California Real Estate Exam Multiple Choice Questions

On FHA and VA loans, the lender is allowed to charge the borrower a fee (percentage of the loan) as an initial service fee. This is generally referred to as a(n): a. subordination fee. b. accommodation fee. c. acceleration fee. d. origination fee.

d. origination fee.

The recording of which of the following creates a lien? a. Attachment b. Easement c. Notice of nonresponsibility d. Restriction

a. Attachment Attachment is an "involuntary lien."

Under which of the following types of financing is a buyer required to purchase term life insurance? a. Cal-Vet b. Conventional c. FHA d. VA

a. Cal-Vet The State of California is the beneficiary.

An investor group recently sold a parcel of land for $217,500, which was 45% more than they paid for it. The land is described as follows: N½ of the NW¼ of the SE¼ of Section 13 plus the W½ of the NE¼ of Section 13. What was the original price they paid per acre for the property? a. $1,500 b. $1,200 c. $1,000 d. $750

a. $1,500 $217,500 ÷ 145% (1.45) = $150,000 original price Acreage: N½ of the NW¼ of the SE¼ = 20 acres W½ of the NE¼ = 80 acres Therefore, price per acre = $150,000 ÷ 100 = $1,500.

A property for sale is listed at $120,000 and has an outstanding assessment bond of $1,200. At time of sale, for tax purposes, the basis for taxes would be: a. $121,200. b. $118,000. c. $120,000. d. indeterminable from information.

a. $121,200.

28. Which of the following would take the position of "senior" lien? a. Assessment bond b. First trust deed c. Homestead d. The one above which was first recorded

a. Assessment bond No matter when, property taxes and assessments take priority over all other liens.

A borrower negotiates a $4,500 loan secured by a 2nd trust deed through a broker. The loan was to be for a term of 2 years. What is the maximum commission the broker can charge for services? a. $450 b. $225 c. $675 d. None of the above

a. $450 For junior trust deed, under $10,000 for 2 to 3 years = 10% $4,500 x 10% (.1)= $450.

14. Code requirements for "studding" in single-family units is: a. 16 " o.c. b. 18 " o.c. c. 20 " o.c. d. 24 " o.c.

a. 16 " o.c. In some areas, codes allow up to 24´´ on center, but the standard is 16´´ on center.

The resale of which of the following would NOT require a notice to the Department of Real Estate (DRE)? a. 2 units in a planned development b. 5 units in a condominium project c. 5 lots in a standard subdivision d. 5 units in a stock cooperative

a. 2 units in a planned development The DRE requires a notice to be filled for the resale of 5 lots or more in a planned unit development (PUD)

According to R.E.S.P.A., on applicable loans, a lender is required to furnish a copy of a Special Information Booklet (prescribed by Housing and Urban Development) together with a "Good Faith Estimate" of closing costs to every person from whom it receives (or for whom it prepares) a written application for a federally related loan, within: a. 3 business days. b. 12 business days. c. 15 business days. d. 21 business days.

a. 3 business days. By delivery, or placing it in the mail within 3 days.

37. A "land project" is best defined as: a. 50 or more unimproved lots in a rural area. b. ownership of an undivided interest in land coupled with the right of exclusive occupancy of any apartment thereon. c. ownership of an undivided interest in common in a portion of property, together with a separate interest in space in a residential, industrial, or commercial building. d. ownership of an undivided interest in land.

a. 50 or more unimproved lots in a rural area.

Which of the following statements is NOT correct? a. A Cal Vet loan is a guaranteed loan. b. An FHA loan is an insured loan. c. A VA loan is a guaranteed loan. d. A conventional loan is not backed by any governmental agency.

a. A Cal Vet loan is a guaranteed loan. Cal Vet loans are "land contracts" with the state holding title.

Depreciation is a factor least affected by which of the following statements? a. A change in value resulting from inflation or other positive economic forces b. Obsolescence resulting from adverse external changes in the neighborhood c. Value deterioration due to action of natural elements d. Obsolescence due to faulty design or inferior quality of construction

a. A change in value resulting from inflation or other positive economic forces "a" represents an unearned increment, or increase in value, due to external causes. It is not a depreciating factor, whereas the other answers to the question are all depreciating elements.

Which of the following would NOT qualify for an "on-sale" liquor license? a. A club that was six months old b. A cafeteria that was six months old c. 12-year-old restaurant d. One year old hotel

a. A club that was six months old Clubs must not have been in business for less than one year.

79. A Licensee would have the least chance of receiving a commission in which of the following circumstances? a. A sale of personal property without written authorization. b. Failing to reveal the amount of profit under a net listing. c. An exchange of businesses under verbal authorization. d. Negotiating a lease of one year or less, not in writing.

a. A sale of personal property without written authorization.

For a limited partnership, the limited partners would have which of the following as their liability? a. Amount of investment written into partnership agreement b. 25% of his investment c. Same as all other partners d. No liability

a. Amount of investment written into partnership agreement However, the "general partner" has NO such limit to his liability.

Accrued depreciation may be estimated by five general methods. Which of the following would be considered as indirect methods? a. Capitalized income and market methods b. Breakdown and engineering methods c. Capitalized and engineering methods d. Market and breakdown methods

a. Capitalized income and market methods The capitalized income and market methods are considered to be indirect methods. Straight -line, engineering, and breakdown methods are classified as direct methods.

65. Which of the following appraisal methods requires a computation for "accrued depreciation"? a. Cost b. Income c. Market data d. All of the above

a. Cost It is an estimate of the accumulated depreciation, which has already taken place in he property improvements, with allowance for condition based upon the "effective age of improvements."

Which of the following types of depreciation would be difficult to eliminate? a. Economic obsolescence b. Functional obsolescence c. Physical depreciation d. Physical deterioration

a. Economic obsolescence The DRE looks at this question as measured by "cost to cure." Economic

4. A property was leased to a lessee for a two-year period, with monthly lease payments to be $800. The lessor collected the first and last month payments. This agreement would most likely not include which of the following statements? a. Escalator clause b. Compliance with local laws c. Condemnation provisions d. Third-party liability clause

a. Escalator clause A signed agreement whereby the lease amount is specifically set (for a short period of time) would probably not include an escalator clause.

Which of the following would constitute a proper delivery of a deed? a. Escrow mailing the deed to the Grantee after signed by seller, and after all other requirements of the escrow had been met, but also after the seller had died. b. After signing, seller gave to broker with instructions to give it to buyer. c. Escrow delivers deed to buyer without completed (signed) instructions. d. After signing the deed, Grantee personally delivers to Grantor.

a. Escrow mailing the deed to the Grantee after signed by seller, and after all other requirements of the escrow had been met, but also after the seller had died. Death does not automatically terminate contract. If it can be proved that the seller intended to deliver to the buyer upon completion of requirements of escrow, it would be a valid delivery.

Which of the following would be an example of economic obsolescence? a. Exorbitant tax rates for civic improvements b. Old fashioned design features c. Deferred maintenance d. Only one bathroom in a two-story residence

a. Exorbitant tax rates for civic improvements Economic obsolescence is caused by extraneous factors. A high tax rate would be such a factor. The other factors are contained within the property.

The Truth-in-Lending Law would apply to which of the following? a. First trust deed and junior loans b. Construction loans c. All loan transactions d. None of the above

a. First trust deed and junior loans Does NOT apply to ALL loans, i.e., construction loans to developers or builders.

102. Quality of income is an important factor in making an appraisal. It is best expressed in which of the following statements? a. In establishing a proper relationship between risk involved and income produced, it is necessary to develop an accurate capitalization rate. b. In the amount of income produced by the real property. c. In making a reasonable allowance for recapture of investment in improvements and in other depreciable items. d. In making a proper determination of the anticipated period of time during which the improvements would produce income.

a. In establishing a proper relationship between risk involved and income produced, it is necessary to develop an accurate capitalization rate. The capitalization of net income from real estate investments is at a rate which is a function of the risk involved. The quality factor of net income is interpreted in terms of risk.

No provision is made for which of the following elements in the calculation of a capitalization rate during an appraisal of income property? a. Income taxes and mortgage payments b. Return on Investment c. Return of Investment d. Depreciation on the improvements

a. Income taxes and mortgage payments Capitalization rates include only return of investment and return on investment. Depreciation is associated with return of investment. Taxes are not a factor in computing capitalization rates.

Which of the following relates to "economic obsolescence"? a. Legislative acts b. Massive cornices c. Outdated fixtures d. Worn-out stairs

a. Legislative acts All others relate to "functional obsolescence."

The ratio of "physical deterioration" of a single-family residence, compared to its original replacement cost, would be greater in the initial 10 years for which of the following? a. Lower quality home b. Fair quality home c. Good quality home d. Excellent quality home

a. Lower quality home Home built with poor quality materials and labor (workmanship) should require more maintenance and will deteriorate more rapidly.

Net income is determined by an appraiser using which one of the following? a. Real property taxes b. Capital additions c. Depreciation reserves d. Mortgage amortization and interest

a. Real property taxes Real property taxes are considered as a fixed expense. Appraisers use them as deductions in computing net income. The other items are not in this category.

When comparing a rental situation with the ownership of a home, which of the following does not represent a cost of home ownership? a. Repayment or amortization of a loan b. Depreciation of the investment in a home c. Property taxes and bond assessments d. An equity investment, which does not produce an income

a. Repayment or amortization of a loan When an owner amortizes, or pays back, the principal on a loan by means of regular installments, it is not an expense because his equity is increased. In effect, he puts money out in one direction, but receives it back from another direction.

If an appraiser were called upon to evaluate a public building, which had unique and distinctive architecture, he would employ which of the following methods of valuation? a. Replacement (cost approach) b. Comparison c. Capitalization d. None of the above

a. Replacement (cost approach) Since there is no income for capitalization and no means for comparing sales, replacement cost is the only approach available.

An owner of a cooperative apartment project makes monthly payments which include principal, interest, taxes, and insurance. Which of the following statements is NOT correct? a. Tax collector will render a separate tax bill to each owner. b. Assessment bond costs will be divided among the owners. c. Owner may deduct the amount of property taxes paid on his income tax return. d. If other owners fail to make payments, all owners could lose their equities, for a foreclosure action could be taken against the (single) blanket type loan, unless delinquencies were brought current.

a. Tax collector will render a separate tax bill to each owner. A stock cooperative receives one tax bill in the name of the corporation.

The Gross Multiplier is an arbitrary number employed by appraisers in the evaluation of certain types of income property. It is calculated in which of the following ways? a. The confirmed sale price of the property is divided by the gross monthly rental. b. The gross monthly rental is divided by the appraised value of the property. c. The market value of the property is multiplied by the capitalization rate. d. The gross monthly rental is multiplied by the capitalization rate.

a. The confirmed sale price of the property is divided by the gross monthly rental. The Gross Multiplier is a number used by appraisers to estimate the value of certain types of income property. When the gross monthly rental is multiplied by this number, the result is the actual sales price of the property.

A lending institution hires an appraiser to evaluate a property for loan purposes. Select one of the following factors which would have the greatest influence on her appraisal. a. The type of neighborhood surrounding the property b. The size of the loan c. The credit rating of the loan applicant d. None of the foregoing

a. The type of neighborhood surrounding the property The appraiser would have a basic interest in the kind of neighborhood and its resulting effect on market value. The other items in the question would be a matter of concern only to the lender.

Unearned increment is considered in the appraisal of income producing property. Select the best example of unearned increment from the following: a. Unanticipated value increase due to circumstantial changes b. Mortgage interest c. Land depreciation d. Property maintenance

a. Unanticipated value increase due to circumstantial changes If the value of a property increases through no efforts, thinking, or planning on the part of the owner, such an increase is called Unearned Increment.

A broker is entitled to one-half of the commission plus all his costs when: a. a loan is denied due to the failure of a borrower to disclose pertinent factors relating to his qualifying. b. loan is not consummated due to failure of a lender to supply funds. c. never. d. none of the above.

a. a loan is denied due to the failure of a borrower to disclose pertinent factors relating to his qualifying.

All the following statements are incorrect, except: a. a real property security can be created from a note on a home not located in any subdivision. b. real property securities are always secured by installment sales contracts. c. real property securities and real property sales contracts are interchangeable terms. d. out-of-state subdivisions offered in California for sale need not comply with Article 6 of the California Real Estate Law.

a. a real property security can be created from a note on a home not located in any subdivision. All that is necessary would be the "guarantee" against loss, or a specific minimum yield, made by the selling broker.

58. In the "income" approach to value, the recapture of capital invested in the improvements is provided for by: a. accruals for depreciation. b. cost to cure. c. observed conditions. d. observed depreciation.

a. accruals for depreciation. Recapture relates to depreciation taken; others relate to the physical deterioration of property.

A landlord does NOT have to file a notice to terminate when tenancy is: a. an estate for years. b. estate for year-to-year. c. periodic. d. estate at suffrage.

a. an estate for years. An estate for years ends at previously agreed upon termination date.

On a property, a pump and well would be considered: a. an improvement. b. taxable as capital gains. c. both a and b. d. none of the above.

a. an improvement.

A corporation "seal" evidences the: a. authority of persons using the "seal." b. rights and privileges of recipient of document with "seal." c. proof of office of the presidency. d. none of above.

a. authority of persons using the "seal."

48. In the construction of a building, there are several indirect costs involved, one of which is: a. building permit fees. b. material costs. c. labor costs. d. subcontracts.

a. building permit fees. "b," "c," and "d" are direct costs. A listing of indirect costs would show such items as permits, surveys, consulting fees, architects, engineers, legal, taxes financing charges, and administrative and overhead costs.

*A broker obtained an exclusive listing to sell a piece of property. He spent much time, money, and energy. The seller refused to allow the broker to proceed under the agreement. The broker should: a. consider the seller's refusal a breach and sue for damages. b. consider the seller's refusal a breach and claim the amount of commission as liquidated damages. c. ignore the seller and proceed. d. relieve seller of liability, and work on improving relationship so as to enable retaining future business.

a. consider the seller's refusal a breach and sue for damages. When seen from a technical point of view. In reality, sometimes "d" would result in more favorable and profitable end results.

Capitalization is a process by which an appraiser: a. converts income into value. b. determines depreciation. c. establishes cost. d. finds gross income.

a. converts income into value. When he ascertains the true net income for investment, an appraiser uses the "capitalization approach" to estimate value.

Past expenditures for residential improvements are called: a. costs. b. investments. c. price. d. value.

a. costs. They have nothing to do with establishing value.

The best source for establishing the age of a home would be the: a. county tax assessor. b. building and safety department. c. county recorder's office. d. either a or b.

a. county tax assessor. The county tax assessor is the best source for establishing the age of a home.

Businesses in California may take the form of an individual proprietorship, partnership, or corporation. Each form has its advantages. One advantage of operating as a general partnership is that: a. each partner has the use of assets of the partnership. b. management of the business can be left to the other partner with little concern. c. personal assets of a partner cannot be touched by creditors of the business. d. there is less responsibility and more time can be spent away from the business.

a. each partner has the use of assets of the partnership. All partners must also agree to a sale or transfer of the property.

An acquired right to use and enjoy that a person may have on land of another is known as a(n): a. easement. b. devise. c. lease. d. riparian right.

a. easement.

The prospective purchaser of real property would be most concerned with the: a. economic life remaining in the improvements. b. physical life remaining in the improvements. c. chronological age of the improvements. d. effective age of the improvements.

a. economic life remaining in the improvements. Effective age indicates existing conditions, as related to past maintenance. Chronological age is related to past events affecting a property. Of course, remaining physical age is important to the purchaser, but she is more concerned with the estimated period over which she may utilize the property for profit.

If a buyer plans to purchase an older building, he would give most careful consideration to the: a. economic life remaining. b. actual life. c. economic life. d. effective life.

a. economic life remaining. The buyer would be most concerned with the future potentials of the property: the economic life still remaining.

The best hedge against inflation would be: a. equity assets. b. government bonds. c. mortgages/loans. d. savings accounts.

a. equity assets. A fine example of an "equity asset" is a single-family residence, which during an inflationary market condition, has a value that tends to follow the inflationary trends.

An appraiser, when using the reproduction cost method on property which has been improved with fences, shrubs, trees, lawns, and sidewalks, should always: a. evaluate each of these items separately. b. regard these items as part of the improvements. c. treat these items as a part of the land. d. consider them as having no influence on the appraisal.

a. evaluate each of these items separately. A good comparative value can only be determined by treating each one of these items separately, thus enabling the appraiser to make a direct dollar adjustment for each item.

The IRS considers a "dealer" as a person who holds interests in real property: a. for sale to customers. b. for investment. c. for production of income. d. none of the above.

a. for sale to customers. A broker who buys and sells real property as inventory may be considered a dealer by the IRS and pays ordinary income taxes on any profit or loss.

When the business cycle is in the prosperity phase, real estate cycle is in a phase of: a. high construction, high borrowing, high sales. b. low construction, little borrowing, low sales. c. low construction, high borrowing. d. high construction, low sales, high borrowing.

a. high construction, high borrowing, high sales.

Advertising regulations of the Truth-in-Lending Law apply to all of the following, except: a. homeowner who is advertising his/her own home for purchase subject to the existing loan. b. homeowner advertising that loan may be assumed under certain terms. c. financing institution advertising to promote consumer credit. d. broker advertising a property with an annual percentage rate.

a. homeowner who is advertising his/her own home for purchase subject to the existing loan. Regulation "Z" requires that those who "extend credit" must make certain disclosures.

The first and last months' rent payments were collected by the lessor, leasing a single family residence. The prepaid rents received would be reported on income tax: a. in year received totally. b. split between year received and year in which last month would occur. c. all in year which last month occurs. d. would not need to be reported because they were prepaid.

a. in year received totally. Easement includes an "interest"; license just gives permission.

The price of real property _______________ as the value of the dollar decreases. The price of real property _______________ as the value of the dollar increases. a. increases, decreases b. increases, increases c. decreases, increases d. decreases, decreases

a. increases, decreases When the value of the dollar decreases, it loses a portion of its purchasing power. This means that more dollars are required to purchase a given piece of property. In order to accomplish this, the price of the property must be increased. Conversely, when the value of the dollar increases, it gains purchasing power. This indicates that fewer dollars are necessary for the purchase of a given piece of property, and thus, a decrease in price is required to adjust for the change.

It is preferable to use the replacement cost method of appraisal on new buildings, as opposed to old buildings, because: a. it is easier to estimate depreciation. b. values of land change. c. it is difficult to estimate historical values. d. local codes are changed from time to time.

a. it is easier to estimate depreciation. As the age of the improvements on a property increases, it becomes more difficult to forecast the allowable depreciation.

77. For a homestead to be effective, it must be filed (except for an automatic homestead) before the: a. judgment is rendered. b. judgment is recorded. c. lawsuit is filed. d. lis pendens is recorded.

a. judgment is rendered. For the homestead to be effective, the recording must occur before an ultimate judgment is recorded. Notice the difference between recorded and rendered. Recording occurs after a judgment is rendered.

Under an FHA program, monthly payments made (principal + interest) on a home loan must be: a. level payments. b. horizontal payments. c. varying payments. d. unamortized payments.

a. level payments. Level payments means the same amount (P+I) throughout the entire repayment of the loan.

A personal, revocable, and unassignable permission of authority to do one or more acts on the land of another, without possessing any interest therein, is the definition of: a. license. b. easement. c. encroachment. d. option.

a. license. Easement includes an "interest"; license just gives permission.

Appraisal fees: a. may vary. b. are always a fixed amount. c. are based on a percentage of the appraised value. d. are set by the loan broker.

a. may vary. An appraiser's fee is set by the difficulty of the work and by the level of expertise required to complete the work. Percentage fees are illegal.

A principal gives a broker $50,000 with which to purchase 2nd notes and trust deeds. He stipulates that he must receive a minimum of 18% on his investments, after broker's expenses. Broker states that if notes do not yield the investor his 18%, he will make up the difference. If the investor accepts this offer, the broker: a. must post a bond. b. broker's license is all that is required. c. broker is in violation of California law. d. none of the above.

a. must post a bond. Since broker "guarantees" yield, he is selling real property securities and would need to post a $5,000 bond.

A broker agrees to manage a client's investment portfolio ($85,000) of 1st trust deeds. If broker guarantees a return of 11% on the investments, he: a. must provide a bond. b. must obtain a loan broker's license. c. would be violating "Regulation Z." d. would be violating usury laws.

a. must provide a bond. Must obtain a Real Property Security Dealer's Endorsement, which requires him to provide a bond ($5,000).

76. A buyer purchased a home for $85,000, putting $8,000 cash down, taking over a $75,000 first loan, and assuming the liability for paying a $2,000 outstanding sewer bond. This assessment is: a. part of the purchase price. b. a personal debt assumed by buyer for improvements on personal property. c. prepaid to offset future taxes. d. none of the above.

a. part of the purchase price. The previous owners did not pay off the bond but allowed the buyer to assume the obligation and pay $2,000 less in cash.

All of the following are essential elements to claim an easement by prescription, except: a. payment of taxes for 5 years. b. open and notorious use for 5 years. c. use is hostile to owner. d. claim or right.

a. payment of taxes for 5 years. Payment of taxes is tied to taking title by "Adverse Possession."

When selling a reasonably priced, well established home in a classy, suburban neighborhood, the broker would probably gain the most interest in: a. prestige. b. tax advantage. c. investment. d. need.

a. prestige. Probably the best "guess" knowing so little about buyer motivations.

A broker suggested to his sales staff that they seek new listings in an area where minorities have recently begun to move into. He also suggested that they take listings only from white owners, since they would most likely be sellers due to the fact that the minorities are "moving in." Regarding two possible areas of concern, (1) instructions to his sales staff; and 2) his discrimination regarding their seeking of listings from whites, the broker is in violation of the Fair Housing Act (guilty of discrimination) as follows: a. regarding (1) and (2). b. regarding (1), not (2). c. regarding (2), not (1). d. no violation.

a. regarding (1) and (2). It is a violation to discriminate in any manner concerning race, color, religion, national origin, sex, or marital status.

As compared with other commodities, capital turnover in real estate investments is: a. slower. b. slightly above the average. c. faster. d. about equal.

a. slower. Because of the large amounts of money involved, together with the fixed nature of real property, the turnover of capital is slower as compared with other commodities.

There are three methods normally used in the evaluation of real property. However, one of these might prove more effective and accurate than the others, depending on the type of property being appraised. For example, the comparison approach would be the most desirable choice in the appraisal of: a. so-called amenity properties. b. service properties. c. industrial properties. d. apartment properties.

a. so-called amenity properties. Because of the appeal of amenities and of the effect of emotional factors related to single-family residences, the best basis for the analysis of current market value is by means of comparison.

The term "highest and best use," as the fundamental concept of value, is best defined as: a. that which produces the greatest net return on the investment over a given period of time. b. that which produces the highest gross income. c. that which complies with all laws and restrictions. d. that which makes the highest general contribution to the community.

a. that which produces the greatest net return on the investment over a given period of time. Appraisers always consider the highest net income as the basis for the highest value.

60. The income approach to appraisal requires the selection of an accurate capitalization rate because: a. the appraised value of property increases if the capitalization rate is decreased. b. the appraised value of property increases if the capitalization rate is increased. c. a provision for return on the investment is a limitation on the calculation of a capitalization rate. d. a property, which has a reliable tenant, would justify a higher capitalization rate than one with a tenant who has a poor financial background.

a. the appraised value of property increases if the capitalization rate is decreased. Appraisal value increases when the capitalization rate is decreased. The capitalization rate represents the integration of the rate of income, expressed as interest, and the rate of recapture, expressed as depreciation.

An owner offered his home to a buyer for $100,000 cash. The buyer paid the owner $100 cash to keep the offer open for two weeks. The owner accepted the $100. Ten days later, the owner notified the buyer that he was withdrawing his home from the sale. The next day the buyer tendered $100,000 cash to the owner. Under these conditions: a. the offer to sell was binding. b. seller violated the agreement to hold open the offer to sell, but did not have to sell to the buyer because the buyer had not promised in his original conversation to buy the property. c. seller rescinded, voiding the transaction. d. although the seller violated the agreement, he effectively prevented a binding contract from forming by withdrawing his property from the market.

a. the offer to sell was binding. Seller has no option. By accepting the $100 payment, he entered into a binding agreement. Only the buyer has the privilege of deciding "to buy, or not to buy." That is what the $100 option money paid for.

An option is given to an optionee for a $1,000 consideration. All the following are true statements, except: a. the optionee has a legal interest in the property. b. the consideration is valid. c. the optionor must sell the property. d. the optionee has no obligation to purchase.

a. the optionee has a legal interest in the property. The optionee merely has the right to buy the property under agreed upon conditions.

Which of the answers makes the following statement true? No real estate salesperson may be licensed in the employ of a corporation real estate broker licensee, or perform acts for which a real estate license is required on behalf of the corporation, if: a. the salesperson, singly or together with other real estate salespersons licensed in the employ of the corporation, owns or controls, directly or indirectly, a majority of the outstanding stock of the corporation. b. the salesperson is a director or officer of the corporation. c. both a and b. d. none of the above.

a. the salesperson, singly or together with other real estate salespersons licensed in the employ of the corporation, owns or controls, directly or indirectly, a majority of the outstanding stock of the corporation. There is only a corporate broker license, but major stock holders can buy or sell corporate real property.

Demise deals with: a. transferability of an estate by lease or will. b. personal property left in a will. c. a "type" of will. d. none of the above.

a. transferability of an estate by lease or will. Not to be confused with "devise," a gift of real property by will.

99. A corporation listed a property with a broker, and subsequently the entire slate of officers were killed in a plane crash. The listing is: a. valid. b. void. c. voidable. d. invalid.

a. valid. $217,500 ÷ 145% (1.45) = $150,000 original price Acreage: N½ of the NW¼ of the SE¼ = 20 acres W½ of the NE¼ = 80 acres Therefore, price per acre = $150,000 ÷ 100 = $1,500.

As part of his determination of value by means of the cost approach, an appraiser would employ the market data approach to determine the: a. value of the land. b. value of the improvements on the land. c. integration of property values. d. comparable values of adjoining properties.

a. value of the land. The market data approach is used by an appraiser to compare the selling prices of similar land sites in the area. When values, so found, are added to the costs of improvements, this procedure is called the cost approach, and the result is a total value estimate of both land and improvements.

95. The lower the loan-to-value ratio, the greater the: a. interest. b. down payment. c. loan amount. d. term.

c. loan amount. If the down payment is smaller, the loan must be larger.

An owner gives an "open listing" to many brokers, including "A" and "B." Broker A shows the home to a customer, but does not make a sale. Broker B later sells the home to the same customer. The seller is obligated to pay: a. "A" a full commission. b. "B" a full commission. c. "A" and "B", who split the commission. d. "A" and "B", who both receive full commissions.

b. "B" a full commission. Generally, an open listing pays only to the salesperson who sells.

An apartment owner desires to carpet his units. The area to be covered is 60% of the total 15,000 sq. ft. living space in the building. If the total cost of the carpet (including installation) is $14 per sq. yd., what will be the owner's total expenditure? a. $12,000 b. $14,000 c. $16,000 d. $18,000

b. $14,000 Area to be carpeted (yds) = 15,000 x 60% ÷ 9 sq. ft/sq yd = 15,000 x (.60) ÷ 9 = 1,000 Total cost = area x $14 = 1,000 sq. yds x 14 = $14,000.

22. A buyer recently purchased a property for $150,000. If the cost to sell the property would be 9% of sale price, how much must the property appreciate in value in order for the owner to sell and get his $150,000 out of the sale? a. $13,500 b. $14,835 c. 9% d. 109%

b. $14,835 The original price now will be equal to only 91% (100% - 9%) at the time of sale. To determine the new required sale price: Value divided by its percentage value = $150,000 ÷ 91% (.91). New sale price must be = $164,835.16. Therefore, appreciation was $164,835 - 150,000 = $14,835.

An investor purchased a property, financing with a 75% loan-to-value ratio loan. Payments of interest only for the first 6 months was $6,000. Interest rate is 10%. What was the appraised value of the property? a. $170,000 b. $160,000 c. $150,000 d. $140,000

b. $160,000 Annual Interest = $6,000 x 2 = $12,000 Principal Amount = $12,000 ÷ 10% (.10) = $120,000 Appraisal Value = Loan divided by (LTV Ratio) = $120,000 ÷ 75% (.75) = $160,000

88. A buyer purchased a residence for $225,000, with 12% down, and the seller is taking back a note and T.D. for the balance, payable at 12% per annum. Monthly payments were to be $520 principal plus interest. Taxes are $2,700 per year and hazard insurance is $804 per year. What will be the buyer's 1st monthly payment plus monthly amounts for impound account for taxes and insurance? a. $2,972 b. $2,792 c. $2,279 d. $2,927

b. $2,792 Sale price: 12% = 225,00 - 27,000 = $198,000 Monthly interest = 198,000 x 12% ÷ 12 = 198,000 x (.01) = $1,980 Monthly principal (per agreement) = 520 Monthly taxes = 2,700 ÷ 12 = 225 Monthly insurance = 804 ÷ 12 = 67 Total Payment (P + I + Tax + Insurance) Monthly = $2,792

Seller has paid the 1st half of the annual tax bill of $1,200. Buyer agrees to assume existing fire insurance policy, originally dated Oct. 1, 1986, with a three year premium of $900. Escrow to close on Mar. 1, 1988. What would be the net buyer proration for closing? a. $200 credit b. $275 debit c. $675 credit d. $475 debit

b. $275 debit Taxes: $1,200 ÷ 12 = $100 per month. Seller owes buyer for 2 months = $100 x (2) = $200 credit buyer Insurance: $900 ÷ 36 = $25 per month. Buyer owes seller for 19 months unused premiums = $25 x (19) = $475 debit buyer Net = debit buyer ($475 - 200) = $275 debit buyer

An investor purchased a $140,000 four-unit apartment building. For a "Cap Rate" of 10%, what would the owner have to get monthly from each of the two bedroom units? a. $342 b. $292 c. $252 d. $272

b. $292 Value x Rate = Income; $140,000 x 10% = $14,000 Gross Annual Income; $14,000/4/12 months = $292 per unit per month.

39. An investor is considering buying a vacant property and building a building on it which will cost $170,000. Rental income will be $2,700 per month, and annual expenses will be $8,200. What is the maximum he can pay for the land if he uses an 11% capitalization rate? a. $60,000 b. $50,000 c. $40,000 d. $30,000

b. $50,000 Annual gross income = $2,700 x 12 = $32,400 Net annual income = $32,400 - 8,200 = $24,200 Value = Income divided by "cap" rate = 24,200 ÷ 11% (.11) = $220,000 (Total Value) Total Value - Bldg. Value = Value of the Lot = $220,000 - $170,000 = $50,000

16. A property valued at $550,000 has a capitalization rate of 10%. The net income is $55,000. If the "cap rate" increased to 11%, what would be the adjusted value of the property? a. $495,000 b. $500,000 c. $480,000 d. $450,000

b. $500,000 An increase of one point (1%) in the "cap rate" would result in a reduction in value of the building of $50,000. Value = Income divided by Cap Rate = $55,000 ÷ 11% (.11) = $500,000.

A property offered for sale for $88,000 has been appraised for a new FHA loan at an appraised value of $87,500. How large a loan can be obtained if the FHA down payment is 3% of the first $25,000 of the appraised value plus 5% of the remainder of $25,000 ? a. $84,100 b. $83,625 c. $84,338 d. $84,125

b. $83,625 Loan calculation must use the APPRAISED value Appraised Value = $87,500 Down Payment Requirements: 3% x $25,000 = $750 5% x 62,500 = 3,125 Total Down Payment = $3,875 Sale Price - Down Payment = Loan = $87,500 - 3,875= $83,625

A parcel of land 500 ft. x 300 ft. is bisected into two equal sized rectangles by a row of eucalyptus trees. How many acres are there in each portion? a. 3.44 b. 1.72 c. 0.34 d. 15.0

b. 1.72 Total area = 500' x 300' = 150,000 sq. ft. 150,000 ÷ 43,560 = 3.44 acres total ÷ 2 = 1.72 acres each.

An appraiser evaluated a building and reported to the owner that the $2,500 per month income was in line with other compa rable properties in the area. Recent sales of some of those comparable properties brought $350,000. What monthly gross multiplier would he use in further evaluations? a. 130 b. 140 c. 150 d. None of the above

b. 140 Sale price divided by monthly income = $350,000 ÷ 2,500 (Monthly Gross Multiplier) = 140.

A home sold for $150,000 on which the seller was to pay a 6% brokerage fee. Additional costs were: 2% prepayment penalty on existing loan balance of $102,800, escrow fees of $210, new loan discount fee of $534. The seller's cost of sale will be what percent of gross equity? a. 20.5% b. 25% c. 23.4% d. 228%

b. 25% Commission = $150,000 x 6% = 50,000 x .06 = $9,000 Escrow Fees = 210 New Loan Discount Fee = 534 Prepayment Penalty = 2% x $102,800 = 2,056 Total Seller Costs = $11,800 Equity = Sale Price minus 1st loan = $150,000 - $102,800 = $47,200 Costs as "%" of Equity = $11,800 ÷ 47,200 x (100) = 25%

A piece of lumber that is 2" x 12" x 24 ft. contains how many board feet? a. 36 b. 48 c. 60 d. 72

b. 48 2" x 12" x (24 x 12) = 2 x 12 x 288 ÷ 144 = 48.

A piece of lumber 4" x 4" x 6' is how many board feet? a. 6 b. 8 c. 10 d. None of the above

b. 8 4" x 4" x 12" x 6' ÷ 144 = 8.0 board feet.

85. The term on a listing agreement is dated January 7, 2005, through April 5, 2005. This agreement would be for a term of: a. 3 months. b. 90 days. c 91 days. d. 92 days.

b. 90 days. Jan. = 25 days + Feb. = 29 days + Mar. = 31 days + Apr. = 5 days Total number of days = 90 days.

If each of the following properties was purchased for $150,000, which would make provision for the most dollars of allowable depreciation? a. A farm b. An apartment building c. A commercial property d. An industrial property

b. An apartment building In this example, the apartment building would probably use the least amount of the cost basis for land value. This indicates that the largest portion of the $150,000 would be depreciated.

Which of the following would come first? a. Hereditament b. Attachment c. Writ of Execution d. Judgment

b. Attachment Attachment is the process whereby property is seized and retained in custody of court as security for satisfaction of judgment plaintiff "hopes" to obtain in pending litigation. Execution is the final act. Hereditament is property that is capable of being inherited.

Broker A accepted a deposit from Buyer B with an offer on a property, and promptly deposited the Buyer's check into his Trust Account. Seller rejected the offer and Buyer demanded the deposit back—immediately. Broker wrote check to Buyer from Trust Account, but later learned that Buyer's original check had not cleared due to insufficient funds. Which of the following statements is correct? a. Broker violated Real Estate Law by refunding Buyer's deposit before receiving notice it had cleared. b. Broker has shortages in his Trust Account. c. Broker should have given Buyer a postdated check. d. All of the above.

b. Broker has shortages in his Trust Account. This was poor judgment on the part of the broker

If a broker procures a loan for a principal for $89,000, the broker would provide which of the following documents? a. Real Property Security Statement b. Broker's Loan Statement c. Both a and b d. Neither a nor b

b. Broker's Loan Statement A Broker's Loan Statement is required anytime a broker procures a loan.

A developer of a subdivision included a clause in each purchase agreement prohibiting signs offering individual properties for sale, until he had sold all the subdivision. Until developer completes sales of all parcels, which of the following is true? a. Buyers may put up any size sign to attract prospective buyers for resale. b. Buyers may put up reasonable size signs to attract prospective buyers for resale, for the original clause prohibiting signs would be unfair restraint and in violation of fair trade laws. c. Buyers cannot put up any signs, as it would be against the law. d. None of the above.

b. Buyers may put up reasonable size signs to attract prospective buyers for resale, for the original clause prohibiting signs would be unfair restraint and in violation of fair trade laws.

In the condominium concept, one buys a common interest in the common areas and an exclusive interest in a particular unit. Which of the following is NOT correct about condominiums? a. Can be part of an office building b. Can be only a "life estate" with right of survivorship c. Owner has interest in real property d. Can be liened generally or specifically

b. Can be only a "life estate" with right of survivorship Key word - "only"

Three of the following are closely related. Which one is NOT? a. Judgment b. Claim c. Real estate taxes d. Easement

b. Claim Claim is associated with insurance, whereby the others are types of encumbrances.

Appraisers use which of the following methods for estimating costs? a. Comparative square foot, unit in place b. Comparative square or cubic foot, unit in place, quantity survey c. Residual income, resulting from capitalization calculations d. Replacement costs, resulting from capitalization calculations

b. Comparative square or cubic foot, unit in place, quantity survey There are three accepted methods for cost estimation: 1. comparative square foot or cubic foot, also called the Unit Method 2. Unit cost in place 3. Quantity survey

When an appraiser evaluates real property, his concept of annual, or periodic, depreciation applies to which of the following? a. Actual life b. Economic life c. Physical life d. Theoretical life

b. Economic life Ordinarily, a loss in value is considered on an annual basis. Economic life treats such loss, whether accrued or future, at a periodic rate.

101. Which of the following would NOT be considered a "deferred payment" form of contract? a. Conditional sales contract b. FHA purchase contract c. Installment sale contract d. Land contract

b. FHA purchase contract The forms of a, c, and d are where the balance of principal to sellers will be deferred until a later time. The FHA agreement requires that all sums are due and payable to sellers at end of escrow.

SHE owns a single-family residence in which SHE lives. SHE trades HE for another residence which HE is renting to a tenant. Both parties intend to use their newly acquired properties for rental income. Which of the following is true? a. SHE can negotiate a tax-free (deferred) exchange. b. HE can negotiate a tax free (deferred) exchange. c. Both parties can negotiate tax-free exchanges. d. Neither can negotiate a tax-free exchange.

b. HE can negotiate a tax free (deferred) exchange. HE is exchanging income property for the same—like-for-like; SHE is not.

Which of the following would NOT be eligible for filing a mechanic's lien? a. Architect b. Handyman, if more than 75 days has elapsed since recording of notice of completion c. Subcontractor, if a notice of completion has been recorded within the past 29 days d. None of the above

b. Handyman, if more than 75 days has elapsed since recording of notice of completion Following recordation of a notice of completion, a general contractor has 60 days to file; a subcontractor has 30 days . "b" has exceeded allowed time and therefore is ineligible to file. "c" must hurry, for he has only one day left.

Which of the following lenders tends to give the longest term on loans? a. Banks b. Insurance companies c. Private individuals d. Savings banks

b. Insurance companies Life insurance companies will generally give the longer term, sometimes 30 years.

What landmark case of the U.S. Supreme Court affected fair housing by prohibiting discrimination? a. Shaffer v. Beinhorn b. Jones v. Mayer c. Weinhoff v. Morgan d. None of the above

b. Jones v. Mayer Jones v. Mayer (After Civil War) was the landmark case that helped create Title VIII of the Federal Civil Rights Act of 1968.

Which of the following could be used with a purchaser without the immediate involvement of a title change? a. Grant deed b. Land contract c. Quit claim deed d. Warranty deed

b. Land contract The land contract does not pass title until some later time, whereby the buyer (vendee) has performed certain requirements (i.e., accumulate a minimum amount of equity for down payment); title in the meantime remains with the seller (vendor).

Under a lease agreement, who holds the leasehold estate? a. Beneficiary b. Lessee/Tenant c. Lessor d. None of the above

b. Lessee/Tenant Lessor owns the property, lessee holds leasehold estate.

An investor has purchased an apartment building. She reports income on a cash basis, and will be allowed deductions for all but which of the following? a. Cost or redecorating b. Loss of rent due to vacancies c. Interest payments on 2nd loan d. Depreciation, even though the building is going up in value daily

b. Loss of rent due to vacancies Loss of rent due to vacancies is not allowed as a deduction.

For which of the following could a deduction for income tax purposes be taken when unimproved land is held for investment? a. Depreciation b. Loss on the sale of land c. Short-term capital gains d. None of the above

b. Loss on the sale of land IRS does allow capital losses deductions for land held for investment. NOTE: Land does not wear out; therefore, there is no depreciation.

Which of the following would NOT affect the basis of real property? a. Remodeling b. Maintenance c. New roof d. New concrete patio

b. Maintenance Refers to "cost basis or adjusted cost basis."

Amenity type properties are appraised most often by which of the following methods? a. Income method b. Market data method c. Cost method d. Risk-rating method

b. Market data method Amenity type properties are single family residences, and the market data method is most often used for these.

Which of the following groups represent ALL specific liens? a. Lien for descendants' debts, vendor's lien b. Mechanics' liens, tax liens, assessment liens c. Federal income tax liens, attachments, state inheritance tax liens d. Corporate franchise tax liens, federal estate tax liens, judgment liens

b. Mechanics' liens, tax liens, assessment liens All liens in this group are against one property.

Which of the following restrictions, set up by the developer of a subdivision (based on experience), would be the least likely to be enforced? a. Height restrictions (including number of floors) b. Minimum dollar amount expended for improvements on each lot c. Limitations on lot size d. Limitations on minimum square footage for improvement on each lot

b. Minimum dollar amount expended for improvements on each lot Inflationary trends that vary make dollar amount limitations meaningless in a very short time, and, therefore, impossible to enforce.

Which of the following most clearly describes the "Principle of Regression"? a. Less desirable properties enhance the value of more desirable properties. b. More desirable properties are adversely affected by less desirable properties in their midst. c. Tomorrow evolves out of today, which came out of yesterday. d. None of the above.

b. More desirable properties are adversely affected by less desirable properties in their midst.

If an out-of-state resident were to ask when the first installment of the county taxes becomes due, you should answer: a. December 10. b. November 1. c. March 1. d. July 1.

b. November 1. First installment of county property taxes becomes due on November 1.

Which of the following is primarily responsible for the considerable increase in low cost rental housing for low income groups? a. Federal Housing Administration b. Public Housing Administration c. State Housing Act d. Urban Renewal Service

b. Public Housing Administration

Which of the following is considered a "debit" to the buyer? a. Accrued interest b. Purchase price c. Rentals payable in advance d. Selling expenses

b. Purchase price Debit is a charge: the buyer is charged the purchase price.

Buyers submitted an offer to purchase the home of Sellers. The purchase was made "subject to" the existing VA loan. In a subsequent foreclosure, should VA sustain losses, who would be liable for those losses? a. Buyers b. Sellers c. Both Buyers and Sellers d. Neither Buyers nor Sellers

b. Sellers Veteran is liable to VA, unless he or she had obtained a prior release.

In a subdivision, which of the following would NOT be a blanket encumbrance? a. Trust Deed b. Subdivision lot improvement assessment c. Mechanic's lien d. None of the above

b. Subdivision lot improvement assessment Would be levied against each and every lot in the subdivision separately.

By what method does a tenant rent out his apartment if he has a leasehold interest in the apartment? a. Assign b. Sublet/Sublease c. Transfer d. Suffrage

b. Sublet/Sublease A "sublease" is a lease given by a tenant.

To a land developer, suburban land is preferable to urban land for development purposes. Which of the following reasons is applicable? a. Development costs are lower. b. Suburban land has the potential for containing a complete community. c. The value of adjoining land is increased. d. Low-cost housing for single persons can be provided.

b. Suburban land has the potential for containing a complete community. When working with suburban land, the developer, in conformance with zoning ordinances, has the freedom to select suitable areas for school, commercial properties, and residences. In urban areas, where growth patterns and zoning requirements are usually well established, the developer has much less freedom of choice.

Accountants and appraisers are interested in depreciation of real property from two different viewpoints. Which of the following statements is true? a. The appraiser is only interested in book value. b. The accountant is concerned with book depreciation and the appraiser deals with actual depreciation. c. The accountant is interested in the book value and the appraiser in the "theory of depreciation." d. The accountant is only interested in what caused the depreciation.

b. The accountant is concerned with book depreciation and the appraiser deals with actual depreciation. Accountant: For tax purposes, book depreciation. Appraiser: To establish "present value," actual depreciation.

A father needed money to send his son to college. He borrowed money from the bank, securing the loan with a first trust deed. Later, he sold the home subject to the first loan, and took back a 2nd trust deed from the buyer as a part of the purchase price. In the event of a default, which of the following would be true? a. The bank could obtain a deficiency judgment against the purchasers. b. The bank could obtain a deficiency judgment against the father. c. The father could get a deficiency judgment against the purchasers on the 2nd trust deed. e. None of the above.

b. The bank could obtain a deficiency judgment against the father. The father is liable on (hard money) first loan; purchasers are not, for they bought "subject to" the loan. The 2nd loan is a purchase money loan, and no deficiency judgment is attainable.

Two buildings, comparable in all respects, are leased to two different tenants, one the owner of a retail store, the other an agency of the federal government. How would the capitalization rates compare between the two buildings? a. The capitalization rate on the federal building would be higher. b. The capitalization rate on the federal building would be lower. c. The capitalization rate would be the same for each. d. The capitalization rate would be lower on the retail store.

b. The capitalization rate on the federal building would be lower. A lease to a federal agency offers greater security to a lessor than does a lease on a retail store. This probably means that the lessor would accept a lower rental and lower income on the federal agency building. In turn, this indicates that the capitalization rate for the federal building would be lower and that it would be higher for the retail store. Since both buildings have equal size and value, these conclusions could be verified by the following computations: Assume the cost of both buildings at $200,000: the annual rental from the retail store at $12,000: from the federal building at $10,000: then: $12,000 ÷ $200,000 = .06, or 6% cap rate for the retail store. $10,000 ÷ $200,000 = .05, or 5% cap rate for the federal building.

The primary activities of FNMA in the secondary money market involve: a. FHA loans only. b. VA and FHA loans. c. 2nd loans up to $22,000. d. all types of real estate loans.

b. VA and FHA loans. The key word is the "primary" activity. FNMA can now deal with conventional loans, but still heavily works with VA and FHA loans.

For a given loan amount, with a specified interest rate, which of the following would result in lower monthly costs to a borr ower? a. FHA loan b. VA loan c. Conventional loan (90% of value), which requires an additional ¼% monthly private mortgage insurance d. None of the above

b. VA loan Both FHA and conventional loans require extra monies for insurance premiums; VA guarantees its loans, requiring no insurance for the borrower to pay.

In which of the following would you use a "package mortgage"? a. When covering more than one parcel of land in a subdivision. b. When encumbering real property and using personal property as additional collateral. c. When securing additional financing from the lender at a later date without rewriting the original loan. d. None of the above.

b. When encumbering real property and using personal property as additional collateral. A loan that is secured by the basic lot and improvement, plus fixtures attached to the home (appliances, carpeting, drapes, air conditioning, and other kinds of personal property).

A real estate broker discloses the race of a buyer to the seller upon request of that information. Is the broker in violation of the law? a. Yes, because of specific federal and state legislation. b. Yes, this is a violation of current civil rights legislation per state attorney general's office. c. No, because agent is required to disclose all matters to his principal. d. No, as this has not been made the subject matter for specific legislation.

b. Yes, this is a violation of current civil rights legislation per state attorney general's office.

A tax that the city could levy against a real estate brokerage firm, based on its gross receipts, would be: a. documentary tax stamps. b. a business license tax. c. a sales tax. d. a use tax.

b. a business license tax.

An owner acquires title to additional land on his river-front property when the river shifts its course. This is acquiring by: a. acclamation. b. accession. c. abstraction. d. alienation.

b. accession. Accession - addition to property through efforts of man or by natural forces. Accretion - Accession to property through natural forces, for example, alluvium. Alluvium - Gradual increase of the earth on ocean front or bank of stream resulting from action of water.

The following are essential to the creation of an "agency" relationship, except: a. parties are competent. b. agreement to pay consideration. c. agreement between principal and agent. d. fiduciary relationship.

b. agreement to pay consideration. "Gratuitous agent" would not necessitate consideration.

Under real estate law, a manufactured home park is: a. an area or tract of land where 5 or more manufactured home lots are rented/leased for human habitation. b. an area or tract of land where 2 or more manufactured home lots are rented/leased to accommodate manufactured homes used for human habitation. c. an area or tract of land where 1 or more manufactured home lots are owned outright by a manufactured home owner. d. none of the above.

b. an area or tract of land where 2 or more manufactured home lots are rented/leased to accommodate manufactured homes used for human habitation.

In determining local property taxes on a property: a. assess land and improvements separately, then multiply each by a different rate. b. assess separately and then multiply total by one tax rate. c. assess together, they multiply each by a different tax rate. d. assess together, then multiply by one tax rate.

b. assess separately and then multiply total by one tax rate. Land value + Improvement value = Total Value Tax = Total Value x Tax Rate.

All of the following instruments are used to convey an interest in real property, except: a. agreement of sale. b. bill of sale. c. deed. d. lease.

b. bill of sale. A bill of sale is used to convey title to personal property, NOT real property.

A business has been sold, and the State Board of Equalization has checked the records and found that all required taxes have been paid. The board will then issue to the buyer a: a. tax paid receipt. b. clearance receipt. c. successor's liability receipt. d. none of the above.

b. clearance receipt. If the buyer does not get this clearance receipt from the board, the buyer is liable for any unpaid taxes the seller did not pay.

66. "Just compensation" is a term used in condemnation proceedings. In determining the fair market value of a property, the court would use any of the following, except the: a. comparative income data approach. b. cost approach. c. income approach. d. market data approach.

b. cost approach. The court seldom uses the cost approach, unless the property is unique in some way and has very little turnover.

30. The income approach to valuation requires the measurement of, and the provision for, future depreciation. For this purpose, an appraiser would use all of the following methods, except: a. sinking fund rate. b. cost of reproduction. c. straight-line. d. a capitalization rate, which includes a risk rating.

b. cost of reproduction. The cost of reproduction method treats more of past loss in value rather than of expected loss of value in the future. The answers, "a," "c," and "d" are methods developed to analyze the problems of future depreciation.

97. When interest rates increase but net income remains unchanged, the value of an owner's equity tends to: a. increase. b. decrease. c. remains the same. d. none of the above.

b. decrease. An owner's equity will decrease when net income remains the same while interest rates increase.

When lessees pay one month's rent in advance of the lease period, accounting procedures regard this as: a. deferred expense for the lessor. b. deferred income for the lessor. c. accrued income for the lessee. d. accrued expense for the lessor.

b. deferred income for the lessor. This is deferred income for the lessor because it is income received, but not yet earned. For income tax purposes, it is reported as income for the year in which it is received. Deferred expense indicates expense paid in advance, but not used. Accrued expense indicates expense owing, but not yet paid.

Depth tables are used by appraisers as a tool to: a. show the depth of water in arid areas. b. determine the value of commercial properties on which the lots vary in depth. c. facilitate the calculation of interest payments on declining balances. d. determine the relationship between beach properties and high-tide elevations.

b. determine the value of commercial properties on which the lots vary in depth. If lots have the same front footage, a shallow lot is less valuable than a deep lot. When evaluating commercial properties, appraisers use Depth Tables to estimate the relative value of lots which vary from a normal depth.

When an investor purchases income property, he should realize that there will be certain expenditures for upkeep, replacement, and management designed to produce greater income. When the point is reached, beyond which adding to improvements will not result in increasing returns, this is an example of the principle of: a. conformity. b. diminishing returns. c. supply and demand. d. substitution.

b. diminishing returns.

Base lines run: a. north and south. b. east and west. c. north and east. d. none of the above.

b. east and west. Base lines run east and west; meridian lines run north and south.

61. When a tenant who had rightfully come into possession of a property by means of a lease agreement retains possession after the expiration of said lease without permission of the owner, it is called a(n): a. estate for years. b. estate at sufferance. c. periodic tenancy. d. estate at will.

b. estate at sufferance. Also, an estate at sufferance does not require a notice of termination.

"Moral philosophy" best matches: a. ethnics. b. ethics. c. dedication. d. subordination.

b. ethics.

The agency of a real estate broker is best created by: a. estoppel. b. expressed contract. c. implied contract. d. ratification.

b. expressed contract. Should be expressed, in writing.

Sheet metal used to protect a building from water seepage is called: a. furring. b. flashing. c. footing. d. facade.

b. flashing. Furring are strips of wood applied to walls; footing is the bottom of a foundation; facade is the front of a building.

5. In a single-family dwelling, the extended (spread out) part of the bottom of the exterior of the foundation is called the: a. base. b. footing. c. foundation. d. pier.

b. footing. Base of foundation wall, pier, or column.

84. When lot size increases in depth, the value of: a. square footage increases. b. front footage increases. c. front footage decreases. d. square footage and front footage, as a unit, decreases.

b. front footage increases. When the depth of a lot increases, the front foot value will increase. Also, increasing the depth will increase the square footage, but, usually, the square foot value will be reduced.

An incompatible positioning of a residence on a parcel of land would be an example of: a. economic obsolescence. b. functional obsolescence. c. physical obsolescence. d. wear and tear.

b. functional obsolescence. Because the home is not correctly situated on the lot it occupies, it does not function as well as it could, suffering a lost in value.

An apartment house tenant was injured in the swimming pool of his apartment complex. He sued the obtained a judgment of $5,000. When recorded, the abstract of the judgment will create a lien that is: a. voluntary. b. general. c. specific. d. exclusive.

b. general. Judgment liens are general liens.

An investigation of a certain building reveals that there is a serious deterioration of the foundation and supporting beams in the basement. An appraiser would classify this type of defect as: a. curable physical deterioration. b. incurable physical deterioration. c. curable functional obsolescence. d. incurable functional obsolescence.

b. incurable physical deterioration. In this context, this type of physical deterioration is classified as incurable because it is not economically profitable to replace, or to cure, the conditions as of the date of the appraisal.

A lender with vast funds for investment, who prefers larger loans without collection responsibilities, would most likely be a(n): a. commercial bank. b. insurance company. c. private lender. d. savings bank.

b. insurance company.

A fire station building and a small appliance sales and repair store were recently leased on long-term leases at the same lease payment. Between the two, the fire station building would probably have a stable capitalization rate, which would be: a. higher. b. lower. c. same as. d. varying; sometimes higher, sometimes lower than the other property.

b. lower. Since the lessee of the fire station building would be the government, classified as a more stable tenant, the owner would probably be willing to accept a lower return on investment.

In a real property sales contract for the purchase of newly subdivided land, a clause prohibits the purchaser from prepaying principal during the first 12 months following the purchase. The buyer is to only make his normal monthly payments. If the buyer subsequently selects to pay off the contract, within the first 12 month period, the clause: a. is binding on the buyer. b. may be ignored by the buyer. c. is illegal and voids the contract. d. could have been waived by the buyer by sending such notification to the subdivider.

b. may be ignored by the buyer. "Lock-ins" are allowed only in private party financing.

Which represents the largest area? a. 1/10 of a township b. miles square c. square miles d. sections

b. miles square 2 mi. sq. = 2 mi. x 2 mi. = 4 sq. mi. 1/10 of section = (.10) x 36 sq. mi. = 3.6 sq. mi. 3 sections = 3 x (1 sq. mi.) = 3 sq. mi. 2 sq. mi. = 2 sq. mi.

Regarding Conditions and Covenants, which are restrictions imposed upon grantees limiting property use, the enforcement of "conditions" would be considered: a. the same as for covenants. b. more stringent than for covenants. c. less stringent than for covenants. d. none of the above.

b. more stringent than for covenants. Breach of condition - possible loss of property; Breach of covenant - possible money damages.

89. A broker's loan statement is now called a: a. broker's disclosure statement. b. mortgage loan disclosure statement. c. mortgage statement. d. none of the above.

b. mortgage loan disclosure statement.

45. All of the following are necessary for obtaining title to a property by "adverse possession," except: a. must possess under some evidence of color of title or claim of right. b. must pay taxes 5 years, before they become delinquent. c. must possess property continuously for 5 years. d. must occupy property hostile to recorded owner.

b. must pay taxes 5 years, before they become delinquent. The word "delinquent" is NOT required by law; just pay the taxes for 5 years.

When all expenses, including taxes and insurance, are paid by the lessee along with a new amount of "rent" as agreed upon to the landlord, this is referred to as a: a. gross lease. b. net lease. c. percentage lease. d. sandwich lease.

b. net lease. Net lease. Lessor receives a net amount for lease payment, lessee pays for expenses; property taxes, fire insurance, and operating expenses.

An appraiser should have knowledge of economic trends, which affect property values. For example, in an area which has heavy bonded indebtedness and high property taxes, he would probably conclude that: a. large investors would be attracted to the area. b. new construction and general industry would tend to leave the area. c. there would have to be better schools and services in the area. d. there would be a good market for street bonds.

b. new construction and general industry would tend to leave the area. Under these conditions, new business ventures would be discouraged by the upward tax trend, and would be inclined to seek other locations. Assessment bonds would be difficult to market. High taxes do not necessarily imply better schools.

You have taken an exclusive right to sell listing to assist an owner in selling his home. The owner could lease the property for a maximum of: a. as long as he wishes, with consent of broker. b. not more than 99 years, with or without the broker's consent. c. not beyond the listing period, without the broker's consent. d. the owner cannot lease the property without the consent of the broker, as is clearly spelled out in the listing agreement.

b. not more than 99 years, with or without the broker's consent. The owner can do as he wishes, with or without the consent of the broker. However, violation of the listing agreement could create a condition whereby the owner was liable to the broker for a full commission. Under no circumstances can the owner lease for a period in excess of the 99 years maximum allowed by law.

18. In the determination for replacement costs of a new property, an appraiser would use all of the following methods, except: a. comparative square foot. b. observed condition of the property. c. quantity survey. d. unit cost-in-place.

b. observed condition of the property. Observed condition is a method for estimating accrued depreciation, and it is NOT used to determine replacement costs.

6. All of the following would cause economic obsolescence, except: a. improperly placed improvements. b. old fashioned kitchens. c. unfavorable zoning changes. d. industries moving out of the neighborhood.

b. old fashioned kitchens. Old fashioned kitchens represent a form of functional obsolescence. The other three items are caused by factors outside the property. Therefore, they are forms of economic obsolescence.

An appraisal is an: a. estimate of value. b. opinion of value. c. opinion of listing price. d. opinion of selling price

b. opinion of value. Appraisers are licensed and certified to provide a professional opinion of value. Anyone may estimate. Answers "c" and "d" are professional services provided by licensed real estate agents and brokers engaged in the sale of real estate.

By definition, a planned development is where: a. owners of separately owned lots have another ownership in common in one or more additional lots in the development. b. owners of separately owned lots (home and site) also own in common with other owners in the development the common grounds, facilities, parking lots, etc. through an "owners association." c. a development having been totally approved throughout the entire city/county planning department. d. none of the above.

b. owners of separately owned lots (home and site) also own in common with other owners in the development the common grounds, facilities, parking lots, etc. through an "owners association."

The California Commissioner of Real Estate has authority to: a. create laws to discipline licensees. b. promulgate reasonable rules and regulations. c. settle commission disputes. d. issue licenses for out-of-state licenses.

b. promulgate reasonable rules and regulations. Does not create laws, but makes the rules and regulations that have the effect of law.

In order to maximize return for his efforts during a tight money market, a real estate broker would best direct his efforts into: a. sale of single dwellings, with assumption of existing loans. b. property exchanging. c. sale of recreational properties. d. sale or leasing of income property.

b. property exchanging. Exchanges most frequently would require minimal new, or refinancing, exchanging equities.

When real property is leased to various tenants, appraisers find it helpful to use a gross multiplier, which is founded upon: a. gross income as a function of capitalized value. b. rental value versus the selling price of the property. c. gross income versus estimated gross income. d. gross income as related to future net income.

b. rental value versus the selling price of the property. Use of the gross multiplier implies a definite relationship between gross income and market value.

The grantor is the: a. buyer. b. seller. c. renter. d. lender.

b. seller. The grantor is the one who signs the deed.

If an appraiser observes wide cracks in the walls of a basement, he will attribute the probable cause to: a. normal curing of the concrete. b. settling of the house. c. weakening joists. d. deterioration due to moisture.

b. settling of the house. Settling of the house on its foundations would cause such wide cracks. The other answers would not have this effect.

In appraising a residential property, the appraiser must consider the forces currently influencing the neighborhood. Boundaries of such a neighborhood are best established by: a. geographical situation. b. social composition. c. street pattern. d. traffic flow.

b. social composition. Theory: most people with mutual interest and desires usually group together in a given area (forming a neighborhood), creating market influences.

An owner, desiring to sell his residence, demands that the words "property is offered without respect to race, creed, national origin, etc." be omitted from his listing agreement. The broker should: a. ignore the seller's request and take the listing. b. suggest that under those terms, the seller should sell himself. c. refuse to show the property to minorities. d. none of the above.

b. suggest that under those terms, the seller should sell himself. A licensee must refuse to take a listing that discriminates.

75. Management of a condominium project, under control of and for the benefit of the owners, may acquire, hold, and sell: a. tangible personal property. b. tangible and intangible personal property. c. personal and real property. d. none of the above.

b. tangible and intangible personal property.

64. Two single persons desire to take and hold title to property, with the ability to later will their portions to whomever they desire. They should take title as: a. joint tenants. b. tenants in common. c. community property. d. severalty.

b. tenants in common. Joint tenancy carries "right of survivorship" - NO wills; singles CANNOT hold title as community property; severalty means "one" owner, which is NOT the case in this situation.

A buyer offers to perform on his purchase contract. This is known as a: a. condition. b. tender. c. covenant. d. surrender.

b. tender.

55. A corporation issued a deed to real property. The president and secretary both signed the deed and affixed the corporate seal. These actions would probably be sufficient to pass marketable title if: a. the deed is executed in connection with the dissolution of the corporation. b. the transaction involved is within the ordinary scope of business of the corporation. c. the transferor is a religious organization or church. d. all of the assets of the corporation are included in the transfer.

b. the transaction involved is within the ordinary scope of business of the corporation.

An investor needed cash for additional investments, and "took out" a loan against his property. His interest payment on this new loan was less than the net return he was realizing on the property. This is an example of: a. capital turnover. b. trading on equity. c. band of investment. d. deficit financing.

b. trading on equity.

91. The secondary money market refers to: a. participation in California real estate financing by out-of-state lenders. b. transfers of notes and T.D.s between mortgagees for value. c. junior loans. d. transfers of loans and T.D.s between mortgagors for value.

b. transfers of notes and T.D.s between mortgagees for value. Transfers between lenders as well as agencies set up for the purpose of buying and selling notes and T.D.s, i.e. "Fannie Mae," etc.

A subordination clause written into a 1st trust deed would benefit the: a. trustee. b. trustor. c. beneficiary. d. lender.

b. trustor. Allows the borrower to more easily obtain additional funds (i.e., for construction loan) with the new funds being secured by a new first trust deed, which moved ahead of the original first deed, which has now subordinated to the subsequent loan.

In contracting, if one of the parties enters the agreement under duress, the contract would be: a. valid. b. voidable. c. void. d. Illegal.

b. voidable. Until proved either valid or void, it is voidable.

One month interest payment on a straight note amounts to $180. At 9% per annum interest rate, what is the face amount of the note? a. $26,000 b. $20,000 c. $24,000 d. $27,000

c. $24,000 Annual Interest = $180 x 12 = $2,160. Interest amount divided by Rate = Principal Amount = $2,160 ÷ 9% = $24,000.

80. Prior to granting a loan, a lender considers the ability of the borrower to repay the loan, the character of the property, and the terms of the requested financing. This is known as a: a. credit check. b. loan origination check. c. loan evaluation. d. mortgage discounting.

c. loan evaluation.

Seller "ABLE" recently sold a property for $141,450, which was 15% more than he paid for it. He held the property for two years, during which time his interest expenses were 10% of his purchase price (5% per year). Taxes were $80 per $1,000 of assessed valuation, and the property was assessed at 25% of the original purchase price. Seller's ownership resulted in a net: a. $11,070 loss. b. $3,690 gain. c. $1,230 gain. d. none of the above.

c. $1,230 gain. $141,450 ÷ 115% (1.15) = $123,000 Assessed Value = 25% x Purchase Price = (.25) x $123,000 = $30,750 Taxes = $80 x $30,750 ÷ 1000 = $80 x 30.75 = $2,460 x 2 yrs = $4,920 Interest Expense = 10% (.10) x $123,000 = $12,300 Gross Expenses = $4,920 + $12,300 = $17,220 Sale Price - Purchase Price = $141,450 - 123,000 = $18,450 Net Profit = $18,450 - 17,220 = $1,230 Gain

A real estate syndicate fails to disclose a true statement of the condition of title and all the encumbrances thereon. The penalty for this violation is: a. $5,000 judgment against officers. b. $5,000 fine and 10 years in jail. c. $10,000 fine and 10 years in jail. d. $5,000 fine and 5 years in jail.

c. $10,000 fine and 10 years in jail.

42. The most important economic characteristic of property is: a. lot size. b. lot shape. c. location. d. capital improvements.

c. location. Location! Location! Location! Forget everything else!

94. A single owner who resides in a home for two of the last five years is entitled to a capital gains exclusion of: a. $100,000. b. $200,000. c. $250,000. d. $500,000.

c. $250,000.

What is the monthly impound account payment for fire insurance for the following? Insured value = $100,000; Rate = $0.40 per $100; 3 yr. premium = 2.5 times annual rate. a. $25.78 b. $26.78 c. $27.78 d. $28.78

c. $27.78 Annual premium = $100,000 x (0.40) = $400.00; 3 year premium = $400 x 2.5 = $1,000; Monthly impound payment = $1,000 ÷ 36 = $27.78.

3. A buyer has purchased a residence for $100,000 utilizing VA entitlement to finance the entire purchase price. The interest rate = 12%; combined monthly payments for 30 years will accumulate to be $370,300. What will be the initial month's principal payment? a. $128.61 b. $78.61 c. $28.61 d. $0.00

c. $28.61 Monthly (P+I) = $370,300 ÷ (30 x 12) = $1,028.61 Initial month interest = $100,000 x 12% ÷ 12 = $1,000 Therefore, initial month principal amount = $1,028.61- $1,000 = $28.61.

An investor who owned a 16-unit apartment complex has evaluated a newly installed freeway near his property, which has caused a decrease in monthly rent in the amount of $320. When an 11% "cap rate" for the area is applied, what is the resulting loss in value he has experienced due to the freeway? a. $45,000 b. $40,908 c. $34,909 d. $32,468

c. $34,909

If land was selling for $10,000 per acre, what would the following parcel sell for? The SE¼ of the SE¼ of the SE¼ of Sec. 4 a nd the S½ of the SW¼ of the SW¼ of Sec. 3 and the N½ of the NE ¼ of the NE¼ of the NE¼ of Sec. 9 and the N½ of the N½ of the NW¼ of the NW¼ of Sec. 10. a. $400,000 b. $425,000 c. $450,000 d. $500,000

c. $450,000 Sec. 4: SE¼ of SE¼ of SE¼ = 1/4 x 1/4 x 1/4 x 640 acres = 10 Sec. 3: S½ of SW¼ of SW¼ = 1/2 x 1/4 x 1/4 x 640 acres = 20 Sec. 9: N½ of NE¼ of NE¼ of NE¼ = 1/2 x 1/4 x 1/4 x 1/4 x 640 acres = 5 Sec. 10: N½ of N½ of NW¼ of NW¼ = 1/2 x 1/2 x 1/4 x 1/4 x 640 acres = 10 Total Acreage = 45 acres Price (total) = $10,000 x 45 acres = $450,000

A person holding a judgment against a real estate broker seeking relief from the Recovery Fund could obtain a maximum of: a. $10,000. b. $15,000. c. $50,000. d. $250,000.

c. $50,000. $50,000 per claimant, not to exceed that figure for all claimants in a single transaction. The $250,000 is the maximum for multiple transactions per one licensee.

If the taxes on a newly acquired property will amount to 1.25% of the purchase price, what will the first installment (6 months) bill for a home costing $125,500 be? a. $765.35 b. $742.51 c. $784.38 d. $795.97

c. $784.38 $125,500 x (.0125) ÷ 2 = $784.38.

You wish to purchase 2 acres of property for which you will pay up to $1.13 per square foot. The purchase price (maximum) would be: a. $87,650. b. $984,456. c. $98,445.60. d. $49,222.80.

c. $98,445.60. 2 acres x 43,560 = 87,120 sq. ft. 87,120 sq. ft. x $1.13 per sq. ft. = $98,445.60

Real estate brokers and salespeople are authorized to engage in listing and selling certain manufactured homes which have been registered with the Department of Housing and Community Development for a minimum of: a. 18 months. b. 6 months. c. 1 year. d. 2 years.

c. 1 year. No minimum time limit if manufactured home has been converted into real property.

An investor purchased a property for 10% less than the listed price, then resold it for the previously listed price. What was the percentage profit? a. 9% b. 10% c. 11% d. 12%

c. 11% MADE divided by PAID = RATE

National Fair Housing principles are founded on: a. First Amendment to the Constitution. b. Unruh Act. c. 13th Amendment to the Constitution. d. Rumford Act.

c. 13th Amendment to the Constitution. The 13th Amendment and Title 8 of the Civil Rights Act of 1968 both provide for fair housing on a national level.

Which of the following is a "penalty payoff"? a. VA loan origination fee b. FHA loan origination fee c. 2% fee on Cal-Vet loan d. All of the above

c. 2% fee on Cal-Vet loan VA and FHA loans have no prepayment penalty provisions. Cal-Vet does allow a prepayment penalty charge of 2% of the outstanding loan balance, if the loan is paid in full within 2 years of its origin.

A cattle rancher purchased the following two parcels of land for grazing pasture. How many feet of wire will be required to enclose the entire pasture? Descriptions: E½ of the SE¼ of the SE¼ of the NW¼ and the W½ of the SW¼ of the SW¼ of the NE¼ of Section 34. a. 4,620' b. 3,300' c. 2,640' d. 1,980'

c. 2,640' The parcels are 5 acres each, and join to form a square parcel, with a total of ten acres. Therefore, 10 acres = 43,56 0 sq. ft x (10) = 435,600 sq.ft. By taking the square root of the area, a side length = 660 ft. 660 ft. x 4 = 2,640 ft. Alternative: Comparing sides of the 10-acre parcel and the section, the parcel side represents 1/8 of the length of the section side (there could be eight such parcels along the section side). Therefore, a section side = 1 mile = 5,280' and the side of the parcel = 5,280' ÷ 9 = 660'. With four sides, the wire needed = 4 x 660' = 2,640'. 4

A $2,000 down payment was made on a property, which was purchased for $20,000. The gross return on the purchase price was 9%. The only expense in the transaction was a 7% interest charge. The percentage return on this investment would be: a. 11% b. 13% c. 27% d. 8%

c. 27% $20,000 x . 09 = $1,800 Gross return $18,000 x .07 = $1.26 Interest expense = Gross return - interest = net return = $1,800 - $1,260 = $540 net return. Net return divided by Investment = % return on investment $540 ÷ $2,000 = 27%.

Which of the following is smaller than a section? a. 1/36 of a township b. Sixteen 40 acre parcels c. 27,000,000 sq. ft. d. Lot 5000' X 6000'

c. 27,000,000 sq. ft. 27,000,000 ÷ 43,560 = 620 acres. A section = 640 acres.

If two lots were purchased for $9,900 each, then split into three lots and sold for $8,500 each, what is the percentage yield on the original purchase price? a. 26.79% b. 27.79% c. 28.79% d. 29.79%

c. 28.79% Original purchase price = $9,900 x 2 = $19,800 Sale price of lots = $8,500 x 3 = $25,500 Profit on sale = $25,500 - 19,800 = $5,700 Yield = $5,700 ÷ $19,800 x (100) = 28.79%

In the event there is an encroachment on another's property, legal action must commence within: a. 6 months. b. 1 year. c. 3 years. d. 5 years.

c. 3 years. Per statute of frauds.

20. You own the business you run and lease the building in which you operate. You hold a (an): a. remainder. b. interest in, but not an estate. c. less-than-freehold estate. d. freehold estate.

c. less-than-freehold estate. With a less-than-freehold (leasehold) estate, there is no direct ownership of real estate.

31. A building has two separate sections, each with internal dimensions of 25' width by 80' depth. The dividing center wall, running from front to back, is 12" thick, and all exterior walls are 6" thick. How much land does the building cover? a. 4,043 sq. ft. b. 4,061 sq. ft. c. 4,212 sq. ft. d. 4,366 sq. ft.

c. 4,212 sq. ft. Width = 6" + 25' + 12" + 25' + 6" = 52' Depth = 6" + 80' + 6" = 81' Gross sq. ft. = 52' x 81' = 4,212 sq. ft.

A house sold for $120,000 on which a seller was to pay 6% brokerage fee. Other costs were 1% prepayment penalty on existing $90,000 first loan balance, escrow fees of $500, title insurance premium of $400, and 3 points (%) loan discount fee on a new loan of $110,000 (VA). The seller's costs would be what percent of his equity? a. 10.25% b. 17% c. 41% d. 13.7%

c. 41% Total costs: Broker's fee $7,200 Prepayment penalty $900 Escrow and title fees $900 Discount fee on new loan $3,300 Total Costs $12,300 Equity = Sale Price - Old Loan Balance = $120,000 - 90,000 = $30,000 Percentage = $12,300 ÷ $30,000 x (100) = 41%

A land project consists of: a. 50 or more parcels and less than 15,000 voters within two miles of the subdivision. b. 100 or more parcels and less than 1,500 voters within two miles of the subdivision. c. 50 or more parcels and less than 1,500 voters within two miles of the subdivision. d. none of the above.

c. 50 or more parcels and less than 1,500 voters within two miles of the subdivision.

Regarding termination of estates in manufactured home parks, a tenant who has a tenancy in a manufactured home that cannot be legally moved without a permit, may not have the tenancy terminated without written notice of not less than: a. 30 days. b. 45 days. c. 60 days. d. 90 days.

c. 60 days.

59. An investor put $10,000 down on a property purchased for $100,000. He received a 9% gross return on the purchase price and had a 9% interest expense on the loan amount as his only expense. What would the percentage return on his investment be? a. 0% b. 11% c. 9% d. None of the above

c. 9% Gross income = $100,000 x (9%) = 100,000 x (.09) = $9,000 Interest expense = $90,000 x (9%) = 90,000 x (.09) = $8,100 Net return = $9,000 - 8,100 = $900 Percent return on investment = $900 ÷ 10,000 x (100) = 9 (9%)

The least protection against blighting in any given area is provided by which of the following? a. Zoning ordinances b. Artificial and natural barriers c. A neighborhood not fully developed d. Residents aware of the hazards of blighting

c. A neighborhood not fully developed A partially developed neighborhood receives little protection from blighting influences. Unfavorable elements, such as poor upkeep and divergent uses of property, are difficult to restrict or control.

*For federal income tax purposes, a taxpayer could increase the basis of his/her residence with which of the following? a. Property taxes b. Accrued depreciation c. Addition of a patio d. None of the above, for a personal residence basis cannot be adjusted for any reason

c. Addition of a patio Capital improvements are acceptable adjustments to basis.

78. The cost of replacement method is least effective in evaluating which of the following properties? a. A new single family residence. b. A new school building. c. An older single family residence. d. All of the foregoing.

c. An older single family residence. Depreciation is difficult to estimate on older properties, with the result that the reproduction cost method might have rather wide variations. It is not necessary to estimate depreciation on new properties.

A new, large-scale shopping center requires a loan for financing purposes. The lender would place major emphasis on which of the following features? a. Long-term leases b. Short-term leases c. Anchor tenant (A+ credit/large company) d. The experience and background of the developer

c. Anchor tenant (A+ credit/large company) A large company, having an excellent credit rating and offering very good potential for payoff of the loan, would be called an "Anchor Tenant."

By definition, economic obsolescence would not apply to which of the following? a. Location of a government building adjacent to the property b. Neighborhood reconstruction projects c. Antique fixtures in a building d. Regulatory changes

c. Antique fixtures in a building The antique fixtures would represent functional obsolescence, not economic obsolescence.

Which of the following can make withdrawals from the broker's trust account? a. Sales associates employed by broker b. Corporate officers of licensed real estate corporation c. Bonded unlicensed employees of broker d. All of the above

c. Bonded unlicensed employees of broker Remember, the person must have authorization from the broker to withdraw from the account. Brokers and unlicensed employees under a fidelity bond.

Value levels in a residential neighborhood are influenced more by social characteristics of its present and prospective occupants than by any other factor. What would maintain high values in a given neighborhood? a. Everybody purchasing with comparable down payments. b. Everybody having approximately the same income levels. c. Both a and b. d. None of the above.

c. Both a and b. Neighborhoods generally have similar physical structures based on common social, economic, and political characteristics.

A member of the Institute of Real Estate Management would carry the designation: a. NAREM. b. MAI. c. CPM. d. PMA.

c. CPM. CPM - Certified Property Manager. The others are: NAREM - National Association of Real Estate Managers; MAI - Member of Appraisal Institute; and PMA - Property Manager's Association.

8. The owner of a large apartment complex was considering adding another swimming pool. An appraiser hired to do a study for the owner would use what basic principle of appraising to determine the feasibility of adding the pool? a. Substitution b. Competition c. Contribution d. Appreciation

c. Contribution Would the addition of the pool contribute to the rent schedule?

36. An appraiser would have to be able to identify land values separately in which one of the following appraisal techniques? a. Market data approach b. Income approach c. Cost approach d. All of the foregoing

c. Cost approach The cost approach requires the appraiser to identify land values separately from the reproduction cost of the improvements located on the land. In the other appraisal methods, the appraiser develops the entire property as one total value, then separates land value from improvement value.

93. An "agreement in a deed" best matches which of the following? a. Prescription b. Avulsion c. Covenant d. Option

c. Covenant

Sellers sold their residence and closed escrow on Oct. 15. Taxes on the property were $1,400 per year and had not been paid since payment of the last installment of the preceding tax year. What will their tax proration for this escrow be? a. Credit $408 b. Credit $467 c. Debit $408 d. Debit $467

c. Debit $408 Taxes were paid through June 30th. Sellers owe for 3½ months, namely July, Aug., Sept. and one -half of Oct. A charge is a "debit." Amount = $1,400 ÷ 12 x 3.5 months = $408.33 = $408.

74. A family purchased a residence two years ago, financing through a mortgage company with a small down payment. Which of the following would be the most likely reason for refinancing? a. Small equity b. Rise in interest rates c. Decrease in interest rates d. Increased taxes

c. Decrease in interest rates If interest rates had dropped enough to make it more economical to refinance, the reduced monthly payments would compensate for the costs involved in such refinancing.

Which of the following represent the four unities of market value? a. Time, title, interest, possession b. Possession, encumber, will, sell c. Demand, utility, scarcity, transferability d. Location, demand, financing, interest

c. Demand, utility, scarcity, transferability Remember: D-U-S-T.

96. Provision for the recapture of capital improvements is made in which of the following during an income evaluation approach to appraisal? a. Cost of replacement new today b. Cost of replacement new at installation date c. Depreciation accrual d. Condition of improvements, as observed

c. Depreciation accrual Funds are set aside on an annual basis for any depreciation.

Five people hold undivided interest as tenants in common. Which is always true? a. Each has an equal interest. b. Each acquired their interest at the same time. c. Each cannot identify their respective part of the property. d. Each has an unequal interest.

c. Each cannot identify their respective part of the property. Each tenant in common owns an "undivided interest" in the property.

Some forms of depreciation are curable, some are not. Which of the following forms is not curable? a. Physical depreciation b. Physical wear and tear c. Economic obsolescence d. Functional obsolescence

c. Economic obsolescence Economic depreciation, or obsolescence, takes place beyond the confines of the property. Thus, the property owner cannot exert control over such features as economic recession, aircraft noise, adverse zoning, or the departure of major industries from the area. These situations can only be regarded as incurable.

In a situation whereby a deposit with an offer to purchase was in the form of a promissory note instead of cash or check, which of the following is NOT true? a. The contract is just as binding at the time of acceptance by both parties as if there were a cash deposit. b. Agent is required by law to make seller aware that he has received a nonnegotiable promissory note deposit, in lieu of cash or check. c. Failure of buyer to redeem note as required by purchase agreement is a violation of California real estate law. d. None of the above.

c. Failure of buyer to redeem note as required by purchase agreement is a violation of California real estate law. The maker of a check represents there is money in bank to cover; maker of a note makes no such representation and failure to pay (redeem) is not a crime.

40. When purchasing a "business opportunity" and using personal property acquired to secure a loan, which of the following is necessary to "perfect" the transaction? a. The contract developed to facilitate the sale b. Filing of the security agreement c. Filing of the financing statement d. Recording the original contract

c. Filing of the financing statement The "financing statement" (UCC-1) filed with the secretary of state is used to give public notice of the transaction and to "perfect" (complete) the security interest.

A real estate broker lends his own money to Buyer to aid in purchasing a home. The note is for $4,000, and will be secured by a trust deed on the purchased property. The note interest rate is 12% per year, with monthly payments of $40. Final payoff will be on the 48th monthly payment. Which of the following is true? a. Broker holds legal title to property. b. Broker is in violation of usury. c. Final amount of payoff on the 48th month will be $4,040. d. None of the above.

c. Final amount of payoff on the 48th month will be $4,040. Payments are "interest only," resulting in no principal reduction. The final month payment PLUS the $4,000 principal is due at that time.

Which of the following approaches would an appraiser use in determining today's value of a single-family residence, which was built around 1930? a. He would refer to a cost index and adjust for changes over the years. b. Draw a conclusion from comparable sales figures in 1930. c. He would use today's replacement costs and adjust for depreciation accordingly. d. He would use 1930 construction costs as a starting point for his calculations.

c. He would use today's replacement costs and adjust for depreciation accordingly. The simplest and most feasible approach would be to use today's replacement costs and to make allowances for any recognizable depreciation in determining the value of the property.

Which of the following would be an example of "economic obsolescence"? a. No bathroom on first level of multilevel residence b. Eccentric design c. High tax rate d. Lack of normal, proper care

c. High tax rate High taxes, resulting from excessive local improvement needs, would be an "outside" or "extraneous" situation or factor.

90. Value is the present worth of future benefits, arising out of ownership, to typical users and investors, is one definition of value. To which one of the following appraisal techniques does it relate? a. Comparison b. Reproduction cost c. Income d Market data

c. Income The income approach depends largely upon the anticipation of future performance. Today's dollars are used as a measure of future benefits.

A purchaser of a home could not complete a legal contract because of which of the following? a. Did not have sufficient cash for down payment and costs b. Is not a citizen c. Is not yet "of age" (is 17 years old) d. None of the above

c. Is not yet "of age" (is 17 years old) Lacks essential element of contract—capacity.

A net lease may be said to have which of the following characteristics? a. It is a percentage of the profits. b. It does not benefit the lessor. c. It produces a net income for the lessor. d. The lessor pays for all variable expenses.

c. It produces a net income for the lessor. A net lease provides a lessor with a fixed income, which is founded on an agreement requiring the lessee to pay all variable costs, such as insurance and property taxes.

In situations whereby real property taxes are not paid, the Tax Collector will affect a "Sold to the State" on which of the following dates? a. July 1, following the unpaid year b. June 30, five years after the unpaid tax year c. June 30, the last day of the unpaid tax year d. None of the above

c. June 30, the last day of the unpaid tax year On the day just prior to the new tax year, the collector effects a "book sale" of the property to the State. If not redeemed within 5 years, then on June 30 (end of 5th year following book sale), property is deeded to State. Sale or auction would follow.

Which of the following is an encumbrance? a. Freehold estate b. Homestead c. Lease agreement d. Recorded subdivision map

c. Lease agreement Anything which affects or limits fee simple title to real property is a burden.

Which of the following may value real estate for a federally related loan transaction? a. Real Estate Brokers b. Certified Public Accountants c. Licensed or Certified Real Estate Appraisers d. Chartered Evaluators

c. Licensed or Certified Real Estate Appraisers Brokers may value real estate for non-loan purposes, CPAs value business interests, Chartered Evaluators are British Appraisers.

Which of the following defines a "blind ad"? a. Neither sale price nor terms of property are included in the ad. b. Licensee does not include address of property in the ad. c. Licensee does not reveal that the ad was placed by licensee. d. None of the above.

c. Licensee does not reveal that the ad was placed by licensee. When agent advertises customer's home, but does not reveal the ad was placed by a licensee. Be safe, say, "Agent, 345-6789" or name the company.

Which of the following abbreviations is associated with the FHA? a. NAR b. CPM c. MIP/MMI d. MBA

c. MIP/MMI MIP - Mortgage Insurance Premium/Mutual Mortgage Insurance.

38. Which of the following is NOT associated with market value? a. Exchange value b. Reasonable value c. Material costs d. Objective value

c. Material costs

67. "Placement of a Home" would best match up with which of the following? a. Prescription b. Subordination c. Orientation d. Novation.

c. Orientation

Which of the following is NOT real property? a. Giant redwood tree growing in yard b. Stock in mutual water company c. Owner has removed fence, stacking the wood on the ground d. None of above

c. Owner has removed fence, stacking the wood on the ground Wood stacked on ground is personal property; the redwood tree is growing in the ground, and stock in the mutual water company is appurtenant to the real property.

Personal assets of principals of which of the following are available to creditors for satisfaction? a. Corporation b. Limited Partnership c. Partnership d. None of the above

c. Partnership A partnership does not protect principals' assets against creditor. For the limited partnership, only the general partner's assets would be vulnerable.

Which of the following is not an example of functional obsolescence? a. Excessive strength in the foundation members and exterior walls b. Excessive number of partitions in an office building c. Proximity to a chemical plant, which gives off noxious fumes d. Archaic architectural design

c. Proximity to a chemical plant, which gives off noxious fumes Proximity to a chemical plant is a form of economic obsolescence, since the cause lies outside the property. The other answers represent functional obsolescence, since they are within, or are inherent to, the property.

The members of the National Association of Real Estate Brokers are called: a. Realtors®. b. Consolidated Brokers. c. Realtists. d. None of the above.

c. Realtists.

Which of these words does NOT belong with the others? a. Will b. Executor c. Sale d. Heir

c. Sale a, b, and d relate to disposition of property after death.

California law requires a subdivider to notify the Real Estate Commissioner whenever there is a material change after the "final public report" has been issued. Which of the following would be considered a material change? a. Price increase b. Broker given exclusive listing c. Sale of six units to developer d. All of the above

c. Sale of six units to developer Upon sale of five (5) units or more, to same buyer, the subdivider and new purchaser must report this change to the Commissioner.

A salesperson purchased a property listed through his broker's office. Later the sellers complained to the Commissioner that the salesperson had neglected to inform them he was a licensee. Which of the following is correct? a. Salesperson is not responsible, just the broker. b. Seller should have guessed that the buyer was licensed, due to his knowledge. c. Salesperson and broker are both subject to disciplinary action. d. No violation of real estate law.

c. Salesperson and broker are both subject to disciplinary action. Broker must exercise reasonable supervision over salesperson, and is required to sign all contracts within 5 days. Broker should have known that salesperson did not give proper disclosures.

An appraiser, engaged to appraise a single-family residence, took away an amount of value because of "functional obsolescence." To which of the following was he referring? a. Dry rot b. Poor neighborhood c. Single car garage d. Zoning

c. Single car garage In today's world, this feature would be considered "outdated," or in other words, functionally obsolete.

Which of the following would be most like an easement appurtenant? a. Easement in gross b. Attachment c. Stock in a mutual water district d. Lease

c. Stock in a mutual water district Easements appurtenant cannot be separated from the land, as the stock in a mutual water company cannot be split from ownership.

32. An investor in an eight-year-old apartment building will be allowed by the IRS to calculate depreciation by which of the following methods? a. Income method b. Cost method c. Straight-line method d. None of the above

c. Straight-line method Straight-line method. The others are types of appraisals.

An unlawful detainer action may be filed by a landlord in all but one of the following. Which is it? a. Tenant holds over after termination of lease. b. Tenant fails to pay rent. c. Tenant exercises lease option agreement, but fails to make payment as required. d. Tenant breaches lease by permitting nuisance on the property.

c. Tenant exercises lease option agreement, but fails to make payment as required. By process of elimination, this is the exception. The others are three of five lawful situations for exercising this action, the others being: (4) failure to perform any lease covenant, and (5) failure to give up possession when he had previously given written notice of intention to do so.

A landlord is required to keep all but which one of the following in good order? a. Commercial rental property with certain commonly used areas for convenience of all tenants b. High-rise apartment building with extensive lobby and hallways c. Theater's lobby and restroom facilities d. Private dwelling leased for occupancy by one family

c. Theater's lobby and restroom facilities Landlord may be liable where injury results from defective conditions of parts of premises over which landlord retains control. Landlord has a statutory duty to maintain dwelling house "fit for human occupation" by repairing conditions which render premises unlivable (except such that are caused by tenant's negligence). Generally, landlord is not liable where entire building is leased. Injuries to tenants (or invitees) resulting from defective conditions of areas such as lobby or restrooms are the responsibility of the tenant.

25. A loan of $200,000 is placed on a fourplex which has a tax basis of $150,000. Which of the following applies? a. The basis is increased by the amount of the loan. b. The basis is decreased to the amount of the loan. c. There is no tax due on the transaction. d. The basis is increased to the extent that the loan exceeds the basis.

c. There is no tax due on the transaction. The tax basis is affected only by: (1) the addition of capital improvements, or (2) the deduction of depreciation.

For an appraisal being conducted on a residence built in 1910, which of the following would an appraiser use? a. Original cost of construction b. Original cost of materials multiplied by the change in the cost of living index since 1910 c. Today's cost of reproduction less depreciation d. None of the above

c. Today's cost of reproduction less depreciation This is the replacement cost method (cost approach).

In the appraising of real estate, there are several "principles of value." Of the following, which most clearly describes the "Principle of Change"? a. Less desirable properties enhance the values of more desirable properties. b. More desirable properties are adversely affected by less desirable properties in their midst. c. Tomorrow evolves out of today which came out of yesterday. d. None of the above.

c. Tomorrow evolves out of today which came out of yesterday. Principle of Change: (1) Development; (2) Static; (3) Decline.

47. On which of the following types of business collateral would one file with the secretary of state (Sacramento) to perfect a security transaction? a. Consumer goods b. Growing crops c. Trade fixtures d. Uncut timber

c. Trade fixtures Others (personal property) are recorded with local county recorder.

Mr. and Mrs. Yearsley, a married couple, purchased a home for $300,000 in 2003. They sold the home for $500,000 in 2006, and were exempt from capital gains taxes. How many years must the Yearsleys have resided on the premises to qualify for this exemption? a. Six months b. One Year c. Two years d. None of the above

c. Two years 2 years.

The cost of an improved parcel of real property would probably be equal to its value in which of the following instances? a. Highest and best use of the parcel. b. The parcel as a new piece of property. c. When a and b are both present. d. None of the foregoing.

c. When a and b are both present. A new piece of property would offer the best possibility of equality for cost and value. Determination of the highest and best use of a parcel would probably justify the cost of additional improvements, with the expectation of creating a profit.

When taking a listing, what is the most important question to ask? a. Will you help finance the sale? b. What is your asking price? c. Why are you selling? d. What are your existing loans?

c. Why are you selling? It is called "Motivation," and tells you how serious they are about selling.

According to the statute of frauds, all the following must be in writing to be enforceable, except: a. an agreement that (by its terms) is not to be performed within one year of execution of the agreement. b. an agreement that employs a broker to solicit, sell, lease, or exchange real property. c. a partnership agreement between two or more parties to engage in the sale or exchange of real property. d. an agreement for leasing real property for more than one year.

c. a partnership agreement between two or more parties to engage in the sale or exchange of real property. If this had been a limited partnership by definition, then it, too, must be in writing.

The normal method of disposing of government property is by: a. sealed bids. b. negotiated sale. c. auction. d. predetermined prices.

c. auction.

A waiver is defined as a: a. release from an attachment. b. release from an injunction. c. bilateral act that voluntarily relinquishes a known right or privilege. d. all of the above.

c. bilateral act that voluntarily relinquishes a known right or privilege.

The sale and leaseback of a property is a situation in which the buyer would have the least concern with the: a. lessee's credit rating. b. structural soundness of the building. c. book value of the property, less depreciation. d. location of the property.

c. book value of the property, less depreciation. The seller, not the buyer, is affected by book value minus the depreciation charge. The other statements in the question would be of considerable concern to the buyer.

The Real Estate Commissioner has the power to investigate, suspend, or revoke the license of a licensee when that person has been found guilty of: a. using a false or fictitious name, knowingly made false statements in any application for registration of a manufactured home as a vehicle. b. submitting a check, draft, or money order to the Dept. of Motor Vehicles for any obligation or fee due the State, which was thereafter dishonored or payment refused upon presentation. c. both a and b. d. none of the above.

c. both a and b.

The punishment for any persons who violate the "kickback" provisions of R.E.S.P.A. may be: a. not more than a $10,000 fine. b. one year in prison. c. both a and b. d. none of the above.

c. both a and b.

An "agreement in a deed" would best match up with: a. option. b. prescription. c. covenant. d. subrogation.

c. covenant.

The initial step in the appraisal process is to: a. collect the fee. b. correlate the data. c. define the problem. d. determine the fee.

c. define the problem.

62. A purchaser in a sale-leaseback transaction would be least concerned about: a. the location of the property. b. general credit of the lessee. c. depreciated book value of the improvement. d. condition of improvements.

c. depreciated book value of the improvement. Purchaser will set up his own depreciation schedule, and cares not about what the previous owner's book showed, with respect to depreciation.

"Gross multiplier" is used to determine value of certain types of income properties. It is determined by: a. dividing the gross rental income by the appraised value. b. multiplying the market price by the capitalization rate. c. dividing the sales price by the gross monthly rental. d. multiplying the gross monthly rental by a reasonable cap rate.

c. dividing the sales price by the gross monthly rental. Gross Rent Multiplier is a rough, quick way of converting gross rent into market value.

A land developer should initially: a. acquire the land. b. do a cost analysis. c. do a market analysis. d. determine the development costs.

c. do a market analysis. Otherwise referred to as a "feasibility" study, which will help determine if this or other alternatives should be pursued.

For an exclusive listing, negotiations for a buyer should be conducted through the: a. seller. b. trustee. c. listing broker. d. none of the above.

c. listing broker. A duty of the listing broker is to assist the seller in evaluating all offers to purchase.

For a straight-line schedule of depreciation: a. earlier years receive more weight. b. later years receive more weight. c. each year receives equal weight. d. none of the above.

c. each year receives equal weight. For straight-line, the value is divided by the number of years over which depreciation is run—the same amount for each year. For "accelerated" methods, allow greater amounts of depreciation for the earlier years, and less for the later years

All of the following are methods for estimating accrued depreciation, except the: a. engineering method. b. market analysis method. c. economic method. d. cost of reproduction method.

c. economic method. There are five recognized methods for measuring past, or accrued, depreciation: 1. The breakdown method 2. The engineering method 3. The straight-line method 4. The market method 5. The capitalized income method The economic method is not included in this category.

A real estate broker who negotiated a real property loan must record the trust deed: a. within 10 days of release of funds, provided lender authorizes prior release. b. before any funds are released. c. either a or b. d. none of the above.

c. either a or b.

When looking for records regarding chattel liens, you should go to the: a. Secretary of State. b. County Recorder. c. either a or b. d. none of the above.

c. either a or b. Chattel (mortgage) - County Recorder; Security Agreement - Secretary of State.

51. California real estate law considers manufactured homes: a. personal property. b. real property. c. either a or b. d. none of the above.

c. either a or b. Personal property, until (1) placed on foundation (with permit), (2) certificate of occupancy is issued, and (3) proper documents filed reflecting unit has been fixed to foundation.

98. A contract of sale to an investor is conditioned upon the new prospective owner finding tenants for his building in advance. This agreement is: a. unreal. b. unenforceable. c. enforceable. d. void because it violates the statute of frauds.

c. enforceable. Contracts in which performance is made subject to buyer's approval of specific terms or conditions (as in this case, buyer finding satisfactory leases) have been upheld by most recent court decisions as valid and enforceable.

Under a real property sales contract, buyer is considered to be a(n): a. lessee. b. tenant in common. c. equitable owner. d. vendor.

c. equitable owner. No title passes, but buyer is equitable owner of the property. Should record a "memorandum of agreement" or land contract to give constructive notice.

Functional utility in a building is most dependent upon: a. conditions of heating-cooling systems. b. desires of occupants. c. floor plan and equipment. d. area zoning.

c. floor plan and equipment.

An appurtenant easement need NOT be mentioned in a deed since it: a. is hypothecated. b. is pledged. c. goes with the land/runs with the land and is thus automatically transferred. d. all of the above.

c. goes with the land/runs with the land and is thus automatically transferred. Automatically goes with the land.

The U.S. Bureau of Labor Statistics publishes a cost of living index. If a lease contains an escalator clause, which requires periodic adjustments in relation to changes in the index, the lease is called a(n): a. fixed lease. b. standard lease. c. graduated lease. d. federal lease.

c. graduated lease. If rentals are adjusted in relation to the movements of a recognized national index, such as the cost of living index, the controlling lease is called a Graduated Lease.

"Domicile" most frequently means: a. semi-circled ceiling. b. relationship of parties. c. home or residence. d. none of above.

c. home or residence.

An appraiser observes wide cracks in the corner of a basement, spreading up two walls. This was most likely caused by: a. weak joists. b. deterioration due to dampness. c. house settling (appraiser should get soils report). d. none of the above.

c. house settling (appraiser should get soils report).

An easement held by the power company for erecting poles and lines as required is an easement: a. personal. b. appurtenant. c. in gross. d. prescriptive.

c. in gross.

43. When interest rates on real property loans increase, capitalization rates on income properties tend to: a. be affected inversely. b. remain the same c. increase d. decrease.

c. increase

The series of parallel beams to which floorboards and ceiling laths are nailed, which are supported by large beams, girders, and bearing walls, are called: a. braces. b. plates. c. joists. d. guides.

c. joists. Joists are structural parts supporting floor or ceiling loads.

A broker was hired by a seller to sell her land for a prescribed commission. However, the broker incurred more expenses while trying to sell the land than he anticipated. If the broker asked the seller to increase the commission at the time of the sale, and the seller agreed to do so, this would be: a. against the law. b. illegal. c. legal. d. none of the above.

c. legal. A contract to be performed may be altered with consent of all parties involved.

If a lessor wanted a long-term, uncomplicated income from a sale-leaseback arrangement, the type of lease best fitting this requirement would be a: a. step up. b. percentage. c. net. d. none of the foregoing.

c. net. The lessor receives a net amount as rental, whereas the lessee, or tenant, pays for taxes and insurance and handles all maintenance problems. This is a simplified arrangement for the lessor.

A broker has the listing on a seller's home (exclusive agency), and has expended much time, money, and effort in attempting to generate a sale. While the listing is still in force, the seller sells the property herself to a coworker. The broker would b e entitled to: a. costs and expenses. b. 1/2 the normal commission agreed on. c. no commission. d. full commission per listing agreement.

c. no commission. In an "exclusive agency agreement," the seller reserved right to sell herself without paying any commission to the broker.

An option in a lease: a. is illegal. b. is valid only if recorded. c. normally passes with the assignment of lease, even if not mentioned in the assignment. d. none of the above.

c. normally passes with the assignment of lease, even if not mentioned in the assignment. All terms of lease pass with lease, whether mentioned or not.

After a broker shows a client's property to a prospective buyer, the broker should: a. notify the office staff of the showing by memo. b. confirm showing with the buyer by written memo. c. notify the seller in writing as to the prospect's identify. d. wait until the prospect contacts the owner.

c. notify the seller in writing as to the prospect's identify. The broker who is the procuring cause of the sale is the one entitled to the commission. To protect himself, the broker must inform the seller in writing of the prospects to whom he has shown the property, no later than at the end of the listing period.

In residential real estate lending, when lenders "soften" their requirements to allow less than qualified buyers to "qualify, ": a. overall financing costs tend to remain the same. b. overall financing costs tend to decrease. c. overall financing costs tend to increase. d. overall financing costs are not affected.

c. overall financing costs tend to increase. When borrowers with lower incomes and weaker credit ratings are allowed to borrow, the lender must cover the increased "risk." Thus, the overall increase in costs of borrowing.

"The right of one or more persons to possess and use something to the exclusion of others" describes: a. discrimination. b. novation. c. ownership. d. equity.

c. ownership.

Which of the following would complete this (true) statement? Property is: a. real if movable. b. personal if a fixture. c. personal if not real. d. real if tangible.

c. personal if not real.

A seller sold a property taking back a note and trust deed for $20,000 as a part of the purchase price. He later desired to purchase a lot on which he could build a home and needed $9,000 to buy the lot. He borrowed the money from the bank, giving the $20,000 note and T.D. as security, which was considered to be a: a. chattel mortgage. b. holding agreement. c. pledge. d. purchase money loan.

c. pledge. Pledge - depositing of personal property (note and TD) by a borrower with a creditor (lender) as security for a debt (loan).

The legal purpose of police power is to: a. keep all types of commercial property out of residential neighborhoods. b. keep the land in every area as similar as possible. c. preserve or protect public health, safety, morals, or general welfare. d. none of the above.

c. preserve or protect public health, safety, morals, or general welfare.

When a deed is recorded: a. title always passes. b. possession is granted. c. presumption of delivery arises. d. none of above.

c. presumption of delivery arises. Deed must be delivered to be effective. It is logical the grantor intended delivery if the signed and had it acknowledged by a notary public.

To divide equally or proportionately to time of use is to: a. progress. b. probate. c. prorate. d. procrastinate.

c. prorate. Prorate is to divide, assess proportionately.

35. Cost estimating methods currently used by builders, architects, and appraisers are: a. capitalization of residual income. b. capitalized cost of replacement. c. quantity survey, unit in place, comparative square, or cubic foot. d. unit, unit in place, quantity survey.

c. quantity survey, unit in place, comparative square, or cubic foot.

If the "demand" for homes goes up and the "supply": a. diminishes, the values will decrease. b. remains the same, the values go down. c. remains the same, the values will increase. d. goes up, the values will go up.

c. remains the same, the values will increase. Law of supply and demand: If there is high demand and low supply, then values will rise.

82. A broker has received a $5,000 personal check as deposit on an offer. Since the sellers are not home, broker deposits the buyer's check into his broker trust account. Buyer thereafter rescinds offer and demands return of deposit. Broker should: a. return the buyer's check. b. return the buyer's deposit in the form of a check drawn against the broker's trust account. c. return the deposit. d. none of the above.

c. return the deposit. If the broker gives deposit back prior to buyer's check clearing, he may be giving away a free $5,000 to the "buyer."

The expression "A Bundle of Rights" best describes: a. a Lessee's rights to quiet and complete freedom of possession of the leased property. b. a Vendee's rights in a Land Contract agreement. c. rights or interest which an owner has in the thing he/she owns—the right to possess, use, encumber, dispose of, and to exclude. d. none of the above describes a "bundle of rights."

c. rights or interest which an owner has in the thing he/she owns—the right to possess, use, encumber, dispose of, and to exclude. Best describes a "Bundle of Rights"

Financial enhancement, as compared to comfort and safety when purchasing a home, is generally considered: a. absolute. b. primary. c. secondary. d. none of the above.

c. secondary.

When using the cost approach to determine the value of land and improvements of a property, an appraiser would use: a. one approach to arrive at a value for both. b. one approach to arrive at a value for each. c. separate approaches to arrive at a value for each. d. none of the above.

c. separate approaches to arrive at a value for each. Value of land - comparison approach; Value of improvements based on today's building costs.

When a real estate licensee has been accused of a Code violation, the initial step for the Commissioner in initiating the hearing procedure would be to: a. require complainant to file testimony at the hearing. b. bring charges against licensee. c. serve the accused licensee with the accusation. d. file a complaint against the licensee.

c. serve the accused licensee with the accusation.

Any person in whom the title of real estate is vested, who afterwards has a name change must: a. change all recorded documents to reflect the change, immediately. b. sign any subsequent conveyance with latest name, including maiden name. c. set forth the name in which such person derived title, in subsequent conveyances. d. none of the above.

c. set forth the name in which such person derived title, in subsequent conveyances. Must either grant title in the identical name originally taken, or refer to such former name. For example: Where a single woman received title as Mary Smith, and later marries, she should grant as "Mary Smith Jones, formerly Mary Smith."

70. Condominium ownership is an undivided interest in common areas with all other project owners, plus separate interest in the "air space" of a particular unit. Air space is: a. space within prescribed boundaries indicated by legal description of project. b. space between outer boundaries of buildings. c. space between painted exterior walls (inner surfaces) of prescribed unit. d. all of the above.

c. space between painted exterior walls (inner surfaces) of prescribed unit. Includes the outside surfaces of the paint on exterior walls, inside the unit, and to the outside surfaces of glass windows and doors. Anything beyond these would be extending into the common areas, owned in common with all others.

California State sales tax applies to: a. food products. b. real property. c. tangible property. d. all of the above.

c. tangible property. Tax is imposed upon retailers for sales of tangible personal property at retail. Items typically exempt are: food, drugs, certain necessities, and property subject to excise tax—liquor and gasoline.

If on a grant deed the manner of taking title is not indicated after the names of the two grantees, the courts would rule: a. severalty. b. joint tenancy. c. tenants in common. d. community property.

c. tenants in common. There are two grantees, so it cannot be severalty (sole ownership); there is no mention of right of survivorship, so no joint tenancy; there is no mention of marriage, so no community property.

A buyer wishes to purchase a home through Broker Bob, making the following offer: Sale price is $100,000; Buyer to put $10,000 down and obtain a new FHA insured loan for $80,000; Buyer to execute a 2nd note and trust deed in favor of seller for $10,000. Broker should advise: a. transaction is okay. b. seller should not have the new 2nd trust deed recorded until after escrow has closed, so as not to alarm FHA. c. the Buyer that she cannot purchase in this manner, because FHA does not allow 2nd notes and trust deeds, but requires cash to the FHA loan. d. none of the above.

c. the Buyer that she cannot purchase in this manner, because FHA does not allow 2nd notes and trust deeds, but requires cash to the FHA loan. This is an FHA requirement.

The following are all correct concerning a valid homestead, except: a. the declarant must reside on property at time of declaring. b. the declarant must give a description of the property. c. the declarant must be married at the time of declaring. d. all of the above

c. the declarant must be married at the time of declaring. The declarant need not be married to file/declare.

When a lender refers to a "nominal" interest rate, it means: a. points will be required because of the lower than normal rate. b. the maximum rate of interest allowed. c. the rate of interest specified in the promissory note. d. that the final rate of interest granted will be greater than the original commitment.

c. the rate of interest specified in the promissory note. Usually, an annual amount, compounded more frequently, e.g., 15% compounded monthly, would deal with monthly payment periods.

The county building inspector would not approve a site ready for construction on a new residence until a "percolation" test had been approved. The latter deals with: a. the water table. b. runoff drainage. c. the septic tank. d. none of the above.

c. the septic tank. Deals with the ability of earth to filter liquids from the septic tank.

Over and above the strictly legal relationship, the Real Estate Commissioner feels that the relationship between the salesperson and the client should be like that higher and more important relationship of: a. vendor to vendee. b. broker to salesperson. c. trustee to beneficiary. d. attorney to client.

c. trustee to beneficiary. Trustee has a "fiduciary" relationship with the beneficiary

A broker's loan statement protects the: a. broker. b. trustee. c. trustor. d. beneficiary.

c. trustor. Protects the borrower

Productivity is a direct function of: a. demand. b. supply. c. use. d. value.

c. use. The more a commodity/product is "used," the more will be produced.

A salesperson, working with buyers having limited cash available for down payment, finds a property listed at $96,000, ca sh to new loan. The buyers want the home. However, the maximum loan available is for 80% of value, requiring 20% cash investment. The buyers say that if the sellers would take back a 2nd note, maybe they could buy it. Sellers do not want to take back a note, per listing information. The salesperson should: a. not write any offer, since it will not be what sellers want. b. call the sellers to discuss their taking back a 2nd note. c. write the offer the buyers want to make and present it to the sellers. d. write an offer for cash to a new loan, and hope the buyers are lucky and obtain a cooperative lender.

c. write the offer the buyers want to make and present it to the sellers. For the "willing" buyer, write an offer and start the negotiating process. Be realistic, but don't you decide what the principals will do.

To whom is the Mortgage Insurance Premium (MIP) on a VA loan paid? a. The broker b. The mortgage company c. The Veterans Administration d. To no one

d. To no one FHA has the requirement for such a premium, not the VA.

"A" has been given power of attorney for the purpose of selling "B's" house. Which of the following is NOT true? a. "A" cannot sell the property if "B" has recorded a homestead on it. b. Power of attorney must be recorded for "A" to sell the property. c. Power of attorney is terminated in the event "B" is declared incompetent and unable to enter into a legal contract. d. "A" may purchase the property, providing he/she pays a fair market value for the home.

d. "A" may purchase the property, providing he/she pays a fair market value for the home. An attorney-in-fact cannot deed or convey the property to self. If he desires to purchase it, he/she must "give up" the power of attorney.

Mr. E purchased property for $150,000 (Improvement 80%: Land Ratio 20%). If he used the straight -line method of depreciation with 35 years remaining life, what would be the adjusted basis of the property after 10 years? a. $85,408 b. $106,760 c. $110,204 d. $115,714

d. $115,714 $150,000 - 20% = 150,000 - 30,000 = $120,000 improvement value. $120,000 ÷ 35 years = $3,428.57 x 10 years = $34,285.71 accrued depreciation. Adjusted Basis (10 yrs later) = $150,000 - $34,286 = $115,714.

An investor purchased an income property at $200,000, with a capitalization rate of 10%. If the next income increased by 10% (with NO additional expense), and the "cap" rate increases to 12%, the new value of the property would be: a. $220,000 b. $265,000 c. $299,000 d. $183,333

d. $183,333 $200,000 x 10% (.10) = $20,000 net income $20,000 + 10% = 20,000 + 2,000 = $22,000 new net income Value = Income divided by "cap" = $22,000 ÷ (.12) = $183,333

A property sells for $121,000. The purchaser gives $10,000 down payment, agrees to place an additional $5,000 down, and ta ke over an existing VA first loan of $100,000, with the remainder to be in the form of a 2nd note and trust deed. For these cond itions, how much would the documentary tax stamps be? a. $1.10 b. $5.50 c. $133.10 d. $23.10

d. $23.10 Do NOT pay on old existing loan being taken over. Therefore, ($121,000 - 100,000) ÷ 1,000 x ($1.10) = 21.0 x $1.10 = $23.10.

An office building purchased for $200,000 with 25% down and 75% financed, had $1,500 per month payments with 12% annual interest. Ten years later, the property sold for $400,000. What is the owner's equity at the sale (includes original investment)? a. $100,000 b. $150,000 c. $200,000 d. $250,000

d. $250,000 Since monthly payment included "interest only," there was no principal reduction. Therefore, $400,000 - 150,000 = $250,000 equity.

86. The value of an investment is as follows: Total value = V(t) = $300,000 Income attributable to building = $21,600 Reasonable "cap rate" = 9% What is value of the land? a. $90,000 b. $80,000 c. $70,000 d. $60,000

d. $60,000 Value (bldg.) = 1 (bldg.) divided by "cap rate" = $21,600 ÷ 9% = $21,600 ÷ (.09) = $240,000 Value (land) = Value (total) - Value (bldg.) = $300,000 - $240,000 = $60,000

If a $52,500 loan was made on a property which was equivalent to 70% of the appraised value. What was the amount of the appraised value? a. $90,000 b. $80,000 c. $50,000 d. $75,000

d. $75,000 $52,500 ÷ .70 = $75,000 appraised value.

A home built in 1959 cost $14,500. The home is 32' x 48' and the attached garage is 18' x 20'. In 1983, the cost per square foot factors were $75 (house) and $15 (garage). If the improvement depreciated at 2% per year and the land value of the lot had risen to $25,000, what was the value of the property in 1983? a. $84,367 b. $81,258 c. $87,531 d. $87,712

d. $87,712 32' x 48' = 1,536 sq. ft. x $75 = $115,200 18' x 20' = 360 sq. ft x $15 = 5,400 { $115,200 + 5,400 = 120,600 } Cost new in 1983 = 120,600 Minus 2% per year depreciation = - 57,888 { 120,600 - 57,888 = 62,712 } Improvement adjusted basis = $62,712 Land value = 25,000 { 62,712 + 25,000 = 87,712 } Approximate value (1983) of property = $87,712

Complaints involving violations of federal law must be filed within how many days of the violation? a. 90 b. 120 c. 150 d. 180

d. 180

A section of land is to be enclosed with a double strand of wire. If a rod equals one pound of wire, how many pounds of wire will be required? a. 640 b. 1,280 c. 1,920 d. 2,560

d. 2,560 1 mile = 320 rods; 1 section is 4 miles around Therefore 1 sec. = (4 mi.) x (320 rods) = 4 x 320 = 1280 rods per strand For 2 strands, 2 x 1280 rods = 2560 rods = 2,560 pounds

What is the area of the parcel described as follows: NW¼ of the SE¼ and the W½ of the NE¼ and the NE¼ of the NW¼ of Section 13; plus, to this add the SE¼ of the SW¼ and the SW¼ of the SE¼ of Section 14? a. 200 acres b. 160 acres c. 120 acres d. 240 acres

d. 240 acres Remembering that each section = 640 acres; (1) each quarter of that would equal 160 acres; (2) ½ a quarter = 80 acres; ¼ a quarter = 40 acres. Then: (Section 13) NW¼ of the SE¼ = 40 acres; W½ of the NE¼ = 80 acres; NE¼ of the NW¼ = 40 acres. (Section 4) SE¼ of the SW¼ = 40 acres; SW¼ of the SE¼ = 40 acres. Total Acres = 240.

A plot of land that is 30 miles square contains how many townships? a. 0.69 b. 4 c. 9 d. 25

d. 25 The plot is 30 miles on a side and a township is six miles on a side. Therefore, the plot has five townships on a side, or 5 by 5 = 25.

Mr. Soldier wants to purchase a home on his VA entitlement. The asking price is $100,000. The VA "CRV" came back at $98,750. Which of the following statements is correct? a. Buyer can ask seller to reduce purchase price. b. Buyer can pay the extra $1,250 in cash and get the $98,750 loan. c. Buyer can request the VA to reevaluate the property (ask for re-appraisal), hoping to get the full value. d. All of the above.

d. All of the above. The only thing the buyer cannot do is finance above the CVR.

In addition to being registered for a minimum of one year, manufactured homes sold by real a. 8' wide and 20' long. b. 6' wide and 40' long. c. 12' wide and 30' long. d. 8' wide and 40' long.

d. 8' wide and 40' long.

If not specified in escrow, what is the number of days normally allowed to close an escrow? a. 30 days b. 45 days c. 60 days d. A reasonable time

d. A reasonable time There is NO standard time. Make certain that there is sufficient time allowed to accomplish the work to be done.

68. Which of the following is not necessary in a bill of sale? a. Date b. Mention of consideration c. Signature of vendor d. Acknowledgment

d. Acknowledgment

A homestead offers NO protection against which of the following filed prior to the filing of the homestead? a. Real property taxes b. Mechanic's liens c. Prior recorded liens d. All of the above

d. All of the above

An appraiser must be careful to distinguish the fundamental purpose of the appraisal from which of the following? a. Appraisal procedures to be used b. Function for which the estimate of value is required c. Techniques he will use to determine his opinion of value d. All of the above

d. All of the above

An owner has been found guilty of discrimination under the Health and Safety Code. What action can the aggrieved party take? a. May purchase the property in question, if still available b. May purchase another like property, if the original property is not available c. May be awarded $500 in damages if neither a nor b available d. All of the above

d. All of the above

Which of the following would be considered a "general lien"? a. Federal tax lien b. Tax lien c. Judgment lien d. All of the above

d. All of the above

Which of the following is NOT a lien? a. Encumbrance b. Homestead c. Zoning d. All of the above

d. All of the above A lien is a charge against property, whereby the property is made security for payment of the debt, i.e., attachment.

A property was sold on a real estate sales contract. Subsequently, the buyer refused to make required payments, breaching the agreement. The seller may take which of the following courses of action? a. Unilateral rescission b. Action for damages c. Action for specific performance d. All of the above

d. All of the above All courses of action listed are open to the seller.

69. When appraising residential properties, an appraiser should carefully examine which of the following? a. Comparable homes currently for sale b. Comparable homes recently for sale, but not sold c. Comparable homes recently sold, escrow's being closed d. All of the above

d. All of the above Although it is true that those homes for which the escrow has been closed provide "what the buyer will pay," the other data is of great value in establishing the ranges of value within which the subject property should fall.

On which of the following properties may one file a valid Declaration of Homestead? a. Fourplex b. House on 2-acre parcel c. Single-family dwelling d. All of the above

d. All of the above Requires "principle residence."

California law opposes the practice of discrimination due to race, color, religion, national origin, or ancestry in public assisted housing accommodations. Discrimination in which of the following cases would be in violation of this code? a. In houses receiving tax exemptions (exception VA) b. On land purchased for less than value due to state or local sale pursuant to Federal Housing Act of 1949 c. Housing in multiple dwellings financed with federally insured or guaranteed funds d. All of the above

d. All of the above Where government money is involved, no discrimination of any kind is allowed.

81. An "installment sale" contract is which of the following? a. A real property sales contract in which a seller agrees to convey title to real property to the buyer, after the buyer has met certain conditions specified in the contract. b. Does not require conveyance of title until after one year. c. Will allow a seller to "stretch out" his tax liability over a longer period of time, thereby reducing the effective tax paid on a capital gain realized. d. All of the above.

d. All of the above. All answers describe a real property sales contract.

9. A tenant is justified in abandoning a lease property if the landlord demonstrates constructive eviction. Which of the following acts would be considered constructive eviction? a. The property has been shown to another party that has entered into negotiations with the landlord. b. The landlord has failed to make needed repairs and maintain the property in the agreed manner. c. The landlord has altered the building to an extent that is no longer usable for its original purpose. d. All of the above.

d. All of the above. All define constructive eviction.

Regarding a "Blanket Trust Deed," which of the following statements is correct? a. It covers more than just one property. b. It usually contains a "release clause" providing for release of a particular parcel upon the repayment of a specified portion of the loan. c. It is typically used with a tract of homes built on speculation. d. All of the above.

d. All of the above. All the statements describe a blanket encumbrance, or trust deed.

When computing the net income of an office building, an appraiser would consider, as a management expense, which of the following? a. Salary paid to a manager b. The owner acting as his own manager c. A tenant performing as manager in lieu of rental d. All of the foregoing

d. All of the foregoing Calculation of net income for properties requires an assessment of management fees, regardless of the manner in which the service is performed.

Economic obsolescence would be created by which of the following? a. Old fashioned ceiling heights b. Poor architectural arrangement of floor space c. Inadequate parking facilities d. An excessive number of similar properties available in the area

d. An excessive number of similar properties available in the area Economic obsolescence is created by causes lying beyond, or outside, the property. An oversupply of similar, or competitive, units in the same area fits this parameter. The other answers to the question represent deficiencies in the property itself.

Which of the following is nearest to a synonym of "metes and bounds"? a. Angles and degrees b. Measures and perimeters c. Degree of perimeters d. Angles and measures

d. Angles and measures "Metes" means distance or angles; "Bounds" means boundaries or measures.

Which of the following would be considered publicly assisted housing? a. Property purchased with FHA insured loan. b. Property purchased with government assistance. c. Property receiving tax exemption (other than Veterans). d. Both a and b.

d. Both a and b. Generally, "public" assistance means "government" assistance.

Characteristics of a particular lender are: prefers short-term loans; prefers interim loans; buyer costs are higher than other lenders; past relationships with borrowers are important. What kind of lender is this? a. Savings bank b. Insurance company c. Private individual d. Commercial bank

d. Commercial bank

Abe owned two parcels of land, "A" and "B." Abe sold lot "A" to Bob who, before escrow closed, had the escrow officer change the deed to read lot "B." Escrow closed and documents were recorded. Bob then sold lot "B" to Chuck, who recorded his deed. Subsequently, Abe sold "B" to Daren, who recorded his deed. Who is the owner of lot "B"? a. Abe b. Bob c. Chuck d. Daren

d. Daren Alteration (unilaterally) of the deed in escrow voided that deed. Therefore, no transfer to Bob of lot "B," and subsequently, none to Chuck, for Bob did not have title to that lot. Abe's transfer to Daren was valid. Title insurance involvement in these transactions would have saved a lot of trouble and headaches.

What is the written instrument used to create land use restrictions for the benefit of the owners in a new subdivision? a. Zoning ordinances b. Original subdivision deed c. Subdivision map d. Declaration of restrictions

d. Declaration of restrictions A developer uses the declaration of restrictions to create deed restrictions.

Regarding easements, which of the following is NOT correct? a. Easements can be created by reservation. b. Easements can be created by dedication. c. A lessee can give an easement for the duration of a lease to a third party. d. Deeds granting unlocated easements are invalid.

d. Deeds granting unlocated easements are invalid. Easements do not have to be specifically located to be valid.

Which one of the following illustrates the most common type of depreciation? a. Faulty plumbing b. An increase of amenities c. Outmoded appliances and poor architectural design d. Deferred maintenance

d. Deferred maintenance Deferred maintenance is maintenance which has been postponed to some later date. This is a common practice, and it tends to deteriorate the physical condition of a structure.

The four essential elements of value are: a. Cost, Demand, Utility, Scarcity b. Cost, Demand, Capitalization, Scarcity c. Demand, Improvements, Selling Price, Time on Market d. Demand, Utility, Scarcity, Transferability

d. Demand, Utility, Scarcity, Transferability "DUST" Cost, selling price, and time on market have nothing to do with value. Capitalization is a mathematical tool.

Which of the following is not included in the "Principle of Balance"? a. Land b. Management c. Capital d. Depreciation

d. Depreciation The 4 ingredients involved in the production of income are: labor, capital, management, and land.

The primary purpose of the Federal National Mortgage Association (FNMA) is to: a. provide large sums of money for the building industry. b. finance the construction of low cost residential housing. c. lend money in the residential marketplace lower than normal interest rates for lower income families. d. Expand available home loan funds by buying and selling VA, FHA, and conventional loans in the secondary money market.

d. Expand available home loan funds by buying and selling VA, FHA, and conventional loans in the secondary money market.

All of the following are used in the purchase of residential properties, except: a. Cal-Vet. b. VA approved lenders. c. Commercial banks. d. FHA approved lenders providing insured FHA Title I and Title II loans.

d. FHA approved lenders providing insured FHA Title I and Title II loans. FHA Title I loans are for home improvement.

Jurisdiction over practices of unfair or discriminatory acts in housing matters belongs to the: a. Real Estate Commissioner. b. Labor Commission. c. Department of Housing. d. Fair Employment Practices Commission.

d. Fair Employment Practices Commission.

Who is responsible for properly working sewer systems in a community? a. Real Estate Commissioner b. Homeowner c. Subdivider d. Health officer

d. Health officer

An investor constructs an office building and soon discovers that he can only rent a small percentage of the office space. Also, the electrical, plumbing, cooling, and heating systems are found to be oversize. This is an example of what kind of obsolescence? a. Incurable locational b. Curable functional c. Curable economic d. Incurable functional

d. Incurable functional If such an office building has excessive capacity and more-than-adequate facilities, it will suffer a loss of value due to functional obsolescence, which is incurable. Economic obsolescence creates a loss of value due to causes outside the building.

Of the following statements concerning a life estate, which is NOT true? a. All conveyances for life estates must be in writing to be enforceable. b. It is a freehold estate. c. Person holding a life estate does not have fee title. d. It cannot extend beyond the life of the life tenant.

d. It cannot extend beyond the life of the life tenant. Can be based on life of someone other than the life tenant.

If other factors are equal, and if the areas of living space are comparable, how are the costs of a two-story house and a one- story house related? a. There is no cost relationship between the two types of houses. b. The cost factors are equal. c. It is more costly to build a two-story house. d. It is less costly to build a two-story house.

d. It is less costly to build a two-story house. For a given square footage of living space, a two-story house is less costly than a single story house because certain basic factors are reduced by 50%; for example, heating ducts, roof area, lateral plumbing lines, and foundations.

On which of the following dates do California real property taxes become a lien on the subject property? a. December 10 b. April 10 c. July 1 d. January 1

d. January 1 On January 1 of the preceding the tax year, the lien is placed on the property. December and April dates above are dates taxes become delinquent for their respective periods, and July 1 is the beginning of the tax year.

*Which of the following phrases would best bind all parties to pay their debts? a. Jointly b. Individually c. Individually and severally d. Jointly and severally

d. Jointly and severally All parties are held responsible collectively or individually for the entire obligation.

46. Which of the following would not be constructive eviction of a tenant (lessee) by a landlord? a. During lease, landlord attempts to lease property to others. b. Landlord ousts tenants or allows third party to oust tenants. c. Landlord makes extensive, unwarranted alterations to the property. d. Landlord fails to repair excessive wear and tear to property caused by tenant's neglect.

d. Landlord fails to repair excessive wear and tear to property caused by tenant's neglect. All other answers do constitute "constructive eviction" by the landlord, which would allow the tenant to abandon the property and refuse to pay further rent, and doing so without incurring liability for breach of lease agreement.

A property is owned by five persons in "joint tenancy." Which of the following actions would destroy the respective tenancy relationship? a. One tenant wills his interest to another. b. Judgment and writ of execution is rendered against a tenant. c. Another of the joint tenants places a trust deed against her interest. d. Lender completes a foreclosure action against a joint tenant, issuing a trustee's deed to the highest bidder.

d. Lender completes a foreclosure action against a joint tenant, issuing a trustee's deed to the highest bidder. The new deed "breaks" two of the unities—TIME and TITLE. New owner with trustee's deed is tenant in common.

73. An FHA appraisal report includes the abbreviation "MPR." This refers to: a. Maximum Property Requirements. b. Multiple Property Ratio. c. Maximum Price Ratio. d. Minimum Property Requirements.

d. Minimum Property Requirements. Minimum Property Requirements

H.U.D. has established certain factors (standards) that must exist before it will insure a home loan through one of its agencies. Known as MPRs, these are: a. Maximum Probability Ratio. b. Mortgage Protection Requirements. c. Market Price Rating. d. Minimum Property Requirements.

d. Minimum Property Requirements. The FHA is an agency of H.U.D. (Department of Housing and Urban Development).

Two businessmen have been operating their businesses successfully in a community for a number of years. They have frequently made referrals between one another. Mr. E is an insurance broker; Mr. M is a real estate broker. They are considering joining forces, as partners - "E" & "M" Real Estate & Insurance. Which of the following statements is correct? a. Their partnership would be permissible, as the law allows brokers to form partnerships. b. They would be required to secure a partnership license and file their name with the Secretary of State. c. This is good as long as only Mr. E sells insurance. d. Mr. E would be required to secure a real estate broker's license.

d. Mr. E would be required to secure a real estate broker's license. Although real estate brokers can form partnerships with unlicensed persons, only brokers' names are permitted as part of the firm's name.

Of the following types of appraisal reports, which would be the most detailed? a. Certificate b. Form c. Letter d. Narrative

d. Narrative Gives appraiser opportunity to support his observations and opinions.

72. If an appraiser used all three methods in evaluating a residential property, he would combine the results in what way? a. He would give reasonable weight to each estimate and divide by 3. b. He would add the three estimates and divide by 3. c. Both a and b. d. Neither a nor b.

d. Neither a nor b. The appraiser's resultant estimate would be founded on judgment and professional experience rather than on some arithmetical process.

Which of the following would most likely appear in an appraiser's definition of "highest and best use"? a. Contract rent b. Ground rent c. Economic rent d. Net return

d. Net return Definition refers to the use, which at the time of appraisal is most likely to produce the greatest net return to the land and/or buildings over a given period of time.

Adam purchased a residence for $180,000 and made $20,750 in capital improvements. He sold the house for $200,000 and moved into an apartment on a 3-year lease. What kind of tax effect would this sale have? a. Capital gain of $750 b. Capital loss of $750 c. Capital loss of one-half of the $750 d. No effect

d. No effect Cannot declare loss on personal residence.

53. A 60-year-old man has been living in a home he bought 9 years ago, for which he paid $90,000. He recently sold the home for $120,000, incurring $9,600 selling expenses and brokerage fees. What capital gains taxes will he owe? a. $20,400 b. $30,000 c. $9,600 d. None

d. None $250,000 is allowed for gain without tax liability.

A single buyer purchased a new residence for $210,000, lived on the property for 3 years, then sold the property for $400,000. How much of his profit is subject to capital gains taxation? a. $100,000 b. $200,000 c. All d. None

d. None A single person is entitled to $250,000 capital gains exemption. This profit is only $180,000, so no capital gains.

If a broker decided to add to his real estate business and handle the sale of trust deeds, what other kind of license would he have to get? a. Loan broker's license b. Securities dealer's license c. Business opportunity license d. None of the above

d. None of the above A broker's license is required. The other answers are nonexistent. For selling real property securities, a broker must obtain an "endorsement" to complement his broker's license.

Which of the following would NOT be considered one of the major forces influencing value? a. Building restrictions b. Economic adjustments c. Government regulations d. None of the above

d. None of the above All are influences affecting value. The four forces are: (1) Political or governmental regulations; (2) Economic adjustments; (3) Social ideals and standards; (4) Physical characteristics.

Which of the following is NOT related to a "will"? a. Bequeath b. Bequest c. Devise d. None of the above

d. None of the above Bequeath - to give, hand down, leave by will; Bequest - that which is given by terms of will; Devise - gift by will.

27. Which of the following can contain the Real Estate Commissioner's recommendation for sales? a. Real Property Security b. Residential subdivision c. Syndicate security d. None of the above

d. None of the above Commissioner's office can "issue public reports" that might be favorable, but cannot make any recommendation to purchase.

Under the Manufactured Home Act, which of the following would NOT be grounds for disciplinary action? a. Agent fails to withdraw advertising on unit within 48 hrs. after receipt of notice of its sale. b. Agent advertises new manufactured home as used, since he can only work with units that have been registered with DRE for at least one year. c. Agent represents that the manufactured home is capable of being operated as a vehicle on California roads, if the unit does not meet all applicable equipment requirements for such operation. d. None of the above.

d. None of the above. Because a, b, and c are all grounds for disciplinary action

A real estate broker negotiates the sale of a residential property, which involves execution of a new first trust deed. Under what circumstances would the broker be excused from the recording the trust deed? a. When he has a financial interest in the trust deed. b. When the buyer instructs him not to record. c. When the escrow officer "promises" that she/he will see that the trust deed is properly recorded. d. None of the above.

d. None of the above. Only when the lender (beneficiary) instructs the broker not to record the trust deed is he excused, by law.

An owner of a business property sold the property and then "leased it back." Which of the following factors was most advantageous for the owner/lessee? a. Was relieved of property management. b. Has an improved tax situation, with all rent payment being deductible from income. c. Does not have to be concerned about property taxes on the building in the future. d. Now has more working capital at his disposal.

d. Now has more working capital at his disposal. Probably the best answer in most situations.

Which of the following represents an essential part of a valid grant deed? a. Acknowledgment and recordation b. Offer and acceptance c. Parties capable of contracting d. Parties properly described

d. Parties properly described The five essential elements of a valid deed are: (1) In writing; (2) Parties properly described; (3) Adequate property description; (4) Operative words (granting); (5) Signed by Grantor.

44. Which one of the following is not classified as a subdivision? a. Community apartment project with 20 or more apartments. b. Condominium project with 10 or more units. c. Stock cooperative containing 10 or more units. d. Planned development containing four lots.

d. Planned development containing four lots. A subdivision must have five or more units.

SBM & BL, MDM & BL, HM & BL are abbreviations which have meaning to: a. Small Business Administration. b. County Recorder. c. Secretary of State. d. Points of interest for surveyors.

d. Points of interest for surveyors. The three principal "base and meridian" intersections in California.

A salesperson brought in an offer on an office lot listing for $18,500. The broker, when taking the listing, was informed by the seller that they would take $18,000. What must the broker do? a. Do nothing and close the deal at $18,000. b. Inform the buyer of the $18,000 acceptable price. c. Say nothing to the seller, and split the $500 equally with the selling salesperson. d. Present the $18,500 offer to the sellers for approval.

d. Present the $18,500 offer to the sellers for approval. A salesperson must present all reasonable offers to the seller at the same time.

When an appraiser is concerned about "equilibrium" and "decline," he is working with one of the three sub-principles of which of the following? a. Principle of Substitution b. Principle of Supply and Demand c. Principle of Highest and Best Use d. Principle of Change

d. Principle of Change Relative to the Sub-Principle of Integration and Disintegration, (1) Integration (development); (2) Equilibrium (static state); (3) Disintegration (decline or decay).

Which of the following lenders would NOT be approved (respectively) by VA or FHA? a. Federal bank b. Institutional lender c. Insurance company d. Private lender

d. Private lender VA and FHA do NOT guarantee or insure loans made by private lenders.

For a buyer in a new subdivision, which of the following would provide the least amount of protection against loss in value in the subdivision? a. Zoning b. Newness c. Natural barriers d. Private restrictions.

d. Private restrictions. Typically, by limiting use, etc.

With which of the following would appraisers least likely use the "gross income" appraisal technique? a. Residential apartments b. Industrial c. Commercial d. Public buildings

d. Public buildings Public buildings do not have "income production" capacities.

One particular appraisal method would be more detailed and accurate than others. Which would it be? a. Unit of cubic foot method b. Unit of square foot method c. Unit cost in place d. Quantity survey

d. Quantity survey The quantity survey is used by contractors in calculating the cost of construction of improvements. It is rarely used by appraisers because costly details are not necessary for most of their evaluations.

It is unlawful for any person to affect the sale of any franchise that is regulated by the Franchise Investment Law, unless such person has made an application to the Corporation Commissioner, and is licensed by the: a. Franchise Tax Board. b. Corporation Commissioner. c. Real Estate Commissioner. d. Real Estate Commissioner or Corporation Commissioner.

d. Real Estate Commissioner or Corporation Commissioner. A license from one of these two is required

In the development of a subdivision of single-family homes, which of the following would be the least economical? a. Cul-de-sacs b. Long blocks c. Right angle (90%) intersections into major streets d. Short blocks

d. Short blocks With more streets, there's more cost and less land for homes.

52. A clothing store owner could NOT use which of the following as security for a loan? a. Accounts receivable b. Fixtures c. Personal note d. Stock

d. Stock Stock in trade CANNOT be used to secure a loan, for when the merchandise is sold, there is no longer any security.

12. If an appraiser wishes to measure the extent of accrued depreciation, he would rely upon which one of the following methods of calculation? a. Cubic foot b. Square foot c. Front foot d. Straight-line method

d. Straight-line method Appraisers do NOT use footage as methods of calculating depreciation; therefore, they would select the straight-line method.

A true disadvantage of owning real property would be the lack of liquidity. Of the following, which would provide the greatest amount of liquidity to such an investment? a. Amortization b. Leaseback c. Leverage d. Syndication

d. Syndication A syndication participant would be able to convert property interests into cash, without having to sell the property.

Which of the following would be considered an offer in a real estate transaction? a. Condition b. Covenant c. Performance d. Tender

d. Tender Tender is an offer to perform.

92. A brother and sister own a property as joint tenants. The sister marries and then deeds one-half of her interest to her new husband. Which of the following is a true statement? a. All three are now joint tenants. b. Brother is joint tenant, sister and husband hold title as community property. c. Brother holds in severalty, sister and husband hold as community property. d. The joint tenancy is totally destroyed.

d. The joint tenancy is totally destroyed. Sister automatically eliminates her joint tenancy when she deeds to her husband. Brother cannot thereafter (as only one person) hold in joint tenancy. Therefore, he, too, loses joint tenancy.

Examination of the records indicate there are conflicts between the local zoning restrictions and private restrictions contained within the deed that conveyed the property. Which of the following statements is true? a. The deed restrictions would prevail. b. The zoning restrictions would prevail. c. Since they are in conflict, the earlier restriction would prevail. d. The more restrictive of the two (deed vs. zoning) requirements would prevail.

d. The more restrictive of the two (deed vs. zoning) requirements would prevail. The more restrictive of conflicting zoning restrictions would prevail.

Under a real property sales contract, Buyer "A" makes a $2,000 down payment to Seller "B" on a property he had been renting. The agreement is filed with the county recorder. Subsequently, "A" moves to Florida, without making any further payments, and with no notice of his intentions being made to "B." Which of the following would be true? a. Seller could resell the property and obtain a deficiency judgment against "A." b. New buyer should not be concerned about the previous sales to "A." c. "A's" activity has no effect upon the marketability of the property. d. There would be a cloud on the title to the property.

d. There would be a cloud on the title to the property. Seller "B" would need a quitclaim deed from "A," or would need to seek a "quiet title action" in court to clear the cloud on his title so he could sell the property to another.

Owner-occupied homes in a residential area have an immediate effect on the local economy in which of the following ways? a. Property values would be maintained at a maximum. b. This situation would induce property speculation. c. Rental incomes would be at a maximum. d. There would be a lower occupancy turnover.

d. There would be a lower occupancy turnover. Owner-occupied homes lend economic stability to a neighborhood and lessen the possibility of turnover. Property values are maintained at maximum figures over a long term, rental income is nonexistent, and property speculation is not attractive to investors.

What is NOT required to be disclosed under the Truth-in-Lending Law? a. Annual percentage rate (APR) b. Length of loan c. Monthly payment d. Total finance charge in purchase of single-family, owner-occupied dwelling

d. Total finance charge in purchase of single-family, owner-occupied dwelling Only the APR, length of loan, and monthly payments are required.

Which of the following would NOT be considered a "fiduciary" relationship? a. Agent to seller b. Attorney-in-fact to principal c. Attorney to client d. Trustor to beneficiary

d. Trustor to beneficiary Fiduciary relationship involves "trust and confidence." This is NOT required between trustor (borrower) and beneficiary (lender).

Involving the sale of a property, which of the following would be exempt from the "discrimination and unlawful acts" of the Health and Safety Code? a. Duplex financed by VA loan. b. Single family, owner-occupied residence financed by FHA. c. Single family, owner-occupied residence unencumbered. d. Twenty unit apartment financed by a conventional loan.

d. Twenty unit apartment financed by a conventional loan. Law applies to: (1) owner-occupied, publicly assisted (gov't. financing program) single family dwellings; (2) Publicly assisted apartment units (3 or more); (3) Privately financed apartments (5 or more); and (4) Public housing projects.

Which of the following would issue a CRV when asked to approve a new loan? a. Savings bank b. Department of Veterans Affairs c. FHA d. VA

d. VA CRV is a "certificate of reasonable value," a VA appraisal.

Which of the following types of financing generally does NOT require any down payment? a. Cal-Vet b. Conventional c. FHA d. VA

d. VA There is generally no down payment required with a VA loan

10. Considering the "Interstate Land Sales Full Disclosure Act," which of the following is NOT true? a. Controls subdivisions of 25 (or more) lots, unimproved at the time of sale. b. Developer must register subdivision with Office of Inter-Land Sales Registration (OILSR), and provide copy of "property report" to purchaser or lessee. c. Any contract to purchase or lease may be revoked by purchaser or lessee within 7 days of signing the contract. d. Violations are punishable by fines up to $50, imprisonment of up to 5 weeks, or both.

d. Violations are punishable by fines up to $50, imprisonment of up to 5 weeks, or both. Fines up to $5,000; imprisonment up to 5 yrs., or both.

100. According to California law, legal closing occurs at which of the following times? a. When broker gets all required signatures and acceptance is acknowledged b. When funds for loan are placed in escrow c. When escrow disburses money (checks) d. When all instruments necessary to transfer title have been executed and recorded

d. When all instruments necessary to transfer title have been executed and recorded Title insurance has been furnished, and money necessary to pay seller's equity, less costs and expenses, are in the hands of the broker or escrow holder. Transfer of title and money are thought of as simultaneous acts.

Which of the following would NOT be included in an "eminent domain" situation? a. Condemnation proceedings b. Fair consideration c. For public good d. Zoning regulations

d. Zoning regulations This provision will assure the buyers that their money is safe, until such time the developer can get a release on the parcel of land involved with their purchase. Otherwise, without such "partial" release, no transfer of title could occur on various purchase s until the encumbrance on the entire parcel developed was paid in full.

13. In real estate, the word "tenancy" means: a. a device. b. a tenacious person. c. two or more persons joined in an enterprise. d. a mode or method of holding ownership.

d. a mode or method of holding ownership.

A real estate licensee attempted to solicit a listing in a neighborhood by stating to owners that "non-whites" would be moving into the neighborhood, causing property values to decrease. This conduct would be considered all of the following, except: a. blockbusting. b. illegal conduct. c. panic selling. d. acceptable practice.

d. acceptable practice. The answer was for that which was NOT acceptable, or wrong

An appraiser would NOT be in violation of the USPAP if he: a. pays people to refer clients to him. b. accepts an appraisal assignment, knowing that he is not fully qualified to handle the assignment. c accepts an appraisal fee based upon a percentage of the value estimate. d. accepts an appraisal fee for service on a property in which he has an interest, a fact which has been disclosed to his client in writing.

d. accepts an appraisal fee for service on a property in which he has an interest, a fact which has been disclosed to his client in writing. It is permissible to collect a fee for service on a property in which the appraiser has an interest, providing the fact has been disclosed properly to the client.

7. One way to jointly hold title to real property is "joint tenancy." Another way would be: a. tenancy in common. b. community property. c. tenancy in partnership. d. all of the above.

d. all of the above.

83. Regarding condominium ownership, which answer is most correct? Owner has: a. an undivided interest in common with others in common areas. b an equity interest in real property. c. exclusive ownership of respective unit, which is separate and distinct from that of all other owners. d. all of the above.

d. all of the above.

For a "blanket encumbrance," the typical release clause requires the debtor to pay more to the lender than each released property is worth because: a. better lots are sold first. b. compensates for unsold lots. c. lender desires to increase security on overall loan. d. all of the above.

d. all of the above.

The goal of the Fair Housing Act is for the purpose of: a. removing prejudice in every community. b. establishing selling practices that are "color blind." c. establishing selling practices where you do unto others as you would have them do unto you. d. all of the above.

d. all of the above.

A real estate syndicate ownership may take the form of a: a. corporation. b. real estate investment trust. c. limited partnership. d. all of the above.

d. all of the above. "Syndicate" has no precise legal significance, and organizational structure is set-up by the syndicator. "Limited partnership" is most frequently used for real estate syndicates.

In order to maintain a "release schedule," the beneficiary of a blanket loan usually charges a higher proportionate payment amount to release each lot: a. to have better security on remaining lots. b. to protect against the better lots selling first. c. to protect the investment as individual lots are sold. d. all of the above.

d. all of the above. Having more paid off (than proportionate) to release each lot sold will result in the entire loan being cleared before all the property is reconveyed.

56. A bearing wall in a building: a. could be at any angle relative to a door. Can be an archway. b. probably would not be removed during remodeling. c. would have stronger structural members. d. all of the above.

d. all of the above. Such a wall bears much weight, supporting upper floor and/or roof loads.

An agent may represent both parties in a transaction, providing he: a. gets consent of both parties. b. informs both parties. c. discloses his commission agreement with both parties. d. all of the above.

d. all of the above. These are all requirements for representing both the seller and buyer (dual agency).

An appraiser's definition of "Value" would be: a. present worth of all rights to future benefits arising out of ownership. b. the ability of one commodity to command other commodities in exchange. c. relationship between the thing desired and the potential purchaser. d. all of the above.

d. all of the above. These are elements of value.

71. A power-of-attorney is terminated by: a. death of principal. b. expressed revocation of principal. c. incapacity of principal to contract. d. any of the above.

d. any of the above. Instrument of revocation must be recorded in same office as the power of attorney. For dealing with real property, power of attorney must be acknowledged and recorded in county recorder's office.

In determining the value of a property, an appraiser would use the: a. cost approach. b. market approach. c. income approach. d. any or all of the above.

d. any or all of the above. Appraisers use all three approaches to determine value.

According to California law, real property securities include all of the following, except: a. any out-of-state subdivision offered for sale in California. b. promotional notes secured by any part of subdivision offered for sale in California. c. guaranteed notes or sales contracts. d. any transaction including real property as security for a loan.

d. any transaction including real property as security for a loan. Ordinary real estate loans are not usually real property securities as defined by law.

A "walkup" in real estate terms refers to: a. manufacturing properties. b. drive-in restaurants. c. manufactured home parks. d. apartments.

d. apartments. Multilevel tenement apartments, without elevators.

If one person has the authority to act on matters for another, including the right to bind (sign for) on contractual matters, the person with that authority would be known as the: a. power of attorney. b. beneficiary. c. trustee. d. attorney-in-fact.

d. attorney-in-fact. A step beyond that of agent. Can affix that other person's name to a contract. Signature: "Principal, by Agent Only, His Attorney-in-Fact."

In a partnership, if one of the partners dies, the surviving partner: a. cannot transact any partnership business by himself until heirs of the estate are able to assume responsibility. b. becomes a partner with the heirs. c. cannot transact any partnership business as death conceals the partnership. d. becomes exclusive manager of the partnership business, and retains the title to the partnership property until he winds up the partnership business.

d. becomes exclusive manager of the partnership business, and retains the title to the partnership property until he winds up the partnership business.

To be effective, good property management should begin: a. upon completion of construction. b. when expenditures have been made for property improvement. c. after the property has been acquired. d. before the property has been acquired.

d. before the property has been acquired. Good management should have an opportunity to participate in the decision leading up to the acquisition of the property.

A request for a "Notice of Default" on a first trust deed is for the benefit of the: a. trustor. b. vendee. c. trustee. d. beneficiary on the junior loan/second trust deed.

d. beneficiary on the junior loan/second trust deed. A beneficiary of any junior note and trust deed would benefit from such a notice, in a timely fashion, so that he will have sufficient time to take necessary measures to protect himself during the reinstatement period.

21. "Assignment of rents" in a loan or trust deed: a. provides for new buyer to pay rent until title passes. b. provides that the borrower pays. c. protects trustor or mortgagor. d. benefits mortgagee or beneficiary.

d. benefits mortgagee or beneficiary. At default, this would allow lender foreclosing on property to collect rents from tenant, and apply this money towards debts of borrower.

49. Assume the streets in a subdivision were financed through the issuance of 1911 Street Improvement Act Bonds. When he prepares his income tax return, the: a. owner of the liened lot can deduct principle and interest payments on the bonds. b. owner of liened lot can deduct only principal payments. c. bond holder must report principle payment received as taxable income. d. bond holder need not declare the interest as income.

d. bond holder need not declare the interest as income. Bonds are tax exempt; therefore, income generated is not taxed.

The Uniform Commercial Code revised, combined, and replaced many statutes and laws, including: a. Uniform Conditional Sales Act. b. Uniform Negotiable Instruments Law. c. neither of the above. d. both a and b.

d. both a and b. California Code passed in 1965.

All contracts to be valid must contain the following elements or characteristics, except: a. competent parties. b. consideration. c. legal object. d. must be in writing.

d. must be in writing. Real estate contracts must be in writing, but NOT all other contracts must be in writing

Relative to requirements for establishing "planning commissions," they: a. may be established in cities, must be established in counties. b. must be in cities, may be in counties. c. must consist of members with experience in appraisal of real estate. d. both cities and counties must appropriate funds for establishing planning commissions.

d. both cities and counties must appropriate funds for establishing planning commissions. It is mandatory that funds be available and the commissions formed.

In California, the salesperson's commission is paid by the: a. seller. b. buyer. c. escrow holder. d. broker.

d. broker. All money for salespeople MUST come from/through their broker.

24. In the course of evaluating apartment property net income, an appraiser would regard an annual payment for a street paving assessment as a(n): a. fixed expenditure. b. operating expense. c. expense related to income. d. capital outlay.

d. capital outlay. Assessments for street improvements are considered to be capital expenses, which increase land values. They are not regarded as expenses deductible from income.

All but one of the following constitutes completion for purposes of filing a mechanic's lien: a. cessation of labor for 60 days. b. acceptance and possession of structure by owner. c. filing of notice by owner. d. cessation of labor for one month on any form of home improvement.

d. cessation of labor for one month on any form of home improvement. Cessation for 30 days must accompany an owner's filing of the "notice of cessation."

A buyer purchasing a home financed by a new FHA loan should do all of the following, except: a. find a property that will meet FHA requirements. b. find a seller willing to sell under FHA terms. c. find a lender who makes FHA loans. d. contact FHA for an appraisal.

d. contact FHA for an appraisal. The lender or broker will have the appraisal made, if the seller has not already done so.

87. In the real estate business, the buyer is commonly referred to as a(n): a. attorney-in-fact. b. fiduciary. c. client. d. customer.

d. customer. The seller is referred to as the "client."

A change in the flight patterns of an airport creates excessive noise over an apartment building. This results in increased vacancies and loss of property value. This loss of value would be called: a. functional obsolescence. b. ecological obsolescence. c. physical deterioration. d. economic obsolescence.

d. economic obsolescence. Economic obsolescence results from adverse factors beyond the confines of the property.

If Notification of Default was filed on July 15 and publication of sale was started on Oct. 15, the right of the Trustor after Oct. 15 is: a. pay the back payments and late charges and fees. b. pay the balance due, including all penalties and late charges. c. neither a nor b. d. either a or b.

d. either a or b. The loan can be reinstated until 5 days before the auction.

33. Borrowing against a property with a loan interest rate less than the "equity yield" on the property: a. is unlawful. b. decreases equity yield. c. has no effect on equity yield. d. enhances equity yield.

d. enhances equity yield. Referred to as "trading on equities."

A licensed real estate broker desires to work as a salesperson. She should: a. apply to take salesperson's examination. b. inactivate broker license and apply for salesperson's license. c. apply for salesperson's license. d. enter into agreement (written) with employing broker and work as a salesperson.

d. enter into agreement (written) with employing broker and work as a salesperson. Cannot function in any way as to use his broker license while operating under other broker's license as salesperson, other than acting as a salesperson

19. By recording a deed with the County Recorder's Office, one: a. validates the document so recorded. b. makes it possible for the new owner to be able to sell the property. c. gives actual notice of interest in real property. d. establishes precedence over subsequently recorded instruments.

d. establishes precedence over subsequently recorded instruments. Creates priorities between various instruments.

A freehold estate is a(n): a. estate for years. b. estate at will. c. estate from period-to-period. d. fee simple estate.

d. fee simple estate. Freehold = Fee simple; Less than Freehold = Leasehold.

50. When personal property becomes (by intent) a part of real property, it becomes a(n): a. attachment. b. inclusion. c. dedication. d. fixture.

d. fixture.

An apartment house offered single garages. When a new unit was built nearby, offering double garages, the tenants all moved into the newer units. This is an example of: a. physical deterioration. b. economic obsolescence. c. social obsolescence. d. functional obsolescence.

d. functional obsolescence. Refers to "outdated" condition.

Which of the following properties could be purchased using FHA financing, but NOT VA financing? The purchase of: a. a business. b. a farm. c. farm equipment. d. income property/property to be rented to a tenant.

d. income property/property to be rented to a tenant. VA requires the veteran purchaser must "move into" the property being purchased as personal residence. The purchase of "units" (4 maximum) is allowed, if the veteran will be residing in one of the units.

A licensed real estate broker, buying and selling many properties for himself, may have his profits taxed as: a. long-term capital gains. b. short-term capital gains. c. deferred capital gains. d. ordinary income.

d. ordinary income. One who holds property "primarily for the sale to customers in the ordinary course of business" is considered a "dealer" and may have profits taxed as ordinary income.

If the rent of commercial property increased well above the maintenance or servicing costs, the resulting situation would: a. not affect the vacancy rate. b. increase the effective gross income. c. increase the demand for space. d. increase the vacancy rate, and tenants would tend to conserve on space.

d. increase the vacancy rate, and tenants would tend to conserve on space. When rent controls are not a factor, rental prices can become highly competitive. When established rent is too far above housing and servicing requirements, tenants tend to conserve on space, and the vacancy rate will increase.

If the purchasing power of the dollar decreases, the price of property _______________. If the purchasing power of the dollar increases, the price of property _______________. In both cases, the value of the property _______________. a. increases, decreases, increases b. decreases, increases, increases c. decreases, decreases, increases d. increases, decreases, could remain the same

d. increases, decreases, could remain the same When the purchasing power of the dollar decreases, prices increase. When the purchasing power of the dollar increases, prices decrease. When measuring the value of a commodity as a reflection of such changes in the purchasing power of the dollar, it can be said that for example, the value of a home, which sold for $39,000 in 1958, could have the same value in 1995 at a selling price of $120,000.

63. Deed restrictions are enforced by: a. consent decree. b. desist and refrain. c. indictment. d. injunction.

d. injunction. Is a writ or court order restraining named parties from doing an act which is deeded inequitable or unjust in the regards to the rights of other parties in the suit or proceedings.

Occasionally a property owner will realize a taxable gain when his property is destroyed or taken through condemnation. This is known as: a. trading up. b. depreciation. c. owner's amenities. d. involuntary conversion.

d. involuntary conversion. The conversion of real property to personal property (money).

Three general partners borrowed money and agreed to be liable for the repayment, either individually or collectively. They signed the security instrument: a. jointly. b. singularly. c. jointly and collectively. d. jointly and severally.

d. jointly and severally. They are jointly (collectively) and severally (individually) responsible.

15. Less-than-freehold estates consist of estates owned by: a. grantees of life estates. b. holders of easements. c. beneficiaries of trust deeds. d. lessees.

d. lessees. A "freehold" estate is of indeterminable duration—fee simple or life estate. Therefore, "less-thanfreehold" would be of determinable time or duration—a lease.

A buyer with a low income considers many factors in choosing a home, the most important of which would be: a. the surrounding neighborhood. b. his income. c. the type and size of home. d. location.

d. location. The location of the home in relation to his workplace would be a major consideration, since it would have an important impact on his commuting problems and costs.

First time buyers are concerned as to how the lenders qualify prospective buyers regarding income. Lenders: a. look at the income of only the husband, even if the wife also works. b. look at husband's and half of the wife's income. c. look at half of husband's income and half of wife's income. d. look at all income from both husband and wife, including incomes other than from wages and salaries.

d. look at all income from both husband and wife, including incomes other than from wages and salaries. All income is used for qualifying. This includes wages and any other form of income available—interest, dividends, trust payments, etc. Wives' incomes are no longer handled differently than husbands'.

2. A conventional loan would differ from an FHA loan in that the conventional loan would have: a. lower monthly payments. b. lower interest rates. c. lower down payment requirements. d. lower loan-to-value ratio.

d. lower loan-to-value ratio. FHA typically will loan a greater percentage of value to the borrower than a conventional lender, requiring a smaller down payment. The conventional lender does not have the "insurance" against loss that the FHA lender has and, therefore, is taking greater risks and must receive more down payment (equity) from the buyer/borrower.

In a period of tight money, the Federal Reserve Bank can increase the supply of money by: a. raising the discount rate charged to member banks. b. increasing member bank reserve requirements. c. selling bonds on the open market. d. lowering member bank reserve requirements.

d. lowering member bank reserve requirements. The resulting surplus reserve funds would increase money available for customers to borrow from member banks. Answers "a" "b" "c" would result in decreasing available funds.

Which of the following statements will INCORRECTLY complete this phrase? A subdivider who is not a licensee of the DRE: a. may not sell or offer for sale any lots in a subdivision prior to issuance of the Commissioner's Public Report. b. may sell all lots in a subdivision himself. c. may make any improvements on the land prior to receiving the public report. d. may employ licensed real estate salespeople to sell lots in a subdivision.

d. may employ licensed real estate salespeople to sell lots in a subdivision. Only a broker can hire or employ salespeople to sell real estate. The subdivider would have to employ a broker , who in turn would hire salespeople.

Real estate appraisers may use the 4-3-2-1 Rule as a useful tool in their work. It applies to the: a. lot and improvements. b. tract evaluation. c. house, lot, and garage d. method for appraising lots of differing depths.

d. method for appraising lots of differing depths. The 4-3-2-1 Rule is used to measure the value of adjacent lots, which have different depths. Lot value is considered to be 40% in the first quarter (front of lot), 30% in the second quarter, 20% in the third quarter, and 10% in the last quarter of depth.

A married woman purchased a business with separate funds, and subsequently decided to obtain a liquor license. She: a. must apply to the Department of Alcoholic Beverage Control. b. must apply to the Franchise Tax Board. c. must apply, with her husband, to the Board of Equalization. d. must apply, with her husband, to the Alcoholic Beverage Control Department.

d. must apply, with her husband, to the Alcoholic Beverage Control Department. The "ABC" controls issuing liquor licenses. When a married person applies, bot husband and wife must apply together.

Mr. Traveler needs money to go on a trip. He possesses a $10,000 note and T.D. on the Mayor's farm. Mr. Banks offers to loan Mr. Traveler the $4,000 he needs, providing he can hold the $10,000 note and T.D. as security. If all agree, this would be an example of a: a. real chattel agreement. b. purchase money trust deed agreement. c. subordination agreement. d. negotiated pledge agreement.

d. negotiated pledge agreement. This is a negotiated pledge agreement - Mr. Traveler has pledged the not and TD as security.

If a home were properly insured with fire insurance to indemnify the owner, he could expect to: a. always gain. b. gain, but never lose. c. lose, but definitely not gain. d. neither gain nor lose.

d. neither gain nor lose. "Indemnify" means to "make compensation for incurred lose/damage."

29. A "quitclaim" deed implies that the: a. grantor has not previously transferred the property to another. b. grantor has not created an encumbrance against the property that has not been revealed. c. grantor actually owns the property. d. none of above.

d. none of above. Grant deed has warranties, NOT the "quitclaim" deed. It implies nothing, not even that the party giving the deed does, in fact, own an interest in the subject property.

FHA programs have caused the "quality" of homes to be improved because the FHA: a. grants quality home loans. b. insures home loans. c. requires "maximum building standards" (MBS). d. none of above.

d. none of above. The FHA establishes minimum property requirements (MPRs) that, in most situations, are more demanding than State Housing Law or local building code requirements.

If a deposit receipt does NOT contain a legal description of the property to be purchased, it would be: a. illegal. b. unenforceable. c. voidable. d. none of the above.

d. none of the above. Adequate description of the subject property would be sufficient. The title company will require "legal" to insure the sale.

34. Mr. and Mrs. "Z" own property in joint tenancy. The "Zs" each have a son by a previous marriage. Mrs. "Z" dies and leaves by will 2/3 of her property to her son and the other 1/3 to Mr. "Z's" son. The sons: a. hold title as tenants in common. b. hold title as joint tenants, with right of survivorship. c. may select to hold title in community property. d. none of the above.

d. none of the above. The property, upon death, automatically passed to Mr. "Z" as surviving spouse. The will was invalid, as to passing the title. Mr. "Z" now holds title to property in severalty.

An appraiser's final step in estimating value is to correlate the three indications of value obtained through the cost, income, and market data approaches. The final estimate of value is obtained by: a. averaging the three values. b.assigning weights to the three individual values ("reconcile"*), and then averaging those values. c. both a and b. d. none of the above.

d. none of the above. There is no "averaging" used in correlating value estimates by appraisers. The final step is to estimate value through correlation by placing more emphasis on the approach that appears to be most accurate.

An agent obtains a listing to sell a registered franchise from the owner. The sale will include both building and land. Before he begins servicing the listing, the agent must: a. file an application and receive a permit from the DRE. b. file an application for exemption of registration of the offering with the corporations commissioner. c. obtain a "cooperative" sales agreement from a stock broker. d. none of the above.

d. none of the above. Those allowed to sell a nonexempt franchise are: (1) Real estate brokers; (2) Broker dealers or agents under the "securities law" licensed by the corporations commissioner; and (3) Person identified in application registered with the corporations commissioner for an offering of a California franchise.

Buyer purchased a home with a standard policy of title insurance. After moving in, she discovers that the roof eave is only two feet from the property line. The zoning requirements are five feet minimum. In this situation, the buyer may collect: a. price of repair minus attorney fees. b. price of damages plus cost to repair. c. price of the property plus treble damages. d. nothing.

d. nothing. Standard title insurance policy (CLTA) does NOT provide on-site inspection. Extended coverage (ALTA) would have covered this type of defect, but a property inspection would have been made prior to policy issuance anyway.

An auctioneer who sells a business on which a Notice of Sale was properly recorded and published: a. is personally liable for any losses to seller's creditors. b. must have a "Business Opportunity" license. c. must have a "Securities Dealer" license. d. only needs a Real Estate Broker's license.

d. only needs a Real Estate Broker's license. Sale of business opportunities fall under DRE jurisdiction.

When a building is positioned on a lot in such a way that it reflects consideration of noise, sun, wind, privacy, and other factors, the act of positioning is called: a. land use conformity. b. orographic arrangement. c. profile elevation. d. orientation.

d. orientation. The phrasing of the question is a good definition of orientation.

23. Mr. "O" intentionally causes Mr. "G" to believe that a real estate broker is his agent. In fact, the broker is not Mr. "O's" agent. However, under the above conditions, the agency relationship is: a. actual. b. implied. c. nonexistent. d. ostensible.

d. ostensible. Ostensible agency is often referred to as a "presumptive" agency, where one party intentionally induces another to believe that another is his agent, though in fact he has not employed that person as an agent.

A "Notice of Completion" benefits: a. contractors. b. laborers and material suppliers. c. lenders. d. owners.

d. owners. With the filing of said "notice," owner shortens the time for mechanics' liens to be filed.

A loan (trust deed) held by an individual is: a. a chattel real. b. real property. c. a real chattel. d. personal property.

d. personal property. A loan or trust deed is a lien; chattel real or real chattel are technical names for leasehold estates.

"Placement of a home on a lot" best matches: a. option. b. avulsion. c. dedication. d. plot plan.

d. plot plan. Plot plan is planning the most advantageous place on a parcel of land for an improvement to be located.

Fill in appropriately: "A trend in real estate ______________ the recession trends of business, and when business starts a swing upward." a. precedes, proceeds b. follows, lags behind c. lags behind, precedes d. precedes, lags behind

d. precedes, lags behind Typical business cycle: (1) Expansion...prosperity (good times) (2) Recession...turn around from prosperity (real estate precedes) (3) Depression...opposite from (1) above (4) Revival...turn around in prosperity (real estate lags)

57. Market price is: a. what a property would bring in the open market. b. price offered by an informed purchaser. c. price asked for by an informed seller. d. price actually paid for property (escrow closed).

d. price actually paid for property (escrow closed). Others are just "ideas" of what price should be. The final sale sets the record straight.

The primary source of funds for junior loans is: a. the FHA. b. institutional lenders. c. noninstitutional lenders. d. private lenders.

d. private lenders. Owners, taking back 2nds, 3rds, etc.

The highest annual operating expense of an apartment normally would be assigned to: a. utilities. b. general maintenance. c. management fees. d. property taxes.

d. property taxes. Property taxes in recent years have shown steady increases, and are becoming a greater factor in overall operating expenses.

The primary reason for maintaining funds in a trust account separate from the broker's general account is to: a. insure the future control of funds. b. make the bank liable in the event of fraud. c. provide easier and more simplified record keeping. d. protect funds in the event of a civil suit against broker.

d. protect funds in the event of a civil suit against broker. A broker must NOT commingle funds.

Concerning FHA loans, all of the following statements are correct, except: a. level payments required. b. monthly payments of taxes and insurance for impound account. c. monthly budgeted payments suitable to buyer's pocketbook. d. provides maximum building standards.

d. provides maximum building standards. FHA loans involve MPRs (minimum property requirements), not maximum building standards.

The wording... "all monies paid on the property are to be held in trust until a release is obtained from the blanket encumbrance..." is required to protect the: a. holder of blanket encumbrance. b. broker. c. subdivider. d. purchaser.

d. purchaser. This provision will assure the buyers that their money is safe, until such time the developer can get a release on the parcel of land involved with their purchase. Otherwise, without such "partial" release, no transfer of title could occur on various purchases until the encumbrance on the entire parcel developed was paid in full.

Broker "U" receives a $5,000 deposit with an offer to purchase one of your personal listings priced at $100,000. The escrow is to close in only one week. The seller has previously agreed to pay you a $5,000 commission for any sale he can get on this property. Seller now instructs you to place the deposit into escrow. You (broker) should: a. put the $5,000 into escrow with instructions to escrow to pay this amount back to you at closing. b. put $5,000 into your broker trust account. c. keep the $5,000 in the office (locked in your desk drawer) until the seller comes by to sign papers related to the sale. d. put $5,000 into escrow.

d. put $5,000 into escrow. Only one obvious solution. When in doubt, follow directions of the principal.

The appraiser's primary measure of the efficiency of an office building plan is: a. elevator capacity. b. corridor widths. c. parking. d. ratio of net rentable area to gross area.

d. ratio of net rentable area to gross area.

17. When a broker sells six notes and trust deeds taken back by a developer of a new subdivision, he must give to each prospective purchaser a: a. final public report. b. loan disclosure statements. c. notice of intended sale. d. real property security statement.

d. real property security statement. selling a real property security requires a real property securities dealer endorsement dealer.

The trust deed (and note) that normally takes priority is the one that is: a. for the greatest amount. b. a construction loan. c. executed/delivered first. d. recorded first.

d. recorded first. First to record is first in rights. If a trust deed is without a subordination clause relinquishing priority, and is recorded first, it will take priority over subsequently recorded instruments.

If a structure is repaired without changing the interior or exterior design, this process is called: a. modernization. b. reclamation. c. remodeling. d. rehabilitation.

d. rehabilitation. When a property is restored to satisfactory condition without changing style, form, or plan, this is known as rehabilitation.

At the time of his death, Broker "A," a licensed real estate broker, had 18 listings in his possession. He left his entire estate to a son, "B," who also is a licensed real estate broker. If "B" desires to collect any commissions on the sales of any of the 18 listings, he must: a. take "quiet title" court action to authorize collection. b. notify each owner that the commissions would be payable to him in lieu of his father. c. do nothing. d. renegotiate new listing contracts with each of the 18 owners.

d. renegotiate new listing contracts with each of the 18 owners. Upon death, the listing contract (for personal service) would terminate. Had the father been incorporated, the renegotiation would not be necessary, as the corporation does not die.

All of the following are methods for appraising unimproved real property, except the: a. development method. b. abstractive method. c. market data method. d. reproduction method.

d. reproduction method. There is NO structure to reproduce on unimproved property. Therefore, the reproduction method is not applicable.

In real estate matters, the word "impound" most often means: a. attachment. b. judgment. c. principal and interest account with lender. d. reserve account for taxes and insurance with lender.

d. reserve account for taxes and insurance with lender. Borrower applies monthly amounts of insurance premiums and taxes, which are available as necessary for the lender to pay these obligations.

Re-zoning ordinances, attempting to rid an area of nonconforming uses, may require all of the following conditions, except: a. allowing reasonable time, within which abuses may be eliminated. b. prohibition of expansion. c. prohibition of rebuilding. d. retroactive zoning ordinances.

d. retroactive zoning ordinances. Other answers are used frequently to gradually decrease non-conforming areas.

To "rescind" is the same as to: a. revise. b. transfer. c. resale. d. revoke.

d. revoke. To revoke, or take away a license. (The Real Estate Commissioner has this power.)

41. A broker had signed an agreement to locate property for his principal. Having found a property which suited his principal, which could be purchased for less than he was willing to pay, the broker bought the property himself. Later the broker sold the property to his principal at the higher price, keeping the difference for himself. This is considered: a. commingling. b. conversion. c. divided agency. d. secret profit.

d. secret profit. The broker is required to obtain the property for the principal at the lower price, saving the principal the difference.

The least important factor in a "sale-lease back" is: a. the credit rating of the lessee. b. a well designed general purpose building. c. a well located building. d. seller's book value of the building.

d. seller's book value of the building. Seller becomes lessee. The book value is not important any longer, for the new owner will set up his own books for tax purposes.

A soil pipe is used in: a. irrigation. b. soil conservation. c. soil depletion. d. sewers.

d. sewers. A soil pipe is used to carry waste and sewage from a property.

54. Sites for industrial buildings are usually gauged by the: a. cubic foot. b. front foot. c. acre. d. square foot.

d. square foot. Industrial building sites are usually valued according to square footage. Acre is a unit of measure seldom used.

11. A valid lease need NOT contain: a. amount of payment. b. description of property. c. names of parties to lease and terms of lease. d. stipulated transfer fee.

d. stipulated transfer fee. There is NO transfer fee involved with leasing.

In evaluating agriculture properties, an appraiser would consider the overall effects of our economic growth during the past 50 years upon such properties. All of the following statements would be true, except: a. farmers' investments in equipment and storage facilities have expanded considerably since the 1940s. b. stables with stanchion spaces for cows are being replaced with sheds and milking facilities. c. value of the various buildings—living quarters, barns, hay, and straw baling storage facilities, etc.— is expressed in terms of value added to the property being appraised. d. the average individually owned farm size has shown a steady downward trend since the 1940s.

d. the average individually owned farm size has shown a steady downward trend since the 1940s. With modern equipment, the acreage that one man can farm effectively has increased farm sizes, and large corporations have affected farm sizes.

A broker arranges the sale of a home. There is a purchase money T.D. from the lender. The broker is NOT required to see that the T.D. is recorded if the: a. buyer instructs him not to record. b. buyer and seller select not to have an escrow. c. broker is not involved financially in the loan procurement. d. the beneficiary instructs him not to record the T.D.

d. the beneficiary instructs him not to record the T.D. Only a lender (beneficiary) can decide whether a promissory note and trust deed are to be recorded.

26. When establishing value by "appraisal," it is necessary to recognize the difference between the function of the appraisal and: a. the appraisal process. b. amenities to the owner. c. principles of appraisal. d. the purpose for which the appraisal is being made.

d. the purpose for which the appraisal is being made. The purpose may be to estimate value for: (1) listing with a broker, (2) financing, (3) condemnation, or (4) an insurance settlement.

1. A real property security endorsement is valid for: a. as long as the broker's license is valid, and it needs no further endorsement. b. multiples of 4 years. c. one year. d. the term of the broker's license to which the endorsement is affixed.

d. the term of the broker's license to which the endorsement is affixed.

Mr. A sold Mr. B an option for $500 for a 60-day period starting March 13. In the event the option was exercised, the buyer would be required to complete a 30-day escrow commencing on the day the option was exercised, paying all cash for the property. Mr. B assigned his option to Mr. C for $1,000 consideration. On April 30, Mr. C informed Mr. A that he would pay cash for the property on May 7. Mr. A claimed that the option was void. The option was: a. void, because the original buyer sold it without permission. b. void, because the proposed purchase date would not be within the 60-day option period. c. void, even though original holder had sold the option—however, the purchase day was beyond the required date of sale. d. valid, and the Assignee (Mr. C) would be able to purchase the subject property on May 7.

d. valid, and the Assignee (Mr. C) would be able to purchase the subject property on May 7. Option assignment was legal (without prohibition stated in the original document), and the escrow period commenced within the option period and did not run beyond the prescribed 30-day period.

Which of the following is NOT necessary in the formation of a contract? a. Acceptance b. Consideration c. Offer d. Performance

d. would not need to be reported because they were prepaid. Performance comes after the contract is formed.