of a material change (ch. 13)
41
Under the federal Truth-in-Lending Law (Regulation Z), certain borrowers have how many days to rescind their loan?
a. 30
b. 10
c. 5
d. 3
d. 3 (ch. 8)
42
A seller employed a broker under an open listing. The seller indicated to the broker that the roof leaked. While showing the home to a buyer, the broker stated that the roof was in good condition. After the sale, the buyer discovered that the roof leaked. The broker is guilty of:
a. false promise
b. statute of frauds
c. misrepresentation
d. all of the above
c. misrepresentation (ch. 4)
misrepresentation: broker misstates some material feature of real property
- failure to disclose in other cases
43
Under Division 6 of the Uniform Commercial Code (Bulk Sale), a public notice must be given 12 days before transfer by:
a. the seller
b. the buyer
c. the creditors
d. all of the above
b. the buyer (ch. 1)
44
The value of the subject property as set by the price of comparable properties is based on the principle of:
a. change
b. regression
c. substitution
d. highest and best use
c. substitution (ch. 10)
principle of substitution: maximum value of property tends to be set by cost of acquiring equally desirable and valuable substitute property (assuming no costly delay)
45
A California real estate broker sold a ranch in Montana to a California resident. A Montana broker assisted in the sale. To show appreciation, the California broker gave part of the commission to the Montana broker. This action was:
a. unlawful because the California broker was not licensed in Montana
b. unlawful because the Montana
c. lawful
d. none of the above
a. unlawful because the California broker was not licensed in Montana (ch. 4)
46
Income tax benefits for homeowners include deductions for:
a. interest on home loans
b. depreciation on buildings
c. expenses and repairs
d. all of the above
a. interest on home loans (ch. 14)
applicable to homeowners LIVING IN residence:
-interest paid deductible against personal income
applicable to absentee/non-owner occupied homes:
- depreciation on buildings
- repairs, maintenance, management, insurance, misc. operating expenses
- 1031 exchanges (like-kind property)
47
All REALTORS® in California are bound by which code of ethics?
a. National Mortgage Brokers Association
b. National Association of Real Estate
c. National Association of REALTORS® (NAR)
d. all of the above
c. National Association of REALTORS® (NAR) (ch. 1)
48
In issuing a policy of title insurance, the title company is least likely to make an on-site inspection if the policy is a(n):
a. CLTA standard owner's policy
b. ALTA extended policy
c. construction loan policy
d. lender's policy
a. CLTA standard owner's policy (ch. 11)
49
A real estate broker must retain copies of all listings and deposit receipts for how many years?
a. 1
b. 3
c. 4
d. 5
b. 3 (ch. 5)
50
The first half of real property taxes is due and payable on November 1. The taxes become delinquent after December 10, at which time, if not paid, a penalty is added to the amount. The penalty is:
a. 10 percent
b. 8 percent
c. 6 percent
d. 3 percent
a. 10 percent (ch. 14)
51
A Notice of Non-responsibility is usually posted and recorded by an owner when a:
a. bulk sale takes place
b. tenant approves repairs without consent from the landlord
c. transfer of title takes place
d. mechanics' lien is filed
b. tenant approves repairs without consent from the landlord (ch. 7)
52
The maximum ownership rights in property are known as:
a. fee simple absolute
b. estate for years
c. fee simple defeasible
d. life estate
a. fee simple absolute (ch. 6)
FEE / SIMPLE are synonymous.
ABSOLUTE: in estate involves greatest title power; no limitation or end.
DEFEASIBLE: open to revision or forfeiture.
53
Which of the following is not a fiduciary relationship?
a. broker to seller
b. trustor to beneficiary
c. attorney to client
d. attorney-in-fact to principal
b. trustor to beneficiary (ch. 8)
54
An appraiser determines that the market rent for a parcel of land is $700/mo. and that interest (capitalization) rates should be 11%. The approximate value is:
a. $54,545
b. $69,280
c. $76,364
d. $105,000
c. $76,364 (ch. 10)
$700 x 12 = $8,400
$8,400 / 0.11 = $76,364
55
An owner plans to divide a parcel of land into nine parcels, with the intention of selling three parcels per year for each of the next three years. The owner:
a. must satisfy the Subdivision Map Act
b. must report to the real estate commissioner, but not need to conform to the Subdivision Map Act
c. must comply with the Subdivision Map Act and the Subdivided Lands Law
d. need not comply with any special law, as fewer than five lots are being sold in any one year
c. must comply with the Subdivision Map Act and the Subdivided Lands Law (ch. 13)
subdivided lands act:
- FIVE or more lots OR parcels
- administered by STATE (CA) commissioner
subdivision map act:
- TWO or more lots OR parcels
- administered by LOCAL officials
56
Which of the following is a less-than-free hold estate?
a. fee simple defeasible
b. fee simple absolute
c. leasehold estate
d. life estate
c. leasehold estate (ch. 12)
leasehold estate: interest in property as a tenant
freehold estate: interest in property as an owners
57
A lease that lies between the primary lease and the sublessee is a:
a. sandwich lease
b. percentage lease
c. ground lease
d. wedge lease
a. sandwich lease (ch. 12)
58
A California easement by prescription requires a minimum period of hostile use of:
a. five years
b. three years
c. two years
d. one year
a. five years (ch. 7)
59
A corporation built a large tract of homes and hired a handyperson to take care of the maintenance. The handyperson was given extra compensation for showing the homes on weekends to prospective buyers.
a. the corporation is not in violation of real estate regulations
b. the handyperson could be fined for showing homes without a license
c. as an employee, the handyperson does not need a license to show homes
d. all corporate employees and officers selling the homes must be licensed
b. the handyperson could be fined for showing homes without a license (ch. 1)
60
After a trustee's sale, any money remaining after paying lienholders and costs is remitted to the:
a. trustor
b. trustee
c. beneficiary
d. mortgagor
a. trustor (ch. 8)
61
The person who acquires title to real property under the terms of a will is known as the:
a. devisee
b. administrator
c. testator
d. executrix
a. devisee (ch. 6)
| devisee: one who receives a bequest made by will
62
A "commercial acre" is:
a. 43,560
b. a normal acre, less deductions for streets and setbacks
c. an acre zoned for commercial use
d. 42,513 sq. ft.
b. a normal acre, less deductions for streets and setbacks (ch. 6)
63
As required by law and regulations, a real estate broker must have a:
a. trust fund account
b. trust fund logbook
c. credit card for business use only
d. both a and b are correct
b. trust fund logbook (ch. 4)
64
An owner gives a quitclaim deed to Wilson for a parcel of real estate. Wilson does not record the deed. Which of the following is true of the deed?
a. it is not valid since an essential element is recording
b. it will not become valid until recorded
c. it is valid, but Wilson may lose title if another party records a deed
d. recording is not required if the part is in possession
c. it is valid, but Wilson may lose title if another party records a deed (ch. 6)
65
When public records are used to establish a chain of title, a written summary of the results is known as a(n):
a. guarantee of title
b. abstract of title
c. opinion of title
d. affidavit of title
b. abstract of title (ch. 12)
66
After a mortgage is executed and recorded, title:
a. remains with the mortgagee
b. transfers to the mortgagee
c. is given to the trustee
d. remains with the trustor
a. remains with the mortgagee (ch. 8)
67
A real estate contract to by an emancipated minor is:
a. void
b. voidable
c. unenforceable
d. valid
d. valid (ch. 5)
A contract is VOID if by a minor (under 18 years old).
EMANCIPATED MINORS are the exceptions. They are married or serving in the military or whose parents have been relieved of legal responsibility for their minor's actions.
EMANCIPATED MINORS can LEGALLY contract for real property.
68
An exclusive agency listing differs from an exclusive right-to-sell listing in that:
a. only the exclusive right-to-sell listing must have a definite termination date
b. the broker is entitled to a commission if the owner sells a property under an exclusive agency listing
c. only the exclusive right-to-sell listing must be in writing to be enforceable
d. under the exclusive right-to-sell listing, the broker is entitled to a commission no matter who sells property during the term of the listing
d. under the exclusive right-to-sell listing, the broker is entitled to a commission no matter who sells property during the term of the listing (ch. 5)
69
A buyer in a land project can rescind the purchase for any reason and obtain a refund within:
a. 3 days
b. 5 days
c. 10 days
d. 14 days
d. 14 days (ch. 13)
70
Which of the following represents the four essential value?
a. scarcity, cost, demand, utility
b. utility, transferability, cost, demand
c. transferability, utility, demand, scarcity
d. demand, cost, utility, price
c. transferability, utility, demand, scarcity (ch. 10)
71
All of the following are contracts, except:
a. escrow instructions
b. a listing agreement
c. a deed
d. a deposit receipt
c. a deed
72
The cost approach to value has limited use when appraising:
a. a new building
b. tract homes
c. museum buildings
d. special-purpose properties
b. tract homes (ch. 10)
73
When an agent violates anti-discrimination regulations, the real estate commissioner can:
a. sue for damages
b. file a criminal action
c. revoke a license
d. do all of the above
c. revoke a license (ch. 10)
commissioner only has ability to revoke and suspend license.
74
Zowski holds a life estate measured by his own life. He leased the property to Anderson for five years, but died two months later. The lease is:
a. still valid
b. no longer valid
c. invalid from the inception
d. binding on their heirs of Zowski
b. no longer valid (ch. 7)
75
An owner sold a lot for $70,400 realizing a 20% profit over what was originally paid for the lot. The profit is:
a. $11,733
b. $14,080
c. $13,714
d. $12,509
a. $11,733
$70,000 / 1.20 [20% over what was originally paid for] = $58,667
$70,400 - $58,667 = $11,733
76
Which of the following is not essential to a general contract?
a. that it be in writing
b. mutual consent
c. capable parties
d. lawful object
a. that it be in writing (ch. 5)
trick question. 5 essential elements of a real estate contract are:
- parties capable of contracting
- mutual consent
- lawful object
- sufficient consideration
- statute of frauds: must be in writing
77
An example of a lender that frequently uses loan correspondents and funds
large commercial loans is a:
a. savings bank
b. commercial bank
c. credit union
d. life insurance company
d. life insurance company (ch. 9)
78
The TRID closing disclosure is required to be delivered to the borrower no later than:
a. three days after application
b. five days before the appraisal
c. ten days after loan approval
d. three days before closing
d. three days before closing (ch. 11)
79
A deeds a title to B with the condition that B never sells alcoholic beverages on the property. B has a:
a. less-than-freehold estate
b. fee simple absolute
c. fee simple defeasible
d. periodic tenancy
c. fee simple defeasible (ch. 6)
fee simple defeasible: ownership dependent on specific requirements
80
An abstract of judgment can be recorded:
a. in any county
b. only in the county where the judgment is to be placed
c. only in the county where the debtor has real property
d. only in the county where the creditor resides
a. in any county (ch. 7)
81
The amount of real estate commission is:
a. regulated by the real estate commissioner
b. subject to negotiation
c. fixed by trade groups
d. governed by the state law
b. subject to negotiation (ch. 5)
82
A roof that is pitched with two sloping sides is called:
a. hip
b. gable
c. mansard
d. gambrel
b. gable (ch. 15)
gable roof: pitched roof with sloping sides
gabrel roof: a curb roof, having a steep lower slope with a flatter upper slope above
83
A contract that is executory:
a. has not been performed
b. has been signed
c. is completed
d. has been notarized
a. has not been performed (ch. 5)
| executory: some act of the contract remains to be completed by one or more of the parties
84
How much money would have to be invested at a 7 percent return to give an investor $200/month?
a. $34,286
b. $48,000
c. $43,705
d. $39,325
a. $34,286
$200 x 12 = $2,400 year
$2,400 / 0.07 = $34,286
85
A person who believes he or she has been discriminated against in seeking housing can file a complaint with the:
a. Federal Trade Commission
b. Rumford Commission
c. Unruh Commission
d. Fair Employment and Housing Commission
d. Fair Employment and Housing Commission (ch. 13)
86
A borrower decides to apply for a loan with a 90% LTV which requires PMI. The borrower did this to:
a. create more equity
b. have a smaller down payment
c. get a better interest rate
d. to pay off the principle sooner
b. have a smaller down payment
PMI = private mortgage insurance; protects the lender in case of mortgage issues with borrower.
-common with loans of down payments less than 20%
87
After a loan has been granted, rapid unanticipated inflation would most benefit a:
a. borrower with an ARM loan
b. fixed-interest rate beneficiary
c. trustor with a fixed interest rate
d. trustee
c. trustor with a fixed interest rate (ch. 8)
88
The most difficult depreciation to correct is:
a. physical
b. economic
c. functional
d. accrued
b. economic (ch. 10)
89
Properties A and B each have a value of $200,000. Property A was appraised using a capitalization rate of 6%, whereas Property B was appraised using a capitalization rate of 7%.
a. Property B has more income than Property A
b. Property B has less income than Property A
c. Property A and Property B have the same income
d. none of the above
a. Property B has more income than Property A
Net Income = (Property Value x Cap Rate) / 12
Property A: $200,000 (.06) = 12,000 / 12 = $1,000/mo.
Property B. $200,000 (.07) = 14,000 / 12 = $1,167/mo.
90
Which of the following is not appurtenant or incidental to the land?
a. stock in a mutual company
b. an easement
c. reasonable airspace
d. a picked crop
d. a picked crop (ch. 2)
| keyword: picked; an unpicked crop would be considered an easement
91
Recording of an instrument gives:
a. actual notice
b. constructive notice
c. preliminary notice
d. recorded notice
b. constructive notice (ch. 6)
constructive notice: notice given by the public records
92
A rate of interest that exceeds the legal rate is:
a. the nominal rate
b. the going rate
c. the stated rate
d. none of the above
d. none of the above (ch. 8)
| usury: the illegal practice of lending money at unreasonably high interest rates
93
The Federal National Mortgage Association (Fannie Mae) was primarily created to:
a. insure low-income housing loans
b. increase the amount of money available to finance housing
c. insure bank depositors for up to $250,000 per account
d. lengthen the term for real estate loans
b. increase the amount of money available to finance housing (ch. 9)
FHA (Federal Housing Administration) loans insures mortgages for low down payment financing, typically 3.5% to 20%
94
Broker Sanchez and Broker Roberts both have an open listing on a home. Broker Sanchez showed the home to a buyer who decided not to make an offer. A month later, Broker Roberts showed the same home to the same buyer, who then decided to buy. The seller owes a commission to:
a. Broker Sanchez only
b. Broker Sanchez and Broker Roberts
c. Broker Roberts only
d. Broker Sanchez, who needs to split it with Broker Roberts
c. Broker Roberts only (ch. 5)
95
Both the buyer and the seller initial the liquidated damages clause in a deposit receipt. Later the buyer backs out. The seller is entitled to:
a. actual damages
b. no damages
c. punitive damages
d. liquidated damages
d. liquidated damages
96
A person borrowed $2,500 on a straight note. In eight months, $150 in interest was paid. The interest rate is:
a. 8.4%
b. 9%
c. 10.1%
d. 10.6%
b. 9%
$150 / 8 = $18.75/mo. in interest
$18.75 x 12 = $225 total interest
$225 / $2500 = 0.09
97
If a dispute arises during escrow and the buyer and seller cannot agree, the escrow holder may legally:
a. file an interpleader action
b. return all funds to the respective parties
c. cancel the escrow
d. do all of the above
a. file an interpleader action (ch. 11)
98
The SW 1/4 of the NW 1/4 of the SE 1/4 of the SE 1/4 of the NW 1/4 of a section contains:
a. 1/4 acres
b. 2 1/2 acres
c. 5 acres
d. none of the above
d. none of the above (ch. 5)
99
Which of the following requires a real estate agent to do a physical inspection of a home and then report the results of said inspection?
a. Disclosure Regarding Real Estate Agency Relationship
b. Real Estate Transfer Disclosure Statement
c. Natural Hazard Disclosure Statement
d. Independent Real Estate Inspection Report
b. Real Estate Transfer Disclosure Statement (ch. 5)
100
An owner hired a broker to act as a property manager and collect rent from tenants. Rents are due on the first of the month. On July 1, the broker collected rents from all but one of the tenants. The next day, the owner died. On June 2, the broker asked the remaining tenant for the rent. The tenant refused to give the rent money to the broker. The tenant:
a. must give the rent to the broker
b. should not give the rent to anyone but the heirs or the court
c. is in default by not giving the rent to the broker
d. need not pay the rent
b. should not give the rent to anyone but the heirs or the court (ch. 4)
101
Which of the following employment situations would require withholding taxes?
a. independent contractor
b. jobber
c. employer-employee
d. agent
c. employer-employee (ch. 4)
102
If there is no notice of completion, a subcontractor must file a mechanic's lien in:
a. 10 days
b. 30 days
c. 60 days
d. 90 days
d. 90 days (ch. 7)
103
Which of the following is not issued by the Bureau of Real Estate?
a. real estate broker license
b. prepaid rental listing license
c. real estate sales license
d. escrow license
d. escrow license (ch. 1)
104
The fine for an unlicensed individual who receives a real estate commission is:
a. $20,000
b. $2,000
c. $200
d. none of the above
a. $20,000 (ch. 1)
105
When a buyer purchases a condominium, the buyer must be given which of the following regarding CC&Rs, the amount of homeowner dues, and financial pending lawsuits (if any) about the homeowner's association?
a. common interest development general information
b. real estate transfer disclosure statement
c. natural hazard disclosure statement
d. seller financing disclosure statement
a. common interest development general information
106
An out-of-state developer wishes to sell lots to Californians. All of the following apply, EXCEPT:
a. the sales agreements must carry a disclaimer approved by the California real estate commissioner
b. all advertising must carry a disclaimer approved by the California real estate commissioner
c. the Subdivision Map Act will be enforced
d. all of the above apply
c. the Subdivision Map Act will be enforced (ch. 13)
107
The $500,000 exemption on the profits from the sale of a qualified principal residence applies for homeowners who are:
a. 50 years or older
b. married and file joint tax returns
c. native Californians only
d. earning an income of $125,000 or less
b. married and file joint tax returns (ch. 14)
108
Equity in real property is the:
a. cash flow value
b. total of all mortgages
c. difference between the mortgage balance and current value
d. appraised value
c. difference between the mortgage balance and current value
109
The maximum time that urban real estate can be leased is:
a. 99 years
b. 51 years
c. 30 years
d. 15 years
a. 99 years
110
Which of the following is not required to obtain title to unimproved land by adverse possession?
a. minimum of 5 years
b. open and notorious use
c. color of title or claim of right
d. that the acquiring party live on the property
d. that the acquiring party live on the property
111
Certain unities are required to maintain a joint tenancy relationship. They are:
a. grantee, unity, possession, and claim
b. time, title, interest, and possession
c. interest, time, title, and possession
d. ownership, time, title, and interest
c. interest, time, title, and possession (ch. 6)
112
The Health and Safety Code specifies minimum standards for water and sewer facilities in a new subdivision. Approval and control for local water and sewer rest with the:
a. local officials
b. real estate commissioner
c. state officials
d. planning commissioner
a. local officials (ch. 13)
113
Most real estate syndicates in California use which form of ownership?
a. corporation
b. limited partnership
c. real estate investment trust
d. joint venture
b. limited partnership (ch. 6)
114
The words "procuring cause" would have the most important meaning under which circumstance?
a. a lawsuit by the buyer
b. a dispute between brokers over a commission
c. a disagreement between buyer and seller
d. a dispute over loan proceeds
b. a dispute between brokers over a commission (glossary)
procuring cause: the cause originating from a series of events that, without break in continuity, results in the prime object of an agent's employment producing a final buyer
115
Which of the following would violate the advertising provisions of the Truth-in-Lending Law? Ads that state:
a. no money down
b. $100,000 all-cash sale
c. $200,000 price, easy terms
d. qualification for FHA financing
a. no money down (ch. 8)
116
In the event that a seller backs out of a valid purchase contract, all of the following are true, except:
a. the buyer could sue for damages
b. the buyer could sue for specific performances
c. the broker could sue for damages
d. the broker could sue for specific performance
d. the broker could sue for specific performance (ch. 5)
117
A federal law regarding the sale of subdivided lots is the:
a. Subdivision Map Act
b. Interstate Land Sales Full Disclosure Act
c. Land Project Act
d. Subdivided Lands Law
b. Interstate Land Sales Full Disclosure Act (ch. 13)
Interstate Land Sales Full Disclosure Act: regulates land sales between two or more states
118
The instrument used to transfer title to personal property is the:
a. deed
b. bill of lading
c. lease
d. bill of sale
d. bill of sale
bill of sale: a written instrument GIVEN TO PASS TITLE of personal property from the vendor to the vendee
deed: CONVEYS what is legally included in the sale, a RECEIPT
119
An example of functional obsolescence is a:
a. one bath, four bedroom home
b. cracked foundation
c. truck route in front of a home
d. detrimental change in zoning
a. one bath, four bedroom home (ch. 10)
functional obsolescence: a loss in value caused by:
- an unpopular floor plan and layout
- lack of updated, modern appliances and equipment
- a poor or unpopular architectural design and style
a four bedroom, one bathroom home is an UNPOPULAR FLOOR PLAN
120
When the real estate commissioner receives a valid complaint against a licensee, the commissioner institutes action against the licensee under the:
a. Business and Professions Code
b. Administrative Procedures Code
c. Real Estate Code
d. Rules and Regulations Code
b. Administrative Procedures Code (ch. 1, p. 9)
the commissioner and members of the bureau screen applicants for licenses and investigate complains against licensees.
121
When a business opportunity is sold, a price is often paid for continued patronage. This continued patronage is called:
a. goodwill
b. blue sky
c. turnover
d. future sales
a. goodwill (ch. 1, p. 15)
| goodwill: expectation of continued public patronage
122
A cloud on title could be created by:
a. a recorded homestead
b. a deed of trust paid, but never reconveyed
c. an easement for utility poles
d. recorded covenants and conditions
b. a deed of trust paid, but never reconveyed (ch. 8, p. 203)
cloud on title: any conditions revealed by a title search that affect the title to property; these are usually relatively unimportant items, but cannot be removed without a quitclaim deed or court action
quitclaim deed: a deed to relinquish any interest in property the grantor may have
grantor: seller of property
grantee: purchaser of property
123
A written agency between a real estate broker and a principal would NOT be:
a. executed
b. implied
c. expressed
d. a contract
b. implied (ch. 5)
implied contract: parties have NOT formally agreed verbally or through WRITTEN agreement to perform an act
124
Which act of California law prohibits real estate agents from discriminating while conducting business?
a. Unruh Civil Rights Act
b. Housing Financial Discrimination Act
c. Holden Act
d. Civil Rights Act of 1968 and 1988 Amendments
a. Unruh Civil Rights Act (ch. 13, p. 358)
Unruh Civil Rights Act: law that makes it unlawful for people engaged in business in California, including real estate agents, to discriminate when providing business products and services
The Civil Rights Act of 1968 and 1988 Amendments is the FEDERAL FAIR HOUSING ACT. This states that within constitutional limits, fair housing should prevail throughout the U.S.
125
When a real estate broker acts exclusively for the buyer or seller, but not for both, it is called a(n):
a. dual agency
b. exclusive agency
c. divided agency
d. single agency
d. single agency (ch. 5)
single agency: a broker represents EITHER the buyer or seller, but NOT BOTH, in a real estate transaction
"exclusively" is a trick word in this question. an "exclusive agency" is a type of LISTING; it is a written instrument giving one agent the right to sell property for a specified time, but reserving the right of the owner to sell the property without the payment of commission.
126
The most important factor in estimating the value of residential homes is:
a. square footage
b. demand by ready, willing, and able buyers
c. floor plan
d. rent
b. demand by ready, willing, and able buyers (ch. 10, p. 267)
remember DUST in creating/estimating value:
- Demand
- Utility
- Scarcity
- Transferability
assuming a scarce number of properties for sale, the greater the number of READY, WILLING, AND ABLE buyers (demand), the greater the likelihood that the property offered for sale will increase in value
127
In an exclusive-agency listing:
a. only the broker who is the procuring cause gets paid
b. the listing broker must be the one who sells the property to be paid
c. a buyer's agent from MLS and the listing broker would be paid if the property closes
d. if the seller sells the property, the listing broker will be reimbursed for marketing fees
c. a buyer's agent from MLS and the listing broker would be paid if the property closes (ch. 5)
128
Once an abstract of judgment is recorded, it remains in force for:
a. 1 year
b. 3 years
c. 5 years
d. 10 years
d. 10 years (ch. 7, p. 186)
abstract of judgment: a WRITTEN SUMMARY of a judgment which states how much money the losing defendant owes to the person who won the lawsuit
the judgment lien normally runs for 10 years. any real property acquired during the 10-year period in the county where the abstract is filed automatically becomes encumbered by the judgment lien.
129
The secondary mortgage market refers to:
a. the resale of existing loans
b. the granting of second loans
c. mortgage brokers who arrange loans
d. none of the above
a. the resale of existing loans (ch. 9, p. 253)
the secondary mortgage market: existing real estate LOANS ARE BOUGHT AND SOLD--in other words, lenders sell their loans to other lenders and investors. this funnels money back into the primary market so that money can be lent again.
there is only a finite supply of money. demand can be great, and there needs to be a balance. mortgage funds need to be shifted where they are needed.
130
Real estate loans that are pegged to some index and in which the interest rate may change during the term of the loan are called:
a. conventional loans
b. FHA loans
c. ARM loans
d. seller carry loans
c. ARM loans (ch. 8, p. 200)
ARM (adjustable rate mortgage) loan: a mortgage where the interest rate may go up or down, thereby the monthly payment may decrease or increase over the life of the loan
these were hugely common during the 2008 crisis. borrowers weren't able to pay for their mortgages when the market slowed down and rates went up, causing an influx of defaults. eventually, MBS in bonds went bad and bond prices EVENTUALLY moved
131
The unauthorized use of the term REALTOR® is:
a. a criminal offense
b. a violation of California Real Estate Law
c. not a problem if the person is a licensed broker
d. not punishable in California
b. a violation of California Real Estate Law (ch. 1)
132
If a tenant is late on the rent, an owner should serve a(n):
a. 30-day notice
b. 3-day notice
c. unlawful detainer warrant
d. eviction notice
b. 3-day notice (ch. 12)
133
Once a real estate broker's license has been revoked or suspended, his or her sales associates can:
a. be paid commissions earned prior to the suspension
b. collect rents as property managers
c. continue to work on existing listings
d. take new listings with a post date on the contract
a. be paid commissions earned prior to the suspension (ch. 1, p. 9)
- once a real estate broker's license is suspended or revoked, any salesperson working under said broker's license must cease working for that broker.
- any commission earned by the salesperson PRIOR TO THE DATE OF THE BROKER'S SUSPENSION OR REVOCATION are allowed to be paid to the salesperson.
134
A woman died and left an estate. 37% went to her husband; 18% went to each of the two sons and one daughter. The rest went to a college foundation. The college foundation received $37,000. The daughter's share was:
a. $74,000
b. $84,000
c. $96,000
d. $124,000
a. $74,000
[college: 9%]
$37,000 / 0.09 = $411,111
husband: 37%; son a: 18%; son b: 18%; daughter: 18%
[total family: 91%]
$411,111 (0.09) = $74,000
135
Adam sells his property to Baker. Baker places the deed to the property in his safety deposit box without recording. Adams also sells the property to Collins who records her deed and takes possession with no knowledge of the baker transfer. Who is most likely to be deemed the owner of the property?
a. Baker and Collins will have title as joint tenants
b. Baker
c. Baker and Collins in severalty
d. Collins
d. Collins (ch. 6)
- ACCEPTANCE of a deed is a voluntary act that may be accomplished by RECORDING
- Because Collins recorded the deed and Baker did not, Collins will most likely be deemed the owner
136
Personal property attached to a building in such a way that it becomes part of the building is known as a(n):
a. appurtenance
b. fixture
c. attachment
d. dedication
b. fixture (ch. 2)
fixture: appurtenances attached to the land or improvements, which usually cannot be removed without agreement, as they become real property
- plumbing fixtures
- store fixtures built into the property
appurtenance: something annexed to another thing that me be transferred incident to it; that which belongs to another thing
- barn
- a dwelling
- a garage
- an orchard
- all are incident to the land to which it is attached
137
The situation by which property reverts to the state for lack of heirs is called:
a. escheat
b. eminent domain
c. condemnation
d. intestate succession
a. escheat (ch. 6)
escheat occurs if intestate succession does not.
"probate courts do all in their power to locate possible heirs. after escheat proceedings are instituted, the title is held in trust be the state for a set time. if at the end of that time no heirs have been located, title to the property transfers to the state. every year, millions of dollars' worth of property escheats to the state of California because of the lack of heirs."
intestate: a person who dies having made no will or a will that is defective in form, in which case the estate descends to the heirs at law or next of kin.
138
When work is done per the Street Improvement Act of 1911, property owners are allowed to pay their pro rate share within how many days before it goes to bond?
a. 30
b. 60
c. 90
d. 180
a. 30 (ch. 14, p. 373)
Street Improvement Act of 1911: a law used by cities and counties for street improvements.
- Local government or a specially formed district hires a contractor to install or improve streets
- Each owner along the street is liable for a pro rata share of the cost. The owner can pay in full within 30 days after completion, or the local government can sell bonds to raise the revenue to pay the contractor.
- If the project goes to bond, the property owners can pay their pro-rated share in installments over a period of time.
- Failure to pay a special assessment can result in a loss in the property owner's title, similar in nature to a tax sale.
139
The real property tax year runs from:
a. January 1 to December 31
b. March 1 to February 28
c. July 1 to June 30
d. December 10 to December 9
c. July 1 to June 30 (ch. 14, p. 370)
140
Which of the following is correct regarding an "as is" home sale?
a. caveat emptor agent is not required
b. the real estate agent is not required to physically inspect the home
c. all material facts about the home must still be disclosed
d. "as is" home sales are not allowed in California
c. all material facts about the home must still be disclosed (ch. 4, p. 64)
The Transfer Disclosure Statement (TDS) must be provided even if the transaction is an "as is" sale. The responsibility for providing this disclosure rests with the real estate agents. If no agent is involved, the seller must still provide the statement.
Sellers should ask themselves: "If I were purchasing the property, would I want to know...?"
141
In qualifying married buyers for a loan, the least important is:
a. regular income
b. spouse's income
c. monthly debts
d. overtime pay
d. overtime pay (ch. 9)
Income for both members of the party is essential information.
Monthly debts is important to know because debt-to-income is considered.
Overtime pay is the least important.
142
Rates for title insurance are established by:
a. title insurance companies
b. the Bureau of Real Estate
c. the Department of Insurance
d. the corporation commissioner
a. title insurance companies (ch. 11)
143
A duly licensed real estate salesperson may lawfully receive a commission from:
a. the seller
b. the escrow holder
c. the broker
d. all of the above
c. the broker (ch. 1)
144
A real estate broker would not be disciplined by the real estate commissioner for:
a. making a secret profit
b. making a false promise
c. making a misrepresentation
d. acting as a dual agent with the full knowledge and approval of all parties
d. acting as a dual agent with the full knowledge and approval of all parties (ch. 4)
145
A California Real Estate Purchase Contract is frequently referred to as a(n):
a. purchase agreement
b. listing agreement
c. option
d. lease
a. purchase agreement (ch. 5)
146
The important case of the U.S. Supreme Court that prohibits discrimination in housing is:
a. Wellenkamp v. Wilson
b. Jones v. Mayer
c. Unruh v. Smith
d. Rumford v. Brown
b. Jones v. Mayer (ch. 13)
Jones v. Mayer: in this landmark case, the U.S. Supreme Court interpreted and applied an act of Congress passed in 1866 immediately after the Civil War. The constitutionality rested on the 13th Amendment, which prohibits slavery. Using the Act of 1866 and the 13th Amendment, the U.S. Supreme Court held that the Civil Rights Act of 1866 bars all racial discrimination, private as well as public, in the sale or rental of property, and that the statute was a valid exercise of the power of Congress to enforce the 13th Amendment.
147
The maximum mortgage broker commission allowed on a $5,000 second trust deed loan due in 7 years is:
a. $250
b. $500
c. $750
d. $1,000
c. $750 (ch. 8)
maximum commissions:
[first trust deeds]
< 2 years = 5%
2-3 years = 5%
3 years and > = 10%
[junior trust deeds]
< 2 years = 5%
2-3 years = 10%
3 years and > = 15%
148
The maximum amount allowed from the Real Estate Recovery Fund for all parties in a single-judgment case against a broker is:
a. $100,000
b. $125,000
c. $150,000
d. $250,000
d. $250,000 (ch. 14)
$250,000 for single
$500,000 for married
149
A corporation is prohibited from holding title as:
a. joint tenants
b. tenancy in partnership
c. tenants in common
d. severalty
a. joint tenants (ch. 6)
150
In a 1031-Exchange, taxable unlike property is called:
a. like-for-like
b. basis
c. foreign property
d. boot
d. boot (ch. 14, p. 377)
boot: unlike property received in an exchange that creates an income tax liability (ex: cash, notes, and personal property)
